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Real Strategy examined how the anticipated impact of COVID-19 on the commercial real estate market would compare to previous instances of economic downturns in our “Lessons for COVID-19” series. We noted how the full extent of a recession is not felt by local landlords and the commercial real estate market until a couple of years down the line. Tenants with multi-year commitments are forced to wait until the end of their lease before they are able to begin downsizing. For this reason and more, we’re predicting the following commercial real estate trends in Ottawa for 2021.

1. More vacancy

Real Strategy Advisors is predicting that the city’s overall vacancy rate will continue to increase through the next 12 to 18 months and especially in the Downtown Core. This prediction is due to the significant amount of space that hit the market in Q3:2020 and Real Property (PSPC) confirming in late October that the government’s plan is to continue reducing its office portfolio moving forward.

2. Decreased tenant demand

The decrease in tenant demand throughout 2020, as office tenants go on a COVID diet and shed space (now surplus) as more and more of their employees expect to increasingly work from home on a more permanent basis. This has already led to record increases in sublet availability and tenant-friendly cash inducements. Some of the negotiations Real Strategy has been a part of this past year are ones that could not have been imagined in 2019.

3. Falling rental rates

Discussions surrounding rental rates are steeped in the larger questions about the short and medium term business fundamentals (that vary sector to sector) in addition to how quickly and to what degree employees end up returning to the office. Until wide-scale vaccination is here, many companies will continue to embrace the fully remote setup or transition to short-term shared collaborative spaces since not everyone’s home environment is conducive to their work needs, preferences, and/or responsibilities.

Real Strategy is certain that we are now in the midst of the most pro-tenant commercial real estate market of our lifetime as everyone rethinks their physical use of office space and impacted landlords scramble to fill their vacancy.

Contact Real Strategy Advisors today if you’re considering a commercial real estate lease or purchase. Whether relocating, renewing a lease, or purchasing a property, our commercial real estate advisors are available to help you maximize your results and save money!