Condo builders are squeezing office developers out of the downtown core to the point that the few remaining commercial development sites are insufficient to meet demand for new space beyond the next decade, according to a local real estate expert.
Nathan Smith, a senior vice-president in Cushman & Wakefield Ottawa’s capital markets group, said developers have constructed slightly more than six million square feet of office space in the central business district over the last 30 years, including 2.5 million square feet since 2001.
In a luncheon speech Wednesday to members of the Ottawa chapter of the Building Owners and Managers Association, Mr. Smith said the central business district can accommodate an additional 2.5 million square feet of space under current zoning regulations.
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The largest remaining downtown office development sites include Brookfield’s surface parking lot at Kent Street, between Queen and Albert streets, Morguard’s property at the corner of Bank and Slater streets, as well as GWL’s site just west of O’Connor Street, between Laurier Avenue and Slater Street.
Alterna Savings is also selling its property on Albert Street for redevelopment, and was in discussions with Broccolini Construction last summer.
Based on past consumption patterns, Mr. Smith said the city will run out of development opportunities by 2023 unless the city relaxes zoning restrictions.
“With the apparent insatiable appetite by our condo developers in acquiring all downtown sites from the Queensway to Parliament Hill, how will the (central business district) keep up with demand for office space?” he said.
“The city has certainly given residential developers free rein, balanced by intensification guidelines … Is it time Ottawa has truly high-rise office development? Should Brookfield, Morguard, GWL and others be permitted to double their density?” he rhetorically asked.
Mr. Smith also highlighted that federal downsizing has not had the negative impact on landlords some had predicted.
That’s because Public Works’s portfolio is comprised of buildings that it owns as well as space that it leases from the private sector.
While the federal government has indicated it has or will vacate 1.4 million square feet in central Ottawa, the bulk of that space has been in the older buildings that it owns and are in need of extensive renovations, according to Mr. Smith.
Rather than putting the pinch on landlords, he said Public Works has actually increased its leased portfolio by approximately 270,000 net square feet. Those landlords losing government tenants are generally the owners of older properties that would have been at risk with or without federal budget cuts, Mr. Smith said.