City's office vacancy rate among the lowest

March 20, 2009
Winnipeg Free Press
Written by: Murray McNeill

WINNIPEG'S commercial real estate market is weathering the economic storm better than most other major Canadian cities, according to a new report from CB Richard Ellis Ltd.

The national real estate firm said Manitoba's relatively strong economy kept office vacancy rates in Winnipeg at one of the lowest levels among seven major cities surveyed.

It said the overall office vacancy rate here increased by three-tenths of a percentage point in the last year, climbing to 5.7 per cent from 5.4 per cent.

The only city with a lower overall office vacancy rate is Ottawa, at 5.1 per cent. That was up two-tenths of a percentage point from a year ago.

"Strong economic fundamentals continue to buoy businesses throughout Manitoba, as it remains one of the few Canadian provinces where the gross domestic product is expected to rise in 2009," the report said.

In other areas of the country, challenging conditions in the manufacturing, retail and resource sectors, coupled with access-to-capital constraints, have helped drive up commercial vacancy rates over the last year, it said.

That pushed the national vacancy rate to 7.5 per cent in the first quarter of this year from 6.3 per cent a year earlier.

Derek Chartier, president of CB Richard Ellis Chartier & Associates in Winnipeg, said vacancy rates have held pretty steady in all three categories of commercial real estate -- office, industrial and retail -- since the recession hit Canada late last year.

The vacancy rate in the city's primary retail nodes -- places like Polo Park, Regent and Lagimodière, St. Vital and Kenaston and McGillivray -- remain at around two to three per cent, he said.

The vacancy rate in the city's industrial sector is unchanged at 4.6 per cent.

"That's a healthy rate by Winnipeg standards and by national standards," he said. "Anything close to five per cent for both office and industrial is a great number."

And barring a large company leaving or a big one moving in, Chartier said vacancy rates should remain stable for the next few months.

"Things are flat," he said. "But flat isn't a bad thing because you've got some markets running significantly higher vacancy rates...."

In Calgary, overall office vacancy jumped to 8.1 per cent from 4.3 per cent in the past year and in Edmonton it's up to 6.5 per cent from 4.9 per cent.

murray.mcneill@freepress.mb.ca

Weathering the storm in commercial real estate

CB Richard Ellis Ltd.'s report shows the Winnipeg market is holding up well in spite of the deepening Canadian recession:

Vacancy rate:
Category Q1, 2009 Q4, 2008
Office (overall, downtown) 5.7 % 5.4 %
Class A office (downtown) 7.6 % 7.1 %
Class B office (downtown) 5.4 % 5.4 %
Class C office (downtown) 4.6 % 4.8 %
Industrial (overall) 4.6 % 4.6 %
Retail 2 to 3 % 2 to 3%

Average net rental rates (per square foot):
Category Q1, 2009 Q4, 2008
Class A $15.81 $15.56
Class B $12.59 $12.59
Class C $9.30 $9.30
Industrial $5.72 $5.59