Ottawa’s historically steady industrial property market is projected to weaken further as 2016 draws to a close after vacancy rates jumped nearly a full percentage point in the third quarter, a local real estate firm says.
In a report released Tuesday, Cushman & Wakefield Ottawa said the citywide industrial vacancy rate climbed 90 basis points from 6.8 per cent in the second quarter to 7.7 per cent at the end of September.
To put that figure in context, the real estate services firm said Ottawa’s average industrial vacancy rate since 2010 is approximately six per cent.
The volume of leasing activity this fall was outstripped by several large blocks of space coming onto the market. This includes a 52,000-square-foot former furniture warehouse and showroom at 401 Coventry Rd. as well as 86,000 square feet at 950 Ages Dr. vacated by Veritiv after the distribution company relocated to Vars, Cushman & Wakefield said.
In another sign of rising vacancies, net absorption – which measures the change in occupied space – was negative at -201,000 square feet.
Despite the rising vacancy rate and negative absorption, asking rental rates continued to climb and reached $9.12 per square foot, according to Cushman & Wakefield, which called it “one of the highest asking rates in the country.”
In a separate third-quarter report on Ottawa’s industrial market, Colliers International said new buildings and smaller spaces are in the highest demand among tenants. The company said older properties and those with pockets of space in excess of 15,000 square feet are more likely to remain vacant.
“A flight to quality remains the focal point for most active users. Newer developments that offer higher ceilings and recent improvements are often leased more quickly than older product,” Colliers said. “Repositioning of these (older) assets may pose a challenge, but is well worth it in the growing industrial market.”