With available industrial space shrinking and rents steadily rising in the National Capital Region, an executive from one of the city’s largest commercial property management firms delivered a blunt message to an audience at the Ottawa Real Estate Forum last week.
“We need to start moving dirt and putting steel up,” Brent Arseneau, vice-president of leasing at Colonnade BridgePort, said last Thursday during a roundtable discussion on the future of the city’s industrial market at the Ottawa Conference and Event Centre.
“You have to show that you’re doing something to build space. There’s a severe lack of quality industrial space. There are a lot of tenants out there in buildings that are 40, 50 years old that are 18 to 20 feet clear and they need 60,000 square feet, and they don’t have any other options.”
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Traditionally dominated by smaller tenants who occupied buildings with smaller bays than today’s massive warehouses, Ottawa’s industrial sector isn’t large by national standards.
Just how big depends on the source. According to CBRE, for example, the region had about 36.3 million square feet of industrial real estate at the end of the third quarter. Rival brokerage Colliers, meanwhile, pegged the total at more than 46 million square feet.
No matter what, Ottawa’s industrial inventory lags far behind cities such as Edmonton (156.6 million square feet), Calgary (153.7 million square feet) and Winnipeg (86.4 million square feet), all according to CBRE.
One thing, however, is not in question: Ottawa’s industrial sector is having a moment.
The city’s industrial availability rate was 2.2 per cent in the third quarter, CBRE says – fourth-lowest in the country and well below Edmonton’s rate of 5.2 per cent and Calgary’s 3.8 per cent.
As available industrial space becomes more scarce, the price of leasing keeps soaring. According to Colliers, asking net rents in Ottawa have risen nearly eight per cent over the past year to $15.92 per square foot.
Sensing opportunity, a growing number of developers are expanding Ottawa’s industrial footprint as non-traditional users such as e-commerce and logistics companies drive demand for bigger-bay properties with higher ceilings designed to serve markets well beyond the capital region itself.
Colonnade BridgePort, for example, is partnering with Toronto’s CanFirst Capital Management on a four-building project in Barrhaven that will see up to 900,000 square feet of new warehouse space added to the south end of the city.
Located on a 50-acre plot of land just south of Amazon’s 2.8-million-square-foot fulfilment centre that opened in late 2021, the development is expected to generate significant interest from other e-commerce firms.
But CanFirst executive vice-president of investments and business development Mark Braun told the panel an array of businesses, from data centres to manufacturers, have been inquiring about leasing space at the site.
Demand from e-commerce providers “is there, but not to the extent that we thought,” Braun said.
Fellow panellist Erik Langburt, vice-president of real estate development at Montreal-based construction giant Broccolini, agreed there is “healthy demand” for industrial space across a wide range of users, even as Ottawa gains momentum as a logistics hub due to its skilled labour force and close proximity to Toronto and Montreal.
Those attributes also enticed Mike Jager, co-founder of Montreal-based Rosefellow, to move into the Ottawa market with a two-building project on Huntmar Drive in Kanata that is slated to add 480,000 square feet of big-bay, “state-of-the-art” inventory to the west end.
Jager’s firm is also planning to construct up to 350,000 square feet of new industrial real estate at a 15-acre site near Colonnade BridgePort’s project in Barrhaven.
Both developments are being built on spec, but Jager said he has no worries about filling them.
“If you can bring the products to market, the tenants will come,” he told the audience of several hundred real estate executives, explaining that Ottawa is a “great place to set up shop” for e-commerce firms, logistics companies and manufacturers targeting the Eastern Ontario and Quebec markets.
“We believe investors will keep looking at Ottawa as a safe haven to invest,” Jager said. “We’ll keep growing and keep looking at opportunities to keep buying and developing accordingly.”
Arseneau said the National Capital Region, with a population of more than 1.3 million, is large enough to support a “sustained industrial economy” as it diversifies beyond its traditional tenant base.
“We’re going to create an industrial market,” he said. “We have a draw for tenants to come to this city and really invest in the city from distribution, warehousing, logistics and hopefully some manufacturing. That’s where we need to go in the future.
“I think we’ve missed the boat a little bit because we wanted to insulate ourselves and consider ourselves white-collar. I think that we need to start growing that (sector) actively as real estate professionals here.”
