Tenants continued to snap up smaller industrial spaces at a steady clip in the first quarter of 2024, new figures show.
The city’s industrial availability rate held firm at 2.6 per cent in the first three months of the year thanks to persistent demand for small- and medium-bay properties, CBRE said in its latest industrial market report issued this week.
Meanwhile, Colliers said its research showed Ottawa’s industrial availability rate ticked up slightly to 2.5 per cent from 2.3 per cent in the fourth quarter of 2023.
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The brokerage said tenants and landlords are striking agreements more quickly than they were a year ago as small-bay space remains at a premium.
“Despite ongoing economic uncertainties, tenants are no longer content with remaining passive observers,” the brokerage said in its industrial market report released this week. “They are actively participating in buying, selling, and leasing properties. Tenants are striking deals faster than the previous year as they make decisions and commitments to move forward.”
Colliers said tenants signed 29 new lease agreements for spaces under 12,000 square feet last quarter, for a total absorption of nearly 128,000 square feet.
“The consistent demand from mid-to large warehouse and distribution tenants is also expected to contribute to positive absorption in both Q2 and Q3 of 2024,” the company added.
Asking net rents rose slightly last quarter. Colliers said tenants were paying an average weighted net rent of $15.71 per square foot, up from $15.61 in the previous quarter but a two per cent drop from the same period in 2023.
Rents at newly constructed properties commanded higher rates ranging from $17 to $19 per square foot, the brokerage added.
Despite ongoing demand for small and medium-bay properties, large-scale projects dominate the Ottawa construction market as developers hope to capitalize on the region’s emergence as a warehousing and e-commerce distribution hub.
According to CBRE, work is expected to begin on six properties of at least 100,000 square feet this year.
Colliers said construction is now underway on six projects with a combined area of nearly 1.2 million square feet, with more than 95 per cent of the space expected to be completed by the end of 2024.
Noting that the National Capital Region has the second-smallest industrial footprint of any major urban area in Canada, CBRE Ottawa managing director Louis Karam said he’s optimistic the space will eventually be spoken for.
“We can sustain a lot more growth,” Karam said. “I still think that given our market, we can absorb it. In the long run, it’s just a question of time before we fill the space.”
