More investors ‘kicking the tires’ in Ottawa’s office market, veteran broker says

St. Laurent Boulevard building
Cushman & Wakefield recently helped broker the sale of this building at 2465 St. Laurent Blvd. from Cominar to a private investor.

A leading commercial real estate broker says Ottawa’s investment market is gradually gaining steam after a dismal 2023 that saw transactions plummet more than 50 per cent compared with the previous year.

Scott Brooker, vice-president of Cushman & Wakefield’s capital markets group in the National Capital Region, told OBJ Tuesday he believes the local market is “stabilizing” following a tumultuous four-year period in which office vacancy rates soared to record levels as tenants abandoned their cubicles during the COVID-19 crisis.

Brooker noted that while Ottawa’s first-quarter vacancy rate of about 13 per cent was historically high by local standards, the city still has a lower percentage of vacant space than almost any other big city in Canada outside Vancouver.  

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“Ottawa is really the stable port in the storm,” he said. “People are adjusting to the market around them. I think the return to the office is hastening. I think that generally speaking, vacancies have peaked.”

The federal government, the National Capital Region’s largest occupier of office space, made headlines earlier this spring when it announced it would speed up its plan to divest up to 50 per cent of its real estate holdings over the next decade.

That prompted Darren Fleming, CEO of local commercial brokerage Real Strategy Advisors, to declare that the feds “are not coming back to the downtown core.”

Brooker, however, has a somewhat rosier outlook on the government’s long-term office strategy for the National Capital Region.

While acknowledging that the feds are “going to give up space” in a bid to reduce office operating costs and greenhouse gas emissions, Brooker said the presence of Parliament Hill and the sheer scope of the federal office footprint in Ottawa make it unlikely the government will ever abandon the core.

“I think we’ll see the feds downtown for a long time,” he predicted.

Yet while at least some tenants appear to be eyeing a return to the office, investors remain slow to jump back into the market.

A report from Morguard released last week said total office property sales in five of Canada’s largest cities hit their lowest level in seven years last quarter. 

Morguard cited the “combination of the rising cost of debt, increased economic uncertainty, and the subsequent widening of the gap between vendor and purchaser acquisition pricing expectations” for the slowdown in investment.

Ottawa was one of the few bright spots in the report. The federal government’s $125-million acquisition of a building at 181 Queen St. accounted for nearly half the value of all Canadian office transactions in the first quarter.

Still, the local market is coming off a year in which the total total dollar value of commercial real estate transactions dropped 53 per cent from 2022. But Brooker thinks a turnaround is coming. 

His firm just helped broker the sale of a 63,000-square-foot, class-B office building at 2465 St. Laurent Blvd. from Cominar to a private investor that intends to occupy part of the complex and lease out the rest. Terms of the deal were not disclosed.

Brooker said there was a “fair amount of interest” in the property, which was previously occupied by the Canada Revenue Agency. 

“We’re starting to see more momentum,” the veteran broker added. “I think there are investors kicking the tires (of assets) across the board.”

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