This past year has been one for Ottawa’s history books to say the least. For this year’s retrospect and local commercial real estate review, Real Strategy wants to emphasize how swiftly our views have changed with respect to working from home and managing a remote workforce. The overall theme of 2019 was one of high tenant demand that gobbled up most of the National Capital Region’s available quality office space. Demand was driven primarily by the local tech sector and was mostly seen in the sub-markets of Kanata and Downtown. So of course, the (pre-pandemic) forecast going into 2020 was one that expected this strong appetite for office space to continue.
1. First quarter’s lockdown
In Canada, interest rates fell while government stimulus and relief measures were implemented to help temper the immediate economic hit. Speculation for Ottawa’s commercial real estate sector was still fairly encouraging given the presumed shorter pandemic timeline and, due to the presence of a large number of federal public servants, the fact that Ottawa’s been traditionally insulated from more extreme market volatility. At Real Strategy Advisors, we knew that suddenly sending so many workers home for an extended period of time would be an unprecedented catalyst for change in the way humanity uses office space.
2. Second quarter’s softening of the market
Real Strategy also predicted that the impact of COVID-19 would create more vacancy and begin to put downward pressure on rental rates for the remainder of the year. By the end of Q2:2020, our forecast was confirmed and it was clear that the market would continue to soften. By mid-summer, the vast majority of office tenants were working from home to avoid a potential outbreak in the office with more and more companies trialing digital by default approaches… but with a variety of results.
3. Third quarter’s fear of the second wave
Employers, including the federal government, concerned about the potential for a second wave in the fall began to realize that the full-scale return to work would likely be delayed for a year or more. Real Strategy observed tenants choosing short-term lease extensions or listing their space for sublease (to no avail) during this period. The speculative sublease surge talked about earlier in the year was now fully underway.
Companies like Shopify and Klipfolio (who all occupy lots of quality downtown office space) were putting their offices up for sublease causing an increase of over 60% in sublet availability from just the previous quarter. Join us next time as we take a look at what to expect in 2021!
Contact Real Strategy Advisors today to see if your workplace and approach is optimized for staff productivity, performance, and retention. Our commercial real estate advisors can engage with your team and develop a plan to help foster productive, happy, and long-term employees — all within your budget!