A senior Morguard executive says the real estate giant is “bullish” on the Ottawa market and hopes to keep expanding its Kanata footprint after acquiring the newly constructed head office of one of the west-end tech hub’s highest-profile companies.
“We are excited about it because it is a brand-new, state-of-the-art building,” Morguard senior vice-president Tullio Capulli said of 3199 Palladium Dr., which officially opened in June and is fully leased to supply-chain software darling Kinaxis – a publicly traded firm that’s emerged as one of the few bright lights in a grim year for most tech stocks.
Mississauga-based Morguard recently acquired the building from Ottawa’s Taggart Group for $64.5 million. The purchase of the five-storey, 163,000-square-foot property in the Kanata West Business Park enlarges Morguard’s total Ottawa portfolio to 5.5 million square feet of retail, office and industrial space – second only to Colonnade BridgePort among landlords in the National Capital Region.
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Calling Kanata West a “great node to be in,” Capulli said Morguard is excited about the development potential of the site, which is located a stone’s throw from Highway 417 and amenities like the Tanger Outlets mall.
“We’re really excited about having them as a tenant. The niche they’re in, I could just see it getting bigger and bigger.”
Besides the new Kinaxis headquarters, the property also includes nearly four acres of additional development-ready land. Capulli said there is room to construct another 120,000 to 150,000 square feet of office space beside the existing building – and he’d love nothing more than to see Kinaxis occupy the entire campus.
“Hopefully, they can grow and we can expand (the current office footprint) for them,” he said. “We’re really excited about having them as a tenant. The niche they’re in, I could just see it getting bigger and bigger.”
The bulk of Morguard’s Ottawa holdings – nearly 3.5 million square feet – consists of office space, with about 2.7 million square feet of it located in the downtown core.
About 53 per cent of the firm’s office portfolio is leased to the federal government. While the feds have been coy about their long-term plans for bringing employees back to the office full-time, Capulli said Morguard remains confident that office space in the nation’s capital – particularly in the downtown core – will continue to be a solid investment for decades to come.
‘Bullish on the office’
“Nobody knows exactly what they need or what’s going on in the office,” he told OBJ in an interview on Tuesday afternoon. “You just don’t know how it’s going to shake out. But we’re here for the long run.
“It might take a few years, but I am bullish on the office. Most companies are going to try the hybrid (approach) and everything else, but not everybody can work from home. I’m not sure it’s going to work.”
Among Morguard’s best-known Ottawa properties is Performance Court at 150 Elgin St. The distinctive 21-storey, 360,000-square-foot office tower opened in 2013 and gained instant cachet when rising e-commerce star Shopify signed on as the lead tenant.
But the software giant stunned many in the business community in 2020 when it announced it was going “digital by default” and vacating the 170,000 square feet of space it rented at Performance Court, even though its lease doesn’t expire until the end of 2026.
Capulli said about three-quarters of Shopify’s former footprint has been subleased to other tenants, adding he fully expects the rest of the space to be backfilled in the near future.
“There’s no doubt in my mind,” he said. “Everything in that building is top-notch. I don’t think we have a problem there.”
Capulli said there’s a lot to like about the Ottawa market, whether it’s downtown or in the suburbs. While the central business district “will always have its place,” he sees big upside in sites near transit hubs and along the Queensway such as 3199 Palladium Dr.
“We’re here for the long run,” he reiterated. “The economy is going to go up and down, but we plan on being here for another hundred years.”