Shopify set to vacate 170,000-square-foot Elgin Street HQ in bid to reduce office footprint

Shopify HQ
Shopify is actively looking to sublease 170,000 square feet of space at its head office on Elgin Street, sources have confirmed to OBJ. File photo

Three months after declaring it was going “digital by default” in the wake of COVID-19, Shopify is preparing to vacate its Elgin Street headquarters as part of a plan to consolidate its Ottawa operations at an office tower on nearby Laurier Avenue, OBJ has confirmed.

The e-commerce giant currently occupies about 170,000 square feet of space on several floors in Performance Court at 150 Elgin St., where it has been based since October 2014. More than 850 people occupied the space before Shopify’s employees began working from home in March as the coronavirus began spreading across the country. 

Shopify’s lease at Performance Court does not expire until the end of 2026, but the company is actively trying to sublease the space in an effort to reduce its real estate footprint as many of its employees are expected to keep working from home permanently, sources said Monday.

CBRE Ottawa managing director Shawn Hamilton, who confirmed the news Monday morning, said the market response to Shopify’s decision will be a good litmus test of the office sector’s resilience.

“I’m interested to see what kind of uptick this causes in leasing activity in the market,” he said. “I don't think this is the death knell of the office leasing market for Ottawa. I do think it’ll present an opportunity that will give us a sense of how vibrant our leasing market is – or isn’t.” 

Royal LePage, which represents Shopify in local real estate negotiations, is expected to start actively marketing the space to prospective tenants this week, another veteran broker told OBJ. 

“I guess they’re going to have more people working at home or perhaps people working differently,” the broker, who asked not to be named, said.

234 Laurier space to be ‘reimagined’

Morguard, which co-owns and manages Performance Court, and Eric Van Hofwegen, Shopify’s broker at Royal LePage Performance Realty, referred all requests for comment to Shopify. 

Shopify officials would not directly answer a question about whether the firm was subleasing its space at 150 Elgin St. However, in a statement emailed to OBJ last Friday afternoon regarding its future real estate plans in the capital, the company made no mention of Performance Court and instead focused on Shopify’s space in the former Export Development Canada tower at 234 Laurier Ave. W., which it leased in 2017.

Shopify lounge
Shopify instantly became Performance Court's marquee tenant when it moved into the building in 2014. File photo

“Ottawa remains an important talent market for us ​– it’s where Shopify was founded and our 234 Laurier office will be reimagined for our digital by default mindset,” the statement said.

Shopify’s exit from Performance Court – a distinctive 21-storey highrise with a construction price tag of more than $160 million – is poised to leave a major void in one of the central business district’s signature office buildings.

Already a rising star in the world of e-commerce, Shopify gave the gleaming new 360,000-square-foot office tower instant cachet when it became Morguard’s marquee tenant nearly six years ago. 

With headline-grabbing features such as a go-kart track and massive state-of-the-art games room, Shopify’s HQ became a symbol of a hip new generation of Ottawa tech firms that were setting up shop in the city’s core rather than the suburbs of Kanata. Other firms subsequently opened their own shiny new downtown digs, including fellow software enterprises Klipfolio and Fullscript. 

Now, the capital’s tech darling is set to abandon its fancy headquarters in favour of newly renovated offices just a few blocks away on Laurier Avenue. Shopify signed a long-term lease for 18 floors covering 325,000 square feet of space in the building more than three years ago, saying the additional real estate could provide space for another 2,500 employees.

Shopify coffee shop
Shopify employed more than 850 people at its Elgin Street headquarters before the COVID-19 pandemic. File photo

“We hire people so quickly that filling up has not ever been a problem,” Greg Scorsone, Shopify’s director of internal operations, told OBJ in March 2017.  

But the commercial real estate outlook has changed dramatically since COVID-19 hit as many companies began rethinking their need for large swaths of traditional office space. 

While Shopify has continued to grow at a breakneck pace – even supplanting RBC as Canada’s most valuable publicly traded company earlier this year – most of those new hires are now working from home due to the pandemic, and likely will continue to do so for the foreseeable future.

In May, Shopify co-founder and CEO Tobi Lütke said the company’s offices will remain closed until 2021, adding most employees would probably work remotely on a permanent basis. Lütke tweeted that Shopify is a "digital company" by default, adding "office centricity is over."

Vacancy rates still far from historic highs

Still, many longtime commercial real estate executives say it’s too early to predict the long-term impact of the pandemic on the Ottawa market.

According to CBRE’s second-quarter office market report, the amount of sublease space available in Ottawa jumped 11 per cent between the beginning of April ​– roughly the same time the effects of the coronavirus pandemic really began to be felt in the capital ​– and the end of June.

But the 283,000 square feet of space available for sublease at that point was still a far cry from the nearly 2.2 million square feet of space that was up for grabs back in 2003, after the tech bubble of the late 1990s had burst.

“Certainly, (Shopify) putting 170,000 square feet on the market will drive vacancy up, but I still think we’re a long way from what historic highs have been,” Hamilton said on Monday. “I don’t think that this will create a tidal wave of people vacating their space.

“We have a long way to go to get to problem territory. I think we would need another two or three Shopifys to come on the market for things to be a problem.”

The veteran broker said that while the most obvious candidate, the federal government, might not be a good fit for the newly vacant Performance Court space, it could be an enticing commodity for a growing software enterprise that’s seeking to make a splash.

“It may be a little too esoteric for federal government-type use,” Hamilton said, noting a couple of federal Crown corporations are currently in the market for space. “I do think this will open up opportunities for tech (firms) who are looking for creative space.”