Brian Murray of Sakto Corp. (Darren Brown, OBJ)

The federal government's voracious appetite for office space in the height-restricted downtown core is pushing an increasing number of larger tenants to Preston Street, which is quickly becoming the city's next commercial centre, say some Ottawa real-estate watchers.

But as demand for commercial space along the Preston corridor increases, some say the city must allow developers to build denser and taller towers in exchange for setbacks and green space to help preserve the historic neighbourhood's character.

"Preston Street is a wonderful place and we could have more of this," says Colliers International vice-president Paul Bennett from a seat inside the Starbucks on the ground floor of Sakto Corp.'s Preston Square Tower III.

"All you have to do is enable it to take place ... I hope the city realizes that they've got a jewel here."

Sakto's Preston Square Towers II and III, opened in 2006 and 2007, respectively, added 346,000 square feet to the market. They followed the 2002 construction of Colonnade's 96,000-square-foot Dows Lake Court II, according to BOMA Ottawa's 2007-08 Office Space Directory.

A new 19-storey mixed-use building on Preston Street, one block north of Carling, is planned to replace an existing parking lot and will contain some office space, along with retail and condominiums.

A future rapid transit system, which tentatively includes a new O-Train station at Gladstone Avenue, is expected to spark a commercial building boom along the swath of land running along the west side of tracks up to Bayview, says the head of the Preston Street BIA.

"As soon as there is a rapid transit system, it will be all systems go," says executive director Lori Mellor.

She says the land is zoned for dense development and contains several parcels owned by the city, the National Capital Commission and the federal government, which occupies a property just off Gladstone.

Ms. Mellor says she approached the federal government to propose building a year-round farmer's market on the site, but was told an office tower development is the priority.

Any new supply would be welcome news for commercial tenants currently faced with close to two-per-cent vacancy rates for class-A space in the downtown central business district.

Along with the shortage of space, Sakto director of leasing Brian Murray says the congestion and costs of a central Ottawa location are forcing people to realize that the Preston area is an extension of the downtown core.

"End users are realizing that Preston Street is not the west end ... It isn't Nepean, it isn't even Churchill (Avenue)," he says, adding the highly visible presence of companies such as Adobe, Bell, Sunlife and Xerox has caught people's attention.

Mr. Murray says Sakto's original 11-storey Commerce Plaza, constructed in 1989, previously competed with the cluster of office buildings in the vicinity of the Carling-Queensway interchange. Now, he says he goes head-to-head with class-A downtown landlords.

"(Preston Street) is what a high-end business user would expect in a downtown business area," he says, referring to the neighbourhood's amenities that include pubs, restaurants, banks and coffee shops. And, he adds, even on a busy day drivers are seven minutes from downtown.

Another major attraction for tenants is the area's green space, such as Dows Lake and the gardens, grass and outdoor seating included in the area's recent developments.

However, Colliers' Mr. Bennett says the city needs to be more flexible with its density limits if it wants future projects to include these types of features.

He says he would like councillors to adopt the 'density incentives' proposal currently being prepared by city planning staff that would allow developers to build higher in exchange for setbacks or green space.

"I understand height can be a political issue, but in a downtown, there is a time and place for it," he says, noting that the four-storey Preston Square Tower III conceals two 11-storey towers behind it and its small-scale retail outlets, set back from the sidewalk, make the community highly walkable.

"Somebody has to realize that if you don't want 20-storey buildings in Barrhaven, you've got to allow more height elsewhere, and I think Preston Street and downtown is a good spot to start." N

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JUST THE FACTS...

Prominent Preston properties

Preston Square Tower II

343 Preston St.

Sakto Corp.

Built: 2006

Storeys: 11

Total square feet: 221,253

Commerce Plaza

333 Preston St.

Sakto Corp.

Built: 1989

Storeys: 11

Total square feet: 138,000

Preston Square Tower III

353 Preston St.

Sakto Corp.

Built: 2007

Storeys: 4

Total square feet: 124,765

Dow's Lake Court II

877 Carling Ave.

Colonnade Development Inc.

Built: 2002

Total square feet: 96,000

Carling Square II

785 Carling Ave.

Arnon Group

Built: 1976

Storeys: 10

Total square feet: 92,900

Dow's Lake Court I

875 Carling Ave.

Colonnade Development Inc.

Built: 1994

Storeys: 9

Total square feet: 91,500

City Centre Towers

250 City Centre Ave.

District Realty Corp.

Built: 1964

Storeys: 8

Total square feet: 59,413

Carling Square I

560 Rochester St.

Arnon Group

Built: 1976

Storeys: 6

Total square feet: 58,400

Source: BOMA Ottawa 2007-2008 Commercial Space Directory