Lease brokerage services deal could permanently increase business opportunities for brokers, observers say
One of Ottawa’s leading commercial real estate services firm has won a long-awaiting contract to help the federal government deal with a large volume of upcoming lease expiries.
The 18-month lease brokerage services contract between CB Richard Ellis and Public Works is seen as a pilot project that could lead to the federal government relying more on the private sector to help it manage its extensive real estate portfolio.
The initial contract is relatively modest, limited to deals of less than approximately 21,500 square feet. However, some in Ottawa’s brokerage community speculate that if the contract is executed effectively, it could permanently increase the amount of available government work.
“This is an opportunity to work with the largest tenant in the national capital region,” says Greg Clark, managing director at CB Richard Ellis.
“If we are able to successfully deliver our services and meet their goals and objectives, our hope is that the next time around, the scope will grow.”
The federal government already outsources some of its real estate functions, such as facilities management.
The new contract being handled by CB Richard Ellis only covers work on the Ontario side of the Ottawa River. Along with office leasing, it also covers the letting of space – predominately retail – in government-owned buildings, as well as advisory services such as providing advice on whether the government is better off renewing a lease in a specific building or moving to an alternative site.
Three companies submitted bids, according to a government spokesperson.
When Public Works first released its solicitation documents, some brokers privately questioned whether the industry could profit from the arrangement in its current form, given the undefined volume of work the contract involves.
Furthermore, it is well-known that servicing the federal government involves a huge amount of reporting and paperwork. This could place a significant administrative burden on a company’s senior brokers who could be working on other deals.
However, Mr. Clark says he is “extremely comfortable” with his company’s bid.
“We wouldn’t have submitted if we didn’t think it was something that was worthwhile,” he says.
He says five employees are assigned to the contract: three sales professionals, a researcher and an advisor.
Mr. Clark says he expects work to start within 60 days. The government has the option of extending the contract four times, for a period of six months each.
In earlier solicitation documents, the federal government said the successful proponent would be guaranteed a minimum $100,000 in revenues.
A Public Works spokesperson says the contract will have a maximum call-up value of approximately $2.1 million, but that the actual amount will depend on the workload.
The federal government is easily the largest single tenant in Ottawa. It says it leases approximately 17.2 million square feet in the city, representing about 400 leases.
Across the country, Public Works says it occupies 33.4 million square feet in 345 publicly owned buildings, 36.6 million square feet in 1,453 leased buildings and another 5.8 million square feet in 10 lease-purchase buildings.