- What 219 Labrador Drive has traded for $6m, and 410 Conestogo Road is on the block for $9m
- Why The valuations for the Class-B office buildings are upward of $230/sq ft
- What next Owner-occupiers and private investors are driving activity in Waterloo
A Class-B office building in Waterloo has traded for $6.1m after receiving multiple bids, and another has been teed up for $9m.
CopperTree Investments purchased 219 Labrador Drive in an off-market deal that closed this summer. The company plans to set up operations in the office building.
The valuation for the 25,000 sq ft property works out to $247/sq ft. Whitney & Co. Realty had the marketing assignment on behalf of an owner-occupier.
Tenants at 219 Labrador Drive, which is over 90% leased, include Lantern Hill IT, Shaw Investment & Insurance Solutions and Van Essen Instruments. Built in 2009, the two-storey property is over 90% leased.
Net rents range from $14/sq ft to $19/sq ft. According to Colliers, the weighted average asking net rent for office space in Waterloo was $16.15 in Q2.
Amenities include a grill and a patio. There are 112 parking spaces. Conestoga Mall, the largest shopping centre in Waterloo, Grey Silo Golf Club and many restaurants are nearby.
The major thoroughfares of Weber Street North, King Street North and the Kitchener-Waterloo Expressway are within 5km of 219 Labrador Drive, and several Grand River Transit bus lines serve the site.
Improving fundamentals
Compared with that of larger cities, such as Toronto, where the office vacancy rate has continuously edged up for several quarters, Waterloo’s office market has registered a 7.3% decline in vacancy since the peak in Q1 2022. According to Colliers, it was 13.1% in Q2, down 1% over the past year. Over the same period, the weighted average asking net rent has increased by 7%.
“Our owner-occupier market has been extremely strong throughout the post-Covid world. We have a ton of local and nonlocal businesses that would prefer to own their real estate versus lease it,” Chris Kotseff, executive vice president at JLL, told Green Street News.
“We have a unique opportunity in the Waterloo Region whereby we have an inventory of buildings that are 20,000 to 50,000 sq ft that can actually be sold. In Toronto, you’re dealing with buildings that are 500,000 sq ft. It’s a little bit different, and tougher, for a user to go and buy one of those.”
Amid Waterloo’s strengthening fundamentals, a flex office building at 410 Conestogo Road is on the block. The valuation for the 39,000 sq ft asset comes to $232/sq ft.
The two-storey property has been under the same ownership for 19 years. It is separated into eight units, though they can be further divided to accommodate new users.
Whitney & Co. also has this assignment, and the marketing campaign is targeting owner-occupiers and private investors.
The property is approximately 88% leased to tenants including Coronation Dental Specialty Group, Eby Financial and Elysis Massage Therapy & Osteopathy. Net rents vary by tenancy. A vacant 8,000 sq ft space is asking $16.50/sq ft in net rent and $8.09/sq ft of additional rent.
There are 98 parking spaces and two car-charging stations. Conestoga Station — a major terminal for Grant River Transit, Perth County Connect and the ION LRT — and Conestoga Mall are within 650m of the property. Access to King Street North, Weber Street North and Conestoga Parkway is within 2km.
Part of the Waterloo Region, Waterloo is 95 km west of Toronto. The two form the Toronto-Waterloo corridor, the second-largest technology cluster in North America. Blackberry and OpenText are among the companies headquartered in Waterloo.
“We’ve had a change in office real estate on a more macro scale,” said Kotseff, who was not involved in the sale of 219 Labrador Drive or the listing of 410 Conestogo Road. “The investment lens is a lot different now. Groups aren’t as interested in investing in office.
“What’s happened is some of these private equity ownership groups are looking at their assets and saying, ‘What else can we do? Our office lease-up isn’t going as well as we’d hoped.’ Now they’re sellers. And we’ve got this buyer pool that is user-based and they’re saying, ‘Hey we’d like to own.’ What that has created is an opportunity for those buyers that we haven’t really seen before, and they’re taking advantage of it.”
“Because of the number of owner-occupier deals we’ve seen, the availability of vacant office buildings to actually acquire is dwindling,” he said. “It’s getting quite tight, and tougher to find something.”
