Ottawa office leases got 23 months longer. That is the deal.

The number everyone quotes, and the one nobody does

CBRE's second quarter figures put Ottawa office vacancy at 15.0%, up 70 basis points from 14.3% in Q1, on 120,000 square feet of negative net absorption. Fourth consecutive quarter of increases. If you lease office space here you have read some version of that line five times this year, and the takeaway is always the same. Tenant's market. Go get your free rent.

Here is a number from the same quarter that nobody has repeated. CoStar's July report on the Ottawa-Gatineau office market puts the average new lease signed here at roughly 61 months. A year earlier it was around 38.

Twenty-three months. That is the real story of 2026 leasing in this city, and it has nothing to do with rent.

Landlords stopped fighting on rate a while ago

I wrote back in June that face rent is the least useful number in an Ottawa lease and that the real negotiation lives in the inducements. Still true. What has changed is that the aggregate data now shows what tenants traded to get them.

Average asking rent across the region sits around $33 a foot and grew 2.8% over the past year, below inflation. CBRE noted that net asking rents held up through Q2 in both the central and suburban markets despite climbing vacancy, and put it down to owners believing they can still get fair value. That is one reading. The other is that owners do not need to cut the rate, because they found something tenants will pay with instead.

After incentives the real all-in number lands closer to $29 a foot. Getting from $33 to $29 is about a 12% discount. To collect it, the average tenant is now signing five years instead of three.

Five years from a Q2 2026 lease is mid-2031

Ask yourself what you actually know about your space needs in 2031. Then ask what you know about Ottawa's.

The two biggest forces here pull in opposite directions and neither is forecastable. The federal government has signalled a workforce reduction in the range of 40,000 positions, which shrinks the space it needs. At the same time executives went back five days a week in May, the rest of the public service moved to a four-day minimum in July, and Public Services and Procurement Canada has said it is looking at taking on more space in the National Capital Region to house them.

One of those wins. I do not know which, and neither does the person quoting you a rate. What I do know is that a tenant who signs 61 months at $29 and needs 40% less space in year three has done worse than one who signed 36 months at $33 and kept the option to walk. The discount was 12%. Being wrong about your footprint costs far more than that.

The soft market is not the market you want to sit in

CoStar splits the region by building age and the gap is brutal. In buildings completed before 2010, vacancy runs about 15.7%. In buildings completed since, about 5.0%. Same city, same quarter, three times the vacancy.

The soft market you have been reading about is almost entirely the old half. That is where twelve months of free rent lives. Space built after 2010, sitting at 5% vacancy, is not a soft market by any definition, and the landlord there is not buying your signature with abatement.

Which sets up the trap. Take the deep discount and you take it on older stock, locked in until 2031, at exactly the moment the city has stopped building alternatives. Roughly 220,000 square feet of office is under construction across the entire region, most of it one project in Kanata, while obsolete buildings keep getting pulled out of inventory for conversion or demolition. 110 O'Connor is coming down for a 26-storey residential building.

Less new supply plus steady removals means the good half tightens from here. Signing five years into the weak half to save four dollars a foot is a decision worth making with your eyes open, not one that falls out of a spreadsheet. I went through how much those inventory shifts distort the headline vacancy rate in my breakdown of the Q2 numbers.

What I would negotiate instead of another month free

If you are going to give a landlord term, charge them for it in something other than rent.

Contraction rights. A pre-priced option to hand back a defined block of space at year three or year five. You pay a fee, the landlord takes the space back, and an unknowable forecast becomes a known cost. Where landlords want term this badly, it is the ask that draws the least pushback.

Sublease and assignment language you can actually use. Most standard clauses give the landlord consent rights broad enough to block anything. Narrow it to consent not to be unreasonably withheld, define unreasonable, and put a response deadline in the document.

Early termination with a formula. If the out reads "the parties will discuss in good faith," you have nothing. Price it now, in dollars, with a notice period.

A cap on operating cost increases. Your net rent is fixed for 61 months. Your additional rent is not, and over five years that is where the surprise usually shows up.

Get all of it into the offer to lease. An option that lives in an email thread shrinks between the handshake and the signature.

None of this transfers to industrial. Availability there is tight enough that landlords are not buying anybody's signature, and I laid out why the small-bay squeeze puts the leverage on the other side of the table.

The honest counterargument

Term is not automatically a bad trade. Ottawa asking rents around $33 sit well below Toronto at $41 and Vancouver at $47.50, so the cost of being wrong here is smaller than in a larger market. If you run a stable business with a known headcount, five years on good space with real incentives is a fine outcome.

The mistake is not signing five years. It is signing five years because the discount looked good, without pricing what you handed over to get it. Those 23 extra months are not free. They are the consideration.

What this looks like on your file

If your renewal falls inside eighteen months, start now. Term is the currency here, and you have more of it to spend the earlier you engage.

If you are weighing two proposals, run the net effective math the way I described in the inducements piece, then run it again assuming you need 30% less space in year three. If the ranking flips, the flexibility clause is worth more to you than the abatement. And if your team is watching the defence and tech leasing out west, the housing side is moving too, so browse Kanata.

Landlords, the tenants who understand this trade are writing contraction rights into deals right now. The rest are signing 61 months on your terms. That gap will close.

Sitting on a renewal, or trying to work out whether the term a landlord wants is worth the discount attached to it? Send me the two offers and I will run the math with you. I am at 613-262-6545 or fil@613realtor.ca.