Third quarter market highlights for Saskatoon
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?
The sector does appear to have stabilized despite the influx of sublease product that entered the market in 2015. Vacancy for competitive downtown office space rose only slightly to 9.55 per cent while suburban went down to 11 per cent.
The numbers become skewed when the sublease product vacancy is added in. Describing this available vacancy, the numbers adjust to 12.6 for competitive downtown office and 12.4 for suburban inventory.
Despite higher than usual vacancy, asking lease rates have not moved. There is limited inventory in Class “A” inventory which impacts positively on renewals in those properties.
The economic slowdown will continue to affect the office market. In order to solve long term vacancies, landlords will have to continue to explore tenant incentives to remain competitive.
Much like office, the industrial market saw only a slight increase in vacancy over the second quarter. The overall vacancy rate for industrial is estimated to be 8.3 per cent, according to ICR. The adjusted vacancy, which discounts vacant anomalies in the market, sits at 7.64 per cent.
Construction has slowed to a crawl with only a handful of construction permits being issued by the City of Saskatoon since this spring, and primarily for owner users. This bodes well for an industrial market suffering from oversupply of new product.
Although asking rates have plateaued for the time being, industrial landlords are finding ways to entice tenants similar to their office counterparts. Everyone is sharpening their pencil for the real deals that present themselves.
Although Saskatoon’s growth has slowed, GDP is still expected to grow by 1.8 per cent this year. Certainly not as exciting as the past six years but we’ll take it. And because we’re growing in this province, Saskatoon still holds considerable interest to retailers.
Retail businesses with no Saskatoon presence continue to look at our market while those that are here seek expansion options. Because of this continued pressure on available inventory, lease rates may keep pushing upward.
Vacancy decreased slightly to 3.05 per cent. This is a result of a positive absorption of nearly 205,730 SF this year to date.
Posted by Kelly Macsymic