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The Path Forward for Canada's Subterranean Retail World

Montreal and Toronto Fought for Decades for Underground Supremacy

He was a critical architect behind Toronto's 30-kilometre underground shopping network, the world's largest by some accounts. Now, more than three decades later, Robert Millward recalls the battle Canada's most populous city waged with Montreal for subterranean supremacy.

But as Toronto's commissioner of planning and development from 1987 to 1996 wanders the mostly deserted home to 3.7 million square feet of retail known as the PATH beneath city office towers on a Friday afternoon, he realizes Canada's two largest cities have a common enemy: office workers who want to stay home.

"This has always worked because of the people in the buildings above the PATH," said Millward. He wonders whether some new direction might be needed to create a buzz in the connected underground that offers more than 200,000 business-day commuters, tourists, and residents a respite from both the snowy weather that can extend into April and the increasingly hot summers.

Office use in Canada remains among the world's lowest, with Toronto leading all domestic cities. This means these underground areas sometimes fall silent, raising the question of whether to wait for the 9-to-5 crowd to return or imagine a new underground with attractions and residents to lure more people below.

Change will take work. The PATH remains a collection of retail stores underneath 75 buildings, with almost as many landlords, brought together by a city that foots the bill to connect them. The stakeholders need to agree on a common vision, no easy feat in a disparate system where building ownership includes real estate under the structures in a network of retail basements connected by a public concourse.

Millward is accompanied on his Friday visit by his former colleague, Hugh Mansfield, president of communications company Bizcomgroup and one-time special assistant to Toronto Mayor June Rowlands from 1991-94. They take a break from the PATH tour to sit down for lunch, but the buzz at Jump Restaurant makes conversations hard to hear, an audible increase in the activity from just a year earlier. Even so, reservations are no longer impossible to find on a Friday afternoon.

"Maybe we need to get some cultural, social, and community events happening. We can begin to think of different things. Residential connected to the path could be part of it," said Millward.

Montreal is already taking the latter path, connecting its first apartment building to the underground system and reducing reliance on office workers.

Meanwhile, in Toronto's PATH, some residents have already hooked up to the underground system with borders that extend to roughly near Edward Street to the north, Queens Quay to the south, Victoria and Yonge streets to the east and John Street to the west.

Ali Baker, a sales representative and vice president of retail sales and leasing with Avison Young, said the PATH has seen solid retail activity as the pandemic waned. But he concedes a direct correlation exists between a return to the office and traffic.

"It's almost up to pre-pandemic levels Tuesday to Thursday," said Baker, adding there is hope that back-to-office mandates will increase as the year progresses. "Mondays and Fridays are still quiet."

She said food operators have been generating leasing activity, but the new reality is traffic peaks just three days a week.

"There is a want and need for services like nail salons, fitness. When people are in the office, they want to do the things they would typically do at home," said Baker. "I think we will see a surge where more services come into the PATH."

Today, there is a broader discussion about the level of traffic on the underground and the effect on rental rates, she said.

"I don't think it will have a long-term impact on the PATH, but I do know tenants and landlords have to work together more than ever right now to get deals done that work for tenants in the short-term while we watch the office recovery continue," said Baker.

Underground Golfing?

The other big question is whether some of those tenants should change. Paul Fisher, president, chief executive, and managing partner of Modern Golf, an indoor virtual golf location that opened a location in the PATH in March 2023, saw an opportunity downtown as the pandemic eased.

"We know our core customer is downtown, and the landlord at First Canadian Place was very open to giving us a try," said Fisher.

The demand has been so strong that Modern Golf is expanding from its current location with 2,800 square feet to a space with 9,000 square feet and nine bays for virtual golfing.

"You can feel how everything has picked up in traffic from where it was. People are a little negative on the PATH. It won't be what it was 10 years ago; times have changed, but the reality is there is a lot of walk-by traffic still," said Fisher. "Sure, there is no one there in the evenings. But it was always like this."

Even his new location, planned to include a bar and food to encourage people to hang out, will have a hard stop at 8 p.m. "We don't even want to open late," said Fisher. "There is a cost of running a business more hours."

The proof the underground still matters has emerged as Toronto's financial core has moved south toward the Lake Ontario waterfront and the central transit hub at Union Station. Office developers still demand a connection to the underground.

Hugh Mansfield, left, and Robert Millward worked for the city of Toronto when the PATH first came together. (Marcus Oleniuk/CoStar)

"I remember when we had to talk them all into the plan to connect" their buildings," said Millward. "It was not something many were interested in. They didn't want competition with rival retail landlords. Then there were all the arguments over signage. Now everybody demands to be connected."

The process took years to link up with participants wanting to ensure their underground retail was promoted, even as the city picked up the actual connection costs. Eventually, it became second nature for commuters and office workers to shop underground, with $1.7 billion in annual sales generated before the pandemic.

These days, Toronto's PATH is affected by low return-to-office mandates as the COVID-19 fallout and work-from-home preferences continue to hurt retailers.

