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Winnipeg Free Press - PRINT EDITION

City's office-vacancy rate highest, survey says

By: Murray McNeill

Posted: 07/18/2011 1:00 AM | Comments: 0 (including replies)

WINNIPEG has the highest office-vacancy rate among nine major Canadian cities, according to a new survey.

Chicago-based Jones Lang LaSalle, one of the world's largest commercial real estate services firms, pegs the overall vacancy rate in Winnipeg's downtown and suburban office buildings at nine per cent.

It said Montreal has the next-highest rate, at 8.5 per cent, while the national average for the second quarter of this year was 7.9 per cent.

A JLL official cautioned against reading too much into Winnipeg's high vacancy rate, saying it's down nearly three percentage points from a peak of 11.9 per cent during the 2008-09 global recession.

"Slowly but surely you guys are coming back down," Kristian Halkias, the firm's senior national research analyst, said in an interview, noting the city's pre-recession rate was seven per cent.

"Jones Lang LaSalle views Winnipeg as a market that is essentially very stable and very healthy."

In his mid-year commercial vacancy rate report, Royal Le Page Dynamic Real Estate's Wayne Johnson pegged Winnipeg's overall office vacancy rate at 6.9 per cent.

But Halkias said it's not surprising JLL's numbers differ from those of other firms because they use different methodologies and don't survey the same number of buildings.

Johnson, for example, surveys 17.6 million square feet of office space, compared to JLL's 10.3 million. And he includes government buildings, while JLL does not.

Halkias said Winnipeg's biggest improvement has been in the Class A office category, where the vacancy rate has plunged to 3.9 per cent from 13.8 per cent in the second quarter of last year. He attributed that to a strengthening economy and some Class B tenants feeling more comfortable with moving up to better quarters.

He said the Class B and C vacancy rates, on the other hand, have both increased, with Class B rising to 10.1 per cent from 8.7 per cent and Class C climbing to 13.4 per cent from 8.8 per cent.

Because it's a transportation and warehousing hub and doesn't have a lot of corporate head offices, Halkias said Winnipeg doesn't get a lot of new office development.

And any new developments it does see will likely be mixed-use facilities, with a combination of office and retail space or office and industrial space, rather than strictly office.

Because it rarely sees big spikes in demand, Halkias said office rental rates here also tend to climb at a slower pace. And that isn't likely to change.

JLL said the average gross asking rate for Class A space is $29.60 per square foot. For Class B it's $25.42, and for Class C it's $21.21.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition July 18, 2011 B7

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