Regional Group acquired a three-building office complex on Baseline Road this week, giving a major boost to its suburban portfolio.
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Regional Group acquired a three-building office complex on Baseline Road this week, giving a major boost to its suburban portfolio as questions swirl about the viability of downtown real estate in a world where “hybrid” work has become entrenched since the pandemic. The Ottawa-based developer and property management firm purchased Qualicum Centre, a 224,000-square-foot, class-A office campus, from Manulife Investment Management in a transaction that closed on Monday. Terms were not disclosed. Completed in 1989, Qualicum Centre includes a trio of low-rise structures – a five-storey building at 2934 Baseline Rd., a four-storey building at 2936 Baseline Rd., and a three-storey structure at 2932 Baseline Rd. – as well as a four-level parking garage. The complex, which recently underwent a $5-million renovation, is 100 per cent leased, with a weighted average term of 6.3 years. Its tenants include telecommunication giant Rogers, which operates a data centre at the site, engineering firm Morrison Hershfield and animation company Mercury Filmworks.
“A class-A, prestige office campus doesn’t come to market every day,” Regional Group CEO Sender Gordon told OBJ, pointing to attributes such as the buildings’ recent upgrades, their stable, “high-quality” tenant base and their close proximity to highways 416 and 417 as well as the Queensway Carleton Hospital. The deal comes as Ottawa’s overall office vacancy rate hit a four-year high of 10 per cent in the third quarter, according to real estate brokerage CBRE. Sublets are on the rise and downtown vacancies ticked up to 11.5 per cent in late summer as more companies began to rethink their need for space amid a continued shift to a mix of remote and in-office work. But Gordon said he remains bullish on the future of the office. He noted that Regional’s portfolio is “heavy weighted” to properties outside the core, adding he believes suburban office space will become even more sought-after in a post-pandemic world.
Now totalling about three million square feet, Regional’s holdings include Kanata’s Hazeldean Mall as well as office buildings at 1550 Carling Ave., 130 Colonnade Rd. and 495 Richmond Rd. “We really do believe that our new way of working in the future is only going to encourage more and more office users in suburban markets,” Gordon said. Colliers International's Ottawa-based vice-president Michael Pyman, who helped broker the deal, said the property attracted “a lot of interest from all buyer types both locally and nationally,” adding Manulife received multiple offers for the complex. The eight-acre property also includes about 2.7 acres of development land now occupied by a surface parking lot. Pyman said the opportunity to add further buildings to the site provides “a bit of a hedge against inflation in the long term” as rising interest rates drive up cap rates.
The excess land is currently zoned for commercial use, but Regional Group said it isn’t ruling out a potential residential development at the site in the future. “It’s more icing on the cake for us,” senior director of acquisitions Sachin Anand said of the land’s development potential, adding there is no timeline for any future projects. “Down the line, we know we can unlock value.” About 16,000 square feet will be up for grabs in the existing office complex in February, when an existing tenant’s lease expires. But Anand said he doesn’t expect the space to be empty for long. “We’re already getting leasing interest on day one of having this,” he said. “We think it’s going to take care of itself.”