Office vacancy rates fall in city
By Martin Cash, Business Reporter
Winnipeg Free Press, Business B6, Friday, March 27, 1998
Office and industrial vacancy rates in Winnipeg are approaching levels not seen since the early 1980's.
A study by Royal LePage Commercial Inc., shows vacancy rates in Winnipeg's industrial building are the lowest among nine Canadian cities at 2.9 per cent, and the office vacancy rate is third lowest at 6.3 per cent. "It's not a good time to be in this business - it's a great time," said Jim Neal, general manager of Morguard Investments Ltd. in Manitoba, which manages about two million square feet of industrial space in the city. Morguard's own vacancy rate is even lower than the city average, at about 1.5 per cent.
Wayne Bollman, executive vice-president and general manager of Stevson and Co., the Winnipeg affiliates of Royal LePage, said the market is looking extremely good. "What is absolutely astonishing is how well Class C buildings are doing," he said. "Last year at this time the vacancy rates were more than 18 percent. No they are around 12.5 per cent." Bollman said one of the things that is happening in the office market is a migration of tenants from the top quality office buildings like the ones at Portage and Main to the lower quality, less expensive buildings.
"One result of that is that there is a light, slight increase in vacancy rates in A and B buildings," Bollman said. Still Royal LePage's numbers indicate Class A vacancy is at four per cent, and Class B at 5.8 per cent. "Those are 1982 levels," Bollman said. "That means rates are going up and inducements are declining." In the past, many tenants were able to move from lower quality to better quality buildings because of lower rental rates and softer demand. But not any more.
"It's a landlord's market in every category in most cities in the country,: said Gord Siebe, chief financial officer of Consolidated Properties Ltd. a Winnipeg-based real estate asset management company that owns more than $200 million in commercial real estate properties across the country. But even though the market is an undeniable state of buoyancy, no one is expecting a building boom as a result. "Even back in the mid-80's there was not much new space built on speculation, said Sandy Shindleman, president of Shincico Inc. "But two years ago it seemed like every industrial building was for sale. Now none of them are for sale."
Bob Andjelic, president of Sun-X Properties, is arguably positioned best to take advantage of the lack of supply in industrial space. Sun-X has recently acquired more than 100 acres of serviced industrial land, including the 26-acre Labatt property. "That 2.9 per cent (vacancy rate) may even be a little low," Andjelic said, "because there is lots of dysfunctional space on the market. There is no doubt there is a shortage of supply, especially quality space." Sun-X is about to commence construction on two 40,000-square-foot multi-tenant industrial buildings and Andjelic said he is looking to get early possession of the Labatt property so he can start first-phase development on that site -a 90,000-square-foot building.
Although the supply of office space is tightening up, there are some large leases that are winding up. Wayne Pratt of Colliers Pratt McGarry said his company is marketing about 100,000 square feet of space in the Bank of Montreal building on Main Street after the departure of a couple of large federal government tenants. "But we're optimistic because the market has definitely firmed up and we expect it to continue to," Pratt said.