The federal government says it is aiming to cut the average time it takes to dispose of surplus properties in half – from nine years to four-and-a-half – as it looks to reduce its real estate costs and accelerate the conversion of empty office buildings to housing.
Public Services and Procurement Canada, which owns or leases more than 30 million square feet of office space in Ottawa-Gatineau, plans to reduce its office footprint by up to 50 per cent over the next decade in an effort to lower operating costs and cut greenhouse gas emissions.
In their budget tabled last week, the federal Liberals said the government will invest $1.1 billion over the next 10 years to help “accelerate the ending of leases and disposal of underused federal properties” across Canada.
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The civil servant in charge of much of the government’s real estate portfolio told the audience at Ottawa’s city-building summit Tuesday morning that offloading office buildings has traditionally been a complex, time-consuming process that involves consulting various federal departments, other levels of government, Indigenous groups and other potential partners before the properties are put on the open market.
“Historically, the government is not very good at disposing surplus properties,” Mark Quinlan, the assistant deputy minister of real property services at Public Services and Procurement Canada, said during a presentation at Lansdowne Park’s Horticulture Building.
“That process takes a lot of time, and it was never the priority for most departments.”
Quinlan, who has been in his current role since last October, said his department is compiling a “master list” of surplus federal office buildings with the aim of selling them to developers who can convert them to housing and other uses.
He told the crowd of more than 100 business leaders the process of getting surplus office buildings off the government’s books currently takes an average of nine years. He said his department is hoping to cut that timeline in half to help address Canada’s escalating housing shortage.
Eyeing ‘underutilized’ sites
“A lot of government office buildings have high potential for conversion into housing,” Quinlan said during the discussion moderated by Mary Rowe, president and CEO of the Toronto-based Canadian Urban Institute.
He said the government is specifically zeroing in on properties that could be suitable for such redevelopments as well as “underutilized” sites that contain office buildings but also have enough adjacent land for housing.
“Identifying those and getting those assets in the hands of developers will be really important,” Quinlan said.
With Ottawa’s downtown office vacancy rate still near a record high as employers re-evaluate their real estate needs in a post-pandemic world, office-to-residential conversions are being touted as a possible solution.
There are currently five such projects on the go or in the planning stages in downtown Ottawa.
Meanwhile, developers and property managers are anxiously awaiting word of PSPC’s plans for 10 aging local office buildings it earmarked for disposal nearly a year ago. The list includes notable properties such as the L’Esplanade Laurier complex and CBC’s former headquarters at 1500 Bronson Ave.
Quinlan did not provide an update on his department’s plans for those properties on Tuesday and did not speak to the media.
However, he suggested during the panel discussion that office redevelopments could play a major role in helping solve Ottawa’s housing woes.
Quinlan pointed to Calgary’s recent wave of conversions as an example, calling it a “huge locomotive” for revamping the Alberta city’s downtown core.
“I think that’s certainly part of the solution for Ottawa,” he said. “The good news is those assets that we’re going to be getting out of, we’ll be really pushing to convert into housing. If I look at the future of Ottawa, there’s a hard transformation that’s happening, but the future is very bright.”
In addition to disposing of excess real estate, the government also plans to redesign its remaining offices to make them more efficient, Quinlan explained.
Before the pandemic, federal offices had an average occupancy rate of 60 per cent due to employees being absent for vacations, training, sickness or other reasons, he said.
No more assigned workspaces
But as the government downsizes its portfolio and adopts a permanent hybrid work model, employees will no longer have assigned workspaces and instead will work in whatever areas are available on a given day.
“When we unassign offices, we’re able to unlock an unbelievable amount of efficiency,” Quinlan told the crowd. “That means that the office spaces we’re going to stay in will have a much higher rate of use.”
The government expects the average occupancy rate of its real estate footprint to rise to 80 per cent once the downsizing is complete. Quinlan said that will be good news for downtown Ottawa merchants.
“That foot traffic in and around those government offices is going to be a lot higher than it ever has been in the past.”
Hugh Gorman, CEO of property management firm Colonnade BridgePort, said Quinlan’s remarks indicate the government is serious about doing its part to address the capital’s growing inventory of vacant downtown real estate.
“As a landlord, having more foot traffic, having a more vibrant core in the daytime … I think it is going to be a huge benefit,” said Gorman, who was part of a task force that produced a report last year on revitalizing Ottawa’s downtown.
But he said the business community needs to hear more details before it can really start to get excited.
“This is an overview of the plan. The market, and the capital markets specifically, need clarity around what the plan is so we can work in partnership with them.”
Veteran real estate broker Shawn Hamilton said PSPC’s plans don’t go far enough to spur new development of much-needed housing in the core.
Hamilton, a principal at Proveras Commercial Realty, suggested the department “should be donating properties for development at a controlled rate” that could be converted into affordable units.
“There are solutions,” he said. “I just feel (the feds) are missing the mark.”
