Midwestern Ontario recorded 104,138 sq. ft. of negative net absorption in Q4 2019 which resulted in a 90 bps climb in vacancy to 10.3%. Supported by strong leasing momentum in early 2019, overall annual leasing activity remained positive, however, recording 238,818 sq. ft. positive absorption.
The overall net rental rate largely held steady and increased slightly by 0.3% to $13.53 per sq. ft. At the submarket level, Waterloo and Guelph continue to boast the highest net rental rates, sitting well above the market average at $14.72 per sq. ft. and $14.73 per sq. ft., respectively. Alternatively, rental rates in the Region’s largest office market, Kitchener, decreased quarter-over-quarter to $12.95 per sq. ft. as vacancy dropped to 13.8%.
Waterloo Region can expect new supply in 2020 with 210,000 sq. ft. due for delivery by Spring. Strong interest has been noted at 345 King Street West in Kitchener’s Innovation District, which is currently 40.0% pre-leased.
In order to keep up with demand, the construction pipeline has expanded to include over half a million sq. ft. of office product. In total, there is 481,000 sq. ft. anticipated to come online in 2020, including projects currently under construction.