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Montreal skyline facing changes

Montreal skyline facing changes

33,000-square-foot parking lot located between Ren&#233; L&#233;vesque Blvd. W., Canadiens-de-Montr&#233;al Ave. and between Drummond and de la Montagne Sts.
 

33,000-square-foot parking lot located between René Lévesque Blvd. W., Canadiens-de-Montréal Ave. and between Drummond and de la Montagne Sts.

Photograph by: Marie-France Coallier , The gazette

MONTREAL - Canderel’s Phillips Square site, long promoted as the future location of a gleaming 900,000 square foot LEED certified office tower is up for sale, The Gazette has learned.

Eager to capitalize on growing demand for buildable land downtown, a Canderel executive said the company wants to sell because it’s already busy with an office project in the Quartier des spectacles, along with plans for a new, soon-to-be-

announced residential development.

“Having three (projects) in the same city at the same time was a little too much,” said Daniel Peritz, Canderel’s senior vice-president, Montreal and Ottawa.

The 80,000-square-foot site is hitting the market at a time when vacancy rates for downtown office space are dropping, fuelling pressure for new construction 20 years after the last privately funded tower was built in Montreal. The vacancy rate for Class A downtown buildings dropped to 6.2 per cent during the first three months of 2012, compared with 7.3 per cent during the same quarter last year, a report this week by real estate services firm Cushman & Wakefield said.

Construction is under way for 230,000 square feet of new office space within the mixed-use Altoria project in the Quartier International district, and plans are being worked out for at least four new office projects – including one by Canderel and the Fonds immobilier de solidarité FTQ for a 30-storey building on the site of the old Spectrum theatre.

But tenants in Montreal – Canada’s second-largest office market after Toronto – are reluctant to accept the higher rents required for new construction, raising speculation about how many of these projects will actually break ground. Nationally, Montreal’s office rents remain comparatively low; during the first quarter, the average net rent for downtown office buildings was $16.87 a square foot in Montreal vs. $20.78 in Toronto and $25.32 in Vancouver, the Cushman report said.

Some argue Canderel’s site,

located at Phillips Square and Cathcart St., south of Ste. Catherine St., would be better suited for condos. Indeed, the site is zoned for office or residential, an alternative once considered by Canderel, developer of Toronto’s 78-storey Aura condo skyscraper – Canada’s tallest residential building.

Still, Peritz said he expects tenants’ reluctance to pay higher rents will change as they discover that new Leadership in Energy and Environmental Design (LEED) construction comes with operating efficiencies – including increased worker productivity, for example – that aren’t necessarily reflected in their basic costs.

What’s more, today’s companies want their office space to hold a larger number of employees per square foot than in the past, but Montreal’s aging stock of office buildings weren’t built with ample elevator or HVAC capacity, for example, to accommodate those extra workers.

“Our building stock is aging. If you look at tenants’ needs, the technical requirements are different now.”

alampert@montrealgazette.com

@RealDealMtl

FIVE DEVELOPMENT PROJECTS THAT, IF COMPLETED, COULD TRANSFORM THE CITY'S DOWNTOWN IN THE COMING YEARS

Montreal skyline facing changes

1. Overdale Site

Google street view image of Overdale site

What is it now?

A 140,000-square-foot parking lot bordered by René Lévesque Blvd., Overdale Ave. and Lucien L’Allier and Mackay Sts.

What it could become?

Site bought for $28 million is to be transformed into a two-part project, with a 40-storey condo tower, said Jack Arduini, minority partner with businessman Kheng Ly in the numbered company that bought the land last year. The vocation of the second tower and ideas to transform the historic Louis-Hippolyte LaFontaine mansion into a museum have yet to be finalized.

Will it work?

Plans are still in the city’s hands. Arduini said the project is well capitalized by Asian backers.

2. Waldorf Project

Waldorf project

What is it now?

A parking lot East of Guy St., just south of Sherbrooke St. W.

What it could become?

Announced in 2008 during the tourism boom before the global economic crisis, the Waldorf project was pitched as a $200-million hotel with two towers, 250 guest rooms and 76 residences.

Will it work?

Originally scheduled to be completed in 2011, the project was put off because of the economic downturn. But four years later, a trailer on the site is the only evidence of a project. A Monit spokesperson said the project is “still very much alive” and has gone through several re-designs and consultations. “Monit is now re-examining certain elements of the project and fine-tuning the latest costing, which is too high. Once the final cost is established at a level satisfactory to Monit the sales program will be launched.”

3. Cadillac Fairview Project

Cadillac Fairview Project

What is it now?

Five million square feet of land surrounding the Bell Centre, amassed by pension fund manager Cadillac Fairview Corp. Ltd. for $150 million.

What it could become?

Announced a year ago, the $400-million project to build three condo towers on de la Montagne St. and an office tower on St. Antoine St. was said to resemble the Maple Leaf Square in Toronto.

Will it work?

In December, Cadillac Fairview received city approval for a residential tower just Southeast of Ave.-des-Canadiens and de la Montagne St. The 40-storey tower project, which has already changed in height a few times, according to media reports, is delayed.

Marketing of the residential building has not yet commenced, when it was originally supposed to begin by late 2011 or early 2012. Cadillac Fairview refused to comment.

4. Carterra Management/Broccolini Construction

The parking lot facing the Bell Centre

What is it now?

A 33,000-square-foot parking lot located between René Lévesque Blvd. W., Canadiens-de-Montréal Ave. and between Drummond and de la Montagne Sts.

What it could become?

Bought by Montreal’s Broccolini Construction with financial backing from Toronto-based Carterra in January for about $14 million, the site was reported by media to be developed as condos. Sources, however, have recently told The Gazette that it would be built as an office tower.

Will it work?

Montreal’s downtown office vacancy rate is plummeting but securing tenants willing to pay rents that cover developers’ construction costs remains a challenge. If the tower is indeed built as condos, Broccolini would face competition from other projects. In a recent interview, Anthony Broccolini said he’s: “Not in a position now to release our plans.”

5. Rio Tinto Alcan project

Rio Tinto Alcan

 

What is it now?

The Maison Alcan, located at Sherbrooke St. W., between Drummond and Stanley Sts. is the Canadian headquarters of the global aluminum giant.

What it could become?

Last year, Rio Tinto Alcan put its headquarters up for sale amid media reports that it was looking for 200,000 square feet of space in a new LEED-certified tower. Cirque du Soleil founder Guy Laliberté was looking to transform the old head office into a type of venture to showcase the renowned Cirque.

Will it work?

The deal with Laliberté is solid, but it’s conditional on negotiations being finalized for a new Rio Tinto-anchored building at Westcliff’s Place de la cité internationale at Square Victoria.