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Morguard JV acquires 'highly coveted' Ottawa office tower

215 Slater Street, the Telus building, in Ottawa. (Courtesy Morguard)
215 Slater Street, the Telus building, in Ottawa. (Courtesy Morguard)

Morguard Corp., one of Ottawa's largest office owners and operators, has increased its holdings by acquiring a 50 per cent stake in the nine-storey Telus building at 215 Slater St.

The class-A downtown property contains 109,208 square feet of space and was purpose-built in 2007 to accommodate the Ottawa headquarters of the telecommunications firm.

In addition to the 50 per cent stake in the property, Morguard will also become the asset and property manager. It takes over from Montreal-based Canderel, which is also a major holder and manager of Ottawa commercial real estate.

The acquisition is being made as part of a joint venture with TD Asset Management.

Downtown Ottawa remains a stable market

"Downtown Ottawa is one of Canada's most stable office markets thanks to the large presence of the federal government, combined with a sizeable yet growing technology sector and limited future supply of new office construction," Michael Swan, assistant vice-president, property management and leasing office and industrial for Morguard in Ottawa, said in the announcement. 

"This is a highly coveted property with an exceptional tenant in a premium location. 215 Slater will provide additional stability and upside to our already expansive Ottawa portfolio." 

A published report indicates Morguard paid $28.1 million for its share of the property.

In the announcement, Morguard says there is a lot to like about 215 Slater, including “attractive design, high quality construction materials and finishes, and modern efficiencies with LEED-Gold certification.” 

The building also offers ground-floor retail space.

Morguard also has extensive knowledge of 215 Slater because it acted as a previous property manager for the building several years ago.

The location is three blocks from Parliament Hill and one block from the Parliament station on Ottawa’s LRT system. Located in the central business district, it also offers easy access to food and entertainment options and other amenities. 

Like virtually all the major Canadian urban centres, Ottawa's office market struggled in Q4 2022. Statistics released this week by CBRE show a rise in office vacancy to 11.1 per cent, with a downtown rate of 12.2 per cent. Class-A vacancy was at 10 per cent citywide and 8.9 per cent downtown.

Morguard sees stable Ottawa economny, office market

On the flipside, Morguard sees Ottawa's economy growing by 2.6 per cent in 2023, the company says in its 2023 Canadian Economic Outlook and Market Fundamentals Report, also released this week. It also noted the increase in office market investment in the Greater Ottawa Area (GOA).

"The flow of investment capital into the GOA office property sector increased significantly recently," the report reads. "A total of $475.4 million of office property investment sales volume was reported for the first half of 2022, up 283.9% year-over-year. Sales volume had already increased by 104.7% year-over-year in 2021. Investors exhibited a willingness to invest in a market with relatively healthy fundamentals, a track record of resilience, and a positive outlook." 

Despite the ongoing work-from-home trend, and the federal government's intention to speed up its consolidation of office space, Morguard predicts a continuing stable market.

"Economic expansion will support equally modest job growth, which will support expansion activity. Vacancy will trend slightly lower," the repot states.

"To some extent, however, expansion activity will be offset by the shedding of excess space by companies looking to reduce their office footprints. As a result, rents will continue to stabilize. As sector fundamentals gradually strengthen, investors will continue to look for opportunities to invest in this market."

Morguard's second recent acquisition

215 Slater is the second acquisition of a high-calibre Ottawa asset by Morguard in recent months, upgrading its holdings and increasing its scale in the market. 

The Mississauga-based firm acquired a new five-storey, 170,000-square-foot building at 3199 Palladium Dr. in the west-end neighbourhood of Kanata last summer. That building is fully leased by Ottawa-based logistics company Kinaxis, having been occupied in Q1 2022 after being design-built by Taggart Group.

Morguard paid $64.5 million for that property.

Morguard's total office portfolio includes 12 million square feet and is valued at $3.3 billion as of Sept. 30, 2022. 

In the Ottawa region, Morguard's office portfolio now totals 3.5 million square feet with a value of $1.2 billion. 

Recent Ottawa office transactions

It is far from the only commercial real estate firm to show confidence in the Ottawa market during the past year or so. There has been a steady stream of transactions, including:

  • Regional Group acquired the three-building, 224,151-square-foot Qualicum Centre office campus in suburban Ottawa from Manulife Investment Management in November;
  • True North Commercial REIT acquired 400 Cumberland St., an 11-storey, fully occupied 174,000-square-foot office building, in August for $40.5 million;
  • Vancouver-based Lanyard Group acquired the low-rise, 46,500-square-foot office building at 2625 Queensview Dr. for $9.35 million;
  • Groupe Mach acquired 110 O’Connor St., a 202,000-square-foot tower in the heart of the city’s business district, as part of a portfolio from the former Cominar REIT in March. It paid $40 million for the vacant property;
  • Crown Realty Partners acquired four class-A office buildings comprising 415,000 square feet of space, as well as up to 500,000 square feet of future development potential, in Ottawa’s east end in February;
  • BTB Real Estate Investment Trust invested $38.1 million to buy two class-A office buildings, comprising more than 116,000 square feet, adjacent to Lansdowne Park and TD Place Stadium from Minto Group in January.

EDITOR'S NOTE: This article was updated after publishing to include information from the Morguard economic report.

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