Downtown Ottawa continues to ‘struggle’ with retail vacancies as civil service layoffs loom

January 29, 2026

An uncertain return-to-office mandate and looming layoffs in the federal civil service mean downtown Ottawa retail properties are becoming more difficult than ever to fill, market watchers say.

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An uncertain return-to-office mandate and looming layoffs in the federal civil service mean downtown Ottawa retail properties are becoming more difficult than ever to fill, market watchers say. “The Ottawa market downtown has been a tough one for a number of years,” retail expert Bruce Winder told OBJ on Thursday. “The problem is that, although there are return-to-office mandates, there’s also significant layoffs planned at the federal level in the public service. This is probably a case where retailers and companies are a little hesitant to invest because there’s a lot of uncertainty in terms of consumer spending.” Foot traffic isn’t what it was prior to the pandemic and, while it has improved as workers return to in-person work, Winder said civil service layoffs would mean another round of changes to the area’s demographics and economics, with fewer people spending and people generally spending less. “A lot of Canadian downtowns have been struggling and that’s why government officials, banks and large companies have mandated workers back full-time, to try to stimulate downtowns,” he said. “Suburbs have been doing well as people work from home, but it’s something that’s going to be tough. A number of retailers need to invest at the same time to rebuild an area and right now I’m not sure there’s been progress made.” On Wednesday, real estate firm CBRE released its H2 2025 Retail Rent Survey, which found that investors are hesitant when it comes to Ottawa’s downtown properties. “Suburban markets continue to captivate tenant interest as demonstrated by low vacancies and high rents,” the report said. “The downtown core of Ottawa meanwhile continues to struggle with vacancies. National tenants are hesitant to invest in the core until there is a stronger return-to-work commitment by the Federal Government.” According to the report, the city’s retail market overall is seeing movement. High-quality properties of 750 to 3,000 square feet are receiving multiple offers while landlords demand high rents and minimal inducements. And a host of new inventory is expected to come online over the next few years, with those developments expected to lease more quickly and easily, depending on market demand, according to the report. But long-term vacancies, Winder said, will remain challenging to fill. “The public has forgotten about (those properties),” he said. ‘There’s usually a reason why it hasn’t been touched in three or four years. It’s usually in an unfavourable location, it doesn’t have enough traffic going by or the other stores near it don’t match the brand. Or there are significant social issues and shoppers don’t feel comfortable in the area.” The cost of rent aside, Winder said some properties can be expensive to take on, even if they haven’t been sitting empty for long. Vacant properties and larger properties such as former Hudson’s Bay locations may require extensive repairs and upgrades, he said, and investors often aren’t willing to take the risk. “The escalators might not work well. The air conditioning needs an overhaul. You put a lot of money into the property to make it worthy of opening,” he said. “That might just not make sense from a number standpoint, especially with so much uncertainty around (consumer) spending.”

Former HBC spaces draw interest, but Rideau location may struggle

According to CBRE, former Hudson’s Bay locations across Canada have begun drawing interest from larger retailers. Some locations have already been leased by companies such as Canadian Tire, Sport Chek, Mark’s and TJX. Other companies, like Happy Kingdom and Splitsville Bowling, are exploring potential entertainment uses. Most of Ottawa’s five former Bay locations are located in suburban malls, which Winder said is more appealing to these types of companies. But the Rideau Street location in the ByWard Market may not move as quickly. “The traditional department store is gone,” he said. “It’s almost an older format and, with these spaces, the newer formats don’t fit. And the stores that are interested in these spots, like Canadian Tire, might not be conducive to downtown.” Some retailers, however, are trying to adapt their business model to fit into smaller downtown properties with minimal parking. Food Basics has done this, opening its first “urban concept” grocery store on Queen Street last summer. Winder said downtown Hudson’s Bay locations, like the one on Rideau Street, could be ideal for such efforts. “But you need that economic base to do that,” he said. “Loblaws, in Toronto, they’ve working on a smaller city version of No Frills. But they had that economic density. You need the population, the foot traffic, the disposable income to make the numbers work.” The Rideau Street Bay store could also be split into smaller chunks, something that Winder said has been considered at other locations and has been successful with similar large properties such as former Sears and Nordstrom locations in Toronto. In Ottawa, the former Nordstrom location in the CF Rideau Centre also remains vacant. “Marquee malls are filling that space by chopping it up and re-imagining the layout,” Winder said. “But you need those people who are willing to come in and invest. The Rideau Centre already has a Simon’s location, but it doesn’t have an Eataly. You kind of need that store that can draw people in. It can’t just be something you can get everywhere. It has to be a flagship, to get people to come to the mall. Remember, these are anchor locations and the anchor is supposed to bring people in.”