Downtown St. John’s is seeing as much as 1/4 of its high-end office space empty, with a vacancy rate that’s the second highest in all of Atlantic Canada, according to an analysis by Halifax-based observer Turner Drake and Partners.
For perspective, a vacancy of 4% indicates progress towards full occupancy, while 5% is considered a benchmark for balanced market conditions, Alex Baird Allen of Turner Drake said in an interview.
The problem fully took root a few years ago upon the entry of new space into the downtown and suburban areas, at a time when the city saw sustained demand – a level of demand that correspondingly declined upon the oil price crash, Baird Allen told CBC News.
This economic reality, not unknown to other affected regions such as Alberta, has proven to be especially troublesome for Newfoundland and Labrador, according to Bill Stirling, the CEO of the province’s Association of Realtors.
“We’re in the trough of a business cycle, and in a lot of ways it’s a trough in the business cycle that we’ve never, ever seen before,” Stirling explained.
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In the worst cases, major players like ExxonMobil Canada have elected to own their spaces, making them unavailable to the commercial rental market.
Profit imperatives are also making large businesses to move out of the downtown area altogether.
“Oftentimes, they can reduce cost by moving to a new, suburban modern building as opposed to a legacy building downtown,” Stirling noted.
“A large employer in a legacy building like Atlantic Place might need 50,000 square feet, but they can fit the same number of employees into something like 35 or 38,000 square feet in a brand new, purpose-built, open concept kind of building.”