This article is sponsored by the Ottawa Real Estate Board.
With many office towers and traditional mainstreets still quiet, tenants and landlords alike face an uncertain outlook.
Have the ways in which the city works and shops changed forever? Or are residents eager to rush back to Ottawa’s commercial districts to collaborate with colleagues and shop in-person as vaccines are rolled out?
In both scenarios, members of the Ottawa Real Estate Board’s Commercial Network say the evolution of office, retail and industrial leasing in the city has opened up opportunities for tenants and landlords to explore new markets and re-evaluate how they think about commercial space.
“Whether you’re a tenant or a landlord, now is a great time to get on the phone with your Realtor and discuss the possibilities happening in the market,” says Darren Fleming, CEO of Real Strategy Advisors. “Working with a trusted Realtor will help you navigate the uncertainty of what lies ahead and ensure you’re getting the best possible deal.”
A changing mainstreet
Mainstreet property landlords are facing a drastically different market as their retail tenants continue to face financial and operating challenges stemming from COVID-19 restrictions.
Many business owners are more cautious to sign a lease than they were pre-pandemic and are searching for smaller, more affordable spaces, says Bill Edelson, a sales representative with Royal LePage Team Realty.
This is having an impact on rental rates in some of Ottawa’s hot neighbourhoods.
“Landlords aren’t seeing the same rent prices in Westboro that they would have three or four years ago,” he says, adding that lower prices have the potential to entice some new businesses to the area. “Alternatively, if there are tenants that just can’t afford to stay in these communities, they will look elsewhere.”
This is contributing to an increased interest in properties closer to the suburbs and city boundaries – which could open more leasing opportunities for landlords and better deals for tenants.
In rural regions especially, tenants can find high-value space at a fraction of the cost, making areas such as Almonte a market to watch.
“Businesses are trying to go to where the people are, and that’s just not downtown anymore,” he says. “We’ve heard about people moving to rural areas during the pandemic; now commercial tenants are following suit.”
Rethinking the office
For any tenants considering upgrading their office space, now may be the perfect time to make the move, says Fleming.
With many businesses experimenting with hybrid or fully virtual workplaces, landlords will likely look at lowering rental rates on class-A space to minimize vacancies.
“We’ve seen many businesses let their leases end in favour of new working options, so this is good news for tenants looking to make an upgrade,” he says. “This shift could give a lot of office tenants choice in the next few years.”
Lease negotiations have also evolved during the pandemic, with the majority of tenants looking to sign shorter three-year terms to reduce their long-term financial commitments. They are also looking for modern facilities that come equipped with updated finishings to help entice employees to return to the office, putting pressure on landlords to renovate their spaces.
“When buildings were full, it didn’t make sense for a landlord to upgrade flooring or paint the walls because they were making money,” says Fleming. “Now, landlords who choose to leave their space untouched will likely face higher vacancy rates going forward.”
Rising demand for industrial space
While some office and retail landlords are facing short-term occupancy challenges, industrial vacancies, by contrast, are approaching all-time lows.
Tenants are snapping up smaller pockets of space of between 1,000 and 5,000 square feet as soon as they hit the market, causing demand to skyrocket, says Geoff Godding, a sales representative at Decathlon Commercial Realty Corp.
“We are experiencing the lowest vacancy rates and the highest rental rates I’ve ever seen,” says Godding. “It’s definitely a landlord’s market out there.”
Driving the market are local plumbers, contractors and construction companies that are seeing demand for their services spike during the pandemic.
Although there are some new industrial projects in development that could bring some relief to the market, working with a commercial member of OREB is critical to helping you find available space when demand is this hot, adds Godding.
“We’re checking for listings every day, and as soon as one pops up we’re on the phone to a client,” he says. “Tenants will need someone with experience to help them navigate the market if commercial leasing continues this way.”
How can an OREB member help you?
Commercial Realtors provide professional services including:
- Exclusive access to thousands of listings through the MLS System;
- Professional advice based on market knowledge, experience and education;
- Tenant and landlord representation;
- Advice on real estate investment purchases and leasing