Saskatoon City Council has approved the sale of the former municipal police building on 4th Ave S and now the work will begin for us.
Originally built with a uniquely specific purpose, this property is going to get a new lease on life.
Saskatoon City Council has approved the sale of the former municipal police building on 4th Ave S and now the work will begin for us.
Originally built with a uniquely specific purpose, this property is going to get a new lease on life.
He has observed other cultures which have successfully embraced the partnership model more frequently than he sees in Canada.
Are Canadians simply more independent thinkers? Or does it speak to a lack of confidence in this form of ownership?
In commercial real estate leasing the landlord can fully recover the hard costs associated with operating the building from the tenants. These expenses are most commonly referred to as occupancy or operating costs.
Most leases will allow for tenants to ask for a breakdown of costs on a per annum basis. But is there a benefit in asking for the breakdown during lease negotiation?
We have just completed a series of meetings which focussed on the review of our corporate vision and mission statements. One of the elements discussed which is absolutely central to our company vision is trust.
It is irrelevant how good we say, or believe we are, without a high level of trust embedded within our culture as well as the trust of our clients we simply cannot achieve our corporate mission(s).
Saskatoon residents spoke with their votes: they want change at City Hall. The city is abuzz with news we will now hand the mayoral seat to a new individual.
But what does this mean for our business community?
Let’s also assume you provided that purchaser a very comfortable six week conditional period to complete their due diligence and arrange financing so they don’t have to come back to you with a request for an extension.
I just experienced this exact situation as a listing broker working with a buyer’s agent from another brokerage.
Like many women, I craved the shopping. The brands, the designers, the looks you just can’t get in little old Saskatoon. I wanted to invest in some items for work attire.
There has been much written about the benefits of the “new” open office concept. On the other hand it’s not difficult to find articles which state the open office concept has been proven to not be effective.
The truth is it depends upon the dynamics of a company and personal preferences of the individual. It is important to tell you that I have my own bias on this issue. I will nonetheless do my best to present the pros and cons objectively.
The International Council of Shopping Centers (ICSC) held their annual Canadian Convention in Toronto from September 19-21. The event allows brokers, owners, developers, and retailers to meet up and form relationships at one central location.
With over 150 booths of various disciplines, attendees were able to mingle and cook deals in person. ICR sent a large contingency of brokers as usual and they came back with encouraging news.
It must be an organization that will allow me to provide a high level of service to my clients and provide a culture for me to thrive as a Broker. In keeping with that philosophy, we have recently announced a strategic partnership with one of the world’s largest commercial real estate brokers.
Who is JLL and why the change?
Leases are created by landlords to protect their investments. They identify the rights and responsibilities for both parties during the term of the relationship.
Because in most cases the lease comes from the Landlord, he or she is going to be more aware of the clauses and ultimate implications. No one is trying to pull the wool over a tenant’s eyes, but there are items that are important to understand prior to entering into an agreement.
We have seen annual property tax increases average 5.43 per cent over the current council’s four-year term. During this same period the consumer price index indicates inflation has risen by an annual average of 1.9 per cent.
Anyone seeking civic office who is riding on the representation that they’ll keep increases under the rate of inflation without revealing a road map simply lacks credibility.
There is lots to talk about surrounding this issue.
How brave are you? Are you willing to take risks?
Buying an old building to restore or spiff up can be a bold move but the reward can be so satisfying.
Research this topic and you’ll find many opinions and trending theories and on the most efficient and pleasing office environments. Contrary to what some of these theories may try and tell us, I don’t subscribe to the belief that one solution fits all.
There are some useful tips available that is worthwhile considering to help make informed business decisions.
Accountability is defined as the fact or condition of being accountable; therefore, responsible. I think it’s a word that is thrown around without much consideration for the consequence of the potential expectation created.
We hear much discussion about the lack of downtown parking options. Fueling that discussion in both Saskatoon and Regina are the varied opinions on the pros and cons of bike lanes and their impact when parking stalls are eliminated to create those bike corridors.
Many times mid-week, on an evening in the dead of winter, I’ve found it necessary to drive around the block more than once to find a parking spot in downtown Saskatoon. It doesn’t seem to matter if it’s -30C, prairie people are hardy souls who keep on going no matter what the weather throws at them! Here’s a synopsis of the stats from our recently released Parking Survey.
A few weeks ago, I was searching for a photo to accompany an earlier blog post. It didn’t surprise me, but it was a little disheartening to find that images of female real estate agents were hard to come by.
In an earlier, January 2015 blog post I discussed the Employee Purchase of ICR. Nineteen months have passed since that announcement; let’s try and take an objective look at the pros and cons of this method of selling a business.
I believe in both our personal and work lives, where change is involved, it is beneficial to stop and take note of what worked, and what kind of challenges we encountered along the way.
