Commercial Real Estate News

[OTSkyline]

Because most of the private sector (Mtl or Tor) is back in person in the office (at least more consistently) - 2, 3, 4x per week.

Meanwhile in Ottawa, the public sector fights tooth and nail not to go in person. What is the minimum guideline today, 1x or 2x a week? And through experience many people I know always find an excuse not to go.

15% obviously doesn't sound great but at least it still seems in line with Toronto and Montreal.

[J.OT13]

Originally Posted by OTSkyline

Because most of the private sector (Mtl or Tor) is back in person in the office (at least more consistently) - 2, 3, 4x per week.

Meanwhile in Ottawa, the public sector fights tooth and nail not to go in person. What is the minimum guideline today, 1x or 2x a week? And through experience many people I know always find an excuse not to go.

15% obviously doesn't sound great but at least it still seems in line with Toronto and Montreal.

That makes sense, but it doesn't explain why cities with roughly the same vacancy rate continue to build office buildings.

In any case, if we can remove some Class C and Class B buildings from the market and replace them with residential (adaptive re-use of demolition), we should be in a good position.

[J.OT13]

Vacancy rates in downtown Ottawa hit all-time high as public service employees continue to work from home

ADAM STANLEY
SPECIAL TO THE GLOBE AND MAIL
PUBLISHED AUGUST 29, 2023


Approximately half of Ottawa’s inventory of office space is occupied by federal employees.

The return-to-office policy of the federal government – Ottawa’s largest employer – has resulted in a unique set of challenges in its downtown office market, commercial real estate insiders say.

Last year, the Treasury Board of Canada Secretariat announced a common hybrid model in which its employees would be required to return to the office for two or three days a week.

A resulting two-week national strike in April – with more than 155,000 public servants on the sidelines – disrupted some government services, with the work-from-home policy being the linchpin for the work stoppage.

A survey released in June by the Professional Institute of the Public Service of Canada showed that 70 per cent of the respondents were “dissatisfied with how the return-to-office policies were implemented,” which has left some commercial real estate veterans in Ottawa wondering what’s next for the downtown core that’s seeing record-high vacancy rates.

Alan Doak, a partner of Proveras Commercial Realty, says when and how often public service employees come to the office is a manager-to-manager situation, an uncertainty that has left many tenants and landlords in the lurch.

Downtown investment

Crown corporations, large national associations and pseudo-governmental entities tend to follow the public service and it remains to be seen how many of those organizations will downsize, move or right-size their real estate footprint, Mr. Doak says.

“We’ve got [a] bottleneck and we don’t have any clarity on it,” Mr. Doak says. “As real estate professionals, it’s time to ask the government to signal that if we care about what the capital of our country looks like, we need to start investing in downtown. And the best way to do that is for people to return to the office [for] the majority of their working hours.”

To encourage business support for the area, Shawn Hamilton, a principal at Proveras, organized a recent event called Ottawa is Open for Business. It was attended by 300-plus people including representatives from all three levels of government.

“We wanted to say to the private sector, ‘Come on in, the water is fine,’” Mr. Hamilton says.

The gap in communications from the federal government is “causing a downward spiral in our business,” he adds.

Paul Thompson, deputy minister of Public Services and Procurement (PSPC), recently told the standing committee on government operations that instead of a 40-per-cent reduction in its real estate holdings, a 50-per-cent reduction is now more likely. The PSPC holds 6.9 million square metres of office space in Canada, more than half in Ottawa-Gatineau.

“We can deal with a compressing federal government, but we just need to understand how it’s going to be done so we can adjust,” Mr. Hamilton says.

Hot topic

According to a CBRE study, Ottawa’s downtown vacancy rate in the second quarter was just over 15 per cent. That’s below the national average of 18.1 per cent, but it’s the highest in Ottawa since CBRE began tracking the stat in 1996.

Calgary had the country’s highest vacancy rate, at 31.5 per cent, but it was one of three cities with a positive net absorption in this year’s second quarter.

“Other major markets have their challenges as well, but we have a totally different type of worker here,” Mr. Doak says. “Calgary has a higher vacancy rate than we do, but their occupancy rate is higher than Ottawa because when the private businesses call people back, people go.”

Ottawa’s working population is about 737,000 and the federal government employs more than 113,000 people – up from 100,000 in 2021.

But what has happened to the offices those workers occupy?

Louis Karam, senior vice-president and managing director of CBRE in Ottawa, says it’s “the hottest topic” in the city.

Fifty per cent of the city’s inventory of office space is occupied by the public service. While the PSPC’s next steps and the balance of remote versus work-from-home are important, they’re not the only drivers of what’s happening in Ottawa.

Remote work

“We are staring at a looming recession, interest-rate hikes … the tech sector that had been really strong in Ottawa is on the sidelines for now as they’ve been recalibrating after the huge growth in the pandemic,” Mr. Karam says. “All those things combined have put us in this situation.”

Mr. Karam, who says CBRE has “walked the walk” and moved to a right-sized office on the 19th floor of a building in Ottawa’s downtown core from a large office in the Little Italy neighbourhood, believes the numbers won’t look good for the next 12 to 24 months.

“But after that, things are set to improve,” he explains. “The PSPC’s portfolio reduction of 50 per cent is not going to happen overnight. By the time it does, all these other factors will have moved on.”

Mr. Karam says both employers and the City of Ottawa need to work in conjunction to make back-to-office efforts into downtown easier, including tackling Ottawa’s much-troubled transit system.

