Winnipeg's normally staid industrial market is showing signs of new life, with at least three new investment buildings under construction or in the works and more possibly on the way.
Two of the new buildings are in the fast-growing southwest quadrant of the city. One is a 36,500-square-foot industrial building Artis Real Estate Investment Trust (REIT) is building at 1595 Buffalo Pl. The other is a 40,000-sq.-ft. warehouse/distribution centre Winnipeg's Saults & Pollard Real Estate Ltd. is building on Fennell Street.
The third new building is a 40,000-sq.-ft., build-to-suit industrial complex Bentall Kennedy (Canada) LP hopes to build on Meridian Drive in northwest Winnipeg. It would be a built-to-suit complex that would be leased back to the client. Negotiations are underway with a prospective client, but a deal hasn't been finalized.
An Artis official said the new Buffalo Place building replaces an old, obsolete industrial building that was recently demolished.
David Johnson, Artis's senior vice-president of asset management for the central Canadian and U.S. region, said if the new building leases up fairly quickly, Artis will look at replacing some more of its older industrial buildings in the city with new ones that better meet the needs of today's industrial tenants.
A large, new distribution centre that was completed last fall in the Inksbrook Industrial Park recently moved one step closer to becoming fully leased with the landing of a second major tenant.
The 152,000-sq.-ft. Discovery Place Distribution Centre, which Bentall Kennedy built for British Columbia Investment Management Corp., had just one tenant -- Staples Advantage -- signed when construction began. Staples leased 60,000 square feet in the building.
TransForce Inc, a North American transportation and logistics company, also signed a multi-year deal to lease 50,000 square feet in the centre.
The real estate agent who represented TransForce in that deal, Colliers International's Gary Goodman, said he has another client who wants to lease the remaining 40,000 square feet.
"That (a leasing agreement) could happen by spring or summer," he said.
Martin McGarry, president of the DTZ affiliate in Winnipeg, said local developers have been watching closely to see how quickly the Discovery Place Distribution Centre leases up.
He said if it's fully leased within a year of being completed, that could give other developers the confidence to build some more new industrial buildings in the city.
"I wouldn't be surprised if before the end of this year we see some announcements on some new spec developments in 2015," he added.
Spec developments are developments in which no tenants have been signed in advance of construction beginning.
McGarry, Goodman and several other industry officials were quick to say new industrial-development activity here will be modest in comparison with what's taking place in larger industrial markets such as Calgary and Toronto.
"I don't think there will be a whole whack of new industrial buildings springing up all over the place," said Murray McRae, another industrial real estate specialist in Colliers International's Winnipeg office.
"I think one of the things that separates us from other markets is that we don't overbuild," added Tom Derrett, who is also an industrial specialist in Collier's Winnipeg office. "We're more of a cautious society... and I don't think anyone is going to go out there and go nuts on building new product. I think before anything is built, it will be carefully thought out."
The Artis and Saults & Pollard's buildings are both spec developments. Derrett, who is the leasing agent for the Artis building, and McRae, who is the leasing agent for the Saults & Pollard building, said the developers are confident they'll find tenants for their new buildings.
They said the buildings have the type of amenities many industrial tenants are seeking, including extra-high ceilings, energy-efficient features, modern loading docks and large parking lots. Both can also be developed to suit a single tenant or multiple tenants, depending on market demand.
Derrett also noted the industrial vacancy rate in southwest Winnipeg is less than one per cent, it's one of the city fastest-growing areas, and new industrial buildings in other parts of the city -- such as Discovery Place Distribution Centre -- are finding tenants.
"So they (Artis officials) are confident in the market and that they will get it leased up."
He and McRae said a growing number of Winnipeg industrial users are now willing to pay the higher rental rates new industrial buildings command. Artis, for example, is seeking $9.75 (net) per square foot for its building.
"If you want to attract young employees who are... university grads, they don't want to work in a dark, dingy building," Derrett said. "They want to be in a modern building, and I think that's what a lot of companies out there are realizing."
Goodman said TransForce has no qualms about paying a higher rental rate because it wanted to consolidate its two Winnipeg operations under one roof -- they used to be at separate locations -- and it wanted the new location to have modern amenities such as high ceilings.
He said he also wouldn't be surprised to see a couple more new projects announced in 2014.
"It's still Winnipeg, but we're certainly hopeful there will be more."
Know of any newsworthy or interesting trends or developments in the local office, retail, or industrial real estate sectors? Let Murray McNeill know at the email address below, or at 204-697-7254.