We field a number of questions regarding the type of sale or lease product that moves the quickest in our market. It’s hard to generalize because every commercial real estate property is different however there are certainly those that stand out from the rest.
We are always searching for new product to bring to our clients, so pay attention to our wish list:
We provided you a quick overview of our Saskatoon commercial real estate industrial, retail and office markets last week. Let’s now take a closer look at the industrial sector.
With an abundance of industrial and office inventory, the story in Saskatoon’s commercial real estate market has not necessarily improved since the beginning of 2016 but it could be stated that things may be stabilizing.
There have been many advancements over the past 20 years in commercial real estate technology that have changed the way I work. We are able to provide our clients with relevant data which allows them to make better informed business decisions whether they are buying, selling or leasing. We are going to see over the next 5 years, a giant leap forward in the way we do business with the potential for all parties to benefit if we stay open and adapt to these new opportunities.
I had a conversation with a small contractor this week whose view of the commercial real estate market was a little off to me. He indicated that landlords should be bowing to tenants and taking whatever offers they can, given our current vacancy.
I won’t disagree that we have a fair amount of inventory within our Saskatoon industrial and office markets. While deals and incentives are being offered I don’t think it’s a dire situation.
Saskatoon is the envy of many other cities. As a result of our city administration’s proper long term planning and successful execution of those plans, we have a vibrant and healthy core area.
There are many times I’ve had to circle the block during the week, in the middle of the evening, in the dead of winter looking for a parking spot. It’s somewhat understandable that there is a desire to entrench that success. In an earlier post, Saskatoon approves Growth Plan to Half a Million, we explored the city’s goal for the next 30 years.
Here we’ll explore the administration’s proposed office bylaw that would restrict suburban office development to under 21,000 square feet.
Location and demand stand out as the major leasing drivers of commercial real estate however they are not the only factors.
Here’s a few tips I share with landlords to help their properties shine above the competition.
There is an old saying: “You can’t really understand another person’s experience until you’ve walked in their shoes.” This certainly hit home for me when I unexpectedly found myself in a situation, taking an action as a real estate Broker that clearly placed me in a conflict of interest.
There is no definitive start to when a generation begins, but millennials are loosely described as the next demographic following Generation X. They are defined as people born from the early 1980s up to around the year 2000.
Their needs and wants should be important to employers, because as a generality this group of workers will not necessarily just follow the money; they want a workplace that offers a lot more.
Not only the office set up but location and amenities will play huge roles in companies’ ability to attract millennial employees. We see examples of this already impacting our commercial real estate market.
Many people I speak with are surprised to learn that we have such a high demand for investment product in this province. I am quite often asked the question (possibly due to the high vacancy rate in the industrial and office sectors) whether we believe prices have “bottomed out.”
I will first need to qualify my definition of “quality,” however in the last number of years there has been absolutely no downward movement in the price of these assets. As a matter of fact there has been some minor cap rate compression in the past year.
After much consultation with the public and their own administration, the City of Saskatoon approved their official Growth Plan to Half a Million last week during a regularly scheduled Council meeting.
In a municipality that has traditionally accommodated modest growth, the City is identifying how they are going to service nearly double our population in the next 30 to 40 years. Change is imminent, they explain in this new report.
A common question asked in conversation is: “how’s the market?” It’s difficult to provide a one sentence response to that question!
We’ve already reported the rather dull current status of the Saskatoon office and industrial leasing markets. We do have a strong demand for good quality Saskatchewan commercial real estate investment property however our supply is limited.
Where the story gets better, where we have a good balance between supply and demand and where we are still seeing new construction on spec is… retail!
The Saskatoon office market is sitting with an abundance of inventory on the market at the end of the first quarter for 2016. While this isn’t good news for landlords, it creates a real opportunity for tenants to negotiate attractive terms on new leases.
There are three important due diligence items that should be on your to-do list when purchasing commercial real estate in any asset class. I have just resolved that when applicable, my Business Manager and I will do everything reasonably possible to ensure Buyers that we represent will be provided these documents prior to removal of their purchase agreement conditions. Let me explain why!
While building inventory in the industrial sector may be high, demand for industrial zoned lots continues. According to the ICR first quarter report for 2016, the industrial market is stabilizing but vacant inventory has risen slightly since the final months of 2015.
During my commercial real estate career I have had the opportunity to represent many different motel buyers and sellers throughout the province. I find these assignments rewarding in a number of different ways. The hospitality industry simply seems to attract good people! People who have a passion for providing comfortable accommodation for the weary traveller.
Let’s look at the reasons this can be an attractive asset class for you to consider.
It’s important that both parties in the lease agreement understand the obligations and implications of executing a sublease.
Many commercial real estate leases will include an option to renew clause. Like all clauses in a lease, this one is bound by some pretty specific rules that have important consequences to both the landlord and tenant.
