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Winnipeg Commercial Real Estate Outlook 2023

February 21, 2023 3 Minute Read

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2023 Real Estate Outlook Series

Winnipeg was a Canadian standout in the final quarter of 2022, one of the few downtown office markets to see its vacancy drop, albeit just slightly, to 15.7%. It was the second consecutive quarter of falling vacancy.

Winnipeg’s industrial market took delivery of 284,000 sq. ft. of new supply in Q4 alone, helping push the industrial availability rate up slightly to 1.9%. And more supply is on the way. (…up slightly to 1.9% with more supply on the way.

Winnipeg Managing Director Paul Kornelsen assesses what lies ahead for his city’s commercial real estate market in 2023.

Office

It’s a nice headline – that Winnipeg saw office vacancy drop – and it speaks to one of the city’s key economic traits: stability. Winnipeg is generally resilient in terms of fluctuations, good and bad, and we’re holding steady at the moment. Q4 was the second quarter in a row of falling vacancy in our downtown office market, which is a good thing, especially in light of downtown office trends in other major cities around the country.

However, 2023 is going to be a pivotal point for our office market. I would be more optimistic if not for this large influx of space. Wawanesa Mutual Insurance Co. will be moving to True North Square in its own built-to-suit headquarters, comprising 300,000 sq. ft. It is consolidating several class B locations in the downtown area, all of which will come back to the market. That’s going to add approximately 300 basis points of vacancy to the market in one swift move.

This is not without precedent, however. We saw the same thing in 2018, when the first phase of True North Square was completed and resulted in a significant impact on the market, with several years of “musical chairs” as both landlords and tenants readjusted to the new market opportunities.

Winnipeg doesn’t see a steady influx of new tenants in the market so everyone shuffles around. At that time, the market shift took until the start of the Covid-19 pandemic to “settle,” just to be hit with yet another massive disruption. Now we have 5% higher vacancy than we did in 2018, and there is less certainty around people being in the office.

A bit of good news is that there’s a federal government policy that requires employees to be in the office two to three days a week as of March 31. Aside from the odd Jets game, which is usually 40 to 50 nights a year, the reality is that Winnipeg’s downtown vibrancy hinges on the commuting workforce coming into work on a daily basis. So this was a welcome announcement for our downtown.

A big topic of conversation in 2023 is the serviced land finally coming to market at CentrePort Canada

Industrial

There continues to be a lot of new industrial space in the pipeline, about 1.0 million sq. ft. A big topic of conversation in 2023 is the serviced land finally coming to market at CentrePort Canada. Whether it’s developers or owner-users, a large portion of that land will be transacting within this calendar year. That’s a big deal for our industrial market and will hopefully alleviate the limited supply of space that we currently face.

The availability rate did rise from 1.6% to 1.9% this past quarter, but I wouldn’t read too much into that as a trend. In reality, the true vacancy rate is lower than that. A lot of that excess supply is essentially what we call, “functionally obsolete.” It should be torn down or redeveloped.  

When we’re looking at options in the industrial market just simply evaluating clear height, or what’s available with ceilings over 18’ let’s say, that availability rate is currently under 0.5%.

Retail

Retail continues to be notably strong here. Downtown streetfront or low-grade interior mall locations are facing challenges. But those trying to find space in the key nodes in power centres are finding it tough as those opportunities don’t currently exist. That space is leased up as soon as it’s available.
Similar to other markets, there has been no new retail development over the past few years, so we are currently experiencing a lag. We could really use some new supply. There are a couple of projects coming up, though, including The Refinery District, which has 23 acres of planned retail. This is a project to watch.

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