Tenants in Ottawa’s downtown core and tech hub of Kanata continued to shed office space in early 2021 as the city’s office vacancy rate rose for the fifth quarter in a row, real estate firm CBRE says.
The overall office vacancy rate stood at 9.6 per cent at the end of March, the firm said in its latest market report, up nine-tenths of a percentage point from the previous quarter.
The increase was even more dramatic in the downtown core, where the rate jumped from 9.5 per cent in the fourth quarter of 2020 to 10.7 per cent in the first three months of 2021. Class-A real estate in the core fared comparatively better, but 7.9 per cent of that premium space is now empty, up from seven per cent in the previous quarter.
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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.
An additional 460,000 square feet of space came on the market in Q1, 225,000 of it in the central business district.
Sublease space declines
CBRE did note that sublease space in the core – which skyrocketed last year after major tenants such as Shopify and OpenText vacated properties as the work-from-home trend accelerated – declined slightly in the first quarter. But the firm said the bounceback could be short-lived, with an additional 100,000 square feet of space expected to be returned to the market in the second half of 2021.
As always, the federal government will play a key role in determining the future course of the city’s office market. CBRE said it expects the feds to continue to take a “wait-and-see approach” to their real estate needs.
“As federal building conditions continue to worsen and leasing expiries loom nearer, market participants will be closely watching the decisions made by Ottawa’s largest office tenant,” the firm added.
Meanwhile, CBRE said available industrial space continues to get snapped up as the region evolves into a growing e-commerce distribution hub.
The availability rate of industrial properties in Ottawa fell nearly a full percentage point last quarter, dropping from 4.1 per cent at the end of 2020 to 3.2 per cent by the end of March.
Surging demand helped push up average rents 85 cents to $11.63 per square foot, a new record.
“The industrial market remains active coast-to-coast, Ottawa included,” CBRE’s report said. “In comparison to other major cities, however, Ottawa lacks a pipeline of speculative builds for tenants seeking immediate occupancy in high-quality space.”