Montreal-based Alre Properties has spent $25 million to build a 45,000-square-foot office-retail building on the oldest street on the continent in St. John’s, N.L.
With two storeys of class-A office space comprising 30,000 square feet and 15,000 square feet of ground-floor retail, the recently completed 331 Water St. will house the Newfoundland and Labrador regional offices of BMO Bank of Montreal and its main St. John’s branch.
“The Bank of Montreal is one of our larger tenants,” says Roberto Di Giorgio, president of Alre Properties. “They mentioned to me they were in the market to relocate their regional offices in Newfoundland and asked if me if I had anything going on in St. John’s. I ended up finding a vacant piece of land right in the heart of St. John’s, on Water Street, which surprised me.”
The vacant space, which was being used as a parking lot, “was just primed for redevelopment.”
Alre Properties has several Bank of Montreal buildings, primarily in Quebec, Ontario and Manitoba. At 331 Water St. , BMO has leased the entire third floor of office space to go along with its ground-level bank branch.
Leasing the remaining 331 Water St. space
To lease the remaining 45 per cent, Di Giorgio says Alre is talking to some national professional firms for the second floor – some that are downsizing, others that are upsizing – and is in discussions with a few local chefs for a ground-floor restaurant.
He says there has been a fair amount of interest from professional firms and “I believe it will be fully leased by springtime.”
Di Giorgio says the office space was limited to two storeys “because that’s what the market dictated at the time.”
Alre originally considered building three or four storeys of office space when 331 Water was in the planning stages prior to the pandemic, but concluded the market wasn’t there for an additional 30,000 square feet.
In addition, since the building is right by the harbour, “underground parking below sea level is a huge concern. We only went with one floor of underground parking because it would be cost prohibitive to consider two or three floors of underground parking.”
As well, a zoning change would have been required to allow a four-storey building, a process that would likely have taken 12 to 18 months, which did not fit Bank of Montreal’s timetable.
In retrospect, “with COVID coming along, it was probably the best move not to add the additional office space.”
A revival for downtown St. John's?
The ground floor of the building incorporates masonry in a nod to surrounding heritage buildings, with glass on the second and third floors.
“We’ve had several comments about the building just fitting in perfectly. One of our potential tenants said it’s transformed the Water Street image.”
Di Giorgio says it is common in St. John’s that builders don’t deliver what was shown in their original architectural renderings, but Mayor Danny Breen told him: “Robert, you actually delivered what you showed me two years ago.”
According to a recent market survey by Halifax-based real estate counsellor Turner Drake & Partners, the office vacancy rate in St. John’s is 23.37 per cent.
St. John’s has higher office rents than the rest of Atlantic Canada with average rents of $18.34 per square foot and class-A rents of $22.96.
“The real estate situation is the same as anywhere else in the world. It’s all upside down. Their downtown is hurting,” Di Giorgio says.
However, there are hopes in the St. John’s real estate community offshore drilling initiatives will rejuvenate the market, he says.
“If we go back 10 years, when St. John’s was at their offshore drilling boom, their vacancy level of downtown office space was at zero per cent. People were leasing residential garages for office space.
"I’m expecting that to come back, maybe not to that level, but the activity to increase over the next 24 months.”
Alre's second project in St. John's area
331 Water St. is Alre’s second project in the province. Paradise Plaza, a retail plaza at 1641 Topsail Road in Paradise, opened two years ago and is home to tenants Shoppers Drug Mart, Dollarama, Starbucks, Pet Valu, Circle K and Burger King.
Alre will build a second phase to Paradise Plaza. The developer is in negotiations with a tenant for a 35,000-square-foot retail store on the site’s remaining land, which would cap the project at 95,000 square feet.
Founded in 2005, Alre is privately held by Di Giorgio and his family.
Aside from its standalone bank buildings, Alre’s portfolio includes several sites leased to Shoppers Drug Mart and its Quebec brand Pharmaprix.
In Laval, outside of Montreal, Alre has a 90,000-square-foot office building at 3225 St-Martin Blvd. W. that is fully leased to BMO and serves as its regional head office for the North Shore.
As for future sites, “I basically go where my tenants ask me to go,” Di Giorgio says.
“Whether it’s BMO or Shoppers or Dollarama or whoever is in our current stable, if they ask us to look at a project, we’ll go where they want us to go.”