With at least one federal department already worried it won’t have enough space to bring its employees back to work four days a week, a prominent commercial real estate broker is calling on the feds to reconsider plans to sell some of their downtown office properties.
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With at least one federal department already worried it won’t have enough space to bring its employees back to work four days a week, a prominent commercial real estate broker is calling on the feds to reconsider plans to sell some of their downtown office properties.
Public Services and Procurement Canada, which manages a large chunk of the federal government’s office portfolio, put 10 Ottawa office buildings on its “disposal list” in 2023. The sites include the three buildings that make up the downtown L’Esplanade Laurier complex, the Sir Charles Tupper Building on Riverside Drive, and the 1500 Bronson Building and Annex, the former headquarters of the Canadian Broadcasting Corp.
At the time, the federal department said the decision to dispose of the properties was part of its “long-term real estate portfolio plan to optimize the office space under our responsibility, lower operating costs and reduce greenhouse gas emissions.”
But the office landscape has changed considerably in the three years since. Most public servants are expected back in the office four days a week starting in July, while executives will return a full five days a week beginning next month.
As a result, some federal departments are already saying the new mandate will strain the capacity of buildings that have been designed to accommodate most workers three days a week. Last week, for example, Global Affairs Canada told most of its unionized employees they will not be required to work in the office four days a week starting in July, Radio Canada reported, because there won’t be enough space.
After pledging in 2024 to reduce its office space by half over the next 10 years, the federal government has since revised those plans in the light of the new return-to-office mandate. A PSPC spokesperson told the Ottawa Citizen in February the 50 per cent reduction target “will be adjusted accordingly” due to the increased presence of more on-site employees, and the department told OBJ this week it’s not ruling out “potentially acquiring additional space” to meet demand for more desks.
With questions swirling as to whether enough office space is available, it’s time for PSPC to press pause on its disposal program until it has a better idea of its long-term real estate needs, says Ottawa commercial broker Shawn Hamilton.
“The whole list never made sense to me,” said Hamilton, a principal at Proveras Commercial Realty. “It makes even less sense now, given I think they need to have a full review of their inventory to accommodate people. I bristle every time they mention the disposal list.”
While federal officials, including Prime Minister Mark Carney, have cited one of the buildings on the disposal list – the Jackson Building at 122 Bank St. – as a candidate to be converted to residential use, the government has provided no recent updates on the status of the properties.
In 2023, a PSPC spokesperson said the sale of any Ottawa properties listed for disposal in the Canada Public Land Bank could take “several years” to complete.
Asked by OBJ this week if there have been any talks about revisiting the list in the wake of evolving office space requirements, a PSPC spokesperson said only that the department “uses its operating budget to invest in maintenance, ensuring that buildings remain safe and suitable for employees as on-site work requirements increase.”
Linda Jenkyn, director general of PSPC’s real property services branch, said Tuesday the department is still aiming to “rightsize” its real estate portfolio by selling some of its Ottawa holdings.
“We have a public bank of properties that we list and we’re recognizing that we have assets that are very big in spaces that are mixed-use, transit-oriented and in great locations across the city,” Jenkyn said during a panel discussion at the City Building Summit at the Rogers Centre Ottawa.
“We should be, and are, leveraging that and putting that out there to developers to build on and contribute to housing.”
While the buildings on the list remain government property, local real estate executives told OBJ this week that some have fallen into disrepair and questioned whether it would be worth trying to rehabilitate them.
“I think the majority of the buildings on the disposal list are buildings that are in critical condition, that require extensive reinvestment for them to be viable,” said Dominic Dostie, a vice-president at CBRE’s Ottawa office. “I’m not sure if there’s a budget to reinvest in some of these assets.”
Brent Arseneau, vice-president of leasing at Ottawa-based property management firm Colonnade BridgePort, said the feds typically require private-sector landlords to meet strict green building standards, such as those set out by the global Leadership in Energy and Environmental Design (LEED) program.
With that in mind, the veteran real estate executive wonders if the feds would be willing to pay the price to modernize buildings on the disposal list that are in most dire need of upgrades.
He argues it might make more financial sense for the government to sell the properties to developers who could then decide whether to renovate them or tear them down and rebuild.
“What’s the cost to make those (buildings) into a LEED gold facility?” Arseneau said. “I don't know what that cost is, but that would be pretty easy math versus disposition.”
– With additional reporting from Marissa Galko
