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Globalization hits Ottawa's commercial real estate market
By Jim Donnelly, Ottawa Business Journal Staff
Tue, Jul 4, 2006 12:00 AM EST
Concept illustration of new Telus office building at 215 Slater St.
When Telus announced the groundbreaking of its new downtown Ottawa building last week, there was absolutely nothing out of the ordinary about it.
That's because they were using an out-of-town developer to do the groundbreaking.
Broccolini Construction, from Montreal, is slated to construct the new 105,000 square-foot, eco-friendly office tower on the corner of Bank and Slater.
Ottawa's commercial development market is booming, of this there is little doubt. Riding an overall corporate vacancy rate of 3.3 per cent downtown over the latter half of 2005, many commercial real estate developers and operators are enjoying their best times since the high-tech frenzy reduced vacancy rates to practically nil at the beginning of the decade.
But just who owns and develops the space used by innumerable government departments, high-tech firms, and other businesses is another story. Because most owners and developers in Ottawa, it turns out, aren't even from here.
Primecorp Commercial Realty's Aik Aliferis says Ottawa's commercial market has become so inviting to out-of-town or out-of-country investors; virtually every major player has their eyes on the assets of the nation's capital. Commercial real estate has gone global, he explains, and properties along Richmond Road or the Rideau Canal are now just as accessible and inviting to multinationals as oceanfront in Dubai.
Add a sheer lack of development space in the downtown core to the equation, and you've got a recipe for some very hungry buyers.
"They look at Ottawa's steady population growth, the demographics, the stability of income in our market being a federal government town," says Mr. Aliferis. "These are strong investment factors." He says Ottawa's always been a great commercial market thanks to these factors, but now that the population has crested one million, there's enough volume to attract the big players.
Aside from big guns like Standard Life or Oxford Properties, some out-of-towners active in the Ottawa market include Broccolini Construction (Montreal/private ownership), Rosdev (Montreal/private), Alexis Neon REIT (Montreal/investment trust ownership), Giffels Developments (Toronto/private), LaSalle Investment Advisors (Toronto/international pension fund), GWL Realty Advisors (Toronto/national pension fund).
It's this kind of momentum, explains Building Owners and Managers Association of Ottawa president Ian Fisher, that's made private and local building ownership, the norm 20 or so years ago, almost extinct in Ottawa today.
"What's happened in that side of it is the globalization of our industry. Real estate is now a global industry, and people buy real estate assets in this country, that country, or wherever," he says. "And secondly, money is very, very fluid. And there's so much money looking for a place to invest. Therefore, Canadian real estate becomes desirable to them, and that's why you see them coming in and outbidding Canadian ownership, essentially."
Individual building owners, especially locals, can't compete with the cold, hard cash of investment trusts looking to sink money into Ottawa's foundations, or multinationals from abroad. "So I think what's gone from Ottawa, is the individual developer one-off kind of owner," says Mr. Fisher.
Not that there's anything wrong with that, however. In fact, some out-of-town developers have teamed with locals to create opportunity where none existed before, in joint ventures that combine expertise in different areas.
"It happens occasionally, and usually it's when the bigger conglomerates are looking for some of that local entrepreneurial expertise," he says. "Some of the big guys don't have true development arms, and the little guys don't have access to money.
"So it's a natural relationship."
Larger developers also often have tenant relationships on a national scale, enabling them to fill a building before it's even built. This is now common in Ottawa, exemplified by the Adobe Tower being built on Preston Street that's already been completely leased.
"No one is developing on spec in Ottawa," says Mr. Aliferis. "Everything is sort of pre-leased, and pre-sold, and pre-set up before going into the ground."
Mr. Aliferis says Ottawa's low vacancy rates means this trend won't change anytime soon, either. The current lack of real estate supply, coupled with high rates of return on investments, means Ottawa is now a major market on the national and international playing field and will likely stay that way.
"There's a laundry list of developers who want to be in Ottawa, who aren't currently in Ottawa, and they may not be able to get in simply because the opportunities aren't available," he says. "And the supply of opportunities may not be enough to satisfy the appetites of these larger players.
"It's all subject to the opportunities that are brought forward," he continues. "They're not going to develop an office tower if they don't have a tenant, so just although they're looking in the market, doesn't mean they're actually going to move into the market, unless an opportunity makes economic sense."
