There's a wonderful irony wrapped around 700 Sussex Drive, a new residential-retail complex next door to the Chateau Laurier hotel in Ottawa's downtown core.

The just-completed building houses the city's most expensive condominiums on one of its busiest corners. But it also stands at the base of Rideau Street, a 1.5-kilometre-long strip of tattoo parlours, fast-food joints and tiny storefronts that has been steadily decaying over the past two decades.

With a high end of $2 million for a penthouse unit, 700 Sussex has a lot of hopes pinned on its stone facade.

Developer Claridge Homes sees it as a link between the tourist draw of Parliament Hill and the Byward Market's nightlife.

Ashley Fraser, Business Edge
The residential-retail complex at 700 Sussex Drive, offering Ottawa's first million-dollar condominiums, is brightening up the downtown of the nation's capital.

"Of course, the residential aspect appeals to the affluent who want to live closer to the city and have all downtown amenities at their doorstep," says Claridge Homes vice-president Neil Malhotra.

"But the overall planning goal was to create something that was active 14 hours a day, something that would help bring people downtown for more than their jobs."

The site has a huge, established traffic flow, since it is kitty-corner to the Rideau Centre shopping mall and only a few minutes' walk from Ottawa's business hotels, the National Arts Centre and the Rideau Canal.

It also borders Sussex Drive's trendy stores and McKenzie Avenue's U.S. Embassy and Major's Hill Park, one of Ottawa's premier festival sites.

But, after dark, that flow dries up except for the late-night exodus from the Byward Market. The local business community and the city hope 700 Sussex can help change that by being the catalyst that remakes Rideau into the citywide destination that it was in the 1960s and 1970s.

The site's original occupant was a department store. It was also the lone building downtown using Chicago-style architecture - where the structure's external frame, not its walls, carried the weight, allowing five times as many windows. Taken over in the 1960s by federal government offices, the Daly Building never got the attention it deserved despite its location.

By 1978, the bureaucrats had left and the Daly decayed until it was demolished in 1991. In 1998, a Canadian Gateway Development Corp. plan for an apartment-hotel-aquarium complex was accepted by the National Capital Commission (NCC), the site's owners.

The $75-million deal fell apart, however, ending in a lawsuit and an undisclosed settlement.

When Claridge's proposal for a 10-storey, 70-unit residence with about 34,000 sq. ft. of retail space got the go-ahead in 2001, it had to incorporate the NCC's public-space mandate. The result is that 30 per cent of 700 Sussex's footprint has been given over for public use. Steps surrounding its courtyards are on a grade, making a natural ampitheatre, although programming is still in the planning stages.

"One of Rideau's big problems is lack of public space and there is a wonderful opportunity to get this on the 700 Sussex site," says Peggy Ducharme, executive director of the Rideau Street Business Improvement Area.

Ashley Fraser, Business Edge
Claridge Homes' Neil Malhotra checks out the 700 Sussex condominium model.

The location's value to Ottawa's downtown reinvigoration is important, but for Claridge Homes the project was about selling apartments.

Prior to the development there were no multimillion-dollar condos and most downtown residences rarely rose above three storeys.

When Claridge Homes broke ground, the construction bill was set at $30 million, not including a 66-year lease that sees the company pay the NCC $100,000 annually. Malhotra won't reveal how much that's grown, but puts the building's value today at $65 million.

The increase comes mostly from custom-design elements added to the original architectural plans.

Units started at just under $400,000 for about 1,000 sq. ft., with the two-storey penthouses peaking at $2 million for about 3,200 sq. ft. One attraction for buyers is that taxes and condo fees are about one-third of comparably priced units in Toronto.

With more than 90 per cent of the units sold, and two already occupied, Claridge's move appears to have paid off. Downtown merchants and developers couldn't be happier.

"What it's done is send a message that people are willing to pay millions to live downtown. We've never seen this before, so I think 700 Sussex is a real turning point for the city," says Peter Saarty, a commercial real estate investment specialist for Colliers International in Ottawa.

The only remaining question mark hangs over the project's retail space. About half has been leased, primarily by two restaurants: The Metropolitain Brasserie, an upscale eatery operated by the Empire Grill Group, and the family-oriented Milestones, run by Cara Operations Ltd.

Merchants often wait to see what kind of turnover a unique complex such as 700 Sussex can generate, especially with rents reaching $40 to $50 per sq. ft., but Malhotra says he's not worried.

"We're talking with lots of possible tenants because we're clearly geared less to (condo) residents than to the surrounding community. We have all the character of the Sussex boutiques and all the traffic of the Rideau Centre," Malhotra says.

He adds that the complex is likely to add a fashion outlet, a medical-services company and a toy concept store.

Ducharme doesn't care who moves into 700 Sussex just as long as its commercial element takes hold.

"The area is still struggling and this could be a real gateway for other developers," she says. "There has been a licence-application boom going on, which usually means that in three to five years the place could be hopping.

"But I think they're waiting on the sidelines to see what happens (with 700 Sussex) before going ahead with any specific project.

"Anything that helps bring Rideau Street out of its decline is what we're hoping for. One thing for sure, we're getting a buzz that we couldn't get before and I hope the city keeps to its promise by encouraging the kind of development we need."

Ducharme also sees Claridge Homes' other Rideau Street project - a twin-tower condominium about 500 metres from 700 Sussex and bordered by Cumberland and the University of Ottawa - as another reclamation hope.

Claridge Plaza and its 382 residential units will be anchored by a three-storey podium that Malhotra says will house at least one big-box retail outlet. Construction is to start early next year.

"It's probably the biggest catalyst for Rideau because it will help gentrify an area that's pretty raw right now. The retail should be strong enough to bring people from all over the city," he says.

"Unfortunately the city is cutting back right now on its moratorium on (building) fees. (Claridge Plaza) is costing about $1 million in building permits. That will hurt (other) development plans," Malhotra says.

(Mike Levin can be reached at levin@businessedge.ca)