Ottawa commercial real estate execs ‘seeing the market come alive again’

November 11, 2024

Michael Pyman, Colliers’ Ottawa-based vice-president of national investment services, says there could be a significant uptick in local commercial transactions in 2025, especially if the Bank of Canada continues to reduce interest rates and it becomes cheaper for investors to borrow capital.

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Leading commercial real estate executives say the National Capital Region’s investment market is showing signs of a revival as interest rates fall. Michael Pyman, Colliers’ Ottawa-based vice-president of national investment services, says there could be a significant uptick in local commercial transactions in 2025, especially if the Bank of Canada continues to reduce interest rates and it becomes cheaper for investors to borrow capital. “We’re seeing the market come alive again, which is great,” Pyman told OBJ last week. “I think that these interest rate drops really reawakened the market on multiple levels. We’re seeing it now on the income side of it, but also on the development side, which has kind of been at a standstill waiting for interest rates to come down.” Pyman’s remarks came two weeks after Canada’s central bank dropped its benchmark rate by 50 basis points to 3.75 per cent. Economists expect further rate cuts in the coming months, which could fuel a new wave of interest in all types of commercial properties, Pyman said. “I think that’s going to make its way into the market, and we’re going to definitely see a lot more trading volume next year,” he added. “I think that there are still some institutional vendors out there that have been waiting for the opportune time to go to market.” Developers are also looking to capitalize on a market where cap rates for some assets are still “well off peak-market pricing,” Pyman explained. Colliers, for example, just helped broker the sale of an office building on Argyle Avenue in Centretown that is currently occupied by defence and security firm ADGA Group. Ottawa’s Gagnon family, which founded ADGA in 1967, sold the company to Commissionaires Ottawa Group three years ago. However, it held on to the firm’s 17,700-square-foot head office at 110 Argyle Ave., which it acquired in 2013 for $3.85 million. The family put the 58-year-old building, which ADGA Group is vacating next month, on the market four months ago for $5.7 million. Ottawa-based Colonnade BridgePort, which is redeveloping the site next door at 100 Argyle Ave. into a multi-residential complex, ultimately acquired the building along with a triplex at nearby 455 Metcalfe St. that was also owned by the Gagnon family for $6.9 million. “At the end of the day, (the owners) had multiple offers kind of come in at the same time,” Pyman said. “I think everybody that was looking at it was looking at it as a redevelopment property as opposed to maintaining the existing office building. The overwhelming interest was from the development community.”

Market 'moving in a positive direction'

Sachin Anand, vice-president of acquisitions at Ottawa-based Regional Group, agreed the real estate investment market is more active than it’s been in a while. “I would say there’s been a lot of people on the sidelines for the last few years waiting for interest-rate certainty or plateauing,” Anand said in an interview with OBJ last week. “I think now people have sort of seen the inflection point happen, and they see (the market is) moving in a positive direction. You’re seeing more people come to bid; you’re seeing more lenders say that they’re active in all asset classes.” While the office sector has struggled to recover from a mass exodus of tenants during the pandemic, Pyman said there are signs it could be on the upswing. “I think that long-term, the office market will rebound,” he said. “We’re seeing occupancy levels increase, and back-to-work strategies are getting more prevalent. There is definitely still some uncertainty from an investment standpoint in that market segment. We’re seeing some pretty opportunistic buys out there.” Anand said deals stalled over the past couple of years because buyers and sellers were often at loggerheads over valuations. “That disconnect between the bid-ask just annihilated transactions,” he said. “I feel bad for brokers, because a couple of billion dollars in transactions they would’ve expected never really materialized in Ottawa.” But as 2024 comes to a close, Anand senses things are turning around. “I think there’s going to be a lot more activity in the sector across all asset classes,” he said. Pyman predicted that “grocery-anchored retail” properties could be a hot commodity in the coming year as investors look to cash in on what has become a chronic shortage of high-quality retail real estate in the nation’s capital. He also said there is a “tremendous amount of interest” in larger, good-quality industrial buildings, adding high-density, multi-family properties are also seeing a bump in demand. As for any potential reverberations from last week’s U.S. presidential election, Pyman said it’s still “too early to tell” what impact a new Trump administration might have on the commercial real estate investment climate north of the border. Pyman said the potential for a change in government in Ottawa next year will likely have deeper long-term ramifications for Canadian real estate. “I think our election next year is probably going to have some impact on sentiment for real estate generally in Canada,” he said.