Following a year highlighted by a growing downtown tech presence, local real estate observers say they’ll be watching whether Ottawa’s central office market can continue to accommodate an expanding public and private sector in 2019.
Bolstered by the likes of Telesat, SurveyMonkey, Klipfolio and Shopify, Ottawa’s downtown office vacancy rate fell from 9.5 per cent in December 2017 to 7.5 per cent at the end of the third quarter in 2018, according to statistics from CBRE.
It's particularly notable that it's these tech firms – not just the federal government – that are taking large blocks of space, said Bernie Myers, senior vice-president of real property at the Regional Group.
“(The industry is not) just waiting for growth in the government,” he said. “The private sector is doing its part and absorbing space, making downtown their home and reducing vacancy.”
The tenant mix in Ottawa’s central business district is also shifting and reached a tipping point in 2018, said Shawn Hamilton, a senior vice-president and managing director in CBRE’s Ottawa office.
“Urban technology now occupies more space in our downtown core than the legal and accounting communities combined,” he says.
Despite the growth of urban tech tenants, the federal government remains the region’s largest space user and continues to hold significant influence over the market.
Myers said Public Services and Procurement Canada is continuing to transition out of some of its older buildings and move federal staff into newer accommodations.
“You’ll see increasing demand for better-quality real estate for government employees,” he said.
All these factors are combining to reduce the number of options available to large tenants and push rents up close to a level that could trigger the construction of a new downtown build, Myers said.
“We’re not quite there yet,” Myers said. “As long as there is existing space available that can compete for those needs, it’s highly unlikely you’re going to see a new build. But that can change.”