What is the current direction of Ottawa’s office market, and how does it compare to other major Canadian cities? 

In Q2 of 2024, Ottawa’s office market continued to show a mixed and gradual improvement. At 11.5 per cent, Ottawa’s office vacancy has decreased for the fourth consecutive quarter and is currently the third lowest in Canada, following Victoria and Vancouver. 

Ottawa’s reduction in office vacancy is driven by positive net absorption, in both the downtown and suburban markets. However, the city’s return-to-office rate remains low compared to other major cities. At the end of Q2 2024, Ottawa’s office market was operating at 73 per cent of its pre-COVID occupancy levels, compared to Toronto at 89 per cent, and Vancouver and Montreal at 77 per cent.

Despite a slower return-to-office, the Ottawa market is showing positive signs in leasing activity as downtown occupancy levels continue to trend upward. At the end of 2023, occupancy in the downtown core was reported at 36 per cent; it has jumped significantly to 62 per cent over the past two quarters. 

How do trends differ in Ottawa’s downtown office market and suburban office market?

Ottawa’s downtown and suburban office markets have both experienced significant change. The downtown office market continues to experience a strong demand for well-located, quality office spaces, and is seeing an increase in leasing activity as tenants execute post-pandemic accommodation plans. Vacancy rates in the downtown area have declined to 10.7 per cent as a result of positive net absorption of 93,438 square feet. 

Similar to the downtown core, vacancy in the suburban office market is at 12.1 per cent after dropping by 51 basis points. This change occurred due to positive net absorption of 117,044 square feet, particularly in the western and southern ends of Ottawa. The market has benefited from companies seeking to decentralize their operations, choosing suburban locations that offer cost savings and accommodate hybrid work models. 

What unique requirements are being sought by Ottawa office tenants?

As hybrid work models remain prominent, tenants are prioritizing office spaces that can accommodate flexible layouts. These requirements include smaller, decentralized offices, collaborative spaces, and areas that can be easily reconfigured. Additionally, proximity to public transit and major roadways remains a priority for businesses and tenants, as they are looking for easily accessible locations to help improve work-life balance for employees. 

Modern tenants often require office spaces that are fully equipped with the latest technology, including robust internet infrastructure, SMART building systems and enhanced security measures. For government and tech sector tenants – the two major tenant groups in Ottawa – these amenities are particularly important. In addition, growing emphasis on Environmental, Social and Governance (ESG) performance has led tenants to seek energy-efficient buildings with green certifications, including LEED.

What does the tenant profile generally look like in Ottawa’s office market? How has the profile changed over the past five years?

In 2024, Ottawa’s office market tenant profile is characterized by three major sectors: government, technology and professional services. The federal government remains the largest tenant in Ottawa, occupying a significant portion of the downtown core. 

Government offices are typically housed in Class A buildings with stringent security requirements, and preferably ones that are energy-efficient and sustainable. As a major tenant in this market, government institutions provide a stable foundation with long-term leases. 

The tech industry in Ottawa, particularly the Kanata area (known as Silicon Valley North), continues to grow due to both startups and established firms. This sector favours modern, flexible office spaces that support innovation, collaboration and hybrid work models. Consequently, office spaces have advanced technological infrastructure, high-speed internet and amenities that promote employee well-being. 

Professional services include law firms, consulting companies, financial services and other corporate offices. These tenants typically prefer smaller spaces in both downtown and suburban areas that offer prime accessibility and prestige. 

What changes are you seeing in the federal government’s approach to office leasing? 

The federal government’s shift towards a more permanent hybrid work model for public sector employees in 2024 is expected to significantly impact Ottawa’s office market.

Demand for more adaptable office spaces is predicted to grow as the government will require offices that can support hybrid work environments and collaborative spaces. Increased demand may shift how office spaces are designed and marketed in Ottawa. Furthermore, there will likely be a move to decentralize some government offices to suburban locations, to be closer to where employees live and accommodate hybrid work needs.

What challenges are tenants facing when looking for office space in the Ottawa market?

Tenants in Ottawa are demonstrating the “flight-to-quality” trend that has increased competition for Class A buildings with strong ESG credentials. The limited supply of such spaces has created challenges for tenants looking to lease top-tier office spaces. 

As the demand for premium facilities increases, so do rental rates. Tenants are facing higher costs when trying to win spaces in high-quality buildings. Some are compromising on location when their budget does not align with Class A options. With the limited supply of Class A office spaces in Ottawa, particularly in prime locations like the downtown core, and with development timelines of new Class A options further out, some tenants are opting for short-term leases in Class B and C buildings.

How does your expertise in office tenant and landlord representation in Ottawa help your clients?

Tracking the posted net rate of buildings is just the tip of the iceberg. It is important to understand the market trends and motivations for landlords and tenants, to know what incentives to push on. In office leasing, we set up the tenants and landlords for long-term relationships, and this requires having knowledge of the buildings, how they are managed and how they are maintained. 

More than ever, landlords need the best exposure for their buildings. Turnkey model suites that target specific business types are essential to not only tenants, but to the brokerage community as well. 

I pride myself on being very knowledgeable on which tenants and brokers are currently active in the market. I take calculated risks, do extensive research and apply years of expertise in the market, which has led to many successful leasing transactions for landlord clients.