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Ottawa’s office vacancy rate jumps in third quarter as tenants relocate, downsize

October 2, 2025

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Ottawa’s office vacancy rate jumped nearly half a percentage point in the third quarter as several large swaths of space came back on the market amid a wave of downsizing among both downtown and suburban tenants, Colliers said Thursday. The city’s overall office vacancy rate rose to 11.3 per cent at the end of September, the real estate firm said in its latest market report, up from 10.8 per cent in the second quarter. The downtown vacancy rate increased more than six-tenths of a percentage point to 12 per cent as more than 115,000 square feet of space was returned to the market in the core. That included nearly 44,000 square feet that the Canada Revenue Agency vacated at 250 Albert St., bumping the class-A vacancy rate in the downtown core up 41 basis points. Still, Warren Wilkinson, Colliers’ senior managing director in Ottawa, sounded an upbeat tone, saying the widespread shift toward mandating employees in both the public and private sectors to return to the office four or five days a week “breeds optimism” that more empty cubicles will start filling up. CBRE’s top Ottawa executive also expressed confidence that the local leasing market is starting to pick up steam. While his firm’s numbers also showed an uptick in overall office vacancy to 12.8 per cent in the third quarter from 12.5 per cent at the end of July, Max Foucaud said the 204,000 square feet of negative net absorption last quarter was largely the result of two big pockets of space being put back up for lease – 94,000 square feet at 495 Richmond Rd. vacated by the Canadian Institute for Health Information (CIHI) after it relocated to Constitution Square, and 90,000 square feet formerly occupied by cannabis producer Canopy Growth at 350 Legget Dr. in Kanata. “That’s big enough to make the market move,” said Foucaud, CBRE’s managing director for Ottawa. Like Wilkinson, Foucaud said moves by the provincial government and the City of Ottawa to bring most workers back to the office full-time in the coming months are “positive signs” that could spur other employers to do the same. “Generally, it looks like we’re trending towards a four-day-in-office work week,” he said. “There’s definitely positive momentum. Hopefully we see a similar (mandate) from the federal government come into effect.” While both companies reported increases in overall office vacancy last quarter, they diverged slightly when it came to the amount of empty real estate downtown. At 14.8 per cent, CBRE’s vacancy rate for the core was still higher than that of Colliers. But it’s a drop from 15 per cent in the second quarter, thanks mainly to the removal of a 12-storey, 125,000-square-foot office tower at 77 Metcalfe St. from CBRE’s leasable office inventory figures after owner Groupe Mach announced plans to demolish the building and replace it with a rental apartment complex. (Colliers had already taken 77 Metcalfe St. out of its calculations in the previous quarter.) CBRE also took a 55,000-square-foot building at 265 Carling Ave. that’s being converted to apartments off its active inventory list. Foucaud said the property owners’ decisions to reinvent the buildings as residential projects are a “positive” sign for the office sector. “Some of the assets in Ottawa need to be repurposed for higher and better uses,” he said. “So having those two (offices) taken out helps our inventory a little bit.” While CBRE’s research showed average asking net rents in class-A buildings fell to $19.13 from $19.61 the previous quarter, Foucaud said top-flight office real estate remains “prized and sought after” in the National Capital Region. “I’m not worried about that at the moment,” he said. “I think there’s positive momentum in the office sector.” However, one leading Ottawa broker says even tenants that are ramping up their return-to-office mandates are looking to do so in less space than they occupied in the past. “There has been interest in the A-class properties, so they’re continuing to draw from the B-class market,” Alan Doak, a partner at Proveras Commercial Realty who represents office tenants, said in an interview Thursday morning. “But the largest tenancies in many of the A-class buildings are finding efficiencies as their leases roll over and they’re getting smaller.” Doak noted, for example, that CIHI’s new office at Constitution Square is 65,000 square feet – a 35 per cent reduction in footprint from its old space on Richmond Road. In addition, he said many of the professional services firms that form the backbone of Ottawa’s blue-chip tenant pool are also downsizing. He pointed to law firm Norton Rose Fulbright, which recently moved from a 40,000-square-foot office in the World Exchange Plaza to an area in the Sun Life Financial Centre that’s 10,000 square feet smaller. Brokers are also keeping a close eye on Shopify’s former headquarters at 150 Elgin St., which the e-commerce giant vacated early in the pandemic, leaving 170,000 square feet of empty space on several floors of the marquee office tower. Some of that space has since been subleased to tenants such as co-working firm TCC Canada, but it remains to be seen what will happen to the rest when Shopify’s lease officially expires at the end of 2025. Next door at 160 Elgin St., Bell has also been trying to sublease space it’s no longer using but still rents, Doak added. Much of these so-called “shadow vacancies” – space that’s still under contract but no longer occupied – will soon become leasable inventory again, he explained. “It does create a situation where more space is coming back in that category of tenants than is being leased,” Doak said. “There’s a lot of big pockets of space that are available across competing portfolios of A-class properties.” Wilkinson agreed that spaces such as Shopify’s former HQ could be a good litmus test of the strength of Ottawa’s leasing market. “It’s all (available for sublease) right now, and it’s going to hit the vacancy (market) if it doesn’t get eaten up. We’re watching that very closely to see what the overall impact is going to be.”

