Rising high above the site of a former retail development, a 23-storey apartment tower just steps from Gloucester’s Blair LRT station at the end of the Confederation Line signals a new era of transit-oriented rental construction in the National Capital Region.
RioCan and Killam Apartment REIT are teaming up on the multi-phase project that could see as many as 1,000 new rental suites built over the next decade. After phase one of the development known as Frontier opened to tenants in June, OBJ sat down with RioCan chief executive Jonathan Gitlin to talk about what the project means for the future of his company and real estate in Ottawa.
Here is an edited transcript of that conversation:
OBJ: RioCan has a big presence in Ottawa. What in particular do you like about this market?
JG: Let’s talk about two elements. One is retail; our roots are in retail. And one is our mixed-use strategy and the intensification process that we’re undergoing. We’ve got 32 retail properties in Ottawa and close to four and a half million square feet here. For us, it’s one of our larger markets, and we’re very committed to it. It’s a city that’s fairly stable – it doesn’t see big ups and downs in its economy.
With respect to the mixed-use projects that we’re now embarking on, including Frontier, for us, it’s some of the same attributes. I think there hasn’t been a lot of new-build rental and so to be first to market is always a good thing. One of the things that lured us to build on the site is the transit that’s right across the street. The Blair LRT station for us is a game-changer. While I know this is a city that’s still a vehicular commuter city, I think it’s going to change.
The city’s government has taken a very bold step in intensifying the LRT infrastructure here, which will in my mind prompt a lot more developments like this. There’s nothing more logical than putting density next to transit.
OBJ: We recently hosted a City-Building Summit, and a major theme that emerged was that Ottawa is poised for a surge in mixed-use developments near light-rail stations. What’s your take on that premise?
JG: I agree with that. There’s definitely a lot of intensification that has happened right in the downtown core of Ottawa. I think what is lacking here is good residential offerings on that outer ring.
Where there’s transit nearby, for us this is the perfect set of circumstances where we can provide a place to live, a community, that isn’t necessarily caught up in the downtown hustle and bustle or urban sprawl, but rather you’ve got more open spaces here. You’ve got the benefits of suburban living with the access to urban living. To us, that’s a great combination.
OBJ: Where are some of the other transit nodes where you really see an opportunity for something like this?
JG: We’re always looking at our portfolio. Typically, a shopping centre will cover 25 per cent of a parcel of land; the rest will be parking lots. We’re often looking at, are there opportunities to take a portion of that parking lot and build multi-unit residential buildings? We’ve got zoning on Elmvale Acres (and) Westgate Shopping Centre, which again doesn’t have an LRT station there, but it’s right on the highway and it’s right next to bus transit.
OBJ: You’re also looking at redeveloping Lincoln Fields Shopping Centre. What are your plans there?
JG: Right now, we’re focused on redoing the retail. We’re building more of a conventional retail outlet there which won’t have an enclosed mall. Then we’re going to explore what to do with the residual land. But to me, the ingredients are there for potential mixed-use development. You’ll have great retail which will serve the residents. To us, that marriage is so critical. To us, it adds value to your retail tenants, and it also adds value to your residential tenants.
Lincoln Fields right now has a very strong grocery component, and we’re going to recreate that grocery component. The Wal-Mart closed there, but there are certainly other uses – a pharmacy, restaurant and things of that nature which will form part of that.
OBJ: With the explosion of e-commerce, are you having to rethink the way you structure your retail complexes?
JG: In part, but that’s not the thrust of it. Whenever we build residential (units), we will typically replace the retail that was there. We’re firm believers in the need for bricks-and-mortar retail.
There’s obviously a strong narrative that suggests that there’s no need for it, but if you look at our statistics as a company, we have 97 per cent occupancy (of retail space). Our metrics have really never been better. So we believe that bricks-and-mortar retail is a very important part of the shopping landscape notwithstanding the existence of e-commerce.
I think we’re doing a number of things to ensure that we have relevant retail. One of those is changing the types of tenants that we have in our buildings. Part of it is building mixed-use (developments), where we urbanize, modernize and bring residential (units) to our retail sites.
OBJ: How are you changing that mix of retail tenants?
JG: I think there’s definitely a push to install … a lot of experiential tenancies. So things like gyms and restaurants and coffee shops and spin studios – things that really add to an environment, that draw people to a shopping centre; where you need to actually show up as opposed to ordering things online or not shopping there at all. The other trends that we’re focusing on are moving away from some of the retail segments that have certainly been hurt by not just the internet but rather changing consumer habits. If you look at what we’ve done over the last 10 years, the percentage of revenue that we receive from department stores and from clothing stores has decreased quite substantially. And in its place you’ll see a lot more necessity-based grocery stores and some of those other service-related uses like gyms, dentist and doctor offices, which are still thriving and vital parts of our retail experience.
OBJ: RioCan now owns most of Shoppers City East. People are always asking us what’s happening with the plan that was announced a couple of years ago to build a Costco there. Is that still in the works?
JG: It’s not public at this point. We are very happy with the future use of that land. I really do think the community will be pleased about it.
OBJ: What are some of the other long-term trends you see in retail and mixed-use development?
JG: You’ve certainly seen a trend toward urbanization. You’ve seen a lot of retailers strive to be in those built-up city centres. You see now in downtown Ottawa, there’s a lot more vibrant retail offerings in and around that area – not just the ByWard Market, but now you’ve got a large proliferation of retailers all over the place there.
OBJ: How much more rental construction do you expect to launch in Ottawa over the next few years?
JG: In the short term, we’d certainly like to build at least 3,000 units. But I think that beyond that, there will be quite a bit more. For us, it’s a terrific community. I think there is a need for more newer rental housing with modern technology, with modern security. So I think as long as the city is receptive to that type of product, we’re happy to provide it to them.
We have fairly lofty long-term objectives for the city of Ottawa. Again, it’s market-dependent. It’s also dependent on us getting permissions from the city. If it all works out, we’d love to continue to grow here in Ottawa.
OBJ: Finally, Frontier isn’t your father’s apartment building. Twenty years ago, you didn’t see these kinds of amenities.
JG: That’s really true across Canada. RioCan Living and Killam are looking to provide a different kind of living experience. We’ve got a geothermal heating and cooling system here which is sustainable and environmentally friendly and will be cheaper in the long run for our tenants here. And it’s transit-oriented. Those things are all elements that we’re very proud of.
Within the building, it’s a totally different kind of offering. There are great collaboration spaces where you can come get your work done. It’s akin to being at a Starbucks, except you don’t have to leave your front door. We’ve got great party spaces, great outdoor spaces and a state-of-the-art gym. We’ve got a parcel delivery service where now you can get courier packages delivered to a unit, you get a text message when it comes, you put in the code and (the door) opens up for you. It’s just little touches like that. It was a bold step by us.
There are not a lot of other highrises in this area. I think there were a lot of naysayers who said, ‘Why are you building out in Gloucester?’ We’ve always had the same disciplined approach and the same conviction in the belief that if you build in a site that has key attributes like transit and great retail next door, you will succeed. So far, we’ve seen the fruits of our labour work out