One of Ottawa’s largest commercial property management firms has acquired a prominent south-end office building as real estate insiders say suburban properties are becoming more attractive investments in a post-pandemic world.
Inside Edge Properties purchased the 94,500-square-foot building at 2 Gurdwara Rd. from Montreal-based real estate investment trust Proreit for $15.3 million in a deal that closed on Sept. 13.
The six-storey, class-A office property is located near the intersection of West Hunt Club Road and Prince of Wales Drive. Its tenants include medical offices, professional services firms and fast-growing software firm Knak, which took over a full floor in the building in 2022.
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Until recently, the building was 100 per cent occupied, according to Inside Edge vice-president of acquisitions and corporate development Jordan Bianconi. The company now says on its website that a full floor – 16,356 square feet – is available for lease at a rate of $16 per square foot.
In a recent interview with OBJ, Bianconi said the building, which sits on 4.3 acres of land, “checked a lot of boxes” for its local buyers.
“It’s a very prominent corner in Ottawa,” he said. “The asset itself kind of stands out.”
Bianconi said acquiring the building is a “strategic” play for Inside Edge, which owns and manages more than two million square feet of commercial space in the National Capital Region.
The south end boasts the lowest office vacancy rate in Ottawa at just six per cent, according to second-quarter figures from Colliers, compared with nearly 11 per cent in the downtown core.
Class-A space in Ottawa south is particularly at a premium, with a vacancy rate of just 3.6 per cent.
Bianconi said he expects those rates to fall even further as landlords look to repurpose aging downtown office assets.
“We believe that there is strong potential for suburban office (space),” he explained. “As some office buildings are converted to multi-family in more central locations, I think that it’s going to pull down office vacancy rates and will just drive up more demand for suburban assets like this that are within close proximity to expanding neighbourhoods.”
Bianconi said the building’s location near two main traffic arteries appeals to residents of suburbs such as Barrhaven and Riverside South who don’t want to commute all the way downtown on days they are required to be in the office.
“The asset is situated at a highly visible corner, close to the Ottawa Airport and a variety of amenities,” he added in an email to OBJ. “It’s a class-A property with a BOMA Bronze certification, meeting all our acquisition criteria at the time.”
Graeme Webster, a principal in Avison Young’s capital markets group who helped broker the transaction, said “well-located suburban assets with strong fundamentals” such as 2 Gurdwara Dr. are drawing attention from local buyers that are landing “very attractive” deals as REITs and larger institutional owners look to dispose of buildings that no longer fit their portfolios.
“(Private-capital) investors really see this as an opportune time,” he said. “I wouldn’t normally expect to see this much office activity, but it’s been good.”
Webster said more and more office tenants are giving suburban buildings a closer look as they see clear benefits to setting up shop closer to where their employees live.
“Traffic is getting tougher, parking is getting difficult to find (downtown),” he noted. “There’s a pain-in-the-butt factor that didn’t used to exist that people don’t want to deal with. It’s closer to home, closer to amenities. Because of that, activity has been (strong).”
The new acquisition is one of the largest assets in Inside Edge’s portfolio. Founded by Paul Hunter in 1998 and now run by his sons David and Taylor, the company manages a total of 18 office, retail and industrial buildings, most of them outside Ottawa’s core.
Bianconi said the firm will continue to pursue other deals.
“There was definitely a bit of a lull over the past year and a half. With that being said, I think that with interest rates (dropping) as they are, I think there are a lot more potential opportunities coming across our desk,” he explained. “We are starting to see things slowly start to pick up again on the acquisition front, which is a good sign for Ottawa in general.”
The property was one of two Ottawa office buildings Proreit sold to local investors this month. The firm also closed a deal that saw Ottawa-based Domeron acquire a 69,000-square-foot property at 1335 Carling Ave. for $11.3 million.
In a news release late last week, Proreit referred to both buildings as “non-core” assets.
Biaconi said he’s not surprised that national real estate players such as Proreit are divesting some of their local commercial real estate holdings.
“I think institutional investors have a global market to play in, whereas local companies like ourselves are really specialized in the communities that we serve,” he said. “It’s a great time for private-capital companies like ourselves to really focus on trying to pick up assets that (institutional owners) no longer are in (need) of.”
