Predicting how Winnipeg’s office and industrial real estate sectors would respond to COVID-19 at the beginning of the pandemic was no simple task. In April, CBRE vice-president and managing director Ryan Behie likened the situation to trudging down a football field.
"We’re on the one-yard line," he said.
It’s hard to say how far down the gridiron the world has travelled in the last six months, but to extend the metaphor, at the end of the year’s third quarter, local real estate still has the pigskin, while some other major markets are either scrambling or getting sacked.
"Winnipeg just seems to continue to find a neat, tidy, stable place in the middle," Behie said about the city’s showing in CBRE’s third-quarter report. "So far, we haven’t actually seen a lot of detrimental effects (to the local market)."
Office vacancy rates in places such as Toronto, Calgary and Montreal, increased significantly. Each city’s rate grew by one per cent or more compared with the second quarter, with an even more precipitous rise in downtown vacancy. Nationally, office vacancy rose by an average of just over one per cent; in Winnipeg, it rose by just half a per cent.
CBRE’s report attributes the rise in vacancy rates to two trends: a growing sublease market and a disconnect in the leasing cycle that resulted in many listings becoming vacant. The growth this quarter in subleased space was substantial in some cities like Montreal (101 per cent), Toronto (136 per cent) and Ottawa (189 per cent), but in Winnipeg it only grew by 16 per cent. Paired with the below-national-average vacancy rate, Behie said the city’s market is in relatively good shape.
Subleasing is generally seen as a barometer of stability, Behie said. When businesses sublease space, it’s put on the market for another tenant to take it over, which could take months or years.
"We haven’t seen a lot of growth or expansion so far, but we also haven’t seen (in Winnipeg) any mass exodus in terms of organizations going out of business or giving up space to work from home," he said. "On a whole, we are generally on pause," which is better than going backward.
Across the country, the industrial market has proven resilient, CBRE data show.
Five of the 10 major markets assessed in the latest report had contracting availability rates, with two remaining stable; Winnipeg’s availability (the industrial equivalent to vacancy) contracted slightly. It also had 541,000 square feet of positive absorption — an amount large enough to offset the cumulative negative absorption accrued in the last six quarters.
Such a large figure indicates a growth in demand in relation to supply, a notion supported by the fact that of 465,000 square feet of new property completed last quarter, 90 per cent is already spoken for. Much of the new space is in local business parks.
A big reason for the national stability in the industrial market is the growth of e-commerce during the pandemic. The sector was already growing before the spring shutdown, as was the need for logistics and distribution space.
"It’s one of the reasons we see buoyancy in the industrial market," Behie says, adding that the quick leasing of new product shows pent-up demand for high-quality industrial space within the city limits.
Behie said despite the pandemic, Winnipeg’s markets remain relatively stable — a good place to be during a time of great uncertainty.
"Although we’re seeing negative statistics in other major cities, we’re generally holding our own here," he said, adding there’s still a possibility for a negative stretch.
"It harkens back to why some people really love Winnipeg," he said. "In the best of times, it’s not good enough for some people, but at times like this, it’s exactly what an investor or a business should be looking for."
Ben Waldman covers a little bit of everything for the Free Press.