Downtown offices preparing for tenant shuffles

by Geoff Kirbyson

The biggest game of musical chairs is taking place in downtown Winnipeg right now.

With the majority of tenants in True North Square’s office tower preparing to move in this June, downtown office buildings of all classes are scrambling to lock down tenants to avoid higher vacancy rates.

For example, law firm Thompson Dorfman Sweatman has already moved from 201 Portage to True North Square and accounting firm MNP will follow suit later this year.

The 17-storey, 300,000-square-foot office tower - one of four buildings rising out of the ground in downtown Winnipeg as part of a $400-million project by the owners of the Winnipeg Jets — is changing the face of downtown Winnipeg but Gail Auriti, leasing manager of Harvard Developments, told the crowd at the WinnipegREALTORS® Forecast Breakfast on Feb. 6 that there’s no reason for alarm.

“We’ve filled those vacant spaces. We’ve pretty much filled it all,” she told the more than 500 people in attendance at The Victoria Inn.

For example, law firm Taylor McCaffrey is in the middle of relocating from St. Mary Avenue to 201 Portage, financial services firm Wellington Altus has moved in, as has BDO Canada and Investors Group. At the other end of the spectrum, payroll management provider Ceridian will also make the jump to True North Square, leaving its location on Garry Street where it also happens to have its name on the side of the building.

“The landlords have been more aggressive because of True North Square with tenant improvements and some free rent. We’ve been upgrading our building, including our concourse area, new conference centre and new food court tenants,” she said.

Most of the activity involves existing tenants looking to upgrade or add to their space, chief among them food delivery company Skip the Dishes, along with a few new-to-market tenants. Auriti said while human resources firm People First left 360 Main Street for the Tuxedo Business Park, most downtown tenants want to remain in the central business district.

“Portage and Main is still the business and financial district of Winnipeg with law firms and accounting firms there,” she said.

When it’s completed in three years, True North Square will have offices for more than 1,500 employees, 288 hotel rooms and 324 apartments and condominiums.

Benjamin Tal, deputy chief economist of CIBC World Markets was the forecast breakfast’s keynote speaker. He told the audience to prepare for a slowdown in the global economy as the days of easy money from central banks are coming to an end.

“There were negative interest rates in Japan and Europe. They were printing money. And there were extremely low interest rates in North America. There was a lot of energy in the system. If you generate enough wind, even pigs can fly,” he said.

“This was all one big mirage. This was not real life. It was cheap money.”

The U.S. economy is following suit, primarily because President Donald Trump stimulated the U.S. economy with his tax cuts last year when the economy didn’t need any kickstart at all.

“As a government, you stimulate the economy when it’s down. When you stimulate it when it’s up, you waste a lot of money because it doesn’t need it,” he said.

The forecast crowd also heard that MLS sales in Winnipeg were down six per cent in 2018 to 12,773, which is slightly below the 10-year average, but Peter Squires, market analyst with WinnipegREALTORS, wasn’t worried.

First of all, 2016 and 2017 were the two best years on record. Secondly, a higher stress test for mortgages squeezed some would-be buyers out of the game.

“We certainly outperformed many other markets around the country. Vancouver was down 32 per cent, Toronto was down 16 per cent and the country as a whole was down 11 per cent. A lot of markets really struggled. The mortgage stress test was the No. 1 factor,” he said.