Ottawa’s office vacancy rate continued to rise in the second quarter, commercial real estate firm CBRE said Monday while noting that signs of a recovery are on the horizon as the downtown vacancy rate declined for the first time since the pandemic began and the share of sublease space on the market fell to its lowest point in 12 months.
The city’s overall vacancy rate stood at 9.8 per cent at the end of June, up two-tenths of a percentage point over the previous quarter. The increase was fuelled by a major jump in the suburban vacancy rate, which rose half a percentage point to 9.1 per cent.
With the restrictions aimed at controlling the spread of COVID-19 still keeping many workers hunkered down at home, office towers across the region have been hollowing out over the course of the pandemic.
But CBRE said it’s seeing signs of a turnaround over the past few months as the economy slowly begins to rebuild.
The downtown office vacancy rate, for example, dipped slightly from 10.7 to 10.6 per cent in the second quarter. The percentage of empty space in class-A space fell by 20 basis points to 7.7 per cent, which CBRE called “a sign of flight-to-quality taking place,” while average rents edged up 11 cents to $23.43 per square foot.
The brokerage firm also pointed to a decline in the amount of office space up for sublease.
Available space down 2.6%
While that inventory had been growing throughout the COVID-19 crisis as renters looked to hand off unused space to other tenants, the overall amount of sublet space declined 2.6 per cent in the second quarter to just under 578,000 square feet.
That drop was largely a result of two floors covering 35,000 square feet being subleased in Performance Court at 150 Elgin St. That followed co-working firm TCC’s move to sublease several floors in Performance Court that had been vacated last year by e-commerce giant Shopify, a transaction that occurred in Q1.
Sublease space now represents less than 15 per cent of the city’s overall stock of vacant office space, the lowest total since the second quarter of 2020.
On the industrial side, available space continues to get swallowed up as the region stakes its claim as an e-commerce distribution hub.
CBRE said the availability rate of industrial properties in Ottawa fell to three per cent at the end of June, compared with 3.2 per cent in Q1. Meanwhile, average net rents rose 43 cents to a record $12.06 per square foot.
The firms said interest in the capital’s industrial market remains “steady.” CBRE said that while no new construction is currently under way, more than 30 development applications are now active for projects ranging from 4,000 up to one million square feet.