Oversupply and slow absorption lowered expectations over the previous quarter, but where does that leave us?
The sector appears to have stabilized despite the influx of sublease product that entered the market in 2015. The vacancy rate for competitive downtown office space rose only slightly to 9.55 per cent while the suburban rate went down to 11 per cent.
The numbers adjust to 12.6 per cent for competitive downtown office and 12.4 per cent for suburban inventory when sublease product vacancies are added in.
Despite higher than usual vacancies, asking lease rates haven’t moved. There’s limited inventory of class-A space, which impacts positively on renewals in those properties.
The economic slowdown will continue to affect the office market. In order to solve long-term vacancies, landlords must continue to explore tenant incentives to remain competitive.
Much like office, the industrial market saw only a slight increase in vacancies over the second quarter. The overall vacancy rate for industrial is estimated to be 8.3 per cent. The adjusted vacancy rate, which discounts vacant anomalies in the market, sits at 7.64 per cent.
Construction has slowed to a crawl, with only a handful of construction permits being issued by the City of Saskatoon since the spring, and primarily for owner-users. This bodes well for an industrial market suffering from oversupply of new product.
Although asking rates have reached a plateau for the time being, industrial landlords are finding ways to entice tenants similar to their office counterparts. Everyone is sharpening their pencils for the real deals that present themselves.
Although Saskatoon’s growth has slowed, gross domestic product is still expected to grow by 1.8 per cent this year. That’s certainly not as exciting as the past six years, but we’ll take it.
And because we’re growing in this province, Saskatoon still holds considerable interest to retailers.
Retail businesses with no Saskatoon presence continue to look at our market while those who are here seek expansion options. Because of this continued pressure on available inventory, lease rates may keep pushing upward.
The vacancy rate decreased slightly to 3.05 per cent. This is a result of a positive absorption of nearly 205,730 square feet this year to date.