Tech Sector Buoys Waterloo Office Market Amidst Increased Scrutiny

CBRE points to high-tech successes and industrial momentum as driving forces in 2014

WATERLOO, March 18, 2014 – Waterloo Region has been the focus of international attention as corporate real estate decisions have sent ripples through the market. Peter Whatmore, Senior Vice President for CBRE Limited, hosted CBRE’s annual Southwestern Ontario Market Outlook Breakfast in Waterloo this morning. He encouraged the audience to differentiate between headline hype and what is going on at street level.

“People perceive our market to be in flux, but it’s what has not changed that is most interesting. Kitchener Waterloo continues to house an entrenched, collaborative, and resilient high-tech cluster,” said Whatmore. “The tech sector will continue to be an engine of economic growth in Waterloo Region and it would be wrong to let concern over one company’s performance undermine confidence in this unique and dynamic market.”
  
Despite the large amount of office space that was returned to the market from a single office user, there was healthy demand for office space in 2013. Office transaction volume actually increased from 150,000 sq. ft. in 2012 to 346,935 sq. ft. in 2013. As a result, the overall vacancy rate only rose from 8.4% to 9.3% last year. Demand came mostly from mid-sized tenants in the 10,000 to 20,000 sq. ft. range.

The trajectory of companies like Desire2Learn, a provider of eLearning solutions, shows that the high-tech sector has the ability to absorb significant amounts of office space in Waterloo Region. In 2010, Desire2Learn’s operations were initially housed in just over 42,000 sq. ft. of office space. The company now occupies nearly 120,000 sq. ft – 180% more office space than four years prior. Sysco Systems also recently leased 35,000 sq. ft. in Waterloo, which is a testament to the fact that the talent pool in the Region continues to attract innovative, growing companies.

“There are numerous success stories that lead us to believe in the resilience and broad based growth of the tech sector going forward,” said Whatmore. “While the office market was in the spotlight in 2013, the industrial sector also built up positive momentum that is likely to carry over into 2014.”

The recent decline in the Canadian dollar is helping manufacturers in the Region. Despite some additional plant closures, Southwestern Ontario recorded an increase in demand for industrial space. More than 7.0 million sq. ft. of industrial space was sold or leased in 2013, compared to 5.0 million sq. ft. in 2012.  A lack of new supply has helped the industrial market to find its footing since the recession; however, there is little quality industrial product available and what is built is quickly leased.

“The true test of the commercial market is the willingness for investors to remain active and purchase property, which is certainly the case in Waterloo Region,” Whatmore noted. “Low interest rates are allowing investors to acquire a wide range of best in class assets, while developers are updating properties to attract the next generation of users, and businesses are investing to expand future operations. While we are realistic about the ongoing transition in this market, we are upbeat and optimistic about the prospects for commercial real estate in Waterloo Region.”

About CBRE
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue).  The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

In Canada, CBRE Limited employs approximately 2,200 people in 22 locations from coast to coast. Please visit our website at www.cbre.ca.