Page 13 - BOMA_2019BuildingDirectory

buildings have a significant amount of
additional vacant space available for
lease which speaks to the confidence
amongst these users and developers.
This is also a reflection of limited
acquisition opportunities of good
quality user buildings in the suburbs
which is causing some business
owners to simply go ahead and build
their own.
Where are office
vacancy rates right now?
Any predictions for 2019/20?
RB: After a few years in the 6-7%
range, the downtown Class A
vacancy jumped from 6.9% to
12.5% when the office tower at
True North Square was completed
last year. We saw this coming and
our prediction was an easing of
Class A vacancy as it pulls from
the B market.
Currently, the A market has been
slowly decreasing and sits at
11.6%. The B market, as expected,
experienced seven straight
quarters of negative absorption
since the completion of the office
portion of TNS. The downtown
Class B vacancy rate presently sits
at 13.3%. The downtown Class
C market has been stable in the
9% range and the suburbs have
been improving in recent quarters,
currently at 7.5%.
What are the current trends in the office sector?
Is the market changing from a tenant perspective, and if so,
what’s your advice for landlords?
RB: I began speaking in 2016 about what is now one of the most critical trends
facing both landlords and tenants and that is the precarious state of the downtown
Class B market. The proverbial pie consisting of all downtown B tenants has
shrunk considerably by 160,000 sq. ft. in just over a year. This contraction in
such a short amount of time is the greatest magnitude of growth (or lack thereof) in
this asset class in over a decade.
Not all owners have suffered equally and not all tenants will benefit from this
opportunity the same. Investors and organizations will need to take action in order
to avoid the pitfalls and capture the opportunities created by this dynamic. There
are great opportunities out there and those who act can beat the market and those
standing flatfooted will be left on the sidelines.
From an investor perspective, consider the ownership group of 330 Portage
Avenue consisting of KingSett Capital and Corpfin Capital: In 2017 they committed
to investing over $10 million in a struggling B building; a capital project currently
underway and visible from throughout downtown. At its recent peak the building
was experiencing 27% office vacancy earlier this year but while the B market was
contracting in a hurry, the asset is now outperforming the market with office vacancy
of approximately 11%.
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Manitoba 2019 Commercial Building Directory 13