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66 Slater St. (Etienne Ranger, OBJ)

More than 500 real estate brokers and investors gathered last week to discuss the Ottawa market. Here's a look at what they said.

Cash, please

Less than a week after acquiring a 250,000-square-foot office tower at 66 Slater St., Primecorp Commercial Realty has already been approached by investors interested in the property, according to company principal Aik Aliferis.

"It's not even on the market and we've had multiple calls from investors across the country. The message was that they had cash available," said Mr. Aliferis, using the anecdote to argue that leveraged buyers still trying to make deals in the current credit environment are not going to be competitive with cash buyers.

Fellow panellist Nathan Smith, a senior vice-president in the capital markets group at Cushman & Wakefield LePage Inc., also said vendors would favour buyers who don't need to debt finance the acquisition. Mr. Smith added institutional investors have "patient capital" that doesn't need to be immediately invested and suggested potential buyers would step back to look for quality properties in fundamentally strong markets.

Earlier in the panel discussion on Ottawa investment activity, Mr. Aliferis said there are long-term investors who are keeping a large amount of capital "sitting on the sidelines." He added that while Primecorp is confident in the Ottawa market and is pleased its assets are receiving attention, when it comes to pricing, vendor expectations are still higher than what the market will bear.

'B'umped up?

Rental rates for class-B office space in the central business district will likely increase as landlords retrofit older space vacated by the federal government, which is expected to move into new class-A downtown buildings currently under construction, predicted two real estate observers.

Maureen Flanigan, vice-president of asset management at GWL Realty Advisors, and Stan Humphreys, leasing director at GE Real Estate equity, both floated the idea during a panel discussion on the trends and outlook of the downtown office market.

But Bernie Myers, Morguard Investments' director of asset management for Eastern Canada, predicted rates will stay flat in the short term even as buildings are renovated to meet accommodations standards. He called this "defensive capital" that must be spent to keep buildings in play as new product comes onto the market.

The national view

A senior Morguard Investments official said he expects Ottawa office portfolios to once again outperform the national average as falling resource and commodity prices slow growth in Western Canadian markets.

Mark Holden, Morguard's vice-president of office/industrial asset management, said strong office markets in Vancouver, Calgary and Edmonton in recent years led to Ottawa falling below the national Investment Property Database Canadian Index. But it's his long-term view that Ottawa's central business district will outperform other major markets as it has for each of the past five-, 10- and 15-year rankings.

Mr. Holden's sentiments were echoed by Don Harrison, GWL Realty Advisors Inc. senior vice-president of asset management, who noted his firm's Ottawa portfolio, 70 per cent of which is leased to the federal government, has outperformed its Toronto portfolio in nine of the last 10 years.

Another panelist, Bentall LP chief investment officer Paul Zemla, reminded those in attendance that only a few years ago, investors were complaining the returns generated in Ottawa were "boring" compared to the boom taking place out west.

"Now, boring is just fine," he joked.

Both Mr. Zemla and Phil Gillin, Sun Life Financial's senior managing director of Canadian real estate, said their respective firms would like to be net buyers in the Ottawa marketplace in the short term but are having challenges finding appropriately priced properties.

Mr. Zemla added Bentall is likely to start building on its development sites in the south and east ends of the city.

"There should be more investments going on here. The market suffers from not having quality product to sell," he said.

"We like Ottawa, we just would like more of it."

Civic engagement

The chair of the city's planning committee argued Ottawa lacks a single, unifying vision for its future and suggested municipal politicians should be more willing to take risks and work with private-sector partners to make the city a creative national capital.

Alta Vista Coun. Peter Hume, rumoured to be considering running for mayor in 2010, said the city lacked leadership when it comes to urban design.

"As a government town, creativity has taken a back seat to process ... You need to take political risks and Ottawa politicians don't take risks," said Coun. Hume, adding he believes urban creativity should be driving the city.

He displayed a photo taken from Major's Hill Park looking down the facing rows of parked cars in the centre of York Street in the ByWard Market, as an example – he then showed an artist's rendition of the same street, only as a pedestrian plaza without a car in sight. Continuing the hypothetical anecdote, Coun. Hume challenged the audience to also think big for the better of the city.

"Which one of you wants to partner with the city to build an underground parking lot (in the ByWard Market)? It will take partnerships ... We need to take risks and challenge the norms."

Charlesfort Developments president Doug Casey also took a critical position in the discussion on the factors shaping Ottawa's future and heaped scorn on the National Capital Commission (NCC) in general for its "lacklustre" development projects, and, in particular, its handling of the first phase of the LeBreton Flats redevelopment project, which has been publicly lambasted as uninspiring.

"You can't dictate design ... and by doing so you ended up with only one proponent," he said, drawing applause from the audience.

Seated beside him, NCC chief executive Marie Lemay conceded some mistakes were made and said the NCC must do a better job engaging the private sector, as well as members of the public, in future redevelopment phases.

But she also noted that criticism so far has been largely directed at a single residential tower in a larger planned complex.