“It’s clear remote work is not going away,” Mr. Karam says, “but it’s a question of how many days in the office that doesn’t take away from office space and amenities.”

https://www.theglobeandmail.com/busi...ublic-service/

[Marcus CLS]

Update 405 Huntmar Drive: Although according to devapps. site plan control is not yet approved, site prep. and substantial grading has started for the two Rosefellow warehouses. Could not find a specific thread so posted here.

[rocketphish]

Tenants seeing best deals in years in Ottawa’s ‘highly competitive’ office market

David Sali, OBJ
September 5, 2023 4:23 PM ET

With tenants ditching office space across the city, the real cost of rent is falling to levels not seen in years as landlords offer discounts and other inducements to fill vacancies, industry insiders say. While headline rental rates haven’t budged much during the pandemic, real estate observers acknowledge that many clients are now paying less for office space in Ottawa than they were in the pre-COVID era. Across the National Capital Region, landlords are offering “significant incentives” to tenants, such as months of free rent and more capital to help pay for renovations, says Hugh Gorman, CEO of Colonnade BridgePort, the city’s largest privately owned property management firm. “Those things have always been there, but they’re just a little more aggressive now,” the veteran real estate executive explains. “I think you’ve got to be in tune with what’s happening in the market. I think any landlord that’s not being creative and being aggressive is falling behind very quickly. It is about occupancy right now and kind of weathering the storm.” Indeed, Ottawa is a tenant’s market, from downtown to the tech hub of Kanata, as office towers have hollowed out amid the shift to hybrid and remote work under COVID-19. The capital’s overall office vacancy rate rose to 13.6 per cent in the second quarter, according to real estate firm CBRE, up from 12.3 per cent the previous quarter.

Landlords in the downtown core have been particularly hard hit, with the vacancy rate reaching 15.1 per cent in the quarter ended in June. That compares with 6.5 per cent at the end of 2019, before the pandemic struck.

As a result, building owners are scrambling to offer various inducements – and bargain-hunting tenants are taking full advantage. “I think (tenants) see the opportunity in the marketplace right now, and they’re moving,” Gorman says, noting that tech firms in particular have been “very aggressive” at locking in long-term leases at favourable rates. Alan Doak, a partner at Ottawa-based brokerage Proveras Commercial Realty, agrees.

Doak predicts more and more tenants in downtown properties will see “significant decreases in rental rates mixed with better and better incentive packages” as owners push to sign tenants to long-term deals, even if it is for less space than those companies occupied before. “I think we’re just starting to see a real highly competitive environment evolve amongst multiple (office) towers,” Doak says. Most vacant class-A office space in the core is now concentrated in a handful of properties, including Constitution Square, the Sun Life Financial Centre, the World Exchange Plaza and 55 Metcalfe St., notes longtime broker Shawn Hamilton, another partner at Proveras. But incentives could spread to other properties in the core as short-term lease extensions signed during the pandemic start to expire and flood the market with even more vacant space, Doak adds. “We don’t actually know how low people will go,” he says. “We haven’t seen the bottom yet.”

Determining exactly how much tenants are paying for space in the current market often requires a bit of digging.

Landlords typically like to publicize asking rents because rental rates help determine a building’s value. Research shows those rates haven’t changed much over the past few years. According to real estate firm Altus Group, the average asking net rent in a class-A building in downtown Ottawa right now is just over $21 per square foot. CBRE’s latest report pegged it slightly higher, at $22.90. But most observers agree that the rate tenants pay after incentives have been deducted – known as net effective rent, or “NER” – has been declining throughout the pandemic. Gorman estimates that average NERs in downtown properties have fallen about 20 per cent since 2019, with rates at “Triple-A” buildings dropping from between $23 to $25 per square foot before COVID, to closer to $18 now. Doak agrees, saying some properties that fetched NERs in the range of $25 a square foot in the first quarter of 2020 are now bringing in closer to $15 a square foot. Altus, meanwhile, says its data, derived from surveys of owners, brokers and landlords, hasn’t shown as much of a decline in NERs since 2019, when they ranged from $14 to $17 per square foot.

However, Raymond Wong, the firm’s vice-president of data operations, says recent anecdotal evidence suggests NERs are on a downward trajectory in the capital. “It’s a very competitive landscape,” Wong says. “Net effective rates are coming down, but maybe not at the same rate as compared to Toronto or Vancouver.” He says one explanation for Ottawa’s more gradual descent could be that its downtown office market hasn’t been hit with the same glut of sublet space as many other major Canadian markets.

According to CBRE, 11.3 per cent of all vacant office space in downtown Ottawa last quarter was on the sublet market, compared with nearly 29 per cent in Toronto.

“You’re not experiencing the same issues with your space competing with sublet (space),” Wong explains.

Veteran broker Lindsay Hockey of Colliers International also says that while headline asking rents are holding firm, “the incentive pool is a lot deeper” than it used to be. Still, he says the Ottawa landlords and property owners he deals with are “not going to the same extremes that we’re seeing in Toronto,” adding he’s “hesitant to say” inducements are “happening across the board in a big way.”

Building owners outside the core are also offering more incentives to tenants as vacancies continue to rise in those submarkets. Doak says landlords in Kanata are cutting rates and offering incentives that include up to a year’s free rent and help with fit-up expenses in “a race to provide the best value.”

Rents in class-A buildings in the west-end tech hub that were nearing $30 a square foot before COVID have fallen back to the mid-20s, he says. KRP Properties president Martin Vandewouw, whose firm owns and manages more than three million square feet of commercial real estate in Kanata, wouldn’t reveal how much NERs in its portfolio have changed over the past four years. Vandewouw said the types of incentives landlords are willing to offer vary according to a tenant’s particular needs and the specifications of the building itself. “It depends on the deal,” he says. “Every deal is different.” After a spate of short-term extensions early in the pandemic, landlords and brokers now say they’re seeing a shift back to more five- and 10-year leases as companies fine-tune their back-to-work strategies and get a better sense of their overall real estate needs for the next few years. Gorman says today’s falling NERs are really a reflection of trends that have been snowballing since the start of the pandemic and are still working their way through the system.

