Ottawa office glut prompts conversion of Lisgar Street offices to apartments
"An Ottawa company is taking advantage of the dip in the commercial real estate market to convert part of an office building off Elgin Street into new rental units.
District Realty is renovating the top five floors of its building at 169 Lisgar St., which is separate but connected to an office building at 200 Elgin St., across from city hall’s heritage building.
The former offices will be turned into bachelor, one- and two-bedroom suites in time for occupancy this May or June.
Workers have been cutting new windows into the building’s west-facing wall and will soon add drywall to the framing.
The 42 units will come equipped with air conditioning, washers and dryers and some will feature floor-to-ceiling windows.
Outdoor amenity space on the sixth floor with be shared with a condo building at the rear of the Lisgar building.
A building permit issued by the city in September lists the project’s value at $3.5 million.
Renting B-class office space has been difficult in the past couple of years, said Jason Shinder, District Realty’s executive vice-president.
The departure of two tenants, including the federal government, created some vacancy in the 30-year-old building, which has historically been fully leased.
At the same time, there is greater demand for rental housing, so redeveloping the building became an idea worth exploring, Shinder said.
“With the current demand for housing, we believe we’ll be successful in maintaining a high occupancy,” he said.
Office space is typically categorized in three classes: A, B and C.
Newer, prestigious buildings that charge rents above average for the area and feature high-quality finishes, state-of-the-art systems and exceptional accessibility are A-class.
B-class buildings would have fewer bells and whistles, are likely older and have rents in the average range for the area.
C-class buildings would offer functional space at rents below the average for the area.
The vacancy rate in the downtown core rose in the last quarter of 2014 to 10.2 per cent as a continuing result of the federal government’s move to minimize office presence in the city, said a report released this week by Colliers International.
Bob Perkins, a former president of the Building Owners and Managers Association of Ottawa, said high vacancies might push owners to choose between demolishing a building or finding a use better supported in the market. Perkins said he hasn’t seen many demolitions yet, but some might be coming, especially for properties owned by government and institutions.
The private sector, however, might look more favourably to conversions.
“We’ll see more of this,” he said of the conversions to new rental or condo units. “If there’s no demand for your office space, you can turn it into something that is sellable or rentable.”
Somerset Coun. Catherine McKenney welcomed the news, saying a lack of housing options to suit a wide range of needs was raised frequently during last fall’s municipal election campaign.
“This will fill that gap,” she said.
In addition to its commercial holdings, District manages 1,500 apartments, mostly in Centretown.
Shinder said there is no marketing plan yet or even a name for the overhauled Lisgar building. Rental rates have also not been set yet, but he said they would likely be in the upper end of existing rental products but below the cost of a new condo unit.
Graduate students and young professionals are the types of tenants the company hopes to attract, Shinder said.
Asked if this could be the start of a trend in downtown Ottawa, Shinder said that for properties that can be “feasibly converted, it could be a logical best-use of existing infrastructure.”
He said he’s seen offices converted to condos before, but not something like this.
“In Ottawa, I haven’t seen it happen before,” he said."
Source: Matthew Pearson, Ottawa Citizen. January 17, 2015.