Ottawa’s downtown office vacancy rate rose to 10 per cent, a four-year high, even as other Canadian office markets stabilized and strengthened in the third quarter, according to CBRE’s latest office market report.
For the first time in four years, Ottawa’s office markets slowed, driven primarily by the central business district and Kanata submarkets, the report indicated. Downtown office vacancies surpassed those in suburban areas by 2.7 per cent.
Without finalized return-to-office plans for remote workers, especially federal civil servants, uncertainty remains in the market and is delaying additional commitments as players wait to see how the private sector adapts, the report suggested.
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Many Ottawa tenants downsized as they evaluated their workplace needs, the report indicated. Sublets are on the rise, increasing for the first time since Q4 2020 and now representing 13.6 per cent of vacant space, CBRE’s data showed.
At the same time, seven out of the 10 Canadian cities tracked in CBRE’s report recorded slight drops in downtown vacancy rates. Canada still boasts three cities among the top five with the lowest downtown vacancy rates in North America: Vancouver (7.1), Ottawa (11.5) and Toronto (11.8).
According to the report, Canada saw a decrease of one per cent in overall vacancies in office space.
“Canadian office markets have been remarkably resilient despite enduring years of pandemic-related challenges, new supply additions and ongoing remote work issues, as well as a pending economic slowdown,” said CBRE vice-chairman Paul Morassutti in a news release.
“These latest figures offer compelling evidence that energy and momentum are returning to our cities and helping to bolster leasing activity. Although all eyes are focused on the economy, which is proving more difficult than usual to predict.”
As for Ottawa’s industrial real estate market, availability rose to 2.3 per cent in the quarter, but demand is still outpacing supply.
As a result, asking average net rents reached an all-time high of $13.07 per square foot in the third quarter, surpassing the $13 mark for the first time and rising 9.4 per cent year-over-year. The current construction pipeline is expected to continue driving rates up, with some projects asking as much as $16.50 per square foot, the report said.
Nationally, the amount of available industrial space remained at rock bottom in the third quarter, with the national availability rate unchanged at the record low of 1.5 per cent, the report showed.
“The supply of industrial space continues to lag behind demand regardless of a slowing economy and record levels of construction in many Canadian cities,” said Morassutti. “Market fundamentals remain strong, yet there is the potential for some moderation of industrial rental rates. However, a deceleration in the rate of rental growth should not be confused with a decline in rental growth.”