As self-governing, quasi-judicial bodies, we in organized real estate were charged with the responsibility to determine how the public will be served by our industry. This was not a responsibility that came easy.
It was only after local and provincial real estate boards and councils could convince authorities regulating us that we were in a better position than anyone else to educate and police ourselves. The Globe and Mail’s recent revelations regarding flipping or contract assigning against the B.C. real estate industry and the Real Estate Council of B.C.’s subsequent response to those allegations demonstrate that we have not taken that responsibility seriously.
I’m not much of a gambler, but I’m game to make a few wagers on the immediate future of commercial real estate in Saskatoon. I still thinking putting money in our market is a safe bet but there are some important items to consider.
There is no simple yes or no to that question. It can be common to see strength in one sector and not the other. Let’s explore some of the factors that come to play between these two distinct markets.
Like so many material things in the world, the value of commercial real estate can often be in the eye of the beholder. There are two sides to this story; the hard truth is, the value to an owner user can outweigh what the market may be prepared to pay.
There are a number of items we look at when valuing a piece of commercial real estate. Here are just a few to consider.
In a couple of my earlier blog posts: “Five key benefits of commercial real estate investing” and “Mainstream media’s obsession with the equities market” I discussed why commercial real estate is a viable investment vehicle. It is surprising to some that in spite of the current tepid economy, our demand exceeds available product and is causing compression of some cap rates. There are a few reasons for this…let me explain.
When developers and investors are considering commercial real estate purchases, their broker is often called upon to render an opinion on site feasibility. As Barry and I would both tell you, we are not engineers or architects but we do have a pretty good idea of what is most commonly requested in our market.
Sharing some of our market insight can be important to the development of a site when it comes to tenants’ current expectations and achieving an expedient lease process on the property.
Traditionally the general economic activity affecting Saskatchewan’s commercial real estate industry is impacted by three main outputs: agriculture, energy and potash. The Conference Board of Canada’s forecast of 2% GDP growth in 2016 is based on a resumption of typical agricultural production and somewhat lessening declines in the energy sector.
I’m not sure that I agree with the assumption that we will see recovery in the energy sector next year. Certainly however a lower loonie contributes to a stronger export market with the U.S., by far our largest customer. We believe 2016 will see some growth; two percent may be a bit optimistic.
The Royal Bank of Canada forecasts 3.2% retail growth for this province. An achievable number if we continue to grow our population.
The City of Saskatoon is currently enjoying a vibrant downtown. Evening action rivals the daytime foot traffic moving in and around businesses. Much to the chagrin of drivers, finding a parking spot can be just as difficult at 7pm as it is at noon.
But what do developers and policy makers need to do to take us to the next level? How do we encourage people to start moving downtown?
That’s a 14% increase over the 2014 room count of 4,076. The new properties are Hampton Inn & Suites and Mainstay Suites in the Airport area, Best Western Plus on 8th St, Home Inn & Suites on Preston and a Hampton Inn & Suites in Stonebridge.
With all the economic doom and gloom, it’s time someone looked at what’s going right in Saskatoon. National tenants continue to look at our market and there are brave developers out there with the belief that if they build it, they will come.
Last week @KellyMacsymic wrote an article: How do changes to Saskatchewan’s Enviro Act affect commercial sales? In that article Kelly provided a synopsis of recent amendments to the Environmental Management and Protection Act. What I am writing about here is not new and has not effectively changed with the new Act.
In commercial real estate we wear many hats. It’s a neat career in that we get to learn every day about industries we might not otherwise be exposed to.
A significant factor in a commercial real estate sale can be determining environmental impact on a site through a qualified engineering firm.
There have been recent changes to the Environmental Management and Protection Act, 2010 (EMPA) which I think are worth pointing out. By no means am I an environmental engineer! When in doubt, contact the experts for a full interpretation. These are just my observations.
It is a simple fact the commercial real estate rental space will take longer on average to lease than a residential suite. After a commercial rental unit (cru) has been on the market for a period of time a discussion should take place between the Broker and Vendor exploring potential reasons.
There are many factors that can contribute to a lack of success in locating a suitable Tenant. Has the space been properly marketed, does it require updating, refreshing (You only get one chance to make a first impression) or demolition of obsolescent improvements, would rental incentives such as free rent or a Tenant improvement allowance be appropriate, etc. One of the questions that needs to be a part of that discussion: is a price adjustment required? There isn’t necessarily a simple answer to that question however we’ll explore how that discussion might look.
I came across an article entitled “Real estate value tied to human behavior” which takes an interesting view on the future values of commercial real estate properties, office in particular, when it comes to the psychology of the upcoming millennial workforce.
