Toronto’s MaRS Discovery District and the University of Toronto have struck a deal with real estate developer Menkes Development Ltd. for space at a new building on the waterfront, as MaRS makes a first step beyond its original base near the university.
MaRS and U of T are leasing 24,000 square feet – with an option to lease an additional 24,000 square feet – at Menkes’s Waterfront Innovation Centre, a building under construction across from Sugar Beach, on the inner harbour. It is set to open in 2021 and Menkes wants the building to be home to creative and technology businesses.
The MaRS move comes amid a hot market for office real estate in downtown Toronto, with a record-low vacancy rate. The market has been buoyed by the boom in the tech sector and MaRS has seen the upstart companies it supports benefit from large increases in venture capital financing.
The Waterfront Innovation Centre will be 400,000 square feet, and two-thirds of the building is taken by WPP PLC, as the London-based advertising conglomerate moves its Toronto staff under one roof. The MaRS and U of T space will house tech startups. MaRS will also help Menkes find more established technology companies to occupy the remaining 100,000 or so square feet, to create an atmosphere in the area as exists at the MaRS complex at College Street and University Avenue where startups work near well-known names, such as PayPal.
For MaRS, the expansion marks a new start in its real estate strategy, said Yung Wu, who became chief executive of the organization about a year ago. Established in 2005, MaRS currently has 1.5 million square feet of space, of which about half is in its 20-storey West Tower, its previous expansion. That project struggled, and the provincial government had to spend about $380-million to bail out the development and get it built. U of T, whose campus is across the street, took an equity stake of one-fifth in the West Tower in 2015, and MaRS has since privately refinanced three-quarters of its government debt.
The space MaRS will lease on the waterfront is only a small addition to what it already has, but Mr. Wu said it represents a “signal.”
“It’s only 3 per cent more space, when you think about it that way, but it really is the start of how does MaRS have a footprint that goes beyond the real estate that it develops,” Mr. Wu said.
Technology is underpinning downtown Toronto real estate. OneEleven, another startup accelerator, expanded by about 50,000 square feet on Front Street West earlier this year, according to broker Jones Lang LaSalle (JLL), and Google snatched about the same amount of space in a new building on Adelaide Street West. Microsoft recently announced plans to move its Canadian headquarters downtown and fill 132,000 square feet in a new build called CIBC Square.
The downtown vacancy was at a record-low 3.4 per cent, according to JLL in a report on 2018’s second quarter. “Is a 0.0 per cent vacancy so unfeasible?” JLL said. “It’s a distinct possibility that’s getting closer and closer to reality.”
Editor’s Note: The MaRS Discovery District complex is located at College Street and University Avenue. An earlier version of this story incorrectly said it’s at College Street and Spadina Avenue.