Office vacancy rate to inch up in 2013

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Meagre economic growth combined with ongoing government austerity will cause local office vacancy rates to edge up slightly next year, according to a new report.

Real estate services firm CBRE said the citywide office vacancy rate will increase 10 basis points next year to reach 7.8 per cent. Both the downtown and suburban vacancy rates will also increase by 10 basis points in 2013 to 6.5 per cent and 8.9, respectively. Net rental rates for class-A  space in both submarkets is forecast to increase by approximately two per cent.

Where the downtown diverges from the suburbs is in projected absorption, or the amount of space occupied minus the quantity of space vacated.

Approximately 20,000 square feet of downtown space is expected to be returned to the market in 2013, which follows the 40,000 square feet of negative absorption this year.

By contrast, absorption is in positive territory in the suburbs, where 280,000 net square feet are projected to be occupied next year on top the 500,000 square feet filled in 2013.

This may be in part due to the changing preferences of Public Works.

“(The) public sector’s (decision) to relocate facilities to the suburbs (was) a major factor influencing the office market in 2012 and will continue to have a major impact for the foreseeable future,” the CBRE report said.

On the investment side, multi-residential housing sales are set to end the year at $379 million, up more than 67 per cent over 2011. While that’s projected to moderate to $190 million in 2013, multi-residential housing is still forecast to outstrip all other asset classes in Ottawa next year.