A lack of available office space in Ottawa’s downtown core ranks Canada’s capital among the hardest cities in North America for tenants to find centrally located real estate, according to a new report from CBRE.
In the real estate services firm’s 2020 forecast, CBRE notes that Ottawa’s downtown core, which currently sports an office vacancy rate of 6.5 per cent, is among the six tightest markets in North America. The capital’s downtown vacancy rate is tighter than U.S. cities such as Charlotte and Boston, but has a higher vacancy rate than major cities such as Toronto, Vancouver and San Francisco.
CBRE does not expect relief in downtown Ottawa any time soon. The firm projects vacancy rates in the city’s central business district will dip as low as 5.2 per cent in 2020. Net asking rents for class-A space in the downtown core is expected to climb from $24.05 per square foot to $25.25 in the year ahead.
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CBRE is forecasting a similar story in suburban Ottawa markets such as Kanata. The suburbs posted a vacancy rate of 6.2 per cent at the tail end of 2019, which CBRE expects to fall to five per cent over the course of 2020. Class-A space here was rented at a net of $15.67 per square foot last year, a figure CBRE expects to rise to $16.50 in 2020.
Both the downtown and suburban commercial markets have minimal supply expected to come online in the year ahead.
CBRE wrote in its report that aging federal office space and a booming tech sector are expected to continue to drive demand in Ottawa over the course of the year.
Nationally, CBRE said Canada could see a record-breaking $50-billion worth of investment in commercial real estate this year as macroeconomic tailwinds and immigration policies support the booming sector.
The firm said the investment would be about $5 billion higher than 2019 and about a billion dollars higher than the record set in 2018.
Heightened interest in the market is also creating challenges, including rising rents and limited office and industrial space.
CBRE said prime office rents jumped by 20.9 per cent in Vancouver between 2018 and 2019, 14.2 per cent in Montreal, and 10.1 per cent in Toronto, while national industrial rents rose by 12.3 per cent between the two years for the largest increase on record.
It said the combination of challenges has the potential of slowing momentum in the commercial real estate sector.
The coronavirus outbreak is also creating uncertainty, but the firm said that if it is relatively contained sometime in March, then the impacts on the Canadian economy and commercial real estate would be noticeable in the near term but less substantive over the year.
– With files from Canadian Press