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Downtown shuffle

The demand for downtown office space has collapsed, but the province is considering subsidizing construction of a huge new office tower.


Last week, infrastructure minister Bill Estabrooks told the Chronicle-Herald that he'll announce a decision about provincial funding for the proposed convention centre in downtown Halifax later this month.

I'm guessing from the tenor of his public pronouncements so far that, despite a provincial budget shortfall that will soon loom to perhaps a half-billion dollars, Estabrooks will announce over $100 million in government financial support for the convention centre project. Such is the power of the unelected, but well-paid Trade Centre Limited lobby that manages and feeds off the unprofitable convention biz.

Regardless, we should hope that a real business case, as opposed to the sideshow house of mirrors that has been used to hype a new convention centre, will accompany Estabrooks' announcement.

Consider the issue of office space. The convention centre complex will consist of the publicly owned convention centre in the basement, then two privately owned towers above---one is a 500-room hotel, the other office space. How much office space will be in the complex? We aren't being told yet. But Joe Ramia, the private developer, told me earlier this year that he has "verbal commitments" for leasing 75 percent of the building. "These are big, international companies," he said. "We're talking 100-, 200-, 300,000 square feet each."

I don't find that claim credible. Last week the downtown office vacancy rate went over 10 percent. There are empty spaces in most downtown towers. Ben McCrea has suspended work on the relatively small (100,000 square feet) Waterside Centre for lack of tenants---but when McCrea presented his case before Halifax council last year, he explicitly made claims similar to Ramia's ---that he had the building entirely rented, et cetera. Worst for the downtown real estate market, the future looks even more bleak: Emera is moving out of Duke Tower and over to its new waterfront headquarters, meaning another 125,000 square feet of empty space. Louis Reznick has changed his plans for the Roy Building rebuild, switching from the original office building to residential. The Empire Corporation has had approval to build a 600,000 square foot office building on Barrington Street since 1978; in 2008 the company announced work would soon begin on a building half that size, but those plans have gone the way of trillions of dollars in American mortgages.

So how is it Ramia can throw up an office tower and have it leased out? Well, the only thing that makes sense is that the Trade Centre Limited offices---118,000 square feet---will move from its existing building over to the new building. That's reasonable, of course---you'd want the convention centre offices close to the convention centre. Otherwise, Ramia's "verbal commitments" likely amount to still more reshuffling; that is, he'll poach existing downtown offices into his shiny new building, courtesy of a taxpayer subsidy.

When TCL offices move into the new building, what happens to the existing TCL building? One rumour is that city offices in Duke Tower will be moved over to the TCL building, leaving Duke Tower pretty much completely empty. But the city only rents 50,000 square feet in Duke Tower, and the lease doesn't expire until 2021. So unless the lease is broken, or the new convention centre won't be completed for another decade, it still begs the question: what happens to the existing TCL building?

I put that question to Suzanne Fougere, who speaks for TCL. "It is too soon to know the specifics of future operations should a new facility proceed," she replies. Well, I'm sure Fougere's merely relating what she's been told by TCL execs, but how is it possible to assemble a business plan for the new convention centre without also figuring out what to do with the existing office tower?

If the future of the existing TCL building isn't incorporated into the business plan for a new convention centre, then we can simply laugh the proposal off the stage and move onto some substantial issue where we can have a productive and informed debate.

The point is that a new convention centre, being sold as the salvation of downtown Halifax, may actually pull the rug out from under the market, making the situation downtown even worse than it is now.

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