“It’s not like hotels, where the rate is set every night,” he explains. “There is really a time-lag factor. “The feeling is in terms of occupancy, we’re at the bottom of the trough, and now we’re starting to see it come back out the other side. I think the worst is over. Tenants that are proactive are trying to take advantage of market conditions and are committing to space now. I feel like the tide is turning, but rates will lag and won’t catch up … probably for another 18 to 24 months.”

https://obj.ca/tenants-seeing-best-d...office-market/

[J.OT13]

Big draw for investors? Corel’s former Carling Avenue HQ up for sale

David Sali, OBJ
September 27, 2023

The former home of one of Ottawa’s most prominent tech companies in the 1990s and early 2000s is on the block.

The Churchill Office Park at 1600 Carling Ave. – best-known for being the headquarters of graphics software pioneer Corel during the company’s heyday more than two decades ago – has been put up for sale by owner Manulife Investment Management.

The eight-storey building just north of the Queensway has been instantly recognizable since it opened in 1984 thanks to its distinctive gold tint.

Now managed by JLL, it is currently 81 per cent occupied with an average weighted lease term of 5.6 years. Its tenants include investment advisers BMO Nesbitt Burns and accounting firm MNP.

While Corel (now known as Alludo) no longer has a footprint in the 183,000-square-foot, class-A office complex, the building remains an attractive commodity due to its highly visible location on two of the city’s main traffic arteries, its proximity to public transit and its development potential, CBRE vice-president Nico Zentil said.

Zentil said the complex offers “really good value” to a buyer that wants to keep renting it to office tenants. At the same time, the 4.3-acre site is also zoned for residential use, meaning it has plenty of upside as a potential multi-residential development site, he added.

“It has some optionality instead of just being an office building in perpetuity,” explained Zentil, whose firm is marketing the property.

“That theme is resonating out there with investors. It’s like, ‘If I buy this building, is there an opportunity to take it from its current form into something else if I had to and if I wanted to in the future?’”

Zentil said he expects the property to generate considerable interest even as office buildings continue to bleed tenants, investors grapple with rising interest rates and a volatile bond market drives up the cost of financing major acquisitions.

“We’ve seen some turbulence over the last quarter in that sector, which has made things just a little bit more challenging in certain asset classes to get deals done,” he conceded. “We have seen lenders pull back a bit in the office sector.”

But Zentil said he remains “bullish” on the sector’s long-term prospects. Tenants are gradually coming to terms with the shift to hybrid work and are adjusting their space requirements accordingly, he said, giving the industry a better sense of what the future of the office will look like.

“I think some of the uncertainty has been taken off the table, which bodes well for continued trading in the office sector,” Zentil said. “From an investor’s perspective, that’s what was causing the most pain, was the uncertainty of it.

“The pricing parameters have changed in the last 18 months, no doubt. But (the office sector) is still fundamentally solid. I just think that it’s looked at in a much more discerning way than it was before.”

Zentil said CBRE continues to have a “pretty active book” in the National Capital Region.

Among the other properties the brokerage firm is currently marketing is a 15-storey, 202,000-square-foot office tower at 200 Sacre-Coeur Blvd. in Gatineau that is fully leased to the federal government until the end of 2026.

Zentil said the building could be a potential candidate for conversion to residential use.

“We’re about as busy as we’ve ever been,” he said.

https://obj.ca/corels-former-carling...q-up-for-sale/

[rocketphish]

Ottawa’s office vacancy rate stabilizes in Q3 as conversion trend spreads, reports say

David Sali, OBJ
October 3, 2023 5:04 PM ET

Ottawa’s reeling office rental sector showed signs of stabilizing in the third quarter as several downtown highrises that are slated to be redeveloped into residential units were taken off the market and leasing activity perked up in Kanata, two new reports say.

While the headline numbers were slightly different in the latest market updates from CBRE and Colliers, two of Canada’s largest brokerage firms, the bottom line was similar.

Both companies suggested that landlords seem to be making headway in stemming the mass exodus of tenants that has hollowed out office properties across the National Capital Region.

According to Colliers, Ottawa’s overall office vacancy rate dipped to 12.6 per cent at the end of September, down from 12.9 per cent in the second quarter – the first quarter-over-quarter decline in the city’s vacancy rate since early 2022.

Colliers said the numbers signalled a “positive shift” in the local market as several aging downtown office towers that have outlived their usefulness are being readied for conversion to residential buildings. As a result, the class-C office vacancy rate in downtown buildings declined to 20.9 per cent from 26.1 per cent in the second quarter.

“This transformation reflects a strategic response to Ottawa’s evolving needs, increasing the supply of urban rental housing units and contributing to revitalizing Ottawa’s downtown,” Colliers said in the report released Monday, adding it expects the trend to persist in the face of soaring demand for rental housing.

CBRE also highlighted the removal of several downtown properties that are earmarked for residential use, including 360 Laurier Ave. W., 150 Laurier Ave. and 130 Slater Ave., from the city’s office inventory.

“I think in the long run, I suspect that we will see a few more of these conversions happening in Ottawa,” Louis Karam, the managing director of CBRE’s local office, told OBJ on Tuesday. “It is not the silver bullet that is going to fix everything. But for those buildings where it’s actually feasible, this is going to be one solution for both office (vacancies) and multi-res (shortages).”

