Ottawa’s office vacancy rate to remain tight in 2020: Avison Young


Commercial tenants struggling to find room to grow in Ottawa’s tight office market likely won’t have a much easier task this year than they did in 2019, according to a new forecast from one of Canada’s largest commercial real estate firms.

Avison Young says continued growth in private-sector employment should keep office vacancy rates hovering below five per cent in the downtown core and south of seven per cent in Kanata, where many firms in the booming tech sector are bursting at the seams. 

The company says office vacancy rates in the capital “are expected to decline through 2020,” and the managing director of Avison Young’s Ottawa office says he sees little relief in sight for space-strapped tenants.

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“Somebody’s going to have to build something,” Michael Church told OBJ on Tuesday. “It’s just hard to find (space). It’s a challenge.”

Much of the space at new projects under development in the west end, such as Cominar’s new building at 800 Palladium Dr. ​– where Ford is expanding its local R&D facilities ​– and Kinaxis’s new headquarters in the Kanata West Business Park, is already spoken for, Church noted. 

Meanwhile, many smaller firms are having a hard time carving out new space where they can expand their operations.

Developers are “all waiting for … that 50- or 60,000-thousand (square-foot tenant),” he said. “But those don’t come on trees.”

Apartment boom to continue

Avison Young also expects the recent wave of multi-residential apartment construction to keep rolling in 2020 and beyond as developers scramble to address pent-up demand in a city with a rental vacancy rate of below two per cent.

“Once these projects are completed, increased trading activity in this asset class is expected,” the report says.

Church said Ottawa’s available stock of residential and commercial development land inside the Greenbelt is quickly evaporating, adding he expects to see record prices for any parcels that do come on the market, especially those located near Ottawa’s two light rail lines.

“Ottawa, we’re still poised for what I would call some pretty good growth opportunities,” he said. “I would love to see an acceleration of phase two of the LRT. The thing was designed for 40-plus stops, not 12. We know what’s happening in those nodal areas that are going to be serviced by LRT when they’re finished.

“At the end of the day, people have to live somewhere. There’s room (for growth) there for sure.”

Avison Young also says it expects the city’s industrial vacancy rate to continue to hover around 1.3 per cent in 2020, making Ottawa one of the tightest markets in the country. Noting that little space is likely to return to the industrial pool this year, the company says rental rates will “remain high and are likely to increase for the foreseeable future.”

Church said he thinks a growing push for more locally sourced food among environmentally conscious consumers could lead to new industrial facilities that cater to hydroponics and other green industries.

“I think you’ll see some more development around sustainability,” he said. “I don’t know what it is with industrial in Ottawa. We don’t build (industrial property) on spec.”

On the retail front, Avison Young says Ottawa’s market “continues to evolve with the planned re-purposing of several neighbourhood shopping centres into mixed-use redevelopment projects,” such as RioCan’s proposal to demolish Lincoln Fields Shopping Centre and replace it with a mix of retail, commercial and residential space.

Church said the rise of e-commerce has left retail landlords in a state of flux.

“If nothing crazy happens, I think you can expect continued modest growth in all facets of commercial real estate in Ottawa with the possible exception of retail,” he explained. “It’s still trying to find its level, given the new reality.”

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