Downtown office space at premium

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This article was published 21/07/2016 (3605 days ago), so information in it may no longer be current.

Winnipeg boasts one of the lowest downtown office vacancy rates of any major Canadian city, according to one new report, but local industry officials say the market here is still far from robust.

The latest quarterly office-trends report from commercial real estate firm CBRE says Winnipeg’s overall downtown office vacancy rate has dropped two percentage points in the past year, falling to 9.1 per cent in the second quarter of this year, from 11.1 per cent in the second quarter of 2015.

That leaves it tied with Vancouver for the second-lowest rate among the 10 Canadian cities covered in the report. CBRE said the only city with a lower rate is Toronto, at 4.9 per cent.

The author of the most comprehensive report on commercial vacancy rates in Winnipeg — the semi-annual Johnson Report — puts Winnipeg’s downtown vacancy rate even lower, at 7.6 per cent. Wayne Johnson, who is a commercial sales and leasing specialist with Royal LePage Dynamic Real Estate, said his latest market survey showed the overall rate was down one percentage point from a year ago, when he had it pegged at 8.6 per cent.

But Johnson said even at 7.6 per cent, the rate is still at its second-highest level in at least a decade. He noted in 2008, it was 3.9 per cent.

“So it’s good that this has come down one per cent. But it’s still higher than it was two years ago, or three, four or five years ago.”

As for Winnipeg’s rate being one of the lowest of any major Canadian city, Johnson said that’s more a case of being the best of a bad lot.

“The (Winnipeg) market is soft, it remains soft, and it’s prospects going forward are the same. That’s what I’m hearing from other people.”

Johnson said leasing agents and landlords tell him there isn’t enough leasing activity in the downtown office market.

“That, combined with (the fact) we don’t attract head offices anymore.”

He noted a couple of major new downtown office projects — the 311 Portage Avenue at Centrepoint development, which opened in June of last year, and the True North Square mixed-use development under construction on the south side of Graham Avenue, were able to land some major office tenants. But they’re tenants relocating from other locations in the city, rather than newcomers to the market.

He predicted that will likely be the case with most of the other office tenants True North Square snags, which means the downtown vacancy rate will rise when the first of the True North Square office buildings comes on stream in 2018.

A spokeswoman for one of the downtown’s most prominent office buildings — 201 Portage Avenue — agreed the downtown office leasing market isn’t robust. But it’s not dead, either.

“There is (leasing) activity,” said Gail Auriti, broker/leasing manager for Harvard Property Management Inc., which manages the highrise tower. “Recently, we’ve had some decent activity.”

Auriti said 201 Portage’s vacancy rate currently sits at about 3.3 per cent, which is healthy. But she agreed with Johnson that because most of the downtown leasing activity involves tenants moving from one property to another, the downtown vacancy rate will likely rise when the True North Square office towers come onto the market. She declined to speculate on how much it could rise.

True North Square and CBRE Winnipeg could not be reached Tuesday for comment.

The CBRE report shows Calgary has the highest downtown office vacancy rate, at 22.2 per cent. London, Ont., is second highest, at 19.2 per cent.

murray.mcneill@freepress.mb.ca