There has been a continuation of the vacancy trend that began in the majority of office markets in Canada in 2014. That average national statistic which exceeded 10% at the time has continued to increase in 2015.
It’s important to define the terms we use
We use the terms “competitive market” and “competitive vacancy” to describe buildings that are not owned by government. They include office vacancy classified within Class “A” to “C”.
We estimate that the suburban competitive market consists of approximately 2.7 million square feet and the downtown competitive market consists of approximately 2.57 million square feet.
Current competitive downtown
We typically see an increase in sublease space when a market starts to soften. The Saskatoon commercial real estate market is no different.
As a result of the slowdown in our economy, companies are attempting to minimize their excess office and the sublease listings currently available continues to effect our vacancy numbers. The above graph illustrates the current competitive downtown vacancy including sublease space to be 12.4%. This is up considerably from 2014 when it averaged 6.08%.
The year-to-date absorption is estimated to be (-48,560) square feet.
Current competitive suburban
That sublease factor has also had an impact on the suburban market. The year-to-date absorption in this sector is estimated to be (-27,790) square feet. Once again, you see this trend in the graph.
The current competitive suburban vacancy including sublease space has increased from 8.09% in 2014 to 14.3% year to date 2015.
Office market forecast
An oversupply of inventory has resulted in a softening of some asking net rental rates. With forecasts for our local economy somewhat lower than initially projected for 2015, we do not expect to see any new projects getting out of the ground.
Due to the unique diversification of our Saskatchewan economy and the potential shift in oil development investment from Alberta to Saskatchewan, we believe the Saskatoon office market will continue to transition for the rest of the year and then stabilize in 2016.
This market presents an ideal opportunity to either negotiate early renewal of your existing lease or relocate and upgrade your existing office space.
Posted by Barry Stuart