Ottawa - In its Real Estate Market Study published today, Newmark Knight Frank Devencore reported that vacancy rates in downtown Ottawa have almost doubled over the past year. In mid-2011, the combined Class "A" and Class "B" vacancy rate was 3.0%, and at the end of Q2 2012 that rate had risen to 5.9%. In Class "A" buildings, vacancy rates have risen from 4.0% to 8.0%, and the amount of vacant space has climbed from 395,000 square feet to over 822,000 square feet. Much of the increase in the Class "A" sector comes as a result of the delivery of Export Development Canada's (EDC) new 535,000 square-foot headquarters at 150 Slater Street.
"There are widespread rumours that the Bank of Canada is poised to backfill over 300,000 square feet of the former EDC space at 234 Laurier," said Don Marks, Director, Advisory and Corporate Services for Devencore Real Estate Services Ltd. "The Bank Of Canada is vacating its current building to make way for a retrofit project. In addition, one of its tenants, the Justice Department, has committed to almost 80,000 square feet at the Sun Life Centre. These moves will have a mitigating effect on rising vacancy rates, but don't reflect any increase in demand for office space. Given the federal government's general downsizing and the arrival on the market of at least two major towers, we expect that the overall vacancy rate in downtown Ottawa will increase further over the next 6-18 months."
In Kanata, nearly a quarter million square feet of office space was absorbed over the past year. However, the main storyline here is that the year's positive absorption would actually have been in negative territory had it not been for RIM taking occupancy of its new building, and three tenants of the former Nortel Networks Campus (Genband, Ericsson and Avaya) having made their relocation decisions. Cienna is the sole remaining tenant at the Nortel campus that has yet to announce its relocation plans.
Across Canada, the combined Class "A" and Class "B" vacancy rate fell from 5.4% to 4.5% over the past year. Total vacant space in the country's major cities fell from 11.2 million square feet to 9.5 million square feet. At the same time, the total inventory of built space across the country increased by nearly two million square feet, due in large part to new office towers in Calgary and Toronto, which have both been experiencing a development boom.
"For tenants who have some time remaining on their leases, the changing dynamic of the downtown Ottawa market may present interesting opportunities," Mr. Marks added. "We are advising some of our larger clients to prepare for possible "blend & extend" negotiations in their upcoming lease negotiations, and to initiate the process by performing a needs analysis as soon as possible. Doing so will enable some tenants to extract the maximum value from softening market conditions."
About Newmark Knight Frank Devencore
Devencore is the Canadian partner of Newmark Grubb 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 Grubb Knight Frank
A part of BGC Partners, Inc. (NASDAQ:BGCP), Newmark Grubb Knight Frank is one of the largest commercial real estate service firms in the U.S. It brings together the strategic consultative approach to creating value for clients and leading position in the New York market that are hallmarks of Newmark Knight Frank; the complementary strengths of Grubb & Ellis in leasing and management, investment sales, valuation and capital markets services; and BGC's financial strength, proprietary technology, expertise in global capital markets and deep relationships with many of the world's leading financial institutions.
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