Winnipeg Free Press - PRINT EDITION

Build-first strategy bearing fruit

Local developers quickly leasing industrial space

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Drew Bayes, president and CEO of First General Services (Winnipeg) Ltd., says his company hopes to be moved in at 125 Fennel St. (above) by early next year.


Drew Bayes, president and CEO of First General Services (Winnipeg) Ltd., says his company hopes to be moved in at 125 Fennel St. (above) by early next year. Photo Store

It's taken a while, but their gamble is starting to pay off for several local developers who went ahead with the construction of new industrial buildings before any tenants had been signed up.

Saults & Pollard Real Estate Ltd. now has one confirmed 15,000-square-foot tenant for its 40,000-square-foot industrial complex which is under construction at 125 Fennel St. in Fort Garry.

First General Services (Winnipeg) Ltd. president and CEO Drew Bayes confirmed the property-damage restoration specialist is taking possession of its undeveloped space in the building on Sept. 1, and hopes to be moved in by early next year.

"Our new space is in a beautiful building and we love this area," Bayes added.

The building's leasing agent -- Murray MacRae of Colliers International -- said he's also on the verge of finalizing a deal with another company which wants to rent 20,000 square feet of space in the building.

"We're right down to the final touches of that deal," MacRae said, which will leave only 5,000 square feet of space left to fill.

With 95 per cent of the building leased or about to be leased, MacRae said Saults & Pollard is contemplating building a second building on the site. But this time it will likely play it safe and pre-lease some of it before commencing construction, he added.

Northart Engineered Sales Ltd., a local industrial equipment supplier, also recently landed a tenant for half of the 21,600-square-foot industrial building it built last year at 171 Samborski Dr. in the Rural Municipality of Macdonald. (Northart kept the other half for its own operations).

Company partner Scott Struthers said it took about two years to find a suitable tenant -- Winnipeg Gymnastic Centre -- which was longer than he and business partner Gord Day anticipated.

"But we're not jaded in any way," Struthers said, adding Day would consider developing another building on speculation if the right property becomes available.

"And if I was 40 (years old), there would probably be no doubt I would do more," the 68-year-old added.

Shindico Realty Inc.'s Robert Scaletta said he's also close to signing two new tenants for the 65,435-square-foot industrial building Calgary's Olexa Developments built last year in its Brookside Business Park in northwest Winnipeg.

Scaletta said Shindico hopes to have the one deal finalized within the next two to three weeks, but the other will take longer to complete.

Houston-based Goodman Manufacturing Group was the first tenant to lease space in the Olexa building. It moved into its nearly 12,000-square-foot space earlier this year.

Scaletta said Olexa officials are happy with the pace of leasing activity for the building, which is within the massive CentrePort Canada development site.

"It's just getting people to realize that CentrePort is actually a go. That you can lease space there," he added.

Another industrial building that's under construction -- Artis Real Estate Investment Trust's 36,500-square-foot complex at 1595 Buffalo Pl. -- has yet to land a tenant.

"But 125 Fennel leasing up bodes very well for the activity for this project," said leasing agent Tom Derrett, also of Colliers International.

Derrett and MacRae said the industrial leasing market in Winnipeg is still slower than landlords and leasing agents would like.

"But there appears to be a bit of an uptick in activity in the last little while, which is nice," MacRae added.

Derrett said he's seeing an increase in the number of industrial users who want the amenities that new buildings offer -- things like higher ceiling heights, lower operating costs, better loading facilities and bigger parking lots -- and are willing to pay the higher rents to get them.

Unfortunately, their numbers still pale in comparison to those in larger markets like Calgary, Edmonton and Toronto, which means Winnipeg sees only fraction of the new spec construction those markets see.

Wayne Johnson, who twice a year publishes a detailed report -- the Johnson Report -- on vacancy rates within Winnipeg's commercial real estate sector, agreed most local industrial users still balk at paying the higher rents new buildings command.

He said those net rents generally range from $9.95 to $11.95, compared with $7 to $8 for buildings that are 10 to 12 years old and $5 to $6 for many older buildings.

Johnson's mid-year office survey showed the overall vacancy rate for leasable industrial buildings has climbed to 8.4 per cent from 6.9 per cent at the end of 2013.

"It's been six or seven years since it's been higher than that (eight per cent)," he said, adding, "the vacancies are very broad and in every category (of building)."

While the overall vacancy rate has been climbing over the last 18 months, Derrett said there's still a need for more new industrial space in Winnipeg. He said new entrants to the market still don't have enough new product to chose from, which has forced some to delay their arrival until suitable space becomes available.

That's why he's hoping the recent uptick in leasing activity in some of this year's new spec buildings will lead to more new spec projects being undertaken in 2015.

Bayes said moving into a new building made sense for First General Services because it has outgrown the three smaller buildings it's now in -- one it owns and the other two it leases. And moving into the new building will enable it to give up the two smaller rented spaces and lease out the building it owns to someone else.

"So at the end of they day, to move into our new digs is not going to cost a heck of a lot more than what we're paying now," he added. "And we'll all be under one roof."


Know of any newsworthy or interesting trends or developments in the local office, retail or industrial real estate sectors? Let real estate reporter Murray McNeill know at the email address below, or at 204-697-7254.

Republished from the Winnipeg Free Press print edition July 26, 2014 B5


Updated on Monday, July 28, 2014 at 6:46 AM CDT: Replaces photo

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