[Andy6]

Originally Posted by Winnipegger

Again, not an expert, but for real estate development don't developers look at capitalization rates (net operating income to asset value ratio)? Based on the most recent publicly available information I could find, cap rates on most types of properties in Winnipeg are in-line with most other Canadian cities. See this Cushman and Wakefield report.

For example, in the linked report, the cap rate on Class A buildings in Winnipeg is 5.5% to 6.25% (that is, annual net operating income on Class A in Winnipeg is around 5 to 6% of the market value of the building itself). In Vancouver, it's lower 4.25% to 5.25% and Toronto is 4 to 4.75%.

I'm sure this isn't the only factor developers consider when looking to develop - obviously there has to be a demand for tenants and renters - but I think maybe it dispels the notion that "profits are lower in Winnipeg and that's why nobody develops!".

If we want to see revitalization in key areas in Winnipeg (i.e. downtown), the "economic development"-type agencies should focus on attracting big tenants to Winnipeg, ones that will demand space. I think we've seen that there are developers looking to develop, they just have difficulty finding new tenants. If you attract jobs to Winnipeg that would not have otherwise come, you'll attract workers which will in turn demand places to live, some of which might be close to their workplace (especially as traffic gets worse with the strong growth Winnipeg has seen and is not used to over the past 20 years).

Wouldn’t the low market value of some of Winnipeg’s aging Class A buildings explain the higher cap rate? I’m not sure if that figure is relevant to the profitability of building an entirely new building.