Federal office buildings continue to crumble By Peter Kovessy

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					Ottawa Business Journal - News                                                               Page 1 of 3




Federal office buildings continue to crumble
By Peter Kovessy, Ottawa Business Journal Staff
Mon, Jan 26, 2009 12:00 AM EST

Lorne Building latest departure driving demand for swing space

Several hundred bureaucrats will be on the move by the summer
as the federal government vacates an obsolete 195,000-square-
foot Crown-owned office building on Elgin Street, only steps
away from East Block.

Formerly home to the National Gallery of Canada, the 48-year-
old Lorne Building at 90 Elgin St. is one of several outdated
Ottawa office buildings that the federal government is preparing
to depart or demolish, leaving real estate watchers wondering       The Lorne Building at 90 Elgin St.
where Public Works wants to place the growing number of                  (Peter Kovessy, OBJ)
displaced public servants.

"These relocations and refurbishments will play a major part of Ottawa's commercial real estate activity
for the next several years," says Bruce Wolfgram, a vice-president at brokerage firm DTZ Barnicke.

Roughly four out of every 10 square feet of class-A office space occupied by the federal government in
Ottawa is more than three decades old, according to office market data provider Altus InSite. As
federally occupied buildings continue to age, they become progressively more expensive to maintain
and, as in the case of the eight-storey 90 Elgin St., no longer meet government requirements.

"The building systems within the Lorne Building have reached the end of their useful life, and it has
become progressively more difficult to maintain accommodation standards for public servants in this
building," says Public Works spokesperson Nathalie Betote Akwa, adding the future of the building
itself is still being decided.

Several blocks over, Public Works says further systems upgrades are needed in the 900,000-square-foot
L'Esplanade Laurier building on top of the previously completed work done to replace the potable water
distribution system, renovate the washrooms and upgrade the fire alarm and voice communications
system.

The federal government currently leases the 22-storey building that houses several departments,
including Finance and the Treasury Board, and is rumoured to be looking to relocate those workers
when the lease expires in 2010, even though Public Works has exercised its option to purchase the
facility from Montreal developer Rosdev Group.

Outside the downtown core, the aging buildings in the Tunney's Pasture complex are known to need
extensive renovations while the historic 431,245-square-foot Sir John Carling Building will be
demolished next year.




http://www.ottawabusinessjournal.com/324406009636434.php                                       1/26/2009
Ottawa Business Journal - News                                                                 Page 2 of 3



The "functional performance" of Agriculture Canada's 42-year-old headquarters, located in the Central
Experimental Farm, has been rated as "poor" for the past decade as the building systems reached the end
of their life cycles and the pre-cast cladding of the building envelope deteriorated.

Some of the 1,240 employees who work at the Sir John Carling Building have already been relocated to
Nortel's former Skyline Campus at Merivale and Baseline roads, a process scheduled to be completed by
the fall.

Back in the central business district, the public servants currently working in the Lorne Building will be
relocated this spring and summer to existing government inventory and newly leased space, says Ms.
Betote Akwa.

At least 165 DND employees are moving from the Lorne Building to 110 O'Connor St., where the
federal government quickly signed three leases totalling 112,500 square feet of office space, soon to be
vacated by Bell Canada.

As expected, the federal government has started snapping up space in the only downtown office tower
under construction, Minto's 180 Kent St. Earlier this month, Public Works accepted an offer to occupy
47,700 square feet in the 19-storey tower, beginning in December.

However, the soon-to-be leased space pales in comparison to the federal government's request for
information published last month on the availability of more than 3.8 million square feet of office space,
starting in 2011.

The extremely tight downtown vacancy rate, currently hovering around two per cent, and the lack of
large contiguous tracts of space in the core is likely to force Public Works to look outside into
submarkets such as Kanata, where the government recently signed an agreement to lease 66,000 square
feet at the former Mitel Networks building at 340 Legget Dr.

If Public Works is willing to pre-lease significant amounts of space, it could also kick off multiple new
builds in the core. In Gatineau, Public Works is commissioning two build-to-lease offices totaling
roughly 807,000 square feet while several privately held downtown Ottawa lots are ready for
development.

The government could even choose to tear down the Lorne Building and construct a new tower on the
site and adjacent surface parking lot owned by Public Works, suggests Darren Fleming, a senior adviser
and broker at GVA Devencore.

"That would be a great site for them to knock that building down and build a 20-storey tower, another
Place Bell," he says.

"I don't think there is anything worth saving, except maybe the steel and the concrete."

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AGING INVENTORY

      The federal government owns and occupies 3.4 million square feet of office space in downtown
      Ottawa and occupies an additional 9.2 million square of class-A, B and C space, according to a
      presentation given last fall by Altus InSite president Sandy McNair.




http://www.ottawabusinessjournal.com/324406009636434.php                                        1/26/2009
Ottawa Business Journal - News                                                           Page 3 of 3



     More than two-thirds of the roughly 9 million square feet of government-occupied class-A space
     is more than 20 years old. Approximately 40 per cent of that space is more than 30 years old.




http://www.ottawabusinessjournal.com/324406009636434.php                                   1/26/2009

				
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