Older small-bay warehouses and new projects are in high demand in Ottawa’s industrial market as it continues to display stability, says a new Avison Young report.

The small-bay space demand is particularly high in established areas where units are in short supply, sustaining strong base rates and driving activity.

“Despite their physical and functional obsolescence, base rents in these buildings remain high, and are expected to escalate over the lease term, propelled by the lack of supply in this segment of the market,” said Avison Young.

Meanwhile, new construction projects are commanding premium rental rates due to advanced features such as increased clear heights, multiple docks, and on-site EV charging stations.

Demand for space is broadening to include non-traditional users, such as private sports facilities, clubs, and churches. These organizations seek accessible spaces with ample parking and open layouts, contributing to a diverse demand profile within the industrial sector.

As interest rates begin to decrease, land acquisition is seeing renewed interest, with smaller parcels under 10 acres in high demand. Smaller acreages within the Greenbelt are especially popular, benefitting from superior amenities and access to city services.

Industrial land within the Greenbelt is typically priced at $1.2 to $1.5 million per acre, with lot sizes often accommodating buildings of 10,000 to 25,000 square feet, driven largely by owner-user interest. Outside the Greenbelt, prices tend to be lower as amenities are fewer and municipal services like water and sewer are generally unavailable.

During the third quarter, total industrial vacancy rose 70 basis points year-over-year to 2.3%, while the average gross asking rate was $23.57 per square foot.

The market posted modest positive absorption of 16,000 sf, while 550,000 sf was under construction.

Photo: Courtesy of Avison Young