Winnipeg office and industrial markets offer a snapshot of steadiness thus far in 2017. Vacancy rates in both sectors are below the national average, while rents neither outshine nor dramatically trail those commanded in other major Canadian centres.
Office vacancy rates nudged upwards from December 2016 levels, but so have rents. Colliers International reports an overall vacancy rate of 9.2 per cent, up from 8.3 per cent last December. Meanwhile, the overall vacancy rate dropped below 4 per cent in the industrial market and average asking net rents increased.
The Class B office market is a healthy performer both downtown and in the suburbs. The vacancy rate crept up from 7.7 to 8.3 per cent, but that’s taking into account two new buildings — adding nearly 80,000 square feet of space — that came onto the market earlier this year. Average asking rents rose a healthy $0.64 per square foot downtown to hit $15.03, while average suburban rents surged past that level, to $15.44, after an even more impressive jump of $1.22 per square foot.
Downtown, the Class A vacancy rate rose 220 basis points to just shy of 5.8 per cent, but it’s still a fairly landlord-friendly environment. Colliers analysts qualify the average net rent of $19.53 per square foot, noting that it’s derived from a rent range of $16 to $24 per square foot and “leans toward the lower end of the scale as there is considerably more square footage available at the lower end of the range.” The spectre of 365,000 square feet of new Class A space with the approaching completion of True North Square also looms over the downtown market.
“True North Square is marketing hard for new tenants and, with only an average of 100,000 square feet of positive absorption in the entire office market per year, many of the tenants they will secure will come from other existing Class A and Class B buildings,” Colliers analysts project. “The benefactor will be the tenant, who will have many options to choose from in downtown Winnipeg at competitive economics.”
More than 340,000 square feet of industrial space was absorbed in the first half of the year, with much of that activity occurring in the city’s east sector. The vacancy rate in this submarket fell 124 basis points since the end of 2016 to drop below 4.5 per cent.
Only about 60,500 square feet of space was newly leased in the southwest sector, but that happens in the context of the submarket’s minimal vacancy rate, which was already less than 1 per cent as 2017 began. Activity thus far this year has pushed the vacancy closer to 0.5 per cent, while average asking rents have increased to $11.86 per square foot from $10.52 per square foot at year-end 2016.
Yet, at slightly more than 46 million square feet, the northwest sector boasts more industrial space than the combined southwest and east submarkets. A modest 56,000 square feet of new space has arrived on the market since last year. However, this has contributed to a slight bump up in the northwest sector’s vacancy rate. It rose 29 basis points to hit 4.69 per cent, reflecting about 82,000 square feet of negative absorption. The average asking net rent increased, from $6.26 at the end of 2016 to $6.51 per square foot by June 2017.
“Though quality inventory has been limited, the Winnipeg markets continues to steadily decrease its vacancy,” Colliers analysts observe. “It will still be some time before tenants have more available options for space. For now, they will have to contend with a market that favours landlords.”