Merchants bracing for government office move

By Marianne Arnaudon

The federal government says it may relocate some of its employees to Kanata in light of nearly non-existent vacancy rates in Centretown and the downtown core.

High demand for downtown office space over the last few years has seen vacancy rates in Centretown drop below five per cent, according to the Business Owner and Managers Association’s (BOMA) third quarter office market survey for 2001. While BOMA president John Page says most businesses would like to stay in close proximity to the city’s commercial centre, one solution to the lack of space being considered is empty space in Kanata.

In fact, the municipal government has already looked into this option. The Ottawa Business Journal reported earlier this fall that Nortel is leasing its offices at 2 Constellation Cr. in Kanata to the City of Ottawa at $14 per square foot.

Lucie Coté, spokesperson for Public Works and Government Services Canada, says “negotiations between the federal government and Nortel since June are still being held.”

Coté could not say when a final decision would be made.

But Barry Nabatian, general manager of the real estate consulting firm Market Research Corp, says the cost of relocating is sometimes too high to make the move worthwhile.

Currently there are thousands of square feet up for grabs in Kanata, due to cuts in the waning telecom sector that have left a total office vacancy rate of 26.20 per cent, BOMA’s survey indicates. Class A office space in Kanata – like the space recently vacated by Nortel and JDS Uniphase – goes for a yearly rate of roughly $26 to $36 total per square foot, BOMA’s survey says.

Mike Church, an associate broker for real estate agency Royal LePage, says that whether office space is labelled Class A, B or C depends on the size of the space, the location and its value.

On average, Class A space downtown – like the World Exchange Centre and the Minto Centre – is leased at a yearly rate of $38 to $44 total per square foot. In the central business district alone, the vacancy rate for Class A space is 1.25 per cent, according to BOMA’s report.

While the government move is still hypothetical, if it does happen smaller businesses in Centretown say the impact could be a significant one.

“They’re my bread and butter,” says Steve Smith, owner and manager of Egg Spectation, of the civil servants working in the area.

“There is eight million square feet of office space surrounding me,” he says of his restaurant, nestled at the corner of Bank and Laurier. “That’s why I set up here.”

Gloria De Leon, Tim Horton’s assistant manager, says her Bank and Gloucester store would likely suffer an impact, one that would only exacerbate the drop in sales seen in the wake of the September 11 terrorist attacks in the U.S.

But Page predicts these moves would only be temporary. He says any relocation of federal government offices would likely last only a few years, and would probably end when the high-tech sector comes out of its slump. Page says since many urban offices are in need of renovation, once these renovations are complete the government will probably want to move back into these buildings, freeing up space in Kanata once again.

This phenomenon is something Nabatian refers to as “swing space”. The government gets temporary relief, and owners of the empty buildings in Kanata are happy because they’re filled.

So in the interim, with the low vacancy rate downtown, moving offices to Kanata may seem an attractive solution for the federal government.

Perry Schneider, owner of German Town Deli, a small Centretown business more than a decade old, says if the government goes, his restaurant could still survive. Though he says he may have to lay off a few employees, it’s nothing he couldn’t cope with.

Ron Manson, who owns the Shoppers Drug Mart across the street from Egg Spectation, says his franchise was affected in 1989 when some government offices relocated. Still, Manson says he eventually managed to recover and doesn’t see why he couldn’t do so this time around.

And regardless of whether or not the federal government decides to leave, Smith says there’s an even bigger problem – the city doesn’t let businesses make money. He says Bank Street should only be bars and restaurants.

Still, if the situation gets grim, he would never consider relocating. “I don’t believe in a market out in Kanata.”