Ottawa’s downtown fills up again as employees return to the office

A new report suggests a downward trend in Ottawa’s office vacancy rate, as more employees return to downtown buildings post-pandemic.

According to the report by Colliers, the declining trend in Ottawa’s office vacancy rate has persisted for the third consecutive quarter — bringing the overall vacancy rate to 12 per cent.

“There’s some kind of disconnect where the vacancy rate is not too dramatic — but the return to office level isn’t particularly high either,” Adam Jacobs, Head of Research with Colliers Canada, told CityNews Ottawa in an interview.

Ottawa’s return-to-office levels lags behind other major Canadian cities, including Toronto, Vancouver and Montreal, noted Jacobs.

“We have some data on return-to-office levels and it’s pretty clear Ottawa was lower than the rest of the country,” he said. “I don’t think it’s surprising because of the federal workforce being such a big part of it.”

While Ottawa’s office market is operating at 54 per cent of its pre-COVID occupancy levels, Toronto has risen to 78 per cent, Vancouver to 72 per cent, and Montreal to 67 per cent, said the report.

Following the federal government’s return-to-work mandate in January 2023 — requiring employees to return to the office two to three days each week — downtown Ottawa experienced a peak in occupancy levels in 2023. But since, levels have since declined to 43 per cent.

“This isn’t like renting your apartment where it’s month-to-month or a one-year lease,” Jacobs said, adding “It’s often where they signed a seven-year lease and isn’t something you can discuss for years unless they try to sublet.”

Additionally, the report shows there has been a rise in office leasing activity in 2024, compared with last year.

While companies are showing confidence the market has reached its low point, this has resulted in a surge in interest, especially within the downtown submarket, wrote Colliers.

The company also noted a 1.5 per cent increase year-over-year, in average net asking rates to rent office space.

“After prolonged deliberation following the COVID-19 pandemic, this uptick suggests that tenants are now ready to execute their post-pandemic office accommodations plan,” the report reads.

Vacancy rates dropped in the downtown submarket from 13.2 per cent to 11.2 per cent — partly attributing this to the planned conversion of 200 Elgin Street into a multifamily residence.

The transition of office assets into multifamily projects — including 360 Laurier Avenue West and 130 Slater Street — has created a surge in leasing activity in nearby properties, with tenants seeking alternative office spaces, said Colliers.