A Statistics Canada study released in January showed that the percentage of Canadians usually working from home had risen sharply since the mid-2010s, when it was 7.1% in May 2016. StatsCan said the percentage grew to a peak of 40% in April 2020 before declining to 24.3% in May 2021; by May 2023, it was down to 20.1%.

The executive director of the Toronto Financial District Business Improvement Area, Grant Humes, concedes the PATH can be "a little slow on Mondays and Fridays."

However, he added that it still fills its role as an important feature for office workers.

"There is a natural correlation between the level of [retail activity] and the number of office workers," said Humes, noting when office occupancy fell to near zero during the worst of the pandemic, retail followed.

Office Workers Return — Slowly

Humes points to an index by The Strategic Regional Research Alliance that found as of March 1, average occupancy as a percentage of pre-pandemic occupancy was 63%, the highest level since the pandemic.

The day of the week continues to see divergence, with the peak day being Wednesday at 73% average occupancy and the slowest day now Friday at 40%.

Pedestrians can enter the Montreal system from above ground to avoid snow that can continue to fall into the spring. (Olivier Gariépy/CoStar)

"There is just worldwide, Tuesday, Wednesday, Thursday return. The talk of the death of the office and tumbleweeds" is gone, Humes said.

His business improvement area represents two-thirds of the PATH, and he said about 40 new businesses have opened in a period of a few months. While it continues to be the busiest pedestrian thoroughfare in the city, it also added three recent locations during the pandemic: 16 York St., CIBC Square, and the Bay Adelaide Centre.

Annie Houle, head of Canada Ivanhoé Cambridge, the real estate arm of Caisse de dépôt et placement du Québec, the developer of CIBC Square with Hines, said the two towers being connected to the PATH was a must.

"It was critical to bring tenants," said Houle. "It is connected to the bus station, the train terminal and everything."

In Montreal, pedestrian traffic in the 33 kilometres of the underground city might be diminished, but the tunnels that link metro stations, retail outlets, and offices continue to expand with new properties, increasingly hooked up to residential.

Image of Sebastien Hylands, Vice President of Kevric inside of Montreal's underground pedestrian walkway called RESO, La Ville Souterraine featuring shops, malls, offices, hotels, museums and entertainment venues. It is also the largest underground complex in the world. (Olivier Gariépy/CoStar)
Sebastien Hylands, vice president of Kevric, inside Montreal's underground pedestrian walkway. (Olivier Gariépy/CoStar)

Developer Sebastien Hylands lives and works in buildings connected by the network while operating a company that manages and owns several properties in the system.

Hylands concedes that Quebec's stringent stay-at-home pandemic mandates thinned the pedestrian herds, most noticeably on two weekdays, just like in Toronto.

"You don't have as steady a stream of people. That's the big challenge we're having," he said.

Montreal System's Struggle

The decline of downtown commuter traffic has created unprecedented challenges for what is branded as the RESO, a twist on the French word reseau, or network.

It's a system built on a massive hole in the heart of the city left over from a rail tunnel completed in 1918 that attracted development when Canadian National Railway boss Donald Gordon struck a deal with developer William Zekendorf to build Place Ville Marie in 1955. Architect Vincent Ponte helped design the initial stage of the Montreal system in the early 1960s based on his notion that pedestrians and motor vehicles should occupy separate levels of the city, while wanting office buildings to be linked for executives to meet easily.

The start of Montreal's underground system was a set of tunnels linking Central Station and the adjacent Queen Elizabeth Hotel to Place Bonaventure and the Place Ville Marie office tower in December 1962. Three years later, Montreal saw a boom in infrastructure advances in preparation for the World's Fair, Expo 67, and the opening of the city's metro system kicked the project into overdrive.

The Montreal underground network took its most significant step forward in 1993 when Cadillac Fairview invested $10 million and overcame infrastructure obstacles in the form of sewers and gas pipes to connect the northern section of the network to the southern section anchored by Place Ville Marie. Development has continued in the southeastern portion, as several properties near Square Victoria were added.

Montreal's underground system now roughly runs near Sherbrooke Street to the north, Saint Jacques Street to the south, Clark Street to the east and Drummond Street to the west.

Walking on a wet Montreal day, Hylands said parts of the network, with its seemingly endless brightly lit hallways linking metro stations to buildings, do not always match the expectations of tourists expecting to see attractive retail outlets at every turn. He said the enduring appeal is more meteorological than architectural. “It’s mostly intended to get people out of the inclement weather,” added Hylands, whose company is investing in revamping an office tower on the network at 600 de la Gauchetière W.

In Toronto, staying connected to the underground remains a priority for Mansfield and, to this day, he will only lease in an office connected to the PATH.

"I remember the mayor saying we have no trucks, no cranes [because of the real estate crash], and we need to do a better job marketing the city," he said, explaining the impetus. "We are near 2 million people, but it's bloody cold."