But according to CBRE, Ottawa’s overall office vacancy rate continued to rise in the third quarter, ticking up slightly to 13.6 per cent from 13.5 per cent at the end of June.

That’s because the firm included an additional 150,000 square feet of newly vacant space at the Canada Mortgage and Housing Corporation’s Montreal Road campus in its latest calculations. CMHC, which owns the buildings, previously occupied the entire space, meaning it wasn’t considered part of the region’s “competitive” office inventory and was not factored into the vacancy rate as determined by the major brokerages.

However, that changed when the Crown corporation put the property on the market at the end of August, said CBRE’s Ottawa-based managing director Louis Karam. But Colliers did not include the CMHC property in its third-quarter report, accounting for most of the discrepancy between the two companies’ figures.

Still, Karam said even a marginal rise in the vacancy rate, as opposed to a decline, is cause for optimism. At the same time, he added, the sector remains in a state of flux.

“We’ve been saying that it’s going to get worse before it gets better,” he said of the city’s steady rise in office vacancies since the start of the pandemic. “I’m not yet ready to say that we’re finding equilibrium. I’d like to see these trends continue over a quarter or two before getting to that level.”

Karam also noted the ongoing “flight to quality” is driving up vacancy rates in class-B and C buildings while the amount of empty space in class-A buildings continues to fall.

“We’re seeing this clear trend continue with demand for best-in-class properties remaining strong,” he said.

Meanwhile, Kanata began showing signs of a resurgence in the third quarter.

The overall vacancy rate in the west-end tech hub dropped nearly a full percentage point to 15.3 per cent, CBRE reported. The class-A rate fell by 1.3 percentage points to 17.3 per cent, thanks to deals such as Wind River’s move to lease 58,000 square feet of space at 425 Legget Dr. and Syntronic’s pickup of 67,000 square feet at nearby 340 Legget.

“Businesses continue to prioritize well-amenitized, high-quality buildings, and that’s going to continue, whether it’s in Kanata or downtown,” Karam said.

Colliers also pointed to “significant leasing activity within the Kanata North Business Park by technology tenants” in the third quarter.

“There’s a bit of a shift with tenants looking more in the suburbs instead of the downtown,” explained the firm’s Ottawa-based research analyst Paul Mullin, adding that perks such as free parking and a shorter commute for many employees could be luring companies from downtown.

Mullin also noted that more landlords are rolling out additional incentives to prospective tenants such as free rent, cash for fit-ups and fully furnished “model suites” that are ready to occupy.

Soaring construction costs have made the “turnkey aspect” of such suites particularly attractive to many budget-minded renters, he added.

“Tenants can see what the possibilities are for the space,” Mullin said.

https://obj.ca/ottawa-office-vacancy...bilizes-in-q3/

[J.OT13]

Want expecting CMHC to vacate it's entire campus. They must be moving somewhere else to a smaller space.

Suburban offices are only closer for those who live near by. I still think a central location with access to transit is better.

[rocketphish]

Ottawa industrial rents keep rising as market tightens in third quarter

David Sali, OBJ
October 4, 2023 2:43 PM ET

Available space in Ottawa’s industrial buildings fell slightly in the third quarter as small-bay tenants continued to snap up what little inventory remains in one of Canada’s tightest markets.

The city’s industrial availability rate dipped to 2.2 per cent at the end of September, down from 2.4 per in the second quarter, CBRE said in its latest market report released this week. Average asking net rents rose for the eighth consecutive quarter to $15.50 per square foot, a 15 per cent increase from a year earlier.

“I think there’s a lot of talk of the industrial market slowing down, but we’re not seeing a slowdown here in Ottawa,” CBRE Ottawa managing director Louis Karam told OBJ this week. “Demand is still there, and it’s continuing to push our asking rents higher.”

CBRE said the lack of new supply and limited vacancies mean existing tenants are electing to renew their leases at higher rates.

Karam said the space crunch is especially acute for tenants in small-bay properties who have few choices when it comes to available inventory.

“As a large-bay user, options are there and (more) are coming over the next year,” he said. “When you’re a small-bay user, though, it’s a different story. There’s just virtually no available space on the market.”

National brokerage firm Colliers told a similar story in its latest market report, noting that much of the recent leasing activity was driven by tenants occupying less than 10,000 square feet of space.

“Despite continued strong demand from larger distribution and logistics tenants seeking to expand or enhance their space, only a few options for immediate occupancy are available until new projects are completed,” the company said in its report.

However, relief is on the way for big-bay tenants.

Colliers noted there are currently seven major projects in various stages of construction – three in the east end, three in the Kanata/far west submarket and one in Ottawa south – totalling more than 980,000 square feet, with most of those developments scheduled to be completed by the end of 2024.

The company said another 39 projects with a combined footprint of six million square feet are in the planning and pre-leasing stages. According to Colliers, Ottawa currently has about 46 million square feet of industrial space.

Colliers associate vice-president Daniel Niedra said submarkets such as Kanata that are “traditionally not very well-served by industrial real estate” are now buzzing with activity as developers look to satisfy surging demand for warehouse and manufacturing space.

He points to Montreal-based Rosefellow’s two-building project on Huntmar Drive that is slated to add 480,000 square feet of big bay, “state-of-the-art” inventory in the west end as a prime example.

“There are still (technology) companies here who are making things, and they need the floor space,” Niedra explained.

But as rising interest rates drive up financing costs and soaring inflation makes construction materials more expensive, Niedra says he wouldn’t be surprised if some developers pressed pause on new builds until economic conditions improve.

