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Light rail, LeBreton Flats will attract big Ottawa commercial real estate investments: Avison Young

September 27, 2017

The record-breaking $480-million sale of Constitution Square is “a harbinger of things to come” for Ottawa’s commercial real estate market as investors get ready to ride light rail’s momentum, a new report from Avison Young says.

The commercial real estate services firm’s fall review said the total investment volume in Ottawa fell 57 per cent year-over-year to $320 million in the first six months of 2017. Minto’s sale of 50 per cent of its interest in Minto Place to Investors Group for more than $180 million made up more than half of that total.

But Avison Young noted those numbers don’t include the Constitution Square deal, which closed earlier this month and is the largest private sale of a commercial property in Ottawa’s history.

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The company painted a bullish picture of the future for commercial investors poised to take advantage of light rail’s arrival to the downtown core in 2018.

“Given the inherent stability of this market and the ubiquitous presence of the federal government, astute investors will continue to look at Ottawa for better-than-average yields over time,” the report said.

Canderel and its consortium partners paid “significantly more than a lot of underwriters suggested they should pay” for Constitution Square’s one million square feet of space, said Avison Young managing partner Michael Church. He said that reflects the strong belief that light rail will spark new commercial development along its route at sites such as LeBreton Flats.

“Clearly, something is going to happen there,” he said. “I can’t wait to see what happens when phase two of the LRT gets finished. Phase one will be a taste of it, but you won’t get the full impact of it until some guy can go to a park-and-ride in Kanata and be downtown in half an hour and not have to drive on the Queensway. That why I think you’ll see these kinds of numbers (Constitution Square’s record-breaking price) in the future simply because of proximity to everything. Established assets are only going to get more valuable.”

The report said that while multi-family units accounted for 79 per cent of the total value of commercial investment sales in the first half of 2016, they made up just eight per cent of total sales in the first six months of this year.

Office building sales, which accounted for just nine per cent of deal values in 2016, constituted nearly three-quarters of the total this year, the report added. The total value of industrial property sales jumped 73 per cent year-over-year, while sales of land and retail assets dropped after strong performances in 2016.