Market Update for Kitchener Companies with a Pending Lease Expiry

You are a company in Kitchener that leases office space and you have an impending expiry.  You likely signed your last lease in 2007/2008 and the market place in Kitchener has undergone significant changes in the past five years.  So what should you consider when approaching your lease expiry and impending negotiations?

Fewer options

One of the most significant developments   in the Kitchener market involves vacancy rates. Although it may only appear as a couple of percentage points in the annual reports from five years ago, the makeup of that vacancy has evolved dramatically.  A tenant out looking at lease options in 2007 had a number of good alternatives in the downtown towers:  The Tannery was taking shape and pre-leasing had begun, Deeridge had a new tower completed and Sportsworld was under construction.

Fast forward to 2011 and we see a very different landscape. The downtown towers have options but fewer than in 2007, the fully serviced (air-conditioned, elevator) buildings of The Tannery have leased, Deeridge has one sublet and Sportsworld is fully leased.  The only new possibility is The Breithaupt Block which will offer both a concrete construction “A” class building and “Brick and Beam” space.

A move to quality

I don’t have a single example over the past three years of a tenant that moved into a lesser quality building to benefit from lower rates.  Most of the significant transactions saw companies investing in better buildings.  This means the type of options available today is very different from five years ago.  Five years ago there was much more high quality space available than today.   Fewer choices means more competition for good real estate.

Ownership change

In 2007, most of the downtown Kitchener office towers were locally owned.  That is no longer the case.  Most of the office towers are now owned by Dundee Properties which is a very good, sophisticated national landlord.  If you are a downtown Kitchener company which is not already in a Dundee building, you will no doubt be looking at one of their buildings as an option.

Large blocks of space

I know you are likely tired of hearing this from me, but it continues to be a challenge for major companies in Kitchener to find a selection large blocks of available office space.  There are a number of solutions to this dilemma, but the single most important step a company can take to help itself is to start the process early.  Start the process two years from your expiry date to take advantage of all your options.