by Todd Lewys
Much like the provincial economy, the city’s commercial real estate market is something that never seems to waver.
And though there are areas of the market that, in an ideal world, could perform better, it’s largely in good shape, said commercial market expert Wayne Johnson.
“In a general sense, it’s just fine,” he said. “It’s heavily dependent on the provincial economy, which has been humming along for the last 15 years. For example, there was a recession in 2008-09, (but) there just wasn’t one in Manitoba. Like the provincial economy, the city’s commercial market is just fine.”
WinnipegREALTORS® Commercial Division chair Trevor Clay agrees with Johnson.
“I would say the market as a whole is quite healthy,” he explained. “There’s good interest in it across all areas, and there’s new dollars looking to get into Winnipeg.
“Demand for industrial space is strong and the vacancy rate for office space is the lowest it’s been since 2010, with good leasing activity.”
Clay said there’s also lots of demand on the tech side.
“Retail is in flux, but there’s still good velocity in leasing,” said Clay. “In general, the (commercial) market is performing well. It’s a testament to the diversity of our provincial economy.”
Johnson reported that the industrial market remains solid.
“Sales figures show ever-increasing prices — not dramatic, but higher than inflation.
“Resale figures are good. Leasing has some modest strength, neither strong nor weak. Numbers this year are better.
“In 2016, the vacancy rate (of buildings) was 8.6 per cent. Right now, it’s 7.2 per cent,” he said, adding that the market is averaging three new buildings being built per year.
The burning question is: Can the industrial market make additional headway?
“That depends,” said Johnson. “Right now, businesses feel welcome coming to Winnipeg, and can find help in getting established.
There are also no growth/impact fees on construction of industrial buildings for the moment.
If the city applies growth fees to industrial buildings, some businesses — particularly smaller shops — will move outside the city.
“However, many medium and large businesses will still choose to set up in Winnipeg and pay, as their client base is in the city, as is their labour force.”
In the office market, the news is generally good.
“The suburban market is doing well, with declining vacancies,” he said.
“Meanwhile, the downtown market, which is a far more significant market (at 2.5 times the size of the suburban market), is a bit above where you’d feel comfortable about its performance.
“Right now, vacancy rates are about 7.6 per cent,” added Johnson. “Ideally, you’d like to see that figure around five per cent.”
To get a better idea of how the downtown office space market in Winnipeg is performing, it’s important to look at how its three classes are faring.
“At the moment, Class A is good with a vacancy rate of 3.3 per cent,” he explained.
“However, True North’s project will be coming on the market in about two years, and could take away clients from Portage and Main. That could cause a rise in Class A vacancies.
“Another area of concern is that there are few if any major head office users coming into the city, which means the market has to grow out of the local user base,” added Johnson.
“At present, Class B vacancies are eight per cent, with Class C vacancies being around 12 per cent.”
Johnson said that the growth/impact fee is a looming wild card.
“It makes little or no sense to have it. Things in the office market could get bad if it is (implemented).
“We’re still having meetings on the subject, so we’ll have to wait and see what happens.”
That said, there is other good news.
“Retail vacancy rates are still looking good with a 2017 vacancy rate of 5.2 per cent.
“In general, the commercial market is fine,” Johnson added. “It just needs to improve in a couple of key areas.”