- Stevenson Advisors

Summer, 2016
Winnipeg Market Report
Winnipeg’s retail market faces similar challenges to the rest of Canada
By Bryce Witherspoon, Appraisal Consultant & Ezra Ginsburg, Research and Data Analyst
Over the last five years, the overall retail vacancy rate in
Winnipeg has been steadily rising. Shopping malls, power
centres and retail strip centres have all experienced higher
vacancy rates in recent years as the growth of e-commerce and
increased competition from abroad have hurt the market.
Winnipeg is far from alone in this regard as this has been a
common theme in other cities across Canada, including Calgary
and Edmonton. National retailers such as Target, Mexx, Future
Shop, Danier Leather, Smart Set, Aeropostale and others have
closed their doors for good in recent years with more expected
to come.
The Canadian retail real estate market as a whole has struggled
to adapt to how the customer is changing which has meant retail
locations are no longer the destinations they once were. One way
that retailers are trying to adapt to this trend is by thoughtfully
selecting their in-store items, rather than simply stocking more
merchandise.
The decline in big box stores in particular has meant that retail
landlords across the country are dealing with downsizing
tenants while simultaneously looking for creative ways to
backfill vacant space.
Retailers will be forced to respond to consumers digital needs by
keeping their bricks-and-mortar locations relevant by investing
in e-commerce platforms. In some cases, retail landlords are
adding e-commerce order pickup stations and reserved parking
for those pickup customers.
The changing retail landscape is forcing landlords and
retailers to cater to what consumers can’t find online such as
personalized customer service and sensory experiences.
The landlords who will likely feel the least pain going forward
from store closings are those that are able to attract top-tier
retail tenants which means tenants who are able to pay higher
rents. This certainly hasn’t been a problem in Winnipeg as
average retail asking rents in Winnipeg have steadily increased
since 2012 even though the overall vacancy rate has nearly
doubled during that same time frame. (See graph below)
So how have retail landlords been able to continue to demand
higher rents despite rising vacancy rates?
A major reason is that new build retail centres in well located
retail nodes have out paced and out performed older inventory.
When the new power centre nodes were developed, retailers
chose to locate at these proven retail nodes and pay the higher
rents in exchange for critical mass and superior metrics
conducive to higher sales performance.
Landlords should still be concerned however if there continues
to be large blocks of vacant retail space on the market, as they
may have less leverage if prospective retailers have many
options to choose from leaving them with more bargaining
power.
It’s not all doom and gloom for retail in Winnipeg as there
continues to be solid growth in the Southwest quadrant of the
city highlighted by an exciting new retail development known as
“Seasons” which is currently under construction. The retail/
hotel/office/residential development, scheduled to be completed
in Summer 2017, is located near IKEA at the northwest corner
of Sterling Lyon Parkway and Kenaston Boulevard and will be
a hub for commercial giants. With over 400,000 square feet of
pure outlet shopping experience, Seasons is one of the most
highly anticipated developments in recent memory.
Winnipeg Retail Market 2010-2016
Overall Retail Vacancy Rate vs. Average Asking Rental Rates of Vacant Space
8.0%
$25.00
7.0%
$20.00
6.0%
$15.00
Vacancy Rate
5.0%
$10.00
4.0%
$5.00
3.0%
2.0%
2010
2011
2012
2013
2014
2015
2016
$0.00
Average Asking Rent
Historical data
courtesy of The
Johnson Report
(June 2016)
Summer, 2016
Increasing Trend
Decreasing Trend
Multi - Family
Stable
Winnipeg’s overall apartment vacancy rate is expected to
remain at 3.0% through much of 2016, and is projected to rise
to 3.2% in 2017 (Canada Mortgage and Housing Corporation).
Supply continues to outweigh demand as new units currently
under construction are introduced into the market.
During the first two quarters of 2016, apartment building sales
were slow with with only four apartment buildings sold for over
$1 million (through Manitoba Land Titles). The average sale
price per suite for all apartment buildings sold over $500,000
during the first two quarters of 2016 was $91,911.75.
Apartment
Vacancy Rate
3%
Demand for apartment buildings remains high in Winnipeg as
they remain stable investments with relatively high returns.
Landlords continue to invest significant amounts of capital in
renovating their existing buildings in order to stay competitive
with the new product on the market. The average two-bedroom
apartment rent increased from $1,045 in 2015 to $1,075 in
2016 and is expected to increased to $1,100 in 2017 (Canada
Mortgage and Housing Corporation).
Average Rent
(Two Bedroom)
$1,075
per month
Average Multi-Family
Cap Rate
5.0% - 5.5%
Office
The overall office vacancy rate in Winnipeg was 8.2% in Q2
2016 down from 8.9% in the first quarter of 2016
(Cushman & Wakefield Winnipeg). The overall vacancy rate
is expected to remain stable in 2016 while net asking rents are
expected to increase gradually.
The overall Downtown office vacancy rate was 8.1% at the end
of Q2 2016, down from 8.8% in Q2 2015. The outlook for the
CBD market remains positive as the $400 million dollar True
North Square development is expected to transform the area
once it is completed, attracting new tenants to the area looking
for high quality office space.
Winnipeg Overall Office
Vacancy Rate
8.2%
Construction of the 32,000 sf Osborne Place at the Station (257
Osborne Street) office building is expected to be completed in
late 2016. The six storey building will feature five floors of Class
A office space plus main floor retail space. Two office floors
have already been leased out with three floors still available
for lease. A second phase, 10-12 storey residential tower is also
being planned for the adjacent site at 265 Osborne Street.
