3Q20 industrial vacancy rate improves over last quarter

Although Saskatchewan’s GDP is projected to decrease by 5.5 per cent in 2020, our latest quarterly industrial market survey shows the industrial vacancy rate in Saskatoon has dropped.

A remarkable fact when you consider the financial hit that our economy has just endured due to the pandemic.

With over 24.6 million square feet (SF) of total industrial inventory, 1,409,551 SF of vacancy is considered healthy.

Although there was a marginal increase in 2Q20, at the current 5.72 per cent, we are slightly less than the first quarter number.

The Marquis area, the newest developed industrial subdivision in Saskatoon, has dropped almost 50 basis points since 1Q20 to 5.25 per cent vacancy.

The average asking rental rate has increased marginally to $11.90 net from $11.60 at the beginning of this year.

The industrial sector, which by far makes up the largest portion of Saskatoon’s commercial real estate inventory has performed better than office and retail.

It’s interesting to note however, that the retail vacancy rate has only increased 22 basis points since the beginning of the year to 5.44 per cent.

It will be another few months however before the full impact of COVID 19 upon retail merchants will be known.

An increase in the number of industrial assets sold is the result of historically low mortgage rates and a strong demand from owner occupants.

Investment interest in this sector will only continue to improve as warehousing and distribution grow to satisfy the ongoing growth in e-commerce.

The factors affecting the wide range in average sales price between $95 and $160 psf, can be land to building ratio, location, and the age/functional obsolescence of the building.

We have investors willing to purchase however there’s a lack of inventory of solid income producing property to present.

It’s interesting to note that, as of the most recent report available from the city, only one building permit has been issued in the Marquis Industrial area in 2020 demonstrating that business owners and investors are still hesitant to invest in new construction.

The consensus is that we will continue to see stability in the industrial commercial real estate market for the remainder of 2020 with additional growth emerging in 2021 and 2022.

Posted by Barry Stuart

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