In its most recent Real Estate Market Study, Newmark Knight Frank Devencore reports that combined Class “A,” Class “B” and Class “C” vacancy rates in the greater downtown Ottawa market, including Centretown, the downtown core and the Byward Market, are currently running in the 4.7 per cent range, with just over 900,000 square feet vacant. The downtown Class “A” and “B” availability rate — which includes space soon to be vacated but currently occupied — stands near the seven per cent mark.
In addition, two major office developments underway in downtown Ottawa, combined with sluggish economic conditions and office space demand, will in all likelihood contribute to a significant increase in Class “A” vacancy rates over the next 12 to 18 months. Morguard’s Performance Court at 150 Elgin is nearing completion, with the initial delivery of space scheduled for January 2014. In addition, the Lorne Building redevelopment at 90 Elgin Street, which is being carried out by Public Works and Government Services Canada, is well underway. These buildings will augment the existing downtown office space inventory by almost 1 million square feet. If this inventory were on the market today, overall vacancy rates in the downtown core would rise to over nine per cent.
In the Kanata and west-end submarket, where the combined Class “A” and Class “B” vacancy rate currently stands at 13.4 per cent, acquisition and consolidation events continue to exert a significant impact. A case in point is Blackberry, which completed a new building within the past year and is now shedding space at some of its other locations. The future of the former Nortel Networks campus has also been the subject of speculation. The Department of National Defence (DND) has been slated to consolidate at this 2.3 million square foot campus, but the advisability of that move is now reportedly being re-examined in light of the discovery of electronic bugging devices and the cost overruns that their removal may cause.
As has been the case for the past year, NKF Devencore in Ottawa is continuing to advise its larger clients that there may be advantages in negotiating blend and extend transactions with their landlords, with whom they may enjoy somewhat more negotiating leverage than they have over the past few years.
In the rest of the Canada, combined Class “A” and Class “B” vacancy rates spaces have climbed only slightly through 2013, from 4.5 per cent to 4.9 per cent, reflecting a relatively flat economy. At the same time, it should be noted that the country’s total inventory of built office space has increased considerably over the past two years, from approximately 207.7 million square feet in mid-2011 to 210.9 million square feet today.