In commercial real estate the asset value is often attributed to lease rates. But it’s a unique concept to think employee wants and needs could be a contributing factor in achieving value to a space as well.
It does speak to the rewards that can materialize as a result of perseverance and hope. I felt compelled to break from the norm and share this story which has been inspired by watching my wife over the past few years.
ICR Commercial Real Estate has released their third quarter musings regarding the office, industrial and retail markets in Saskatoon. Oversupply and slow absorption lowered expectations over the previous quarter, but where does that leave us?
With technological advancements facilitating consumer’s ability to shop, the emergence of e-commerce continues to gain momentum. Many experts once believed that the future of retail would lie primarily within the e-commerce marketplace as online retailers were expected to overtake traditional brick-and-mortar chains. As a younger generation of shoppers becomes the main consumer within our marketplace, will e-commerce continue to dominate?
There are many terms and clauses in commercial real estate leases. Sifting through all the legalese can be quite daunting. Various responsibilities and rights exist for the benefit of both tenant and landlord.
One term that rarely makes it into the lease, but may be asked at the offer stage, is the termination clause. Landlords typically shy away from it. Let me tell you why.
A client recently voiced disappointment that I had not introduced a particular party to his property. This party was made aware of the property by the previous occupant and approached the owner directly. We had represented to this owner that if I or one of my colleagues were working with someone whose needs aligned with the space we would present the property. I obviously had not properly communicated however what we would not do without an executed listing agreement in place.
Saskatoon core neighbourhood residents are up in arms regarding the recent announcement of a City Park grocery store closure. The media picked up the story quickly soliciting the shocked reactions of people living nearby the Loblaw-owned Shop Easy Foods on 7th Ave.
The impact to people who utilized and depended on the retailer is significant.
I just returned from our CORFAC International conference in Minneapolis, MN. One of the session topics was “The Art of Negotiating.” In an earlier blog post, The Psychology of the Negotiation, I focused on just four strategies. Since I find this part of my business so fascinating I wanted to share a few more techniques that can be very effective.
The University of Saskatchewan is the largest urban land owner in Saskatoon outside of the City of Saskatoon with almost 1,000 acres of land ready for development. And they are ready to start maximizing their investment.
The U of S set forth a plan in 2009 to start considering the re-use of their expansive land inventory to capitalize on its potential going forward. This plan was recently addressed in the news as it starts to take shape. The U of S has purchased land in Clavet to begin moving some of the agriculture programs out of the City limits.
So what happens next?
The commercial real estate industry has traditionally trained new sales and leasing agents through mentorship programs. That has been the case at ICR Commercial Real Estate. On average it will take four years for a new agent to develop a comprehensive set of skills.
Much like Monopoly, it is especially satisfying when you hit the holy grail: “free parking” in downtown Saskatoon and Regina. It is not easy to find in most large urban centres. Recent statistics released by ICR Commercial Real Estate prove the demand is not slowing down.
Though rates remained relatively stable in the Saskatoon downtown core, rising only 3 per cent over 2014, Regina was not so lucky. Parking rates in Regina’s downtown rose 7.4 per cent over last year.
When I started in the real estate industry, a single exterior photo was the standard for use on listing information packages. As a matter of fact, back then the use of black and white pictures was not uncommon. Within a few years many brokers started using wide angle lens to produce multiple interior and exterior photos.
As the internet evolved, we saw change in almost every area of our commercial real estate industry. The ability to seamlessly post a high quality video link to websites, email blasts and promote them through social media has resulted in much higher market penetration for our listings. Drone technology has now thrust us into the next generation of high definition video.
Barry and I have both discussed the topic of tenant improvements within earlier blog posts. But what are the big ticket items that can make or break a deal? Let’s explore the things to look for when scouting out a place for your business.
Over the years I have had many people make the statement “I could never be a salesperson.” When I question them it becomes clear to me they are coming from a place which provides for a very narrow definition of the word.
For as much as I’ve learned about zoning across municipalities, there is always more to the picture than meets the eye. I’d like to share my latest discovery with you.
I will speak solely of the City of Saskatoon going forward though there are likely similarities to this process in other communities. The important thing to know is that zoning is specific to the municipality you’re researching and the town or city hall is your very best resource for allowable uses on commercial property.
There has been a continuation of the vacancy trend that began in the majority of office markets in Canada in 2014. That average national statistic which exceeded 10% at the time has continued to increase in 2015.
Over my seven years with ICR I’ve had a few deals that stick out in my mind. Much like a snowflake, every deal is unique but there are a few noteworthy examples of what I’d classify as the good, the bad and the downright ugly.
For reasons that can be very different, there are some significant benefits to high ceilings in commercial real estate buildings. For the purpose of this article I am going to focus specifically on office and industrial commercial real estate.
As discussed in previous market posts, Saskatoon is not immune to national trends in office and industrial commercial real estate. Nor is it when it comes to our retail sector.
