City's real estate 'not about home runs'
Staid market is attractive to some investors, but hard to break into
Martin Cash By: Martin Cash
Posted: 05/31/2018 4:00 AM
At what might have been the largest real estate conference ever held in Winnipeg on Wednesday, there was a lot of discussion about technical considerations for investment strategies related to macroeconomic trends, the high cost of construction and uncertainties about headwinds facing the retail sector.
But mostly, investors and developers from Toronto and Vancouver who were in attendance at the Winnipeg Real Estate Forum heard about the well-paced and organized — albeit modest — market that exists in here.
PHIL HOSSACK / WINNIPEG FREE PRESS FILES</p><p>True North Square, the first multi-tenant downtown office building to be built in the city in more than 30 years, is about 50 per cent leased with a little more than a month left before occupancy.</p>
PHIL HOSSACK / WINNIPEG FREE PRESS FILES
True North Square, the first multi-tenant downtown office building to be built in the city in more than 30 years, is about 50 per cent leased with a little more than a month left before occupancy.
One of the speakers made the remark that Winnipeg’s multi-family market is under-demolished rather than overbuilt.
There are modest price increases, but there is no housing bubble anywhere in sight. And the market remains small enough that one new downtown office tower — True North Square — is causing a major ripple effect in the office market.
But the most intense activity for investors and developers across all types of real estate is not office or multi-family or retail developments — it’s industrial.
Welcome to Winnipeg.
But the strong presence of investors from across the country — about one-third of the 700 in attendance at the conference were from out of town — made it clear that they would like to participate more actively in that kind of boring, predictable marketplace where huge risks do not have to be taken to be able to get proper returns on investment.
With apartment vacancy rates at 2.8 per cent and industrial property vacancy rates at three per cent, you would think there would be plenty of opportunities for investors. Vacancy rates are dangerously low, one such investor said — so low they may be impeding growth.
But Don White, a veteran commercial property broker in Winnipeg with Colliers International, said, "The worst thing that could happen in Winnipeg is for someone to come in and build 5,000 apartment units and three million square feet of industrial space."
That’s because the city rate of growth would not be able to handle it.
(Most investors and developers in attendance were reluctant to comment on the fate of the proposed 40-storey SkyCity project. But one senior executive in the know said unequivocally, "It’s done.")
"Winnipeg is about singles and doubles. It’s not about home runs," said Ugo Bizzarri, a senior executive with Timbercreek Asset Management, the Toronto firm currently in the process of converting the old Medical Arts Building into 100-plus apartment units.
That’s relative to other markets, such as Calgary, for instance.
Brian Bastable, the chief operating officer of multibillion-dollar fund Slate Asset Management LP, said his firm just acquired a portfolio of office properties in Calgary.
Obviously he is hopeful about that investment, but he said, "We have lots of leasing to do. It’s scary and dangerous."
The real estate forum, which is held every two years, is an opportunity to highlight the attractiveness of the Winnipeg market.
But this is not 1995. The particulars about the Winnipeg real estate market are well known. The market matured and has well-defined dynamism and undeniable growth opportunities, but it remains hard to break into. And it’s not because everything is too expensive or because there are unique roadblocks to trading in this market.
The local investment community has things pretty much sewn up.
Speakers said whenever a quality property from any investment class comes on the market, there is always plenty of demand and investors line up to get in on the deal.
Blair Forster, president of the Regina-based Forster Projects and co-developer of the 117-acre Seasons retail/residential/office/hotel development whose centrepiece is Outlet Collection Winnipeg, is keen on the Winnipeg market.
But he said he has a hard time finding other opportunities here, even though institutional investors have long treated Winnipeg as a flyover market.
"Level of sophistication among local investors... they take over and transactions occur before properties even hit the market," Forster said.
That being the case, it is not surprising that the local True North folks with partners James Richardson & Sons are responsible for the first new multi-tenant downtown office building in the city in more than 30 years — a building that is about 50 per cent leased a little more than a month away from occupancy.
And while it is causing some vacancies and musical chairs among the other class A office buildings, it is also causing landlords to work on their properties to retain and attract new tenants.
"It’s forcing everyone to up their game," said Ryan Munt, an office leasing agent at Cushman & Wakefield/Stevenson. "It’s a great time to be in the office market in Winnipeg."
martin.cash@freepress.mb.ca
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