Alphabet’s Waterfront Project in Toronto Runs into Turbulence

Alphabet’s Sidewalk Labs has run into turbulence on the way towards the creation of a dramatic new waterfront neighborhood in Toronto. The project may still get a greenlight, but tech players hoping to leverage the next wave of urban development would do well to note its problems as a case study.

Tech players, of course, are envisioning cities as next wave customers for their increasingly, full-bodied platforms. These tie together such features as speedy and comprehensive data connectivity and imaging (including 5G); AI-based services driving commerce, education, infrastructure, safety and conservation; and self-driving transportation.

Futuristic features that would move tech players into new areas associated with Internet of Things are also envisioned. These would include such things as streets that could convert to arcades on demand, heated bike lines and the use of pre-manufactured housing materials.

All of this was meant to come together in Toronto. Alphabet’s Sidewalk — a sister company to Google — had won the right in October 2017 to develop a $1.3 Trillion Master Plan for the city’s landfill dominated waterfront a couple of miles from downtown. The project was promoted as the “world’s first neighborhood built from the Internet up.”

Initially, it looked like a win-win for both Toronto and Sidewalk. Sidewalk would use the city as a social lab; bring new value and even fun to real estate and services; and establish a stunning headquarters on the water for Google Canada.

But major political opposition began bubbling up during the interim. Three major issues emerged: 1) Toronto had emerged as a tech bubble market that didn’t require so much help from a corporation; 2) housing costs had gone through the roof, requiring a shift in priorities; and 3) the costs of adding many miles of public transportation – at the public expense — were much higher than originally estimated.

In light of these issues, Sidewalk adapted its plan. It cut back on several plan proponents that would have driven a lot of its profits, including a huge expansion of the project beyond its original footprint; and a major role in real estate sales. At the same time, Sidewalk promised to add thousands of housing units priced at 40 percent below market levels.

Given increasingly heated privacy concerns, Sidewalk also agreed to cut back on its hopes to leverage personal data, such as facial recognition, location information; and transaction behavior. These cuts, especially, would seem to change the equation for Sidewalk, a pioneer in “sustainable” urban planning (see my 2015 post on LinkNYC, a free WiFi project supported by digital out of home advertising.)

Do all these cutbacks leave enough substance for Sidewalk, and Toronto, to go forward? Being part of Toronto’s exciting new waterfront would certainly have its appeal for Google Canada. The project would also bring a new awareness to Google Fiber, the broadband service that has stalled in other markets.

Most of the other project elements, don’t really appear to bring a lot of core value to Sidewalk, or Alphabet. That said, it doesn’t pay to underestimate Alphabet’s initiative and its comprehensive vision (think YouTube). While Alphabet primarily remains an advertising and commerce company, initiatives into major categories such as health, transportation and utilities could lead to important new directions.

Ultimately, it is the political realities that may weigh this project down a la Amazon’s HQ2 in New York, where opponents saw Amazon as the recipient of undeserved tax subsidies (i.e. the taxpayer funded CEO heli-pad) and the likely driver of soulless gentrification; overheated commercial and residential real estate markets; and unsustainable traffic issues.

The Toronto project may still happen. Being backed by Alphabet means that there is a lot of leeway in any plan. But given all the changes that are being requires, will it still be worth undertaking? My gut is that Alphabet would do better in a private development, like a high-end mall.