Most commercial real estate agents would agree that our tenants and buyers are less likely to show warm, fuzzy feelings about properties like a homebuyer might. Often functionality and cost win out as the primary decisions behind choosing a commercial space.
But presentation does matter to these clients and there is typically only one opportunity to wow them so why not make it count.
Saskatoon has a reputation, literally within North America, of raising up creative leaders with a strong work ethic. We have a healthy arts community. There have been a number of recent examples of innovative new and infill residential developments however the number of innovative commercial examples are few. Why do you think we are lacking in this area?
We are often tasked with researching space for tenants using a monthly budget. But when we use a price per square foot as an industry to compare properties against each other there are a few steps required.
Thinking like a tenant, ICR’s Research Analyst Alvaro Campos put the question to our office this week: how much does $5,000 a month get you in Saskatoon’s office, retail and industrial?
Vacancy continues to rise
Now sitting at 8.2 per cent, our industrial vacancy rate has increase by one percent since the beginning of 2015. It is important to note that 1.53 per cent of that number is made up between six properties which total just over 278,000 sq ft.
This is currently the highest industrial vacancy rate in Western Canada, just ahead of Calgary and Vancouver. Although we see a reasonable level of interest and listing activity, prospective tenants are slow to make decisions to contract.
In short, it means that you are being represented by a commercial real estate brokerage made up of a team that trusts each other. Some believe a team is a group of people who simply work together. Unless trust is present within that group, you do not have a team. Let me explain what is meant by “no door” policy.
There are a number of media sources reporting double digit vacancy rates in the Saskatoon office sector but it’s important to identify the qualifying factors that go into this data. Here is a brief analysis of how our Market Analyst Alvaro Campos is dissecting the information for ICR.
This is not a topic we tend to talk a lot about so I thought it was important to reveal to you here how we really think. We eat, breath and sleep commercial real estate. In order to be successful in this business I need to believe sincerely in the benefits and rewards of investing in commercial real estate. This is one area that we do not fully practice what we preach.
Office condos aren’t for everyone but they may just suit your business better than you think. There are a number of benefits to purchasing a condo:
In an earlier blog post: “Mainstream media’s obsession with the equities market” I made a general comparison between investing in stocks, mutual funds, ETF’s, GIC’s, bonds and commercial real estate. Let’s now take a look at specific advantages of placing some of your hard earned capital into income producing property. The examples I am using will be applicable only to investors who wish to place their money long term.
Starting the search for commercial real estate can be overwhelming given the amount of information there is to digest. Here are a few tips to get started in the right direction if you’re leasing office space specifically.
I like to think that I’m pretty transparent with clients. Developing a relationship of trust is paramount to establishing a long term business partnership. It is therefore funny that some things just seem to go unsaid.
All the protesting and upset aside, the iconic Farnam Block on Saskatoon’s Broadway Avenue is no longer. Jordon Cooper from the Star Phoenix nailed it this week in his commentary regarding the reality of the building demolition.
What I’m most intrigued about is what the next use will be for the site now that the structure is gone. The owners of the property have repeatedly told media that they don’t have an immediate use for the property but that doesn’t mean we can’t speculate here.
Many are still unaware of the on demand stream of up to date information available through twitter. Skepticsm still exists towards the effectiveness of this form of new media. I understand why. It has taken me some time to appreciate just how it can be used as a tool to save time in this world of information overload.
Advances in technology have forced many industries to change their selling tactics and commercial real estate is no different. A throwback Thursday video tweet about the introduction of cell phones in Saskatoon made me pause and contemplate how far we’ve come. But where are we going?
It’s not possible to accurately predict where the commercial real estate market is going this year. In order to understand the factors that generate changes in the market, these causes must be first be identified and evaluated.
A general market gap analysis, evaluating the difference between demand and supply of space involves four major market categories: investment, office, industrial and retail. Even though a region’s economic prosperity tends to move in one direction, it is not uncommon to see these different sectors trending in opposite directions.
As agents we often get asked why certain national and international retailers have not set up shop in Saskatchewan’s commercial real estate market. We don’t have all the answers but there are some legitimate challenges for mega retailers considering our market.
I am going to wander from my typical focus on the topic of commercial real estate. Instead I’ll share a short story about an inspiring individual my wife and I met returning from a recent trip abroad.
It can be so easy for us from time to time to complain about minor details of our life that don’t seem to be meeting our expectations. We may grumble about having to put in a few extra hours at work to complete a task, or what we deem to be a client’s unrealistic expectation of us.
Like most industries, there is specific commercial real estate lingo that we use every day that may not be immediately evident to clients. Here’s a few I use nearly every day that I’ve had clients look for clarification on.
