Business

Winnipeg Free Press - PRINT EDITION

Industrial vacancies stay low Vacancy rates compared

Office market sees opposite trend develop

By: Murray McNeill / Commercial Real Estate

Posted: 03/29/2010 1:00 AM | Comments: 0 (including replies)

JOE.BRYKSA@FREEPRESS.MB.CA Robert Scaletta stands in front of the former Crown Metal Packaging Canada building on Lagimodiere Boulevard, which only took a few months to sell.

The industrial market is starting to feel the benefits of the economic recovery even if the office market hasn't been so lucky, according to the latest market report from CB Richard Ellis.

Robert Scaletta, an industrial specialist in the firm's local office -- CB Richard Ellis Chartier & Associates -- said the industrial vacancy rate in Winnipeg inched up last year from 4.6 per cent in the first quarter to 4.9 per cent by the final quarter of the year.

But since then it's dropped back down to 4.2 per cent.

In the office market, however, the overall vacancy rate started climbing last year and hasn't stopped.

Derek Chartier, president of the company's local office, said the office rate jumped from 5.7 per cent in the first quarter of last year to 8.1 per cent by Q4.

And since then, it's climbed another four-tenths of a percentage point to 8.5 per cent.

But despite the hefty increases, Winnipeg still boasts the third lowest overall office vacancy rate among the 10 Canadian cities covered in CB Richard Ellis's first-quarter national office and industrial trends report.

Ottawa and Waterloo Region boast the two lowest rates -- 5.4 per cent and 6.7 per cent respectively -- while Calgary has the highest at 14.9 per cent.

Chartier blamed the increase in Winnipeg's rate on the lingering effects of the recession, which drove some local companies out of business and forced others to downsize their operations.

He said the only segment of the market that's seen an improvement since the end of last year is Class A, where the vacancy rate has fallen to 7.2 per cent from 8.8 per cent.

Chartier attributed that to several tenants upgrading from Class B or C space.

He said both of those segments have seen a further increase in their vacancy rates, with the B rate climbing to 7.7 per cent in the first quarter, and the C rate jumping to 9.5 per cent.

"That's what pushed up the overall rate."

Colliers Pratt McGarry president Wayne Pratt, whose firm publishes twice-yearly reports on vacancies within the commercial real estate market, agreed office-leasing activity has been slower than anticipated during the first few months of this year.

He said Colliers predicted at the start of the year there would be a modest increase in office-leasing activity this year, and it still expects that to happen as the recovery picks up steam.

Royal LePage Dynamic Real Estate leasing agent Wayne Johnson, who also publishes a twice-yearly report on commercial sales and leasing activity, said the reason Winnipeg hasn't seen a significant decline in office vacancy rates is because it never saw the big increases other Canadian markets saw in 2009.

But Johnson said he also expects vacancy rates in all segments of the market to start inching downward as the year progresses.

Scaletta said the demand for industrial space began to rebound in the fourth quarter of last year and has continued to strengthen in the first few months of this year.

He and Pratt said Winnipeg's industrial market was largely spared from the ravages of last year's recession. Scaletta said the recent pickup in demand for space has been coming from local firms expecting to grow their operations and from some new arrivals to the city.

Scaletta said not only are there more renters in the industrial market, but more buyers as well. He was the listing agency for the former Crown Metal Packaging Canada building at 955 Lagimodiere Blvd., and it only took a few months to find a buyer for the 67,000-square-foot facility.

He said the local buyer plans to lease out the building once the sale is finalized within the next couple of months.

Scaletta, Pratt and Johnson all predicted the demand for industrial space will continue to strengthen as the year progresses.

"And I don't think that's because of the recession recovery," Johnson said. "I think it's because it's been normal for us for quite some time now. The industrial market has done very well for the last two to two and a half years now because of a shortage of product (to rent)."

Know of any newsworthy or interesting trends or developments in the local office, retail, or industrial real estate sectors? Let real estate reporter Murray McNeill know at the email address below, or at 697-7254.

murray.mcneill@freepress.mb.ca

Here is a comparison of the overall office vacancy rates (in percentage terms) for Winnipeg and nine other Canadian cities in the first quarter of 2008 and the first quarter of 2009:

City Q1 '08 Q1 '09

Vancouver 7.2 10.2

Edmonton 6.5 10.6

Calgary 7.9 14.9

Winnipeg 5.7 8.5

Toronto 7.7 9.6

Waterloo Region 5.6 6.7

London 13.5 14.2

Ottawa 5.1 5.4

Montreal 8.8 10.7

Halifax 9.6 9.4

-- Source: CB Richard Ellis

Here is a breakdown of the office vacancy rates in Winnipeg:

Class

of space Q1 '09 Q4 '09 Q1'10

A 7.6 8.8 7.2

B 5.4 7.3 7.7

C 4.6 7.9 9.5

Overall 5.7 8.1 8.5

Here is a comparison of industrial vacancy rates in Winnipeg:

Q1 '09 Q4 '09 Q1 '10

4.6 4.9 4.2

-- Source: CB Richard Ellis Chartier & Associates

Republished from the Winnipeg Free Press print edition March 29, 2010 B4

(You must be logged in to post your reaction)

Your reaction?

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010; View the changes. New to commenting? Check out our Frequently Asked Questions.