Diversified economy allowed Manitoba to avoid worst of recession

Manitoba avoided the worst of the world-wide recession caused by the mortgage meltdown in the United States due to its balanced economy, a financial expert recently told a Winnipeg morning radio talk show  host 

Speaking to CJOB’s Larry Updike, M. Demarin, the president and chief investment officer of BCV Asset Management, said it wasn’t a stretch to claim Manitoba avoided the recession altogether. 

“If you look at all the statistics, the employment levels, you look at the retail sales, restaurants, automobiles, housing, everything points to Manitoba that we have really avoided the recession from a technical perspective,” he said. 

“And, things are pretty balanced here. Lots of good industries like financial services and agriculture and mining that are doing well, even manufacturing in many cases are keeping this economy quite stable.” 

Demarin said the stability of the local economy is based on its variety.

“We’re a diversified economy here,” he said. “We’re not reliant like Alberta is on a certain sector or maybe even Ontario on manufacturing. 

“As well, there is a modest level or risk taking that goes on in this province compared to others so we tend to do well in bad times and do less well in good times. We don’t have the boom-and-bust cycles that we’ve seen in the past. 

“As well, we’ve seen population growth once again and that’s very positive for consumption, for housing, for auto sales. People are relocating back to this province for the first time in a long time,” he added.

Evidence that Manitoba is bucking the recession was shown by some very solid MLS® resale numbers in June and July. And, it appears August is also off to a good start. 

But, it’s not just the residential housing market that is showing positive signs of economic activity — commercial real estate in Winnipeg is also holding up  well.

Wayne Johnson, a past-chair of the WinnipegREALTORS® commercial division, who publishes the Johnson Report on the local commercial real estate market, said the overall vacancy rate for industrial space is only 2.6 per cent. 

Another past-chair of the WinnipegREALTORS® commercial division, Martin McGarry, who is involved in industrial leasing and selling, in a recent Winnipeg Free Press article, said he has never seen the inventory of industrial properties for sale so low. He believes our vacancy rate may be the lowest in Canada. 

He anticipates a new 45,000-square-foot industrial complex built on Lorimer Crescent in Fort Garry by A&S Homes will be fully leased by year-end. 

Also upbeat about industrial space in Winnipeg is Ken Zacharias, leasing manager for ING Real Estate Canada. He anticipates his new 64,690-square-foot building at 801 Century will be fully leased going into 2010.

McGarry said industrial rates are remaining stable, while he expects the industrial space market to remain tight with demand continuing.

Another commercial sector showing some encouraging signs, despite some bump up in vacancy levels, is the office sector. The mid-year Johnson Report showed the overall downtown office vacancy rate for Class A, B and C buildings at only 4.6 per cent, just 0.9 per cent higher than for the same period last year. 

During the last major recession in the early 1990s, vacancy rates were double-digit, McGarry recalled. 

Wes Schollenberg, another former chair of the commercial division and a past-president of 106-year-old WinnipegREALTORS®, also expressed confidence in the local commercial market. 

“Winnipeg’s healthy and resilient economy has served it well during the global economic slowdown, and the office market has remained remarkably strong in contrast to many other major North American municipalities,” commented Schollenberg, the managing partner of Avison Young’s Winnipeg office, in his company’s national 2009 mid-year report.

“According to the Conference Board of Canada, Winnipeg’s GDP growth is anticipated to rank first among major Canadian cities in 2009 at 1.1 per cent, and is forecast to further increase to three per cent in 2010.

“Winnipeg’s office market is behaving very well these days, and many tenants have the confidence that landlords want to see. Some long-term deals are becoming increasingly complex, and even more creativity is required with very little new office inventory anticipated over the next 12 to 14 months, which will result in Winnipeg’s office leasing market continuing to perform strongly into 2010.

“Winnipeg’s downtown class A market, which comprises of 2.4 million square feet (msf), witnessed a net vacancy decrease of 0.1 per cent from the second quarter of 2008 to 4.7 per cent currently or 113,400 square feet (sf),” Schollenberg added. 

“The class B market, which encompasses 2.7 msf, experienced a 4.4 per cent increase in vacancy to 9.9 per cent, or 269,637 sf, due to the move of two significant public sector tenants to newly constructed premises in the downtown core. Winnipeg’s office sublet market has remained flat with a new decrease of 16,110 sf of class A sublet space and an increase of 8,574 sf of class B space since the second quarter of 2008.”  

And not to be outdone by office or industrial, Winnipeg’s retail market is performing exceptionally well with cash registers ringing up more sales. The mid-year Johnson Report showed the retail vacancy is at its lowest level in 20 years at only 3.4 per cent. Last year, it was at 3.6 per cent. 

While not to be insensitive to some of the job losses in Manitoba, as the unemployment rate has edged up over five per cent since the beginning of the year, you have to admit, as a weekly sign at a Cambrian Credit Union branch stated recently, “We are choosing not to participate in this recession.”