The past year has been a slow one for Saskatchewan commercial real estate developers and investors.
Transaction figures show Regina and Saskatoon each saw just over $100 million in transactions, which is about average for the past three years for Regina, but significantly lower for Saskatoon, Colliers International Saskatchewan president Tom McClocklin told attendees at the May 6 virtual Saskatchewan Real Estate Forum.
The Saskatoon figure dropped from a touch over $300 million in 2019. The retail sector, particularly, saw almost no movement in that city.
Building permit tallies showed both cities considerably off their peaks in 2015 when permits were issued representing $1 billion in development in Saskatoon and $700 million in Regina. McClocklin’s figures showed the 2020 permits at $300 million in Regina and $500 million in Saskatoon with a marked shift to residential building over the commercial sector.
McClocklin cautioned real estate figures can swing quickly in the province where both cities are relatively small and one or two big developments can create a major increase in the statistics.
Commodities could be about to rebound
Despite those stats, developers and investors speaking at the conference held out hope for the commercial sector to stay stable or rebound as the province’s commodity-heavy economy enters an upswing in its cycle.
Jason Carlston, regional vice-president land, for Dream Development, said economic stagnation has been an area of concern for developers.
However, the conference heard from representatives of Saskatchewan’s major industries that the province is headed for better times.
Murad Al-Katib, president and CEO of agrifood giant AGT Food and Ingredients Inc., said the province is poised for a generational opportunity in agricultural value-added industry thanks to rising global demand for plant protein and accelerating development of rail and logistical infrastructure.
“In the last two weeks we’ve had the announcement of two major canola processing ventures, as an example, with investments that are totalling something like $1 billion,” said Al-Katib. He added there are investments coming in the renewable fuels sector as well.
Mining sector poised for growth
Saskatchewan’s mining sector, particularly uranium and potash mining, is poised for growth, according to Saskatchewan Mining Association president Pam Schwann. The province’s wealth of potash for fertilizer and uranium for nuclear power keys into global demand for clean energy and food, she said.
Even energy companies, which suffered from declining oil prices, is emerging from a period of corporate consolidation with stronger balance sheets, said Brad Wall, former premier of Saskatchewan and current director of energy company Whitecap Resources.
He added that the skills required of oil and gas service companies translate to up-and-coming energy sources such as geothermal drilling and helium extraction.
A resurgence in mining and energy and the engineering required could help rejuvenate the office sector in Saskatchewan, speakers suggested.
McLocklin pointed out that while the vacancy rate has been stable in the mid-teens in the Regina office market, the rate has been trending up in Saskatoon and could hit the mid-20s in 12 to 18 months. The new Nutrien Tower, for instance, will be added to the inventory by the end of the year.
Office and industrial sectors
Kim Riley, chief operating officer for Artis REIT (AX-UN-T), said she has heard the work-from-home trend created by the pandemic is not working. Short commutes will be an advantage for office locations, she suggested.
“I think there’s going to be an advantage in having an office in the smaller centres like Regina and Saskatoon.”
Luke Schmidt, vice-president and director for TD Asset Management, said his firm owns class-A and class-AA office properties in Regina and Saskatoon. Saskatchewan has been a long-term stable performer for TD, he said.
Schmidt said his firm allows tenant demand to control the pace of development. The firm is one of the companies involved in building the new head office tower for agricultural input giant Nutrien in Saskatoon.
“Nutrien came along earlier than we would have thought.”
Like all of North America, industrial building development is on the upswing in Saskatchewan as vacancies decline.
Blair Forster, president of Forster Harvard Development Corporation, said Saskatchewan is a bit behind other Canadian markets in terms of the size and height of industrial buildings, but it is catching up to Calgary in terms of the size of bays in industrial structures.
Private interest in retail properties
Despite the dislocation created by the COVID-19 pandemic, speakers at the forum were positive about the prospects for retail development.
Forster said his firm’s sweet spot is large-scale mixed-use retail. The market has reached a level of maturity in which most retailers know they need to be represented in Saskatchewan and find that sales productivity in the province is as good or better than elsewhere in Canada, he said.
Riley said her company decided in mid-2020 to sell some of its Saskatchewan properties.
“There are not a lot of institutional buyers looking in markets right now, but a lot of private buyers . . . small private real estate firms, funds and syndicators, wealthy individuals, owner-occupiers are looking.”
She said there were multiple offers on multiple assets even given everything that’s happening around retail.
The Victoria Square Shopping Centre, an enclosed mall in Regina, found a buyer in a Vancouver-based syndicator of Asian capital, Riley said. She said that was the first time Artis had seen that type of buyer in Saskatchewan.
“Maybe Saskatchewan is a little bit behind and now people are starting to take notice and see there’s an opportunity.”