“There are a couple of development agreements that can be acted upon tomorrow, but no one is sticking their shovel in the ground,” says Tom Carpenter of real estate broker DTZ Barnicke. “They’re hesitant … because in order to build new buildings, people are going to have to pay higher rents. And developers are asking if people are willing to pay those kinds of rents in downtown Halifax?”
In fact, for the last decade, companies have been fleeing the downtown in droves, and heading to the tarmac’d pastures of suburbia. In the first quarter of this year alone, an additional 149,000 square feet of office space was leased in outlying regions like Bayer’s Lake, Bedford and Dartmouth. Far from overflowing, the centre, meanwhile, lost almost 20,000 square feet of rented space.
One of those to go was Carpenter’s own company, which moved across the Halifax Harbour to Dartmouth. The building is newer and of better quality than the downtown’s ageing suites, he says. Plus, taxes are cheaper. But the attraction is not just the deal you can cut with your landlord. Many tenants are now factoring in drive times, parking, and all the stress that goes with them when they seek a location, he says.
“We are in and out of the office multiple times in a day and (downtown) we were losing up to an hour and a half a day just walking back and forth to the car. And for that privilege … it was over a hundred dollars a month to park.” Does he miss the bright lights? “I tell you, I am just a five minute walk to the ferry (a 12-minute ride from downtown Halifax).”
There are signs that even the relatively mild influence of the recession on Atlantic Canada office space is waning. In Halifax, sublet space as a percentage of total vacancy is declining, meaning businesses already locked into leases are not trying to unload as much space. In New Brunswick, Paul Moore is hopeful. “In the last three months, we are starting to see people arrive. I don’t mind saying there was a flurry in the (call centre) industry and that was nice to see.”
Even if Atlantic Canada made it through the recession relatively unscathed, one thing is not likely to improve soon: easy credit for developers. Banks are nervous, says Greg Brewster, vice president of Office Leasing at Colliers International (Atlantic) Inc. “They really need bums on seats. They need to see physical people in place,” says Brewster. “It can’t be any part of any formula about what it might be when it leases up.”
Which makes landlords more anxious than ever to get tenants in through the door. Even though prices are rising, they may be more open to negotiate inducements such as renovations and retrofitting. That, says Brewster, is where media attention on the city centre can be a distraction for tenants. “It’s a bit of an anomaly right now. It’s really a tenants’ market. If it’s a smart tenant. If it’s not a smart tenant, landlords can certainly, easily, make it look like it’s a landlords’ market. All they need to do is get sound bites from the media, and most of the sound bites are ‘we’re tight, we’re tight, we’re tight’.”
Other cities in Atlantic Canada may soon find themselves in the same situation, but the transition won’t be easy. Back in St. John’s, Jerry Kirkland admits: “We are very proud of (it). If you ever get to come here, it (downtown St. John’s) is very small. It has the hill going down to the harbour. That’s where the better restaurants are. And that’s where the major firms are.”
Then he adds: “There is a move afoot. There has to be a move to the uptown area. Land is cheaper. The road works are better. That will happen.”
