By Jason Brown
There is such a high demand for prime office space in downtown Ottawa that two companies, and soon possibly a third, have recently unveiled plans for new office towers, threatening to saturate the real estate market.
“I think there’s an issue of timing and absorption,” says David Patton, president of the Building Owners and Managers Association. “When you have two or three new buildings all looking for tenants, you don’t get offices filled very quickly.”
Currently, Truscan Property Corp. and Canril Corp. are rushing ahead to turn Centretown’s skyline into a bustling image of cranes and scaffolding in an effort to capitalize on the five to six per cent Class A office vacancy rate.
The real estate industry has three classes of office space. Class A offices are modern and state-of-the-art. Class B office buildings are older, typically built between 1975-80, but still functional, while Class C is used to describe offices that are in need of major repairs or demolition.
Canril has announced it hopes to break ground at its Sparks Street location by spring, while Truscan intends to begin construction on a second tower at its World Exchange Plaza property in August.
A third company, Ontario Municipal Employees Retirement System (OMERS), has plans for erecting a third tower at its Constitution Square complex but has not made an official announcement on its intentions yet.
The situation is similar to 1992, when the World Exchange Plaza, Constitution Square and Standard Life all built new office towers.
Construction began while the economy was good but took a downward turn by the time the buildings were completed, making tenants a scarce commodity.
“We don’t want to go back to those days,” says Brian Seymour, a leasing and marketing manager for Canderel, Constitution Square’s management company. Seymour says OMERS understands three office towers would make competition for tenants tight, which is why the company has not made a formal announcement on its 18-storey tower.
However, says Seymour, “if they can produce a product superior to the competition, I’m sure they’ll go ahead.”
“The third tower is something that has always been planned. I don’t see the other two dissuading them from eventually going ahead.”
Truscan intends to add a second 16-storey tower to the World Exchange Plaza at a cost of $50 million.
David Gerofsky, senior vice-president of Truscan, isn’t overly concerned about the potential competition because he says the World Exchange Plaza’s locale sells itself.
“I think we have a unique location, I’d say one of the best in Ottawa,” says Gerofsky.
The World Exchange Plaza, which was always intended to have twin towers, has the added advantage of having its foundation laid, parking built and three levels of the second tower already constructed.
“We have a significant advantage in that respect,” says Gerofsky.
For its part, Canril has announced its desire to build a $45 million, 11-storey building on Sparks Street at the former Woolworth building location.
Both Truscan and Canril have said they must lease at least half of their buildings’ offices before they begin construction. Truscan has put its figure at 50 per cent occupancy, while Canril has settled on 60 per cent.
Tenants for these new buildings, according to Patton, will be coming from both the public and private sectors.
Patton says there’s many private businesses that want to move into downtown, particularly high-tech spin-off companies.
“The general rule of thumb is that there’s two supporting jobs created for every new Nortel or Newbridge job,”says Patton. “Those jobs don’t need to be in the west end.”