With new retail construction at a virtual standstill in recent years as escalating costs and rising interest rates kept developers on the sidelines, the supply of available quality space has all but dried up, CBRE said in its recent Canada retail rent survey.
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Ottawa’s retail space crunch has created enough pent-up demand to fill new plazas like one planned for Barrhaven “10 times over,” a prominent commercial real estate broker says – even as the industry keeps a wary eye on a potential trade war with the United States that could disrupt the economy.
“There’s still little to no (retail) vacancy in Ottawa,” Candice Lerner-Fry, head of the retail leasing division at the local office of Marcus & Millichap, told OBJ in a recent interview.
“There’s still an appetite for retailers to expand, especially in new builds. Any new projects that are being announced, there’s a huge amount of interest.”
With new retail construction at a virtual standstill in recent years as escalating costs and rising interest rates kept developers on the sidelines, the supply of available quality space has all but dried up, CBRE said in its recent Canada retail rent survey.
The real estate firm said landlords are “often in receipt of multiple offers” when vacancies emerge.
CBRE is projecting rents at properties such as retail “power centres” and commercial space in mixed-use developments to keep rising in 2025 to the range of $45-$55 per square foot. Rents in mainstreet retail hubs such as the ByWard Market and Bank Street in the Glebe are also expected to soar past $50 per square foot, the firm added.
“Covenant of tenants remain key, but speed of deal and terms are decision drivers for landlords in the current market,” the report says.
Lerner-Fry says projects in Ottawa’s fast-growing suburbs – such as Choice Properties REIT’s new 70,000-square-foot pharmacy-anchored retail plaza on Cambrian Road in Barrhaven south that’s expected to be ready for occupancy in 2026 – can’t get done fast enough.
“We have (enough) retailers to lease it 10 times over,” said the veteran broker, whose firm is handling the leasing for the Barrhaven project. “We’re way behind residential growth.”
Skyrocketing demand for rental housing has prompted many developers to shift gears from pure retail projects to mixed use, multi-residential towers that allow for more leasable space on the same footprint, Lerner-Fry explained.
“If you can (choose to) build a 20-storey residential tower versus a one-storey grocery store, a lot of the developers are choosing the higher-density projects,” she said. “In a perfect world, you need new houses, and then you need a bit of industrial and then you need some retail. That’s not the trend we’re seeing. We’re seeing a huge amount of residential, very few new industrial and retail properties.”
Even when new developments do include a commercial component, it doesn’t always suit retailers’ needs, she added.
For example, she said restaurants usually require specialized HVAC systems, but builders might not take that into account when constructing a retail space.
“A lot of developers are still not getting retail experts to help them design the ground floor (commercial component), so sometimes it’s hard for retailers to wrap their heads around what is being built,” Lerner-Fry said. “A lot of times it’s not being built with a retailer in mind or (taking into account) what is required. It’s not as desirable as pure retail development.”
The result is that retail space is at more of a premium than ever, she added.
“There’s not enough retail being built for the amount of residential being built,” Lerner-Fry said. “There are developments where landlords were going pure retail and now they’re redesigning to put highrise residential with a little bit of retail. That’s not sufficient for the amount of growth Ottawa is seeing.”
