This article has been updated to include clarifications about the amount of available space in the Fringe Core submarket.
Leasing activity in Ottawa’s commercial real estate sector held relatively steady in the past quarter but the upcoming federal election might have a substantial impact on the downtown office market in coming months, according to a recent report from Colliers International.
The real estate services firm said Ottawa’s office availability rate – the amount of space being marketed for lease, even if it’s currently occupied by existing tenants – rose to 8.5 per cent over the three-month period from July to September, up from 8.1 per cent in the previous quarter. The rise in overall availability comes despite a net absorption of roughly 62,000 square feet of leased space in the third quarter.
The average asking price per square foot of office space in the quarter was up 1.1 per cent year-over-year to $16.19.
While leasing waters seem calm now, Colliers warned of potential impacts from the upcoming federal election. Should the Oct. 21 vote result in a new government with tighter pursestrings, the feds’ presence in the National Capital Region’s office market might contract, opening up opportunities for the private sector to take over workspace from government agencies or related organizations.
In its platform released this past week, the Conservative Party of Canada noted it would reduce federally used office space by 30 per cent if elected in next week’s vote.
Colliers highlighted increasing availability in Ottawa’s fringe core as a trend to watch. Nearly 375,000 square feet of space is up for lease in the submarket, which works out to an availability rate of 10 per cent. There are many pockets of 2,000 square feet or less available in the area at the moment – normally a prime leasing niche for smaller companies – but Colliers pointed to the rising influence of coworking in Ottawa as a motivation for startups and other small firms to seek shorter-term or flexible leases.
“This is an example of the disruptive effects that coworking can cause on a more traditional real estate market,” the report said.
Dream Office REIT out of Ottawa
Colliers’ quarterly report also highlighted the top commercial building transactions in the past three months. Topping the list was Crown Realty Partners’ $56.5-million deal to purchase the Carling Executive Park, located near Churchill Avenue and Highway 417.
Just behind that was Dream Office REIT’s $40.5-million sale of 150 Metcalfe St. in late August. The deal, which will see Northam Realty takeover the 23-storey class-A property from Dream, marks the REIT’s departure from Ottawa’s office market as it looks to exclusively focus on opportunities in Toronto.
Current tenants at 150 Metcalfe include the federal government, professional services firms and several embassies.
While Dream is exiting Ottawa’s office market, the firm’s industrial-focused REIT is adding to its capital portfolio. Dream Industrial announced back in June that it was purchasing two buildings totalling 233,000 square feet at Humber Place.
Closing the following month, Dream Industrial’s acquisition was by far the largest-such transaction in Ottawa’s industrial market this past quarter at a price tag of $32.8 million, according to Colliers’ report.
The firm reports that availability in the city’s industrial sector is stuck at 2.3 per cent as a lack of attractive land for new builds is hampering development opportunities.