Vacancy rate the lowest in years

January 28, 2008
Winnipeg Free Press
Written by: Murray McNeill

Winnipeg businesses expand to fill more industrial space: report

TWO big leasing transactions near the end of 2007 helped push Winnipeg's industrial vacancy rate to its lowest level in six years, according to the latest market report from commercial Realtor Wayne Johnson.

In his just-released 2007 year-end report, called The Johnson Report, Johnson said the city's overall vacancy rate fell from 3.8 per cent at the end of 2006 to 3.1 per cent at the end of last year.

That's the lowest it's been since the end of 2001, when it was 2.7 per cent, he said.

In the investment properties segment of the market, the improvement was even more dramatic. There, the vacancy rate plummeted to 6.9 per cent from 10.2 per cent a year earlier as nearly 806,900 square feet of vacant space was absorbed.

Two of the biggest contributors to the improved numbers were a deal to lease more than 200,000 square feet of space in the former SAAN warehouse/distribution centre at 1370 Sony Pl. and a deal to rent all 112,340 square feet of space in the GM Canada office/warehouse building at 1345 Redwood Ave.

Both of those deals were reached late in the year and are still awaiting final approval. Until then, the names of the new tenants are not being disclosed.

While they were two of the largest industrial leasing transactions in the city last year, Johnson said they only accounted for about 40 per cent of the investment industrial space that was leased during the year and 23 per cent of the industrial total of 1.43 million square feet.

"There were there were a significant number of other things going on the marketplace. It wasn't just those two buildings."

Johnson defines investment properties as buildings in which the owners lease out most or all of the space to others. He said they account for about one-third of the overall industrial inventory of 76 million square feet.

He said 2007 was the city's best year for industrial leasing activity since 1999, when 1.63 million square feet of space was leased.

He attributed the strong demand for industrial space to the healthy Manitoba economy.

He said while a vacancy-rate reduction of less than one per cent may not sound like a lot, it is when you consider there is 76 million square feet of industrial space in the city.

"It's hard to make big changes when the database is that big."

Martin McGarry, leasing agent for the GM building on Redwood and past chair of the Commercial Division of the Winnipeg Realtors Association, agreed 2007 was a good year for the local industrial market.

"There's been a lot of leasing," McGarry said.

"Everybody's vacancy rate is declining and things are getting very tight in the office/warehouse market, which is a good thing because it's been a long time (since that was the case)."

McGarry, president of MMI Commercial Real Estate Ltd., predicted there'll be a shortage of available space in 2008, which should push up rental rates -- something he said is long overdue.

Johnson pegged the average net rental rate for industrial space in Winnipeg at $4.68 a square foot at the conclusion of 2007.

The average rate for single-tenant buildings was $4.35, and for multi-tenant buildings it was $4.80.

"I think we're all going to be at five bucks (a square foot) by the end of the year," McGarry said.

And it will probably be even higher in the south end of the city, where the buildings tend to be newer and the demand for space is high.

McGarry also predicted the tight market conditions will spark more new construction this year.

He said his firm is the leasing agent for a 45,000-square-foot industrial complex that's being built on Sterling Lyon Parkway in southwest Winnipeg. The complex should be complete this fall and McGarry said he's confident they'll be able to fill it.

Another firm that's itching to add new space to the market is Bentall Real Estate Services, the company that manages the city's largest portfolio of industrial properties -- the 2.2 million square feet that British Columbia Investment Management Corp. acquired last year from Winnipeg-based Sun-X Properties.

"We are actively looking at opportunities and we would definitely like to build something in '08," Darcy Payne, general manager of Bentall's Winnipeg office, said in an interview.

Payne said Bentall has 35 acres of land in different areas of the city that can be developed.

The areas it's looking most closely at are Inksbrook Industrial Park, St. Boniface Industrial Park and southwest Winnipeg.

He said 2007 was a good year for Bentall.

The overall vacancy rate in its Winnipeg portfolio of 46 buildings fell by about two percentage points to just over six per cent, and some of its buildings are now fully leased.

Know of any newsworthy or interesting trends or developments in the local office, retail, or industrial real estate sectors? Let real estate reporter Murray McNeill know at the e-mail address below, or at 697-7254.

murray.mcneill@freepress.mb.ca

Industrial space fills up in 2007

The Johnson Report is published twice a year (January and June) and provides the most detailed look at sales and leasing activity within Winnipeg's commercial real estate market.

Author Wayne Johnson, a commercial and leasing representative with Royal LePage Dynamic Real Estate, said 2007 was one of the most active years in a while for leasing activity with the city's industrial sector.

"Almost 1.5 million square feet of space was leased," he said. "That's the highest (amount) in some time."
Here is a by-the-numbers look at the city's industrial real estate sector, courtesy of Johnson's 2007 year-end report:

• 76 million sq. ft. -- amount of industrial space in Winnipeg
• 51 million sq. ft. -- amount of owner-occupied industrial space
• 29 million sq. ft. -- amount used for manufacturing
• 19 million sq. ft. -- amount used for warehouse space
• 25 million sq. ft. -- amount of space in investment industrial buildings in the city
• 17.5 million sq. ft. -- amount of industrial space in St. James, which has the highest concentration of industrial space in the city
• 10 million sq. ft. -- amount of industrial space in Central Winnipeg
• 9 million sq. ft. -- amount of industrial space in each of three other areas -- Fort Garry, St. Boniface and Inkster Park
• 2.32 million sq. ft. -- the amount of vacant industrial space in the city at the end of 2007
• 1.43 million sq. ft. -- amount of industrial space that was leased in 2007
• 806,879 sq. ft. -- amount of investment industrial space leased during the year
• 7.7 per cent -- the highest overall industrial vacancy rate on record. It was recorded in 1993
• 1.4 per cent -- the lowest overall vacancy rate on record
• 3.1 per cent -- the overall vacancy rate at the end of 2007
• 6.9 per cent -- vacancy rate in investment industrial properties at the end of 2007

Winnipeg Building Permit Summary

Major Projects - December 2007

2008 Winnipeg Free Press. All Rights Reserved.