View from the ‘Loo: How downtown Kitchener got its mojo working Anthony Reinhart April 4, 2013 View from the ‘Loo If you’ve ever tried to start a campfire in the rain, you’ll appreciate the challenge the City of Kitchener has faced in igniting the revival of its downtown core. Over a three-decade period starting in the early 1970s, the once-roaring commercial heart of Waterloo Region faded to flickering embers, starved of oxygen by the suburbanization of shopping and other key aspects of life. It seemed nothing the city did could reverse the decline; many residents simply turned away, and some have never come back (as a born-and-bred townie, I know more of them than I care to admit). Today, the downtown is on its way back to full blaze, and tech companies – specifically those in the region’s exploding startup sector – have become a key source of kindling for the fire. The most recent example is Industry Corporation, a budding entertainment conglomerate involved in game development, music, talent management and custom interactive projects. Last Thursday, Industry moved out of the Communitech Hub in the Tannery – where it spent 18 months growing from a three-person operation with no business to a full-time staff of 12 with plenty of customers – and into a larger space at 305 King St. W., a stone’s throw away. Last year, fast-growing TribeHR moved into the same building. The company, profiled in last weekend’s Record, left the Hub around the same time as Vidyard, another venture-backed startup on a rapid growth curve. Vidyard bought a house on Oak Street just behind the Tannery last fall, painted it company green and moved in, but has already outgrown it and will soon occupy the top floor of the historic Simpson Block at 117 King St. W. Meanwhile, Thalmic Labs will soon return to downtown Kitchener from a successful stint in California’s Y Combinator accelerator program to build on the success of its MYO gesture-control wristband, a potential world-changer. Andrew Matlock, Industry Corp.’s CEO and creative director, told me his team looked at offices all over Kitchener-Waterloo, but a spot near the Hub just made sense – and not just because he already lives nearby. “I think it’s the place to be,” Matlock said. “The fact that we chose to stay here and close to all the action says a lot about what’s going on.” I had a similar conversation with Vidyard CEO Michael Litt a couple of weeks ago when the company announced it had raised a $6-million investment round. Litt, who also lives downtown, said Vidyard’s new space – which will accommodate up to 60 workers – will allow his current team of 22 to focus on scaling up while staying close to the energy and resources of the Hub. Sudden as these developments might seem, they’re actually the fruit of more than a decade of spadework by a group of people who shared some key traits: vision, collaborative spirit, a cosmopolitan outlook and the courage to think big. I sat down this week with one of them – Rod Regier, Kitchener’s executive director of economic development – to gain some insight into the core’s nascent transformation, and what it means for the future. “It wasn’t really until 2003-2004 that things started to change, and they changed quite dramatically for a couple of reasons,” Regier told me. The Canadian dollar, which had traded as low as 64 cents US, began to rise and didn’t look back, which threatened our export-dependent manufacturing sector. At the same time, Kitchener was running out of easily developable industrial land. “People were saying, ‘Holy cow, what’s Plan B?’” Regier said. Meanwhile, American urban studies theorist Richard Florida had just released The Rise of the Creative Class, an influential (and not uncontroversial) book on how knowledge workers had become key catalysts for economic renewal in the cores of post-industrial cities. Kitchener was faced with a couple of choices: Develop new industrial lots on less-than-ideal, rolling land on its fringe at an unfeasibly high cost of $90 million, or invest in bringing jobs back to the downtown. “The downtown used to be the centre of our economy, so how can we reinvent it in a way that plays that role in the future?” Regier said of the thinking behind the latter. After study and public consultation, council established a $110-million economic development investment fund aimed at bringing knowledge workers to the core. Investments have included $6.5 million for Wilfrid Laurier University to move its school of social work into the former St. Jerome’s High School on Duke Street; $30 million for the University of Waterloo’s pharmacy school at King and Victoria streets; $1.7 million for a new downtown community centre and millions more on streetscape and parking improvements. The first major private sector development to capitalize on the city’s investments was the Kaufman Lofts project, kitty-corner to the pharmacy school. The success of the project, by Andrin Homes, makes it look like a no-brainer today, but it appeared to be anything but a sure thing at the time, Regier said. “Kitchener had market analysis saying there was no market for condominium living downtown,” he said, “so these guys really took a flier on that project. They did their own market research and it turned out to be better than ours, and the rest is history, as they say.” Demand was so strong that Andrin added two levels to the top of the sprawling former footwear factory. At the same time, a regional art and technology working group, facilitated by Silvia di Donato, Kitchener’s then-manager of downtown development (and a fine blues musician in her spare time), had been holding discussions. “We found ourselves thinking, ‘You know what? We’ve got this fantastic group of global digital