Economic Development

Extreme Makeover

After transforming its downtown into a residential mecca, Vancouver is trying to find the right balance between condos and commerce.
by | July 2007

From a distance, especially from the air, downtown Vancouver looks like most downtowns: a pack of modern skyscrapers nesting in a dense and confined central area. Only when you hit the ground do you realize that it is different. The skyscrapers are virtually all condominium towers. This is an overwhelmingly residential high-rise downtown. Some 560,000 people live in Vancouver, Canada's third-largest city, and nearly 100,000 of them reside in tall, slender towers on the less than five square miles of the downtown peninsula.

There is nothing quite like this in North America, not in San Francisco, Chicago or even New York. When it comes to downtown housing density, the closest comparisons are to places such as Rio or Hong Kong. And virtually the entire change has happened in the past 15 years. Since 1991, when Vancouver rewrote its zoning laws to attract downtown residents, launching a self-described "Living First" policy, the physical character of the central city has been so thoroughly transformed that a visitor returning after two decades would have trouble even recognizing the place.

While cities in the United States struggle to lure as many as 5 percent of their residents into downtown living--and some are glad to have 2 or 3 percent--Vancouver is at nearly 20 percent and gaining. What's most remarkable, though, is that the downtown residential boom in Vancouver includes not just singles, couples and empty-nesters but a significant number of families with young children.

There is a brand-new public school in the downtown megaproject called Colonial Pacific Place, at the southern tip of the peninsula, and another one under construction at Coal Harbour, the other huge cluster of condo towers at the northern end. In the words of Lance Berelowitz, a local architect and author of "Dream City," an urban history of Vancouver, "we are seeing the first break in the single family house paradigm. We've discovered that far more families with kids would live in downtown than anyone expected."

Vancouver, in short, has what every city wants these days: a vibrant, safe, glamorous downtown, full of residents who have money to spend and who enjoy themselves spending it at all hours of the day, every day of the week. Promotions for one of the newest condo projects, now under construction, proudly advertise it as "life without compromise."

In fact, though, there is a compromise. Vancouver has begun to realize that its downtown is such a magnet for urban condo dwellers that it runs the risk of ceasing to serve the other purposes downtowns have traditionally served--as centers of commerce, corporate employment, jobs and overall economic life. It's not that business has fled central Vancouver: The downtown peninsula still ranks first as an employment center within the metropolitan area, with about 77,000 jobs. But the percentage keeps going down, there have been virtually no major office building projects launched in this century, the amount of land available for new commercial development is almost non- existent, and given the still-explosive demand for high-rise urban living, it doesn't take too much imagination to see what downtown Vancouver could become in a decade or two: a place where huge numbers of people live but not many work.

"The city we are shaping in the current boom," says local architecture critic Trevor Boddy, "is something quite different from any notion of what a downtown is, was or will be--more of a resort than a conventional downtown."

Planners and elected officials in Vancouver, intensely proud of Living First and the revival it has created, take pains to disagree with sentiments like that. "This isn't a resort strip in Hawaii," says senior planning official Michael Cooper. "This is still the financial and corporate center of a whole province's economy." But then he adds, "we really have to be careful...we could very easily see the entire downtown snapped up for residential."

DOWNTOWN DEMOGRAPHICS

How relevant is this situation to cities in the United States? Well, almost all of them would love to be in the position Vancouver is in now and worry about the consequences later. But, in fact, quite a few American cities are about to face their own variant of the same problem: downtowns that are increasingly attractive to residents and increasingly problematical for businesses.

The 2000 Census confirmed that during the decade of the 1990s, downtown population in major U.S. cities increased by about 10 percent, after several decades of steady decline. Hard data for the past five years are difficult to come by, but the numbers that do exist point to a much more rapid acceleration.

In Philadelphia, which keeps good statistics, the Center City population jumped 11 percent between 2000 and 2005, with predictions of a 25 percent increase for the decade, bringing the total downtown population to more than 100,000. At the end of last year, there were 97 residential projects on the drawing board for Center City, millions of square feet of space for 18,000 new residents, stimulated in part by a 10-year tax abatement program for new residential construction, enacted in 2000. Meanwhile, the amount of office space in Center City was no higher than it had been in 1990, the share of the regional office market was down substantially, and the number of office and professional jobs in the city had declined by nearly 10,000 in 15 years.

