Ottawa’s office vacancy rate falls for fourth consecutive quarter in Q2: CBRE

David Sali

July 2, 2024
2:16 PM
ET

Already an Insider? Log in

Get Instant Access to This Article

Become an Ottawa Business Journal Insider and get immediate access to all of our Insider-only content and much more.

Learn More and Become an Insider

Ottawa’s office vacancy rate fell more than a full percentage point in the second quarter as leasing activity in the class-A and suburban markets continued to gain momentum, CBRE says. The vacancy rate in Ottawa was 11.8 per cent at the end of June, the real estate firm said in its latest office market report released Tuesday, down from 13 per cent in the first quarter. It marked the fourth consecutive quarterly decline in the office vacancy rate, which soared during the pandemic as employers shifted to a hybrid work model that hollowed out office buildings across the region. Continuing a recent trend, the class-A vacancy rate dropped to 10.8 per cent, down from 12.2 per cent at the end of March, “with occupiers relocating and securing spaces within newer, better-amenitized buildings in the core,” CBRE said. That surge in activity helped push the vacancy rate in Ottawa’s core down to 14 per cent from 14.6 per cent in the previous quarter. Earlier this year, CBRE predicted the downtown vacancy rate would rise to 15 per cent by the end of 2024. The suburban market was an even bigger bright spot in the second quarter as the vacancy rate fell to 10.1 per cent, down from 11.7 per cent in the first quarter. Meanwhile, the total percentage of vacant space on the sublet market also declined quarter-over-quarter, falling to 12.5 per cent from 15.4 per cent. While there were fewer empty spaces in class-A properties in the second quarter, net rents declined as landlords continued to dole out incentives to lure tenants back to the office. Average net rent for class-A office space was $18.86 per square foot at the end of June, down slightly from $19.03 the previous quarter. Net rent in downtown class-A space dropped to $22.97 per square foot from $23.29, while average rents in the suburbs fell to $15.69 per square foot from $15.77. New construction continued to be at a virtual standstill, with no new projects underway in the core and just 77,000 square feet of new office space on the go in the suburbs, the same amount as in the previous quarter. “Office owners and occupiers alike have gained a better understanding of the market with each passing quarter,” CBRE said. Ottawa remains one of the strongest office markets in the country. According to CBRE, its vacancy rate is the second-lowest of any major urban centre in Canada behind only Vancouver, where just 9.7 per cent of the city’s office space is vacant. CBRE said the Canadian office market reported 2.2 million square feet of positive net absorption last quarter. That comes after the national market produced nearly half a million square feet of positive net absorption in the first three months of 2024. It marks the first time since the first quarter of 2020 that there were two consecutive quarters of positive net absorption in the Canadian office market.