The overall Suburban office vacancy rate was 8.3% at the end
of Q2 2016 which is down from 10.0% a year earlier in Q2 2015.
The Class A Suburban market in particular has been strong
with a overall vacancy rate of 6.9%.
Class A Suburban
Average Net Rent
$21.00 psf
Average Office
Cap Rate
6.0% - 7.0%
2
Summer, 2016
Retail
The overall retail vacancy rate in Winnipeg was 6% in Q2 2016,
unchanged from Q1 2016. The retail sector continues to be
vulnerable to external pressures, including the low Canadian
dollar and a rapidly changing retail landscape.
The retail vacancy rate is expected to remain stable through the
end of 2016 as retail power centres and shopping malls look to
backfill vacant space remaining from store closures over the last
year.
In late June, Canadian Tire officially opened its new 85,000
square foot store at the former Target location in Grant Park
Shopping Centre. GoodLife Fitness announced that it will be
opening up a 35,000 square foot gym beside the new Canadian
Overall Retail
Vacancy Rate
6%
Tire location in early 2017.
In early May, Winnipeg’s SK Developments Inc. announced
it will build a $35 million four-star Hilton Garden Inn at the
117-acre Seasons retail/office/hotel/residential development in
southwest Winnipeg. The new Hilton Garden Inn will feature a
full service restaurant and bar, meeting and banquet rooms, an
indoor pool and a business centre.
In June, Filipino fast food chain Jollibee announced it will open
its first two locations in Winnipeg at 1400 Ellice Avenue and at
Northgate Shopping Centre.
Average Net Rent
New Construction
$32.00 psf
Average Retail
Cap Rate
5.5% - 6.5%
Industrial
Winnipeg’s overall industrial vacancy rate was 3% in June 2016,
down slightly from 3.1% at the end of 2015. The overall industrial
vacancy rate is expected to decrease by the end of 2016 while net
asking rents are expected to increase gradually.
The industrial investment market in Winnipeg remains tight
as there has been very little new inventory added over the past
several years. Investors continue to search for high quality
product in what has been a landlord’s market for some time now.
Zero shovel ready land is hindering several major projects from
starting in the city and landlords are benefitting from this by
increasing renewal rates. Industrial tenants are having difficulty
Overall Industrial
Vacancy Rate
3%
finding alternative locations, especially larger tenants.
The largest industrial sale transaction in Q2 2016 was the
sale of 1205 Sherwin Road, a 54,370 square foot single tenant
industrial building which sold for $3,800,000 ($69.89 psf). The
fully redeveloped building is on a 2.77 acre site and includes 52
parking stalls.
In mid-July, Maple Leaf Foods announced plans for a $35 million
expansion to its bacon processing facility on Lagimodiere
Boulevard. The government supported project is expected to
create 34 full-time jobs and 34 part-time jobs.
Average Net Rent
Industrial
$7.00 PSF
Average Industrial
Cap Rate
6.8% - 7.2%
3
Summer, 2016
Select Q2 2016 Sale Transactions
1265-1303 Jefferson Avenue
Property Type: Multi-Tenant Retail Strip Mall
Building Area: 61,924 sf
Age: 1981
Sale Date: April, 2016
Sale Price: $9,950,000
Sale Price PSF: $160.68 psf
1205 Sherwin Road
Property Type: Single-Tenant Industrial
Building Area: 54,370 sf
Age: 1966
Sale Date: April, 2016
Sale Price: $3,800,000
Sale Price PSF: $69.89 psf
596 St. Anne’s Road
Property Type: Retail
Building Area: 4,684 sf
Age: 1976
Sale Date: May, 2016
Sale Price: $1,350,000
Sale Price PSF: $288.21
200- 1717 Waverley Street
Property Type: Auto Dealership
Building Area: 58,883 sf
Age: 2003
Sale Date: April, 2016
Sale Price: $9,950,000
Sale Price PSF: $161.34 psf
4
Summer, 2016
Our Team
Stevenson Advisors is a full service appraisal firm located in the
heart of Downtown Winnipeg on St. Mary Avenue and Garry
Street that specializes in valuation, advisory and corporate real
estate services. Advisors is a division of Stevenson Real Estate
Services, an integrated commercial real estate services firm
that was founded in 1901.
We work closely with Cushman & Wakefield Winnipeg
(brokerage), Stevenson Management (property management)
and MMI Asset Management, drawing from a wide collection of
current and historic commercial real estate data. Advisors uses
this competitive advantage to be a market leader in valuation
and advisory services in Winnipeg.
Brett Ferguson
Trevor Smith
Aaron DeGroot
Kassy Phillips-Hnatyshyn
Sean O’Neil
Bryce Witherspoon
Meghann Marshall
Ezra Ginsburg
Managing Partner
P: 204-934-6242
E: [email protected]
Vice President
P: 204-934-6435
E: [email protected]
Appraisal Consultant
P: 204-934-8905
E: [email protected]
Appraisal Consultant
P: 204-934-6247
E: [email protected]
Director- Property Tax Consulting
P: 204-934-6221
E: [email protected]
Senior Appraiser
P: 204-934-6230
E: [email protected]
Appraisal Consultant
P: 204-934-6238
E: [email protected]
Research and Data Analyst
P: 204-934-6200
E: [email protected]
5