MARKETVIEW

Ottawa Office, Q2 2015

Office leasing stabilizes heading into the third quarter Lease Rate (CBD Class A)

Vacancy Rate

Net Absorption

$24.06 PSF

10.1%

Completions

20,200 SF

0 SF

*Arrows indicate change from previous quarter. Figure 1: Ottawa Office Market Fundamentals Net Absorption & New Supply (000’s sq. ft.)

Vacancy Rate (%)

600

12.0

500

10.0

400

8.0

300

6.0

200

4.0

100

2.0

0

0.0

(100)

(2.0)

(200)

(4.0)

(300)

(6.0) Q2 2010

Q4 2010

Q2 2011

Q4 2011

Q2 2012 Net Absorption

Q4 2012

Q2 2013

New Supply

Q4 2013

Q2 2014

Q4 2014

Q2 2015

Vacancy

Source: CBRE Research, Q2 2015. SUBM AR KET HIGHL IGHTS •

•

•

The Ottawa office market saw a considerable amount of leasing activity in Q2 2015 with nearly 250,000 sq. ft. of space traded city-wide. On a net basis, the total market recorded 20,200 sq. ft. of positive net absorption, pulled up by both the Central Business District and West submarkets. The market-wide vacancy rate decreased by 8 bps quarter-over-quarter to 10.1%. However, the marketwide vacancy rate is still well above the trailing 5-year average of 7.7%. With more than 700,000 sq. ft. of total new supply in 2014, there are only a few projects currently under construction across the city. Most notably, Westboro Connection at 319 McRae Avenue is scheduled for completion by the end of the year and will add 116,300 sq. ft. of office space to competitive inventory in the West.

C E N T R AL BUS I N E SS DI S T R I CT (C BD)

Ottawa’s CBD saw a moderate level of leasing activity in Q2 2015. With more than 73,000 sq. ft. of space traded overall, the CBD closed the quarter with 43,850 sq. ft. of positive net absorption. The Class A market is showing signs of relief, posting its third consecutive quarter of positive net absorption and a 28 basis point (bps) decline in vacancy quarter-overquarter to 5.7%. Still, the Class A vacancy rate remains above the trailing five-year average rate of 5.0% and well above the 10-year average rate of 3.6%. Given the softness in the leasing market over the past few years, landlords are stepping up their efforts to reinvest in their buildings in order maintain their

Q2 2015 CBRE Research

© 2015, CBRE Limited |

1

M A R K E T V I E W OTTAWA OFFICE Figure 2: Net Absorption by Building Class and Submarket (000’s sq. ft.) 40 30 20 10 0 (10) (20) (30) (40) (50) CBD

Central (excl. CBD)

Deep West

Class A total: 24,341

West

Class B total: (10,360)

South

East

Class C total: 6,219

Source: CBRE Research, Q2 2015.

competitive edge. For example, Sun Life Financial

new office building at Lansdowne Park, which added

Centre is undergoing ground floor and common area

81,000 sq. ft. of vacant space to inventory in Q4 2014.

renovations, along with the LRT integration. Place Bell will also undergo a $35.0 million renovation of the ground floor area, food court and retail concourse. The Class B market gained momentum in Q2 2015, posting almost 15,000 sq. ft. of positive net absorption and a 30 bp decrease in vacancy quarterover-quarter to 9.5%. The Class C market held steady in the quarter, posting very little, yet positive net absorption. The big unknown remains the federal government, who maintains that it will continue to reduce its footprint within the downtown core. Notable lease transactions include: Public Works and Government Services Canada (PWGSC) leasing 18,800 sq. ft. of space at 170 Laurier Avenue, McMillan LLP leasing 15,000 sq. ft. at 45 O’Connor Street, and Engineers Canada leasing 15,000 sq. ft. of the former Heenan Blaikie space at 55 Metcalfe Street. C ENTR AL , EXC L UDING THE C BD

DEEP WEST

The Deep West saw a moderate amount of leasing activity in Q2 2015, however a few sizeable pockets of space came available resulting in nearly 28,000 sq. ft. of negative net absorption. Most notably, 45,671 sq. ft. of space came available at 390 March Road, which Conversant will be vacating. Another 19,605 sq. ft. block of space came available at 450 March Road, formerly occupied by N-Able Technologies who relocated within the building and expanded by 30,000 sq. ft. Vacancy climbed 12 bps quarter-overquarter to 11.8%, but remains well below the trailing five-year average rate of 13.2%. Vacancy in Kanata held stable at 13.0% overall, despite a few pockets of space coming available in the quarter resulting in some negative net absorption. Kanata’s vacancy rate has declined by

Ottawa’s fringe-core saw little leasing activity in Q2

more than 500 bps over the past five-quarters and is

2015, closing the quarter flat with slightly negative

now at its lowest point in nearly five years. The top-

net absorption. The vacancy rate held stable as a

two lease transactions in Kanata were: DNA Genotek

result, closing the quarter at 13.4%. Vacancy remains

leasing 35,883 sq. ft. of space at 500 Palladium Drive

well above historical averages given the softness in

and MC Countermeasures Inc. leasing 10,982 sq. ft.

the leasing market and recent completion of Minto’s

at 555 Legget Drive.

Q2 2015 CBRE Research

© 2015, CBRE Limited |

2

M A R K E T V I E W OTTAWA OFFICE

WEST

SO UTH

Ottawa’s west-end saw a significant amount of

South Ottawa saw little leasing activity in Q2 2015,

leasing activity in Q2 2015 with more than 74,000 sq.

closing the quarter with 4,106 sq. ft. of negative net

ft. of space traded in the quarter. However, net

absorption. The all-class vacancy rate climbed 13 bps

absorption closed the quarter at 13,389 sq. ft. as a

quarter-over-quarter to 7.9%, but remains slightly

number of sizeable pockets of space came available.

below the trailing five-year average rate of 8.5%.

