It seems to me that question has become more complex as the years go by. One would logically assume that the periods during holiday seasons would be quiet times of year. (Personal note: the only fact I can state with absolute confidence on this topic is that the volume of incoming business will always increase each day I get closer to vacation… without fail!)
General business sentiment
I believe the business sentiment that emanates from our provincial economy has a greater bearing on our Saskatchewan commercial real estate activity than local, national or international. I am not trying to suggest that if there is a major economic or humanitarian event that takes place within one of the later three jurisdictions, that it will not impact the local investment decisions.
I can, however, say with a lot of confidence that if our Riders win the Grey Cup or our farmers bring in a bumper crop at a time when commodity prices are favorable, get prepared to see a lot of deals written.
Interesting isn’t it…either one of those two events have far less than a 10 per cent effect on our provincial GDP. Either one of those two events do, however, impact our confidence and our feeling that the future looks bright!
Parallels between residential & commercial activity
I have found in the past, when we have moved through what could be considered a recession, commercial real estate activity will usually see gains first. It does makes economic sense that additional investment in business results in more citizens working and higher wages.
That in turn creates more disposable income for the purchase of residential real estate. Right now my residential colleagues are stating that activity has been slowing and listings are up.
Conversely we have seen increased levels of commercial activity as we approach the end of the year. What is the explanation for that difference?
One factor is the improving U.S. economy that has increased our provincial export business, which in turn has a positive domino effect on commercial sales and leasing. Among other things, the amount of recent new home construction has exceeded demand and caused oversupply.
Provincial resource sector activity
It’s pretty easy to track our industrial and office commercial real estate demand alongside expansion or contraction in the mining sector. When the potash mines were expanding, engineers moving to the province were filling new office space and the manufacturing and industrial supply firms were filling up new warehouse space.
The same can be said for the oil and gas sector. The exact difference of timing of impact between commercial and residential real estate is not however as easy to predict.
Do you have any theories on this question you can share with us?
Posted by Barry Stuart