The Canadian Broadcasting Corp. has allowed premium office space to sit empty in its downtown Toronto headquarters for years, despite a tight office market that has seen rents climb 60 per cent since the end of the recession.
Commercial real estate brokers in the city estimate the surplus space in the Canadian Broadcasting Centre could be leased for approximately $12-million a year. The broadcaster's Front Street building was built in 1992, but aside from a short window when it opened it has never been fully occupied.
With recent budget cuts putting renewed pressure on the broadcaster to cut its costs and find alternate sources of revenue, the CBC is extending its search for tenants beyond the public sector and has applied to the city to rezone the building to allow for commercial tenants.
"We've tried to find Crown corporations and various other government agencies that we could host but their requirements are very small," said Maryse Bertrand, the CBC's vice-president of real estate. "They want 500 square feet, and I have 500,000."
It's part of a broader effort the broadcaster is undertaking across the country to turn its vast real estate holdings into cash.
Many companies, including the Bank of Nova Scotia, whose Bay Street office tower is expected to sell for a billion dollars, are selling their real estate to raise money. The companies prefer the flexibility being a tenant allows, and older buildings can be expensive to maintain.
CBC's building has about 1.5 million square feet of leasable space, meaning it's sitting one-third empty. It was full when it opened, but a round of budget cuts in the mid-1990s saw scores of employees leave and parts of the building which were used to store sets and costumes were emptied as those services were outsourced.
And while there is a lot of space, it is spread throughout the building in small chunks. The CBC will need to move its people around so it can offer potential tenants larger spaces – an expensive and disruptive proposition.
The broadcaster has sat idle while the market boomed all around it. About 4.5 million square feet of new space has been built in Toronto's downtown since the end of the recession, and virtually all of it has been snapped up by tenants looking for new space.
The vacancy rate in the area of the downtown where CBC built its headquarters is about 4.5 per cent, low by historical standards. Rents in the area, meanwhile, have increased by about 60 per cent since 2008 to about $25 a square foot.
"There has been a reverse migration taking place with companies coming in from the suburbs and looking for downtown space," said Stuart Barron, national director of research at Cushman & Wakefield Ltd. "They want to be near an educated work force, and that is definitely one of the benefits all of the downtown condo developments have brought. There's a positive energy."
The CBC is hoping the Canadian condo appetite isn't quite sated yet, particularly in Montreal where it has recently listed its Radio Canada headquarters for sale. It hopes a private company will buy the site and build condos on its existing parking lots, and also build an office building that could house Radio Canada staff.
Media companies have been active sellers of property, largely because technology has allowed them to eliminate entire departments – most newspapers once printed their own papers in-house, for example, but have since outsourced their printing to large suburban printing plants.
CBC once required a lot of space for technical equipment, Ms. Bertrand said, but that's no longer the case. It has 27 small buildings across the country, and its total portfolio is valued at close to a billion dollars. The CBC will consider offers for all of them except its Toronto headquarters and its recently renovated Vancouver studios.
"We've been hacking away at our vast portfolio of real estate. We have reduced it by almost a million square feet, and now we are chipping away at it some more," Ms. Bertrand said.