“I think we’re eating in linens right now,” I said casually to my mom recently.
We were taking in the tastes offered by Midtown Common, the new Midtown Plaza food court located in the Sears vacancy.
Any semblance of the historic retailer, however, has all but disappeared.
The shopping space has been replaced with exposed concrete and a modern look.
Basically everything Sears wasn’t.
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As reported in our first quarter Saskatoon office survey, we currently have over 400,000 SF or 16.7 per cent vacancy in our Saskatoon downtown competitive office market.
Those numbers do include the vacancy within River Landing’s 185,000 SF East Tower which is nearing completion.
The numbers do not however reflect 40 per cent of the space yet to be leased within the 300,000 SF Nutrien Tower which has just recently started construction.
Once that additional vacancy is accounted for, we will be reporting core area vacancy in excess of 20 per cent.
Saskatoon’s office market is in transition.
The demand for new Class “A” inventory is coming from users already present.
There are not enough new tenants entering the market and the “flight to quality” is projected to continue.
Let’s talk solution.
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It’s easy to see the bad news stories about brick and mortar stores shuttering from the overwhelming move of consumers to e-commerce.
But I don’t think retail will ever die completely.
Rather, there is a disruption to the way we’ve known it to be and commercial real estate landlords will have to navigate their way through this new landscape.
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While both the industrial and office sectors have displayed somewhat volatile vacancy rates over the past five years, the retail sector has consistently performed well.
Aside from Regina straying slightly over 4 per cent in 2017, both cities have otherwise achieved a number below 4 per cent since 2013.
Let’s take a closer look at each city.
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There are three significant numbers I’m looking at to determine the sentiment of the industrial real estate market.
One of those numbers is positive, and two illustrate we have yet a way to go before we’ve fully recovered.
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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.
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There were substantial changes to the commercial real estate landscape in Saskatoon as we close out 2018.
I think it’s is a story of renewal and growth, would you agree?
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Our quarterly market reports have just been released and we’re pleased to report that the overall industrial vacancy rate is heading in the right direction!
The increase in absorption over the last quarter has resulted in just over a 50-basis point decrease in vacancy from 7.5 per cent to 6.9 per cent.
We have, however, seen the average asking net rental rate decrease from $10.61 PSF to $10.20 PSF.
Earlier this week, I forwarded a client some historical data on Saskatoon commercial real estate capitalization rates. He came back to me with the comment, “Would be interesting how it (cap rate information) trends with interest rates.”
Sophisticated investors absorb data to make informed investment decisions. I asked our Market Analyst to gather the information. Here’s my observations because of that research.
One of my biggest challenges is being unable to find the right fit for tenants. In a commercial landscape that remains under-serviced for retail it’s not exactly my fault.
We did see some new construction of retail in 2018, so it’s probably time to revaluate where the inventory levels sit versus vacancy, midway to the end of the third quarter of 2018.
Looking at the numbers by area, who do you ask: landlords or tenants?
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