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Core is swinging to an office shuffle

Driven by growth, several downtown London businesses are moving to larger quarters, offering a glimmer of hope amid one of the country's highest office vacancy rates.

The downtown office shuffle involves some established businesses, such as law firms Foster Townsend Graham and McKenzie Lake, and newer software and technology firms.

"There are issues downtown, but the office market is trending up, there," said George Kerhoulas, vice-president sales representative for Cushman Wakefield, which helped broker some of the deals.

"The trend for office vacancies is down, and that is good."

Top commercial space, called Class A, has a less than 9% vacancy rate but Class B tops more than 20%, putting the total downtown vacancy rate at 16%, one of the highest in the country.

"But the trend line is positive, it is toward growth and we are not anticipating any contraction for 2012," Kerhoulas said.

Even movement of businesses from Class B to A is a good sign. Though it doesn't lower vacancy rates, it means business is improving, he said.

In addition to the handful of burgeoning core businesses, there are some existing Fortune 500 companies that have signed long-term leases downtown, Kerhoulas said.

Amid the shuffling, Old Oak Properties has moved two prominent London law firms, Foster Townsend and Graham and McKenzie Lake.

The move pushes Old Oak's office vacancy rate down to 7%. It has four buildings in the core, at 140 and 148 Fullarton St., 465 Richmond St. and 150 Dufferin Ave.

"We are mopping up vacancies like no one's business," said Keith McAlister, leasing and construction manager for the commercial division of Old Oak.

"The intellectual industry is strong."

In fact, 15 Old Oak tenants have expanded, adding about 40,000 square feet downtown, McAlister said.

Law firms are growing because of consolidation as larger firms expand by buying smaller ones, said Michael Lake, partner at McKenzie Lake.

"We have generated more business from existing clients and brought more lawyers on board and that has led to our need for more space," he said.

"We're fortunate we have commercial clients who are on a growth path."

Sifton Properties, owner of the landmark One London Place, also has some good news on the downtown office space.

It has found new homes for architectural firm Tillman Ruth Robinson and HRdownloads. One London Place, its flagship downtown building, has a 6% vacancy rate.

In fact, Sifton has had to turn some prospective tenants away.

"Our office business is very healthy and we're seeing growth and innovation and businesses moving forward" with expansion plans, said Piper Badgley, leasing manager commercial for Sifton Properties Ltd.

In fact, business is so good at One London Place that if Sifton can find an anchor tenant, it will start to build a second tower adjacent to the existing one, she said.

"We're very optimistic about the future and we have the pylons in place for phase two," Badgley said. "It's becoming more of a reality we would move forward on that."

But the core's most outspoken landlord, Shmuel Farhi, rejects the idea downtown offices are doing better.

The movement is nothing but "musical chairs" as companies move from one location to another while the economy remains poor, he said.

"We have 70% of all vacancies downtown. The city tells me to be patient. I'm running out of patience."

Farhi said he has 480,000 square feet of vacant office space.

But at Citi Plaza, the former Galleria, "things are great," manager Lucas Blois said.

The former mall that has been converted into office space landed Digital Extremes and L360 Architecture that moved from Hyde Park.

"Our vacancy rates are down again," he said, adding the space is about 94% full.

"I think the market is getting better. I think a lot of people in 2008 and 2009 were scared. They held off, but now they're starting up and the market is improving."


The downtown shuffle

In recent months, several businesses have moved to new, larger offices in downtown London to accommodate growth.

They include:

150 Dufferin Ave.

Voices.com: Voice-over software firm. Moved from the research park at the University of Western Ontario to 6,000 square feet in its new home.

Foster Townsend Graham and Associates: The law firm is moving from two houses at 551 Waterloo St. to two full floors of just under 30,000 square feet.

195 Dufferin Ave.

HRdownloads: a software company creating human resources-based software, is moving from its Wellington Street location, tripling its size to more than 9,000 square feet.

100-105 King St. at Talbot

Lashbrook Marketing and Public Relations: is moving into 4,000 square feet from 1,800 square feet at 200 Queens Ave.

Echidna Solutions: The software developer and web manager is moving from 207 King St. into 3,500 square feet.

Citi Plaza

Digital Extremes: The gaming company is moving from a 17,000-square-foot office at 140 Fullarton St. to about 30,000 square feet.

L360 Architecture: Moved from Hyde Park to a 5,000-square-foot office.

140 Fullarton St.

NDS Canada Inc.: Software developer for pay-TV industry will double in size in 2012 and take an entire floor in the building, about 12,000 square feet, from its existing smaller office space.

McKenzie Lake: The law firm will move next summer into 24,000 square feet on two full floors from a 17,000-square-foot building it owns at 300 Dundas St.

200 Queens Ave.

Tillman Ruth Robinson: Architectural firm is moving from a home on Wolfe St. to 12,000 square feet in the building designed by Tom Tillman's father.

358 Talbot St.

Nicholson Sheffield: architectural firm has moved from the Station Park office complex on Piccadilly St., doubling in size to 5,000 square feet.

London Free Press: Core is swinging to an office shuffle

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