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Historical industrial vacancy in Saskatoon. (Data courtesy ICR Commercial)
I promised I’d hold myself accountable for this January 2018 post forecasting industrial vacancy in Saskatoon, and report back to you.
So, how did I do?
At that time, I predicted a decline in the overall Saskatoon industrial vacancy rate from 7.7 to 6.2 per cent. That was after a significant two per cent decline in the previous 12-month period.
Our Q4 2018 results have just been released. Overall Saskatoon vacancy decreased from 7.7 to 6.8 per cent.
Yes, I was off the mark. I am however going to take the “low road” and name a scapegoat.
I stated my prediction was based on RBC’s forecast for Saskatchewan, “that we will see an acceleration of growth in GDP over the next two years.”
We did not see that acceleration of growth but rather ended up with a GDP increase of 1.7 per cent, down from 2.2 per cent the previous year.
Significant factors
However, this continued trend of positive absorption can be attributed to not only a provincial economy that is stabilizing, but also a restrained attitude toward spec building.
It is this cautious mindset, if maintained, that will provide for further decline in the industrial vacancy rate.
Marquis Industrial is the newest and largest industrial area in Saskatoon.
It’s very encouraging to note the year-to-date absorption in this area is 167,641 square feet. The affect of this absorption resulted in an 2.9 per cent decline in vacancy to six per cent.
Landlords continue to offer tenant incentives and/or reduce rents. This has resulted in a further decrease of three per cent in asking net lease rates, which now average $10.30 per square foot.
Although the industrial portion of Regina’s commercial real estate market is smaller than that of Saskatoon, it is healthier.
Illustrating a balanced supply/demand, the Q4 2018 vacancy rate is 4.42 per cent and the average asking net lease is $11.15/sf.
Prediction for Saskatoon in 2019
If we put 10 different economists in the room, we would undoubtedly hear 10 different market outlooks.
When I look at my crystal ball, peering through the existing and future market conditions likely to play a part in our industrial sector, I see six per cent.
That would require continued absorption resulting in a reduction of 0.8 per cent in our existing overall vacancy rate.
Hope to see you back to this column in one year, at which time you get to once again judge the accuracy of my crystal ball!
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