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Will Federal Public Service Cuts Doom Ottawa’s Office Market?

July 11, 2025 4 Minute Read

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Will Federal Public Service Cuts Doom Ottawa’s Office Market?

Canada’s federal public service has shrunk for the first time in a decade, with nearly 10,000 jobs cut in the past year. Seeing as government accounts for more than half of Ottawa’s office footprint, observers may see this as cause for concern about the local office market.

But while the job cuts sound dramatic, CBRE Ottawa Senior Vice President Dominic Dostie, who specializes in office leasing, says they are unlikely to have a major impact on the federal government’s local office usage.

“There are over 150,000 people working for the government in the National Capital Region,” he says. “In that context 10,000 fewer people across different departments is not overly significant. It’s not a doom and gloom situation for most landlords.”

In fact, there are still more federal public service workers than in 2019, according to Dostie. And while he believes the new Liberal government will look for efficiencies to improve productivity, he doesn’t anticipate significant reductions in the public service workforce moving forward.

But he does expect the government to rethink its current office portfolio. “Over the last five years the government hired over 28,000 people in the National Capital Region (NCR) while reducing its office footprint by approximately 3 million sq. ft.,” Dostie says. “Pressure points have been mounting because there’s not enough suitable office space for everyone.”

The return to office is here to stay. I expect to see significant uptick in federal government office leasing activity in the next few years. - Dominic Dostie

Not Meeting the Standard

A lot of government office space is starting to look a lot like 24 Sussex Drive. Nearly 9 million sq. ft. of Crown-owned buildings in the NCR are currently in poor or critical condition, according to the Directory of Real Federal Property. In the next 10 years, more than 50% of the Government of Canada’s total floor area is expected to deteriorate to poor or critical condition.

“Employees are working in outdated spaces that need major investments,” says Dostie. “Some of these buildings are on the disposition list.”

The vast majority of current office accommodations don’t meet the government’s GCworkplace standards, guidelines that include improved technology to support hybrid work, more spaces for collaboration and meetings, and unassigned seating. Proximity to transit is also a key consideration, with new offices needing to be within 600 metres of a light rail station or transit hub.

“The government doesn’t have the resources needed to advance its portfolio optimization strategy, which largely entails transitioning from its dated accommodations to the modern standard,” says Dostie. “It needs to partner with well-capitalized ownership groups aligned with its requirements.”

Green is Good, but Complicated

The federal government must also meet ambitious sustainability standards. Starting in 2030, 75% of domestic new leases and lease renewals will have to be in net-zero carbon, climate resilient buildings. The goal is to achieve net zero carbon emissions by 2050 across all sectors. To do that, all new federal government leases and renewals will need to be in buildings meeting the Zero Carbon Building certification.  

However, the government is lagging on these goals due to lengthy internal approval processes and a lack of funding. No significant new office lease acquisition has been completed in the NCR since 2019.

“The government will need to commit to long term leases in existing buildings in the National Capital Region,” says Dostie.  “It will need to partner with ownership groups aligned with its greening strategy to start weaning off carbon.”

Dostie is having ongoing discussions about the possibility of moving some departments into certified Zero Carbon Buildings and LEED-certified buildings such as Constitution Square and 250 Albert St. “We need to change the conversation in Ottawa,” he says. “The federal public service cuts aren’t the threat they’ve been made out to be for our office market.

“The return to office is here to stay so I expect to see a significant uptick in federal government office leasing activity within the next few years.”

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