Posted Apr 29, 2011, 1:27 AM
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Join Date: Mar 2011
Location: Calgary
Posts: 329
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Quote:
Offices shifting to suburbs
Migration from downtown Halifax 'recipe for disaster'
By CHRIS LAMBIE Business Editor
Thu, Apr 28 - 4:54 AM
Downtown Halifax office vacancy rates are high and developer Ben McCrea says he expects them to go up even more.
Cushman & Wakefield Atlantic has released numbers for the first quarter of this year indicating the overall office vacancy downtown is 8.9 per cent. Class A vacancy rates for downtown sit at 12.5 per cent.
"Vacancy rates have gone from . . . four and five per cent (in 2004 and 2005), they are now 12 and they are still going up," McCrea, Armour Group’s founder and chairman, said Wednesday.
"So there’s a huge movement of firms out of the downtown."
The downtown core has about 4.4 million square feet of office space.
"The downtown has given up space now for probably 10 quarters running," said Bill MacAvoy, managing director with Cushman & Wakefield Atlantic.
Suburban Halifax has 2.7 million square feet of office space. According to MacAvoy, overall office vacancy rates in the suburbs were 5.9 per cent for the first three months of this year. Class A office space in the suburbs had a 9.5 per cent
vacancy rate.
"They’ve been dropping rapidly," MacAvoy said. "In the last 90 days, there was 33,000 square feet absorbed."
That doesn’t bode well for Armour’s proposed $16-million, nine-storey Waterside Centre on Upper Water Street.
"As long as there’s negative absorption and firms keep moving to the suburbs, there’s not much market for a new office building," McCrea said.
Armour is still trying to secure tenants for the Waterside, he said.
"You’re not going to find very many people, if any, that are prepared to do speculative office buildings in this environment," McCrea said.
Last September, commercial real estate services firm CB Richard Ellis Ltd. said Halifax’s suburban office vacancy rate was 7.5 per cent, compared with 12.6 per cent in the fall of the previous year. The downtown office vacancy rate last September was 10.3 per cent, up from 6.9 per cent in the fall of 2009.
"That trend continues today and there doesn’t seem to be a bottom," McCrea said Wednesday.
That, coupled with construction costs in the downtown core being about 30 per cent higher than in the suburbs, creates "a recipe for disaster and the city doesn’t seem to be doing anything about it," he said.
"I think they’re back talking about chickens again."
Armour’s still waiting on an easement from the city that would allow the company to pipe sea water to the Waterside to help reduce the project’s cooling and heating costs.
"I don’t believe it’s a financial consideration anymore," McCrea said.
"We’re not negotiating; we’re just in a waiting mode."
He has been waiting more than a year for the easement.
"It is very difficult to negotiate with tenants and make commitments to tenants or make representations to tenants that were going to do something like a LEED gold building when we do not have the capacity at the moment to make good on it."
LEED is an acronym for leadership in energy and environmental design standards.
Demolition on the project started a year ago. The demolition involves the facades of six historical buildings on a block bounded by Hollis, Duke and Upper Water streets being maintained while a nine-storey metal and glass structure is built on the inside.
"That was a bad mistake because we ended up with a mess down there," McCrea said. "We’ve gone about boarding it up as best we can to try to make it half-decent. So we’ve tried to make it less of an eyesore. We’re just in complete exasperation with the lack of any progress on it. It’s gets to the point of being embarrassing."
Armour can’t go any further with the demolition without "putting an exterior structural hoarding around the whole thing, closing off all the sidewalks, closing off parts of the street, and I’m not doing that until we’re in a better position than we are today."
Armour and the Waterfront Development Corp. announced last fall they had agreed on a conceptual plan for the $70-million private portion of the $190-million Queen’s Landing development on the waterfront between Sackville Landing and Cable Wharf. The private component includes 100,000 square feet of new office space, a 200-room, four-star hotel with harbour views from every room and underground parking.
McCrea, whose company rebuilt Historic Properties in the 1970s, wouldn’t say what Armour’s construction deadline is under its deal with the provincial Crown corporation.
"Our agreement with the province and the Waterfront Development Corp. has a fairly lengthy time frame. That’s confidential. I’m not going to get into that. But it’s longer than normal because we saw this coming."
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I think that the city and province need to start taking a serious look at this problem, maybe offer a few incentives such as small tax breaks or some other subsidies for locating in the downtown. This is a an absolute travesty, and the fact that this that this is being brushed aside while the city says all is good in Halifax while the core is dying is B.S ,the downtown is suppossed the cultural, recreational and and economic center of a city otherwise it's just a spread out massive suburb and that's not what we want!
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