After issuing months of warnings about the rapid expansion of Canada's condominium market, the federal government now appears to want a piece of the action.

Ottawa is planning a major overhaul of a 49-hectare campus-style property it owns in the nation's capital called Tunney's Pasture.

Situated along the Ottawa River about four kilometres west of downtown, it is a drab complex of grey concrete government buildings. But the neighbourhood around it is currently one of the hottest spots for new condo development in the capital.

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Created more than 50 years ago, Tunney's Pasture is the very opposite of the "live-work-play" mantra of modern urban planners who favour intensification and mixed-use buildings. Instead, the buildings on site – which house Health Canada, Statistics Canada and other branches of the public service – are far apart and connected by wide boulevards. After 5 p.m., the area is largely deserted.

The federal government, however, sees an opportunity to turn the property into a place where people can live, work, shop and access the Ottawa River, all without a car. Foreign Affairs Minister John Baird, who is also the political minister for Eastern Ontario, announced Monday that the government is launching consultations on how to redevelop the site. That will produce a master plan by next year that will guide development over the next 25 years.

It is a bold attempt to revatilize a huge swath of land in the city's urban core, although it could meet resistance from in surrounding neighbourhoods who already complain about too much traffic.

There is also the potential for the federal government to make a lot of money. That could help the government pay for new government buildings and renovations of buildings already on site.

"This is a great location," said Roger Greenberg, CEO of Minto Group Inc., one of Ottawa's largest residential developers. Mr. Greenberg said the amount of money Ottawa could raise would be "considerable" given the size of the property and its location.

While the federal government has been mostly expressing concern about the potentially overheated condo markets in Toronto and Vancouver, Mr. Greenberg said Ottawa's market is far less volatile because of its base of well-paying government jobs.

"Ottawa has always been a much more stable environment," he said, noting that he's eager to hear more detail from Ottawa about the plans.

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Many of the government buildings at the site need to be completely renovated or torn down and the federal government is testing the public's appetite for filling in the space between government buildings with condos and commercial space. Ottawa wouldn't build the condos, but could potentially lease or sell some of the land to developers.

"There are a number of options that are available," said John McBain, an assistant deputy minister with the department of Public Works. "We would look for private-sector partners. But certainly we want to get away from the cold, institutional feel that the Pasture has now and develop more of a mixed use that would have eyes on the street, that would have people living in the community."

The location includes a station on Ottawa's bus-only Transitway that will become the western end of a new light-rail line running through the city's urban centre by 2018, making it even more attractive to developers and potential home owners.

Katherine Hobbs, a city councillor for the area who has seen drawings of the proposed developments, said there would be about 12 new residential buildings.

"I'm very pleased. It's a great plan," she said.

Getting public support in the city of Ottawa, however, won't be easy. While the city council is broadly supportive of plans to have more people living in and around the downtown to reduce the financial pressures of urban sprawl, people living in the affected neighbourhoods have been vocal in their opposition to other projects.

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Plans for new condos on the east side of Parkdale Avene – across the street from Tunney's Pasture – are currently the subject of heated debate over their height and potential impact on traffic in the area.

The federal plans could double the number of public servants working at Tunney's Pasture from 10,000 to 20,000.

Jeff Leiper, a spokesman for an area community association, said traffic will be an issue but he welcomed the plan because it could ease the current pressure from developers to build high rises in established residential areas.

"Over all, we're excited," he said.