With class-A office vacancy rates dipping below four per cent in Ottawa’s central business district, talk among some real estate watchers is turning to when ground will be broken on the city’s next office tower.
“We certainly believe that it's time,” said Nathan Smith, managing director of Cushman & Wakefield Ottawa, speaking on the sidelines of this year’s Ottawa Real Estate Forum.
CBRE managing director Shawn Hamilton, who joined Smith on the Ottawa Real Estate Show, noted that a sub-five per cent vacancy rate in many other cities would typically cause net effective rents to skyrocket and, in turn, “cranes going in the air.”
Ottawa is a slightly different market, however, because its growth has historically been tethered to the federal government.
But Smith says there is talk of Public Services and Procurement Canada exploring a request for some 130,000 square feet of central office space.
“We've seen the feds kick off development before,” Smith said.
If the feds were to agree to lease that much space in a new building, Smith said one of the key questions is whether a developer would construct a tower in the hope that private-sector tenants would lease the balance of the space and make the project viable.
Smith conceded that some of his fellow panelists at the Ottawa Real Estate Forum took a conservative position on this question, despite the strength of the emerging urban tech market.
He took a slightly different view.
“I’m sure some investors would certainly take a look at the opportunity to put a crane in the ground,” Smith said.
Strong industrial market
Ottawa’s industrial market is performing at its strongest level in years, with an availability rate of less than three per cent and record rent levels.
Dominic Bonin, the leasing director at Skyline Commercial Asset Management, said Ottawa is seeing a new wave of tenants that were never previously part of the industrial market mix.
“Where we used to have a flooring company’s distribution (centre), we now have a dog daycare hotel,” he said as an example. The growing craft brewery sector is another emerging tenant, using industrial space both for its production facilities as well as tasting rooms.
Michael Polowin, a well-known municipal affairs lawyer and partner at Gowling WLG, says a raft of city and provincial changes to land-use and development regulations have significant implications for builders.
The reality, he says, is that lawyers and planning consultants now need to be brought into the process earlier.
Speaking on the Ottawa Real Estate Show, Polowin made the argument that Ottawa is currently “over-planned.”
We also caught up with André Martin, a partner at Mann Lawyers – a sponsor of the Ottawa Real Estate Show – to hear his outlook for the commercial property industry.
Martin also touched on some of the key trends he’s seeing in the retail real estate market, such as how tenants and landlords alike are adapting to the rise of e-commerce.