"This average was the result of a combination of an increase in vacant space in some of the more expensive class-A downtown core buildings, along with less expensive than average space no longer available in this same submarket and class," said commercial real estate services firm Cushman & Wakefield Ottawa.
The firm's first-quarter Ottawa office report also indicated that vacancy rates in the central area climbed 1.4 percentage points to 5.5 per cent, the highest level for the submarket since the last quarter of 2005. That's compared to the previous quarter's rate of 4.1 per cent in the core.
Cushman & Wakefield Ottawa said the downtown core was hit by consolidations and relocations, including the moving of EDS and Sun Life's Ottawa operations to the suburban market, due respectively to merging and "rightsizing." The firm also pointed to the fact that more of Bell Canada's space - which was already vacant because of ongoing consolidation efforts - officially went on the market during the quarter.
It's a trend that has also affected the Kanata market, with the area seeing a consolidation of space due to the merger between manufacturing firms Sanmina-SCI and BreconRidge, as well as Mitel's move to shed excess space.
As a result, the overall vacancy rate for the city jumped 1.3 percentage points to 7.9 per cent, with more than 465,000 square feet of additional space becoming available in the first quarter, mostly within the class-A market.
There is now close to 2.9 million square feet of vacant space within the city of Ottawa, a level not seen since the latter half of 2004, the report noted.
The significant amount of vacant space pushed absorption rates into the negative, to almost 466,000 square feet.
However, leasing activity remained "fairly consistent" in comparison with the previous quarter, at approximately 379,000 square feet that was largely located in the downtown core and Kanata.
Looking ahead, Cushman & Wakefield Ottawa speculated that new development activity could happen soon to accommodate the tenants currently occupying the former Nortel campus, once they move out to make way for the Department of National Defence.
"Kanata would be the logical choice for the tenants to relocate to and currently there are limited options of contiguous space large enough to house these companies," the report read.
As OBJ previously reported, Ericsson is said to be close to finalizing a deal to lease space at 349 Terry Fox Dr., which will mean even less space and therefore, a possibility for new construction.
