Average net rents for Halifax office and industrial space crept upwards in the first half of 2020 despite a slight increase in vacant space across the region’s dispersed market nodes. The traditional city of Halifax accounts for more than two-thirds of the office market, with about 40 per cent of that located in the downtown core, while upwards of 82 per cent of industrial space can be found in two Dartmouth business parks.
“The total amount of rentable office space in Greater Halifax increased 2.53 per cent over last year with several new buildings coming online in downtown Halifax,” the newly released June 2020 market survey from Turner Drake & Partners Ltd. reports. “The total amount of rentable warehouse in Greater Halifax increased 2.4 per cent over last year, mainly due to new space coming online in Burnside.”
Turner Drake & Partners peg the overall office vacancy rate at just below 15 per cent as of June 2020 — a slight 0.11 per cent uptick since mid-year 2019 — but point to nearly 250,000 square feet of positive absorption in a year when 307,000 square feet of new space came onto the market. Average net rent rose 2 per cent — from $14.02 to 14.30 per square foot — in the same period.
Class A office buildings are pulling up both averages, registering average net rents of $17.78 per square foot and a vacancy rate of nearly 17 per cent. Class B buildings, which represent a greater portion of the region-wide stock, tally a 13.6 per cent vacancy rate and average net rents of $13 per square foot. However, Turner Drake & Partners analysts foresee declining office demand over the coming year, resulting in an overall vacancy in excess of 17.5 per cent by mid-year 2021.
Downtown Halifax, its adjoining periphery and the burgeoning Dartmouth Crossing office node accounted for more than 360,000 square feet of positive absorption in the 12 months since June 2019, while suburban office nodes registered a counterbalancing 236,000 square feet loss of occupancy. That came with a nearly 4 per cent jump in downtown average net rents, which increased from $14.50 to $15.02 per square. Even so, the downtown Halifax vacancy rate remains the highest of the eight surveyed office nodes, climbing 116 basis points since June 2019 to surpass 20 per cent.
In contrast, the vacancy rate fell 768 basis points, to below 12 per cent, in Dartmouth Crossing, as average net rents increased nearly 4.2 per cent, to $14.48 per square foot. No new office space was added in the node during the 12 month period, keeping the inventory at approximately 1.5 million square, with about three-quarters of that built since 2000.
The predominantly industrial precinct on the Dartmouth side of the harbour saw a much more modest amount of positive warehouse space absorption — 6,600 square feet — across 6.6 million square feet of inventory. Average net rents in the Dartmouth business parks increased 3.6 per cent, from $7.31 to $7.57 per square foot, as the vacancy rate climbed 128 basis points to more than 9.6 per cent.
Just 100,000 square feet of new industrial space came online in the business parks during the 12-month period. Nevertheless, that’s the largest share of the 188,000 square feet of inventory added in the entire Halifax region.
Overall, the vacancy rate increased 105 basis points to surpass 10.1 per cent, while average net rents rose 1.9 per cent, from $7.87 to $8.02 per square foot. Looking to 2021, Turner Drake & Partners analysts project declining demand for warehouse space, pushing the vacancy rate up to the range of 14.8 per cent.