By Erika Siegert, Senior Analyst, National Research Insights | September 1, 2020

Office investments lead the way in second quarter as activity pauses in the Ottawa market area

As a result of the continuing uncertainty from the global pandemic, investment activity in the Ottawa market area had slowed, leading to a decrease in real estate transactions as investors were calculated and cautious in their approach. Second quarter activity in the Ottawa market registered only 50 transactions, totaling $399 million, which was a 37% decrease in deal activity and a 43% decrease in total investments compared to Q2 2019. On the heels of a strong first quarter which carried momentum from the end of 2019, the first half of 2020 saw a total of 132 transactions amounting to $820 million, a 27% drop from the $1.1 billion seen in the first half of 2019.

(Ottawa property transactions – all sectors by year)

Ottawa property transactions all sectors by year H2 2020

Making up just over 51% of total investments this quarter was the office sector, which registered $204 million in investment volume. Although the office sector performed relatively strong, this can be attributed to a single $97.5 million transaction. Still, this marks only a 2% decrease in office sector investments from the $344 million recorded in the first half of 2019 to $336 million recorded in the first half of 2020. Development activity in the Ottawa market continues to be prominent as land sales represented roughly 31% of Q2 investment volume, and 37% of investment volume in the first half of 2020. Two asset classes that saw disappointing results in the first half of 2020 were the industrial and apartment sectors, which dropped 74% and 72%, respectively, compared to the same period last year. Overall, the lack of significant transactions was a major story in the second quarter, with only four transactions closing for over $30 million. According to Altus Group’s Investment Trends Survey for Q2 2020, although the market has seen negative momentum, Ottawa’s multi-tenant industrial is the top preferred product-market combination by investors. Similar to other major markets, cap rates have also seen an increase across asset classes.

 

(Ottawa market area cap rates – Q1 2005 to Q2 2020)

Ottawa overall capitalization rates - Q2 2020

Notable Ottawa investment transactions during Q2 2020:

395 Terminal Avenue, Ottawa – Office
This 240,000 square foot office complex was the largest transaction registered this quarter at $97.5 million. The asset was acquired by BentallGreenOak and represents nearly a quarter of the total investments recorded in the second quarter. The eight-storey office building is fully occupied by a single tenant, the Canada Revenue Agency, on a long-term lease.

Crown Realty Partners Portfolio, Ottawa, Nepean & Gloucester – Office
This 23-property portfolio comprised of flex-office assets spread across the Ottawa market area was acquired by Crown Realty Partners from CanFirst Capital Management for $56.4 million. The portfolio was over 90 percent occupied at the time of sale and contains 415,561 square feet of leasable area.

126 York Street, Ottawa – Office
This five-storey, multi-tenant office building located just east of ByWard Market was acquired for $33 million. The 63,231 square foot building sits on 1.25 acres of land, and given the prime location, is likely destined for a future redevelopment.

3713 Borrisokane Road, Nepean – Res Land
Closing at $16.6 million, this 77-acre land parcel acquired by Caivan Communities represented the largest residential land transaction this quarter. Applications have already been submitted to the City of Ottawa for a new low-density residential development which would include 580 residential units comprised of single-family detached homes and townhouses.

222 Citigate Drive, Nepean – ICI Land
This 64-acre land parcel was sold by The Regional Group to Broccolini Construction for $44.8 million, making it the largest land transaction seen this quarter. Development applications have already been submitted to the City of Ottawa for a five-storey, 2.7 million square foot “prestige office light industrial building” which would be leased to Amazon. Once complete, this massive distribution centre would go along with the one million square foot distribution centre also constructed by Broccolini and leased to Amazon on Boundary Road in Cumberland.

(Ottawa property transactions by asset class – H1 2019 vs. H1 2020)

Ottawa property transactions by asset class H2 2020

The COVID-19 pandemic has naturally led to great uncertainty for investors and the global economy, affecting many potential sales. Buyers and sellers are currently experiencing a disconnect with their bid-ask expectations. While a number of transactions were put on hold or cancelled, Ottawa still encountered market action, demonstrating that quality properties will continue to be sought after. In the first half of 2020, the office sector remained steady and the land sectors continued to be in demand as the Ottawa market continues its growth and developers look to add sorely needed commercial and residential space to the area.

 

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ABOUT DATA SOLUTIONS

Data Solutions connects the Canadian real estate industry through the delivery of data with unparalleled breadth, integrity and relevance.  We cover new homes, investment transactions and commercial market inventory in key markets, and also provide intelligence on the national housing market and consumer home buying and borrowing patterns.

Our solutions are used by real estate industry stakeholders to gain market intelligence, identify and validate opportunities, benchmark, strategically plan, manage risk and more.

Data Solutions is part of Altus Analytics, the software and data solutions business of Altus Group, where our focus is to empower real estate clients and partners to work collaboratively to enhance decision making, drive performance and optimize transactional efficiency. Our solutions enable firms to better organize and manage data and connect with the right information and analytics to help them gain a complete picture of real estate assets, portfolios and transactions.

For more information on Data Solutions, please visit www.altusgroup.com/data.

 

ABOUT ALTUS GROUP LIMITED

Altus Group Limited is a leading provider of independent advisory services, software and data solutions to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants across a variety of sectors.  Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.

For more information on Altus Group, please visit: www.altusgroup.com.

 

MEDIA CONTACT:

Elizabeth Lambe
Manager, Communications
Altus Group
(416) 641 – 9787
elizabeth.lambe@altusgroup.com

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