A tide of fresh investment is helping off set the looming prospect of rising office vacancies in downtown Winnipeg, which some say could take a decade to reverse.
“There’s well over a million square feet of available space on the market,” says Taylor Toni, a broker with Re/Max Professionals in Winnipeg, who said the volume could take up to 10 years to absorb at current rates. “We don’t know what to do with it and there’s not enough tenants to go around.”
But several owners are taking the time to reposition assets, with the biggest deal this spring being True North Sports & Entertainment’s plans to acquire and remake Portage Place, a 440,000-square-foot shopping centre six blocks west of the storied intersection of Portage and Main in the city’s historic Exchange District.
A three-year plan for the mall calls for transforming it into a complete downtown community including residential, retail and neighbourhood services as well as parkland.
“For decades, Portage Place unintentionally created a barrier between north and south neighbourhoods that make up our downtown,” said True North executive chairman Mark Chipman in announcing the plans on May 12. “Our goal is to transform it into a place that connects neighbourhoods, provides access to badly needed services, and has social and economic impact by building a sense of community mindedness.”
Proceeding in partnership with the Manitoba government, the cost of the transformation is pegged at $500 million and will include a $300 million “urban centre for health excellence” providing clinical as well as educational and research space delivered by Shared Health and the Winnipeg Regional Health Authority. The first phase will be a new 15-storey health care facility, following a public consultation and stakeholder engagement.
The plans parallel the Southern Chiefs Organization’s formal acquisition at the end of March of the city’s flagship Hudson’s Bay Co. building, which the group plans to transform into 300 affordable housing units, a health and healing centre that embraces both Western and Indigenous practices as well as home to the Governance House for the chiefs of the southern First Nations, which include 34 Anishinaabe and Dakota Nations. A museum honouring Indigenous history and culture is also planned for the ground floor.
True North has yet to purchase Portage Place, owned by Vancouver's Peterson Group. It also needs to acquire the parkade below the mall and development rights held by The Forks North Portage Partnership. True North intends to exercise its options by the end of 2023. Acquisition costs have not been disclosed.
True North’s plans are significant as the imminent spike in vacancy correlates with the completion of the second office tower at True North Place. Wawanesa Mutual Insurance Co. plans to consolidate its offices at the new 300,000-square-foot tower by the end of this year. CBRE Ltd. forecasts that the return of Wawanesa’s four existing offices could boost the city’s downtown office vacancy rate towards 18 per cent shortly after.
But downtown’s challenges are also deeply entrenched.
True North’s plans for Portage Place follow an aborted bid by Toronto’s Starlight Investments to buy Portage Place for $69.9 million with plans for a $400 million redevelopment including two 20-storey residential towers, retail and office space. It backed out in 2021, two years after making its offer.
The city has expressed support for True North’s plans, with Winnipeg Mayor Scott Gillingham saying the project will create “the nexus for the revitalization of Portage Avenue and the entire downtown.”
But other landlords are already making moves.
The owners of 200 Portage at Portage and Main launched a whole-building revitalization in 2020 after Scotiabank relocated to True North Square’s first tower. The five-storey structure was remade as a multitenant building, attracting both local and international tenants including the Winnipeg Chamber of Commerce, World Trade Centre Winnipeg, CentrePort Canada Inc. and accounting firm Grant Thornton LLP.
Other office blocks, such as the Keewayden block at 138 Portage Avenue East, are being converted to residential, in some cases with incentives from the city. Keewayden has been empty for years, underscoring how entrenched issues are starting to turn around.
Wayne Berger, CEO of Americas with co-working space provider IWG plc, said the turnaround signals the kind of innovation that’s needed as the ways people use office space change.
“This is the single greatest structural shift I think we’ll ever see in the office industry because the traditional office is really becoming less relevant today than ever before,” he said.
IWG recently signed a deal for a new location in the city’s downtown that convert some existing space to shared space for the new hybrid workforce as part of an expansion into secondary markets across Canada.
“The issues in commercial real estate are becoming more explicit, and I think they’re going to become more challenging over the next two to three years because the demand is by no means coming close to what the supply is today,” he said. “Building owners and landlords are really going to need to shift their approach to the space. Part of this is looking at different ways to monetize the space, which is what we’re doing with progressive building owners across the country.”
