No cause for panic — or celebration: Downtown Winnipeg developers driven by profits, not altruism
Proposed sale of Portage Place is no bellwether for downtown Winnipeg, but it could ease the housing crunch
In a slow-growth city like Winnipeg, there's a tendency to cheer the appearance of every new downtown construction crane.
For nearly 30 years, pretty much nothing over six storeys went up in the heart of the city. Downtown development was so scarce during the 1990s and 2000s, the arrival of cranes at what's now called Bell MTS Place led former premier Gary Doer to tell the same dad joke over and over, about the return of what he called an endangered bird species.
There were plenty of factors that kept investment away from downtown during what's now regarded as the nadir for the centre of the city.
Winnipeg suffered from sluggish population growth before targeted immigration programs brought the city its fair share of newcomers. The retail sector that used to serve as downtown's lifeblood fled for big-box power centres closer to what used to be regarded as suburbs.
Thanks to several quirks of history, the city's downtown was built too large to benefit from a critical mass of redevelopment in any one area.
And a series of megaprojects — the Civic Centre campus, the Centennial Centre complex, Winnipeg Square, Portage Place and even the successful Forks — largely ignored the key ingredient for inner-city revitalization: residential housing, which ensures people live downtown and spend money there every day of the year.
Thanks to a little bit of luck, a lot of government intervention and a handful of risk-tolerant developers, the cranes started returning about a decade ago, albeit modestly.
Residential-housing grants stimulated the construction of condos in the east Exchange. Manitoba Hydro gambled on a new Portage Avenue headquarters. Private developers sunk money into a pair of residential towers on Assiniboine Avenue.
True North's real-estate arm spearheaded a new residential, office and hotel complex north of Portage Avenue and followed that up with a more ambitious south Portage project that now calls for a total of five new towers.
Combined with entrepreneurial efforts at the storefront level, downtown is more lively and more populous today than it was at turn of the millennium.
Better, but not good enough
But outside of a few pockets in Broadway-Assiniboine and the west Exchange, it still possesses too many vacant surface parking lots, too few open storefronts and too few people overall to make people on foot feel safe at all hours of the day — or at least as safe as they could expect to be in the heart of a mid-sized city.
This is why it's safe to take downtown Winnipeg's boosters and haters with an equal grain of salt. As a status update, "doing better but not good enough" is neither a cause for concern or celebration.
It's also why some skepticism is required when you consider both the jubilance and alarm that followed the announcement Portage Place is about to be sold.
Toronto-based Starlight Investments intends to buy the Portage Avenue mall for nearly $70 million and build a pair of residential towers above two pads, designed precisely for that purpose when the mall was completed in 1987.
Civic boosters have already seized on this plan as proof downtown has become more attractive to investors. Some left-of-centre analysts have raised concerns this would amount to gentrification and the displacement of downtown's existing residents.
A quick look at the underlying real estate market conditions suggests both of those opinions are off the mark.
Portage Place's potential
The main reason the sale of Portage Place is proceeding right now, where it did not in the past, is that the The Forks North Portage Partnership was previously unwilling to part with the parkade below the mall, out of fear The Forks would be deprived of the revenue it needed to get by. For decades, The Forks only survived because of the Portage Place parkade revenue.
But the non-profit organization has been generating more of its own cash in recent years, partly by replacing cheap long-term leases signed when The Forks Market was desperate for tenants with more lucrative rental agreements.
Now, The Forks is in a better position to wean itself off the parkade revenue. This allows the mall to be sold to a buyer who can then count on the parkade revenue to offset the financial liability associated with purchasing a 32-year-old mall that's saddled with an abandoned Imax theatre, a trio of empty conventional movie theatres and other vacant spaces.
Portage Place also appears to have deferred maintenance issues and most definitely suffers from a perception of being unsafe.
But the mall has a lot of things going for it, too, despite its reputation. While Portage Place failed at its intended task of revitalizing downtown in the late 1980s, it has become a vital community space for inner-city residents, many of them newcomers who live in the populous Central Park neighbourhood.
The two pads on either end of the mall allow a new owner to build a pair of residential towers at a much lower cost than needed to build from the ground up. And Winnipeg still has a demand for residential apartments, especially new stock, and will continue to experience this demand as long as newcomers continue to arrive in what the rest of Canada views as a very stable market.
There are few bargains on this scale in fast-growing cities such Vancouver and Toronto. It is reasonable to expect Starlight to build apartments suitable to Winnipeggers of relatively modest means — the company has already indicated it intends to provide some student housing.
Bargain shopping for investors
This is why the Winnipeg boosters must be taken with a grain of salt. Outside investors are swooping in to engage in some bargain shopping, not to place a bet on a steamy market.
Likewise, fears about gentrification also seem misplaced. The addition of any new rental apartment units in Winnipeg will reduce the pressure on the existing housing market, where middle-class renters are displacing lower-income tenants right now.
The new towers should also lure more retailers back to the mall itself, after residential tenants move in. Similar forces drove the construction of the new tower under construction right now on the south end of Winnipeg Square, at the corner of Graham Avenue and Main Street.
When the City of Winnipeg owned the parkade below Winnipeg Square, the old owner of the mall had no incentive to build a tower on the south pad.
Now, Artis Real Estate Investment Trust owns the mall, the parkade and the new tower rising above it all. It had a pad in place to reduce construction costs on the tower — and should be able to hike parkade fees to meet the increased demand that will inevitably result from more people living at this address.
Unlike residential apartments, parking facilities are not subject to rent controls in this province. This is one reason parking lots and parkades make for attractive investments.
If all of this sounds a little clinical, it should. Real estate investment tends to be governed by the expectation of profit, as opposed to some loftier, community-minded goal.
So go ahead and cheer on that construction crane. It doesn't mean anyone believes in Winnipeg, per se.
It means a developer believes there's a dollar to be made — and if that results in more students living downtown, so be it.