By Melodie Caruso
Centretown’s commercial vacancy rate has dropped seven per cent despite prior worries of lack of adequate parking and high net-rental rates.
Current supply and demand of commercial real estate will hardly be affected by increased transit or more parking, says Graeme Webster, research analyst at Colliers International Ottawa.
Vacancy rates in Centretown this quarter tumbled from 16.8 per cent in the third quarter to 9.7 per cent this quarter, states a market survey by the Building Owners and Managers Association (BOMA).
The large decrease can be attributed to the removal of 190 O’Conner Street from the survey as it undergoes renovation. Additionally, more small to medium sized businesses seem to be leasing vacant spaces.
The drop in vacancy comes after a series of years where small to medium sized businesses were leaving Centretown and the downtown core.
The main reasons, as previously reported, were lack of parking and net-rental rates.
Net-rental rates are cost expressed in dollars per square foot, which does not represent the full rental cost.
Taxes of both realty and operation costs must be added to determine the total cost per square foot.
“The downtown area is very strong right now,” says Eli Saikaley of Saikaley Reality Management.
He says the real estate price boom may have affected occupancy, as tenets searched for cheaper real estate out of the downtown area.
“Kanata has had a huge impact on the commercial real estate market,” says Webster.
The boom of cheap real estate in Kanata drove many businesses out of the city and into the suburbs.
The suburbs not only offer cheaper real estate but much higher parking ratios.
According to an article published 2000, a BOMA official stated the regional government had failed to maximize the capacity of city lots, limiting the availability of parking.
Encouragement by the City of Ottawa and independent organizations, such as Centretown Citizens Community Association put pressure on downtown tenants to take public transportation.
Promoting the use of public transportation seems to be two-fold. The city wants to sustain a green and environmentally sensitive city.
But a more tangible explanation for the push is that the lack of parking downtown does not meet demands.
The process of attracting businesses is inhibited, since parking is seen as a necessary requirement for most tenants.
One of the City of Ottawa 20/20 principles states, “Ottawa implements policies that favour walking, cycling, and public transportation over the use of private motor vehicles.”
“Fifty per cent of the people who rent need to park,” says Ann Gregory, President of Centretown Corporate Services.
The cost of parking is another liability.
A survey released in August shows parking rates are higher in Ottawa than in nine other cities across Canada, including Montreal and Toronto.
“Some lots are up to $15 a day, that is a 40 per cent increase from what I used to pay,” Gregory says.
The survey suggests prices to park per day are closer to $17.
Gregory believes parking availability and price are only part of the explanation for the decline of vacancy rates.
“They are taking advantage of the downtown tenants,” she says, while explaining high parking costs imposed by lot owners.
She adds that this factor does not explain why vacancy rates have decreased in the area.
Current figures show empty spaces were absorbed this year.
Rates are at a competitive level, while the overall Ottawa market experienced a healthy year in commercial real estate, indicates BOMA’s most recent report.
More downtown office space has been filled by government as well as both accounting and law firms.
Colliers International Ottawa, a commercial real estate company, expects new developments, including 150 Elgin St., to be fully leased before construction is completed.
It is predicted that vacancy rates will remain competitive well into 2006, indicating the demand for Centretown properties will remain strong.