Downtown Ottawa vacancy rates continue to climb
In its recently-published Real Estate Market Study, Newmark Knight Frank Devencore reported that combined vacancy rates in downtown Ottawa’s Class “A” and “B” buildings have continued to increase and are now approaching 6 per cent. Over the course of 2013, the vacancy rate in Class “A” office buildings rose from 3.7 per cent to 5.3 per cent, and the total amount of space available for lease or sublet rose to just over 510,000 square feet. In the Class “B” sector, vacancy rates over the same 12-month period rose from 4.0 per cent to 6.3 per cent, and the amount of vacant space jumped to almost 422,000 square feet. It should also be noted that the Class “A” and “B” availability rate–which includes vacant space as well as space soon to be vacated but currently occupied–exceeds 8 per cent.
The two major office developments currently underway in downtown Ottawa will augment the existing downtown office space inventory by approximately 930,000 square feet and contribute to a further increase in Class “A” vacancy rates over the next year. This is making the leasing market in the downtown core increasingly competitive. Morguard’s Performance Court at 150 Elgin is essentially complete and tenants have begun to move in. It has secured an A-list of tenants, and as it comes online only about 50,000 square feet is not spoken for. The Lorne Building redevelopment at 90 Elgin Street is still underway. In the latter stages of construction, the project is being carried out by Public Works and Government Services Canada (PWGSC), the real estate arm of the federal government. This 17-storey, 650,000-square-foot building will be three times larger than the building it is replacing at the site.
The Kanata market has been gradually strengthening over the past few years, and vacancy rates have been steadily falling. Today, the combined rate is at 11.8 per cent, and just over 622,000 square feet of space is available for lease or sublet. However, it appears that there are still some consolidations talking place, and some of the major tech players–including Blackberry and IDT–have been shedding space. The high-tech industries remain volatile, which means that occupancy levels in Kanata can shift by a few percentage points relatively quickly compared to Ottawa’s downtown core.
In Canada’s major cities, the combined Class “A” and Class “B” vacancy rate edged up from 4.5 per cent to 5.9 per cent in 2013. However, construction activity remains strong across the country and new towers are being built in virtually every city. The appetite for this premium space also remains strong. In most instances, space in the new towers, most of which are LEED-certified, is being rapidly leased.