Big move starts domino game

June 16, 2008
Winnipeg Free Press
Written by: Murray McNeill

Hydro tower creates a lot of vacancies

The dominos are starting to fall as Manitoba Hydro's new office tower moves closer to completion and landlords begin backfilling space it will be vacating in other buildings around the city.

The first big domino is the 78,000 square feet of space that Hydro's Centra Gas division leases in the office tower at 444 St. Mary Ave.

Industry sources say Great-West Lifeco has agreed to take 57,000 square feet of that space, although Great-West and the building's leasing agent, Morguard Investments Ltd., have yet to publicly confirm that.

Industry sources said the G-W Lifeco move, which isn't to take place until the middle of next year, will free up 43,000 square feet of space in another office tower -- the Newport Centre at 330 Portage Ave.

Avison Young Commercial Real Estate (Manitoba) Inc. is marketing about 62,000 square feet of space in the 17-storey building, including five full floors and several partial floors.

Linda Capar, a commercial agent with the firm, confirmed the bulk of that space -- about 43,000 square feet on four and a half floors -- is occupied by G-W Lifeco. And it's given notice that it plans to leave when its lease expires at the end of next June.

Capar wouldn't comment on where Great-West is going. But she expressed optimism that replacement tenants will be found, noting there aren't a lot of other large blocks of contiguous space available elsewhere in the downtown area.

"We have a couple of prospects...," she said. "The nice thing is we have lots of time. So I think it will be OK."

Wayne Johnson, a commercial and leasing representative with Royal LePage Dynamic Real Estate who issues a twice-yearly report on commercial vacancy rates in Winnipeg, also predicted replacement tenants will be found for most of the space Hydro will be vacating.

"The office market is performing much better right now," Johnson said, noting that in the last year the vacancy rate in the Class B sector has dropped to four per cent from 6.9 per cent.

"In the past it was performing well because we had reasonably low vacancy rates, but we didn't have much activity. But in the last six months there has been more activity."

He noted that, as earlier reported, replacement tenants have been found for most of the 68,000 square feet of Class B space that CN Rail vacated last year in the Citiplace office building. And Canwest Place has filled about two-thirds of the 72,000 square feet of space that became available after last year's merger of Agricore United and Saskatchewan Wheat Pool.

He said the only disconcerting thing is that a lot of the space that's been gobbled up in the last six months was filled by government departments or agencies, rather than the private sector. Ideally, it should be the other way around.

"So it's good news (that leasing activity has picked up), but there's still something at the back there that indicates it's still not performing the way it should be."

Manitoba Hydro spokesman Glen Schneider said Hydro expects to complete its 690,000-square-foot, 22-storey office tower in October, and to have everyone moved in by the end of December.

Hydro leases more than 272,000 square feet of office space in about 10 buildings around the city. Schneider said those operations will eventually be relocated to either the new downtown tower or the current head office building at 820 Taylor Ave.

He said some of the moves will happen late this year or early next year. But in a couple of cases, the leases don't expire for another couple of years, so those moves will be delayed.

Capar said Great-West has been a major tenant in Newport Centre for more than five years.

"It was a good relationship. They were a great tenant and we'll be sorry to see them go," she said. "But hey, that's life. People come and go."

She said in some ways Great-West's departure will be good for the building because it will enable the owner (Huntingdon Real Estate Investment Trust) to diversify its tenant base.

"If you lease a lot of space to one tenant, it creates a challenge if they move out..." she said. "So technically, it could be the best thing that could have happened, depending on who comes in."

murray.mcneill@freepress.mb.ca

Space to rent

Here is a partial list of some of the office buildings that Manitoba Hydro will be vacating once its new downtown head office opens later this year and the amount of space it leases at each location:

• 444 St. Mary Ave. (the former Centra Gas building): 78,000 square feet
• 185 King St. (the Mandarin Building): 19,000 square feet
• Apache Business Mall on Waverley Street: 137,000 square feet
• 1080 to 1090 Waverley St.: 24,000 square feet
• 693 Taylor Ave.: 14,000 square feet

-- Source: Manitoba Hydro

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