Last week, Saskatchewan’s Minister of Finance Donna Harpauer released her second budget, which projects a $34.4-million surplus for 2019. Thinking selfishly, I wondered: how does this budget impact commercial real estate sale investment in our province?
The good news story is that there were no new taxes or tax increases announced. That bodes well for both individuals and businesses.
Already the province boasts some of the lowest personal and business tax rates in the country. In a business-friendly climate like this, investment has the opportunity to flourish.
That provides for new and expanding businesses in our communities, which translates to a healthy commercial real estate market.
In Saskatoon, we see both industrial and retail vacancy is down from 2018 overall.
Retail space remains sparse in high-demand areas, with new construction like Cory Commons in Stonebridge filling up quickly.
Speculative building slowed in 2018 and allowed for an absorption in the industrial product.
Office vacancy remains high, but that has a lot to do with the shuffle of tenants into new or renovated inventory.
Potash loses out
Potash is one industry that will take a hit for 2019. Harpauer announced the government would be removing deductions on production costs which had benefited potash companies.
This will result in an estimated $117-million taxation increase for the provincial government.
An announcement within the potash industry which impacted commercial real estate came last year when Nutrien revealed it would be moving into new digs at the River Landing development in late 2021 or early 2022. The new tower is expected to house 400 Nutrien employees over the top eight floors.
Having already committed to the new headquarters, there has been no indication from Nutrein that the budget announcement would change any of its plans to move.
Saskatchewan infrastructure spending
The provincial government’s capital investment strategy can also impact our sector. The government announced its intention to spend around $2.7 billion in the Crown sector, as well as ministries and agencies.
This will include three new schools in Regina, Moose Jaw and Saskatoon.
A budget for designing new hospitals in Weyburn and Prince Albert was also set aside.
With any of these projects, there is a potential for local trades and builders to benefit.
All in all, the budget did not include anything flashy. Which is maybe what it needed to be.
Despite slower growth, the upside is there for slow, sustained growth.
The budget perhaps reflects that intended strategy .