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We have to go back to 2014 to find a drop in Saskatoon’s industrial real estate vacancy.
Saskatoon’s industrial vacancy rate declined in 2017, according to ICR data. (Image courtesy ICR)
After a two-year period where we witnessed a steady increase of three per cent, I am pleased to report the research for 2017 illustrates a city-wide average decline to 7.7 per cent.
A two per cent decline in one year is significant, but there is much more work to be done.
A drop of only one per cent per year
If you analyze the historical data during periods of vacancy decline you will find on average a drop of only one per cent per year.
I would prefer a more balanced industrial real estate vacancy of sub-five per cent, which we’ve not seen since 2010. At that sub-five per cent, we will typically see reasonable absorption of vacancy as it surfaces.
Let’s speculate that RBC’s predictions for Saskatchewan’s economy are accurate; that we will see an acceleration of growth in GDP over the next two years.
I will assume that as a result of that growth, a further 1.5 per cent drop in vacancy per year is achievable.
It would therefore be reasonable to predict a sub-five per cent Saskatoon industrial real estate vacancy rate by Q4 2019.
A closer look at the major industrial district
It’s important to note that the Marquis area, the largest industrial district, is currently sitting at a higher-than-average 8.9 per cent vacancy.
This subdivision is where the majority of new development takes place.
We will not return to a healthy supply/demand balance unless developers are very strategic; bringing on new supply with in-demand specifications, and only as required.
The City of Saskatoon reports that 11 parcels totalling just over 20 acres were sold in the Marquis area during 2017.
It states there are 27 lots, comprising a total of 68 acres that are unsold. Based on 2017 absorption figures, it would therefore be logical to assume there is a three-year supply of industrial land currently available.
I’ve made a note in my January 2019 calendar to come back to this post and report to you how accurate my assumptions were!
Have an opinion of your own? I’d enjoy hearing from you!
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