At this week’s Ottawa Real Estate Forum, panel discussions touching on the office sector kept returning to a single central tension: rising demand for space versus the market uncertainty holding back new builds and refurbishments.

There were calls for more clarity from the federal government, one of the largest corporate occupiers and managers of office space in Canada, on its needs.

“There's tremendous opportunity here, but we do need a little bit of certainty around the leasing market, and the federal government absolutely has a role to play,” Avison Young president Mark Fieder said at a panel discussion featuring brokerage and development leaders from Avison Young, CBRE, Colliers and Dream Unlimited.

Fieder described the current outlook as a fog the industry must push through. “If the fog doesn't lift, you learn how to drive in the fog,” he said.

The federal government has previously prioritized hybrid work and reduced its office footprint but with public servants now required to spend more time in Ottawa offices, the public service is looking for new spaces.

Government trying to provide clarity

The federal government is trying to provide clarity for the market and expects to grow its portfolio, director general at Public Services and Procurement Canada (PSPC) Linda Jenkyn said, speaking on a government planning-focused panel. 

PSPC has published two invitations to submit expressions of interest (EOI) to provide office space in the capital: an EOI for the availability of warehouse and office space published Sept. 24 and an EOI for the availability of space for lease published on July 10.

The government is looking for over 100,000 square feet of office space for three separate offices and over 200,000 square feet of warehouse space beginning in 2031. Jenkyn said the move was to help PSPC gauge market capacity for new office space but also to provide the market some information of what is to come.

“Over the next little while you will definitely see that kind of move from expression of interest to an invitation to tender, where we'll be looking, you know, more closely at viable options for us to grow our portfolio,” Jenkyn said.

When looking for new office space, the federal government isn’t prioritizing buildings with top amenities but rather speed and functionality, she added.

Speed, she said, is important because when new government programs or agencies are announced, employees need to move into spaces quickly.

High construction and financing costs causing hesitation

Office landlords, however, continued to express skepticism about building in the current economic climate.  

“I don’t see a whole lot of cranes coming. The math is not there. The interest rates aren’t there. The demand is not there,” Terry Young, president of Kanata office developer KRP Properties, said at a panel discussion on Ottawa's office sector.

Mike Swan, Morguard's AVP of property management and leasing, advised landlords not to build on spec. 

“Don't build [new offices] on spec because when you build it on spec, you are now going to be leasing it at a market rate," he said. "Wait for the demand, build it to suit, and you'll get an economic rent.”

According to CBRE, at the end of Q3, the average asking rent for offices was $19.06 per square foot in Ottawa but Swan said premium offices built for specific clients could fetch $40 per square foot.

This quarter was the first that saw positive net absorption since mid-2025 and vacancy rates in Ottawa fell to below 15 per cent but there remains zero new office construction in the city.

A Q2 market report from Colliers published July 6 showed that interest is high in pre-built office space that is move-in ready, but landlords don’t want to invest in updating buildings until there is more certainty around leasing.

Construction costs and interest rates both remain high, making major upgrades or construction projects a significant risk with no tenant on the horizon.

Dream Unlimited's EVP of commercial properties Gordon Wadley said making “the math work” for refurbishing office space is difficult under the current conditions.

“I think people have to start getting their heads around a little bit of change, and a little bit of uncertainty, over the next little while,” he said.

RTO mandates driving expansion

Aside from the federal government, many major private companies have also been bringing workers back into offices, prompting the need for additional space.

According to Swan, Shopify sublet their Morguard office space on Elgin Street in Ottawa beginning in 2020, but come January 2027, the e-commerce giant will be reoccupying the space after signing a new 10-year lease.

This upswing isn't isolated to Ottawa, broader national markets are seeing similar return-to-office momentum, forum attendees heard.

The Bank of Nova Scotia, which consolidated prior to the pandemic and then went remote during COVID, has expanded its footprint in Toronto. 

Fieder of Avison Young said Scotiabank's new CEO decided he wanted everyone back in the office including 4,500 new employees hired since the pandemic. “All of a sudden they're on the market for a million square feet, and they probably satisfied, I think about three quarters," he said.