Scarcity best describes the state of commercial real estate in Ottawa, with all asset classes reporting product shortages except for office space in the city’s downtown core. Industrial sales and leasing remain tightest, with demand greatest for manufacturing, warehousing and distribution facilities. While availability rates edged up year-over-year in Ottawa, according to a recent report by Altus Group, vacancy rates remain stubbornly low, hovering at just over one per cent. Competition is fierce in the marketplace, with little product available, particularly within the urban boundaries.
Land sales have exploded in 2023 with industrial land now fetching $1 million an acre (and has moved for as high as $1.2 million an acre in recent months). With the expansion of the city’s official plan, there’s also been an uptick in the sale of development land for residential use, with purpose-built rentals and condominiums a top priority. Projects with approvals in place tend to move quickly, as evidenced by the recent quarter billion-dollar sale for a mixed-use development on 55 acres. The revitalization of LeBreton Flats, according to the LeBreton Flats Master Concept Plan, continues unabated, with several new buildings underway and applications for two more high-rise buildings under consideration. The Aqueduct District, situated within LeBreton Flats fronting the Ottawa River, will be ground zero for development in Ottawa over the next decade.
Retail has also experienced growth this year, especially in sought-after areas such as Westboro, Glebe, Centertown, and downtown. Demand for retail storefront in high traffic areas has been especially brisk. Malls and shopping centres are also doing well, with the Hudson’s Bay Company recently relaunching the Zeller’s brand within their locations in Rideau Centre and St. Laurent Shopping Centre. Chapters-Indigo recently closed its bookstore on Rideau St. to relocate to a new, large-format store within the Rideau Centre.
The office sector has had its challenges during the pandemic and its aftermath, with civil servants recently identifying the ability to work from home as a major bargaining chip in their contract negotiations. There are some very real questions regarding the future of commercial office space in downtown Ottawa, given that the city’s largest employer will likely not require as much space as it has had in the past. That said, the price per square foot for leased space has flatlined, but limited supply at this point is keeping current prices elevated. Altus Group recently pegged the availability rate for office space at 12.5 per cent in Ottawa during the first quarter of 2023, up from year-ago levels, but still amongst the lowest levels in the country. While the impact on downtown office leasing has yet to be determined, one commercial office building is already transitioning to residential. It’s expected the buyer will keep the existing structure but gut the interior down to the concrete base and reconfigure for residential use. Small office buildings, on the other hand, are in high demand throughout the city, with medical services the typical end user.
Opportunities currently exist within Ottawa for commercial investors, many of whom are attracted to the market because of its reasonable price point. Small office building, industrial buildings, and residential land, particularly product on the greenbelt, all represent a solid investment strategy. For those looking longer term, commercial office space is expected to bounce back, against a backdrop of population growth both nationally and within Ottawa itself.