Cobblestone Homes has sold a portfolio of small-bay industrial/commercial buildings on Discovery Drive in Grande Pointe Industrial Acres, just southeast of Winnipeg, to a local family-owned business for $34.36 million.

“We've done multiple transactions with them in the past, and they heard that we were going to be bringing this and they asked to take a first crack at it,” Re/Max Performance Realty commercial real estate sales and leasing advisor Cliff Dyck told RENX in an interview that also included his partner Taylor Toni.

“We never had any market exposure on this at all and we just dealt directly with them. They're investors in agricultural equipment and they're very involved in the supply chain management business on the poultry side and with big grain farmers. 

“They have various commercial real estate assets, some of which we've helped them with over the last few years.”

The deal’s components

The current high demand for small bay industrial buildings presented an attractive opportunity for Cobblestone to sell.

Cobblestone, which has been constructing homes in the area for 20 years, also built the structures it just sold in Grande Pointe Industrial Acres. The oldest of the buildings dates back to 2018 while the newest is still under construction and should be ready for occupancy in a couple of months. 

The 22.56-acre portfolio includes 175,051 square feet of gross leasable area occupied by 47 long-term and approximately 330 self-storage tenants. The units in the multi-tenant buildings range in size from 2,000 to 10,000 square feet and have ceiling heights ranging from 16 to 18 feet.

The transaction also included three development lots totalling 6.77 acres.

“Where we've done some vacant lot sales in that industrial park, they went extremely fast,” Toni said. “We really positioned that as an opportunity for the purchaser to capitalize on that demand. 

“They could have it as future development land and build what they wanted, they could do build-to-suit for new owners coming in, or they could sell off the lots and make a quick buck on that.”

Grande Pointe Industrial Acres

The approximately 160-acre Grande Pointe Industrial Acres is surrounded by roads and residences and has no room to expand. More nearby residential development is happening and there are several thousand homes in the development pipeline for the surrounding area, which adds to its allure.

Grande Pointe Industrial Acres offers highway access, security and ample parking for tenants, as well as rents that are a bit lower than those in Winnipeg. About one-third of its lots remain available for development, according to Dyck.

The park also includes The Toy Caves and The Toy Caves 2, two successful self-storage facilities.

“This entire park caters to a broad cross-section of users that could take a small storage unit for personal items for a brief period, or run a very small business on a month-to-month basis,” Toni said. 

“And once you grow a little bit, you could move into a 1,500- or 1,800-square-foot unit, and then you upgrade to a 2,000- or 2,500-square-foot unit. This entire business park has its own ecosystem in terms of allowing tenants to upgrade within one small geographical area and have many different options.”

The Manitoba small bay industrial market

Dyck described the Manitoba small-bay industrial market as being “very robust,” with lots of multi-tenant construction happening and a flight to quality from older buildings to meet the high demand.

“Small bay industrial is now just an extrapolation of the storage community, because we're seeing a lot of small businesses expand out of smaller work spaces and they need these spaces,” Dyck said. 

“You're getting really great tenants and businesses that have been around and have a proven track record of success over the last four or five years expanding into these units. They’ve got a long runway now in a 2,000-square-foot unit where they can run their business in perpetuity.”

“Multi-purpose tenants can take advantage of the lower per square foot costs of an industrial building as opposed to a traditional retail setting,” Toni added. 

“We have a couple of tenants in the park that are gymnastics and dance studios that need a wide open space and don't want to pay the premium of being in a shopping centre and paying 30-plus dollars net per square foot. And several small tenants definitely need a small office space and an open warehouse.” 

Rents for these units starts at around $14 per square foot, with annual escalations at least benchmarked to the inflation rate, according to Dyck. While one- and two-year leases were previously common, terms are now stretching to three, five or even 10 years.

Winnipeg’s overall industrial market

Toni described Winnipeg’s overall industrial market by saying: “It's not over-built, it's under-demolished.”

A flight to quality is happening and there’s been a lot of activity in CentrePort Canada, which offers 20,000 acres and on-site access to rail, truck and air cargo operations.

“Some larger tenants have renewed and expanded with huge units and multiple dock doors,” Toni said. “The vacancy rate and availability rate is still quite low. 

“It's risen a little bit over the last couple of years but it’s still very robust. If there's quality product that comes online, it does not take very long for it to get scooped up.”

“The standard tranche of real estate that's getting picked up by industrial investors is usually a larger footprint of 15,000 or 20,000 square feet,” Dyck added. “They've got large single tenants in there with extremely good covenants.

“That inventory is limited and they're starting to look more towards the small bay product because it's easy to plug and play and there's a high demand for that right now.”