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I promised you that I’d hold myself accountable in my January 2020 post about the overall Saskatoon industrial vacancy rate and report back to you.
So, how did I do? At that time, I predicted a decline from 5.65 per cent per cent in 2019 to 4.8 per cent (by the end of 2020).
That’s after significant declines of two per cent in 2018, and 0.9 per cent – to 6.8 per cent – in 2019.
Where did we end up?
I ask you to keep in mind when I made my prediction most of us were not aware of the profound impact COVID-19 was about to have across the globe.
So you have to go easy on me!
In spite of RBC’s recent estimate that Saskatchewan’s real GDP contracted by 4.7 per cent per cent in 2020, Saskatoon’s industrial vacancy rate still declined by 0.33 per cent to end up at 5.32 per cent.
RBC’s forecast for the next couple of years looks more favourable (Saskatchewan forecast at a glance).
Saskatoon industrial market emerges as strongest sector
Our Q4 2020 industrial report states, “Investor interest in the industrial market continued to be driven by relatively strong sectoral and property market fundamentals, both of which are expected to extend into the beginning of 2021.”
There still seems to be a lack of speculative building. Only two industrial building permits were issued in 2020 totalling 20,000 square feet.
This is only going to place greater pressure on the existing vacancy rate.
What’s my take on 2021?
Regardless of whether we are discussing industrial, retail or office, I believe we are in a healthy commercial real estate market when vacancy rates are under five per cent.
The historic industrial vacancy rate in Saskatoon since 2010. (Courtesy ICR Commercial)
I believe our overall Saskatoon industrial vacancy rate will finally break that five per cent barrier in 2021, which would be the first time since 2010.
The one factor that could negatively impact that prediction is a significant increase in spec building this spring and slowing market demand to absorb that new inventory.
Nonetheless, I will report back to you in 12 months . . . you can hold me accountable!
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