Ottawa - In its Real Estate Market Study published today, Newmark Knight Frank Devencore reported that combined Class "A" and Class "B" vacancy rates in Ottawa's downtown core has climbed to 5.6% in the first months of 2012, higher than it has been at any time during the past decade. Most of the increase took place in the Class "A" sector where vacancy rates doubled over the last half of 2011 from 4.0% to 8.0%. This is largely attributable to the delivery of Economic Development Canada's (EDC) new 535,000 square-foot headquarters at 150 Slater Street. With this move, EDC vacated over 300,000 square feet at 234 Laurier Avenue and 50,000 square feet at 251 Laurier Avenue.
"This single move demonstrates how profoundly the decisions of the federal government and its agencies can affect vacancy rates in downtown Ottawa," said Don Marks, Director, Advisory and Corporate Services for Devencore Real Estate Services Ltd. "Aside from the real estate decisions of the federal government, a variety of other factors should soon impact the downtown market dynamic as well. For example, development projects slated for the downtown area will significantly broaden the range of opportunities available to tenants. The Crown-owned Lorne Building at 90 Elgin Street was recently demolished, and is slated to be replaced by a 17-storey, 600,000 square-foot LEED Gold office building which will be leased by the federal government. Another major project currently under construction is Morguard's 27-storey, 350,000-square-foot tower at 150 Elgin. Occupancy for both of these developments is scheduled for 2014."
In Kanata, the Class "A" vacancy rate now stands at 10.6%, down from 17.8% in mid-2009. Much of this decrease comes as a result of Avaya and Ericsson committing to lease space in Kanata. Both companies were tenants at the Nortel Networks Campus, which PWGSC purchased in 2010. Another major tenant in that complex is Cienna which has still not made its relocation plans clear, but Cienna's decision may also have a significant impact on the Kanata market.
Overall Class "A" and Class "B" vacancy rates in Canada's other major cities also fell significantly over the past year, from 6.8% to 4.7%. This decrease came even though the total inventory of built space across the country increased by nearly two million square feet, due in large part to the new developments that came online in Calgary and Toronto. What is equally reflective of the strength of the market is the fact that office space in the new state-of-the-art towers has been in particularly high demand, despite its premium cost. The success of these projects has spurred further development activity.
"The overall vacancy rate in downtown Ottawa is expected to increase significantly over the coming 12-24 months, but by exactly how much is difficult to predict," Mr. Marks said. "The new supply coming onto the market is good news for tenants, whose options have been very limited for most of the last ten years. As vacancy rates rise, asking rental rates should begin to soften, and landlords may be willing to negotiate more aggressively in order to sign tenants to longer-term leases."
About Newmark Knight Frank Devencore
Devencore is the Canadian partner of Newmark Knight Frank, one of the largest real estate service firms in the world. Newmark Knight Frank Devencore is Canada's largest corporate real estate advisor and brokerage exclusively representing corporate, industrial and retail space users. With offices across the country, Newmark Knight Frank Devencore offers its global clientele comprehensive services that are individually designed to ensure executive real estate decisions are supported by effective strategies and professional execution. To learn more about our capabilities, please visit www.devencorenkf.com.
About Newmark Knight Frank
Newmark Knight Frank is one of the largest real estate service firms in the world. Headquartered in New York, Newmark Knight Frank and London-based partner Knight Frank together operate from more than 240 offices in established and emerging property markets on five continents. With a combined staff of more than 7,000 and revenues last year exceeding $993 million, this major force in real estate is meeting the local and global needs of tenants, owners, investors and developers worldwide. For further information, visit www.newmarkkf.com.
Newmark Knight Frank is a part of BGC Partners, a leading global brokerage company primarily servicing the wholesale financial markets. For further information, visit www.bgcpartners.com.
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