Office vacancy in Ottawa continues to rise, despite growing expectations for workers to return to offices more frequently, according to a new Avison Young report.

Vacancy rates have remained high even as the federal government workforce in the National Capital Region has grown by 22% over the past five years — to 282,000 from 231,000 employees.

Office vacancy in Ottawa rose from a low of 6.3% in the first quarter of 2020 to a peak of 10.0% in the third quarter of 2023, before settling at 9.4%. The report attributes the weak demand to hybrid work arrangements and federal downsizing of older office spaces, which have outweighed the effects of employment growth.

Despite negative absorption in second and third quarters of 2023 (-41,595 and -41,858 square feet, respectively), the market saw a reversal in fourth quarter, with 189,296 sf positive absorption. This shift coincided with more assertive return-to-office (RTO) directives in both the public and private sectors.

Avison Young notes that federal office occupancy policies have a greater influence on local office demand than overall job creation. The government’s September 2024 mandate for public servants to be in-office at least three days per week could help reduce vacancy — particularly in the downtown core — but uneven application of the policy across agencies may slow recovery.

Pictured: Office building in Ottawa.

Photo: Courtesy of Avison Young

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