Newmark Knight Frank Devencore has reported in its real estate market study that vacancy rates in downtown Ottawa’s Class “A” and “B” office buildings continued to increase over the past six months, and are now edging up past 6.5 per cent. However, there has been increased tenant activity in recent months and some landlords have begun to market their Class “A” properties more aggressively.
The steady climb in vacancy rates over the past few years has been driven by a variety of factors, the brokerage reported in a news release.
“First, the federal government–the single largest tenant in the nation’s capital–has made a concerted effort to reduce its occupancy needs. Second, a number of new developments have been delivered to the greater downtown area, augmenting the existing inventory by over 900,000 sq. ft. This has provided some tenants with an opportunity to relocate and realize greater space efficiencies and lower occupancy costs. Finally, the increase in vacancy rates in downtown Ottawa reflects minimal private sector growth.”
Occupancy rates have been gradually climbing since 2012 in the Kanata market, and there is a renewed sense of optimism in the technology sector, spurred by the recent success of Shopify’s $100-million-initial public offering. Some industry analysts predict that more IPO’s may be in the offing, which may generate more activity in the region’s tech sector. In 2014, overall Class “A” and Class “B” vacancy rates were in the 10 to 11 per cent range, and in the first quarter of 2015 overall rates reached 11.6 per cent. In the Class “A” sector alone, vacancy rates fell to 9.1 per cent at the end of Q1.
Most of Canada’s largest cities have seen increases in office vacancy rates. In Calgary, where the energy sector drives the local economy, the combined Class “A” and Class “B” vacancy rate in office buildings jumped from 4.4 to 6.2 per cent over the last six months of 2014, and rates in Montreal also climbed as new inventory was delivered. There were more moderate increases in vacancy rates in Toronto, Edmonton, Winnipeg and Halifax, while rates were essentially unchanged in Vancouver over the same period. One of the factors affecting the rise in the country’s overall vacancy rates is the new inventory that continues to be built. Over 4 million feet of office space was added to the market inventory in 2014 alone.