After a highly publicized turf war, it seems the office towers at Portage and Main and True North Square, five blocks away, might live in harmony after all.
Winnipeg’s downtown Class A vacancy rate dropped from a recent peak high of 12.8 per cent at the end of 2018 to 10.9 per cent as of December 31, 2019, according to CBRE’s fourth-quarter national report.
This was particularly good news for the three towers at Portage and Main, which had been in scramble mode since True North Square’s 17-storey Scotiabank Tower opened in the third quarter of 2018, adding about 365,000 square feet of office space to the market in a new business enclave.
A steady stream of tenants, including high-profile names such as accounting firm MNP and law firm Thompson Dorfman Sweatman, relocated to the new project, which is owned by the same group that owns the Winnipeg Jets.
In the immediate aftermath of Scotiabank Tower opening, the Class A vacancy rate nearly doubled to 12.5 per cent.
“Portage and Main will always be Portage and Main; it’s our centre of commerce. The turbulence it went through was very predictable but anticipated to be short-lived,” said Ryan Behie, Winnipeg-based vice-president of CBRE. “We’re making it through to the other side of that turbulence right now. The SHED (sports, hospitality and entertainment district) and centre of commerce are coexisting and creating vibrant alternatives for downtown Class A tenants.”
There hadn’t been a new office tower built in Winnipeg in more than a quarter-century so it was only natural that True North Square would attract tenants from the city’s most famous intersection, he said.
“We knew we were going to have 12 or 24 or 36 months of tough times at Portage and Main. Now the tough times that lie ahead are going to be in the mid-level buildings that are in mediocre condition with limited amenities within the Class B market and off centre-ice locations,” he said.
CBRE says the downtown Class B market finished the year with a “rare” quarter of positive absorption while the downtown Class C market went the other direction with negative net absorption of 26,351 square feet. The Class C trend is expected to continue as SkipTheDishes migrates from its offices in the Exchange District into 95,000 square feet at the SHED, a move that will boost the amount of Class C space in the city.
The fact that Scotiabank Tower completely filled up within a year of opening the doors was in line with the expectations of Jim Ludlow, president of True North Real Estate Development.
“I think some people might say it was well done in terms of speed. We’re pleased with the response to the new product,” he said.
There’s no question that the five-tower True North Square development will have a major impact on downtown Winnipeg for many years to come.
The second tower, a 24-storey apartment and commercial building, opened last year. A Sutton Place hotel and a Sutton Place condo building will be the third and fourth towers. The next domino in the office sector will come in 2023 when Wawanesa Insurance centralizes all of its operations into the fifth tower, a 21-storey building.
Ludlow said he expects to see much the same kind of reaction as the various spaces currently used by Wawanesa are vacated. In fact, they may even be snatched up faster because the plans have been made public four years before moving trucks pull up in from of Wawanesa’s offices.
“There is lots of time for planning when and how those spaces will come to market,” he said.
The fact that the downtown vacancy rate is recovering less than 20 months after the new tower opened speaks to the health of the city’s office market, he said.
“There are always opportunities created by movement. The landlords at Portage and Main are also seeing the value and reinvesting in their own product. It’s creating a nice flow. It doesn’t surprise me,” he said.
But True North is looking to do much more than just erect some towers; Ludlow said its goal is to build a downtown community.
The latest development is the December opening of the Hargrave St. Market on the second floor of Scotiabank Tower. The European-style food hall features a collection of local hospitality players, all of whom have a presence elsewhere in town, including pizzerias, microbreweries and burger joints. If you’re looking for a national banner, you’ve come to the wrong place: tenancy is aimed at showcasing local chefs and their restaurants.
Hargrave St. Market is open for breakfast, lunch and dinner and has become a popular spot to eat prior to Winnipeg Jets games, which are just a stone’s throw away at Bell MTS Place.