Ericsson Canada is rumoured to be close to finalizing a deal to lease approximately 200,000 square feet of office and manufacturing space inside 349 Terry Fox Dr., a building that has sat mostly vacant for years and contributed to Kanata’s stubbornly high vacancy rate.
The company, along with Ciena, Avaya and Genband, will eventually be forced to leave the former Nortel campus, as its new owner, the federal government, prepares to fill it with Department of National Defence employees.
With Ericsson out of the real estate market, experts say west-end landlords holding large empty buildings are likely to get more aggressive in courting the remaining tenants of the Nortel campus. They may also be forced to re-examine their buildings and look at subdivision options that would appeal to smaller space users.
Ericsson Canada declined to comment on any specific building and said no deal was done.
“We are in discussions on a lease, but until something is final there is no confirmation that I can make at this time,” said spokesperson Patricia MacLean.
Likewise, the head of the brokerage firm representing Ericsson, Cushman & Wakefield Ottawa managing director Alain Desmarais, declined comment.
Ericsson, like Ciena, Genband and Avaya, has always said it intends to stay in Ottawa after its lease at the former Nortel campus – now branded Carling Place – expires. However, that didn’t stop some observers from speculating that the telecom firms could be tempted by the availability of tech talent and lucrative real estate deals to relocate their operations south of the border.
Along with being good news for the Ottawa economy, Ericsson’s move to 349 Terry Fox Dr. is particularly good news for landlord Kanata Research Park.
Several real estate brokers say the property has sat mostly vacant for some time, save for one suite of office space occupied by The Corporate Centre. It is not clear whether TCC will stay put or be forced to move.
The 243,000-square-foot building is a mix of office and manufacturing space that will need a significant fit-up to accommodate its new rumoured tenant.
“You can look from end to end inside it now,” said one broker.
“It’s going to take a lot of work to turn it into the environment that Ericsson is used to over at the Nortel campus.”
Even if 349 Terry Fox Dr. is taken off the market, it won’t necessarily have a huge impact on Kanata’s office vacancy rate on paper because the bulk of the space is considered manufacturing space, said Darren Fleming, managing principal at real estate services advisory firm CresaPartners.
He said it leaves about a half-dozen buildings in Kanata with 50,000 square feet or more available, leaving the other companies coming out of the Nortel campus with one less option.
But with few large private-sector space users in the market, Ericsson’s move forces landlords to take another look at how they’re marketing their space, said Kelvin Holmes, managing director at commercial real estate services firm Colliers International.
“What this might do is trigger one or two of those landlords who thought they might have the space for Ericsson to re-evaluate how they market their space in terms of subdividing the space, going after smaller tenants,” he said.
Both Genband and Avaya are said to be in the market for 100,000 to 120,000 square feet, which experts say can likely be accommodated in Kanata’s existing building stock.
Ciena, on the other hand, is rumoured to be shopping for 300,000 square feet. There was plenty of discussion about potential build-to-suit opportunities when the sale of the Nortel campus to the federal government was first announced.
But some now say the increasingly tight timeline to erect a new building and fit it up with specialized lab space before its current lease expires may force Ciena – which already has an office on Legget Drive – to consider splitting up its operations in existing properties.
Head count: Roughly 400, according
Footprint: Approximately 100,000 square feet. Lease reportedly expires sometime between September 2012 and May 2013.
Head count: Approximately 1,200
Footprint: 265,000 square feet. Company says it is not required to vacate the former Nortel campus until March 2015 at the earliest.
Head count: Between 820-900
Footprint: 300,000 square feet. Company says its lease expires in late 2012.
Head count: 400
Footprint: Approximately 200,000 square feet. Company says its lease expires in early 2014.