Although Saskatchewan’s GDP is projected to decrease by 5.5 per cent in 2020, ICR Commercial‘s Q3 2020 industrial market survey shows the vacancy rate in Saskatoon has dropped.
It’s a remarkable fact when you consider the financial hit our economy has endured due to the pandemic.
With over 24.6 million square feet of total industrial inventory, 1,409,551 square feet of vacancy is considered healthy.
Although there had been a marginal increase in Q2 2020, at the current 5.72 per cent we are now slightly below the first-quarter number.
The Marquis area, the newest developed industrial subdivision in Saskatoon, has dropped almost 50 basis points since Q1 2020 to 5.25 per cent vacancy.
The average asking rental rate has increased marginally to $11.90 net from $11.60 at the beginning of this year.
Industrial Saskatoon’s strongest performer
The industrial sector, which by far makes up the largest portion of Saskatoon’s commercial real estate inventory, has performed better than office and retail.
It’s interesting to note, however, that the retail vacancy rate has only increased 22 basis points since the beginning of the year to 5.44 per cent. It will be another few months however, before the full impact of COVID 19 on retail merchants will be known.
An increase in the number of industrial assets sold is the result of historically low mortgage rates and a strong demand from owner occupants.
Investment interest in this sector will only continue to improve as warehousing and distribution grow to satisfy the ongoing growth in e-commerce.
The factors affecting the wide range in average sales price between $95 and $160 per square foot can be land-to-building ratio, location, and the age/functional obsolescence of the building.
We have investors willing to purchase. However, there’s a lack of inventory of solid income-producing property to present.
It’s interesting to note that, as of the most recent report available from the city, only one building permit has been issued in the Marquis Industrial area in 2020. This demonstrates business owners and investors are still hesitant to invest in new construction.
The consensus is that we will continue to see stability in the industrial commercial real estate market for the remainder of 2020, with additional growth emerging in 2021 and 2022.