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Jesta Group’s Anthony O’Brien stands in front of the imposing former Viger train station in Montreal.Robert J. Galbraith/The Globe and Mail

It was built in the glamorous heyday of train travel, a grand turrets-and-gables railway hotel incorporating elements of both the châteaux of the Loire Valley and Scottish baronial mansions.

Today, after years of neglect and the cancellation of an upscale redevelopment project following the 2008 financial meltdown, Château Viger is set to to once again take pride of place as a centre of urban activity at the eastern edge of historic Old Montreal. The imposing heritage structure, built by Canadian Pacific between 1896 and 1898, is being transformed into a large, mixed-use development of open-concept office space, rental units and retailing that includes a market and craft brewpub.

The $250-million project is a welcome boost for Montreal, which for the longest time had little to show in the way of significant new office or mixed-use projects. Indeed, until last year, the Deloitte Tower next to the Bell Centre hockey arena to the west was the first privately owned office tower to go up in the city's downtown in more than 20 years.

Château Viger represents an extension eastward of the downtown's commercial real estate stock and is intended to fill a niche between the lower-cost lofts farther north and costlier prime downtown space.

But the neighbourhood around it is an unlikely mix of new condo construction, low-rent apartments, flophouses and unsightly concrete public squares used mostly by street people. The developers are counting on the arrival of an imposing new neighbour guaranteed to have a transformative impact on the district: the $2-billion superhospital known as the Centre hospitalier de l'Université de Montréal (CHUM).

The health centre, expected to open in 2016, will bring together about 16,000 employees under one roof and many of them will be on the hunt for apartments in the area and keen to frequent amenities-rich venues, such as Château Viger, says Anthony O'Brien, senior managing director of Jesta Group, a Montreal-based developer with a mixed real-estate portfolio in Canada, the United States and Europe.

"We've focused on what does this market really need," said Mr. O'Brien on a recent tour of the former hotel, designed by famous New York 19th-century architect Bruce Price, also credited with CP's Château Frontenac in Quebec City and Banff Springs Hotel, among others.

The total space available for the project – which takes in two other railway stations on the site – is about one million square feet over three phases stretching out over several years.

Phase 1 involves the revitalization of Viger as well as the adjoining Berri station for commercial and office space of about 150,000 square feet. So far, tenants include point-of-sale products maker LightSpeed, women's actionwear company Coalision, brewpub Brasseur de Montréal and Jesta Group. The subsequent phases include plans for apartments, more office space and a courtyard.

Château Viger taps into the move to a new generation of big, mixed-use developments with a strong retail component and millennial-friendly amenities such as bicycle parking.

"Lifestyle is critical," said Eric Aintabi, vice-president of Jesta Group. The Viger project has the added advantage of being the eastern gateway to Old Montreal, a "work-and-play" environment, he said.

Alexandre Sieber, senior vice-president and managing director at commercial property consultants CBRE Ltd. says the presence of the CHUM could end up attracting some life-sciences companies to its orbit, adding to the value of the area.

As for the recent rise in Montreal office vacancy rates, to 8 per cent from 6.8 per cent at the end of 2014, Mr. Sieber is not worried that a major project such as Viger, which is adding space on top of other big developments in the downtown, is hitting the market at the moment when an oversupply looms.

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