As summer’s lease is set to expire, Winnipeg’s downtown office sector has made gains with positive absorption of 114,631 square feet, decreasing the downtown vacancy from 13.3% to 12.8%. Following an influx of supply in recent months, this marks the first decrease in the downtown vacancy rate since the third quarter of 2018. In contrast to downtown, the suburban market showed signs of slowing its recent hot streak, vacating approximately 52,655 square feet.
Analyzing the collective office market, net gains in occupancy were offset by the addition of 68,300 square feet, holding the overall vacancy rate at 11.7%. Focusing on the downtown market, Class AA buildings accounted for approximately 50% of the downtown absorption as Meyers Norris Penny and Ceridian prepare to move into 242 Hargrave Street. In the year since the introduction of True North Square, tenants longing for upgraded premises have finally been able to source new options. The Bank of Montreal announced its move from its owner- occupied historic asset at 335 Main Street into a lease at 201 Portage Avenue, while law firm, Taylor McCaffery LLP, opened the doors of its new offices on the 22nd floor of the same building.
As the vacancy in Class AA declines, the weighted average for downtown net asking rental rates has decreased by nearly a dollar to $17.73 per square foot. Similarly, the net rental asking rates in the suburban market also fell with Class B suburban buildings showing a decrease from $16.68 per square foot to $15.88 per square foot as higher-grade assets have leased and older Class B buildings are left with vacancy. With pockets of vacancy set to hit both downtown and suburban markets in the upcoming years, building positioning will remain the focus for landlords.