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Winnipeg Free Press - PRINT EDITION

Little space to spare

One of only two cities to see drop in office vacancy rates

By: Murray McNeill

Posted: 08/6/2009 1:00 AM | Comments: 0 (including replies)

Winnipeg has some of the lowest office vacancy rates in the country and they're poised to head even lower, according to a new report from Avison Young.

The commercial real estate services firm said Winnipeg and Regina were the only two major Canadian cities to record a drop in their overall office vacancy rates between the second quarter of last year and the first quarter of this year.

It said Winnipeg's rate fell 90 basis points to 4.7 per cent, while Regina's dipped by 10 basis points to 2.3 per cent.

And only three cities -- Regina, Quebec City and Halifax -- have lower downtown and suburban vacancy rates, the company added. It pegged Winnipeg's downtown rate at 4.4 per cent and its suburban rate at 5.5 per cent.

"Winnipeg's office market is behaving very well these days, and many tenants have the confidence that landlords want to see," said Wes Schollenberg, managing partner for the Winnipeg office of Avison Young.

He said the nervous ones are usually companies with U.S. roots.

"Most of them are not in an expansion mode and may be hesitant to move. It's more the status quo (for them)." But for most local firms, "it's business as usual," he added, "although there is a little bit of belt tightening going on all over."

Although Winnipeg's vacancy rates are already among the lowest in Canada, Schollenberg said he expects them to dip even lower in the second half of this year as the North American economy begins to strengthen and companies start feeling more comfortable about expanding or upgrading their space.

How much lower is difficult to say, he added.

Schollenberg said the only segment of the local market to see an increase in vacancy rates over the past year was the Class B segment.

And he blamed that almost entirely on two large downtown tenants -- Manitoba Hydro and the Winnipeg Regional Health Authority -- moving out of rented space into newly built downtown office buildings.

The Class B rate jumped by 4.4 per cent to 9.9 per cent, while the Class A rate dipped by a miniscule 0.1 per cent to 4.7 per cent.

Schollengberg said that despite the healthy demand for office space, rental rates have remained stable for both Class A and B space.

Nationally, the Avison Young report said vacancies in Canada's office market surged by more than two percentage points to 8.5 per cent from 6.1 per cent in mid-2008. And they'll climb toward levels not seen since the dot-com bust earlier this decade before finally levelling out towards the end of 2011, the firm added.

"The vacancy rate will definitely be trending up in the coming quarters," said Bill Argeropoulos, director of research at Avison Young.

"We're not sure if it will breach the recent high of 11.5 per cent in 2003, but we do see the vacancy perhaps breaching the 10 per cent barrier in the coming quarters and perhaps into 2010, largely because of new supply coming into the market."

-- with files from Canwest News Service

murray.mcneill@freepress.mb.ca

Not a whole lot of rooms to rent

Here's how Winnipeg's office vacancy rates compare to the national rates and the rates for 10 Canadian cities for the second quarter of this year:

Jurisdiction Downtown Suburban

Canada 6.9% 10.4%

Halifax 5.2% 15.5%

Quebec City 2.6% 5.2%

Montreal 7.3% 10.5%

Ottawa 2.7% 10.2%

Toronto 7.6% 11.1 %

Mississauga 11% 10.5%

Winnipeg 4.4% 5.5%

Regina 2.3% 2.7%

Edmonton 5.9% 10.5%

Calgary 7.8% 11.8%

Vancouver 5.0% 9.1%

Here is a further breakdown of the Winnipeg vacancy rate numbers:

Type Second Second

quarter 2008 quarter 2009

Overall 5.6% 4.7%

Class A 4.8% 4.7%

Class B 5.5% 9.9%

-- Source: Avison Young

Republished from the Winnipeg Free Press print edition August 6, 2009 B4

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