Winnipeg Free Press
November 6, 2007
By Murray McNeill
Vacancies could hit second-lowest level ever in '08
WINNIPEG'S apartment vacancy rate is expected to drop to its second-lowest level ever in 2008, even though new apartments are being built at a rate not seen in nearly two decades.
Canada Mortgage and Housing Corp. predicts Winnipeg's overall vacancy rate will fall to 1.2 per cent next year from this year's 1.4 per cent. The only year where the rate was lower was 2004, when it dipped to 1.1 per cent.
Jeff Powell, CMHC's senior market analyst for Manitoba, said Monday 700 new apartments are expected to be built in the city this year -- the most in a single year since at least 1990. And even though there were 1,568 built in the three years prior to that, it still hasn't been enough to keep up with the influx of new residents to the province.
Wilf Falk, the province's chief statistician, confirmed Manitoba's population is expected to grow by about 10,000 people this year when you take into account births, new immigrants, and net migration from other provinces.
"That's about the best (growth) in 20 to 25 years," Falk said in an interview. "And when you've got more people, you need more accommodations."
Adding to the problem is the ongoing conversion of apartments to condominiums -- an average of 200 a year over the last three years, Powell said.
The result is that local apartment seekers are facing zero to near-zero vacancy rates in many city buildings, and waits of up to three years in some highrise blocks, industry officials said.
Edison Rental Agency, for example, has no vacancies in any of the 23 highrise apartment blocks it owns and manages in the city. And it hasn't had a vacancy in eight years, according to general manager Robert Simpson.
"We have hundreds of people on our waiting lists," Simpson said. "We're finding that people who are successful at getting one of our suites have been waiting an average of three years."
Powell said that for all intents and purposes, a vacancy rate of 1.2 per cent is essentially a zero vacancy rate.
"Once you get down to around one per cent, it's awfully hard to get much lower because you'll always have some vacancies because of people moving out and people moving in," Powell said. "So I think we should consider anything in the one per cent neighbourhood to be basically full occupancy."
Powell also doesn't see the situation improving much over the next few years.
"We would expect to see vacancy rates remain below two per cent of the foreseeable future...," he said.
While the obvious solution would be for builders to build more apartments, the president of the Professional Property Managers Association of Manitoba said that's not likely to happen as long as rent controls remain in effect in Manitoba.
Ron Penner, who is also vice-president of operations for one of the city's largest rental property management firms -- Globe General Agencies -- said although new rental units are exempt from rent control guidelines for the first 15 years, the guidelines have kept rents for existing units artificially low in Winnipeg.
With construction costs going through the roof, Penner said it's difficult for developers to build new rental units, turn a profit and still keep rents at competitive levels. So many of them just don't bother building any new units here.
However, the owner and president of one of the most active builders in the Winnipeg market -- B.C.-based Broadstreet Properties Ltd. -- said rent controls haven't deterred his firm from building close to 700 new apartments in the last four years, with 305 more under construction this year on north Main Street.
"Our pace (for Winnipeg) is 300 to 400 new doors (rental units) per year," Kris Mailman said in an interview. "And this is the pace we're probably going to stay at for at least the next 10 years."
Mailman said one of the reasons Broadstreet can build new apartments and still keep its rental rates competitive -- an average of $850 for a two-bedroom apartment -- is because it has its own in-house construction crews.
He said there's been no shortage of takers for the new apartments Broadstreet is building, with every building being fully leased even before construction is complete.
Alarming numbers for apartment hunters
1.4 per cent -- the overall apartment vacancy rate in Winnipeg in 2007
1.2 per cent -- the projected overall vacancy rate for 2008
1.1 per cent -- the lowest overall vacancy rate on record, set in 2004.
1,568 -- the number of new rental units built in the city between the beginning of 2003 and the end of 2006.
700 -- the number of new rental units expected to be started this year in Winnipeg, including the 627 starts recorded during the first nine months of the year.
57,000 -- the number of rental units in Winnipeg in 1992
53,000 -- the number of rental units today.
200 -- the average number of apartments converted to condominiums in Winnipeg in each of the last three years.
400 to 500 -- the average number of conversions that occurred each year between 1993 and 1998.
11,500 -- the number of new immigrants expected to arrive in Manitoba in 2007.
5,549 -- the number who arrived during the first six months of the year.
6,000 to 8,000 -- Manitoba's anticipated net gain in population this year from the inter-provincial migration of people.
1,400 -- the net gain in 2006.
10,000 -- the anticipated increase in the province's population this year when taking into account births, new immigrants, temporary residents, and inter-provincial migration.
20 to 25 years -- the length of time since Manitoba last had population growth of that magnitude.
-- Source: Canada Mortgage and Housing Corp. and the Manitoba Bureau of Statistics