Saint John’s office vacancy rate came down slightly last year, but at 19 per cent, it’s still the highest in the six largest Atlantic Canadian markets.
Turner, Drake and Partners Ltd., a commercial real estate consulting firm, conducts a survey every year to determine office space usage in Atlantic Canada. Alexandra Baird Allen of the company’s economic intelligence unit said Saint John rounds out the bottom three.
“Following behind is St. John’s, Newfoundland, which is at 17 per cent, and Halifax, which is at 13.9 per cent,” she told Information Morning Saint John.
And leading the top three is Fredericton with a seven per cent vacancy rate, then Moncton with eight per cent and Charlottetown at 7.6 per cent.
Saint John’s economy is more industrial-based, which is not a typical office space user.- Alexandra Baird Allen of Turner, Drake and Partners Ltd.
Baird Allen said Saint John being at the bottom of the pack says something about its economy, but not necessarily about the economy’s success.
“It’s not necessarily that it’s in dire straits,” she said.
The main thing to keep in mind, she said, is that Saint John’s economy is not office-based.
Fredericton, with government and universities, is an office-based economy. And Moncton “has positioned itself in recent decades as more of an office-based economy with the call centres,” she said.
“Saint John’s economy is more industrial-based, which is not a typical office space user,” she said.
Old retail space
Baird Allen said empty shopping malls and retail spaces, that are a legacy of the economic success in mid-20th century, have been repurposed into office spaces and may be one of the reasons for the high vacancy rates.
“If you removed a few of those former malls, which are now rental office space, and they have occupancy… and assumed that those tenants went elsewhere in the city, if you took out three buildings you’d have no vacancy,” she said.
Irving Oil home office impact
Irving Oil is moving 1,000 employees to its new 11-storey headquarters in uptown Saint John. Baird Allen said because Irving owns the building, the movement won’t be good news for occupancy rates.
“In the near time term, what you’ll see is a shift from rental-occupied space to owner-occupied space, which when you’re looking at just the rental market market only shows up as an increase in vacancy,” she said.
But there’s a silver lining.
“The flip side of that is that they are consolidating in the uptown and you’ve seen a lot of momentum in the uptown in Saint John over the past few years,” she said.
“When you have a new fully occupied building creating that vibrancy, that may serve to help create a draw into Saint John.”
According to the survey, Class A office space is concentrated in the uptown and it commands the highest rent.
The average square foot of Class A space is charging $14 in Moncton, but in Saint John it’s closer to $17.
Baird Allen said this means Saint John has a few good-quality buildings that can charge higher rates, therefore bringing up the average rent.
“Overall, high vacancy rate doesn’t mean that you don’t have individual buildings that are performing really well,” she said. “It’s indicative of fairly good quality space which can command a bit of a premium rent.”
However, the high vacancy rate may mean Saint John has to lower rent.
“If Moncton and Fredericton landlords are lowering their rental rates, you may see that Saint John needs to follow suit in order to attract new demand to market coming from outside,” she said.