What is vertical phasing in real estate developments

and what it means for cities

7 min readJan 6, 2021

As an architect I want it all when it comes to urban planning. I want cities to be vibrant, pedestrian friendly, dense, flexible, affordable, sustainable and with lots of green open spaces.

The standard real estate narrative says that housing prices go up because the offer can’t cope with the demand. Developers try to put more product in the market and cities start to get denser and denser.

While towers start to pop-up in every single lot, the distance between towers starts to diminish. This results in a case where neighbours across the street can see you clearly in plain sight and, as a consequence, a feeling of a lack of privacy arises.

At street level, people start to complain about the lack of open spaces and about the fact that from the street you can only see glass towers. The sky is covered by towers and the streets and parks are in permanent shadow. How did we ended up like this? — people wonder.

This is the reality of many cities and it will require a lot of thought and years to reverse this reality and bring some air, light and public spaces to them.

At the same time, we have cities with big amounts of land that have been growing as a sprawl. For municipalities, running these cities are very hard. The cost of maintaining infrastructure is very high and hard to sustain without raising taxes. In addition, these cities are experiencing a growing boom due to people moving out from bigger cities towards them looking for more affordability and open spaces.

These cities are in the process of redefining themselves and want to create an identity for themselves. They want to provide a combination of housing and workplaces without falling in the same mistakes than their peers.

Artistic rendering of downtown Surrey’s future skyline. (City of Surrey)

The skyline from these cities tends to be pretty flat, and when developing their central areas, high buildings tend to look like a sore thumb in the middle of the landscape. These cases slow down development as citizens tend to oppose to them since they are perceived as out of context and scale.

The city’s view of densification is right, but how can they accomplish it in a way that the skyline can grow organically over time? And more importantly, how can developers make sure that the market can absorb the amount of development that the city would like to see?

The standard answer for this tends to be phasing. Developers, instead of doing a big tower on a site, tend to split it into two or three towers on the same site. This ensures that the the product brought to the market can be absorbed efficiently over time.

Phasing makes the construction costs of the development to go higher, since there is more excavation and a duplicity of elements. At the same time, it consumes more space in the lot, reducing the separation between towers. However, it reduces risks for the developer and is a sweet compromise.

But what if instead of building two towers in a site, developers planned to do one tower on top of another one phased in time? This is what we call vertical phasing.

At the end of the process, the final tower will look as a single tower, but it will be built in two phases in time, slowing the amount of product that is brought to the market. It also allows phase 1 to be in operation while phase 2 is being built on top of it like in an horizontally phased development.

Moreover towers would have bigger distances between them and there will be more open spaces at grade.

In horizontal phasing, the phases are treated as independent building while in vertical phasing phases go one on top of each other building eliminating duplicities and maximizing synergies between them.

Benefits for cities

For cities, vertical phasing means also the ability to have a more permeable and public open space, since we can reduce the number of towers next to each other. It also helps to make evolve the sky line consistently bringing it higher over time and limiting blocking views between developments.

From a site plan perspective the vertical phasing strategy accommodates a higher amount of public realm, with more open space, privacy, view corridors and permeability for the city blocks.

In Phase I of an horizontal phasing scheme the towers become locked in a certain location to be able to provide room for the Phase II of the development. In a vertical phasing scheme the position of the towers is not constrained by the future location of Phase II. Towers can be placed more freely to maximize, sun, views, privacy and open space.

With horizontal phasing in Phase II of the development the city becomes more dense and the amount of open space, and privacy between towers is reduced considerably while in a vertical phasing scenario it stays the same as in Phase I

Horizontal Phasing restricts pedestrian views and movements to the street grid, while vertical phasing creates opportunities for crossed views and permeability inside the block

With horizontal phasing the higher amount of towers limits the available space for green areas and they are more likely to be in shadow. In vertical phasing, the open space can have larger areas and is more flexible in its location. It generates a better ratio between the height of the towers and the public open space.

In phase I the datum is established comparing to the existing context and with a goal of immediate growth

In Phase two in horizontal phasing, is hard to justify a higher height since the context has already established a reference height plane and these new buildings will reduce public space and bring more density and shadow. In vertical phasing, since developments will not impact negatively in the public realm because the footprint stays the same, it will be easier to justify to the public going higher. At the same time all the city datum grows consistently. The skyline can be planned with a longer time frame in mind.

Initial Considerations

To make vertical phasing work the zoning and permit by-law would need to be able to lock the ultimate shape of the development when submitting the proposal for phase I. Regulations need to be flexible enough to create a framework for the future development.

Developers should be aware of potential code changes that would need to be grand fathered in the original design. From a structural stand point the building should be designed with the end result in mind and accommodate column sizing, elevator shafts and mechanical rooms.

Developer Benefits

A vertical phasing approach makes construction faster and easier, since the most complex parts of the project like excavation and environmental issues have to be dealt only during the first phase.

It also gives a good flexibility to adapt to the market, we can plan a building in two phases but if the market changes suddenly the phasing can be adjusted to become 3 phases since the building has been planned for the ultimate shape.

Main Complications

The biggest complication for this kind of phasing is the need of phase 1 to keep operating during the construction of phase 2 in an efficient and safe way, otherwise the disadvantages will out weight the benefits.

Lifting materials above an operating Phase I, with trusses going up the windows, have to be handled with care. The safety of pedestrians walking on the streets below also have to be ensured.

Financial Benefits

In the paper from Richard Neufville, “ Vertical Phasing as a corporate real estate strategy and development option”, published in the Journal of Real Estate Vol. 11, they run a case with 3 scenarios of construction:

a)Short building

In this case the building is built just with the number of floors that the market can absorb and the structure is not ready for future expansions

b)Large building

In this option the building is built at its maximum density in only phase, incurring in a higher initial cost and with a more difficult market absorption.

c)Vertical Phased Approach

The building is planned for the ultimate maximum density, but is built in two phases to be able to adapt to potential market changes.

3 Scenarios for the case study, short building, large building and vertical phased development

After running the cost and benefit analysis, the study found out that the vertical phasing approach increased the Net Price Value of the development by 50% compared to the short building, and it only increase the initial investment about 10%.

Target Adopters

Even if this strategy could be applied to any kind of development, it presents the most benefit for corporate real estate developments, where a potential expansion of a building means to have all their staff in the same space, contrary to have different buildings in a city and its duplicity of services and commute time between offices.

For rental product, either commercial or residential where the developer keeps ownership of the asset for a long time, it is also an interesting option. Since developers can control better the amount of product they bring to the market, adapting to market fluctuations, while it makes it easier for them to build phase 2 while operating phase 1.

Vertical phasing however is not a very attractive option for developments where the prices are low, since the extra added cost to the initial development would be an added risk to the viability of the development.

Existing Cases

Vertical phasing has already been proved as a viable solution in multiple cases around the world like Bentall Tower 5 in Vancouver. The tower was built in two phases after the dot com bubble burst. The first phase was built with 22 storeys and later on an additional 13 storeys were added adding to a total of 35 storeys. Since that possibility had been incorporated in the original design, the transition to build it in two phases was easy.

In its ultimate shape the building also become more consistent with the skyline of the city while ensuring the financial viability of it by not overbuilding in the first phase.