Most notably, 17,462 sq. ft. of space formerly occupied by Everest College came available at 1050

EAST

Morrison Drive; and 10,000 sq. ft. of space came

Ottawa’s east-end saw very little leasing activity in Q2

available at 85 Plymouth Street, which was formerly

2015, closing the quarter with 4,659 sq. ft. of negative

occupied by Vice Hunter LLP. The all-class vacancy

net absorption. As a result, the all-class vacancy rate

rate declined 19 bps quarter-over-quarter to 9.2%, but

increased 10 bps quarter-over-quarter to 15.0%.

remains well above the trailing five-year average rate

Excluding the 291,400 sq. ft. availability at Bona’s

of 6.4%. Excluding the 100,000 sq. ft. availability at

new office building at 1625 Vanier Parkway that came

855 Brookfield Road that came to market in Q1 2015,

to market in Q4 2014, the all-class vacancy rate would

the all-class vacancy rate would be 135 bps lower.

be 566 bps lower at 9.3%. To date, Bona Management

Notable lease transactions include: Spartan

has almost exclusively focused its effort on securing a

Bioscience leasing 16,850 sq. ft. of space at 2934

deal with a public sector tenant.

Baseline Road, Maplesoft leasing 6,622 sq. ft. at 1545 Carling Avenue, and, TASKE Technology leasing 6,432 sq. ft. at 2650 Queensview Drive.

Figure 3: Notable Lease Transactions

Size (SF)

Tenant

Industry

Address

Submarket

35,883

DNA Genotek

Biotechnology

500 Palladium Dr.

Deep West

18,800

PWGSC

Government Administration

170 Laurier Ave. W.

Central

16,850

Spartan Bioscience

Biotechnology

2934 Baseline Rd.

West

15,469

Corsa Technology

Computer Networking

11 Hines Rd.

Deep West

15,000

McMillan LLP

Legal

45 O’Connor St.

Central

15,000

Engineers Canada

Industry Association

55 Metcalfe St.

Central

Source: CBRE Research, Q2 2015. Figure 4: Notable Sale Transactions

Size (SF)

Price ($)

Buyer

Address

Submarket

145,104

25,200,000

Regional Group of Companies Inc.

100 & 130 Colonnade Rd.

South

139,885

13,100,000

Concentra Financial Services Association

473 Albert St.

Central

18,000

4,000,000

Domeron Inc.

2685 Queensview Dr.

West

Source: RealTrack, CBRE Research, Q2 2015.

Q2 2015 CBRE Research

© 2015, CBRE Limited |

3

M A R K E T V I E W OTTAWA OFFICE

Figure 5: Market Statistics Q2 2015 Submarket

Inventory (SF)

CBD

16,085,877

8.3

1,215,826

119,233

43,850

0

0

18.64

Class A

10,082,583

5.7

463,869

108,792

28,001

0

0

24.06

Class B

4,893,055

9.5

457,650

5,572

14,761

0

0

16.86

Class C

1,110,239

26.9

294,307

4,869

1,088

0

0

12.86

2,600,341

13.4

346,410

1,753

(335)

0

0

16.27

Class A

489,572

23.4

114,778

0

4,270

0

0

19.82

Class B

1,233,965

11.5

139,833

1,753

(10,858)

0

0

14.24

Class C

876,804

10.5

91,799

0

6,253

0

0

14.92

3,244,042

7.9

182,117

73,870

(4,106)

0

0

12.41

Class A

1,229,616

10.9

59,627

73,870

5,437

0

0

13.95

Class B

1,795,502

5.9

105,318

0

(9,543)

0

0

12.11

Class C

218,924

7.8

17,172

0

0

0

0

8.89

4,672,017

15.0

670,311

28,812

(4,659)

0

0

18.22

Class A

2,476,417

20.5

477,717

28,812

(5,248)

0

0

20.13

Class B

1,818,914

9.6

173,709

0

589

0

0

13.54

Class C

376,686

5.0

18,885

0

0

0

0

12.86

6,808,261

9.1

593,560

29,175

13,389

0

116,304

14.44

Class A

4,502,363

6.2

272,462

6,150

28,971

0

116,304

15.22

Class B

1,865,877

11.5

200,526

13,425

(14,460)

0

0

13.99

Class C

440,021

29.6

120,572

9,600

(1,122)

0

0

13.45

Deep West*

6,927,403

11.8

684,415

133,419

(27,939)

0

25,125

12.26

Class A

4,916,268

10.3

396,165

109,132

(37,090)

0

25,125

12.61

Class B

1,875,584

16.5

284,585

24,287

9,151

0

0

11.78

Class C

135,551

2.7

3,665

0

0

0

0

12.00

40,337,941

10.1

3,692,639

386,262

20,200

0

141,429

16.18

Central (excl. CBD)

South

East

West

Overall Total

Vacancy Rate (%)

Direct Space (SF)

Sublet Space (SF)

Net Absorption (SF)

New Supply (SF)

Under Construction (SF)

Avg. Asking Lease Rate ($/SF/annum)

*Kanata accounts for 80.0% of total inventory in the Deep West. Source: CBRE Research, Q2 2015.

Q2 2015 CBRE Research

© 2015, CBRE Limited |

4

M A R K E T V I E W OTTAWA OFFICE

CONTACTS

Shawn Hamilton VP, Managing Director +1 613 782 3092 [email protected]

Daniel Niedra Research Coordinator +1 613 691 2113 [email protected]

CBRE OFFICES

CBRE Limited 333 Preston Street, 7th Floor Ottawa, ON K1S 5N4

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE Limited clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE Limited.