An upswing in private-sector growth is translating into good news for the city’s downtown and Kanata office markets, according to the latest report from Colliers International.
The city’s overall office vacancy rate rose to 12.4 per cent in the second quarter from 10.6 per cent a year earlier, the report says, attributing the increase to a “direct result of government downsizing and relocation, which, because of its magnitude, has had a domino effect on the overall office market.”
However, the report says the vacancy rate in the Kanata and downtown submarkets has dropped to 14.4 per cent from 16.1 per cent in the second quarter of 2014, thanks largely to a resurgent technology sector.
“Ottawa stopped being just a ‘government town’ long ago, and our Q2 results illustrate the gradual growth the high-tech sector is experiencing,” Kelvin Holmes, managing director of Colliers International in Ottawa, said in a release. “Growth in the private-sector office market, particularly in high-tech, will go a long way to mitigate the impact of the federal government’s real estate strategy.”
Mr. Holmes said several factors could have a significant impact on vacancy rates over the next year, including the Department of National Defence’s move to the former Nortel complex on Carling Avenue in 2016, the upcoming federal election and a number of government tenders for office space in the downtown core.
“The result of this back-and-forth in expansion and contraction among the private and public sectors in Ottawa is that a number of landlords are offering aggressive deals in order to minimize the impact of large-scale tenants, such as the federal government, leaving their buildings,” he said.
“The report says the current common trend in Ottawa is high interest from the private sector in conjunction with high competition from landlords.”
The vacancy rate in Ottawa’s industrial market fell to 3.3 per cent in the second quarter, the report says, down from 4.8 per cent in the first three months of 2015.
Mr. Holmes said a lack of fresh industrial space means existing tenants who might otherwise consider moving have few options and are simply choosing to stay where they are.
“Ottawa needs to create new industrial inventory, and until that happens, there is reason for caution for the remainder of 2015,” he said. “There is a lack of activity, regardless of price, in this sector. This lack of action on well-located, good-quality industrial space could indicate a slowing of this market until new quality inventory is added.”