Ottawa - In its Real Estate Market Study published today, Newmark Knight Frank Devencore reported that vacancy rates in downtown Ottawa have remained essentially flat between mid-2012 and the end of the first quarter of this year, moving from 5.9% to 5.6%. However, the statistics are somewhat deceiving, as the Bank of Canada backfilled over 300,000 square feet of the former EDC space at 234 Laurier, and the Bank Of Canada's former building was taken off the market as it undergoes a retrofit. Additionally, the Justice Department, a tenant in the Bank of Canada building, has signed a lease for approximately 80,000 square feet at the Sun Life Centre. Once these moves are considered, net absorption over the past six months was slightly negative.
There are two major developments in progress that will likely bump up the Class "A" vacancy rate. At 150 Elgin, Morguard's 346,000-square-foot Performance should be ready for January 2014 occupancy. At 90 Elgin Street, the Lorne Building is being redeveloped for Public Works and Government Services Canada. The 585,000-square-foot building is scheduled for move-in in Q4 of 2014. The Department of Finance will be its main tenant.
While market activity has slowed, NKF Devencore is seeing a number of tenants using the opportunity to carry out a space needs analysis. In many instances, this leads to blend & extend negotiations, through which a tenant will strive to reduce the rental rate it pays and potentially shed some space in exchange for extending the term of its lease. This strategy can be especially effective in a soft market; not only do advantages accrue to tenants, but landlords also reap the benefits of securing long-term tenancies.
Corporate real estate markets across the rest of the country also showed a slower pace of growth in 2012. The overall vacancy rate in office spaces in Canada's major cites fell from 4.7% to 4.5% over the course of the year, and the amount of available space declined by approximately 245,000 square feet. Approximately 9.6 million square feet of office space is currently available for lease or sublet in the country's downtown areas.
The developments currently underway in Ottawa and Gatineau will augment the current office inventory by approximately 3.6 million square feet by early 2015, the Real Estate Market Study notes. Given that the space requirements of the federal government are likely to undergo further consolidation, tenants seeking top-quality space should have a greater range of options open to them than has been the case in recent years. Larger tenants are being advised to evaluate the long-term value of blend & extend negotiations with their landlords, with whom they may enjoy somewhat more negotiating leverage than they have over the past few years.
About Newmark Knight Frank Devencore
As part of Newmark Grubb Knight Frank, one of the world's leading commercial real estate advisory firms, 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
Newmark Grubb Knight Frank is one of the world's leading commercial real estate advisory firms. Together with its affiliates and London-based partner Knight Frank, Newmark Grubb Knight Frank employs more than 11,000 professionals, operating from more than 340 offices in established and emerging property markets on five continents.
With roots dating back to 1929, Newmark Grubb Knight Frank's strong foundation makes it one of the most trusted names in commercial real estate. Its integrated services platform includes leasing advisory, global corporate services, investment sales and capital markets, consulting, program and project management, property and facilities management, and valuation services. A major force in the real estate marketplace, Newmark Grubb Knight Frank serves the local and global property requirements of tenants, landlords, investors and developers worldwide. For further information, visit www.newmarkkf.com.
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