“I think they’re going to have to assess the risk of putting up a building on spec and having to take time for that space to be absorbed,” he said. “Tenants in this market are eager to get into modern, functional product. It just takes some time for leases to roll and tenants to find the right opportunities to relocate.”

Meanwhile, Colliers said there were few notable sales transactions in the third quarter.

“In the face of rising interest rates and economic uncertainty, real estate investors maintain a strong appetite for industrial assets,” the report noted. “Nevertheless, the limited availability of investment-grade properties in the current quarter has led to a predominance of sales involving users and smaller-scale buyers.”

https://obj.ca/ottawa-industrial-ren...third-quarter/

[phil235]

Originally Posted by J.OT13

Want expecting CMHC to vacate it's entire campus. They must be moving somewhere else to a smaller space.

Suburban offices are only closer for those who live near by. I still think a central location with access to transit is better.

I really can’t stand when people make that statement - suburban locations are closer to where people live. It’s just not true, and that’s before you consider that everyone basically needs a car to access these suburban office parks.

On CMHC, I’m not sure that they are vacating the whole office. My understanding was that it is just one of the three buildings, but I don’t know for sure.

[rocketphish]

According to SpaceList, 55% of the CMHC campus is available for lease:

• The entire 142,636 ft² in Building A, a 3-storey office building. Brochure
• The entire 52,593 ft² in Building B, a 3-storey office building. Brochure
• 40,471 ft² of the 231,975 ft² in Building C. Two floors (7+8) of the 8-storey office building. Brochure

https://www.spacelist.ca/listings/on/ottawa

[J.OT13]

Originally Posted by phil235

I really can’t stand when people make that statement - suburban locations are closer to where people live. It’s just not true, and that’s before you consider that everyone basically needs a car to access these suburban office parks.

On CMHC, I’m not sure that they are vacating the whole office. My understanding was that it is just one of the three buildings, but I don’t know for sure.

Agreed. The crusade to get a large Federal department in Orleans has always been a head scratcher for me. We're one economic region. Doesn't matter where the employer is as long as they are accessible. Think of the commute for workers from Gatineau or Orleans when DND moved to the old Nortel campus. It' not realistic to expect them to uproot their lives and move to the more anglophone and expensive west end. That said, I can better understand that move due to security reasons, but overall, the idea of shuffling Federal Departments so everyone gets their campus is kind of ridiculous.

Originally Posted by rocketphish

According to SpaceList, 55% of the CMHC campus is available for lease:

• The entire 142,636 ft² in Building A, a 3-storey office building. Brochure
• The entire 52,593 ft² in Building B, a 3-storey office building. Brochure
• 40,471 ft² of the 231,975 ft² in Building C. Two floors (7+8) of the 8-storey office building. Brochure

https://www.spacelist.ca/listings/on/ottawa

Thanks. Glad they aren't completely vacating.

[phil235]

Originally Posted by rocketphish

According to SpaceList, 55% of the CMHC campus is available for lease:

• The entire 142,636 ft² in Building A, a 3-storey office building. Brochure
• The entire 52,593 ft² in Building B, a 3-storey office building. Brochure
• 40,471 ft² of the 231,975 ft² in Building C. Two floors (7+8) of the 8-storey office building. Brochure

https://www.spacelist.ca/listings/on/ottawa

Thanks. Surprised they are giving up so much, given what they just put into renovating the buildings. Giving up the historic building entirely is a bit sad.

[rocketphish]

CMHC says plans for vacant Montreal Road buildings still up in the air

David Sali, OBJ
October 6, 2023 4:24 PM ET

Canada Mortgage and Housing Corp. still hasn’t decided what to do with more than 220,000 square feet of office space at its main campus on Montreal Road that was vacated during the pandemic, the agency said Friday.

A spokesperson for CMHC confirmed Friday that two of the three buildings at the Crown corporation’s 700 Montreal Rd. headquarters – Building A, which has a total of 165,933 square feet, and Building B, which covers 56,805 square feet – are no longer occupied.

Building C, which is the largest property at about 205,000 square feet, now houses all of the 1,050 CMHC employees who were previously spread across all three office buildings.

Once Building C was reopened in December 2022 after being shuttered earlier in the COVID-19 crisis, “employees no longer had access to Buildings A and B,” CMHC spokesperson Brie Martin said in an email to OBJ on Friday.

She said the move is part of “an initiative to modernize” the way employees work “by redesigning, consolidating and renovating” the organization’s work sites.

“The workspaces in Building C are not dedicated offices but rather are booked and shared as needed among employees, including executives,” Martin said. “This flexible approach allows us to use the available space more efficiently.”

CMHC owns all three buildings at the Montreal Road campus, which has a total capacity of about 425,000 square feet.

Martin said the housing agency is still “considering how best to align the use of these buildings with CMHC’s mandate and objectives.”

At the same time, a significant chunk of the property is being shopped around to potential tenants.

An online listing from BGIS, the organization that manages more than 21 million square feet of federally owned real estate in the National Capital Region, indicates there is space available for lease in all three buildings at 700 Montreal Rd. – including nearly 140,000 square feet in Building A, 52,600 square feet in Building B and about 41,000 square feet on two empty floors in Building C.

The listing highlights features such as kitchenettes, meeting rooms, on-site daycare, access to amenities such as showers and lounges and “significant views from all sides allowing for an abundance of natural light,” while adding that many of the floors “can come fully furnished or unfurnished.”

A BGIS sales representative told OBJ Friday afternoon the properties were still listed but would not comment on whether any of the space has been leased.

The impact of CMHC’s decision to put Buildings A and B on the market is reflected in the discrepancy between office vacancy rates recently reported by two major brokerage firms.