In New York, after September 11, 2001, the city's primary commitment was to rebuild the office towers at the World Trade Center site and restore the commercial and office presence that was lost when the towers went down. Nearly five years later, no new office buildings on the site have even started construction.

Meanwhile, all over Manhattan, older commercial space has been going condo at a rapid rate--an estimated 8 million square feet of it in five years. The number of people living in the area below the World Trade Center was about 15,000 in 2001; now it is more than 30,000; by the end of next year, there are projections of more than 40,000. Thirty floors of the Woolworth Building are being turned into condominiums, and the House of Morgan building, at Broad and Wall streets, recently reopened with 326 new condo units.

This isn't happening only among the elite in coastal cities. Officials in St. Louis discovered a few months ago that the downtown office vacancy rate had fallen to less than 15 percent--the lowest number in many years. This wasn't because of an increase in the number of office tenants looking for space. It was because of the amount of office space that had turned residential--more than 1.3 million square feet in the past several years. Perhaps the most conspicuous move involves the vacant 22-story Union Pacific building, a downtown landmark that employed more than 1,000 workers before the company moved those jobs to Omaha last year. When it is renovated, the building will contain a token number of office suites, but it will essentially be a residential tower, with 153 condominiums and 30 rental apartments.

A FISCAL SPIRAL

These are all striking changes, but are they really problems? After all, cities have changed their function repeatedly over time. If, 20 years from now, historic downtowns are mostly places to live, with diverse entertainment choices and a vibrant street life, and the offices and jobs exist somewhere else, who will really suffer?

This is just the question that is preoccupying Vancouver these days. There is a fair amount of evidence that, if nothing else, the municipal budget suffers in the long run. Commercial properties account for about 40 percent of Vancouver's current tax base, and they pay taxes at a higher rate than residential properties do, while costing less in services. As the balance tilts toward the condos, the burden on business goes up even more, potentially driving commercial tenants out of the central city and creating a dangerous fiscal spiral.

One of those who worries publicly about this is Vancouver's mayor, Sam Sullivan, elected last November on a generally pro-business platform. "Business per assessed value is now paying six times as much in taxes," Sullivan says. "We're making extra effort to nurture industry, but it's constantly under threat."

Most academics who have studied the issue agree that it's a genuine problem. "If we went totally residential, there would be some very significant tax consequences," says geographer Tom Hutton, who heads the Centre for Human Settlement at the University of British Columbia. "You can't be a purely residential consumption-based urban economy."

Hutton raises larger questions as well, about the mixture of uses and people that has defined downtowns for the past century: daytime office workers, retail shoppers, out-of-town visitors--and in some places, a modest number of residents. That combination, in varying proportions, has created the sense of energy and vitality that characterizes the very best downtowns. If the office and commercial element goes away, or even shrinks by a significant margin, will the energy still be there? Hutton doubts it. "It would be a funny place if it were purely residential," he says. "You'd have a weird mix of people who weren't tied to the city in any way." Indeed, Vancouver already has a substantial "reverse commuter" population that leaves the downtown condos in the morning to work in the suburbs. Some demographers think that by 2020, more people could be commuting out of downtown each day than into it.

All those points are echoed, not surprisingly, by the commercial real estate industry, which feels it has largely been left out of the boom that has come to Vancouver in the 21st century. "There's a reason New York or London has that financial power," says Wendy Waters, research director at Avison Young, one of Canada's largest commercial firms. "The reason you have downtown is for the synergies of businesses working together." Waters thinks her city is losing much of its global economic importance even as it wins consistent praise for its planning achievements.

One oddity of this situation is that, by common agreement, there is no shortage of commercial tenants who would willingly move in to new office space downtown. But there's little incentive to build it, and very few places to put it. The return on investment for condominiums is five times as high as the return on office space. Moreover, the sites are virtually all taken. Five years ago, there were a handful of sites on the downtown peninsula viewed as favorable for projects that would bring renewed commercial life to the heart of the city. One by one, they have gone condo.

