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| Population 720,000 | ||||
| Employment 395,000 | ||||
| Unemployment Rate 4.2% | ||||
| Retail Sales $9.5 billion | ||||
| Consumer Price Index 2.8% | ||||
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| ↑ | Office | ↓ | ||
| ↑ | Industrial | ←→ | ||
| ↑ | Retail | ↓ | ||
| Overall Cap Rates ↑ |
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| Source: DTZ Barnicke | ||||
| 2007 | 2008e | 2009f | 2010f | |
|---|---|---|---|---|
| Real GDP* | 3.7% | 2.7% | 2.5% | 2.9% |
| Population* | 0.7% | 1.1% | 1.1% | 1.0% |
| Employment* | 2.2% | 1.2% | 1.4% | 1.2% |
| Unemployment Rate | 4.7% | 4.2% | 4.4% | 4.6% |
| Personal Income per Capita | $35,123 | $36,638 | $38,022 | $39,221 |
| Total Housing Starts | 3,400 | 3,000 | 2,900 | 3,300 |
| Retail Sales* | 5.8% | 7.3% | 5.1% | 4.8% |
| CPI* | 2.1% | 2.8% | 2.7% | 1.9% |
| Source: Conference Board Canada | *Percentage Change from Previous Year | |||
Market overview
Winnipeg’s economy expanded by 2.7% in 2008, placing it third overall in the nation, behind Regina and Saskatoon. The growing demand for Manitoba’s low-cost hydroelectric energy, and the province’s capacity to produce energy using biomass, wind and geothermal is spurring the economy. Complementing this is the city’s high tech manufacturing, agriculture and mining industries. A diversified and growing economy has renewed interest in working in Manitoba, driving population growth and contributing to the 14.5% increase in average residential detached house prices to $219,382. Another landmark development which will strengthen Winnipeg’s presence is the Canadian Museum for Human Rights, a $265 million project set to commence when funding is in place. Already, over $90 million in donations from the private sector has been collected, plus $160 million from different government bodies.
Projections show Winnipeg’s GDP growth will slow to 2.5% in 2009, but there is an opportunity for Winnipeg to exceed this expectation if the Canadian dollar remains in the $0.85 US dollar range and the US continues its pursuit for energy independence from the Middle East and turns to Manitoba to do so in the northern states.
Winnipeg has a highly diverse economy, a bonus in terms of economic stability. In recent studies by Moody’s Investor Service and the Conference Board of Canada, Winnipeg has been viewed to have a very diverse economic structure.
Destination Winnnipeg
Office
Winnipeg’s overall office market vacancy rate fell 80 basis points to 4.9% in 2008, with vacancy in the downtown Class A market falling 30 basis points to 5.7%. As a result, Winnipeg remained a landlord market with net rental rates increasing $0.47 to $12.63 downtown, and increasing between $0.15 and $0.30 throughout the rest of the Winnipeg market.
A large contributor to the positive absorption of office space in 2008 was the expansion of consulting and engineering firms due to large construction projects such as the $350 million airport expansion, the expansion of the Nelson River hydroelectric project and other government projects.
2008 saw the completion of Winnipeg’s largest new office building, the $278 million, LEED Gold, Manitoba Hydro headquarters. This 690,000 square foot office development will be home to Manitoba Hydro’s 2,150 employees consolidated from throughout Manitoba.
Little growth is expected in the office market for 2009. No major new construction projects or completions are expected to take place and existing tenants that service the city and the city’s businesses have already expanded to meet Winnipeg’s growth. While the market will remain challenging for tenants seeking larger opportunities, tenants seeking small subleases will have an opportunity at attractive rates.
Industrial
Winnipeg’s industrial market experienced a banner year in 2008 with 255,000 square feet of newly completed space and the absorption of approximately 700,000 square feet. Consequently, the vacancy rate fell 120 basis points to 2.3% compared to 2007.
Although crude oil prices have pulled back significantly from the $147 high experienced in July 2008, the threat of rising oil prices and the growing importance/adoption of just-in-time inventory continues to position Winnipeg as a key distribution hub. In 2009, expect growth in occupied space to continue in Winnipeg’s industrial market albeit at a slower pace. Vacancy rates should remain stable but may rise marginally to around 3.0%. New spec construction for 2009 will be very limited (less than 200,000 square feet) therefore there should be good absorption in these developments as there will be very little competition.
| Office Inventory | 17.0 million sq ft |
| Office Vacancy | 4.9% |
| CBD Class A Vacancy | 6.1% |
| Industrial Inventory | 76.0 million sq ft |
| Industrial Vacancy | 2.3% |
| Source: DTZ Barnicke and Conference Board Canada | |
Investment
2008 was an active year with more buyers than available product. Multi tenant office warehouse space was the most sought after product, while retail shopping centres attracted the least attention. Demand in 2009 will remain strong for the same asset classes but, as the availability of credit in Canada declines, many challenges are expected to trend investment activity downwards.
Cap rates for 2008 ranged between 8% and 8.5% and are expected to rise to 9.0% in 2009.
Retail
Retail sales surged 7.3% in 2008, thanks to a growing population with more disposable income. Annual retail sales growth is forecast to return to more sustainable levels in 2009 and onward for an average annual percentage change of 4.8% per year from 2009 to 2012.
The retail market has been particularly strong in the Southwest area of Winnipeg. Chartered banks, Manitoba Liquor Control Commission (MLCC), Shoppers Drug Mart and Starbucks increased their presence during 2008. While downtown Winnipeg experienced higher vacancy rates compared to other areas in the retail sector, overall the retail market is expected to remain stable in 2009.