E-commerce boom adds to pressure on Ottawa industrial market

Urban boundary expansion opens new opportunities to meet growing demand
Amazon digger
Editor's Note

This article originally appeared in the BOMA Ottawa Commercial Space Directory. Read the full publication here.

Ottawa will have to play catch-up on the industrial real estate scene if it wants to reach its potential to become a major distribution hub, says one of the city’s leading industry experts.

With industrial land so scarce and vacancy rates at record-low levels, Ottawa could risk losing new business opportunities to other smaller, more nimble municipalities in Eastern Ontario, says BOMA Ottawa president Shawn Hamilton. 

“We just don’t have the land right now and, given the emergence of this industry, people aren’t necessarily wanting to wait for cities to catch up; they’re going to go where they can get started right now,” Hamilton says.

Ottawa was traditionally a second-tier market in the warehouse and distribution space relative to cities such as Toronto and Montreal. But a recent shift toward a regional delivery model has turned Ottawa into a more lucrative destination for the sector.

In addition to featuring a talented workforce, the Ottawa area can service far more people within a 400- to 600-kilometre driving radius than many other Canadian cities. 

“Companies like Amazon are looking at this and saying, ‘We can reach more people with less time situated in Ottawa,’” Hamilton says.

Growing pains

Amazon has a one-million-square-foot distribution centre on Boundary Road, just off Highway 417 in Ottawa’s southeast end, and is building a second 2.8-million-square-foot facility in Barrhaven, backing onto Highway 416.

But, on the flip side, Giant Tiger chose to locate its new 600,000-square-foot distribution centre outside the National Capital Region in Johnstown, located near Highway 401.

The best spot for new industrial development is near highways, to allow for the quick transport of goods. The largest cost for distributors is transportation, which is five times more significant than the cost of real estate.

“We have struggled with having land that suits the needs of these users in Ottawa,” Hamilton says, while pointing out that the city is better set up to accommodate new facilities in the 40,000-square-feet range rather the enormous spaces some groups need, from 300,000 to 600,000 square feet, all the way up to one million. “We don’t have an abundance of available, well-positioned land to service that.”

Also not helping matters is the higher cost of land in Ottawa, and what Hamilton calls the “bureaucratic process” that makes Ottawa less agile than other smaller centres.

As well, the municipality’s development charges hurt land development, Hamilton says, adding that he does have sympathy for the city. “It’s in dire need of revenue.”

Ottawa’s development potential is also stunted by the Greenbelt, although the city’s plans to expand the urban boundaries by more than 1,300 hectares between 2021 and 2046 should help create more serviced and available land, he says.

“The City of Ottawa is examining ways to strategically bring the right types of land in the right types of location and the right types of sizes to complement our city,” Hamilton says.

“Ultimately, this is a good news story, in that the distribution world is recognizing the value of Ottawa. We’ve just got to play catchup to be able to accommodate that. If we do, I think the growth potential is in the millions – maybe even tens of millions in square feet. It’s a big deal.”