Globalization hits Ottawa's commercial real estate market
By Jim Donnelly, Ottawa Business Journal Staff
Tue, Jul 4, 2006 12:00 AM EST
Concept illustration of new Telus office building at 215 Slater St.
When Telus announced the groundbreaking of its new downtown Ottawa building last week, there was absolutely nothing out of the ordinary about it.
That's because they were using an out-of-town developer to do the groundbreaking.
Broccolini Construction, from Montreal, is slated to construct the new 105,000 square-foot, eco-friendly office tower on the corner of Bank and Slater.
Ottawa's commercial development market is booming, of this there is little doubt. Riding an overall corporate vacancy rate of 3.3 per cent downtown over the latter half of 2005, many commercial real estate developers and operators are enjoying their best times since the high-tech frenzy reduced vacancy rates to practically nil at the beginning of the decade.
But just who owns and develops the space used by innumerable government departments, high-tech firms, and other businesses is another story. Because most owners and developers in Ottawa, it turns out, aren't even from here.
Primecorp Commercial Realty's Aik Aliferis says Ottawa's commercial market has become so inviting to out-of-town or out-of-country investors; virtually every major player has their eyes on the assets of the nation's capital. Commercial real estate has gone global, he explains, and properties along Richmond Road or the Rideau Canal are now just as accessible and inviting to multinationals as oceanfront in Dubai.
Add a sheer lack of development space in the downtown core to the equation, and you've got a recipe for some very hungry buyers.
"They look at Ottawa's steady population growth, the demographics, the stability of income in our market being a federal government town," says Mr. Aliferis. "These are strong investment factors." He says Ottawa's always been a great commercial market thanks to these factors, but now that the population has crested one million, there's enough volume to attract the big players.
Aside from big guns like Standard Life or Oxford Properties, some out-of-towners active in the Ottawa market include Broccolini Construction (Montreal/private ownership), Rosdev (Montreal/private), Alexis Neon REIT (Montreal/investment trust ownership), Giffels Developments (Toronto/private), LaSalle Investment Advisors (Toronto/international pension fund), GWL Realty Advisors (Toronto/national pension fund).
It's this kind of momentum, explains Building Owners and Managers Association of Ottawa president Ian Fisher, that's made private and local building ownership, the norm 20 or so years ago, almost extinct in Ottawa today.
"What's happened in that side of it is the globalization of our industry. Real estate is now a global industry, and people buy real estate assets in this country, that country, or wherever," he says. "And secondly, money is very, very fluid. And there's so much money looking for a place to invest. Therefore, Canadian real estate becomes desirable to them, and that's why you see them coming in and outbidding Canadian ownership, essentially."
Individual building owners, especially locals, can't compete with the cold, hard cash of investment trusts looking to sink money into Ottawa's foundations, or multinationals from abroad. "So I think what's gone from Ottawa, is the individual developer one-off kind of owner," says Mr. Fisher.
Not that there's anything wrong with that, however. In fact, some out-of-town developers have teamed with locals to create opportunity where none existed before, in joint ventures that combine expertise in different areas.
"It happens occasionally, and usually it's when the bigger conglomerates are looking for some of that local entrepreneurial expertise," he says. "Some of the big guys don't have true development arms, and the little guys don't have access to money.
"So it's a natural relationship."
Larger developers also often have tenant relationships on a national scale, enabling them to fill a building before it's even built. This is now common in Ottawa, exemplified by the Adobe Tower being built on Preston Street that's already been completely leased.
"No one is developing on spec in Ottawa," says Mr. Aliferis. "Everything is sort of pre-leased, and pre-sold, and pre-set up before going into the ground."
Mr. Aliferis says Ottawa's low vacancy rates means this trend won't change anytime soon, either. The current lack of real estate supply, coupled with high rates of return on investments, means Ottawa is now a major market on the national and international playing field and will likely stay that way.
"There's a laundry list of developers who want to be in Ottawa, who aren't currently in Ottawa, and they may not be able to get in simply because the opportunities aren't available," he says. "And the supply of opportunities may not be enough to satisfy the appetites of these larger players.
"It's all subject to the opportunities that are brought forward," he continues. "They're not going to develop an office tower if they don't have a tenant, so just although they're looking in the market, doesn't mean they're actually going to move into the market, unless an opportunity makes economic sense."
