Investment Opportunities in the Ottawa Commercial Real Estate Market
While Ottawa has maintained its status as a safe city for business investment, the COVID-19 pandemic has changed the way investors view commercial properties in the capital.
Over the past 18 months, the commercial real estate market has undergone unprecedented stress for landlords and tenants, as businesses have canceled leases, malls have been left empty and Main Street retailers have gone. closed their doors for good.
Because of this uncertainty, members of the Ottawa Real Estate Board’s Commercial Network say a slowdown in commercial real estate investment was inevitable as buyers were reluctant to buy properties without guaranteed financial returns.
However, as Ottawa moves forward on the road to recovery, investors are eager to capitalize on new real estate opportunities in the capital region, said Michael Pyman, vice president of national investment services at Colliers.
“After a record year like 2019 where we have seen record trading volumes, it can be said that the last two years have been asleep,” said Pyman. “But, real estate remains an investment strategy and we are already seeing signs that the market is livening up with some big deals going on.”
Finding security in retail
While Main Street retailers and local stores have been hit the hardest by pandemic closures, one segment of the retail market remains a commodity for investors.
Properties with essential service retailers – a grocery store, drugstore or Walmart – are in high demand, as they are seen as more resistant to pandemics and less likely to experience tenant turnover.
“From an investor’s perspective, they look at these buildings with these tenants and they see the most stable asset they can buy in the retail industry right now,” says Graeme Webster, partner and co-founder of KOBLE Commercial Real Estate. & Brokerage. “We have been through a very difficult time, and they have proven that they can withstand economic uncertainty, which makes them a great attraction for investors.”
Sales agents are also seeing increased demand for these properties outside of town.
As residents continue to stay closer to home, investors are taking a similar approach – buying properties outside of major urban areas, says Webster.
Retail businesses in Peterborough, Pembroke and Carleton Place are of interest to all investors, especially since they are cheaper.
“These secondary and tertiary markets are just as strong because of these investment opportunities,” adds Webster. “A Tim Hortons or a Giant Tiger in Arnprior is arguably just as valuable as in Ottawa. Essential retail is essential everywhere you look.
The race for industrial space continues
Ottawa is also a hotly contested market for industrial space – a market that investors and tenants alike vie for their hands, Pyman says.
Interest in the capital has continued to climb as industrial property vacancy rates remain low and rental rates rise.
However, with the lack of new products or large scale land developments available in Ottawa, it is becoming increasingly difficult to meet customer demand.
“Investors come from all over looking for products in Ottawa, but there are very few 500,000 square foot properties available for large pension funds or REIT investors,” Pyman explains. “And when they come into the market there is a lot of competition, depth of supply and we keep seeing the prices go up.”
As the Ottawa commercial real estate market continues to evolve and adapt to pandemic trends, it is more important than ever to work with an OREB commercial member to navigate the market, Pyman adds. With so much economic uncertainty, a trusted commercial real estate agent can assure you that you are making a good investment for years to come.
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