The Saskatoon office market is sitting with an abundance of inventory on the market at the end of the first quarter for 2016. While this isn’t good news for landlords, it creates a real opportunity for tenants to negotiate attractive terms on new leases.
We are not alone
Saskatoon is not unique for its oversupply of both downtown and suburban office product. Major urban centres like Vancouver, Calgary and Toronto are experiencing similar pains.
For example, MEG Energy announced last week that they were seeking to sublease 307,000 square feet in downtown Calgary. This is the equivalent of 15 floors of office space.
In our smaller market that size of inventory would account for just under half of our total vacancy. We like many other markets, are starting to include sublease space into our available inventory list.
The available downtown vacancy is 14.77 per cent; available suburban vacancy is positioned slightly higher at 15.64 per cent.
What is interesting of Saskatoon’s downtown office vacancy, however, is that a majority of the space sitting vacant or available we identify as B class. What we would consider Class A and B+ buildings in the core are still preforming relatively well.
The majority of suburban office vacancy exists in Stonebridge. Areas with minimal office, such as 8th Street, are still very competitively leasing.
Wait and see
Outside of the obvious implications, another downside to a high inventory is the slowdown in development. Many would-be office sites are on hold until the market has absorbed more of the current vacancy.
We have cyclically seen this problem before in Saskatoon. It will be tough for the market to catch up to demand when (not saying if!) that demand ramps up.
I’d put my projections out for a continued hesitation in the market through the next two quarters this year. I do believe if global markets keep improving it may not take much longer for leasing activity to start rolling in Saskatoon. What do you think?
Posted by Kelly Macsymic