2017 to be a banner year for commercial real estate investment in Ottawa: CBRE
Shawn Hamilton, Managing Director of CBRE Ottawa, has announced that 2017 is pegged to be a banner year for Ottawa commercial real estate (‘CRE’) investment, however, there is still work to be done in the city’s downtown office market in order to capitalize on the growing opportunity that urban tech presents.
Nico Zentil, Vice President of CBRE Ottawa’s National Investment Team, has added that Ottawa’s CRE investment market has seen a surge of activity. In the last 18 months, Ottawa has experienced more investment activity and buildings available for sale than in the combined prior five year period. This momentum is set to continue throughout the year and CBRE is predicting 2017 will be in the top three largest investment years on record, with almost $1.4 billon of transactions.
Discussing the investment market, Zentil said, “Ottawa is increasingly under the spotlight for domestic capital and the rapid growth in pricing experienced in Toronto and Vancouver over the last couple of years has sharpened the relative value the city provides. Investment grade properties in Ottawa, historically one of the most stable markets in North America, provide a 50 to 100 basis point uplift in returns relative to Toronto and Vancouver assets, and that is causing investors to turn a greater critical eye to the city.”
Shawn Hamilton said that Ottawa’s downtown office market has to adapt to continue to attract the burgeoning urban tech scene. This comes against the backdrop of vacancy rates which have steadily ticked upwards for a decade to almost 10 per cent in Q1 2017, primarily driven by the federal government’s shrinking footprint. Hamilton warned the audience that those expecting the expanding workforce from the Liberal government to help reverse the climbing vacancy might be disappointed.
He noted that the additional 9,000 workers hired by the Liberal government have already been absorbed into its current office portfolio without any new requirements for additional space. Hamilton commented that any further expansion by the federal government’s is likely to be offset by its Workplace 2.0 initiative that seeks to reduce the footprint of each employee by 22 per cent. Rather than look to the government for growth, Hamilton urged attendees to reposition vacant space to attract the growing base of tech tenants in downtown Ottawa.
Hamilton presented a strong case for optimism that, with its current increased vacancy, downtown Ottawa could thrive as an urban tech-hub. He stated that after Shopify’s recent expansion, technology companies are now already the largest tenant in the downtown core beyond the federal government and Crown corporations. However, in order to continue to grow Ottawa’s urban tech market, Hamilton reminded attendees that vacant space in aging B and C Class office product in the Central Business District will require repositioning to appeal to tech tenants.
“Ottawa has many of the preconditions for success to be the next great urban tech hub: the most educated workforce in Canada, five post-secondary institutions pumping out new talent, an improving downtown cultural scene, growing transit infrastructure and, most importantly, available and cheap office space. However, the question remains whether much of that vacant space is fit for purpose for the modern tech tenant?
“It’s crucial that landlords work closely with the tech community to understand their unique space requirements. Tech companies have strong aesthetic demands and see the office as an ‘experience’, not just a place their staff gather to complete tasks. The ‘cube farms’ of yesteryear no longer cut it, and today’s tech workforce looks for office spaces which aid collaboration and create a sense of community.
“The tech workforce is perhaps the most mobile out of any industry in history, and if Ottawa can’t provide them with the type of space they want, it will lose out to places like Toronto or Kitchener-Waterloo. While the additional investment required to upgrade Class B and C office space might be seen as a risk for landlords, surely the bigger risk is to do nothing and pin all hopes on a growing federal government,” concluded Hamilton.