Feds eye greater role for private landlords to meet office space needs

Ottawa

The federal government’s top real estate official says he wants to rely more heavily on the private sector to fulfil the bureaucracy's office space requirements.

The remarks by Kevin Radford, an assistant deputy minister in the real property branch at Public Services and Procurement Canada, at last week’s Ottawa Real Estate Forum will likely come as welcome news to local landlords.

The federal government currently occupies about 38 million square feet of office space across the National Capital Region. Within that portfolio, approximately 40 per cent is leased from the private sector while the remainder is comprised of Crown-owned properties or buildings occupied under a lease-to-own contracts, according to Nathan Smith, a senior vice-president at real estate services firm Cushman & Wakefield Ottawa.

“I’m highly supportive of a movement towards leasing,” Mr. Radford said.

“Our preference would be to move towards a leased portfolio when we’re talking about office space,” he later added.

Mr. Radford’s comments come as roughly two-thirds of the federal government’s leased office portfolio in Ottawa-Gatineau – some 10 million square feet – is set to roll over in the next five years. The bulk of those leases are set to expire in the next 36 months, according to Mr. Smith.

Mr. Radford did not indicate how much of that space would be renewed or offer a forecast on the future size of the federal government’s local real estate footprint, except to say that the “dynamic won't change in the Ottawa area.”

He did say, however, that he hoped the private sector would play a larger role in meeting the federal government’s space requirements in the long term by, for example, providing IT services as part of the lease.

Mr. Radford also mused about buying “workspace as a service” – effectively renting desks, rather than entire floors of space – although he conceded that it probably wouldn’t materialize in his lifetime.

Opportunities to accelerate modernization

Mr. Radford’s remarks come as the federal government is undergoing a long-term rethink of its physical office environments.

It wants to move away from drab rows of cubicles in favour of more flexible space that encourages collaboration among employees under programs such as Workplace 2.0 – which Mr. Radford called “a disaster” last year – and initiatives such as activity-based workplaces, replacing structured environments such as offices and boardrooms with more fluid spaces that can be used in different ways depending on the project at hand and who is involved.

“The thought process of (public servants) coming into (the workforce) is different,” Mr. Radford said.

The shift has the support of private building owners, according to one of the city’s top landlords.

"The private sector can do it better and cheaper in the long run."

Bernie Myers, Morguard Investments' office/industrial vice-president for eastern Canada, told OBJ that the federal government is increasingly making the connection between employee productivity and modern, healthy workplaces.

“They’re also realizing the private sector can do it better and cheaper in the long run,” he added.

Mr. Myers said there are still opportunities for the federal government to accelerate its modernization push in leased accomodations, giving the example of upgrading to LED lighting.

Because the energy savings accrue to the tenant, there is no incentive for the landlord to make such upgrades mid-lease.

With the federal government increasingly looking to lease space in green buildings, Mr. Myers said it would be reasonable for tenants to pay for a portion of the upgrades.

“But under the current lease, they’re not prepared to do that,” he said.