Ottawa Commercial Real Estate Overview (2025)

Solid economic fundamentals continued to underpin the Ottawa commercial real estate market, despite renewed concerns of a possible recession given current trade tensions. First quarter activity was strong out of the gate in the industrial and retail asset classes, with demand continuing to outpace supply.

While industrial availability rates have edged slightly higher over the past year, Ottawa remains the lowest in the country’s top eight industrial markets, sitting at 4.3 per cent, according to Altus Group’s quarterly industrial update for Q1 2025. Smaller light industrial buildings remain most coveted, especially those with good ceiling height (21 ft.) and loading docks. A shortage of available land zoned industrial is hampering new construction and no new completions were reported so far this year. Construction is underway on a 200,000 sq. ft. property, but more than half has been pre-leased. Industrial condominiums are a hot commodity as well, with units recently listed in both the city’s east and west sides scooped up quickly. Most never make it to market. Tight market conditions continue to impact net rental rates, but increases have been tempered due to current market realities.

Ottawa’s retail market continues to thrive, with both leasing and sales activity robust throughout much of the city. Most retail space is quick to sell, and finding anything in the sought-after $2 million range is virtually impossible. Adaptive reuse is occurring throughout the asset class, with the best example a new gym at the site of a former Canadian Tire store. After a long drought, new retail construction is expected to break ground in Barrhaven, Orleans and Kanata this year. New entertainment venues are planned for both the Byward Market and Kanata. Investors have been driving demand for retail centres that are anchored by grocery stores. A brokered retail plaza recently traded at a cap rate of six per cent. New business is also filtering in from other provinces. Ottawa was chosen by Montreal-based furniture retailer Cozey for their first pop-up store in 2025, with the intent to eventually open in the city.

Conversions reshape downtown office market

While the downtown office sector has been hard hit and struggling post-pandemic, availability rates are trending downward. According to Altus Group, availability now sits at 12.8 per cent in Ottawa, down from 13.6 per cent one year ago. A Class buildings, and to a lesser extent B Class, remain stable in terms of leasing, while C Class and lower are potential retrofit sites. Conversions have played a role to date, with several properties completed, and at least three more underway, including 360 Laurier Avenue West, 200 Elgin St. and 230 Queen St. Governments at various levels have promoted these conversions, with incentives including a full GST rebate for new residential rental property construction or commercial business conversion to residential. A third building in Kanata recently received approval to transform an 11-storey office tower to a mixed-use building with 115 units. The federal government has set it sight on adding residential housing stock by repurposing outdated federal office buildings. Fifty-six properties have been targeted to date for conversion, including 22 addresses in Ottawa. The intent is to provide a long-term lease to developers as opposed to a one-time sale.

Multi-family supported by institutional capital

Real Estate Investment Trusts (REIT) and institutional investors continue to foster growth in the multi-family purpose-built rentals asset class. RioCan, Killam, and Minto all have a presence in the market, with Dream wrapping up construction on more than 200 units in Zibi Block 204 and Equiton launching three residential towers in mid-2025. CMHC financing has contributed to the upswing in activity in recent years, with up to 95 per cent financing and lower amortization periods through the federal government’s Housing Accelerator Plan. Smaller investors who have been driving demand for multi-unit duplexes and triplexes in areas such as Vanier, Overbrook, and Hintonburg in recent years, have stepped back in 2025 as concerns over tariffs continue incapacitate buyers.

Ottawa’s commercial market is well positioned for the future, supported by strong economic fundamentals and continued demand across key asset classes. Strength in the city’s industrial sector and a burgeoning retail market, thanks to adaptive reuse projects and new developments gaining traction, have set the stage for a stronger second half of 2025. Although challenges persist in the downtown office market, declining availability rates and proactive conversion strategies are indicative of a positive upward trajectory. The growing momentum in the multi-family sector, fueled by institutional investment and federal housing incentives, further signals long-term market confidence.