Ottawa commercial market overview Q2 2026

Ottawa commercial in Q2 2026: a tale of three markets

Ottawa's commercial real estate market in 2026 isn't one market — it's three, moving in three different directions. Office is challenged. Industrial is tight. Retail is rebounding from a long valley. Here's what each segment looks like through the broker's lens.

Office: under pressure but stabilizing

Ottawa's overall office vacancy rate climbed to 13.3% in Q1 2026, the highest since Q4 2024. The driver: large blocks of federal government office space being vacated as Public Services and Procurement Canada (PSPC) continues consolidation under its long-term real estate strategy.

Q2 has shown early signs of stabilization, particularly as the federal four-day return-to-office mandate takes effect July 2026. The mandate is bringing roughly 280,000 federal employees back to physical offices more days per week, which directly affects:

• Downtown Class A demand (Slater, Sparks, Albert, Wellington corridors)
• Tunney's Pasture and west-end government campus utilization
• Adjacent retail and food service in office concentration zones

What's still soft:

• Older Class B and C product in non-prime locations
• Some second-generation space in tower buildings with deferred capital plans
• Sublease availability remains elevated as some federal-adjacent firms right-size

Cap rates for Ottawa office: 7.0% to 9.0%+ on B/C product; 6.0% to 7.5% on well-tenanted A.

Industrial: tight and getting tighter

Q1 2026 industrial vacancy declined 60 basis points to 5.3%. Net absorption has been positive for six consecutive quarters. Asking rents have risen 3–5% year over year.

Demand drivers:

• E-commerce fulfillment requirements
• Cannabis sector consolidation (smaller users, but still real demand)
• Tech and life sciences light-industrial requirements
• Federal warehousing and logistics needs

Where Ottawa industrial is hottest:

• West-end / Stittsville along Hazeldean — newer Class A flex
• Carling Avenue / Bayshore corridor — older infill product with development potential
• Walkley / South Keys industrial pockets — well-located for distribution
• Highway 417 east — proximity to Quebec markets

Cap rates: 5.0% to 6.5% range, depending on tenancy and quality. Construction of new industrial product remains limited by land availability and rising construction costs.

Retail: rebounding selectively

Ottawa retail has been recovering through 2025–2026 from the pandemic and high-rate era. The story is uneven:

Strong:

• Grocery-anchored neighbourhood centres
• Quick-service restaurant pads
• Wellington West, Bank Street (Glebe), and Westboro independent strips
• Lansdowne and Rideau Centre adjacent

Soft:

• Older enclosed mall product
• Power centres anchored by big-box uses with weak balance sheets
• St. Laurent corridor older retail
• ByWard Market street-level (still recovering from 2020–2023 disruptions)

Cap rates: 5.5% to 7.5% depending on product type and location.

What's moving the market

Three trends to watch through the rest of 2026:

1. Federal RTO mandate execution. July 2026 is the formal effective date. Watch how strict enforcement actually is — that determines downtown office and retail recovery pace.

2. Construction starts. New industrial product is constrained by land cost and zoning timelines. Expect continued tightening through 2027.

3. Capital availability. Lender risk appetite for office acquisition remains limited. Equity is selective. Cap rate expansion in office may continue.

Where the deals are happening

In Ottawa's 2026 commercial market, I'm seeing transaction activity concentrated in:

• Industrial under $10M — owner-occupier and small institutional buyers
• Mixed-use redevelopment sites in the urban core — buyers looking for residential conversion potential
• Grocery-anchored retail — pension fund and institutional appetite
• Distressed downtown office — opportunistic capital looking for conversion potential

Where activity is thin:

• Class B office over $25M
• Suburban office parks
• Older enclosed mall sites without redevelopment plans

My take for owners and investors

If you own Ottawa office: focus on tenant retention through 2026–2027. Rate environment stabilization and RTO mandates may bring fundamentals back, but the transition will be uneven.

If you own industrial: ride the curve. Asking rents are still rising. Don't undersell long-term tenants.

If you're an investor with capital: industrial and grocery-anchored retail are the cleanest plays. Office is for sophisticated capital with conversion thesis.

For commercial buyers, sellers, or owners thinking through their next move — I work alongside Zolo Realty's commercial colleagues on Ottawa transactions in the $1M–$25M range. Reach out: 613-262-6545 or fil@613realtor.ca.