Real estate still flying high
Strength to strength overall, despite commercial-sector turbulence, including high downtown vacancy rate
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Hey there, time traveller!
This article was published 03/01/2022 (448 days ago), so information in it may no longer be current.
Real estate professionals love similes, and in Winnipeg’s real estate industry, 2021 felt an awful lot like an airplane: soaring high, though not without some turbulence along the way.
On the residential side, it was a smooth flight with stellar views, according to Peter Squire, the vice-president of external communications for the Winnipeg Regional Real Estate Board. Asked to sum up the year that was, Squire was effusive. “I’d have to say it’s been nothing short of spectacular in terms of the activity generated since the beginning of 2021,” he said.
The year saw the residential real estate sector maintain trends that began in 2020, with a 13-month long span of record-setting sales ending in July 2021 lifting the market to new heights. After that, the sales pace slowed down for a few months, but as the year came to a close, it sprang back: November 2021 was the best November on record for the local multiple listings service.
Squire and others weren’t surprised to see a strong 2020 — which was the second consecutive record-setting year in terms of sales and dollar volume — supplanted by a third straight best-ever showing in 2021. But that doesn’t make the numbers any less impressive to behold: there were over 18,500 sales on the multiple listing services, smashing the previous year’s record of just over 16,000, while dollar volume for the year ended at nearly $6 billion, representing an increase of over $1 billion compared to 2020 data.
The reasons for that growth are manifold: dollar volume increased because both total sales and average sales prices (up 11 per cent, to $380,000) increased, buoyed by increased buyer competition as supply continued to lag behind demand, even with sellers trying to capitalize on a seller’s market; over half of all single-family homes sold for above list price in 2021, as compared to 27 per cent in 2020. Owing to that — plus lingering concerns over a potential interest rate hike this coming spring — local residential realtors were able to achieve a conversion rate of about 80 per cent, meaning about four of five listings that entered the system were sold; whatever came on the market was selling at such a high pace, Squire said, that there were not enough incoming listings to replace those properties sold.
Meanwhile, condominium sales were up 43 per cent over 2020, with a record number of units (over 2,500) sold, while vacant land sales also experienced a banner year.
All that adds up to a result in 2021 that even the most optimistic prognosticator might not have anticipated. Squire says the boom would be difficult to outdo or even match in 2022, which may prove to be a good thing. “To have a healthy housing market, you need to have a balanced market, and right now, we don’t have that,” Squire said. As it stands, the multiple listings service has about two months supply; ideally, Squire says, it would have five in order to achieve home-eostasis.
The commercial markets were also generally soaring, said Trevor Clay, the principal of Capital Commercial Real Estate and the former chair of the Winnipeg Regional Real Estate Board’s commercial division. “I would say that 2021 was a very good year overall in terms of commercial real estate,” said Clay.
Leading the charge was the industrial sector, where Clay said he’s never before seen more interest in the city, when it comes to both new and existing industrial stock. Vacancy rates continue to fall for such space, as demand for warehousing and distribution facilities continues to stay strong in the face of increased e-commerce fulfillment demands.
Developers are taking note: in business parks like CentrePort, the Northwest Business Park, or Brookside, as well as in older stock in St. James or near the airport, Clay says things are on the upswing. Investors are taking note, and developers are responding in kind: facilities continue to be added to the Northwest Business Park, showing confidence on both sides, Clay said. Plus, Amazon, the world’s biggest player in e-commerce, committed to 230,000 square feet of industrial space in Winnipeg, while FedEx purchased property for a 250,000 square-foot ground facility early in 2021.
When discussing retail, Clay said that, “despite some fears and some headwinds” the market has remained quite resilient, especially with regard to service-oriented properties, such as grocery stores, pharmacies, dentists and salons. Each of those property types have been singled out by industry forecasters as key to supplementing mall properties, which face an uphill battle in retaining pre-pandemic levels of foot traffic.
The office market is the one sector where passengers have long been bracing for, and dealing with, turbulence: regardless of where those offices are located, there is still uncertainty for most firms when it comes to space needs or requirements, even as the pandemic nears the 30-month mark. Suburban office space has held relatively strong, specifically in the city’s southwest region, Clay says, but there is still a lack of clarity for many firms regarding both their own needs and — with the Omicron variant circling — what space they are actually able to use. After taking a brief sojourn back into the office in recent months, many major firms are beginning to once again favour remote work as a hopefully temporary measure as Manitoba’s pandemic picture once again becomes cloudy.
Unsurprisingly, the segment of the office market that has taken the biggest blow from unsteady air is in the downtown region, where vacancy rates are teetering in the 14 to 15 per cent range, Clay said, slightly ahead of the rest of the city.
In Avison Young’s recent third quarter report, senior associate Reno Augellone also resorted to aerodynamic language in his assessment of the office sector. “The Winnipeg office market continues to experience turbulence as vacancies increase in the downtown due to the workforce of large institutions continu(ing) with the work-from-home model,” he wrote. Only 24 per cent of downtown office workers have returned to work there full time, Avison Young’s report said, which could have immediate spillover effects on downtown retail, entertainment, and even residential spending.
“Decreasing vacancies in the suburban market are led by companies who have relocated to smaller, flexible use spaces, closer to home for staff with an abundance of parking,” he continued. The return to the downtown office could take longer than anticipated, Augellone added in a calming tone, not unlike a pilot informing the cabin of a delayed landing.
This year’s flight has just taken off. Fasten your seatbelts.
Ben Waldman covers a little bit of everything for the Free Press.
Updated on Monday, January 3, 2022 12:19 PM CST: Adds caption to photo of Squire