Fredericton has lowest office vacancy rate in Maritimes - survey
Published Friday January 28th, 2011
D1
By STEPHEN LLEWELLYN
llewellyn.stephen@dailygleaner.com
Fredericton has the lowest office vacancy rate in the Maritimes and the second lowest in Atlantic Canada behind St. John's, N.L.
A survey by Halifax-based real estate consultants Turner Drake and Partners Ltd. shows Fredericton's office vacancy rate was 6.07 per cent in 2010.
That's up from 5.3 per cent last year, said Ashley Urquhart, business development consultant with Turner Drake.
"It's good in that landlords are trying to maximize as much profits as possible," she said.
Turner Drake said it did one of the most comprehensive surveys conducted in Fredericton and looked at 58 office and industrial building.
Fredericton has 2.3 million square feet of rentable space and Urquhart said 15,690 square feet was added last year.
"The fact that was added and it is still the lowest vacancy rate in the Maritimes, that is showing there is quite a bit of demand there," she said.
Urquhart said St. John's has a 3.8 per cent office vacancy rate, the lowest in Atlantic Canada.
"They are really facing the crisis right now," she said.
Fredericton's office vacancy rate is projected to rise to 8.33 per cent over the next five years, said Turner Drake.
"I have three buildings that are coming to the rental pool: the convention complex on King and Queen streets; the Fredericton Square on 99 Westmorland St.; and then the fourth Knowledge Park Building," said Urquhart.
"Our projected vacancy rates will include that.
"If these new projects weren't coming to the table, it might be more difficult for new business startups to acquire space."
Fredericton's net rent sits at $12.96 per square foot, up from $12.81 per square foot in 2009, said the survey.
Turner Drake said the increase came from a 4.56 per cent increase in net rental rates in C class office space from 2009 to 2010.
"Compared to the rest of the Maritimes, it is kind of right in the middle of the pack," said Urquhart, about the office rental rate.
Rental costs in St. John's, Halifax and Charlottetown are a little bit higher, but Fredericton is close to Saint John and Moncton, she said.
Fredericton's industrial vacancy rate fell in 2010 to 13.11 per cent from 13.26 per cent in 2009, said Turner Drake. The falling vacancy rate can be attributed to the conversion of warehouse space to owner occupation and lack of new space being built, said the survey.
Industrial net rents dropped from $6.47 per square foot to $6.33 per square foot.
Turner Drake said while that rate is falling, it is still the highest in New Brunswick.
Frank Flanagan, Fredericton's director of development services, said the capital's office vacancy rate is both good and bad news.
"It's good that we're robust enough that we can fill office space," he said.
But it's not good when an out-of-city company is searching for space and can't find any, said Flanagan.
"That has been an issue we've had for many, many years," he said.
"Anyone coming to Fredericton looking for more than 30,000 square feet and they wanted to move in in the next few months ... we have not been able to accommodate."
Flanagan said there's a catch 22 situation in development. Banks won't loan money for a project until the developer can show guaranteed tenants and the tenants want to see the space before signing a lease.
"We can't seem to come up with a solution," he said.
"You can't build on the basis of speculation.
"It is just too expensive."
There are two buildings coming to the Knowledge Park this summer but most of that space is spoken for, said Flanagan.
The closure of Meritus University in the Knowledge Park will free up 10,000 square feet, but space in the park has certain criteria, he said.
The new downtown office building opposite the Centennial Building will have 180,000 square feet of space, said Flanagan.
The provincial government is planning to occupy that and renovate the 240,000-square-foot Centennial Building.
When the province consolidates provincial departments across the city into the renovated Centennial Building, that should free up some office space, he said.