A Montreal firm that is now one of Ottawa’s biggest office landlords says it plans to demolish a former government building on O’Connor Street and replace it with a residential highrise containing up to 400 rental units.
Groupe Mach purchased the now-vacant 14-storey building at 110 O’Connor St. on the corner of Slater Street from Cominar REIT for $40 million in 2021.
Groupe Mach president Vincent Chiara told OBJ this week the firm is likely going to tear down the existing structure that dates from the early 1970s and previously served as an office for the Department of National Defence.
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He said the company is looking at a couple of different proposals that would see an 18- to 20-storey highrise with between 350 and 400 rental apartments constructed on the property.
As office vacancies continue to rise and the rental housing market tightens, the idea of converting outdated downtown office towers to residential projects has become a trendy topic in Ottawa real estate.
Several local developers, including CLV Group, District Realty and Katasa, have completed conversions in the city’s core in the past few years, and more projects are in the pipeline.
Chiara said his firm considered a conversion at 110 O’Connor. But after crunching the numbers, Groupe Mach determined it didn’t make financial sense to try to salvage the current building’s skeleton and transform the interior into apartments.
“A lot of those existing buildings don’t convert easily, and the costs of conversion are usually higher than building from scratch,” Chiara said in an interview from Montreal on Monday. “As soon as city officials give us the (green light for demolition), we’re ready to go.”
The O’Connor Street deal is just one of a series of headline-grabbing recent transactions in Ottawa for Groupe Mach, which has acquired 16 properties in the National Capital Region over the past two and a half years.
“We like (the Ottawa) market,” Chiara explained. “We like the stability, we like the quality of the tenancy, we like the professionalism that’s there with our suppliers. It’s a strong market that’s shown a lot of diversity.”
The biggest buy of them all came last spring, when the Montreal firm partnered with family office investor Sarees Investments to purchase One60 Elgin from Toronto-based H&R REIT for $277 million.
At one million square feet, the 27-storey tower at 160 Elgin St. is the city’s fourth-largest office building. Opened in 1971, the building underwent an extensive renovation between 2015 and 2017 that included tens of millions of dollars in improvements, such as the addition of a 39-foot-by-115-foot curved glass wall that surrounds the main entrance.
With a tenant list that includes the federal government, Bell Canada, satellite equipment powerhouse Telesat and two of Ottawa’s largest law firms, Gowling WLG and Kelly Santini LLP, One60 Elgin instantly became the crown jewel in Groupe Mach’s collection of Ottawa assets.
Its vacancy rate of around 10 per cent is par for the course for a class-A asset in the downtown core as landlords and tenants grapple with the new reality of hybrid work.
“A lot of the institutional owners are shying away from office in general,” Chiara said. “They think this asset class has a bleak future, and therefore a lot of pressure is being put on them to dispose of these assets – whether it’s market pressure, whether it’s board pressure or long-term strategic pressures.”
But Chiara sees lots of life yet in the 52-year-old building, even if many experts believe the office sector faces an uncertain future. He notes that the weighted average lease term of One60 Elgin’s tenants is about eight years, long enough to allow the sector to recover.
“We’re starting to see signs of people coming back to the office,” he said. “I think some of the large employers are starting to put pressure on their employees to come back because they’re starting to lose some efficiency … by having their employees work at a distance.
“We definitely think that if and when (the office sector) comes back, One60 Elgin is definitely going to be at the top of your list if you’re setting up shop in downtown Ottawa because it is one of the premier properties as far as location and quality goes.”
The property also comes with a 1,000-space parking deck behind the office tower that is currently underused and could be replaced with a residential highrise should Groupe Mach choose to go that route, Chiara added.
“We see an opportunity there to redevelop that site into something more interesting than just parking stalls,” he said.
Meanwhile, Groupe Mach is also expanding its footprint on the Quebec side of the Ottawa River with plans for a 400-unit apartment complex near Place du Portage in downtown Gatineau. The firm hopes to break ground on that project by next summer.
Chiara said the company, which now owns and manages more than three million square feet of commercial space in Ottawa and Gatineau, is keeping a close eye out for other opportunities in the National Capital Region.
“We’re looking to grow there,” Chiara said. “We’re a long-term player, so we’re not just passing by. We’re looking to be in that market for the long term.”
