One of the hits of last month’s Ottawa Real Estate Forum was a report on the economic contribution of the local commercial real estate sector to the city of Ottawa. Thought to be the first of its kind for any Canadian municipality, the study from Deloitte found that the sector contributed $2.6 billion to Ottawa’s economy in 2011 in terms of economic output, employment and taxes.
Sheila Botting, Deloitte’s National Real Estate Leader who presented the results at the forum, was not surprised at how much money a year’s worth of commercial real estate activity amounted to. She was, however, a little taken aback by the reaction from those in the nation’s capital.
“We are used to the kinds of numbers and impacts that we see. I think what is interesting is the surprise of those receiving the report,” Botting said. “If you think about it, $2.6 billion to the Ottawa economy seems like a big number over one year. You multiple it over 10 years, that is a huge number. The notion that other folks are surprised I think is really fascinating,” she added, noting the results sparked surprise among both government and industry professionals.
Knowledge is power, but is it leverage?
“When you talk about the balance between both industry and government, I think that is really where the opportunity is for this kind of work,” she said.
The Deloitte executive was unsure whether this sort of information might change how government deals with the commercial real estate sector, but it should get both sides thinking.
“Property taxes have been contentious forever between industry and government and certainly with the downloading of services into the various municipalities, this represents one of the few revenue vehicles they have,” Botting explained.
“On the one hand, you certainly understand the municipalities – this is how they [finance their operations]. On the side of the industry, in the ever-increasing property tax world, they would say what is the value for money? What are we getting back in order to support our business and our tenants in the marketplace?” Botting views that dialogue as crucial to creating a “healthy and productive” relationship with municipalities across the country.
Deloitte’s Ottawa report has generated a great deal of excitement among those in the city’s CRE sector, said Dean Karakasis, Executive Director of BOMA Ottawa, which provided data and local expertise to Deloitte and helped spark the creation of the study.
“We didn’t think it would show as much (economic) impact as it did specifically to the Ottawa market and we would be curious to see what it is in other markets as well,” said Karakasis. “It makes the point that this industry is a net contributor to the economic health of this region, (especially with) Ottawa being a non-manufacturing town more so than other regions. Members are asking us to get copies as soon as possible.”
The BOMA executive director also hopes that the new study will give industry and government a common frame of reference.
“It would be nice when it comes to have any kind of discussion to have benchmarks that we can all look at and say how are we doing?” said Karakasis. “They tend to (look at) how many housing starts and how many building starts. They count permits, and we have always been of the opinion that you need a little bit more depth of data when it comes to analyzing exactly what it’s going to.”
What the numbers say
Perhaps not surprisingly, Deloitte found that Ottawa’s office sector generated a dominant share of economic activity. As one of Canada’s major markets totaling approximately 37 million square feet, it accommodates and supports an estimated 300,000 office sector employees. The federal government, Ottawa’s largest employer, accounts for more than 110,000 employees in the National Capital Region and 143,000 including Ottawa-Gatineau.
The development, construction, fit-out, operations and transactions of Ottawa’s office properties in 2011 generated an estimated $1.6 billion in total economic output and full-time employment for about 9,500 people, with a total income impact of $470 million.
Ottawa’s retail sector, which is comprised of approximately 20 million square feet of retail space, accommodates and supports an estimated 100,000 employees within Ottawa’s retail-based sectors. Ottawa’s retail sales per capita is about $13,100 or 9 per cent higher than Ontario’s average of $12,000 per capita but slightly lower than Canada’s average of $13,200 per capita. Ottawa realizes such levels of retails sales per capita with less retail space (16 square feet) than the Canadian average (18 square feet).
Deloitte found that the development, construction, fit-out, operations and transactions of Ottawa’s retail properties in 2011 generated an estimated $664 million in total economic output impacts, provided total full-time employment of 4,900, and total income impacts of nearly $245 million.
From an economic contribution standpoint, Ottawa’s smallest CRE component is its industrial sector, which accounts for 22 million square feet for manufacturing, construction, transport/warehousing and utilities. The development, construction, fit-out, operations and transactions of Ottawa’s industrial properties in 2011 generated over $426 million in total economic output impacts, total full-time employment of about 2,200, and total income impacts of $112 million.
Deloitte also detailed how Ottawa’s commercial real estate industry also provides significant revenue to Ottawa, sending $19 million in development charge revenue and $592 million in property taxes from non-residential property development and operations to the city in 2011.