Ottawa Construction News staff writer
Traditionally, when developers, investors and contractors viewed the Ottawa area’s industrial real estate market, they considered it a minor factor in the big picture nationally.
Not any more. The Real Estate News Exchange (RENX), reporting on the recent virtual Ottawa Real Estate Forum, reports that “a dramatic change in thinking about commerce and supply chains has thrust the city of just over a million people onto the radars of companies which – quite justifiably considering conditions at the time – would barely have given it a passing glance five or 10 years ago.”
RENX says Ottawa is becoming a significant distribution hub for Amazon, but that isn’t the only force. There is increasing activity from major developers and owners including Broccolini, PROREIT, Manulife Investment Management, newcomer Avenue31 and others.
“While Ottawa certainly isn’t as large as some of the other markets, we are in lockstep with every other market in Canada,” Warren Wilkinson, the managing director of Colliers’ Ottawa office, said at the forum, while introducing an industrial pane1.
Significantly more than three million square feet of new space are currently under development (though most of this is for one project – a new 2.88 million sq. ft. Amazon warehouse). As well, several other major projects are in the planning stages.
As an example, Ford recently announced a long-term lease for a 531,000-sq. ft. distribution centre being built by Montreal’s RoseFellow and Bertone Development Corp. to service Eastern Canada, RENX reports.
This is a change from Ottawa’s traditional market for small and medium-bay structures serving local clients. About 77 per cent of the city’s industrial space is smaller than 50,000 sq. ft.
“Quite frankly for groups looking to occupy or purchase space in Ottawa, larger than 50,000 sq. ft., the opportunity is limited,” Wilkinson said.
The the trend towards e-commerce has combined with the COVID-19 pandemic realization of the vulnerability of international supply chains.
“Why is there so much development going on?” Wilkinson asked at the forum. He then answered his own question.
“The one real reason is, I think during the pandemic what we’ve all noticed is what real demand looks like. We also had some champions in the industry step forward and start building new industrial supply.”
Glen D’Silva, managing director, portfolio manager for Manulife Investment Management said businesses are now facing serious product and raw materials delays and “everybody is going to want those components closer to home.”
“We appeared not to learn from SARS and didn’t have supplies on hand when COVID hit, and I don’t think any government is going to let this happen again. People will remember this very clearly.”
These factors combine with a special advantage for Ottawa over other markets.
“Ottawa has the greatest access to people within one working day,” Ryan Semple, director of business development for Avenue31, told the forum.
RENX reports that the Ottawa-based firm has amassed several development sites in the area and is constructing Phase 1 of a new industrial park on land leased from the federal National Capital Commission along Highway 417 in the East End. Overall, Avenue 31 plans to build almost two million square feet of industrial space during the next few years.
“Semple cited a 2020 CBRE Ottawa Industrial Update report which examined how many people live within one day’s driving access from major Canadian cities (roughly 400 km. in one direction). Ottawa is within one day of about 15 million people – a larger reach than either Montreal or Toronto,” RENX reported.
“So businesses that want to provide products to their consumers within one day are now looking at Ottawa as a place to relocate or consolidate,” he said.
Broccolini’s work with Amazon provides proof of this trend’s importance. It is currently developing a massive five-level Amazon facility in South-End Barrhaven, and it is planning for a 700,000 sq. ft. distribution centre just outside the urban boundary.
James Beach, the contractor/developer’s vice-president of real estate, says there are significant development challenges in the city, both inside and outside the Capital Greenbelt.
“Challenges within the Greenbelt (are) land availability, there is not a lot of it available,” Beach said. “If land is available, use of the entitlement process to render it appropriate for these new-style, e-commerce developments can be onerous and sometimes a very long process.
“Outside the urban boundary? Lots of land, but we kind of come back to the same point, zoning. Does the zoning exist? And even if it does, does the infrastructure exist to support the zoning?”
Semple cited the letters ASWL: “It all starts with land.
“It all starts with shovel-ready land, It all starts with zoned land. . . . That’s going to be the biggest challenge, shovel-ready zoned land.”
Beach said land is available in the Ottawa area, but much of it is controlled by government, or NGO-type agencies, and it isn’t easy to develop the sites.
As an example, he pointed out property owned by the Ottawa airport authority.
“They have several hundred acres of industrial airside land available and relatively ready to go, however we go back to the discussion about entitlement, you go back to the discussion about servicing, transportation.
“Those lands need a little bit more work and really it will take a catalyst tenant and a large-scale development to warrant a first phase and for those infrastructure dollars to be implemented.”