Saint John's vacant offices rate highest in province at 21.5%

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Saint John's vacant offices rate highest in province at 21.5%

Saint John's overall office vacancy rate has crept up again, reaching 21.5 per cent. 

"That's about the highest it's been during my [20 year] tenure here," said real estate analyst André Pouliot, with Turner Drake, the brokerage firm that compiled the numbers.

In comparison, office vacancy rates are 9.5 percent in Fredericton, 13.7 percent in Moncton, 15.3 percent in Halifax and 12.7 percent in St. John's.

Because of the excess of vacant offices in the Port City, some landlords told CBC they've felt pressured to drop their rents and pay up front for improvements or consider other incentives to attract tenants in a highly competitive market.   

In Saint John's uptown business district, the least prestigious space with the fewest amenities, also known as Class C space, is renting for as low as $7 per square foot. 

Pouliot says landlords must be feeling the pressure to move their capital elsewhere or repurpose their buildings. 

"When we say the rates are unsustainably high, we're trying to get into the heads of property owners," he said.  

"Property owners are capitalists. They expect to earn a certain return on their real estate."

Pouliot said when vacancy rates are topping 20 per cent, owners still have to make their mortgage payments. 

"Eventually what they do is they look at the situation and say, 'Hey, can I put my property to better use?'"

Seeking tenants

Over at the Harbour Centre building on Prince William Street, John Lawson is looking for tenants to fill 6,000 square feet, or the entire fifth floor.

As he walks through the empty rooms with their views of the harbour, he says the search for a new tenant began almost a year ago, when the previous renters gave notice they would be leaving by November. 

"Right now, it's not great," he said. "We haven't had a lot of inquiries."

Pouliot says employers today are looking for less space per worker and in Saint John he says that trend has not been offset by economic growth.

Some blame the tax rate for stifling that growth.

"We have the highest commercial and property tax rates and it's hurting us," said corporate and commercial lawyer Andrew Costin, who also serves as vice-president for Uptown Saint John, the city's business improvement association.

According to the Real Property Association of Canada, the annual tax on commercial property per $100,000 assessment is $5,043 in Saint John, $4,840 in Moncton, $2,640 in Toronto and $1,386 in Vancouver.

Costin says it's a "serious problem" and he doesn't see any leadership from the province or the city to fix it.

Office stock supply stagnant

Pouliot says Saint John's supply of office stock hasn't changed a lot.

The city had about 2.29 million square feet in 2011 with a vacancy rate of 10.7 percent. Today, there's about 2.53 million square feet. 

But that will change when Irving Oil completes its new headquarters.

That building will create more empty office space in the city when some 100 workers leave their current scattered locations and move in.