media companies, either on the device side or on the software side, and we’ve got this arts community and this cool downtown. What the heck else can we do with this?’” Regier said. Gerry Remers, president and COO of Kitchener-based Christie Digital Systems, was among the first to propose a digital media innovation hub. Among those around the table were Communitech CEO Iain Klugman, DALSA CEO Brian Doody, Desire2Learn CEO John Baker, UW dean of arts Ken Coates, and Regier. “Iain picked up that ball and ran with it,” Regier said, adding that Klugman wasn’t satisfied with locating this new hub in 10,000 square feet inside a former post office building on Gaukel Street. “He said, ‘It’s got to be bigger. I need 30,000 square feet.’” The city had nothing that big to offer, but when Cadan Inc. of Toronto bought the sprawling former Lang Tannery in 2007 with an ambitious plan to redevelop it, Klugman said ‘It’s got to be there,’ Regier said. Kitchener put up $500,000 to get the ball rolling – “It wasn’t enough to do anything, but it was too much too ignore,” Regier recalled – and Communitech set off to raise $107 million in private and public funds to create the Communitech Hub. It opened in the Tannery in October of 2010 with 30,000 square feet, and added 14,000 more, well ahead of schedule due to overwhelming demand, in February of 2012. “For us, it fit perfectly into a vision of a highly competitive, creative, energetic, urban economy where people lived; where people participated in café culture, and where the arts scene was part of a vibrant, creative community,” Regier said. “And the economic-development expression of that creative community was innovation, and the development of globally competitive technology companies.” So far, so good. Since the Hub opened, startup activity in Waterloo Region has exploded, with an average of one new company appearing each day over the past two years. Soon-to-be released figures will show just how strong the economic impact of this activity has been in terms of new jobs created, capital raised, and tax revenue generated per public dollar invested (spoiler alert: the numbers are all high). It was only a matter of time before the effects began to spill into the downtown beyond the Tannery, as employees keen to live and play in the core, and not just work there and head home to the suburbs, began to appear in increasing numbers. Again, it all looks like a no-brainer in hindsight, but nothing was guaranteed when there was only a vision to work with. It took Cadan three years, $30 million and a lot of decontamination work just to get the Tannery site habitable, and many a cynic would have scoffed at the idea of condos in downtown Kitchener a decade ago. Now, between the Kaufman Lofts and the Tannery, a soaring condo tower is planned for 1 Victoria St., while a short distance away between the cores of Kitchener and Waterloo, a large, inner-city condo development called Victoria Common is planned. Meanwhile, on the last derelict corner of King and Victoria, a multimodal transit hub is planned, where the region’s future light rail system, Grand River Transit buses and intercity buses and trains will converge. “For us, it’s a dream come true,” Regier said of the cascading results of the city’s $110-million gamble. “We had confidence in the idea, and we knew that ultimately, it was brain power and creativity that drove the creative economy. But, what we didn’t know was whether we were going to be successful at attracting the level of creative energy to our downtown that would enable us to compete effectively, or whether people would buy into the vision.” Clearly, people have bought into the vision and continue to do so, but there is still massive untapped potential downtown. That potential resides both in empty space and in collaborative opportunities between the technology, arts and culture communities. Regier is among those keenest to unlock it. “In five years’ time, I’d like to see 15 or 20 floors of downtown King Street full; a couple of hundred startups, four or five hundred startup employees working above retail space on King and some of the adjacent streets,” he said. “What we’re talking about, 10 to 15 years from now, is a tech cluster in downtown Kitchener with 15,000 to 20,000 employees generating $1.2 to $1.5 billion a year in personal income,” Regier added, “and creating one of the most dynamic concentrations of tech and creative talent anywhere in Canada.” Achieving this will no doubt require some creative thinking around how we live and move about this community. More downtown workers will likely mean less surface parking than there is now, because new buildings have to go somewhere – and new buildings are a far more productive use of land than parking lots. Less parking means less driving, which in turn means more people taking transit or cycling to work, or living downtown, within walking distance. In short, it means change, from the big small town we’ve been, to the small big city we’re becoming. Change will undoubtedly unsettle some, and come with costs as well as benefits – but there’s little doubt it will come as the region grows and entrepreneurial activity accelerates. For the tech sector, which lives and breathes change, it should all be music to our ears. That certainly seems to be the case at Kitchener City Hall. “We feel good about the investment of time and effort and money that’s been made so far, but the more exciting thing is that we really think we’re just getting started here,” Regier said. “This is just the beginning, and the future is orders of magnitude more exciting than what we’ve got going on right now.” Anthony Reinhart is Communitech’s senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.