DENSITY AND DEMAND

All these consequences, the exciting ones and the more worrisome ones, trace back to a decision that the city government made, without a great deal of fanfare or expectation, in the summer of 1991: to increase the allowable density for new residential units downtown, thus giving landlords the option of building condominiums on sites previously reserved for commercial use. If one event can be said to mark the beginning of the downtown revival that is moving across North America, it is the rezoning in Vancouver.

It was a painless decision, because the office market was flat and few commercial buildings would have been constructed in the early 1990s anyway. The city council and planning department thought it made sense to ease up on the rules and see if the market might respond. It did--with a deluge. "Overnight, we got these huge condo towers," says Gordon Price, who was on the council at the time. Within a relatively short time, 8 million square feet of downtown space had been converted to residential use.

This was in part the result of some strictly local demand factors. Vancouver's downtown has a magnificent setting, with blue water and snow-capped mountains visible in nearly every direction. Almost as important in the early 1990s was the arrival of thousands of affluent Asians who were used to high-rise urban living in Hong Kong and other distant places. Living First made perfect sense to them.

Still, its success was a revelation even to its creator, Larry Beasley, who had recently taken over as Vancouver's co-director of planning. "It worked well beyond what we dared to dream," Beasley was to say many years later.

On the other hand, he will tell you, "it isn't something that happened by accident." Beasley knew what sort of city he wanted. Raised in Las Vegas in the 1950s, he became a planner with a vision of someday creating an urban place that was everything Las Vegas wasn't. A disciple of Jane Jacobs and a student of early New Urbanist literature, he set a goal of creating "an urban lifestyle that will bring people back from their 50-year romance with the suburbs."

Beasley was also a remarkably good politician. As the condos began to sprout up all over the peninsula, generating enormous profits for an emerging corps of residential developers, he saw that the city was in a position to extract substantial concessions from those eager to erect the next tower. In exchange for a building permit--controlled much more tightly by government in Canadian cities than in America-- developers could be asked to provide all sorts of amenities: parks, waterfront walkways community centers, child care centers. This was the political core of Living First, a collaborative policy that brought huge profit to the residential real estate industry even as it brought tangible public benefits to those who lived downtown.

Living First didn't just change the appearance of Vancouver--it changed the structure of community power. Bob Rennie, a real estate marketing entrepreneur who became sales agent for most of the big new projects, began to play a role somewhat akin to the role Michael Milken played on Wall Street in the 1980s: If Rennie gave the word that a project would fly, it flew. The units usually sold out on the first day they became available, long before the buildings were even built. "He's the king of the condo market," says urban geographer David Ley, of the University of British Columbia. "He's the king of downtown." In 2005, Vancouver Magazine voted Rennie the most powerful man in the city. In that year's election, he bankrolled the campaigns of both mayoral candidates.

URBAN CHOREOGRAPHY

By 2000, Beasley had begun to articulate the principles of Living First in published articles and speeches throughout North America. He painted the portrait of a downtown that stressed walking and bicycling over automobiles, one in which moderate levels of congestion were accepted and even encouraged but where green space could be required by law in any new development, and developers could be forced to provide subsidized housing along with the luxury units. "You don't have to wait for lightning to strike," he told audiences in other cities. "You can choreograph this."

Of course, they couldn't choreograph the mountains and the ocean that give downtown Vancouver a spectacular natural setting. But Beasley is convinced that something like Living First can work in places that don't have his city's advantages. "The determinants for housing choice are not all that different," he says. "Households are looking for the same thing. It's that we haven't designed communities in America for families at high densities."

It's a safe bet, however, that no American city is going to look much like Vancouver anytime soon. Walking south across the downtown peninsula, one traverses what feels like a forest of green glass towers, hundreds of them, tall and slender to avoid spoiling the view from the upper floors. At the base of most of the towers, extending to the sidewalk, is a podium-like row of two and three-story townhouses. The towers have to be set back at least 12 feet from the sidewalk, so if you walk along the street and avoid looking up too far, you almost feel as if you're passing a row of medium-sized single family homes.

