Community service agencies that lease commercial space in Toronto saw occupancy costs for their venues jump by an average of 57 per cent in the years between 2011 and 2021. A newly released study examines the real estate footprint of organizations serving vulnerable populations in Toronto and neighbouring Peel and York Regions, and heralds the launch of United Way Greater Toronto’s $100-million fundraising initiative to help accommodate the sector.

“United Way Greater Toronto’s goal is to create, facilitate and support community real estate infrastructure that sustains and empowers neighbourhoods across the region for the long term,” says Ruth Crammond, a vice president with the organization. “We are leveraging the power of philanthropy, partnerships and people to ensure equitable community development and secure essential services.”

Funds raised through the planned 10-year campaign — dubbed the Community Real Estate Initiative — will go toward the development of up to 10 new community hubs that provide operational space for community agencies and house other health care, recreational or government services in the same facility. United Way Greater Toronto (UWGT) will also explore the feasibility of a new loan fund to help agencies acquire or renovate space, and will collaborate with the University of Toronto’s Infrastructure Institute to develop guidance on real estate development and facilities management for the community service sector.

Researchers at the Infrastructure Institute undertook the study, entitled Essential Spaces, Real (Estate) Solutions for Community Needs, to gauge how community service agencies are acquiring, operating and retaining suitable space to interact with their clients. Findings reveal that service providers are now often simultaneously grappling with a growing client load and an accommodations squeeze.

“With significant anticipated population growth and densification affecting neighbourhood change and impacting an increasingly volatile commercial real estate market, agencies are going beyond their capacities to meet growing community needs in spaces that areoften unsuitable and unaffordable,” the report’s executive summary states. “Strengthening the sector requires supporting sector capacity to pursue community-owned real estate (CORE) while increasing the stability of community-leased real estate (CLRE) spaces through creative non-market leasing and ownership models, especially to address neighbourhoods with service gaps and intensifying neighbourhoods likely to undergo change.”

The study looks at registered charities within Toronto, Peel and York Region that deliver:

• career development;
• community health services;
• educational supports;
• provision of free meals/food;
• free distribution of goods;
• housing supports;
• professional services for structurally disadvantaged groups;
• settlement services; or
• other community services.

The locales of each service centre were plotted geospatially to identify the population density and average income of nearby populations, as well as their proximity to major intersections and existing and future transit stations. Service spaces were categorized by tenure type — owned, private market rental or leased from public or non-profit entities — and occupancy costs were assessed as a percentage of the organization’s total revenue and for year-over-year changes over a 10-year period.

A large majority of the organizations (70 per cent) are renters. Two-thirds provide services in a single location, but 20 per cent have upwards of four venues. Typically, they operate in more densely populated areas with at least 1,000 residents per square kilometre and are more numerous within Census tract areas identified as higher-need populations. About 30 per cent of service centres in the study were deemed to be within a walkable distance from an existing transit system.

Organizations that own their facilities generally pay a larger percentage of their total revenue on occupancy costs, including mortgage, maintenance and utilities. (Registered charities are exempt from property tax.) However, on average, occupancy costs have been decreased as a percentage of revenue costs over the past 10 years in Toronto, Peel and York. This could be attributable to rising revenues, declining occupancy costs with the paydown of mortgages or a combination of the two factors.

The dollar amount spent on occupancy costs has increased for both owners and renters in the sector, with renters typically subject to a steeper upward spike. Across the study area, ownership occupancy costs rose by an average of 16 per cent over the 10 years between 2011 and 2021.

Meanwhile, the 26 per cent average increase in rental occupancy costs hides a dramatic experiential difference among the three municipals. Lesser average increases of 13 per cent in York and 9 per cent in Peel balance out Toronto’s 57 per cent jump.

Even so, average rental occupancy costs are now largely comparable in York and Toronto, hovering in the range of $160,000 annually in 2021. The average in Peel was relatively more modest at around $110,000.

“Toronto is the only region where occupancy costs for rented spaces continue to grow in relation to overall revenues, indicating an expensive real estate market where growing costs for CLRE can be expected,” the report recounts.

The researchers also flag a couple worrisome trends. One quarter of rented agency space is located within a walkable distance of future transit stations, suggesting the sites will face rent escalation pressures once the new transit lines are open and real estate development pressures pick up. As well, there is evidence that service agencies face discrimination in the rental marketplace.

“Case study interviewees spoke of difficulties leasing from private property owners due to stigma associated with their services and service users. Property owners routinely reject lease applications from agencies for being an ‘incompatible use’ of the space. NIMBYism is another often cited challenge,” the report states.

Those case studies provide six examples of facilities management experiences, looking at three Toronto-based agencies, two in York Region (in Newmarket and Richmond Hill) and one in Peel Region (in Brampton). The report also makes recommendations about preferred operational models and required supports.