May 23, 2006

Ottawa Profile

A rebound from 2001 tech wreck

Ottawa West is enjoying a resurgence in activity

KORKY KOROLUK

correspondent

OTTAWA

Less than three years after completion of a major expansion, the Ottawa airport is about to grow again.

Earlier this month, the airport authority announced a $100-million project that will add 12 new gates and about 70,000 square feet of passenger and retail space for completion during 2008.

The present facility includes 18 gates and about 650,000 square feet of space.

The expansion comes at a time when the city’s western suburb of Kanata has pretty well recovered from what some call the great tech wreck of 2001, when the high-tech industry collapsed amid unrealistic expectations that the boom would last forever.

Companies failed, merged or moved away. Many of the smaller ones simply disappeared.

But all left vacant office space behind them. Suddenly, in a market where even a bowling alley was converted to office space in a desperate attempt to meet demand, that demand virtually disappeared, sending the vacancy rate ballooning to 30 per cent.

The recovery, then, has been less about building new space and more about retrofitting existing space for the clients who came trickling back.

Now that trickle has become a steady stream, and the latest survey, done by the Ottawa office of Colliers International, shows a vacancy rate for Class A space in Kanata sitting at 8.5 per cent after the first quarter of this year, down dramatically from the 20.9 per cent in the last quarter of last year. The Class A inventory for the area is about 3.8 million square feet.

And there are enough deals in the offing that Colliers’ managing director, David Chorney, believes the area is only a couple of deals away from a much lower vacancy figure. There is even a rumour of one enterprise looking for a space that would bring with it 1,500 jobs to be filled.

“Kanata is bounding back,” Chorney said in an interview. “The west-end market is certainly tightening up.”

Just seven or eight years ago, Kanata’s high-tech firms were generating enough passenger traffic that businesses asked for, and got, a non-stop air link between Ottawa and San Francisco to join the areas known as Silicon Valley and Silicon Valley North. The bursting tech bubble grounded that and other services, but demand is growing again. Now the airport and city economic development staffs are lobbying to get the San Francisco service restored, and a new service instituted to an unnamed European hub.

Venture capitalists are again interested in Ottawa in general and Kanata in particular.

Precise figures are hard to find, but about $360 million in venture capital came to Ottawa last year. That represents nearly 40 per cent of the year’s venture capital funding for all of Canada.

If the high-tech industry is a powerful economic driver in the local economy, another is the federal government, still the area’s largest employer. While no one is yet sure about what a new federal government will mean for the size of the public service, some analysts suggested a few weeks ago that the government needed at least three more buildings.

Since then, a deal has been struck to move the RCMP headquarters into a 900,000-square-foot office complex that once was the home of JDS Uniphase, an optical fibre manufacturer that was one of the victims of the high-tech crash.

JDS spent $200 million to erect the complex at the height of the tech boom, but it has sat largely vacant since the crash. It is now owned by Minto Developments, a local firm that paid $28 million for it when JDS came under intense pressure to sell it. It is in Nepean, another of Ottawa’s western suburbs.

While not all details have yet been released, Public Works officials have confirmed that the deal will cost about $600 million over 25 years. That includes everything from rent, to fit-ups, upgrades, moving costs and management fees, as well as renovation of old RCMP buildings for other uses.

While it was a large deal, Chorney said the property hadn’t been “all that competitive a space,” simply because the owner “wasn’t about to do a 20,000-foot deal in a building that size.”

Elsewhere in the west, the area around Scotiabank Place, the home of hockey’s Ottawa Senators, is due to get a large development that is to include more than 6,200 homes, plus businesses, schools, parks and other recreation facilities.

The idea is for several developers and the city co-operate to create what amounts to a self-sufficient town within the city.

Although the city has already signed off on the principle of the proposal, there are steps that must still be taken before the first shovel goes into the ground. Next, it must be approved by the provincial environment ministry, then detailed development plans must be approved by the city.

Present plans call for restoration of part of the Carp River, a rather nondescript little stream that runs through the property. It floods occasionally, so some flood-control measures have to be built into the development. And since the development would sit on a flood plain, some area residents oppose the plan on environmental grounds.

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