How uncertain conditions in the federal workforce is casting a dark shadow over Ottawa

Not long ago, Midori Gifts opened on Bank Street. The owners were willing to give downtown Ottawa a try. Unfortunately, about three years later, they now have their eye on the Glebe because they say there is not enough business in the area, nor foot traffic.

“This is not the best location,” says manager Sancia Best. “It’s just dead.”

That sentiment is likely common among neighbouring businesses, and more could follow as cuts to the federal public service loom, resulting in fewer workers and less spending power flowing through the downtown core. 

This summer, Minister of Finance and National Revenue François-Philippe Champagne and President of the Treasury Board of Canada Shafqat Ali issued letters to Prime Minister Mark Carney’s cabinet, asking them to find 7.5 per cent savings for the 2026-27 fiscal year that begins on April 1, 2026, followed by 10 per cent in 2027-28 and 15 per cent in 2028-29.

This reality, though not unprecedented, will impact ongoing efforts to revitalize the downtown core, and stakeholders are calling on the government for a clear and consistent plan for the federal workforce. 

Hugh Gorman, CEO of Colonnade BridgePort, says layoffs will affect the real estate market, although they will be more of a ripple than a storm. “There is need for concern, but I don't think it's going to be a long-term, sustained negative impact on the core.” 

Large-scale layoffs have happened three times prior in Gorman’s career, he says, the first time with Prime Minister Jean Chretien’s administration, the second with PM Paul Martin’s, and the third with PM Stephen Harper’s. 

The difference this time, however, is the uncertainty created as the federal government re-evaluates its real estate needs, as buildings have become dysfunctional or surplus. 

“The perception of what's happening is far more detrimental in the short term than what's actually really going on,” Gorman says, explaining that property owners are facing liquidity challenges as valuations are down, resulting from fewer transactions and a lack of buyers. Capital is locked in, so unless it’s necessary, no one is selling right now, Gorman explained. “It’s never a good feeling when your money's tied up in a building that you can't get out of right now if you want to,” he says.

Uncertainty amongst investors who would otherwise pour resources into amenities and residential development is harmful to the city’s efforts to revitalize the downtown core. 

While not exclusive to Ottawa, as cities across the world grapple with the continued fallout from the pandemic and the convoy, hybrid work, financial uncertainty and mental health challenges like addiction, the capital’s core is particularly susceptible with almost 154,000 people working for the federal government. Layoffs could reach 57,000 between 2024 and 2028, according to one report. 

This is why Gorman and other stakeholders are calling on the federal government to provide a transparent workforce plan. 

“We need a very comprehensive, well-communicated workforce strategy so that we could start to look at how we can diversify and make our downtown core more resilient now with the potential of cuts impacting further right people in downtown,” says Ottawa Board of Trade president and CEO Sueling Ching.

 “The bottom line is that it's not an economically resilient model to be so reliant on one sector and so the best path forward is for us to diversify.” Furthermore, Ching is calling on the federal government to articulate its plan for its real estate portfolio “with a new level of urgency and accelerate the disposal of those assets so that they can be redeployed as mixed-use.” 

The Board of Trade’s Downtown Ottawa Action Agenda aims for 40,000 new residents in the area and the creation of 50,000 jobs by 2034. The plan also proposes creating a “joint $500-million fund to kick-start a series of catalytic projects, including significant enhancements to the public realms of Sparks Street and ByWard Market, and the establishment of a new Business Incubation District and an Arts/Culture Corridor.”

The federal footprint in the National Capital Region is about 41 million square feet of office space. Public Services and Procurement Canada has detailed a plan to reduce its real estate portfolio by 50% over 10 years, including a list of Ottawa buildings like L’Esplanade Laurier, the Jackson Building on Bank Street and 1500 Bronson Building and Annex. 

Alain Miguelez, vice-president, capital planning for the National Capital Commission, concurs that it is hard to plan for the future when the fate of the workforce is in question. Nevertheless, Miguelez says the NCC takes a long-term view and is reserving opportunities for federal use of lands, including office or residential space, or even museums or commemorative sites. One of the NCC’s biggest projects right now is playing a role in the addition of a minimum of 6,000 residential units on LeBreton Flats, as well as the sale of 11 acres of land on the same site to be developed as the new home of the Ottawa Senators. 

In the bigger picture, the NCC’s core area plan calls for a downtown core with a larger population and districts that flow more easily into one another.

“We want to create new places. So that are is more destinations to bring people to the core, and we want to turn towards the water so that there are better opportunities for people to get close to the water and more animation and more points of interest or things to do along the water,” Miguelez says. 

Making the core somewhere people want to live and work has always been a challenge, but some developers are eyeing conversions from office to residential space as an opportunity. For example, Groupe MACH is demolishing a building at the corner of Metcalfe and Albert Streets and replacing it with 234 rental apartments. 

But the federal process to dispose of surplus properties is so protracted that it can be prohibitive to developers. “It needs to be dramatically tightened up,” says Gorman. There are opportunities to convert, he says, and the quicker the feds can identify where they won't be renewing leases or alternatively buildings that will be surplus in addition to what's already been announced, that's taking functionally obsolete office space off the market and creating an opportunity for residential development. 

Ultimately, with more residents living downtown, the area can continue its efforts to transition from a government-dependent downtown core to one that’s more diverse, and one that supports small businesses such as Midori Gifts. 

But, reiterates Gorman, that transition needs capital investment, which requires an atmosphere of certainty. “It’s the lack of clarity (from the government) that is really the bigger issue than how many people are going to work downtown five years from now and how many buildings are going to be given up.”