Real estate community: Office space is not dead

Office space is not dead, and other bold predictions

For all those who believe Ottawa’s office towers likely invest more money in upgrading HVAC systems are destined to become nothing but hollowed- and installing technology such as virus-killing UV out shells as the city emerges from the systems as they retool buildings for a post-pandemic pandemic, Mike Church has a pile of documents he’d world. “COVID has been an opportunity to reimagine like to show you. everything.”

“Office space is not dead,” says Church, the Shawn Hamilton, vice-president of business managing director of commercial real estate firm development at Canderel Group’s Ottawa office, is Avison Young’s Ottawa operations. equally bullish on the local office sector’s

As proof, the veteran broker cites the prospects. growing stack of open files on his desk “There’s no reason for us to abandon – now numbering close to two dozen – the optimism that we had going into the that include sale and lease agreements pandemic,” he says. in various stages of completion. Companies were already moving

If commercial real estate is no toward a hybrid work model that longer in demand, Church says, the saw workers split their time between market has a funny way of showing it. home and the office before COVID hit,

“I think people have finally woken up Hamilton says, and the health crisis to the fact that life is going to go on and simply shifted that process into eventually we’re all going to get back high gear. to (the office) in some fashion,” he MIKE CHURCH The former says. commercial real estate

With the future of the office a broker says when hot topic everywhere as employers around the world cornerstone tenants such as the grapple with what workspaces will look like post- federal government downsized in the pandemic, Church and other local industry observers past, other clients such as Ottawa’s say that while office space is here to stay, it will likely burgeoning tech startups picked up be configured very differently once people start the slack. He believes history will repeat returning to their cubicles. itself this time.

As an example, Church points to a client that initially “I think having some space freed planned to ditch a hefty portion of its office footprint up by the federal government is before deciding to retain it all and redesign it to allow uncomfortable because it challenges for greater physical distancing and other health and our comfort zones, but I think it creates safety measures. oxygen for the private sector and the urban technology

“The use of office space is going to evolve over sector to thrive,” Hamilton says. time,” explains Church, adding that companies will Indeed, the industry is keeping a close eye on the

federal government’s plans for 37 million square feet of office space it owns and leases in the National Capital Region. While the region’s largest tenant has no secret about reducing the amount of space it plans to occupy in the coming years, Hamilton doesn’t think that will spell doom and gloom for local landlords. Many buildings in the feds’ own 19-million-square-foot portfolio are either nearing the end of their lifespans or are in dire need of costly overhauls, he notes, which could create new opportunities for other building owners as the feds seek new homes for workers. In addition, the government has suggested it might put aging, energy-inefficient properties such as L’Esplanade Laurier on the block in the near future, providing potential new avenues for redevelopment in the downtown core. “I think there are real opportunities there,” Hamilton adds. “I think L’Esplanade Laurier is the tip of the iceberg.” As the feds push to hit a target of 75 per cent of their leased properties being carbon-neutral before the decade is out, landlords need to act now to ensure their buildings are eco-friendly, he says. At the same time, owners of buildings with a mix of government and private-sector tenants will have to weigh whether pricey retrofits are worth it if it means passing on those costs to occupants that might balk at paying higher rents. “That discussion hasn’t happened yet, and it’s a discussion that has to happen,” Hamilton says. The feds have also suggested that how government office space will be parcelled out could change dramatically as a hybrid work world becomes the norm. Stéphan Déry, the assistant deputy minister for real property services at Public Services and Procurement Canada, said earlier this year he envisions a future where workers are no longer required to commute from the suburbs to central offices in the core. Déry imagined a scenario in which the feds set up a “network” of satellite offices across the country, where civil servants can drop in and share space closer to their homes in the suburbs. Hamilton says the “hub-and-spoke” model “makes a lot of sense,” adding it meshes well with urban planners’ goals of creating more walkable “15-minute neighbourhoods.” “It allows people to have an option to work from home, closer to home or at the mothership, which I think spreads out development across the city,” he says. Ultimately, Church believes Ottawa’s office market will go through “a bit of a transition” as landlords and tenants adjust to a post-pandemic world. For example, he expects more and more owners of aging properties will consider converting them into residential complexes, the approach InterRent REIT is taking with the 50-year-old Trebla Building at 473 Albert St. But he’s not buying the prediction of Shopify CEO Tobi Lütke, who declared “office centricity is over” when he announced early in the pandemic that the e-commerce giant was moving to a SHAWN HAMILTON virtual-by-default work model. “I think at the end of the day we’re going to be leasing probably the same amount of office space,” Church says. “It’ll just get configured differently. This, ‘Oh, we’re going to lose 50 per cent of it’ – not a chance.”