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  #21  
Old Posted Oct 4, 2019, 3:33 PM
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It's costing the something like $80m for this project instead of $200m for a brand new building.
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  #22  
Old Posted Oct 4, 2019, 3:35 PM
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Foundations here in Winnipeg are crazy expensive.
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  #23  
Old Posted Oct 4, 2019, 3:40 PM
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Originally Posted by Biff View Post
Foundations here in Winnipeg are crazy expensive.
Is that mostly due to the geology of the land downtown, or is there some other economic issue (red tape, lack of skilled labour or local know-how) that drives up the cost?

I must admit that I'm by no means an expert on construction or engineering, but my (only) research on the topic seems to indicate that costs of construction aren't too different in Winnipeg versus other major Canadian cities but again, I know next to nothing about this type of thing. (From Altus' 2018 Construction Cost Guide).
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  #24  
Old Posted Oct 4, 2019, 3:51 PM
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I think for a highrise building, the geology here in Winnipeg isn't that bad comparative to other locations. They will be founded on the bedrock no matter what.

(Bedrock is about 40 to 50 feet below grade).

For a small to midrise building, this may be where the numbers can get a bit skewed out of our favour as regardless of the height of the building, you will need a deep foundation.

I don't know where 185 Smith would fit in, but I suspect it has foundation supported directly on the bedrock.

Isn't the low land value in Winnipeg more of the deterrent to $$ developments? I.e. you can't charge high enough rent to justify a very high cost per square foot development..?
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  #25  
Old Posted Oct 4, 2019, 4:17 PM
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Isn't the low land value in Winnipeg more of the deterrent to $$ developments? I.e. you can't charge high enough rent to justify a very high cost per square foot development..?
This is an interesting question. I wonder if land values can get warped and remain high even as actual demand is low? I've always thought that might be the case downtown, historically. Distortions caused by things like government support/incentives over the years, and many amateur land owners with unrealistic expectations.

Downtown, at least in the last 5-10 years, has a lot less red tape overall (unless you want to do something with a heritage building). The Zoning By-law allows you to do almost anything in most places, there are many places with no height restrictions, you don't need any parking, you don't need to go to a public hearing for a variance...

Yet it seems that smaller-scale multi-family residential development in urban areas is going more to St. Boniface, Osborne Village, etc. than to downtown.
It seems developers would rather deal with the uncertainty of a $15,000 rezoning application and a potential NIMBY/community committee circus than they would build midrise downtown without all that cost and uncertainty. Why is that?

Is this real estate development economics? Or is it consumer demand? (I know I'd rather buy a condo/rent and live on River Avenue than I would on Garry Street -- is that's what's driving this?)
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  #26  
Old Posted Oct 4, 2019, 5:22 PM
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Originally Posted by drew View Post
Isn't the low land value in Winnipeg more of the deterrent to $$ developments? I.e. you can't charge high enough rent to justify a very high cost per square foot development..?
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).
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  #27  
Old Posted Oct 15, 2019, 6:08 PM
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  #28  
Old Posted Oct 15, 2019, 7:07 PM
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Quote:
Originally Posted by Winnipegger View Post
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.
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  #29  
Old Posted Oct 15, 2019, 7:27 PM
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The issue in my mind is, say between downtown Toronto and downtown Winnipeg - the office building costs the same or similar to build (it may actually be cheaper to build in TO) but the rent you can charge in Winnipeg is WAY less. That would be for both residential and office.
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  #30  
Old Posted Oct 16, 2019, 7:42 PM
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What blows my mind (as in I'm impressed, not baffled), is that they attempted the 80M reno and not the 30M reno. Obviously tons of work was needed but they didn't need to go this far, disassembling it brick by brick from the top down...

Quote:
Originally Posted by Winnipegger View Post
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).
Cap rates are key, but it is a factor of profit relative to value. an 8% cap rate in downtown Moncton isn't necessarily nearly as profitable as a 5% in Winnipeg or 3.5% in Toronto because the building is only worth $10M compared to $25M in Winnipeg and $100M in Toronto.

Basically, hotter markets also have higher tenant security... if you're guaranteed to keep your building full due to market strength, your cap rat goes down. If your building stands to increase in value over time because the market is HOT HOT HOT, your cap rate will start low and get even lower because value is increasing at a greater rate than rent. But any investor's holding in said property has increased in value but maintained pace in income.

It also highlights potential ability to increase rents and revenue when the tenant market catches up to the property values.

In speculative or weaker (or simply less sexy) markets, cap rates are higher (and may even rise) because they don't have that torrential tenant interest or market security, or upwards potential.

But when investors spot something on sale for a 6% cap that the market says should be 5%, they will buy that in record time. It's being undervalued.

Your last paragraph is key... national, not just piecemeal tenant interest has to increase downtown. This would increase profits but push down cap rates.

I'm generalizing but you get the drift.

Quote:
Originally Posted by Andy6 View Post
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.
That's a short way to say it, but I don't do that apparently.
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  #31  
Old Posted Oct 21, 2019, 5:53 PM
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  #32  
Old Posted Oct 23, 2019, 6:25 PM
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as long as they don't give this the timbercreek treatment it should be really nice. can't wait for some renders of it.
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  #33  
Old Posted Oct 23, 2019, 6:46 PM
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^^Check post number 1.
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  #34  
Old Posted Oct 28, 2019, 12:16 AM
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  #35  
Old Posted Nov 4, 2019, 8:58 AM
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