A look at the commercial side of our local real estate market

By Peter Squire

While WinnipegREALTORS® focuses considerable resources on the Multiple Listing Service (MLS®) it runs and operates in Manitoba — since the residential component of its operation is significant (generated over $4 billion in transactions in 2019) — it also has an award-winning commercial division.

This specialized group of commercial REALTORS® — which comprises all of the leading local commercial brokerage houses — has their own Commercial Property Information Exchange (CPIX®). Currently there are close to 1,300 listings available for sale or lease. You can see for yourself by going to winnipegcommercialrealtors.ca. Listings are province-wide and include 7 different property types: office, retail-commercial, shopping center, industrial, land and farm, hospitality and multi-family.

In addition to providing and delivering CPIX®,  WinnipegREALTORS® supports all of its commercial
REALTORS® in advocating for economic development and strategies to grow Manitoba’s economic footprint, publishing the Commercial Real Estate magazine three times a year while featuring a strong commercial component in its Annual Forecast Breakfast.

Just as you are hearing and reading about the impacts of COVID-19 on Multiple Listing Service® sales activity throughout the country and in our local market, commercial real estate is experiencing challenges as well, with many businesses unable to remain open, or operating in a diminished capacity. 

As has been mentioned by a number of commentators, this is not a normal recession or depression — it is a health crisis that is resulting in serious economic repercussions. Much of the economy, especially in residential and commercial real estate, was performing well in the first quarter of 2020, with optimism for a solid year before the pandemic took hold in March. Strong fundamentals underpinned real estate markets to justify the favourable predictions that were being made for 2020.

We’re all aware of the provincial state of emergency orders that were put in place across the country in April, shutting down economic activity to help flatten the COVID-19 curve. Now we are seeing provinces, including Manitoba, beginning to reopen non-essential businesses in a gradual and cautious manner, with plans to do more as each day goes by with few or zero coronavirus cases.

The outgoing Bank of Canada Governor, Stephen Poloz, has played an instrumental role in the last few months supporting the federal government in its unprecedented move to backstop our economy and support Canadians that have been disrupted by COVID-19. Poloz makes it clear that our current situation has nothing to do with any downward spiral or loss of confidence in the economy. Prior to Covid-19, Canada’s employment numbers had been very impressive. Simply put, the economy was shut down, so it was necessary to put income and other financial supports in place to help everyone weather the pandemic storm until business resumed.

Poloz believes we will bounce back as the economy is reopened and production gears up again. Some industries and sectors in the economy are more impacted than others, and they are making adjustments in keeping with public health orders. The airline industry is just one that’s been severely hit by the pandemic, the result being that Winnipeg’s Boeing plant just announced they are laying off 400 workers.

While many construction and infrastructure projects are still proceeding — including WinnipegREALTORS® own curtain wall remediation project at its building on Portage Avenue — Darryl Harrison, of the Winnipeg Construction Association, has his own perspective on this. He explains how COVID-19 will have an impact on the commercial property market in three ways:

• The immediate impact will be any reduction in demand due to businesses not able to weather the impacts of COVID-19 and the economic slowdown.  The Federal government has made valiant efforts to support business but not all business will return.  This will increase the amount of retail, office and commercial space in the short term.

• Secondly, commercial new builds have reduced by about 35% since mid-March compared to last year.  That reduction is made up entirely by private investors largely delaying projects. While this has an immediate impact on construction labour and material demand, it can have an impact on the commercial space supply. Depending on the length of delay for these projects, there can be an impact of total commercial space availability in the medium term.

• The final impact on commercial space supply and demand, which is purely speculative at this point, will be the long-term shift in lifestyle changes brought about by COVID-19. Will there be more people working from home, reducing demand for office space?  Will there be an acceleration of on-line shopping making bricks-and-mortar stores less viable? Due to the nature of building ownership and lease arrangements, these impacts would be expected to be seen in the medium term.

Canadian commercial industry leader Jon Love, CEO of Kingsett Capital, who spoke recently at a Canadian Real Estate Forums webinar, says this crisis will end and we will get through it. He was most emphatic about stating “you cannot linearly extrapolate the events of the present into the future as it will be wrong.” One example he cited was no one was going to work in a tall office tower after 9-11. Love also opined that office is far more dynamic than commentators give it credit for, i.e. not an either/or between working from home or at the office.

Speaking of forums, every two years the Winnipeg Real Estate Forum is held and has been scheduled this year for October 29 at the RBC Convention Centre. The forum offers a wide range of speakers, presentations and panel discussions on the economic   drivers responsible for Winnipeg’s strong GDP; the major trends in the office, industrial, retail and apartment markets; the availability and cost of capital; and the broad range of development activity and opportunities. Hopefully this event will go ahead as scheduled as it will provide important insights on how the engine of our local economy is moving ahead despite the headwinds it is facing from COVID-19.

Manitoba is making good progress with respect to reopening our economy, but families and small businesses are still feeling the impacts of the pandemic. But a bit more relief is now available when it was recently announced by the Government of Canada that applications are now being accepted for Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. Over the course of the program, property owners will reduce rent by at least 75 per cent for the months of April and May (retroactive), and June, for their small business tenants. CECRA will cover 50 per cent of the rent, with the tenant paying up to 25 per cent and the property owner forgiving at least 25 per cent. (See below for details.)

WinnipegREALTORS® continues to advocate not only for its Members, but for all Manitobans.

Peter Squire is WinnipegREALTORS® Vice-President, External Relations & Market Intelligence.