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Vacancies fall for downtown office space

City's industrial market remains hot, report says

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Construction at the Centrepoint development.

SARAH TAYLOR / WINNIPEG FREE PRESS Enlarge Image

Construction at the Centrepoint development. Photo Store

Winnipeg's office-leasing market is showing some new signs of life while its robust industrial market just keeps rolling along, a new national report from CBRE Limited says.

The commercial real estate firm said Winnipeg's overall office-vacancy rate dropped more than a full percentage point from the first to second quarter of this year, falling to 11.2 per cent from 12.3 per cent. And it was a similar story with the downtown-office-vacancy rate, which dropped to 10.5 per cent from 11.4 per cent.

The only bad news was despite the improvement, Winnipeg still had the third-highest downtown-office-vacancy rate among the 10 Canadian cities surveyed, and was tied with Edmonton for the fourth-highest overall rate.

However, the report also showed an entirely different story for the city's industrial market, which boasted the lowest second-quarter vacancy rate in the country at 3.7 per cent. That was also down more than half a percentage point from the first-quarter rate of 4.3 per cent, even though 80,000 square feet of newly built industrial space was added to the market in the quarter.

The decline in Winnipeg's downtown rate is good news for the developers of two major downtown projects that both have a significant office component -- the 311 Portage Avenue at Centrepoint development and the proposed SoPo Square development.

The Longboat Development Corporation and Artis Real Estate Investment Trust are behind both projects, and have about 16,000 square feet of office space still to fill in Centrepoint's 100,000-square-foot office/retail complex.

They're also still beating the bushes for anchor tenants for the two office/retail buildings in the SoPo Square development, which is to be built on a surface parking lot on the south side of Graham Avenue between Hargrave and Carlton streets.

Wednesday was the official groundbreaking for another major piece of the Centrepoint development -- the 21-storey, 191-unit Glasshouse Skylofts in the City condo tower. Longboat president Scott Stephanson said in an interview following the ceremony they remain confident Centrepoint's office space will be fully leased by the time the office/retail complex opens in the final quarter of this year.

They're also confident they'll find anchor tenants for the two SoPo buildings, although he wouldn't speculate on how much longer that's likely to take. They've already been marketing the space for close to 18 months.

"We have significant interest from several parties," he said. "But to turn that into a building with a tenant and a name on the side takes a long time. By the end of August we might know more, but everything takes time."

Wayne Sato, an office leasing specialist with Cushman & Wakefield, which is the leasing agent for the Centrepoint complex and is also involved in the SoPo project, said he's also noticed a growing interest in downtown Class A office space. And he attributed that in large part to CentreVenture Development Corporation's efforts to revitalize the downtown and to establish a sports, hospitality and entertainment district (SHED) in heart of the downtown.

"There is a definite focus and momentum that is building in the downtown due to the great work of CentreVenture in looking at downtown development as a whole," Sato said. "Their plan for the SHED has allowed people to envision what the downtown will look like, and I think that's what was missing 10 years ago."

It also helps that net rental rates for new Class A space in the suburbs have now caught up to downtown rates, he added. Both are now in the high 20s to low 30s in dollars per square foot.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition June 26, 2014 B9

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