Investors should be parking cash in industrial CRE

In spite of the negative economic impact of COVID-19, the sale and lease activity within our existing industrial market continues.

The vacancy rate has risen marginally by 0.12 per cent to 5.86 per cent, according to our recent Q2 market report.

With over 24.6 million square feet (SF) of total industrial inventory, 1,444,158 SF of vacancy is considered relatively healthy.

An economic bellwether of COVID-19 can be found in the percentage of rent relief requests from each of the industrial, retail and office sectors.

The number of those requests from industrial tenants in Saskatchewan was far lower than the other two.

Similar results have been reported throughout North America.

Interest in industrial assets will only continue to rise as we see warehouse and distribution facilities grow to meet the e-commerce demand to deliver good to its customers.

Marquis Industrial

This is the newest developed industrial area in Saskatoon.

It’s interesting to note that only one building permit has been issued in the Marquis Industrial area in 2020 demonstrating that business owners and investors are still reluctant to invest in new construction.

The Q2 vacancy rate sits at 5.76 per cent, ten basis points below the average city rate.

The average asking net rental rate is one of the highest at $11.64 PSF

Largest reported vacancy

Two areas that showed positive absorption between Q1 & Q2 are still reporting double digit vacancy.

With 141,315 SF of vacancy and 10,869 SF of absorption, Agriplace is sitting at 10.43 per cent.

The CN industrial area still has 160,360 SF available, representing 10.91 per cent in vacancy.

Where does the industrial market go from here?

There are many factors that will play into the direction of this market.

The belief among those most affected within this sector is that we will continue to see stability throughout 2020 with warehouse market growth emerging in 2021 – 2022.

I believe however it will be Q4 of this year before we truly have a clearer picture of the impact of COVID-19 on the world economy.

Posted by Barry Stuart

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