Market analysts foresee less pressure on parking in downtown Ottawa once the light rail transit line, now nearing completion, begins operating later this year. With no new office construction underway downtown, existing class A and B buildings should be well placed as improved transit service draws more prospective tenants to the area.
Colliers pegged the downtown class A office availability rate at 5 per cent at the end of the first quarter of 2018, down 80 basis points from one year earlier. Approximately 283,000 square feet of downtown space was newly leased in the first three months of the year. Downtown also commands the highest rents of any of the city’s submarkets with the average asking net rental rate for class A space at $23.36 per square foot.
In contrast, the Class A availability rate is 13.4 per cent in Kanata, the next largest office node in the city’s west end suburbs. About 19,500 square feet of office space was absorbed in the first quarter, or less than a third of take-up during the first quarter of 2017, while the average asking net rent for class A space was $14.07 per square foot.
“Interest in the downtown core shows no sign of slowing. It’s amenity-rich nature is a benefit for B class buildings, especially with the lack of class A space available,” Colliers’ newly released Q1 report and forecast states. “Tech remains a dominant industry in Kanata, especially when it comes to larger, established tech companies. Start-ups have shown interest in the area, but usually settle downtown.”
Downtown class B buildings and the “fringe core” ByWard Market, Centretown and Glebe neighbourhoods are identified as a good fit for enterprises looking for less than 1,000 square feet and/or co-working space.
“Tenants looking to open a co-working space are likely to take advantage of a central area like downtown to more easily attract tenants from east and west,” the report notes. “Spaces in class C buildings in Centretown are being leased out thanks to their proximity to downtown and its amenities. Old buildings may benefit from fit-ups to give them an edge and stand out to tenants looking in the area.”
Kanata was the locale for the most notable property transaction of the quarter as Fiera Properties acquired four buildings, encompassing 344,000 square feet, for $74.2 million. Otherwise, Colliers reports just six investment sales garnering more than $1 million, with four of those in the $1 to $2 million range. More prominent downtown deals are predicted, though, with the expectation that a 550,000-square-foot two-tower class A complex at Slater Street and Laurier Avenue and a smaller Sparks Street building will go to market this spring.
Citywide, the office availability rate was 10.4 per cent at the end of March, down from 12.2 per cent in March 2017. However, the average asking net rent also dropped — down to $16.50 per square foot from $16.76 per square foot at the end of Q1 2017.
Two buildings are currently under construction in suburban office nodes, bringing just 22,000 square feet of new space onto the market in the near future.