Was I on the Mark in my 2018 Industrial Vacancy Forecast?

I promised you that I’d hold myself accountable in this Jan 2018 post and report back to you. 

So, how did I do? At that time, I predicted a decline in the overall Saskatoon Industrial vacancy rate from 7.7 per cent to 6.2 per cent.

That was after a significant 2 per cent decline in the previous 12-month period.

Where did we end up?

Our 4Q18 results have just been released. Overall Saskatoon vacancy decreased from 7.7 per cent to 6.8 per cent.

Yes, I was off the mark. I am however going to take the “low road” and name a scapegoat.

I stated that my prediction was based on RBC’s forecast for Saskatchewan: “that we will see an acceleration of growth in GDP over the next two years.”

We did not see that acceleration of growth but rather ended up with a GDP of 1.7, down from 2.2 the previous year.

Significant Factors

This continued trend of positive absorption can be attributed to not only a provincial economy that is stabilizing, but also a restrained attitude toward spec building.

It is this cautious mindset, if maintained, that will provide for further decline in the industrial vacancy rate.

One Significant Area to Note

Marquis Industrial is the newest and largest industrial area in Saskatoon.

It’s very encouraging to note that the year to date absorption in this area is 167,641 SF. The affect of this absorption resulted in an 2.9 per cent decline in vacancy to 6.0 per cent.

Landlords continue to offer tenant incentives and/or reduce rents. This has resulted in a further decrease of 3 per cent in asking net lease rates which now average $10.30/SF

Regina’s Industrial Market

Although Regina’s industrial portion of commercial real estate market is smaller than Saskatoon’s, it is healthier.  

Illustrating a balanced supply/demand, the 4Q18 vacancy rate is 4.42 per cent and the average asking net lease is $11.15/SF.

What’s my take on 2019?

If we put ten different economists in the room, we would undoubtedly hear ten different market outlooks.

When I look at my crystal ball, peering through the existing and future market conditions that are likely to play a part in our industrial sector, I see 6 per cent.

That would require continued absorption resulting in a reduction of 0.8 per cent in our existing overall vacancy rate.

Hope to see you back to this column in one year, at which time you get to once again, judge my crystal ball accuracy!

Posted by Barry Stuart


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