Luc Levesque, founder of TravelPod. (Darren Brown)

Companies find leasing space a full-time job in competitive ByWard area

From his ninth-storey office window in the Union du Canada Assurance-Vie building in the ByWard Market, Luc Levesque has a view of the Gatineau Hills and overlooks a surprising number of trees sprouting up between the tops of the surrounding low-rise buildings.

The general manager and founder of the online travel blog company TravelPod says the vibrant atmosphere in the Market allows him and his employees to walk out and grab lunch or an after-work pint as a team, and is a great perk when recruiting new employees.

But finding a new home for the growing company earlier this year turned into an eight-month endeavour as Mr. Levesque sought 3,500 feet of space in one of the city's most unique commercial real estate markets.

"There is just not a lot available ... I'm really surprised how long it took to get it," he says, adding several deals fell apart when he found out how much money he'd have to spend on renovating older space.

Eventually, TravelPod secured a three-year lease above the Second Cup in Mercury Court. They'll move in later this fall. Mr. Levesque says he needed a short-term lease to give him the flexibility to accommodate his growing company.

But finding a larger office space in the ByWard Market three years from now may prove even more difficult, say several commercial real estate watchers.

Historically home to professionals in media, marketing and other creative fields, office space in the ByWard Market is being sought by an increasingly diversified range of businesses even as its supply of space remains relatively stagnant.

"It is a hot little market, but it is a niche market," says Paul Bennett, vice-president at Colliers Macaulay Nicolls.

"(Historically) anybody who was not already in the Market tended to stay out of it ... But everybody in the Market, or those who are relatively ambivalent to it, gets to like it and really wants to stay there."

Mr. Bennett says there hasn't been a flood of new tenants into the Market because of a limited supply of significant office space pockets.

But others say they're seeing indications that demand is increasing.

"There seems to be more interest in the Market than there was two or three years ago," says Shaker Realty Ltd. president Gary Shaker.

"Part of the reason is that the ByWard Market itself has improved dramatically in terms of services and entertainment value ... (Workers) step out of their office and there is so much going on."

Though tenants can often find 2,000 or 3,000 square feet of space in second-floor walk-up offices above commercial or retail businesses, it can be a challenge finding more than 5,000 square feet of space, says Mr. Shaker.

As a result, when space comes onto the market – such as a five-storey, 53,000-square-foot property built in 2006 at 100 Murray – it tends to fill quickly, says Mr. Bennett.

"Almost every shape and size of space is leased," he says. "Vacancies are low, and no building in the Market has had a chronic problem where they've carried vacant space for much more than five, six or seven months."

The tight supply of space means there's often wild fluctuations in the vacancy rate when a property comes onto the market. In its second-quarter office market report, DTZ Barnicke reported the ByWard vacancy rate climbed to eight per cent, up from three per cent, as a result of 10 Rideau St. – located at the corner of Colonel By Drive – coming onto the market.

Mr. Bennett says leasing rates in the Market are comparable to those in Ottawa's central business district, with class-A space ranging between $28 and $31 per square foot and class-B going for $19 to $22.

The office space inventory should see a modest increase when construction on an additional 20,000 square feet atop a renovated parking garage at 41 George St. begins late this year or in early 2009. The mixed-use project will also include about 6,000 square feet of residential property, says Arthur Loeb, president of Ambassador Realty, which owns the building.

"It's not a large project, but it is a significant property in the ByWard Market," says Mr. Loeb.

Colliers' Mr. Bennett calls the plans for the project "spectacular," but says that at only 20,000 square feet of office space, "there is just not enough of a good thing."

Although sensitive to the need to preserve the character of the ByWard Market, Mr. Bennett says the city should be more flexible with its zoning in order to permit construction of office space with larger floor plates and more density.

"The city has been inhibiting the development of office space through its zoning more than any other factor," he says.

"When space does become available, it is very, very popular because there is so little of it."

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BY THE WAY...

Notable commercial properties in the market core:

The Major Building

126 York St.

Built: 1908

Storeys: 5

Total square footage: 85,000

Time Square

47 Clarence St.

Storeys: 4

Total square footage: 79,000

Union du Canada Assurance-Vie

325 Dalhousie St.

Storeys: 10

Total square footage: 72,000

The Carriageway

55 Murray St.

Storeys: 4 and 6

Total square footage: 49,680

Source: BOMA Ottawa 2007-2008 Commercial Space Directory