Vacancy rates low as demand rises
The city`s industrial vacancy rate is at an 11-year low, according to one industry official, and the demand for space is escalating.
In most markets, that would likely lead to a surge in new construction and a spike in lease rates. But not in Winnipeg, according to local forecasters.
Wayne Johnson, who publishes a twice-yearly report on commercial sales and leasing in Winnipeg (
The Johnson Report), and the president of Colliers Pratt McGarry, which recently issued its 2009 year-end industrial market report, both predict only a modest increase in new construction and lease rates in 2010.
Wayne Pratt said the high cost of new construction will discourage developers from adding a lot of new space in 2010. He said developers need to charge about $10 a square foot to cover their construction costs and most tenants aren`t prepared to pay that when the average lease rate in the city is hovering around $5.25.
And without a bunch of new space, there`s no reason for a big jump in lease rates, he and Johnson said.
Pratt wouldn`t predict how much rates are likely to increase this year, saying only, "It`s not going to be a dramatic rise." Johnson, who is a commercial and leasing specialist with Royal LePage Dynamic Real Estate, said he wouldn`t be surprised to see rates climb by five per cent, which would be similar to last year`s increase.
But even a five per cent hike would seem vibrant compared to what`s been happening in the city`s sluggish office market, where Class A rates have remained relatively unchanged for the last 20 years. And as reported here last week, they aren`t expected to change much this year, either.
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