Class-B vacancies rise

Meanwhile, demand for lower-tier office space continued to fall in the third quarter. The vacancy rate for class-B downtown real estate rose to 14.7 per cent at the end of September, up a full percentage point from the previous quarter. “There simply is not a lot of demand for that kind of space in downtown Ottawa at the moment,” said Doak, explaining that the non-profit association sector “has not shown any real signs of coming back to the office on a full-time basis. Many of them have decided to work remotely for good. And those organizations tenanted a lot of those mid-B buildings.” Some B-class buildings that haven’t been upgraded have had large pockets of space sitting empty for “north of five or six years,” Doak added. “And there’s really no prospect of them being leased unless the landlords want to compete solely on price. There are good opportunities for tenants that are interested in upgrading their office space.” While office-to-residential conversions have helped take some obsolete inventory off the market, Doak cautioned they’re not a magic bullet, noting the amount of money it costs to gut aging office towers and completely rebuild their interiors is a major roadblock for many developers. “There isn’t a lot of demand for one-bedroom apartments that are north of $2,000 a month, and that is generally what these conversions are designed for,” he said. “I think that we’re reaching a saturation point for the time being in Ottawa for new apartment development and for these types of residential conversions.” Instead, he thinks many landlords might decide that retrofitting class-B buildings to attract new office users makes more economic sense. “I think we may start to see a greater focus on amenitizing older office buildings or turning them into something that’s interesting for tenants that are in a slightly different price point than the A-class market to look at.” In the suburbs, the vacancy rate rose for the second quarter in a row, ticking up to 10.8 per cent from 10.4 per cent, Colliers said. Ottawa West was hardest hit, seeing its vacancy rate jump 1.7 percentage points to 13.4 per cent due largely to CIHI’s move out of its former space on Richmond Road. Kanata’s overall vacancy rate also increased by more than half a percentage point to 10.9 per cent, driven by the expiry of Canopy Growth’s lease on Legget Drive, but the class-A vacancy rate dipped more than a full percentage point to 9.9 per cent as tech and defence tenants signed new leases. “While there may not be a huge amount of growth in that industry segment, the existing companies there seem to be committing to staying in the area for the long term, which I think is a really positive sign,” Doak said. Wilkinson the federal government’s pledge to beef up defence spending in its budget slated to be tabled next month could pay big dividends for landlords in the west and south ends. Additional pockets of space are expected to open up in the suburbs in the coming months, he noted, citing the Canada Revenue Agency’s recent announcement that it plans to exit more than 100,000 square feet on Walkley Road in the second quarter of 2026. That could give growing companies in Ottawa’s burgeoning defence and security sector additional incentive to expand their office footprints, Wilkinson said. “There are pockets of space that are coming available that … are giving (tenants) new and alternative options, which is great,” he said.