The Gentrification Calculation

Toronto’s Parkdale: Newer and much improved—Photograph by Jaime Hogge

When Nicole Babin chanced opening a secondhand clothing shop on the western fringe of Parkdale, a Toronto neighbourhood long known for rooming houses, prostitutes and cheque-cashing stores, in 2010, she was prepared for some excitement. Not as much as she got when a heroin user entered her store, Common Sort, and tried to steal a belt to wrap around his arm while shooting up. "That was definitely one of those moments," says Babin, "where I thought, 'This is a colourful neighbourhood.'"

Babin is what's known as a "retail pioneer": a brave entrepreneur who moves into an "area in transition" and waits to harvest the fruits of gentrification. For those who get the time and place right, opening a business in an underdeveloped neighbourhood can pay off big.

Such opportunities are at hand in bigger cities across Canada, says Elvin Wyly, a geography professor at the University of British Columbia and co-author of Gentrification, the first textbook on the topic. The transformation of scruffy streets and unappealing real estate into precincts of the bourgeoisie is especially strong in Toronto, Vancouver and Montreal, where population growth is driving demand for downtown real estate and pushing low-income dwellers out of once undesirable neighbourhoods.

Wyly says that process can take anywhere from five to 10 years. For businesses that get in too early, the wait could be fatal. Laggards, on the other hand, get a fully developed neighbourhood dotted with Land Rovers and Bugaboo strollers—and the high rents that come with higher-income clientele.

Fortunately, there's a recognizable pattern to gentrification. Generally, Wyly says, it begins when artists move into poor neighbourhoods looking for cheap studio spaces in which they can live and work. The artists are followed by establishments geared toward that community, such as galleries, cafes and trendy shops, and bars also attracted by the cheap rents. "It takes a lot of guts to move into an area with an uncertain future," says Wyly. "Often, these people are dreamers; they believe in the mission of starting a truly unique business or owning the best coffee shop. It's a passion project."

Next come what Wyly calls the "early adopters"—younger, wealthy professionals who buy old houses and studio spaces and renovate them. He says it's also common to see a wave of creative businesses moving into the up-and-coming area—graphic-design houses, ad agencies and architects. Finally, once the pattern is established, the chain retailers and condo developers start to move in, housing prices rise and the artists who started the wave—and the poor people who lived there in the first place— are forced out.

But even as incomes rise, entrepreneurs in gentrifying neighbourhoods must stay on their toes. In 2005, Julie Yoo joined the ranks of retail pioneers when she opened I Miss You, a vintage-clothing store, on Toronto's Ossington Avenue. "It was my first retail venture," says Yoo, who, with her 60-lb. Rottweiler, welcomed just four or five customers a day. "I had no idea if it would work."

Then, a few bars and cafes opened and a handful of art galleries moved in; by 2007, Yoo was on the most happening strip in Toronto's West End. The condo developers soon followed, sparking a struggle for parking spots. In fact, Yoo moved out of the apartment above her shop in 2009, when the nightlife became too much to handle.

That's not the only change gentrification has forced Yoo to make. She also has adjusted her inventory to stay in lockstep with the strip's new residents. Yoo used to carry a collection of unique, "pure vintage" pieces. Now, she brings in a lot of second-hand items bearing brand names such as Chanel and Tom Ford, which are more popular with the clubby trendsters who gravitate to the strip these days. "You have to be prepared to change or move out of the area," Yoo says. So far, so good: Yoo now serves about 100 customers a day on her busiest days.

Entrepreneurs looking for the next hot neighbourhood should remember this idiom: the apple doesn't fall far from the tree. Districts adjacent to gentrifying neighbourhoods are prime candidates for gentrification themselves, as rising rents push out the pioneers.

For many, the arrival of Starbucks marks the tipping point and time to move on. But not for Yoo, who was "delighted" when skinny no-foam lattes hit Ossington. "It means more foot traffic and a different kind of clientele," she says. "I was delighted."