The National Capital Commission has cancelled a request to lease thousands of square feet of office space, further frustrating downtown landlords intent on filling empty floors in an already stagnant market.
The Crown corporation, which currently occupies about 109,000 square feet of space at Allied Properties’ The Chambers building on Elgin Street, issued a request for proposals this summer with no set space requirement for new offices.
Despite receiving several bids from landlords to accommodate the government body, the NCC has decided to stay put for the time being.
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NCC spokesman Jean Wolff said the organization has cancelled the RFP process and will look at opportunities to move as they arise.
He declined to go into too much detail for the decision, other than to say that a “key factor” that had contributed to the agency seeking out bids had changed.
While Mr. Wolff didn’t say what that factor was, an industry source – who spoke to OBJ only on the condition that they not be named – said another tenant who had agreed to take over the NCC’s space backed out during the RFP process.
The NCC’s current lease runs until 2019. That means that the Crown corporation would still have to pay rent even if it moved out, unless it found someone else to fill the property.
Several brokers who spoke with OBJ speculated a different part of the federal government was getting set to move into the building, which is only a few blocks away from Parliament Hill.
Meanwhile, the cancelled RFP is unwelcome news for downtown landlords who yearned for a government office shuffle that would create a small boost in demand for vacant spaces.
“There’s lots of disappointed people out there who are just going to be that (much) less confident in the prospect of filling their vacancy anytime soon,” said Darren Fleming, managing principal at Cresa Ottawa.
“Everybody hopes that one big tenant will come along with the strong financial backing like the NCC and there aren’t that many.”
The decision is particularly disappointing for bidders because participating in a government office space RFP costs thousands of dollars, said Avison Young broker Michael Church.
The NCC also had a requirement that landlords keep the space vacant throughout the bidding process, he said.
“It can be a little bit frustrating if you’re a landlord because (when) you respond you think, ‘OK, you’ve made the decision you’re going to do this,’ and then willy-nilly they just cancel it,” said Mr. Church. “Everybody’s a little gun-shy going the next time.”
However, he said that those who submitted bids last time would likely do so again because they’ve already spent the money and put in the work.
It’s unclear who submitted a bid, but Mr. Fleming said that Constitution Square at 350 Albert St., which he said has 30 per cent of its space being advertised for lease, or the Export Development Canada building at Slater and O’Connor streets would have been ideal locations for the NCC.
Mr. Church said that Morguard submitted a bid to lease the NCC space in its Performance Court building that’s under construction at 150 Elgin St.
Ottawa’s downtown had a vacancy rate of 7.1 per cent during the third quarter of 2013, according to a recent market report from Cushman & Wakefield. It predicted that the city’s overall vacancy rate will inch up – from 7.9 per cent to as high as 8.4 per cent before the end of the year.
Changes at the NCC could mean the supply of vacant office space will increase even further.
About 16 per cent of the Crown corporation’s workforce transferred to the Department of Canadian Heritage, said Mr. Wolff, leaving empty desks at the organization’s offices.
Government department Public Works already occupies three of the NCC’s 11 floors, he said.
The NCC’s current landlord also isn’t willing to give the agency up as a tenant any time soon.
“It’s a highly valued tenant at The Chambers, and we’ve worked hard, and will continue to work hard, to ensure that the building meets its ongoing needs,” wrote Michael Emory, president and CEO of Allied, in an e-mail.
Sidebar: The NCC’s office space by the numbers
109,000 square feet: The amount of space the NCC occupies at 40 Elgin St.
Between 97,000 and 119,000 square feet: The amount of space the NCC was looking for as part of its request for information for more office space launched in September 2012. However, that was before the federal government announced it would be moving some of the NCC’s employees to the Department of Canadian Heritage, changing its space requirements.
Source: Jean Wolff, NCC spokesman.