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The overall Saskatoon vacancy rate has been trending lower since its peak in 2016.
Our Q3 2019 Industrial Market survey reports an overall current vacancy rate of 6.04 per cent (down from 9.3 per cent in 2016 and 6.8 per cent in 2018).
That one number does not, however, reveal the complete story.
I consider a rate under five per cent to reflect a relatively balanced market.
How close are the eight submarkets to regaining balance? Here’s an overview along with the factors that are important to consider relating to that question.
Variance in Saskatoon submarkets
We’re reporting just under 1.5 million square feet of total vacancy.
It’s interesting the average 6.04 per cent vacancy rate varies from a high of 15.25 per cent in the CN area to a low of 3.46 per cent in Sutherland.
The good news, I’m happy to report, is the two by-far-largest submarkets of North and Marquis areas are reporting 4.71 per cent and 3.74 per cent, respectively. It’s no coincidence Marquis Industrial, which offers the newest inventory, is in greatest demand.
This graphic shows net asking leasing rates for Saskatoon industrial properties, which have not changed significantly since 2016. (Courtesy ICR Commercial)
Despite the improving trend in vacancy rates, the average asking net rental rate has only increased marginally by five cents per square foot net, compared to $10.26 in Q1 2019.
Again, it’s not surprising to see Marquis industrial showing among the highest average asking rate of $12.25 per square foot (as well as the highest occupancy costs) for reasons mentioned above.
Upsurge in design builds
We are experiencing an increase in demand for design-build warehouses.
The features within existing properties are often not ticking all the boxes on the wish lists of prospective tenants.
This is due to the implementation of new technologies and greater demand for specific building elements such as higher ceilings. That explains why many new projects are initiated by owner occupants.
We are hearing mixed reports regarding our city and provincial economy.
I find it encouraging to see Saskatoon’s industrial real estate market, which represents close to 50 per cent of our total commercial real estate, performing so well.
Feel free to contact me if you’d like to receive a full copy of our most recent office, industrial or retail market reports.
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