Market Facts and Analysis

 

December 2007 - The Commercial Market is strong

A relatively strong provincial economy is having a corresponding effect on the commercial real estate markets in Winnipeg and throughout Manitoba.  Continued high costs for new construction is expected to keep real estate rental rates, especially those pertaining to existing properties, growing for the foreseeable future.

Limited supply of new office space will continue as lending practice demands 50% pre-leasing or better prior to lending on projects.

The 24,000 square feet Ediface proposed development in St. Boniface still awaits commitments and as such the cranes haven't begun work.  Credit Union Central's head office was built and they have leased 75% of the space which leaves 25% remaining to attract a tenant.

Tuxedo Business Park is being built without debt and each time a building goes up it attracts a tenant or two right away and is fully leased quickly thereafter.  This process is available for those developers with serious cash but not for those who need financing to begin.  This is also the process that is changing Calgary's skyline - the developers are building on spec but without debt.

Winnipeg Office Market - 7.8% vacant. 

The sublet market was all but non-existent until a few recent announcements including Agricore's 75,000 SF void.  The sublet market stands at +/-150,000 square feet at Q4 2007, which is tight by Winnipeg standards.  Soaring construction costs are making relocation to new buildings very expensive for tenants and therefore landlords are able to lever significantly higher rents at renewal time from those without suitable alternative sites to fall back on.  The need for Tenant Representation is strong.

The concern over potential increases in rent is driving many to consider purchasing.  However, those who already own are now seeing an opportunity to increase rents so they are less likely to consider selling.

What about the space destined to be returned to the market as a function of Manitoba Hydro's consolidation to its new state of the art head office on Portage Avenue?  Significant portions of that space are already under negotiation to some large users.  Other portions (predominantly suburban) are being evaluated as potential conversion back from office space to highly sought after industrial space in the southwest quadrant of the city.

 If you would like to discuss the Winnipeg office market with me I'd be happy to talk to you.

Joe Banfield