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Through the 1980s it was called Silicon Valley North. Commercial properties were jammed wall to wall with tenants.

But when the bottom fell out of the high-tech sector at the turn of the decade, Kanata took on a new name -- Ghost Town.

Now the Ottawa suburb, about 20 kilometres west of the city centre, is flowering again. Not with the confident blush of innocence, however -- this time it's with the broader perspective of a veteran.

Kanata is the real estate story of the year, says Paul Hindo of Royal LePage Commercial in Ottawa.

"It's amazing, the reversal of fortune. In 1999-2000 they were converting bowling alleys into offices," Mr. Hindo says. "In 2003 you could play bowling in the abandoned office space.

"Today most of the office space is now being leased," he says.

During the third quarter of this year, vacancy rates in Kanata plummeted to 12.3 per cent from 17.1 per cent in the previous quarter. The rate had been as high as 30 per cent following the 2000 tech bust.

About 320,000 square feet of space were absorbed, with additional space leased, during the third quarter as well.

The reviving commercial real estate sector in Kanata was given a boost this past summer when the Texas-based Dell Inc. leased the former Nokia Corp. building and its 156,000 square feet at 2500 Solandt Road for use as a call centre.

When companies of that calibre settle, you can be sure others will follow, says Bob Perkins of CB Richard Ellis, whose company negotiated the Dell deal. Startup high-tech companies and professional services firms, such as lawyers and accountants, also have been moving in.

Helping to drive the action in Kanata is an infusion of venture capital.

About $300-million will be invested in Ottawa high-tech firms in 2005, a level not seen since 2002, according to the Ottawa Centre for Research and Innovation (OCRI). The number of technology companies as of June, 2005, was 1,740 compared with 1,030 in 2001.

When the boom went bust, about 20,000 high-tech employees in Ottawa lost their jobs.

Some were absorbed by coincidental government hiring, but many joined startup companies, says Judy Quigley, manager of investment response for global marketing at OCRI.

Many of these entrepreneurial spinoffs were companies with 10 employees or fewer, Ms. Quigley says.

Solace Systems is an example. The company, which makes network routers, started in Kanata in 2002. It now has 60 employees using 14,100 square feet and plans to double that within six to 12 months, says Lara Clarke, marketing communications manager for the company.

NorthSeas AMT moved to Kanata in September, 2003, because it "has an atmosphere and environment of innovation that is recognized in the U.S. and elsewhere," says the company's president, Stephen Spence. "When we tell people we're from Kanata they know where it is and that it is a technology centre." The company, which makes an e-mail archiving device, has 20 employees on 5,000 square feet with plans for expansion, he says.

The economic picture wasn't so rosy for Kanata after the high-tech bubble burst.

In the years following 2000, many companies folded or consolidated. Nortel Networks Corp. shrank to 5,500 employees in Ottawa from 17,000 at its peak.

Large companies were tied into long-term commercial property leases that would expire in 2009. The vacancy rate in Kanata crept up toward 30 per cent, and space that had been originally rented for about $16 to $20 a square foot was offered to tenants for free if they would pay operating costs.

From 2000 to 2004, the incentives remained on sublease space, which totalled more than one million square feet of vacancy in Kanata and other west Ottawa suburbs. However, to the outsider the situation might not have seemed as bad as it was because tenants such as Nortel and Nokia were still paying rent on space they weren't occupying.

Some observers began referring to Kanata as Ghost Town.

Toward the end of 2004, however, things began to turn around, says David Chorney of Colliers International.

"Vacancy began to steadily decline to about 25 per cent because the office market [in downtown Ottawa]was extremely tight and expensive, pushing tenants west to Kanata."

Tenants began to fill buildings between downtown Ottawa and Kanata, such as the Corel Corp. building at 1600 Carling Ave. and Canderel Ltd. at 495 Richmond Rd.

Soon, with class A office space diminishing in the immediate western suburbs, Kanata, with empty and less expensive office space, became more appealing.

"In Kanata, we are now seeing lots of tenant retention and new tenants moving in," Mr. Chorney says.

So, 4½ years after the end of the tech boom, demand is once again coming over the horizon to meet supply. More than 600 acres of land that is zoned commercial and industrial is still available in Kanata, leaving ample space for new building.

"We expect the trend of positive absorption to continue for the balance of the year," Mr. Perkins says, "with asking rents beginning to climb in 2006."

Market tightens in Ottawa's core

The Ottawa commercial real estate market, which traditionally has had one of the lowest vacancy rates in North America, is ending a strong year, and experts say available space in the core is shrinking.

"We expect the Ottawa office market to finish 2005 on a positive note," said Bob Perkins of CB Richard Ellis. But tenants looking for large blocks of space will find limited availability, he says, and "this could lead to the refitting of some facilities that have been seen in the past to be undesirable."

Most of Ottawa's office activity can be found in the downtown core and running west through the suburbs to Kanata. In downtown Ottawa, class A real estate costs about $48 a square foot. Toward the west that price drops to about $35, and in Kanata it's about $25. A result is that tenants are gradually moving west from the core.

But the downtown's vacancy rate for commercial property isn't rising accordingly -- instead, it's falling because of considerable growth.

Space downtown is becoming scarce even though nearly 400,000 square feet is added to the inventory each year.

Contributing to the situation are height restrictions that limit building size to keep structures from diminishing the Peace Tower.

"Our limited land resource will be maxed out in a matter of years," says David Chorney of Colliers International. "Since our vacancy rate has always been so low, when we do run out of space to build downtown, we will be put on waiting lists.

"There will be no choice but to move to a western suburb like Kanata."

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