Our Buzz Talks often focus on residential developers and projects, but today we’re spicing things up a bit with an interview with Jordan Karp of Paracom Realty.
Jordan gives us some insight into the importance of retail space in condo developments and the inside scoop on a few up-and-coming retail areas in Toronto to look out for.
BuzzBuzzHome: Your specialty is downtown commercial real estate? How does one gain enough knowledge to put this on their resume?
Jordan Karp: I got into urban retail in about 1999. I was in investment real estate for about 12 years before that, but I was bored and looking to get out of real estate. I decided to go shopping and we didn’t have some of the stores I wanted to shop at in Toronto. Then it came over me, “why don’t we have certain stores here?”
I started doing some investigation. I went out and pitched a business to Gucci and landed them as a client and put them on Bloor Street. That’s what started my focus on urban retail. From that, it morphed into condominium developers and the first project I really dug into was the Prince Arthur at 38 Avenue Road, across from the Four Seasons.
Developers back then traditionally were looking at their retail component of their developments last because they were focused on the selling their condo units. When I looked at other projects around the city, there were some mistakes in the design and in the tenant mix. From there I started working on them and realized two things: retail can drive a lot of value to the bottom line and can set the tone of a condo development.
Most people immediately see the ground floor when they walk by a condo development. They don’t look up and see the architectural features above. There was a financial incentive for developers to start focusing on retail space early on.
BBH: You mentioned that developers had been using the retail space in condos in a way that wouldn’t be advantageous to them. Can you go into more detail about that?
JK: The focus was primarily on the residential components so things like positioning of sheer walls where duct work was coming down on the ground floor or the type of baseboard heaters being used were after thoughts. They weren’t up front saying “if we put a column right here in front of a window, it’s going to cause a problem for retail.” They didn’t look at the type of retail users and what their requirements would be in the same way that they were looking at the requirements of end users of residential units.
Builders that were targeting high end customers for their residential would put in the fancy kitchens that they all wanted, but they wouldn’t do the same with the retail. It was really an after thought. If you look at some condo developments, the retail has columns in the wrong places, the sizing of the windows doesn’t work from a retail perspective and so on.
Some developers sold off their retail before it was leased, which, in many cases, I think was a big mistake because interests were not aligned with the owners of the retail, the condo developer, and the end users. You have some projects where the retail continues to turn over and the quality of the retail is not reflective of the overall development because the retailer is only worried about that part of the building. As a result, you could live in this gorgeous building with a low quality retailer on the ground floor.
For the most part, residential still drives the design, but you can continue with your design and not necessarily compromise what you were doing and consider the retail space at the same time — more and more today, that’s what’s happening.
BBH: Where were you before you came to Paracom?
JK: I was with Avison Young for five years.
BBH: How did you come to be a part of Paracom?
JK: In a conversation with one of the principals of Paracom a question was asked of me and that sparked their interest in pursuing me to join their team. Paracom has traditionally focused outside of urban settings and they have great relationships with developers. They’ve sold development sites in an urban setting, but never have had someone to work with the developers on the execution of the retail component. The fit was very good for what I do and I share a lot of the same principles of the owners of Paracom.
The timing was perfect and it was just the right thing to do.
BBH: Paracom work a lot with large “big box” stores outside of the city core? Is that a fair assessment?
JK: They deal a lot with big box and smaller box type tenants. On the listings side, they take a lot of listings on in strip plaza environments, in an enclosed mall environment and big box environments. Again, they didn’t focus on the urban setting and on the tenant side, but some of their tenants that are “traditionally” big box retailers are now trying to get themselves into new formats in urban settings.
My joining Paracom allowed them to focus on listings of condo developments in urban settings and also allowed them to service these tenants coming out with these new urban formats as well as trying to figure out how to put these two together.
BBH: What is the most expensive intersection for retail in Toronto?
JK: Definitely Bloor Street between Avenue Road and Bay Street, by far.
BBH: Is there any area that would come even close?
JK: No. The farther away you move from that key block of Bloor between Bay and Avenue, the more the rents drop. In Toronto, our second most expensive street front area would probably be Queen Street West, but your rents are about a third of what they are on Bloor Street.
BBH: What is the rental rate for a place on Bloor?
JK: On the main blocks on Bloor between Bay and Avenue, the rents have stabilized on ground floors at approximately $300 per square foot, second floor retail can be upwards of $75 per square foot. Rents in Yorkville itself can be between $100 per square foot and $150 per square foot.
BBH: Do you have any insight into up-and-coming retail strips or neighbourhoods in Toronto?
JK: I think King West will continue to be one of the city’s strongest restaurant nodes. We’ve seen a lot of independent operators on King West, but now we’re starting to see big chain operators come in, like The Keg going to Fashion House. I think King Street will continue to expand west and eventually join up with the Liberty Village area. Right now there’s pockets that need to be filled.
I think farther along Queen West toward Roncesvalles will be gentrified. There’s also a lot of talk of the downtown east area with the Pan Am Games coming in and the River Walk development where they’re planning 5,000-6,000 units of residential. I think that area is going to solidify.
I also think that, at some point, the national fashion retailers will end up somewhere in the Beaches area. Traditionally they’ve looked, but they haven’t gone there yet. The demographics of the area and the distance from a good mall would, to me, support the fact that there’s a very loyal customer base in the Beach area. I could foresee the Gaps of the world looking into the Beach and securing a location there, replacing the mom and pops that are currently occupying Queen Street East.
BBH: Summer’s almost over. Did you do anything exceptionally fun this summer or was it all work?
JK: Well a client sent me down to the U2 concert in Miami at the beginning of the summer, but other than that, the summer was really focused on the transition. I’ll be leaving next week to go to two of my favourite places in the world, Barcelona and Tel Aviv, so I’ll have my summer fun then.
BBH: Would you prefer a night out at a rock concert or a symphony orchestra?
JK: Probably rock concert and probably somewhere other than Toronto.
BBH: Why is that?
JK: I think you get a better experience when you see different people and experience different cultures than you do in your day-to-day life. Going to the U2 concert in Miami was probably much more exciting and interesting than if I had seen it in Toronto.
Thanks Jordan for taking the time to buzz with us!