I promised you that I’d hold myself accountable in my Jan 2019 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 6.8 per cent to 6 per cent.
That’s after a significant 2 per cent decline in 2018 and a 0.9 per cent decline to 6.8 per cent in 2019.
I’ve never professed to be a psychic, but I think looking over the trends of the past year I can safely make a few bets on the commercial real estate market for Saskatoon in 2020.
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Ongoing expansion in our Saskatoon commercial retail sector has resulted in the overall supply exceeding demand.
Our 3Q19 retail market update reports the average vacancy rate has edged up to 4.6 per cent.
Let’s look at where that expansion is taking place and the market locations where the most interesting vacancy story can be told.
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The City of Saskatoon has tabled their epic discussion on a two-year budget for 2020/2021.
While the preliminary budget released this summer projected a 3.97 per cent property tax increase overall, we can all breathe a sigh of relief because it will only be 3.7 per cent.
Wait, what the heck?! That’s still a lot!
This is not good news for anyone, especially commercial property owners who already carry a greater tax load than their residential counterparts.
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The overall Saskatoon vacancy rate has been trending lower since its peak in 2016. Our Q319 Industrial Market survey reports an overall current vacancy rate of 6.04 per cent.
That one number does not, however, reveal the complete story.
I consider a rate under 5 per cent to reflect a relatively balanced market.
How close are the eight submarkets to regaining balance?
Here’s an overview along with the factors that are important to consider surrounding that question.
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Canadians have never been more in love with household pets.
According to the latest statistics from the Canadian Animal Health Institute (CAHI), there are 8.2 million dogs and 8.3 million cats in Canadian households.
That’s a ten per cent increase over the past ten years, reports CAHI.
This equates to approximately 41 per cent of all homes having one dog, or 37 per cent having one cat.
It’s no surprise then that the pet business is booming.
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“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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