By Shaun Ziai
Building managers and developers are embracing the federal government’s recent expansion into downtown’s best office space because it’s filling in where businesses have left-off.
Previously, this was seen as an unwanted pressure on an already tight market.
But Fred Speer, senior vice-president of O & Y Enterprise, which manages the World Exchange Plaza, says federal government expansion could be a potential driving force behind the development of new office space in Ottawa.
He says federal government expansion creates demand and low vacancy rates.
“(This is) probably a good thing because what it could do is add stimulus to building new office towers downtown, which makes it a win-win situation for everybody,” says Speer.
The federal government has recently leased several large Centretown buildings, including 100 Metcalfe St. and 219 Laurier Ave. Most recently it purchased the Royal Bank building at 90 Sparks St.
New development to meet the market’s needs has already started and expansion can be seen all over the city.
The World Exchange Plaza began the construction of its new tower last year, O & Y Enterprise has a site plan for twin office towers on Kent Street between Queen and Albert and Sakto Development Corp. recently received approval to build a second office tower off Preston Street at the Queensway.
As the need for development in Ottawa becomes more apparent, Speer says a “couple more office towers are sure to pop up.”
Brian Murray, director of marketing for Sakto, says “six months ago I would have said that government expansion would have a negative impact, but in the past 90 days with a weak market, I think government may be able to sustain Ottawa market rates.”
He says cities such as Toronto, Calgary and Montreal, where government expansion is not as abundant, the slump in the market will hit real estate holders harder.
Ottawa, on the other hand, is in a different predicament.
“While government is expanding, business seems to be contracting, so the government might be able to pick up what could be some slack,” says Murray.
The effect on Ottawa businesses having to move out because of government expansion will be minimal, says Murray.
“(The transition) will be fairly amicable because if the government forces its hand, there will be some backlash from the business community and the last thing they want is backlash from businesses in their own backyard,” he says.
For instance, at the Royal Bank building businesses won’t be forced out on to the street. Instead, they will be allowed to finish their leases, which will give them time to seek out a new location, says Murray.
Deloitte & Touche, an accounting agency located in the Royal Bank building, has already found a new location. It will move into the new tower of the World Exchange Plaza, which is almost all leased.
Gail Logan, president of the Greater Ottawa Chamber of Commerce, confirmed this amicable relationship.
She says that the chamber has not heard any complaints from Royal Bank building tenants.
Speer says the federal government has always been a player when it came to contending for office space in Ottawa.
This has become more demanding because of low vacancy rates for prime office space downtown, which stands at less than two per cent.
Pierre Teotonio, spokesperson for Public Works and Governmental Services Canada, says it has become difficult to find office space downtown because “we’re not the only players anymore, we noticed recently the high-tech sector is also looking for office space because of their recent boom.”
The government’s office space needs are growing because of new programs, such as a gun registry. Some of the buildings they currently own are also up to 40 years old and are in desperate need of renovations. This means swing space is needed until repairs are completed, says Teotonio.
Because of such demands he says the federal government expansion will continue and they are already looking for more property for the next few months.