Timing really is everything, and O&Y Properties Corp. couldn't have picked a better one to build more than 900,000 square feet of class A office space in two squeakily tight downtown markets.
The company has just started work in Toronto on a 20-storey, 432,000-square-foot tower on a site once owned by developer Robert Campeau. His ghost also hovers over the new O&Y project in Ottawa -- a 20-storey, 300,000-square-foot tower and a 17-storey, 200,000-square-foot tower -- to be built on the Place de Ville site Mr. Campeau originally developed.
There is a growing demand for class A downtown space in both of those urban markets. In Ottawa, the office space vacancy rate is the lowest in Canada, averaging 1.3 per cent.
"There is absolutely no class A space available downtown or in the suburbs," says Paul Hindo, vice-president and general manager of Royal LePage Commercial Inc.
The federal government is growing again and looking to consolidate some departments into more efficient class A premises, he says.
Early next year, O&Y will start beating the government and corporate bushes for tenants in Ottawa.
It won't have to beat very energetically or very long, but even with that kind of hot market, O&Y is hedging its bets. Rather than build a single monolithic tower on the 50,000-square-foot site, it's building two towers. O&Y secured site plan approval in September, well ahead of the November municipal election and the uncertainty and possible delays a new council might impose on the project.
Philip Reichmann, O&Y's chief executive officer, explains that its projects have to be at least 50 per cent leased before the company will break ground.
"With all the approvals in place we could theoretically start building this afternoon if we wanted to," Mr. Reichmann observed, "but first we have to work on design development and produce marketing materials."
The new O&Y buildings will be fitted up with the latest technological services class A office space tenants expect. But it's more a case of building in capacity for future change than running in a lot of wires, Mr. Reichmann says.
"The important thing is to have the capacity to accommodate whatever technology surfaces later, to have lots of risers so tenants can pull cables through them, a lot of power and backup power," he added.
O&Y doesn't have to depend on the federal government to fill its space, in any event, not with the growth of high-tech companies in the Ottawa area.
The only other class A building that could absorb some of the demand is the World Exchange Plaza under construction in downtown Ottawa and owned by TD Investment Real Estate. Some 180,000 of its 240,000 square feet of space is already leased and it -- the first office building in the capital's downtown core in eight years -- won't be completed until the end of next year.
Richard Brisbin, in charge of the Ottawa office of Brisbin Brook Beynon Architects ofToronto, says the single tower the firm could have designed would have been "too large for the market, too cumbersome and ungainly esthetically." About a third of the site will be preserved as open space, Mr. Brisbin added, notably a pocket park between the two towers. He visualizes it as a "delightful little sanctuary", giving the new towers "a foreground and setting, more gracious and soft than one might normally find in the urban context of Ottawa."
Other developers have looked at the parking lot site over the years and taken a pass, Mr. Brisbin adds, because of the high cost of providing underground parking. Since O&Y owns and manages Place de Ville I and II towers, it can achieve some economies by extending spare underground parking and mechanical systems capacities to the new companion towers, making it more financially viable.
As for the design of the two new towers, Mr. Brisbin says they "wanted to keep the [architectural]language in the same gene pool as the previous Place de Ville towers.
"The structural glass will allow the two ground floors in the new towers to be very transparent, with the park visible between the two. The colour of the glass will be different so the primary massing of the building will be more crystalline or silver-like, to distinguish these phases from the earlier ones," Mr. Brisbin said.
Meanwhile, O&Y broke ground Nov. 2 in downtown Toronto for its 20-storey, 430,00-square foot tower, the first such building in the core since 1993. Maritime Life Assurance Co. is the lead tenant, accounting for 150,000-square feet of the space.
The Toronto and Ottawa towers are O&Y's first development projects, a shift from buying, selling and managing real estate.
REIT WATCH*
Dec.8 Weekly YTD
close change total return
CAP REIT $11.85 2.6% 19.4%
CHIP REIT 8.60 0.6 9.6
Cominar REIT 10.00 0.0 19.6
CPL REIT 12.90 -0.8 -12.0
CREIT 11.20 -0.9 12.1
H&R REIT 11.75 2.2 21.0
Legacy REIT 8.50 0.6 11.9
Morguard 8.50 0.0 17.6
RESREIT 12.10 0.8 18.1
RioCan 8.80 -0.6 12.0
Royal Host 6.45 -0.8 34.3
Summit REIT 10.95 0.9 16.5
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