Mansfield worked closely with Millard in planning, and both chuckled a bit about the rivalry with Montreal, a battle that saw that city get the first major league baseball team and host an Olympics.

"For a while, it was always who had the biggest, and people would go back and forth and brag we just added another three kilometres," said Millard.

Navigating the Maze

Toronto's PATH system, spanning 3.7 million square feet and generating about $1.7 billion in annual sales, connects more than 75 buildings, six subway stations and provides access to attractions including the Hockey Hall of Fame, Roy Thomson Hall and the Scotiabank Arena that's home to professional hockey's Toronto Maple Leafs and pro basketball's Toronto Raptors.

Montreal's underground city spans 32 kilometres (20 miles) and links 60 buildings, 10 metro stations, 1,200 offices, 2,000 stores, 200 restaurants and seven hotels and it is visited by an estimated 500,000 users per day. Their historic milestones span more than a century from conception to the current configuration.

The Toronto PATH has always been a circuitous system with no actual street grid, and one of the significant challenges has been directing people through what is a maze where visitors can lose track of what's above ground at any time.

"The downtown is not a linear thing. It is a series of blocks east and west," said Millard, who recalls the city brought stakeholders together and created a non-profit corporation that connected it all.

Even today, the length of the system amazes people who, unlike Mansfield, don't have a map hardwired inside their heads.

"Do you have any idea how we get to Sheraton," a desperate couple asks Mansfield, a total stranger, about the hotel that's directly across from his old stomping grounds at city hall but can be traversed underground on a wet, cold day.

With directions from the underground veteran, the couple keeps heading north on a system that Mansfield and Millard once dreamed would stretch even further.

Millward said what seems like increasingly scorching summer heat may prove to be a bonus to the system. "People have always used it to get out of the sun," he said.

Technically, travel is possible between Canada's two largest cities by train without going outside as both are connected to a main commuter terminal attached to the underground cities.

View from inside of Montreal's underground pedestrian walkway called RESO, La Ville Souterraine featuring shops, malls, offices, hotels, museums and entertainment venues. It is also the largest underground complex in the world. (Olivier Gariépy/CoStar)
The view from inside Montreal's underground called RESO, featuring shops, offices, hotels and entertainment venues. (Olivier Gariépy/CoStar)

As is the case in Toronto, said Brett Miller, chief executive of Montreal-based Canderel Group, businesses still express a desire to be connected to the underground maze in Quebec's largest city.

"Buildings connected to the network definitely are more attractive to tenants," he told CoStar via email.

Miller's company owns several significant properties on the network, including residential towers near the Bell Centre arena.

Different World Underground

Pieter Sijpkes, a McGill University architecture professor, notes that other rules appear to govern the climate-controlled parallel universe underground.

While sitting on one of the few benches in Complexe Desjardins, a tunnel-linked structure initially designed as a public meeting space, he notes the properties may look like a city but have private ownership that can decide who to permit on the premises at any given time.

"We are sitting on a bench here as if we're sitting in a park, but here you are subject to the authorities, who might not like you," he said.

Now 80, Skipjes moved to Montreal in 1966, just months before the underground city started. In addition to academic research on the properties, he still conducts walking tours of the downtown tunnel network, excursions he said take about two hours.

"Some believed the tunnels would suck the life off the street, but I concluded that it's a symbiosis. One feeds the other. On a nice day, people are outside. On bad days, we are down here," he said.

Image of Pieter Sijpkes, Professor of Architecture at McGill University on a bench inside of Montreal's underground pedestrian walkway called RESO, La Ville Souterraine featuring shops, malls, offices, hotels, museums and entertainment venues. It is also the largest underground complex in the world. (Olivier Gariépy/CoStar)
Pieter Sijpkes, professor of architecture at McGill University, on a bench inside Montreal's underground pedestrian walkway. (Olivier Gariépy/CoStar)

As is the case in Toronto, a lack of authority overseeing the Montreal underground network has led to some confusion.

Two decades ago, an initiative briefly addressed that, explained Martine Bouchard, whose company, Belanger Branding Design, oversaw an upgrade effort.

Belanger Branding founder Jules Belanger held a well-attended presentation in 2003 on the project aimed at making the corridors more navigable.

The owners signed a commitment to update their maps and signs, but it did not last.

"They didn't keep them up to date," said Bouchard in an interview. "They asked, 'Why should I be giving directions to a place further down the line?'"

The City of Montreal later took up the effort with little success.

Sijpkes and Hylands are among those who say the future of Montreal's underground city relies on adding more residential units to the system, but one problem is that while the housing on the network might be attractive to young professionals, families with young children might find the lack of resources problematic.

"There has to be a reason you want to live downtown," said Hylands. "That's why we need schools, libraries and other public services."

Ivanhoe Cambridge's Houle said it might be time for landlords to think together as if they were one mall.

Pointing out the biggest struggle for transformation in both cities, Houle said "it's hard for one landlord to just say we are going to do this because it has to be connected to that piece and this piece."

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