Modest market growth still the rule

Hey there, time traveller!
This article was published 04/03/2019 (1488 days ago), so information in it may no longer be current.

CBRE is likely not incorrect when it says in its latest real-estate market outlook 2019 report on the country’s commercial real estate scene that after the global financial crisis near the end of the past decade, investors from around the world sought safe harbour in Canada.

Sure, much of the interest was in Canada’s largest cities and over the past decade, Toronto and Vancouver have become undeniably world class in that they are now included in many rankings of the most expensive cities in the world in which to live.

The “influx of global capital” that CBRE mentions in the report that came out last week was certainly not spread evenly across the country. It’s open for debate as to whether or not Winnipeg got its fair share since the city’s commercial real estate scene has always been frustratingly conservative.

But as modest as the growth has been, it has always been at the pace of demand. The organized market that exists in Winnipeg has meant the city has avoided the congestion that overly aggressive development has caused in other markets and has meant that the city continues to be an attractive investment market with reasonable returns, albeit with not as many opportunities as might be the case elsewhere.

That said, the Winnipeg market did receive a portion of the dynamic that CBRE talks about in the report when it says, “This is what it is to be a leader in the world. This is what it feels like to live in thriving global cities. These are the challenges that governments, businesses and citizens face when the pace of change accelerates due to rising competition and opportunity.”

Winnipeg’s downtown office market got its own little tsunami of competition with the construction of True North Square’s 365,000-sq.-ft. office tower that’s part of a four-building development that will eventually represent about one million sq. ft. of new development, including an apartment building, hotel and 130-unit luxury condo tower.

CBRE says the new office tower — the first multi-tenant downtown building in Winnipeg in a generation — has caused other class A building owners to invest in their assets. Some of the Portage and Main building owners says they have filled in all the space from tenants who moved to TNS. But it’s kept everyone on their toes because, as the report notes, much of the movement has been a “shuffling of the cards with no new major office tenants entering the market.”

CBRE is forecasting that the addition of the TNS class A office building to Winnipeg’s notoriously slow-growth market will increase downtown vacancy rates in 2019 to 13.2 per cent, up from 8.8 per cent in 2017 and 11.7 per cent in 2018. (True North Square’s office building opened in the third quarter of 2018 during which quarter it claimed bragging rights as the only new class A building entering the Canadian market.)

CBRE lists the Railside development at The Forks, ongoing True North Square development and investment in other buildings in the SHED (Sports Hospitality Entertainment District) and industrial developments in CentrePort as its projects to watch in Winnipeg.

Providing marketing and regulatory support to developers, CentrePort has seen the introduction of new serviced industrial land sell off at a record clip with optimistic forecasts for a batch of new serviced land as well.

Industrial land is the uncontested winner among the development sectors, according to the CBRE outlook report, with rents, sale price, new supply and projects under construction all forecasted to increase in 2019 compared to 2018, all of which also trended up in 2018.

The Free Press recently reported that the Railside project at The Forks still needs to finish assembling the land required for what is ultimately expected to be a 12-acre development of up to 30 low-rise buildings, including about 1,200 apartments with street-level storefronts.

On the retail front, the Seasons development, including the Outlets Collection mall, is deemed a “resounding success” by CBRE. The enclosed outlet mall on the north half of the site is just about fully leased and ongoing development is occurring on the 100-acre property.

CBRE is forecasting retail sales growth in Winnipeg that will double last year’s 2.1 per cent increase, but the expectation is for only a modest amount of new retail development in 2019.

martin.cash@freepress.mb.ca