Re: Telus announces new office tower in downtown Toronto
From The Star
Telus deal caps downtown revival
Trio of towers now planned
Phone giant to locate by ACC
Jul. 11, 2006. 06:50 AM
TONY WONG
BUSINESS REPORTER
After more than a decade without a new commercial tower breaking ground downtown, Toronto now has the plans for three new skyscrapers to demonstrate the dramatic turnaround in the city's fortunes.
"Toronto is still the financial capital of this country, and this clearly shows that the biggest institutions have confidence in the future of the city," said Ray Wong, national director of research for CB Richard Ellis.
Yesterday, Menkes Developments and Telus announced the building of a $250 million, 30-storey, 780,000-square-foot skyscraper adjacent to the Air Canada Centre. The project is the second confirmed, tenanted tower in a banner year of development announcements. A 1.2 million-square-foot project in the city's entertainment district was announced earlier this year, and a tenant is expected to be revealed shortly for the Bay-Adelaide Centre in the financial district.
The three new buildings would represent an additional 3 million square feet of space in the downtown core.
Toronto has seen no shortage of condominium building, but commercial towers, the most visible symbols of a city's economic strength, have been conspicuously lacking.
Over the past few years, however, a solid economy and strong job numbers have meant companies such as Telus have been looking at ways to house growing workforces, Andrea Goertz, vice-president of enterprise services for Telus, said in an interview.
"We have experienced phenomenal growth over the last few years, and it was time for us to bring our team together," said Goertz.
Vancouver-based telecommunications company Telus signed the deal with Menkes to be the lead tenant, taking 440,000 square feet of space, or about 60 per cent of the building.
Telus started looking for space last year, but couldn't find an existing building that met the company's needs, said Goertz.
The company sent out a request for proposal to five developers, and decided on the Menkes plan.
"The existing buildings downtown were getting older, and we thought there was a real need for buildings with updated technology," said Peter Menkes, president of Menkes' commercial and industrial division.
The tower is a joint venture among Menkes, Hospitals Of Ontario Pension Plan and institutional real estate equity vehicle Halcyon Partners Fund.
Earlier this year, Cadillac Fairview Corp. announced it would build a 1.2 million-square-foot building at Simcoe and Wellington Sts., beside the new Ritz Carlton hotel.
The last major tower to be built in the city core was BCE Place at Bay and Wellington, in 1992. Since then, a recession, a spate of overbuilding and the bursting of the technology bubble in 2000 caused headaches for developers.
Any building was one in the 905 regions, where rent and taxes were cheaper.
But Canada and Toronto are once again on the radar map of global investors.
A strong currency has also meant that Toronto is now within striking distance of New York City when it comes to the cost of office space, according to a recent CB Richard Ellis survey.
This year, the city leaped 16 slots in the world rankings of occupancy costs, with rents in the financial district poised to rise another 10 per cent by year's end.
Class A or top office space now has a vacancy rate of 6.8 per cent and is forecast to drop to a minuscule 4.7 per cent in 2008, given the absence of new buildings. A figure lower than 10 per cent is considered a landlord's market.
Wong estimates that, with two buildings, the vacancy rate will rise to 8.8 per cent. Three would bring the vacancy rate to 10.4 per cent.
Good demand has given developers the kind of courage that has been lacking since the building bust of the late 1980s, when occupancy rates hit the high double digits.
Brookfield Properties Corp. has said it will soon start building its long-dormant Bay-Adelaide tower, although the company has not yet announced a key tenant.
Real estate sources say the company is currently in negotiations with consulting firm KPMG LLP as a possible lead tenant.
The developer received approval from Toronto city council to start building this year.
Real estate sources say that two buildings already confirmed and tenanted will make things more difficult for a third player.
