In its Real Estate Market Study published today, Newmark Devencore reported that the office vacancy rate in downtown Ottawa should rise considerably over the next 2-3 years, opening up a range of opportunities for tenants that have not existed for most of the past decade. The possibility of new office towers being built for the private sector, coupled with the intention of Public Works and Government Services Canada (PWGSC) to vacate a substantial amount of its space downtown, is driving this shift in the market dynamic.
Through the first half of 2011, vacancy rates in Class “A” buildings stood at 4.0%, and approximately 395,000 square feet was available for lease or sublet. Class “B” vacancy rates registered a very low 1.8%, and less than 150,000 square feet was available.
“We anticipate that vacancy rates in downtown Ottawa could double—to 6% or higher—over the next couple of years,” said Don Marks, Director, Advisory and Corporate Services for Devencore Real Estate Services Ltd. “As a result, rental rates should soften and tenants will be presented with a greater range of opportunities. Any increase in vacancy rates, however, may be tempered by the degree to which federal buildings are taken off the market for retrofitting.”
Combined Class “A” and Class “B” vacancy rates in Kanata held at 15% mid-year, down slightly from 16.3% at the end of 2010. These vacancy rates may soon fall, however, as two major tenants of the Nortel Campus—Ericsson and Avaya—recently announced that they would be moving their operations to Kanata, and collectively absorbing approximately 300,000 square feet of space.
“The accelerated space absorption in Kanata being driven by the Nortel exodus may be a temporary and limited phenomenon,” Mr. Marks cautioned. “Nevertheless, over the short to medium term, tenants seeking leasing opportunities here will have to research emerging market trends carefully.”
Across the rest of Canada, corporate real estate markets have remained relatively healthy in 2011. The overall vacancy rate in Class “A” and Class “B” office buildings in Canada’s major cities dropped from 6.8% to 5.4% over the first half of the year, and total vacant space fell from 14 million square feet to just over 11 million square feet.
About Newmark Devencore
Devencore is the Canadian partner of Newmark, one of the largest real estate service firms in the world. Newmark Devencore is Canada’s largest corporate real estate advisor and brokerage exclusively representing corporate, industrial and retail space users. With offices across the country, Newmark Devencore offers its global clientele comprehensive services that are individually designed to ensure executive real estate decisions are supported by effective strategies and professional execution. To learn more about our capabilities, please visit www.devencorenkf.com
About Newmark
Newmark is one of the largest real estate service firms in the world. Headquartered in New York, Newmark and London-based partner Knight Frank together operate from more than 240 offices in established and emerging property markets on five continents. With a combined staff of more than 7,000 and revenues last year exceeding $993 million, this major force in real estate is meeting the local and global needs of tenants, owners, investors and developers worldwide. For further information, visit www.newmarkkf.com.
Newmark is a part of BGC Partners, a leading global brokerage company primarily servicing the wholesale financial markets. For further information, visit www.bgcpartners.com.