Despite a recent spike in the amount of space available for sublease as companies look to shed real estate during the pandemic, a major Canadian brokerage is predicting Ottawa’s office vacancy rate will remain among the lowest in the country in 2021.
In its 2021 market forecast released earlier this week, Avison Young says the local vacancy rate should hold steady at around seven per cent next year. That’s expected to be the second-lowest rate among the 10 major Canadian cities surveyed after Vancouver, which is forecast to have an office vacancy rate of 4.6 per cent in 2021.
Avison Young is forecasting the overall average vacancy rate in the cities it surveyed to tick up slightly to 12 per cent next year.
While the firm says “co-working spaces and tech firms have driven demand for office space across Canada,” it argues that the COVID-19 crisis has “challenged the co-working model and brought lofty expectations for this sector down to earth.”
Meanwhile, the report calls the Canadian tech real-estate picture “mixed.” Avison Young notes that while some companies are continuing to make big space commitments, others are opting to shift to a work-from-home model and sublease huge swaths of space.
That scenario certainly appears to be playing out in Ottawa.
While some tech heavyweights such as booming supply-chain software firm Kinaxis are planning big moves to expand their real estate footprints in 2021, others such as Shopify have recently shed major portions of their local portfolios.
Sublease space nearly doubles
That helped push the overall amount of office space available for sublet in Ottawa in the third quarter to more than 530,000 square feet – nearly double the total from the previous quarter.
“To date, most sublets are small but larger blocks are on the horizon, which could tilt the scales in tenants’ favour and force landlords to adjust pricing – particularly in major downtown centres,” Avison Young says.
“Apart from challenged markets such as Calgary and Edmonton, rent growth may have plateaued in 2020 after rising for several years and may begin to soften.”
The study comes the same week CBC reported that the federal government could be eyeing a radical restructuring of its real estate portfolio in a bid to achieve “net-zero” greenhouse gas emissions by 2050 – an effort that could have a major long-term effect on the Ottawa market.
CBC said the Liberals’ draft plan includes potential measures such as retrofitting buildings and allowing civil servants more flexibility to decide when they want to go to the office.