Commercial Real Estate Winnipeg (2022 Report)

Demand continues to outpace supply across the industrial and multi-unit residential asset classes of commercial real estate in Winnipeg, according to the new 2022 Commercial Real Estate Report from RE/MAX Canada. There is a literal peloton of qualified investors searching for havens to invest their money. Concerns over a recession are likely to impact commercial real estate activity in the coming months, however it is uncertain whether this will deliver a balance to the supply side of the equation. This, as economic expansion has propelled GDP growth in the province to 4.5 per cent in 2021, with another 4.1-per-cent increase anticipated in 2022*. 

While REITs and pension funds remain active, with their ability to zero in on real estate portfolios that provide the best return on investment, end users have been a primary driver for industrial space. With vacancy rates hovering at around three per cent, sales and leasing in the industrial sector have been a challenge this year, with fewer properties available for sale, and less space available for lease. While the shortage has not placed massive upward pressure on lease rates, finding industrial units for leases of all sizes has become daunting. Despite a significant increase in industrial property values, some end users are choosing to work with builders and build to suit their own needs. While today’s supply chain issues and rising cost of materials are concerning, the cost of construction is largely accepted and bypasses the uncertainties of leasing at this time. Industrial sites that are most sought-after include St. James, along Route 90, Inkster Industrial Park and Fort Garry.

The recent completion of the True North Square mixed-use development has contributed to rising vacancy levels in Class A office space in downtown Winnipeg. As availability rates** top 14 per cent, landlords are becoming increasingly aggressive in their search for tenants, with upgrades made to lobbies and common elements, and generous tenant improvement allowances offered. With a good percentage of employees still working from home and in hybrid models, post-pandemic foot traffic continues to be a fraction of what it once was. This segment of commercial real estate in Winnipeg is expected to improve in the months ahead as employees return to the office. Suburban office space has held up well throughout the pandemic, with some neighbourhoods reporting strong activity, and end users snapping up small buildings based on their needs. Some are looking to utilize industrial flex space, making creative changes to the floor plan with emphasis on enhancing the employee experience.

With a rental vacancy rate of just over five per cent***, there appears to be no end in sight for construction of amenity-rich, purpose-built residential rentals. Institutional investors remain a critical component of the equation, funding the numerous projects currently underway throughout the city. 

Retail malls, hit hard by the pandemic and the move to online sales, are looking at new ways to recapture lost income. Many are exploring re-purposing, a distinct possibility for those properties that fit within the zoning criteria. Mixed-use residential, commercial and retail—with retail on the main floor and residential above—has proven to be a winning proposition, with the residential component helping to boost the retail end of the business. A number of projects are currently proposed or underway.

Retail storefront continues to perform well, with neighbourhood microcosms such as Saint Boniface, South Osborne, Wolseley (Sherbrook/Maryland) gaining value. The cannabis industry, once a dominant force in terms of retail consumption in the city, is undergoing contraction given ongoing mergers and acquisitions. Over the next six to 12 months, retail operations are expected to be amalgamated, which may open up inventory levels in this segment of the market. 

While concerns over rising interest rates and inflation have created some trepidation, commercial real estate in Winnipeg continues to be supported by solid economic fundamentals. Record levels of capital investment* coupled with recovery in commodities—canola and wheat prices are up 50 per cent plus—should propel GDP growth by more than four per cent in 2022, according to the most recent provincial outlook published by RBC Economics. As pandemic restrictions ease, a return to normalcy is expected, which should bode well for the overall economy and the commercial market moving forward. 

*RBC Economics, Provincial Outlook. March 10, 2022

** Altus Group

*** CMHC Rental Market Survey, Q4 2021

National Commercial Real Estate Highlights

With North American stock markets dangerously close to correction, bricks-and-mortar commercial real estate continues to resonate with institutional and private investors, particularly those who are personally vested, across almost every commercial asset class in major Canadian centres, say RE/MAX brokers.

The RE/MAX Canada 2022 Commercial Real Estate Report found demand for industrial, multi-unit residential—particularly purpose-built rentals—and farmland was unprecedented in the first quarter of 2022, with values hitting record levels, while retail and office are starting to show signs of growth in multiple markets.

The report examined 12 major Canadian centres from Metro Vancouver to St. John’s. Regional highlights include the following:

• 92 per cent of markets surveyed (11/12) reported extremely tight market conditions for industrial product in the first quarter of 2022. Newfoundland-Labrador was the only outlier.
• 67 per cent of markets surveyed (8/12) found challenges leasing industrial space. Included in the mix were Vancouver, Edmonton, Calgary, Winnipeg, Ottawa, the Greater Toronto Area, Hamilton-Burlington-Niagara and London. Some realtors are recommending tenants start their search for new premises at least 18 months before their current leases come up for renegotiation.
• While demand for overall office space in the core remains relatively soft in 92 per cent of markets (11/12) across the country, Metro Vancouver continues to buck the trend.
• Suburban office space continues to prove exceptionally resilient in 67 per cent of markets surveyed (8/12). Those markets include Vancouver, Calgary, Saskatoon, Winnipeg, Hamilton-Burlington-Niagara, Ottawa, Halifax-Dartmouth and Newfoundland-Labrador.
• Development land remained sought after (industrial/residential) in 67 per cent of markets surveyed (8/12) including Vancouver, Calgary, Regina, Saskatoon, Winnipeg, Ottawa, the Greater Toronto Area and Halifax-Dartmouth.
• End users are encountering challenges in terms of expanding their businesses due to land constraints/shortages, with specific mentions of this noted in Vancouver, the Greater Toronto Area and Regina.
• Retail is on the rebound in 75 per cent of major Canadian markets (9/12), with strong emphasis on prime locations in neighbourhood microcosms. The trend has been identified in Vancouver, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, Hamilton-Burlington-Niagara, Toronto and Ottawa.