Vacancy will continue to fall in Ottawa’s beleagured office market, brokers who specialize in the asset class told the Ottawa Business Journal.

The comments came after CBRE reported that Ottawa office vacancy declined almost two percentage points to 11.2% from 13% in the second quarter of 2024.

“It is clearly a trend,” Shawn Hamilton, a partner at Proveras Commercial Realty told the OBJ.

“There is movement. The era of paralysis or kicking things down the road is coming to an end. Business leaders are making the call that they would like hybrid (work arrangements) to be defaulted from the office rather than defaulted from home.”

In recent years, the Ottawa office sector has been grappling with high vacancy and availability due to the effects of the COVID-19 pandemic, high interest rates, the hybrid work movement, changes in market conditions and the advanced ages of many buildings. The market has also faced considerable uncertainty due to the federal government’s desire to convert 50% of its total office assets to other uses.

According to CBRE, class A vacancy fell to 10.8% in the second quarter from 12.2% at the end of the first quarter largely. But net rents declined due to ongoing tenant inducements, including free rent and fit-up subsidies.

The downtown class A average net rent fell to $22.97 per square foot from $23.29 psf in the first quarter.

Demand was higher in the suburbs than in the core. Suburban vacancy dropped 160 basis points quarter-over-quarter to 10.1% from 11.7%, while downtown vacancy dipped 60 bps.

Sarah Vandenbelt, a suburban office specialist with Paradigm Commercial, was not surprised by renewed demand for spaces in outlying areas.

“Even at the beginning of the pandemic, we had expected that that would be the case, but it never really [happened] that way,” she told the OBJ. “It’s interesting that we’re now seeing it.” 

Tenants are attracted to suburban locations due to their abundance of parking and closer proximity to employees’ homes as in-office work requirements increase following the pandemic.

Suburban business parks with office and industrial zoning also appeal to tenants.

“That opens up [space] to all kinds of different users, not just office users. While we talk about [office-to-residential] conversions in the downtown core, we’re now talking about office conversions in the suburban markets for more industrial-flex users,” she told the OBJ, noting that firms in the Kanata district’s tech hub are driving much of the suburban leasing activity.

She believes that the overall Ottawa office market is “settling back to normalcy.”

“The mindset of business leaders is absolutely starting to look like something that we’re much more familiar with,” she told the OBJ.

Photo: Iryna Tolmachova / Shutterstock.com