Joe Ramia is making a $500-million bet on Halifax's downtown.
It's called the Nova Centre, one of the biggest all-at-once development projects the East Coast has ever seen. Covering two city blocks, it's a million-square-foot, three-tower complex of offices, hotel rooms and condos sitting on top of a publicly funded convention centre.
For the Lebanese-born Mr. Ramia, the 58-year-old president of Argyle Developments Ltd., it's a chance to leave his imprint on the city he's lived in since 1966.
"We have a lifestyle that's second to none," he says. "If you want to know if a city is successful, you gauge it by its heart, which is the downtown."
The complex, to open in 2017, will breathe much-needed new life into the core. While downtown Halifax is undoubtedly historic, much of it is aging with little grace: Before the RBC Waterside Centre opened last year, the newest office towers were built in the heyday of Full House and Guns'n'Roses 25 years ago. Craving the best talent, potential firms have flocked to newer developments in Halifax's vast suburbs, leaving the city with a downtown office vacancy rate twice the national average.
The Nova Centre, whose south tower will be curved like the billowing sails that long powered local industry, is one of a growing number of bets on a downtown rebound. Mr. Ramia and his fellow developers are flooding the Haligonian skyline with the first new cranes in a generation to lure business into the core.
Naturally, there are risks: They're adding more space to an already-soft market. But in doing so, they're playing a crucial game of chicken with the landlords of the old, dark, creaky buildings that dot the downtown, goading them to revamp or rebuild to lure workers back to the core.
"When you have a building that's 50, 60 years old, it needs to be repurposed," Mr. Ramia says in his west-end Halifax office at the end of December, sitting a few feet from a scale model of the Nova Centre. "It needs to be either knocked down or be completely gutted and redone."
Halifax's office market boasts numbers that are hardly worth bragging about: commercial real-estate services firm CBRE Group Inc. estimated in December that the downtown had a 13.7 per cent vacancy rate, or nearly 700,000 square feet.
Mostly, this is because businesses have fled to newer suburban buildings, including in nearby Bedford. But earlier last year, local real-estate counsellors Turner Drake & Partners Ltd. called the whole city "overwhelmed by supply," with a citywide Class-A office space vacancy rate of 14.2 per cent.
In spite of this, downtown developers are awash in optimism. A new shipbuilding contract is driving business interest in the city; there's a rising hope in offshore oil exploration; and international financial organizations, including hedge funds, are setting up offices in the city, which offers low rents and laid-back lifestyles.
Argyle Developments, whose Nova Centre will add 150,000 square feet of office space to the mix next to the city's infamous row of restaurants on Argyle Street, isn't the only developer who's seeing opportunity beyond the vacancy numbers. Armour Group Ltd., led by chief executive officer Scott Armour McCrea, opened the nine-storey, $25-million RBC Waterside Centre late last year – the first new Class-A office complex to open since the iconic Purdy's Wharf in 1990 – and says that it's more than 90 per cent occupied.
Much of the new development is about quality of space, Mr. McCrea says. While the city is rife with historic buildings, there are many built in the 1960s and '70s that grow less attractive by the day.
"There is a shift in user demand – older types of buildings will no longer be acceptable for new tenants who are truly focused on acquiring the best talent," Mr. McCrea says, then laughs: "Nobody asks me for dark, short, squat space."
That's a sentiment shared by Wolfgang Thiel, whose Thiel Group of Cos. owns a swath of the city's downtown and is in the midst of doubling is TD Centre Tower to 200,000 square feet. The developer also has plans for a 500,000-square-foot twin-tower development called 22nd Commerce Square at George and Hollis Streets.
"I think it's a difficult time" to be a developer right now, Mr. Thiel says. "The market is relatively slow right now. All the buildings we have are too old, which is why we started to redevelop the TD Centre two and a half years ago. To have a strong office market, you need strong tenants, and they don't want to be in old buildings."
Thiel Group took the Nova Scotia government to court last year arguing that the Nova Centre's developer got an "unfair advantage" over others in getting certain exemptions to municipal planning rules. Argyle, for instance, was allowed to begin building its lowest levels before a final construction permit was issued.
The case was shut down by the Nova Scotia Supreme Court in December, which Mr. Thiel, who hoped it would set a precedent of fairness for new developments, calls "a shame."
The Nova Centre has landed plenty of other criticism, too. Argyle was able to buy a literal chunk of city street that runs through the planned development, for instance, which when finished will become a pedestrian walkway beneath the convention centre. And in November, Argyle announced a year-long delay for the complex to open – it's now set for January of 2017 – forcing the convention centre management, Trade Centre Ltd., to find other options for 17 scheduled events in 2016.
And the convention centre itself, more than doubling in floor space from its old location beneath the city's flagship hockey arena, comes at a premium of $164-million from all three levels of government in a province where tax dollars are spread thin. In an interview, Trade Centre president Scott Ferguson said the public investment was necessary to get out of its small, dark, aging space to allow for more, and mulitiple, conventions.
"From a market perspective, we have to invest in areas where we can excel," Mr. Ferguson says. "You need a vehicle to highlight your accomplishments and attract top investors and innovators to the city."
There are further concerns with the convention centre's public subsidy, which contractually forces Mr. Ramia to build the whole complex at once, rather than a tower at a time, regardless of market forces. He has not, for instance, announced any tenants, but says he's speaking with financial companies in London and New York.
This, Mr. McCrea says, could distort the office market, offsetting the calculations that landlords like he and Mr. Thiel have made to justify their own commercial developments.
"The only thing that would hurt the market is public bodies, who need to not put pressure for something to be built when there might not be demand," Mr. McCrea says.
But Mr. Ramia believes that, with the allure of Halifax, if you build it – and build it right – tenants will come.
"Once people saw the confidence going into this project from the government, as well as from a developer," Mr. Ramia says, "it sent a signal that downtown is going to be something exciting."