The City of New Westminster hopes to sell a vacant office tower it is building on spec in its downtown core.
The city took over ownership of the 137,000-square-foot Merchant Square building in 2012 after the original developer, Uptown Property Group, bailed out of the project, which includes the Anvil Centre civic community centre at its base.
Now nearing a spring 2014 completion, the tower still has no anchor tenant in a city with an office vacancy rate of 9.3%, third highest of all Metro Vancouver suburban municipalities. If Merchant Square remains vacant, it would push the city’s vacancy rate into the 20% range.
Colleen Ponzini, the city’s manager of financial services, said the 2014 budget projects the sale of Merchant Square officer. If the city doesn’t sell the office tower, she said the city would see a “significant increase” in bank charges related to its loan authorization bylaw.
“The plan is to have it sold, and we pay it back in this current year,” she told council at its January 20 committee of the whole meeting.
According to Ponzini, the city will be incurring some new debt under the loan authorization bylaw. She said a good portion of the $570,000 debt would be for Anvil Centre and the office tower.
“We have no leases signed yet,” said Andrew Laurie, a senior associate with Cushman Wakefield, the commercial broker handling office leases in Merchant Square. “We do have a lot of interest in the project.”
The tower is right next to the New Westminster Skytrain station and its Columbia Street location is in the heart of downtown. It is scheduled to open by this May. “We believe we will have an anchor tenant in place by then,” Laurie said. Net lease rates in the tower are from $27 to $33 per square foot.
Even the only councillor who voted against the city proceeding with the office tower on speculation is confident it will not become a white elephant for New Westminster taxpayers. “Looking long term, it won’t be a bad deal for the city,” said councillor Chuck Puchmayr, who expects the building will eventually be sold.
The tower was built for approximately $33 million, but a portion of that money came from the BC Lottery Corp. under a payment to New Westminster for hosting the Starlight casino, Puchmayr said.
