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Nortel's Carling Avenue campus (Photo by Darren Brown, OBJ)

The federal government must either occupy Nortel Networks's (TSX:NT) Carling Avenue campus or build a massive new office complex if it's serious about occupying a 2.85-million-square-foot property in less than three years, say several local brokers.

However, with a Jan. 30 deadline to respond to the government's recent request for information (RFI) and no large-scale development plans being openly discussed, all eyes are on Nortel, which has recently sold or put up for sale other large complexes in Montreal and Calgary.

"Nortel is probably the only candidate in town who has any kind of sizable space that could theoretically fulfill a good chunk of that requirement," says Kelvin Holmes, managing director at the Ottawa office of brokerage firm Colliers International.

He adds he was unaware of any development site capable of accommodating a building of that size with plans ready to go.

"There is a very short trigger on the RFI (and) it is a huge amount of space," says Mr. Holmes.

Late last week, Public Works and Government Services Canada published a request for information on the availability of 3.875 million square feet of rentable office space in the National Capital Region to meet four separate requirements, starting in the fall of 2011.

The largest requirement is for 2.85 million square feet located in either Gatineau or Ottawa, including Kanata and the far east end. That is more than two and a half times the combined size of the three Constitution Square buildings and has many wondering if Nortel is planning to vacate its Carling Avenue campus and move to a smaller location.

Nortel's director of corporate communications, Ann Fuller, confirms there is currently 180,000 square feet of space available for lease at the 2.3-million-square-foot Carling campus, but would not comment on how much space is expected to be available in 2011.

"We are exploring several options for the Ottawa office, including the sale or lease of parts of the campus. However, I cannot comment on any specifics considerations or activities," she says.

Earlier this year, Nortel placed its 23.8-hectare Calgary business complex, assessed at $105 million, up for sale after announcing in May that it was pulling the plug on its Calgary operations.

In 2007, Nortel sought tenders for its four-building, 800,000-square-foot complex in a Montreal-area business park, eventually selling to a partnership that included Belmont Equity Partners and Brookfield Real Estate Opportunity Fund.

Darren Fleming, a senior advisor and broker at GVA Devencore, says that with rumours of Nortel seeking bankruptcy advice and a large number of Ottawa Nortel employees working in the Metro Ethernet Networks division, which is currently up for sale, he could plausibly see the telecom giant lease its buildings to the federal government and relocate to a property more in line with its size requirements.

Besides the Carling Avenue campus, Mr. Fleming says the federal government could look at several development sites, including Nortel's unserviced lands at Highway 416 and Fallowfield Road, Taggart's lands north of the Queensway by Scotiabank Place and Minto's property around the former JDSU building.

"I don't know of any (site) that would be a slam-dunk for that (request) because it is just so big. (And) if it is a brand new site, I have a hard time believing you could get (a bid) done between now and Jan. 30.

"Either the feds have no idea what they are really asking for and don't have an understanding of what the impact of this is going to be on the development community ... or they already have (a site) in mind."

However, Michael Church, principal and vice-president at commercial real estate firm Avison Young, notes that because detailed concept plans will not be required at this stage, proponents holding development lands will have enough time to put in a bid.

But with only three years to complete the substantially sized project, Mr. Young says it would be "a massive undertaking" for a developer, who would likely need any required zoning approvals fast tracked.

Furthermore, some developers may be reluctant to invest the time and money into preparing a bid if they think the Nortel property is in play, says Bruce Wolfgram, a vice-president and broker at DTZ Barnicke.

With Nortel asking $26 (gross) a square foot for its currently available space, Mr. Wolfgram says a new development is unlikely to be competitive on price.

"It is going to be difficult (for) other developers to be willing to spend a lot of time on this with the huge wild card of the Nortel complex hanging out there."