It's these townhouses, aimed at attracting families with children, that Beasley seems proudest of. There were exactly six of them in downtown Vancouver a decade ago; now there are more than 1,000. "It's the way we get domesticity and urbanism to the street," he says. He calls it "a humane domestic building form for high-density housing."

Not everyone likes the way downtown Vancouver looks. A local architect once called it a "sterile row of glassy towers marching down the street." A recent visiting critic chose to describe them as "cliffs of slivery ice on cloudy days." But it is undeniably original, attracts visitors from all over the world and wins awards every year for planning and architecture. When Beasley retires from his planning post later this year, to preach the Living First gospel in other places, he will arguably have staked a claim as one of the most important urban planners anywhere in the past half-century. And most of the city's residents seem comfortable with the dramatic change that has taken place.

Or, at least, they were until recently. Over the past year, they have begun to worry out loud that the blessings of Living First might be too good to be true. In particular, they have begun to use the "R" word--R for resort, the one thing nobody wants downtown Vancouver to become. "Resort," says the geographer Tom Hutton, "is a metaphor for a non-serious city."

The issue came up repeatedly one evening in May, at a public hearing convened to discuss the qualities citizens are looking for in the successors to Beasley and his co-director of planning, Ann McAfee, who also is retiring this summer. One panelist after another expressed concern for the future. "We've become victims of our own success," warned Leonie Sandercock, a prominent author and community planning scholar. Ray Spaxman, who preceded Beasley as city planner and in many ways set the stage for Living First, conceded that "cities get to the point where they are full of something. We're full of residential now."

These people might have reached their conclusion independently, but there's no question that the catalyst for Vancouver's present discontents is Trevor Boddy, the iconoclastic architect, journalist and critic who has made a virtual career out of debunking the Vancouver miracle.

In a series of newspaper columns, in architecture journals and in public speeches, Boddy has challenged almost every aspect of the Living First orthodoxy. He has warned American cities not to copy it. But the arrow that made a direct hit was his "Fool's Paradise" article in the Vancouver Sun in August 2005. "We may once have dreamed of taking our place in the list of the world's great cities," Boddy wrote, "but unless something is changed soon, to preserve and promote our downtown as a place to work, we will instead join Waikiki and Miami Beach on the list of resorts filling up with aging baby boomers lounging around their over-priced condos."

Nearly everyone in the city's planning and development circles insists that Trevor Boddy is a little over the top, but they are also starting to accept some of his ideas, which were considered little more than eccentric when he began expressing them a few years ago.

He has certainly gotten the city government's attention. The planning department has imposed what amounts to a moratorium on new residential construction in key areas of the downtown peninsula, while it conducts a 15-month study of the city's future prospects and needs. "We've drawn a line in the sand for commerce," Mayor Sullivan says, "and we aren't allowing condos within there." Sullivan realizes a fiat-like prohibition on condos can't work forever, but he's hopeful that in a cooler atmosphere, the city might be able to design incentives for more of the mixed-use residential and office projects that few developers have been willing to take on so far. Bob Rennie, the Condo King, says flatly that this is the answer. "If you mix uses," Rennie proclaims, "it works."

Boddy derides the moratorium idea as "closing the barn door after the office horses had long departed." Beasley insists that it is the right approach at the right time. "We dealt with this issue before it became a crisis," he says. "Five years from now, it might have been a crisis." But timing aside, the new policy does seem to mark the beginning of a rough consensus among most of the major players involved: Vancouver's experiment has been a success, but it couldn't go on unchecked without doing serious damage.

No American city is close to where Vancouver is on the downtown- living front. But if you plot the changes in demographics over the past few years--not only in New York and Philadelphia but also in the less trendy big cities--it isn't hard to believe that the "Vancouver question" will be at the center of policy and planning debates. "I don't know if you could replicate this in Cleveland," says Tom Hutton. "But it could happen. It might take a Larry Beasley. But it could happen eventually."

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