Kevric‘s renovation of its 600 De La Gauchetière St. W. tower in Montreal is paying off with one of the largest new office leases in North American this year: CN will move its headquarters to the 28-storey building.
The railway and transportation giant has spent over 60 years in the same tower just down the road from its new home to be.
CN’s 20-year lease begins in 2028 and covers the 28-storey building’s first 18 floors, representing more than 440,000 square feet. The railway’s current headquarters are in the Cominar-owned 935 De La Gauchetière W.
The new lease is the largest in Quebec so far in 2024, and Sébastien Hylands, vice-president of operations at Kevric, said it represents one of the biggest office transactions in North America, surpassing the largest Q1 transactions in New York City.
CN will occupy about 63 per cent of the building, which was formerly home to the headquarters of National Bank. Built in 1983 and now undergoing a major transformation, 600 De La Gauchetière has about 725,000 square feet of leasable space, including about 30,000 square feet of retail space.
Negotiations took place over three years
Hylands says the transaction with CN took more than three years to put together, given its complexity. The negotiations took place in person for confidentiality reasons “and to really create good confidence between the parties,” he says.
“The fact that we did all of it in person says a lot to the added value of in-person work on complex transactions.”
CN will have its own lobby reception area on the multi-tenant building’s ground floor and its own dedicated elevator bank.
“CN has been part of downtown Montreal’s DNA for over 100 years. Maintaining our headquarters’ presence in the city’s core is integral to our identity,” Ghislain Houle, executive vice-president and chief financial officer of CN, said in a statement.
The new headquarters will “keep inspiring greater innovation and collaboration in a workplace that will nurture our employees’ growth.”
The building will feature the CN logo and a new name to be chosen by the company.
CN will occupy about 20 per cent less space than it does now, which Hylands says “is reflective of the general market in terms of how tenants address their office space and office needs. The fact that they’re downsizing is not necessarily that they’re doing anything less in that space, but that the work environment has evolved dramatically.”
He notes CN has been in its current headquarters since 1961, in an era when there was a lot of paper, few if any computers and much larger workstations.
“Tenants have generally been downsizing their office requirements. However, they’ve been going into much higher-quality spaces to get the most out of the space that they actually do use and rent.”
600 De La Gauchetière at 83% committed occupancy
Other tenants at 600 De La Gauchetière include accounting firm Raymond Chabot Grant Thornton, which has been in the building almost since it was completed, marine cargo handling and environmental services company Logistec and engineering firm Alten Canada.
They bring the tower’s occupancy rate to 83 per cent, leaving only the tower’s top five floors for lease.
Hylands is optimistic the remaining space will be leased within the next year, given that the top five floors have “phenomenal views and a brand-new office standard.”
The CN lease demonstrates the importance of the office environment, Hylands says.
“Employees do need somewhere to meet that is engaging, where they feel the organization’s values, and that’s why tenants are looking at the best space that there is out there to meet current and future needs.”
Acquired by Kevric and public sector pension investment manager PSP Investments in 2019, 600 De La Gauchetière has been undergoing a transformation since the summer of 2022.
The building envelope is being entirely replaced to feature larger windows that double the amount of natural light. A new main entrance is under construction at the interesection of De La Gauchetière W. and Beaver Hall Hill. The work will be completed by the end of 2025.
Other work includes a new atrium and exterior terrace, touchless access technologies, motion-sensing lighting controls and automated window shades. The building will be carbon neutral.
Renovations are being done while tenants remain in the building. A platform suspended from the roof surrounds the building and workers are working entirely from the exterior to remove the building’s curtain wall.
Other major corporations in the neighbourhood
Hylands would not disclose the costs of the transformation, nor the rental rates.
He notes the Quartier International area that is home to 600 De La Gauchetière “is just getting better and better.”
The mixed-use office and residential neighbourhood also houses head offices of Air Canada, CDPQ (Caisse de dépôt et placement du Québec) and Quebecor in addition to National Bank’s new headquarters.
The area is feeling a “gravitational pull” with significant investments to ensure its office buildings meet the current and future needs of occupants, he says.
Kevric owns and manages several properties in the Greater Toronto Area and downtown Montreal, including Place Bonaventure.
Kevric sold the nearby 35-storey Air Canada Tower and 1100 Atwater in Westmount to Blackstone Real Estate in 2022 for more than $230 million.