As downtown vacancy rate climbs, Kanata office market continues to churn along

Mark Brownlee
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For the past four years, the owners of 430 Hazeldean Rd. have been looking for a new tenant.

(Stock image)

Abbott Point of Care (formerly known as i-STAT) was the tenant there for nine years starting in 2001. But in 2010, the company’s lease expired and it moved out.

For that entire time, more than 50,000 square feet has been on the market, according to Pat Charbonneau, the president of Apollo Property Management, which manages the building.

“We are working with a number of prospects and there is some renewed excitement about the building,” wrote Mr. Charbonneau in an e-mail to OBJ. “However, the zoning there is quite restrictive and that has resulted with us being unable to conclude some deals.”

The city has passed a bylaw that would allow for instructional and light industrial uses at the site, he said. That won’t come into effect until the end of April at the earliest, though.

This sort of extended vacancy has been the exception to the rule in the Kanata commercial real estate market, say brokers and landlords who operate in the area.

The suburb’s commercial vacancy rate clocked in at 16 per cent for the fourth quarter of 2013, according to a report from Cushman & Wakefield Ottawa that came out earlier this year.

While that’s well above the citywide vacancy rate of 8.1 per cent and the suburban vacancy rate of 9.1 per cent, it’s right in the middle of where Kanata has been for the past five years.

That doesn’t mean there haven’t been changes in the market, however.

Martin Vandewouw – the president of the KRP Group, which owns the largest swath of office space in the area – said the Kanata market is unique.

That’s because, unlike the core, the federal government does not occupy much of the space. As a result, the demand for offices is tied closely to the fortunes of private businesses.

The tech sector’s drop in prominence from the dizzying highs of the late 1990s has changed how much space each company is using, he said.

“It used to be a smaller number of larger players but … we’re not seeing that anymore,” said Mr. Vandewouw. “We’re seeing smaller companies with fewer employees, but more of them.”

The Kanata Research Park welcomed a few prominent players that moved from the former Nortel campus on Carling Avenue, he said. That included Ericsson, which moved in about a year and a half ago.

That doesn’t mean there aren’t obstacles on the horizon, though.

Lindsay Hockey, a broker with CBRE who operates exclusively in the Kanata market, said the prospect of being located within a walkable distance of where people live and close to transit lines may entice some firms away from the suburbs.

He pointed to OpenText, which took over close to 50,000 square feet of space at 10 Rideau St. four years ago, as an example.

The amount of space available in the downtown market – the 7.4 per cent vacancy rate recorded in the fourth quarter was the highest it’s been in recent memory – is also leading to speculation about what good deals on rental rates in the core will do to Kanata.

“With the vacancy downtown, there could be some value stuff there that might entice a tenant that would typically be suburban to make a move downtown,” said Mr. Vandewouw.

However, he said he hasn’t seen much movement on that front to date.

Sidebar: What about BlackBerry?

A big question on the minds of Kanata real estate brokers is BlackBerry, which owns close to 500,000 square feet of space in Kanata. The company announced in January it was putting that space, as well as other properties it owns across the country, up for sale.

In March, it said it had reached a deal to sell off most of its office space in Canada. However, the company declined to tell OBJ whether that included its Kanata real estate.

CBRE broker Mr. Hockey said the offices in Kanata, which include buildings at 4000 and 5050 Innovation Dr., will be appealing to companies that are looking for the the latest and greatest in office amenities.

“If you’ve been in a building for 10 or 15 years … this offers an opportunity to move to a new space that is a lot more closely aligned to what firms are going to now in new spaces,” said Mr. Hockey.

He listed column spacing, the furniture layout and open concept, collaborative workspaces as amenities that would appeal to technology companies looking for new office space.

Organizations: Apollo Property Management, KRP Group, Nortel

Geographic location: Kanata, Ottawa, Kanata Research Park Carling Avenue Canada

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