According to CBRE, the city’s overall office vacancy rate sat at 13.6 per cent at the end of the third quarter, up from 13.5 per cent in June.

CBRE’s stats included about 150,000 square feet of space at the CMHC campus that began appearing on brokerage firms’ radar at the end of August.

However, Colliers did not factor the empty buildings into its calculations – which showed Ottawa’s vacancy rate falling to 12.6 per cent at the end of September from 12.9 per cent in the second quarter.

CMHC’s decision to empty out two of its three office buildings comes amid a seismic shift in the local office market in the wake of COVID-19.

With hybrid work now the norm for many of its employees, the federal government has begun paving the way for a wholesale revamp of its real estate portfolio in the National Capital Region.

Earlier this year, the feds released a list of 10 aging properties they are planning to dispose of in Ottawa.

The “disposal list” includes L’Esplanade Laurier downtown, the Sir Charles Tupper Building on Riverside Drive, and the 1500 Bronson Building and Annex.

https://obj.ca/cmhc-says-plans-for-m...ill-up-in-air/

[J.OT13]

I have an idea for the Canada Mortgage and Housing Corporation's unused buildings... hear me out... housing.

The heritage portion could be converted to lofts, with the central portion holding the amenities. The ugly 70s extension can be demolished and redeveloped along with the surface parking. A row of buildings could be built along the laneway that connections Montreal Road and the Aviation Parkway. The strip of grass left between the new buildings and the Parkway could use a whole lot more trees, or make it an actual functional park. Anything but grass.

Now if only the City could plan rapid transit down Rideau-Montreal instead of building transit in farm fields and exclusive sfh neighbourhoods.

[rocketphish]

'We need to start moving dirt': Demand for industrial space in Ottawa still strong, panel says

David Sali, OBJ
October 24, 2023 3:48 PM ET

With available industrial space shrinking and rents steadily rising in the National Capital Region, an executive from one of the city’s largest commercial property management firms delivered a blunt message to an audience at the Ottawa Real Estate Forum last week.

“We need to start moving dirt and putting steel up,” Brent Arseneau, vice-president of leasing at Colonnade BridgePort, said last Thursday during a roundtable discussion on the future of the city’s industrial market at the Ottawa Conference and Event Centre.

“You have to show that you’re doing something to build space. There’s a severe lack of quality industrial space. There are a lot of tenants out there in buildings that are 40, 50 years old that are 18 to 20 feet clear and they need 60,000 square feet, and they don’t have any other options.”

Traditionally dominated by smaller tenants who occupied buildings with smaller bays than today’s massive warehouses, Ottawa’s industrial sector isn’t large by national standards.

Just how big depends on the source. According to CBRE, for example, the region had about 36.3 million square feet of industrial real estate at the end of the third quarter. Rival brokerage Colliers, meanwhile, pegged the total at more than 46 million square feet.

No matter what, Ottawa’s industrial inventory lags far behind cities such as Edmonton (156.6 million square feet), Calgary (153.7 million square feet) and Winnipeg (86.4 million square feet), all according to CBRE.

One thing, however, is not in question: Ottawa’s industrial sector is having a moment.

The city’s industrial availability rate was 2.2 per cent in the third quarter, CBRE says – fourth-lowest in the country and well below Edmonton’s rate of 5.2 per cent and Calgary’s 3.8 per cent.

As available industrial space becomes more scarce, the price of leasing keeps soaring. According to Colliers, asking net rents in Ottawa have risen nearly eight per cent over the past year to $15.92 per square foot.

Sensing opportunity, a growing number of developers are expanding Ottawa’s industrial footprint as non-traditional users such as e-commerce and logistics companies drive demand for bigger-bay properties with higher ceilings designed to serve markets well beyond the capital region itself.

Colonnade BridgePort, for example, is partnering with Toronto’s CanFirst Capital Management on a four-building project in Barrhaven that will see up to 900,000 square feet of new warehouse space added to the south end of the city.

Located on a 50-acre plot of land just south of Amazon’s 2.8-million-square-foot fulfilment centre that opened in late 2021, the development is expected to generate significant interest from other e-commerce firms.

But CanFirst executive vice-president of investments and business development Mark Braun told the panel an array of businesses, from data centres to manufacturers, have been inquiring about leasing space at the site.

Demand from e-commerce providers “is there, but not to the extent that we thought,” Braun said.

Fellow panellist Erik Langburt, vice-president of real estate development at Montreal-based construction giant Broccolini, agreed there is “healthy demand” for industrial space across a wide range of users, even as Ottawa gains momentum as a logistics hub due to its skilled labour force and close proximity to Toronto and Montreal.

Those attributes also enticed Mike Jager, co-founder of Montreal-based Rosefellow, to move into the Ottawa market with a two-building project on Huntmar Drive in Kanata that is slated to add 480,000 square feet of big-bay, “state-of-the-art” inventory to the west end.

Jager’s firm is also planning to construct up to 350,000 square feet of new industrial real estate at a 15-acre site near Colonnade BridgePort’s project in Barrhaven.

Both developments are being built on spec, but Jager said he has no worries about filling them.

“If you can bring the products to market, the tenants will come,” he told the audience of several hundred real estate executives, explaining that Ottawa is a “great place to set up shop” for e-commerce firms, logistics companies and manufacturers targeting the Eastern Ontario and Quebec markets.

“We believe investors will keep looking at Ottawa as a safe haven to invest,” Jager said. “We’ll keep growing and keep looking at opportunities to keep buying and developing accordingly.”

