Regional Group has acquired the three-building, 224,151-square-foot Qualicum Centre office campus in suburban Ottawa from Manulife Investment Management.

The three BOMA BEST-certified, class-A, octagonally shaped buildings — three storeys at 2932, five storeys at 2934 and four storeys at 2936 Baseline Rd. in the former city of Nepean — were built in 1988 and 1989. Manulife spent more than $5 million on modernizing and upgrading the properties over the past few years so they require no major capital expenditures.

“It’s not every day that you have a best-in-class office campus come to the market,” Regional Group president and chief executive officer Sender Gordon told RENX. “We were very intrigued by the offering and it’s well-located suburban real estate.”

“This fits a strategy with a suburban office portfolio that we're very comfortable with,” said Regional Group senior director of acquisitions Sachin Anand, who joined the company in February, in the same interview.

“In terms of size and scale, it really added to our platform in terms of property management and assets under management.”

Financial details of the acquisition weren't released.

Qualicum Centre attracted lots of interest

Gordon said there was interest from local, national, private and institutional investors in Qualicum Centre, which went through a multi-round bidding process before being sold.

Qualicum Centre features indoor and outdoor communal amenity spaces and a four-level parking garage.

It’s located minutes away from both Hwy. 417 and Hwy. 416, the main east-west and north-south highways in the region. It also offers easy access to public transit.

Queensway Carleton Hospital, Bayshore Shopping Centre and other service providers, retailers and restaurants are nearby.

About one-third of the eight-acre property is comprised of commercially zoned land that’s now occupied by a surface parking lot, but could be developed in the future.

“We're not really sure about the timeline as to when, but there's excess development land that can be used for future development potential, whether it's commercial office or residential,” said Anand.

“We generally like to have an option to increase value creation on a site or on an acquisition that we do.

"So that fits into our strategy of having something down the line as well to unlock value.”

Strong leasing in place at Qualicum Centre

Qualicum Centre tenants have a remaining weighted average lease term of more than six years. Major occupiers include a Rogers data centre, engineering firm Morrison Hershfield and animation company Mercury Filmworks.

“It's not like there's a lot of uncertainty as to what's going to happen with the tenants in there,” said Anand. “More or less, these tenants came in during COVID and knew what they wanted, so that gave us a lot of comfort.”

The property, which will be leased and managed by Ottawa-headquartered Regional Group, was fully leased when the acquisition closed. It will have one availability of 16,451 square feet as of February.

“We've already received multiple phone calls about the space and we’ve only owned the building for two days,” said Gordon. “It's been very, very intriguing watching how the market is responding to it.”

Regional Group’s Ottawa area office space portfolio also includes properties at 1770 Woodward Dr., 282 Dupuis St., 495 Richmond Rd., 214 Montreal Rd. and 17 York St., among others.

“We've been very fortunate,” said Gordon. “We’re heavily based in the suburban areas or outside the downtown core and we've never been as occupied as we are now.” 

Regional Group is in growth mode

Regional Group owns and develops commercial office, industrial, retail and multiresidential properties and offers investment, land development, property management, asset management, commercial leasing, and tax and valuation services through its platform.

It also has a home-building affiliate called eQ Homes. 

While some real estate investors and developers may be in pause mode because of today’s uncertain economic climate, Regional Group is in growth mode. The firm is seeking building and land acquisition opportunities as well as potential conversion projects.

Gordon said Regional Group has supportive investors and strong lending relationships, which have lasted through good and bad times over the company’s 64-year history, that will enable it to fund new acquisitions and developments.

“We will look at asset classes that are less glamorous, or out of favour with others, and try to figure out how to unlock the value,” said Anand. “We’ll roll up our sleeves and really take on that risk.” 

The Ottawa office market

Ottawa’s office vacancy rate has been increasing, according to a recent CBRE report.

Canada's capital had an 11.5 per cent downtown vacancy rate and an 8.8 per cent suburban vacancy rate in the third quarter, with respective class-A rates at eight and 9.2 per cent.

There was no new office space delivered in the third quarter and only 34,384 square feet was under construction.

The local office market has still been fairly active transaction-wise, however, particularly earlier in the year.

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.

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.

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 building, which had been vacant since its former tenant, the Department of National Defence, departed in 2020 for a campus in the city’s west end.

True North Commercial REIT acquired an 11-storey, 174,000-square-foot office building at 400 Cumberland St. for $40.5 million in August.