Shopify’s decision to give up its flagship office on Elgin Street could provide an opportunity for a new generation of emerging tech startups to spread their wings and mature into industry-leading companies in their own right, a prominent commercial real estate broker said Wednesday.
As OBJ reported Monday, the Ottawa-based global e-commerce powerhouse is set to move out of its headquarters in Performance Court at 150 Elgin St. and consolidate its downtown presence in space it leases at nearby 234 Laurier Ave. W. as it shifts to a digital-first work strategy.
The news immediately triggered a wave of speculation about who would fill 170,000 square feet of suddenly vacant space at the 21-storey office tower that opened to much fanfare six years ago. Shopify, which is expected to start actively trying to sublease the space this week, still has more than six years remaining on a lease that expires in 2026.
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With organizations standardizing hybrid work, Real Strategy anticipates this reduction in tenant demand to continue.
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With the teleworking trend shifting into overdrive since the COVID-19 pandemic began, many real estate observers say Shopify is likely to be just one of many companies putting space on the sublet market in the months to come. Finding tenants to fill the void Shopify left at Performance Court could be a challenge in a commercial real estate market that’s likely to soften considerably, they add.
But Martin Aass, managing principal at real estate brokerage firm Cresa Ottawa, says Shopify’s ritzy digs – with such eye-popping features as a slide between floors and a go-kart track – could be the ideal fit for rising tech startups with an appetite for “funky, cool, appealing space” that are looking to make a name for themselves in the downtown scene.
“It’s spectacular,” he says, adding Shopify could end up “seeding a bunch of technology companies if those are the companies that end up occupying the space.”
Shopify poured a significant amount of money into making its 150 Elgin headquarters Ottawa’s most buzzworthy office, Aass notes. He expects the space will generate plenty of interest from young tech firms looking to benefit vicariously from its ready-made cachet.
“Even if you have to do a little work to sort of segregate off one floor from the other, the reality is you’ve got a hugely valuable fitup done by (Ottawa-based architecture firm) Linebox, one of the best designers in Canada, and it’s all going to be available.
“Spending $20,000 or $40,000 (in renovation costs) compared to saving $200 a square foot – which is millions of dollars – in fitup, it’s going to look really appealing to a lot of technology companies. It’s already built, so you don’t have to do a 10- or a 15-year deal to justify the expense of construction. That’s already been paid for.”
‘It’s expensive space’
Still, Aass concedes even without those extra costs, rent at Shopify’s former HQ will likely be too steep for a lot of would-be tenants.
“Everything depends on price,” he says. “It’s expensive space.”
Darren Fleming, CEO of Ottawa-based brokerage Real Strategy Advisors, isn’t as convinced the space will be snapped up quickly, saying Shopify’s “creatively wacky” design concepts limit the potential pool of subletters.
“There’s some stuff in there that not a lot of tenants might readily be able to take advantage of,” adding that certain elements such as the slide and amphitheatre-like seating in some rooms might need to be modified to attract tenants.
“I think the fact that it’s going to need work is going to be one of the challenges.”
Aass and Fleming agree that the region’s largest renter of office space, the federal government, isn’t likely to throw its hat into the ring.
“It’s just not the sort of fitup that they would want,” Aass says, adding the feds also might not be willing to commit to adding any new real estate to their inventory while the uncertainty surrounding COVID-19 persists.
Fleming adds that Shopify’s move could be just the tip of the iceberg when it comes to downtown companies looking to sublet space and reduce their office footprints in the wake of the pandemic.
“The big wave that’s coming has yet to hit,” he predicts.