Downtown Winnipeg is facing challenges this year, as an estimated 40 businesses in the core have closed due to the pandemic and two major retail redevelopment projects downtown have failed to win support.
The real estate action is now heading, even rushing, out of the core.
In the third quarter 2021, Winnipeg showed positive absorption of office space, a rare occurrence for any Canadian city this year, which drove Winnipeg’s overall office vacancy rate down to 13.1 per cent, the lowest of any major city between Vancouver and Toronto.
But, as Colliers Canada noted in its National Market Snapshot, released in September, “the downtown remains in a holding pattern while office leasing in the suburban markets has increased.”
Winnipeg’s suburban office vacancy rate is now 11.4 per cent, compared to 13.6 per cent downtown.
Three of the five biggest office leasing and sales deals in Winnipeg during the second quarter were in the suburbs, Colliers notes, and the suburbs now account for five of the six largest office developments planned or underway in the Winnipeg region.
Downtown, the biggest office project is the ongoing 300,000-square-foot Wawanesa Tower that completes in 2024. In the suburban Refinery District, Hopewell Developments will have 300,000 square feet completed this year, as will the 60,000-square-feet of suburban office space at Tuxedo Business Park by Terracon.
On the retail side, failure to get traction on redevelopment of the shuttered 600,000-square-foot former Hudson’s Bay building on Portage Avenue and Starlight Investments decision in September to pull out of its $400 million proposal to remake the aging Portage Place mall downtown indicates that shoppers and developers are heading to the suburbs.
An example is the Shops of Kildonan Mile, by Shindico, that will bring more than 340,000 square feet of mixed-use dominated by retail into suburban East Winnipeg, which already has more than three million square feet of stores and services and is surrounded by new residential subdivisions. Meanwhile, leasing action is strong at Shindico’s Pembina Crossing, south Winnipeg, where tenants already include Staples Business Centre, Best Buy, Petland, Shapes, Toys R Us and a 56,000-square-foot medical centre.
“Winnipeg’s retail market is surprisingly vibrant, and our leasing team has never been busier, with showings greater than pre-pandemic levels,” said Sandy Shindleman, president of Shindico.
Shindleman wasn’t surprised when Starlight bailed on the Portage Place mall redevelopment.
“I can imagine it would be difficult to create the ideal living community that Starlight was proposing [downtown]. For instance, there is a preconceived idea that this area isn’t the safest, not to mention with the Hudson’s Bay Company building closing down as well,” he told Western investor.
The rental vacancy rate in Winnipeg is 3.8 per cent and the average rent is $1,107 per month, according to Canada Mortgage and Housing Corp. (CMHC), which makes it one of the most affordable rental markets in Canada.
The city, however, is now characterized by soaring home sales and a lack of listings, which convinced CMHC to label Winnipeg as an “overheated” housing market this September.
CMHC found “considerable” price acceleration for Winnipeg homes this year, with a 14 per cent increase in average prices, year-over-year, as of the third quarter, the second consecutive quarter with double-digit price increases.
Yet, with an average home price of $238,000, it would be difficult find a major Canadian city with lower housing costs than in stable, steady Winnipeg.