It's hard to find the good news in an announcement that, after years of public musing, the Hudson's Bay Co. will finally close its flagship store in downtown Winnipeg. But remarkably, this setback may ultimately move the historic building closer to achieving its potential as the next major piece in downtown revitalization.
Many supporters of both downtown and heritage architecture have long dreamed of a time when the economics aligned to make redevelopment of the Bay downtown more feasible. Several significant hurdles made this a long shot.
First, it cannot really serve anymore as a retail destination. Even before the pandemic struck, traditional bricks-and-mortar retail was under siege from e-commerce and other options that did not require massive investments in real estate.
With many cities still under some level of lockdown, struggling retailers such as the Bay can no longer support their big stores. Earlier this year, the Bay closed a sizable store in downtown Edmonton and has hinted that other cities may also lose their downtown stores.
Second, although the building is structurally sound and aesthetically pleasing, it would require a significant investment to retrofit it for residential and commercial tenants. The cost of that retrofit is the subject of debate within the commercial real estate industry, but there is one point on which most knowledgeable observers agree: the building is worth less than the cost of redevelopment.
Known as a negative equity, it makes redevelopment of the Bay on Portage Avenue — the largest single property by square footage in all of downtown — financially impractical. Last fall, the Bay confirmed what many had been thinking when it confirmed the property had been appraised at $0. That was a problem because previously, industry sources confirmed that the Bay wanted to wring some value out of the downtown store by leveraging its historical and architectural significance into some sort of payday.
That was then, apparently. Now, the company sounds like it might be interested in a more creative solution.
A Bay spokesman said the company is "open to anything, including options outside a traditional transaction." Although there are a number of ways to interpret that comment, let's take the most optimistic view and say that the Bay is willing to walk away from the building for little or no actual cash.
If that interpretation is accurate, it could open up a range of possibilities. "If (the Bay) is going to make the building available for a nominal amount, that would be a game-changer," said Angela Mathieson, president and CEO of CentreVenture, the city's downtown property development agency.
Mathieson said there are a number of scenarios in which private developers would be interested in a property such as this when it can be acquired for next to nothing, allowing the gross majority of any investment to go toward the retrofit.
The economics of the project would improve if one were to include municipal heritage building grants and tax credits, tax increment financing (where a portion of municipal and education taxes are advanced to developers) or even federal grants to promote energy efficient retrofits, she said. "Put all these things together and you're getting close to making it a reality," she said.
However, getting from where we are now to the scenario that Mathieson envisions, would ultimately require the involvement of the city, with the support of the provincial and federal governments. Although no level of government is eager to part with money while it is still suffering the effects of the pandemic, government can play a key role in curating the transfer of title on this keenly important property.
Even though it has lost its purpose as a retail destination, the Bay downtown has not lost any of its importance as a historical artifact from an important period in the evolution of the city and province. Unlike the Portage Avenue Eaton's department store — which was demolished to make way for the Bell MTS Centre — the Hudson's Bay Co. is indelibly connected to the history of Winnipeg and of Manitoba.
Architecturally and structurally, it is one of the most remarkable and best preserved buildings of its kind in North America. At 650,000-square feet, it is enormous and while that is a challenge, it also represents a great opportunity to the design community, which for many years has dreamed of the possibilities that lurk in the deep recesses of the building.
Many other cities have been able to turn similar style and vintage buildings into glorious mixed-use developments, with unique residential units located on top of vibrant commercial space. There is an argument to be made that this is an excellent time to start looking in earnest at turning the Bay into a living, breathing building again.
Right across the street from it, there is new residential development by the University of Winnipeg. And then there is the new Winnipeg Art Gallery Inuit Art Centre, which is being built across from the Bay parkade. Those new amenities certainly strengthen the argument in favour of a redeveloped Bay building.
The announcement of the closure of the store is a sad day for many in this city, not least of which are the people who worked there. But out of that sadness there is a real glimmer of hope. Let's hope the development community, supported by government, can seize on that glimmer.
Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.