Ottawa Industrial Market Report
Metro Positioned for Long-Run Gain,
Despite Near-Term Easing in Leasing Activity
Vacancy rose amid softening demand. Rapidly climbing interest rates have taken a toll on leasing activity since the second quarter of 2022. Net absorption slowed significantly and fell into negative territory in the second half of the year. In early 2023, although the pause of interest rate hikes supported an uptick in demand, a further increase in financing costs during the second quarter caused net absorption to contract again. Leasing activity should regain its footing going forward as the Bank of Canada is expected to hold interest rates unchanged for the remainder of the year. This is already evident in third quarter data, which shows that net absorption returned to positive territory and sat just above 50,000 square feet. On the supply side, roughly 125,000 square feet was delivered as of the third quarter, and another 275,000 square feet is forecast to be completed in the final three months of 2023. This relatively limited supply should help maintain a below-2 per cent vacancy rate by the end of this year.