By Ron Margolis
Tenants’ “flight to quality” (i.e. new builds), the Amazon effect driving industrial growth, unprecedented new residential downtown, the hype around “proptech”, and the confidence which comes from Winnipeg’s reputation as a stable and resilient investment market, were just some of the real estate issues highlighted by a panel of local experts.
Every January, for the past 35 years, the Real Estate Institute of Manitoba (REIM) has held its real estate forecast luncheon, an annual occurrence that brings together a broad circle of Manitoba industry professionals, including property managers, brokers and agents, developers, portfolio investors, insurers, engineers and appraisers, lawyers, accountants, lenders, representatives from municipal, provincial and federal government departments and agencies, construction contractors and trades.
The forecast features a panel of prominent leaders generously sharing their knowledge and insights. I’ve had the honour of hosting this event each of the past eight years, and been joined by senior executives from some of the most successful organizations in our industry. In 2020, my panel included Angela Mathieson, CEO of CentreVenture, Bryce Alston, President of Alston Properties, Chase Allen, Managing Director for Canada ICI, and Sandy Shindleman, President of Shindico Realty.
Alston & Shindleman candidly shared some of their respective reasons to invest their own capital into local projects, even though each have opportunities in other larger markets. Allen described institutional and private debt and equity seeking deployment, fueling much of the activity we see. And all of the panelists agreed with Mathieson’s suggestion that a limited number of carefully curated “retail” streets downtown could play an important role in that sector’s continued success in the e-commerce era.
On the prop-tech side, while each spoke to the benefits of evolutionary or incremental changes taking hold within their organizations through increased use of technology, they couldn’t point to any “disruptors.” Allen disputed any expectation that loans can be efficiently crowd sourced. Alston is encouraged that new building code will enable mass-timber construction up to ~12 storeys. Even with higher awareness of “green building” technology, the drivers are primarily government policy and while tenants are appreciative of opportunities to occupy green space, they’re not (yet) willing to “pay up” (either up front or via additional rent) to cover the necessary investment to create more efficient buildings.
Industrial has long been the largest sector of Winnipeg’s commercial real estate market, and e-commerce growth continues to create local warehousing opportunities as part of more efficient distribution networks, leading to new development in the surrounding rural municipalities as well as within Winnipeg business parks. Shindleman observed that rents for clean class A industrial are now almost on par with retail.
Residential, like industrial, was described by Allen as having the broadest level of interest from institutional lenders and investors. Alston sees opportunities to acquire under managed projects and refurbish while still keeping rents affordable – they’ve had particular success in the Exchange District. Shindleman is planning a new large (248 units) amenity rich in-fill project with steel and concrete construction and underground parking – targeting a different demographic. Mathieson noted 1,000 new housing units built in the downtown in 2019 and another 700 planned for this year. She does question how well the downtown will be able to absorb these mostly rental units.
The “flight to quality” notable within the office sector, is partly driven by the recently completed True North Square development. With landlords having recently reinvested in the Portage & Main towers, more tenant shuffling has and continues to occur. New tenancies have created back-fill opportunities in other class B and C buildings downtown. This could lead to repurposing assets from say office to residential, as in the case of one recent Alston acquisition on Main Street.
One topic of interest to the entire panel was the trend towards densification, which brought mention of Starlight’s plans to redevelop Portage Place shifting the retail component and potentially adding two high rise residential towers, as well as possibility of adding high rise, mixed use development to some notable retail sites such as Polo Park.
The upcoming 2020 Winnipeg Real Estate Forum set for May 5th is a full day event, allowing for more comprehensive discussions and nuanced presentations from a range of industry experts covering all major market segments. I will again be moderating a Financing Panel featuring prominent lenders. Registration opens online in February.
Ron Margolis is President of Margolis Capital – Commercial Mortgage Professionals.