An earlier version of this story had an incorrect figure for the asking net rent at downtown office properties during the fourth quarter of 2018. The story has been updated.
A spike in companies relocating from suburbia to the city centre and burgeoning growth in Kanata’s tech sector continued to shrink the amount of available office space in both parts of Ottawa in the first quarter of 2019, a new report says.
Real estate services firm Colliers International says the availability rate of office space in the downtown core – the amount that’s on the leasing market, even if it’s currently occupied by existing tenants – fell from seven per cent in the last quarter of 2018 to just 4.8 per cent in the first three months of this year.
Colliers attributes the space crunch to the rising number of firms that are competing for skilled younger workers – many of whom don’t own cars – and moving to the core to be closer to where their employees live.
“Firms have demonstrated a willingness to pay a premium for downtown space, as this quarter saw several firms relocate from suburban to downtown locations,” the report says.
Asking net rent for downtown properties, meanwhile, rose slightly to $18.04 a square foot, up from $17.71 in the previous quarter.
“This trend is projected to increase with the opening of the (Confederation LRT line) later this year,” the report notes, adding rising demand has created a shortage of “large, contiguous spaces” in the central business district.
The picture is similar in the city’s second-largest office space submarket of Kanata, Colliers said.
Driven by rising tech employment, the availability rate in the far western part of Ottawa has dropped from 10.6 per cent in the fourth quarter of 2018 to 6.9 per cent so far this year – although average asking net rents have actually fallen slightly from $13.58 to $13.10.
The largest office transaction of the quarter also occurred downtown, where a consortium of life insurance providers under the Canada Life banner purchased 190,000 square feet of space at 219 Laurier Ave. W. from Whiterock REIT for $51.2 million.
Coming in at No. 2 was True North Commercial REIT’s $24.5-million deal to buy the Narono building at 360 Laurier Ave. W. from Dream Office REIT.