We are often engaged to lease or sell property by clients who wish to keep the information confidential from the general public. There can be many reasons why discretion is required. The client gets to choose what level of confidentiality is necessary.
I think it’s fair to say that uncertainty in oil and other resources revenue streams do play a role in the work of decision makers in commercial real estate; their motivation to buy, sell and lease in the Saskatoon market. Given recent events, I’d like to explore the current mood in all sectors of our commercial real estate market.
This is a great day for ICR, its employees and agents. It’s also a great day for Saskatchewan and the owners and tenants in the real estate industry. We are pleased to announce a new partnership. ICR developed over its 22 year history a unique operating model for a Commercial Real estate company. The company operates in a world of multi-nationals and competes at the top level in the Real Estate Arena.
We said hello to many new restaurants and retailers in 2014 but we also had to say goodbye to a few in Saskatoon. A recent article about Toronto landmark real estate that has been closed or demolished, inspired me to think of the properties or businesses that gave way to growth and change taking place in our Saskatoon market in 2014.
It seems to me that question has become more complex as the years go by. One would logically assume that the periods during holiday seasons would be quiet times of year. (Personal note: the only fact I can state with absolute confidence on this topic is that the volume of incoming business will always increase each day I get closer to vacation… without fail!)
There is one area that springs to mind that many people have underrated over the years. See if you can guess where I’m talking about.
Previous to that, between the years 1978 and 2006 I sold new and then resale residential real estate. My last four years during that period I was a non-competing Branch Manager.
When the company I had been working for was sold I made a decision to make a move into the world of commercial real estate.
I knew the business would be different but was not prepared for just how different it was. I brokered a few transactions but mostly floundered for about six months, believing I would find my way by approaching the business using my old residential tools.
It was about the seventh month when I finally came out of denial, realized I had to throw everything I knew out the window, and start asking a lot more questions. So why are the two sectors of the business so different? Here are three of many reasons:
Laws governing commercial real estate tenancies vary from province to province. In Saskatchewan, once a tenant has been determined to be in default (by definition of their lease agreement) there are several remedies available to the landlord.
Some of the information presented here is from an article prepared by the local firm of Robertson Stromberg. This should not be taken as legal advice, rather a discussion on some of the consequences that can be imposed on delinquent tenancies. Each tenancy must be dealt with on a case by case basis.
In an earlier blog post: “Have Saskatchewan commercial real estate values peaked?” I discussed the future of commercial real estate values in this province. Here we look more specifically at what I will refer to as the functionally obsolescent asset class.
For the past eight years, Saskatoon’s retail vacancy rate has stayed under three per cent leaving tenancies with little choice or few options to locate here. Recent construction surges have started to create more opportunities in the commercial real estate market for retailers looking to get their foothold into Saskatoon.
Scary commercial real estate stories to you could be finding out a deal has crashed on the day it’s supposed to close or going back to the days of 10% commercial mortgage rates!
Here are real life events that happened to me which I thought would be appropriate to share as we approach this spooky time of year. Two stories that sent chills down my spine!
Saskatoon vacancy rates have held steadily throughout 2014, with only slight increases due to new construction and tenancies vacating outdated properties. We break our commercial real estate vacancies into three main areas: Industrial, Retail and Office. Here’s a snapshot on each as of October 2014.
We have clients requesting commercial real estate advice on a daily basis. It is also necessary to make personal investment decisions to achieve our own long term financial goals. Here are three examples that come to mind where I was found to be “off the mark!”
Saskatchewan’s largest urban centres are Regina and Saskatoon but did you know there are a dozen secondary markets attracting retailers and developers?
The Secondary Market Retail Outlook for 2014 was just recently released by ICR Commercial Real Estate. In house Research Analyst Alvaro Campos has been hard at work collecting information on these communities, which we’d like to summarize:
Let’s assume you are 75 per cent through your initial term of lease and the space you occupy is working well and business is good. What are some important considerations to keep in mind when approaching the lease renewal?
When researching a commercial real estate lease or purchase, determining the zoning permitted by the municipality should be an important factor in the decision making process. Implications for a tenant or buyer vary slightly but they can both have significant impact down the road.
We find dual agency still very common in Saskatchewan commercial real estate transactions. I am not going to address the pros and cons of dual agency in detail within this article. That is a topic unto itself.
Let me just say that due to the confidentiality requested by many of our sellers, I believe it will continue to be a practical business solution within our industry for many years to come. Complications arise when I, as a listing agent have an offer on my own listing and at the same time one of my colleagues and/or a cooperating broker has an offer.
No one building is alike but there are generally three areas you should focus on when purchasing commercial real estate. Unlike buying a house, you will likely have to consult experts in these individual areas in order to properly assess the potential investment.
