Ottawa’s largest privately owned commercial property manager said Wednesday it partnered with an unnamed institutional investor to purchase a five-storey office tower and four acres of adjacent land at 1900-2000 City Park Dr. from Vancouver-based company.
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Colonnade BridgePort has acquired a prime development site near the Blair LRT station in a deal that could pave the way for rental apartment highrises, condos and other development at the east-end property, the company says.
Ottawa’s largest privately owned commercial property manager said Wednesday it partnered with an unnamed institutional investor to purchase a five-storey office tower and four acres of adjacent land at 1900-2000 City Park Dr. from QuadReal Property Group.
Terms of the deal, which was finalized on Tuesday, were not disclosed.
The site is located just west of the Gloucester Centre mall and a few hundred metres north of the Blair transit station, currently the easternmost stop on the Confederation LRT line.
The area around the east-end shopping plaza has been a beehive of residential construction in recent years as developers scramble to satisfy demand for rental housing near transit stops.
“If you go to any major urban area that’s got a transit system, you typically see intensification around those transit stations,” Colonnade BridgePort CEO Hugh Gorman told OBJ on Wednesday morning. “We’ve been pretty active in that space.”
The Ottawa firm, which manages more than 9.2 million square feet of real estate, joins companies such as RioCan REIT, Killam Apartment REIT, First Capital REIT and Toronto’s Crux Capital that have launched multi-family projects or plan to build residential developments within sight of Blair station.
Gorman said the property’s proximity to light rail, retail amenities, schools and major employment hubs such as the National Research Council and the Canadian Security Intelligence Service made it a good fit with the firm’s transit-oriented development strategy.
“If you’re looking long term, this is going to be a node for high-rise residential development, and it’s going to cluster around (Blair) station,” he said. “The clustering is an important element, and our view is there’s going to be lots of demand for all the (housing) inventory that can be added.”
Originally intended for a second office building, the land next to 1900 City Park is currently zoned for about 1.3 million square feet of residential and commercial development, Gorman said.
The veteran real estate executive said that while the site could likely be rezoned for up to two million square feet of housing, retail and other uses, he’s not sure it could support that much intensification.
“We just don’t see that kind of demand,” he said. “We have to be realistic about expectations.”
Gorman said the company is looking at subdividing the property into several parcels and selling them to other partners, similar to the approach it’s taking to develop 25 Pickering Pl. near the Ottawa train station.
“Conceptual ideas” for the City Park proposal include a mix of lower-density family housing, multi-family residential rental towers, condos and seniors’ residences, he added.
“There’s a lot of work ahead of us to figure that out,” Gorman said.
Colonnade BridgePort will continue to lease and manage the class-A office building at 1900 City Park, which was constructed more than 30 years ago and is currently about half empty.
Gorman conceded the 93,400-square-foot complex needs a “facelift.” He said the company plans to upgrade the space before putting on a “full-court press” to attract new occupants.
“A lot of the space inside the building is tired,” he said. “Our intent is to be fairly aggressive and compete for office tenants in that node.”
The acquisition comes as QuadReal, which is owned by the British Columbia Investment Management Corp., and other institutional investors are rethinking their commercial real estate portfolios amid a massive shift to hybrid work that has driven up office vacancy rates.
Just over a year ago, QuadReal sold its other major holding in Ottawa’s east end, the nearby Park of Commerce at the corner of Blair Road and the Queensway.
In its latest real estate market outlook released this week, CBRE predicts Ottawa’s suburban office vacancy rate will rise to 10.4 per cent later in 2023, up from 10.2 per cent last year and 7.3 per cent in 2021, as tenant uncertainty rises and growing headwinds batter the economy.
But Gorman appears unfazed. He said the city’s economic fundamentals remain strong, putting Ottawa’s office sector in a good position to eventually bounce back.
“It’s one of those things where you’ve got to believe in the long term,” he said. “It’s going to get worse before it gets better, there’s no question about it.
“This is a five-year problem,” Gorman added. “We’re going to be aggressive, but we’re patient. We don’t expect to have it leased up in a year. We feel pretty confident that as the market comes back, we’ll get our fair share of those tenants.”
The deal marks the first acquisition for Colonnade BridgePort’s new private equity real estate fund, which closed its first tranche of funding last month.
Gorman said a “broad base” of investors, including high-net-worth individuals, family offices and other organizations that have worked with the developer in the past, have contributed to the new fund.
While the company has historically signed partnerships with institutional investors on a project-by-project basis, Gorman said the sheer volume of deals Colonnade BridgePort is now pursuing made that approach “more and more difficult” to sustain.
The firm says it has $1 billion worth of residential development projects with up to 3,200 units in its pipeline, much of it near present or future stations on the Confederation LRT Line.
Financing that much construction requires a more efficient approach than the company has employed in the past, Gorman explained.
“We’ve got a pretty sizable pipeline now, so we determined that we needed to put a fund together so that our side of the capital stack on these development projects would be in place as we go to put the land into production and get some buildings built.”
