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A common question asked in conversation is: “how’s the market?” It’s difficult to provide a one-sentence response to that question.
We’ve already reported the rather dull current status of the Saskatoon office and industrial leasing markets. We do have a strong demand for good quality Saskatchewan commercial real estate investment property, but our supply is limited.
Where the story gets better, where we have a good balance between supply and demand and where we are still seeing new construction on spec is . . . retail!
New subdivisions are the market drivers
As residential development in new areas such as Holmwood, Kensington and Stonebridge progresses, demand for retail inventory will continue. Although new home construction has slowed, we are still experiencing population growth within Saskatoon.
This will result in slower but continued retail construction.
Our recently released ICR 1Q16 retail survey shows the current retail vacancy rate to be 3.42 per cent. This is a slight increase from the 2015 rate of 3.3 per cent.
Interest from new retailers continues
Some of the new tenants we will see: Conexus Credit Union and Brown’s Socialhouse in Kensington, Starbucks, McDonald’s and Shoeless Joe’s in Stonebridge and the much needed Costco in The Meadows.
The economic slowdown in Alberta has resulted in renewed focus on Saskatchewan. Many retail merchants have expansion goals to fulfill.
Saskatoon and Regina have been the benefactors of the somewhat altered economic landscape of this country. We expect the majority of new inventory to be pre-leased prior to completion. This has been a recent trend which is expected to continue.
Upward pressure on lease rates
As you can see by the retail synopsis above, we are showing a slight increase in the average net rental rate to $26.50 per square foot. Keep in mind this average number can vary considerably depending on size, location and whether the rental unit is inline, an endcap or a freestand building.
The upward pressure is likely to continue for new developments and inventory within prime retail corridors. We will however see landlords with existing inventory considering redevelopment options and incentives to remain competitive.
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