Arseneau said the National Capital Region, with a population of more than 1.3 million, is large enough to support a “sustained industrial economy” as it diversifies beyond its traditional tenant base.

“We’re going to create an industrial market,” he said. “We have a draw for tenants to come to this city and really invest in the city from distribution, warehousing, logistics and hopefully some manufacturing. That’s where we need to go in the future.

“I think we’ve missed the boat a little bit because we wanted to insulate ourselves and consider ourselves white-collar. I think that we need to start growing that (sector) actively as real estate professionals here.”

https://obj.ca/demand-for-industrial...-still-strong/

[rocketphish]

Seeking to create a downtown renewal
In Ottawa, a shrinking government footprint has the CRE industry, and city leaders, teaming up to find solutions

Don Wilcox
Managing Editor, RENX
October 26, 2023

If there is any question about the emphasis on downtown cores and central business districts of Canada’s major cities, one just needs to attend some of the presentations at Informa’s nationwide series of real estate forums.

Discussions about the cores, the office market and creating vibrant central districts are central to these gatherings and draw large audiences of attentive executives.

Such was the case at the Ottawa Real Estate Forum in the nation’s capital last week.

A sellout crowd of over 730 commercial real estate industry professionals heard all the challenges the city’s downtown has been facing for the past several years, but also received some insight into how it – and other city cores – might continue to recover.

Like every major Canadian city, Ottawa has unique aspects to its downtown business mix. Or, as BOMA Canada president and CEO Benjamin Shinewald noted during a panel devoted to the city’s office sector: “Ottawa is sort of special and it’s not so special at the same time.”

Federal government going through major changes

As the seat of the federal government, Crown leasing or ownership comprises about half of its 44 million-square-foot office sector (when combined with the neighbouring city of Gatineau).

The feds are going through two major transitions, the first involving their workforce under the new post-COVID paradigms, the second in trying to both downsize and modernize the space their agencies occupy.

Both could have significant impacts on commercial real estate in the capital region and beyond.

Canadian Urban Institute president and CEO Mary Rowe said Ottawa is now facing what other Canadian cities with office-dominated cores have already faced, “a failure of single uses.”

“A lot of what we are seeing in downtowns across the country are challenges which pre-existed COVID. So, we were already struggling with parts of cities which were only one use, a monoculture,” Rowe noted during a session on downtown revitalization.

She said other cities have, to varying degrees of success, recognized the need for “dynamic” and “diverse” ranges of uses in the downtown cores.

“You’ve been insulated from that for many years because you’ve had one big employer, but now that that one big employer is changing the pattern of work and changing its relationship with its employees.”

The feds announced earlier this year a plan to shed about 2.4 million square feet of office space in the region (where vacancy currently sits at about 14 per cent) as the government downsizes its real estate footprint – almost 1.2 million of that at four major downtown complexes.

This presents both a challenge and an opportunity to create some of that diversity.

Throw in the ongoing return-to-work debate about how often workers should be in their offices, a four-year-old light rail transit system which has been plagued by breakdowns, a three-week convoy protest which shut down a swathe of the core near Parliament Hill and a lack of major entertainment attractions in the district, and the challenge is magnified.

Signs of renewal, recovery

However, there are signs of recovery.

Altus Group foot traffic data indicates growing occupancy in downtown office and commercial buildings.

“It’s probably between 50 to 80 per cent Tuesday, Wednesday, Thursday and probably drops down from 10 to 30 per cent Monday and Fridays,” said Ray Wong, Altus Group vice-president, data solutions delivery.

C&W’s vice-president of commercial investments, Scott Brooker, noted cellphone traffic in the core is over 50 per cent of pre-COVID levels. He said this puts Ottawa ahead of, or on par with, several other major Canadian centres.

Also, despite the poor performance record of its LRT, the city’s transit service reported ridership levels at 63 per cent of pre-pandemic levels in September, according to Altus’ Ottawa director and general manager Sean Robertson-Tait.

In discussing the B and C office sector, including some of the federal government’s list of properties it intends to dispose of, Ottawa forum chair Sean Hamilton, principal with Proveras Commercial Realty, didn’t mince words.

He suggested a hard look at some aspects of the market is long overdue.

“When I started in this business 30 years ago, the buildings we are calling obsolete or old today were old and obsolete 30 years ago,” Hamilton said.

“We have seen some repurposing, some pivoting . . . but the discussion today of the conversion talk we’ve had, really in the last 18 months there has been more activity to act on this . . . than there has in the last 30 years.”

That activity is already showing some results in conjunction with a spate of mainly apartment construction in the downtown area.

Two former office properties purchased during the past year – 360 Laurier Ave. W., and 130 Slater St. – are slated for conversion to multifamily housing. Together they’ll add about 300 housing units.

Twin thrusts: Multiresidential and a new downtown arena

During their presentation, Wong and Robertson-Tait told of 55 multiresidential buildings under construction in Ottawa to add over 11,400 units in coming months and years.

During 2023, 2,600 units are slated for delivery and a majority of both these figures are in the downtown area.

The downtown will see delivery of eight significant multiresidential projects totalling about 1,600 units, adding more residents into the core and neighbouring urban neighbourhoods.

The trend is to continue, though developers caution it is not a magic bullet.

“There are definitely opportunities for conversions,” said Michael Stones, VP of property management, Ottawa, for Crown Realty Partners. “I just hope we don’t think this is going to be the end-all” or an “easy solution.”

Another possibility which could play a role in renewing the downtown is the growing consensus to build a major new sports venue for the NHL’s Ottawa Senators in area.

Mayor Mark Sutcliffe is pushing to at least consider a core site should one become available, though the current focus has been on the LeBreton Flats area just west of the core.

