Produced by Juteau Johnson Comba Inc.
April 2001
Editor: John Comba
The Ottawa real estate industry is adjusting to the recent changes in the telecommunications industry. A recent article in the Ottawa Citizen indicated that there have been almost 9,000 announced layoffs since the beginning of the year. This has resulted in a significant amount of sub-let space entering the market. However, our office market has been plagued with a lack of space for the past year and rental rates spiked up in the last quarter of 2000 with some suburban office buildings leasing at $22 to $24 per square foot. Both JDS Uniphase and Nortel are expected to add more space to the sublet market over the next month or two. I also expect that investors in suburban office product will remain on the sidelines until there is a clear sign that a corner has been turned. This should happen when there have been a couple of quarters of positive absorption.
In the meantime, investors should be looking at the downtown office market as very few high-tech companies chose to lease space there and the vacancy rate is reported to be at 2.2% in the most recent BOMA office survey. I expect the downtown core will perform very well this year due to the limited amount of new supply and the continuing growth of the federal government.
Now onto the summary of sales that occurred in March and the early part of April.
SALES
The OFFICE market was very active this past month with sales totaling almost $146,000,000.
The Federal Government purchased 90 Sparks Street (the Royal Bank Centre) from Multi-Tenant Properties Canada Inc., Oxford Properties Group Inc. and 3660184 Canada Inc. for $66,000,000 or $165/sq.ft. This is a 400,000 square foot Class "A" office building with on-site parking for 150 vehicles that was constructed in 1981. DS Marcil acted for the vendor.
Mitel Corporation sold their office site at 340, 350 and 360 Legget Drive to Mitel Research Park Corporation for $61,749,999 or $99/sq.ft. The property is approximately 624,036 square feet in size with a combination of office, warehouse and manufacturing space. There is also some 8.3 acres of excess land. This purchase was part of March Networks' purchase of Mitel Networks from Mitel Corporation.
A condominium office building and parking garage located at 25 Nicholas Street was sold by 3173763 Canada Inc. to 25 Nicholas Properties Ltd. for $12,285,000 or $100/sq.ft. This is a 123,293 square foot office building that sits on top of the Novotel Hotel. It is fully leased to the federal government for a seven-year term. The agents for the vendor were Nathan Smith, Bernard St. Onge and Brad Dykeman of Royal LePage.
A four-storey, 72,311 square foot office building at 1223 Michael Street in the east end of Ottawa was sold by Metropolitan Marine Way Investments Ltd. to the Great West Life Assurance Company for $5,900,000 or $82/sq.ft. This property is to the immediate west of the property Great West Life purchased last month from Shenkman Corporation at 1162 Cyrville Road. The agents were Nathan Smith and Alan Desmarais of Royal LePage.
Canadian Tire sold their RETAIL store at 1887 St. Joseph Boulevard in the Orleans community in the east end of the City for $3,150,000 to Metrophotonics Inc. The building is approximately 41,938 square feet in size and is located on a 5.7 acre site. Jon Valiant of Valiant Realty acted for the purchaser and Richard Getz and Allan Kyd of Royal LePage acted for the vendor.
Denis Paquette sold a 12-unit APARTMENT building located in the former City of Vanier at 392 Carmen Avenue to David and Kathleen Wilkins for $540,000 or $45,000/unit.
A six-storey, 34-unit apartment building at 90 Willow Street was sold by Ponnappa Paikera and Satich Seethram to 1414613 Ontario Inc. for $1,150,000 or $33,824/unit.
Po Ping Lam, Peir Chen and Li Chen sold a 3-storey 15-unit apartment building at 1185 Merivale Road to Irene & Antonio Katsoulkakis and Mary & Emmanouel Sklavakis for $635,000 or $42,333/unit.
Two converted houses at 149 & 155 MacLaren Street housing 10 apartment units was sold by Robert Herrear & George Riley to Michael McGahan for $500,000 or $50,000/unit.
A 213,767 square foot INDUSTRIAL building at 311 Legget Drive in the former City of Kanata was sold by Seymour Isenberg and Indu Sinha to 134024 Canada Ltd. for $616,667 or $45/sq.ft. of building area.
A 7,823 square foot industrial building at 84 Bentley Avenue was sold by Torus Construction Ltd. to 177448 Canada Ltd. for $590,000 or $75/sq.ft. of building area.
A 5 acre parcel of industrial LAND located at 2382 Sheffield Road in the east end of the City was sold by Jacques Beaudry to Work Wear Corporation of Canada Ltd. for $650,000 or $130,000/acre.
Uvalde Investment Company sold two parcels of land totaling some 11.04 acres on the north side of Innes Road and the south side of Cyrville Road in the east end of the City adjacent to a Home Depot store. Innes Crossing Inc purchased the land for $3,500,000 or $317,029/acre.
Manotick Village Court Developments Inc. sold a 3.37 acre site with a foundation for a 94-unit condominium apartment building at 555 Doctor Leach Drive in the Village of Manotick to 1427051 Ontario Inc. for $550,000 or $163,205 per acre.
A parcel of land on Sixth Line Road in the north end of the former City of Kanata with frontage on the Ottawa River was sold by James and John McMurtry to Sabino and Valerie Ventola for $860,000.
NEWS
The first quarter office market survey for 2001 from BOMA is now available and can be viewed in PDF format at www.boma.ca/ottawa. The survey indicated that the overall vacancy rate has increased to 2.7% from the year end figure of 1.7% for the whole region. Kanata still maintains a 0% vacancy level for direct space but there was a reported 90,399 square feet of sublet space available which suggested an overall vacancy rate of 4% for the Kanata office market. Since the survey was completed, the amount of sublet space has increased significantly with very little absorption.
Royal LePage has also released their first quarter office survey. This can be viewed in PDF format at www.royallepage3.com under publications. The vacancy rate for office space in this survey is at 2.8% with all of the western suburbs having an overall rate of 2.7% which is similar to the first quarter of 2000 when the vacancy rate was reported by LePage at 2.8%.
Last, is the Colliers first quarter survey which indicates an overall vacancy rate of 5.0% including an estimated 860,334 square feet of sub-let space which is more than the direct space that is available. This survey is an excellent summary of what is occurring in the Ottawa office market right now and I strongly suggest that all office building owners, investors and lenders read it. The article can be viewed at www.colliersmn.com/prod/ccgrd.nsf/publish/index.html.
According to the Ottawa-Carleton Real Estate Board, the Ottawa housing market is starting to slow down from last year's record-breaking pace. The total number of sales in the first quarter was down to 2,676 from 2,711 in the first quarter last year. However, the average price is up some 7% over the same time last year. I would suggest that the housing market probably peaked last quarter as that was when we finally bought a new home. You can always count on appraisers buying at the peak of the market.
The local unemployment rate was at 5.0% in March, which is up 0.2% from February. The increase is due to some of the earlier layoffs that were announced. However, the unemployment rate is expected to increase over the next couple of months as more employees are laid off.