Purpose-built rental housing is gaining popularity with Ottawa developers for the first time in decades. Low vacancy rates, climbing rents and a glut in the city’s residential condominium market are contributing factors, while perceived improved employment prospects in the federal civil service provide assurance of continued steady demand.
Canada Mortgage and Housing Corporation (CMHC) found a 2.6 per cent vacancy rate in its fall 2015 rental housing market survey, with average rents of $1,172 for two-bedroom units in the traditional apartment stock and $1,330 in condominium buildings. However, Colliers International analysts point to “quick absorption rates and top-of-market rental rates” for purpose-built rental accommodations now coming onto the market.
These have primarily been low-rise buildings in the city’s downtown neighbourhoods and/or in close proximity to the pending light-rail transit system, which is now under construction. “Developers are focusing on developing small, efficient units with attractive common areas and on-site amenities so they are able to maximize achievable rental rates per square foot,” advises a recent report from Colliers.
Multifamily cap rates are the lowest among Ottawa’s six surveyed property sectors at 4.5 to 5 per cent for high-rise stock and 5 to 5.5 per cent for low-rise. (Cap rates are highest for suburban office buildings.) However, multifamily yields are better than in Vancouver, Victoria and Toronto.
“Canada’s major commercial real estate markets have had very different starts to the first half of 2016. Ottawa has fit right in the middle with its market not being characterized by highs or lows, but rather by stability,” the Colliers report observes. “The multi-residential market has historically been the most stable of all asset classes in Ottawa.”