A multi purpose facility in the city center would seem to me to make the most sense. If it were my decision, the arena would be about 12,000 seats and lots of luxury boxes.
As for location, the old Uniroyal plant between on Strange Street has lots of room but it doesn't have much else going for it. Single lane streets and no retail around it. If it were rezoned commercial instead of industrial, Glasgow St could have a nice street presence. I think the region is intent on keeping its industrial zoned land that way though.
I think the parking lot between Grand River Hospital and Sunlife is the best location. It will be right on the main transportation route and Sunlife could get a lot of parking out of an underground lot. A tunnel across Union into Sunlife could be worked in too so their employees don't have to freeze their nubblies off in the winter, or dodge cars crossing the street.
I suspect that they will build right on the current site, which isn't a terrible option, but not very exciting either.