Investors, both domestic and from Alberta and B.C., are driving up the price of Winnipeg apartment buildings in what has become a bidding war.
"We are seeing multiple bids on good property, with prices bid up $10,000, $20,000, even $30,000 over the asking price," said Harry Logan, a veteran commercial realtor with Re/Max in Manitoba's capital.
Typical capitalization rates are from 5 per cent to 6 per cent, he added.
Many of the potential landlords hail from Calgary and Vancouver, Logan said, and are looking for smaller walk-up apartment blocks of 25 units or less. Larger concrete tower apartments are being snapped up by real estate investment trusts.
Logan said the result is that the typical small apartment building in the city is selling for a record $80,000 to $100,000 a suite in better neighbourhoods.
"Three years ago, those prices would have been $28,000 to $30,000 a door," he said.
The official rental vacancy rate in Winnipeg, according to Canada Mortgage and Housing Corp., is 1.2 per cent, but Logan, a landlord himself, believes it is actually lower.
"I have people calling me looking for rentals and, when a unit comes up, we will see a lineup of renters," he said.
Winnipeg is not exactly a landlord's dream market, however. Provincial rent controls restrict increases to 1 per cent this year, according to Logan, and it is also hard to find anything for sale.
Some vendors, he noted, are pushing the price envelope. For example, Logan has one four-suite apartment building listed for $569,000 - or more than $140,000 a door. "That is a fantasy price," he conceded. "It is the vendor's price."
But, then, maybe the vendor is onto something.
from Western Investor December 2012
