I don't really understand what makes the Bay so difficult to repurpose for other uses. People bring up that ht has large floor plates but it seems pretty easy to find tons of other buildings in downtowns and outside of downtowns with similar dimensions that are being utilized for office or government:
Here's a few from Montreal:
https://www.google.com/maps/@45.4961...7i16384!8i8192
https://www.google.com/maps/@45.5032...7i16384!8i8192
I've personally been inside these buildings which are full of a mix of artist offices and tech companies including ubisoft
https://www.google.com/maps/@45.5275...7i16384!8i8192
Here's a 6 storey corporate office in Kanata Ontario that is probably even wider than the Bay
https://www.google.com/maps/@45.3401...7i13312!8i6656
As has been mentioned there's also huge bay stores in other canadian cities like vancouver:
https://www.google.com/maps/@49.2818...7i16384!8i8192 with pretty much the exact same dimensions and it's doing fine.
I think if the Bay can't find an economic use here it is much more to do with how we are failing to get people downtown than anything intrinsically wrong or outdated with the building. I don't buy at all that large department stores are unworkable today. Go to the outlet mall where the stores are almost department-store-sized, or to the Bay Polo Park and see both locations so full of shoppers it's hard to walk around. The issue is that Winnipeg isn't doing a great job of supporting retail downtown.
So I don't think we should tear down the Bay, or even gut it and turn it into a donut. Slowly, as more people move downtown, there will be plenty of use for that building.