LeBreton has ample available property and a mandate by the federal National Capital Commission to develop the federally controlled land.

New Senators owner Michael Andlauer acknowledges the building momentum to leave the team’s existing, team-owned facility in suburban Kanata.

“I would suggest that everybody seems to be aligned,” Andlauer told the forum attendees during a Q&A session though he did not tip his hat as to a possible timeline or location.

Sutcliffe said the changes happening in the downtown open up new possibilities to create entertainment and other development options, and that having such a facility in the core could be a game-changer a la cities like Edmonton, Toronto and Montreal.

“We maybe for the first time in a generation have an opportunity to look at options downtown because the federal government is downsizing, moving out of some of its buildings,” Sutcliffe told the attendees.

“So there is shifting in the real estate market in downtown Ottawa . . . for the first time in 20 or 30 years there could be a parcel of land that could become available.”

This, he said, should excite all stakeholders.

“If we do, just imagine the possibilities for downtown Ottawa.”

https://renx.ca/seeking-to-create-a-downtown-revival

[rocketphish]

Richcraft Properties Ltd. is proposing to construct a 10,564 m2 multi-tenant warehouse with 37 loading bays and 126 surface parking spaces, on their property at 2750 & 2760 Sheffield Road, 2713 Lancaster Road, 2865 F Walkley Road and two unaddressed parcels. Of note, this parcel sits on part of the former CN rail corridor.

https://devapps.ottawa.ca/en/applica...3-0065/details

[J.OT13]

Wasn't this part of the Transitway plan that was scrapped a decade ago? Kind of an important corridor to serve Tewin one day, maybe.

Blows my mind the City doesn't own this.

[J.OT13]

Ottawa office vacancies fall in Q4 as inventory removed from downtown market

David Sali, OBJ
January 10, 2024

Ottawa’s office vacancy rate declined in December as aging buildings were taken off the downtown market and a growing number of tenants – particularly in Kanata – moved into new or expanded office space.

According to Colliers, the office vacancy rate fell to 12.2 per cent in the final quarter of 2023, down nearly half a percentage point from the previous three-month period thanks to positive net absorption of nearly 340,000 square feet.

CBRE’s overall vacancy number for Ottawa was slightly higher at 13.3 per cent, but it too was down from 13.6 per cent in the third quarter.

The drop in vacant space follows a protracted market swoon that was triggered by the massive shift to remote work during the pandemic.

Louis Karam, the managing director of CBRE in Ottawa, said the latest figures leave him “cautiously optimistic” about the future of the National Capital Region’s office market.

“It was a good Q4, and hopefully we’ll be able to sustain it,” Karam told OBJ on Wednesday.

“While we continued to see tenants rightsizing and downsizing their offices, we still saw an increase in activity. If I go back about a year ago, what I was saying is that it’s going to take 12 to 24 months; it’s going to get worse before it gets better. I don’t think we’re at the end of the tunnel, but it’s a good sign of things starting to move in the right direction.”

In their reports, CBRE and Colliers cited a couple of key factors for the positive absorption in the fourth quarter.

For one thing, the amount of available space in the downtown core shrank thanks to the removal of two aging class-B office buildings slated for demolition or conversion to residential – 110 O’Connor St. and 130 Slater St. – from the market.

That took a combined total of more than 300,000 square feet of office space out of the city’s downtown inventory. While that gave the class-B occupancy rate a boost as its vacancy rate fell from more than 20 per cent to 15.5 per cent, offices at the higher and lower ends of the quality spectrum continued to struggle to find new tenants.

“It isn’t leasing activity (driving the drop in downtown vacancies), and no one should be fooled otherwise,” explained Warren Wilkinson, the senior managing director at Colliers International in Ottawa. “It isn’t as great as it seems from a percentage perspective, but it’s still positive and we’ll take it.”

Kanata also showed signs of renewed office leasing activity in the fourth quarter.

Colliers said the tech hub’s class-A vacancy rate dropped nearly a full percentage point to 13.2 per cent, while the class-B rate dropped more than a full point to 13.9 per cent as tenants such as Solace and DRS Technologies expanded their footprints.

Wilkinson said that as more and more tech firms mandate a return to the office for most employees – at least a few days a week – it creates a snowball effect as other organizations follow suit.

“Companies are confident that they know how their space is going to be utilized; they know what they need to do in order to bring their employees back,” he said. “We’re seeing that reflected in new lease transactions and positive absorption.

“The biggest thing that companies want to know when it comes to their lease transactions is what other companies are likely doing. Ottawa is a small community, and the tech sector – whether it is software as a service or hardware – they are going to want to know what their compatriots and competitors are doing. They’ll move forward based on that.”

At the same time, Karam noted that site work has begun on a new office building at 777 Silver Seven Rd. in Kanata, which will bring an additional 72,000 square feet of space to the market later this year.

It’s the first major office construction project in the west end since Kinaxis’s new headquarters was completed in 2021. Karam said it’s not clear who will occupy the new development and when.

“I don’t think we’re out of the woods,” he said. “We have to see what’s going to happen with some of that new office (space) in Kanata.”

Other submarkets, such as the east end, saw an increase in vacancies in the fourth quarter.

That didn’t surprise Wilkinson, who said filling office buildings in the eastern suburbs “has always been a challenge.” He suggested ongoing woes with Ottawa’s light-rail system could be dampening demand for space east of the core.

“As Kanata and the downtown core continue to pick up, there are going to be winners and losers,” Wilkinson said. “I don’t think it’s a reflection of a poor market – I think it’s just a level set.”

https://obj.ca/ottawa-office-vacanci...ntory-removed/