The tech firms snapping up office space in Ottawa’s central business district will soon face greater competition for accommodations if the federal government resumes its expansion in the core, according to a local real estate expert.
A growing number of tech firms are looking to locate or expand in central Ottawa. Over the last year, Klipfolio, SurveyMonkey and Telesat have collectively absorbed some 150,000 square feet of office space in downtown Ottawa, CBRE Ottawa managing director Shawn Hamilton said this week in a market outlook presentation.
Additionally, Shopify announced plans in 2017 to take some 325,000 square feet inside the former Export Development Canada tower at 234 Laurier Ave.
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The wave of new downtown tenants has represented a sea change in the downtown office market. By CBRE’s measurement, tech firms now occupy roughly 650,000 square feet in the central business district, or some 150,000 square feet more than the legal and accounting sectors combined.
“Only the federal government is larger,” Hamilton said.
The market has so far been able to accommodate the new and expanding tech companies in large part because the federal government spent years working to reduce its downtown office footprint through consolidation efforts and moving civil servants into buildings elsewhere in the National Capital Region, such as the Ottawa Train Yards.
This helped to push the central business district office vacancy rate up to 10.9 per cent as recently as the end of 2016, according to figures published by Colliers International. That’s since retreated to 8.1 per cent in the first quarter of 2018, the firm reported last month.
However, CBRE argues that a spate of federal hiring under the Liberals and recently published expressions of interest in downtown office space suggest the government is considering a resumption of its growth in the core.
“If the federal government begins ramping up leasing, then I sense that urban tech and the federal government will be on a collision course, fighting for the same space.”
“If the federal government begins ramping up leasing, then I sense that urban tech and the federal government will be on a collision course, fighting for the same space,” Hamilton said. He added that this is unlikely to happen before the bulk of the space being vacated by DND – which is consolidating its presence at the former Nortel Campus – is absorbed.
Some of the pressure will be alleviated by the massive development projects proposed for the western edge of downtown. CBRE estimates that Zibi, RendezVous-LeBreton, Claridge, Invest Ottawa and Trinity have collectively proposed some three million square feet of office space within mixed-use developments at LeBreton Flats and around Bayview Station.
If competition does heat up, Hamilton says landlords will have to make choices between filling their buildings with federal tenancies, which come with exceptionally strong covenants, or tech firms that can often afford to pay higher rents than the public sector.
“It will be exciting to see how landlords decide,” he said.