There is a very interesting article in The Kitchener Record this morning about the night and day differences between the Waterloo and Cambridge real estate markets for Office space, as well as industrial space.
While many people are excited to live in the Bauer Lofts, there is also prime commercial space next door in the historic Bauer building. This space was leased very quickly, while similar space in Cambridge is still sitting empty.
Note: the vacancy rates mentioned in this article are for the commercial markets, specifically the vacancy rate for office buildings. The residential vacancy rates remain very low in Kitchener Waterloo and Cambridge, Ontario (read: “Waterloo Vacancy Among Canada’s Lowest”)
WATERLOO REGION — To paraphrase Charles Dickens, it was a tale of two buildings.
While vacant office space was snapped up quickly in the new Bauer Buildings development in downtown Waterloo when it came on the market in the middle of last year, Cambridge Place remains half empty nearly two years after the city vacated the building for its new city hall.
The fate of the two buildings reflects sharp differences in the local office market among the three cities in Waterloo Region at the close of 2009.
With a vacancy rate of 11.5 per cent, office space is scarce in Waterloo. With a rate of 28.5 per cent, anyone looking for desk space in Cambridge can strike a pretty good deal. Aided by spillover from Waterloo, Kitchener falls roughly in between at 17.5 per cent.
Cambridge also has the smallest supply at 800,000 square feet, compared to 2.5 million in Kitchener and 2.1 million in Waterloo.
By year’s end, the office vacancy rate for the region stood at 16.5 per cent, up 1.7 per cent from the previous quarter.
Those figures were presented today during a seminar on the local commercial and industrial real estate markets hosted by Colliers International.
With “great amenities” such as the Vincenzo’s food store, the Bauer Lofts condos and ample parking of four spots per 1,000 square feet of space, the Bauer Buildings quickly attracted such tenants as CIBC Wood Gundy, BDO Dunwoody and Moxy Media, said John Lind of Colliers. “It was a real success story.”
Parking was a key factor. The Allen Square building across the road at 180 King St., with 2.5 spots per 1,000 square feet of space, still has empty space. In parking-starved Toronto, this space would be snapped up quickly, noted Dave Young of Colliers.
Meanwhile, Cambridge Place has 50,000 square feet begging for occupants. The owners may have no choice but to convert the building into other uses, said Karl Innanen, managing director of the local Colliers office.
Also swelling vacancy rates in Cambridge is an ample supply of office space along Highway 401 built prior to the recession, he said. Developers erected this space on spec, without lining up tenants beforehand.
Building conversions are another success story and a growing trend, he said. The old Lang Tannery in downtown Kitchener is being redeveloped with a mix of uses including office, restaurants and specialty retail. It has already attracted tenants such as the Digital Media Convergence Centre, Desire2Learn and the Downtown Community Health Centre. Innanen called this a “villaging of space.”
Fuelling demand for this project are key neighbours such as the University of Waterloo School of Pharmacy and the area’s designation as a future transit hub, he noted.
While Waterloo rules the office market, the opposite is true in industrial real estate. Cambridge dominates with an inventory of 30 million square feet, following by Kitchener with 21 million and Waterloo with 10 million. Waterloo is hurt by its distance from Highway 401, Innanen said.
Still feeling the effects of the recession, the industrial vacancy rate in the region nearly doubled from 4.9 per cent in 2008 to 8 per cent in 2009. While the market took a shock, with the rate still below 10 per cent, “it’s still not horrible,” he said.
Among the three cities, Cambridge has the highest vacancy rate at 8.6 per cent, followed by Kitchener at 7.6 per cent and Waterloo at 7.4 per cent.
Sometimes, one large building can skew the numbers. In Kitchener, the former Kaufman warehouse at 137 Glasgow St. remains empty. At 350,000 square feet, it boosts the rate by 1.7 per cent all by itself.
While smaller buildings have been faring well during the recession, larger ones above 25,000 square have not, victimized by the weak economy and high Canadian dollar.