Need for more space creates real estate challenge

Hey there, time traveller!
This article was published 05/03/2018 (2809 days ago), so information in it may no longer be current.

From True North Square to the city’s southwest quadrant and the industrial real estate market, 2018 will prove to be an exciting year for Winnipeg.

That comes from the annual Canadian market outlook report produced by CBRE Group — the largest real estate investment firm in the world.

The document highlights a number of growing trends in the Winnipeg real estate market, as well as potential challenges facing investors.

As the report’s executive summary makes clear, 2018 may be a time when “context might be as important as the facts and figures upon which forecasts are built.”

That’s where Ryan Behie, leader of CBRE Winnipeg, comes in.

“One thing that I’m really excited about, one of the key takeaways, is that industrial tenants are going to need to be creative in 2018,” Behie said.

By industrial tenants, Behie means large-scale manufacturing companies. The driving force behind their need to get creative, is that the city continues to see growth in the industrial real estate market, but that hasn’t gone hand-in-hand with the creation of new industrial space.

To put it another way: Behie says the economic pie for these companies continues to grow, but their real estate pie isn’t growing along with it.

A driving factor behind the phenomenon is the high cost associated with breaking ground on new construction projects, Behie said.

“I don’t suspect we’ll see construction costs come down in any significant way. We’ll likely see rental rates continue to rise.

“This is why tenants will have to be creative when they go about expanding and growing,” Behie said.

“They’ll need to look at developing on their land and rethinking how they’ll get their real estate needs met. That will mean things like repurposing existing buildings that don’t presently suit their needs.

“This is relevant for the local shop owners or small manufacturing companies, all the way through to the large multinational, Fortune 500 companies.”

The city’s office market — suburban and downtown — should continue to perform well, according to the 2018 outlook report. In the downtown, “Class A” and higher-quality “Class B” office space have shown strong success.

Meanwhile, the suburban office market has seen speculative construction for the first time in years, which can have an accumulative effect as the success of suburban office projects in turn bolsters further growth.

In addition to projects like the Bishop Grandin Crossing, or phase two of the Southwest Rapid Transit Corridor, the 2018 outlook document — as would be expected — points to True North Square as a key project to watch.

CBRE believes the mixed-use development may cause vacancy rates to jump. That shouldn’t be seen as a bad thing caused by the weakening of the market, but rather as a sign of a strong market realizing inventory expansion.

“True North Square is an example of an expanding ‘Class A’ market. Our downtown ‘Class A’ market has been performing quite well. In 2017, vacancy rates were coming down. We haven’t had a new office building constructed in many years,” Behie said.

“The other thing to consider is it’s not just an office development. The excitement and importance of it is that it isn’t just about office space. The story of True North Square is also about everything else that comes with a project that size.”

While the completion of the project will lead to a proverbial reshuffling of the real estate deck, with some major downtown clients set to vacate their current locations for office and retail space at True North Square, Behie stresses that won’t significantly impact the importance of Portage and Main.

“It’s not going to substantially change the gravity of Portage and Main — the sheer amount of office space there. The synergy of the businesses in close proximity to one another. The reality is there will always be a compelling reason to be at Portage and Main.”

Know of any newsworthy development in the local office, retail, industrial or multi-family-residential sectors? Let us know at business@freepress.mb.ca

ryan.thorpe@freepress.mb.ca@rk_thorpe