Friday, April 21, 2006

Ottawa's Office Vacancy Rates Drop

The office vacancy rate in the Ottawa suburb dipped below 10 per cent in the first quarter for the first time since the technology bubble burst.

The Kanata market waited about six years for to come back, so it's quite significant. So it's good scenario for Ottawa.

Vacancy rates in Kanata approached zero at the turn of the millennium as fast-growing tech firms set up shop in gleaming new office buildings.

But the suburb came to resemble more of a ghost town than a boom town in the years following the bust, with vacancy rates surging above 25 per cent by 2003.

A busy first quarter of big deals drove Kanata's vacancy rate down from 11.4 per cent in the final quarter of last year to 9.3 per cent, the lowest level since the late 1990s, Colliers reported. By comparison, the vacancy rate in the first quarter of 2005 was 20.6 per cent.

The absorption of space has driven up rental rates in Kanata roughly fourfold from the post-bust low, adding that it expects the vacancy rate in Kanata to continue to fall.

Overall, Ottawa's office vacancy rate dropped to 8.8 per cent from 9.4 per cent in the fourth quarter of 2005. Most of the activity took place in west Ottawa and Kanata due to new technology tenants and the expansion of existing tech firms.

The vacancy rate in the downtown core tightened to 3.8 per cent from 4.1 per cent, while the suburban rate fell to 12.5 per cent from 13.3 per cent.

The biggest question mark remains the 900,000 square-foot former JDS Uniphase campus on Merivale Road, which Minto Developments bought last summer and renamed the Mercury Centre.

The RCMP has been rumoured to be a likely tenant, but Minto has indicated they may lease the building to multiple tenants.

It said Minto has been "actively marketing" the property.

The availability of the Mercury Centre has kept the vacancy rate in Ottawa South, including the area surrounding the Ottawa International Airport, at 24.6 per cent. Without the Mercury Centre, the rate would be 13.8 per cent.

But in the downtown core, it expects rental rates to remain unchanged due to uncertainty over the expected completion in 2007 of Oxford Properties' Constitution Square Phase III, and the vacating of other downtown properties.


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