I will preface my comments here by saying that it is important the Seller is serious about selling their property before considering this advice. In an earlier post the question was addressed: Should a Seller pay for a Phase I Environmental. It was recommended that the Vendor contract an Environmental Engineer and begin the process before the property is placed on the market. That’s a good lead in to this article.
An increase in rates has not impacted the demand for downtown parking in Saskatoon. What does the future hold for our core area?
In my earlier article: “The Psychology of the Negotiation.” we looked at four different strategies to achieve a targeted price. But how do you discern what that targeted price is?
It’s not hard to obtain opinions from experts within the commercial real estate industry. But are those opinions relevant?
There was a time when commercial real estate developers were happy to tear down the old and reconstruct new. But a change in thinking geared towards preserving the integrity of old buildings has property owners facing new challenges.
You lift it up, look closely and if it starts to grow too much hair, drop it and walk away! A buyer typically has only a portion of the relevant information before making an offer. Discoveries often surface during due diligence which can quickly take the fun out of the deal.
It may seem common sense that a lease is binding when both parties have executed the agreed upon document. But what if the tenant or landlord change their mind at the last minute and handwrite in a change?
In days gone by, when a new national retail merchant came searching for a spot for their first Saskatoon store we found they usually wanted to locate within the 8th Street, Broadway or Downtown retail corridors. Obviously there were many other available options however the majority of interest centered on those areas.
It does not seem that long ago that my typical response to an inquiry from an investor was: “I have a list of potential purchasers as long as my arm with very little product to present.” Saskatchewan was becoming known for the bounty of its rich resource sector. Lease rates had increased thereby lifting property values to provide incentive for sellers. Many were reluctant to sell because of the potential for further appreciation however we did have buyers and some did decide to sell.
Restaurants open and close every day around the world, and it’s no different in our Saskatoon commercial real estate market. There is always speculation and rumour as to why a venue has been shuttered but it can often boil down to the hard truths associated with commercial real estate.
The parking allocation provided for in a development requires proper planning. A very useable site can be rendered dysfunctional if not properly considered. It is also important to understand what the applicable zoning bylaw states for the intended use.
When we refer to “balanced commercial urban growth”, the discussion differs depending upon the applicable Commercial real estate sector and city. For the purpose of this article I am going to focus on the Saskatoon industrial market. As a brokerage, we track existing and new developments in each commercial area and thereafter advise clients when and what to build.
There has never been a better time to dispose of your Saskatchewan commercial real estate asset that was designed in a past decade. There are many reasons why a building could be referred to in this manner. As an example, if I am talking about retail or office, functional obsolescence could refer to lack of parking; industrial might be due to low ceiling height.
There is no right or wrong answer when it comes to the purchase vs. lease debate for commercial real estate property seekers. The decision lies in your philosophy or mandate when it comes to capital expenditures, business equity, and often, the bottom line in your bank account.
From my perspective, often the most interesting part of an assignment is the negotiation. Believe me, we see all styles of approach in our Saskatchewan commercial real estate market.
For the purpose of this article we’ll focus on only four different strategies, although there are many more. I don’t agree with some of them, however we do need the tools to stick handle each one.
How a commercial real estate building may be used can vary significantly. I am referring to properties in our Saskatchewan market that may be used as office, retail or warehouse. There are unique examples where all three types can cohabit.
Our job as an agent is to paint the picture for our buyers and tenants. In cases where a property has been on the market for some time or developed an unfair reputation, that vision can be difficult to create. But I believe every building has a purpose and a user. We are assigned the task of matching the two parties. Our goal is to develop ways to promote the property in the best light possible.
I have heard Landlords state: “I can renew this Tenant at the same rental rate that you’re able to negotiate.” Alternatively, Tenants often believe they can do a good job representing themselves in their renewal. Whether you are a Landlord or a Tenant, I can make a very solid case why you should contract an experienced commercial real estate broker to represent you. I am not promoting dual agency but rather single agency; a broker representing either tenant or landlord.
In a world of technology where change can virtually occur overnight, it’s hard to determine what tools you need as a professional to keep up with market trends. It’s hard to comprehend doing business with a fax machine though I know a few guys out there desperately hanging onto it!
Social media platforms used on a personal level can be different from those used on a professional level. Without a proper presence, you can seem insignificant compared to those doing it very well.
As the Millennials and Gen X’ers become the decision makers in our world, social media presence will become even more important.
It can be difficult for tenants to estimate what size of space of they need. You are going to pay per square foot for what you lease, so you want to make sure you’re utilizing every inch of every corner.
Often times I will get the call for a specific size range only to take a client on location and find out is much larger or smaller than they actually need. It’s not a great use of their time or mine so I like to use a couple tools to help estimate what that need might be ahead of time, we are much more likely to hit close to their target.
Think of individuals you know who have what you would consider financial depth. I’m speaking of individuals who achieved that financial depth on their own, rather than through inheritance or a lottery win.
