Rising vacancies in Winnipeg’s office market have hit a speed bump with the removal of a significant chunk of sublease space from the market and the sale of a key office tower to the Manitoba Métis Federation.
Data for the third quarter that Colliers International released last week indicate that vacancies fell to 13.9 per cent from 14.1 per cent in the second quarter. The decline was largely attributable to approximately 40,000 square feet of sublease space being taken off the market as the occupant, the Winnipeg Free Press, gained a better read on its post-pandemic space requirements.
“It was one of the key drivers that drove the number down,” says Dan Chubey, managing director with Colliers in Winnipeg. “Companies are still making the decisions in their own business for what the right model is, for whether it’s work from home, work from the office or a hybrid. And most, I think, are now in the hybrid scenario, and many are now evolving their decision-making around the real estate requirements. And we’ve seen a return to more historical decision-making.”
The overall office market saw a net decline of 27,452 square feet in during the quarter, with the decline in sublease space offset by the return of a small amount of headlease space.
Vacancies in the market remain up from a year ago, when the rate stood at 12.7 per cent with a total of 2.1 million square feet available.
Total vacant space has increased by approximately 190,000 square feet in the interim, with more set to be added in early 2024 as Wawanesa consolidates its operations in a new tower at True North Square.
But the sale of one of its current premises will mitigate some of the increase.
On Sept. 28, the Manitoba Metis Federation agreed to buy 200 Main Street and an adjacent property at 165 Fort Street. The purchase price has not been disclosed, pending closing later this year.
The seven-storey property includes 111,778 square feet of office space fully renovated in 2003, as well as 320 underground parking stalls and 35 electrified surface parking stalls. Wawanesa listed the property earlier this year with Capital Commercial Real Estate Services in anticipation of its move to True North Square next year.
“As Wawanesa looks forward to our new headquarters at True North Square – a major investment in the future of Downtown Winnipeg and the Manitoba economy – it has always been important to us that we find a purchaser who is going to be a positive force downtown,” said Wawanesa senior vice-president and CFO Gord Dowhan. “There is no doubt that the Manitoba Métis Federation is the right occupant to move into this building and develop it for the future.”
The federation and its affiliates plan to occupy half the premises, which will include a childcare centre. A federation expects to employ 300 staff downtown.
An existing tenant will round out the occupants for the property as the federation moves forward with an ambitious vision that will see a Red River Métis National Heritage Centre developed here and at two neighbouring properties. A total of $91.2 million will be invested in downtown Winnipeg over the next three years as part of the plan.
“There was a concern as Wawanesa vacated … that we’d see a further spike on office vacancy and ultimately put further pressure on that asset class,” Chubey said. “Ultimately now, a large portion of their space will be occupied.”
While there remains plenty of adjustment in the works for the Winnipeg office market, Chubey is generally positive about the outlook.
“Based on our advisors knowledge of existing tenants that are in the marketplace, our expectation is that we will see positive absorption in the upcoming quarter,” he said.
