Ottawa office rental rates declined in the fourth quarter of 2023 as tenants reduced their space requirements, says a new report from Avison Young.

Office rents fell $1.20 per square foot year-over-year during the period as sublease availability reached a new all-time high, said the company. Net asking rates for class B and C properties declined more than 10% year-over-year.

Employers continue to struggle with a return-to-office strategy following the COVID-19 pandemic.

“Landlords are acting aggressively to secure quality tenants with covenants offering
significant concession packages and longer fixturing periods,” said the company in the report.

Total office availability increased 390 basis points to 14.3% from the same period in 2022. Class A space availability drove much of the increase, rising 320 basis points from a year earlier.

The total available office lease area increased 800,000 sf year-over-year to 5.8 million sf. The market recorded 178,000 sf of negative absorption in the fourth quarter of 2023 and 569,000 sf of negative absorption over the full year.

Sublease availability, as a percentage of all available space, increased 300 basis points year-over-year to a record 14.2%. Demand for discounted short-term sublease space is offsetting new listings and will likely continue through the first half of 2024, according to the report.

“As office tenants continue to find the balance between in-office and remote work solutions, it is becoming increasingly evident that in some office employment sectors, less is more,” said Avison Young.