A new report from Colliers International says investment in Ottawa's commercial real estate market surpassed $1.1 billion last year, a level not seen since 2003.

According to the report, office transactions led the way in 2005, the most notable being CPP Investments' purchase of a 50-per-cent interest in OMERS' Class A Constitution Square complex for $118 million.

Following a year of government uncertainty the Ottawa office leasing market rebounded in 2005, with vacancy dropping from 12 per cent to 9.6 per cent. The biggest drop was seen in the suburbs, while the downtown core saw a minimal decrease to 4.2 per cent from 4.6 per cent a year ago.

The completion of a number of large deals over the year created a shortage of large pockets of space (deemed as spaces over 100,000 square feet) in the region. When the dust settled, at year-end 2005 there were only two available options in the region over 100,000 square feet, according to the report.

Ottawa also remains on track to have one of the lowest industrial vacancy rates in Canada. While last year vacancy edged up to 5.4 per cent, this year that number came tumbling down to an impressive 3.2 per cent thanks to high demand, increased construction costs and limited supply of vacant industrial space.

On pace with last year's performance, the report says retail vacancy dropped to just under three per cent for 2005, significantly below the five-year historical average of 3.5 per cent. Despite predictions of a less-than-outstanding 2005 Christmas retail season, observers point to the Ottawa retail market's continued resilience as a factor in the drop.