Of those individuals where you have a reasonable insight into their history, how many amassed that wealth through investing in stocks, mutual funds, ETF’s, GIC’s, bonds etc? How many people do you know through diligent saving and contributing to these various investment vehicles, either on their own or through an investment counsellor have been excited with the results?
The truth is I don’t know many who stand up and speak with enthusiasm about their investment results in this area.
You’ve found the space and have come to terms with the Landlord. You’re nearly at the finishing gate to getting your business venture off the ground, and BAM! The landlord has presented you with a 30-40 page lease that you must review to finalize the deal. Should you read it or just sign off and get the moving party started?
We find Tenants have difficulty understanding why a sophisticated Landlord will not “drop their pants” negotiating lease rates with new and existing tenants, even when a property may appear to be in distress. Let me explain why this counter intuitive statement is, in most cases, true.
We have clients ask this question quite frequently. In many cases there is a benefit if you are seeking financing in excess of $1 Million. However, it can very much depend upon the borrower and subject property. Let me explain why!
As much as new tenants can use an education on the world of leasing, so too can existing tenants. For newbies, certainly there is a learning curve with the terminology and nuances of negotiation. But even for tenants in the Saskatoon real estate market that may have been leasing for years, there is some benefit in going back to Leasing 101 class.
In order for us to treat your interest as serious, you will need to know: the size (square footage) you require, the budget you have to spend and the term you’d be able to enter into. We can give you an idea very quickly if these expectations are realistic. Agents should ask questions regarding your business plan. We want to make sure that you will be a good fit for the long haul.
Would a Tenant actually enter into a deal with this specific goal? I have seen it happen. The Agents and Landlord involved were blind to the Tenant’s motive until long after possession was granted. Information later surfaced that revealed the whole process was a very intentionally played game.
All lease and sale negotiations can be characterized as a dance of sorts. An offer is written, a counter is submitted. Both parties angle to achieve the best results for themselves. There is give, there is take. It’s not over till the music stops, proverbially speaking.
One of the more underestimated dances, however, is the renewal interaction. From our experience, both Landlords and Tenants can benefit from some advice in this category.
Capitalization rates and mortgage interest rates are considered among the most underlying driving force of commercial real estate sale activity. However, our chatter when discussing Saskatchewan Commercial Real Estate values can tend to focus primarily on Capitalization Rates. As those cap rates continue to compress, it is important to consider the bigger picture.
Obviously we have to be careful when generalizing about cap rates and commercial mortgage lending rates because they can vary significantly depending upon the asset class, condition of the property, price range, depth of the borrower, etc.
Here is an example of a Marketing Strategy we might use for a new commercial development. Each project is unique and therefore our strategy can change significantly depending on the form and timing of the assignment contract.
I predicted capitalization rate reductions of ¼% to ¾ % in my 2013 forecast. When we review the limited amount of investment sale data over the past year, we find that prediction to be accurate. With the average cap rates on apartment sales dropping ¼%, retail & office ½% and industrial approximately ¾%.
For many first time buyers and tenants the Offer process can seem a bit confusing. At what point am I committed past the point of no return? What are my obligations to this agreement? When is my money due and can I still get it back? Let me break down the process for you.
I recommend this process start even before a property is placed on the market. The benefit is a Buyer will require less time to satisfy its’ due diligence conditions. The odds are better of obtaining an environmental report that works favorably towards the successful completion of the sale.
The process of confirming a commercial real estate site is free of contaminants can be one of the most onerous tasks within a Purchaser’s due diligence condition list. If the Seller is engaging the Engineer for this report he has the opportunity to choose a firm that has a solid reputation for providing accurate reports. Where a Phase I report recommends further action is required, it can result in several thousand dollars in cost as well as up to three months in additional time.
Vacancy rates are relatively stable and absorption continues to be positive in Saskatoon’s leasing markets. ICR has recently completed a yearend wrap which includes a forward look into 2014 for our office, retail and industrial sectors.
There has been a distinct move to suburban office demand with 126,100 sq.ft absorbed in 2013. Vacancy in downtown Class A increased dramatically as several larger tenants moved out of the core, leaving an overall downtown vacancy rate of 4.83% up from 3.53% at the end of 2012.
It was a great year for both sale and lease transactions as Stuart Commercial achieved a best ever year to date. We came in a tight second place overall for the province in 2013 sales for ICR agents. Our number of transactions totaled a new high of deals in total.
Although we saw an increase in the the total volume of deals, the average amount per transaction was down. This was indicative of the industry this year. While the Saskatchewan economy continues to hum along, there were not as many large lease and sale transactions.
With momentum and continued enthusiasm, we are looking forward to what 2014 will hold for the Saskatchewan market.
Posted by Barry Stuart