• Alvi Campos - Commercial Real Estate

Q1 2021 Saskatoon Industrial Overview

Updated: Apr 27, 2021

Saskatoon’s industrial market has managed to overcome turbulent times and transition into a competitive state over the past year; something that is anticipated to continue in 2021.

At the start of 2010, the industrial market was a landlord’s market with vacancy sub 3 percent and lease rates on an upward trajectory resulting in the City having some of the highest industrial lease rates within the country. A booming economy and a lack of industrial inventory fueled these market dynamics; a state that would endure until mid-way through 2013 when a significant drop in oil prices and a significant volume of new inventory would yield a rapid increase in vacancy that would see landlords scrambling to adjust to the challenging market conditions.

As speculative development was put to an almost complete halt, the previous development cycle had already inundated the market with new inventory that remained vacant. At the start of 2016, it was believed that the market was overbuilt and that it would take 2-3 years of absorption to return to a competitive state. With vacancy nearing double digits, lease rates began to soften as landlords started to become very competitive with tenant inducements.

Since 2016, the market has introduced very little speculative inventory except for the latest phases of the Matrix Business Park by REIT developers Triovest. This halt in development has boded well for the market as demand has managed to find a healthy equilibrium with supply. Landlords remain competitive with the tenant inducements, however, after a steady decline, lease rates have shown signs of stabilization and are expected to hold firm in the coming year.

The COVID-19 pandemic has not had the same adverse effects on the industrial sector as it has on the office or retail sectors. Rather, one can argue that the industrial sector has gained traction throughout this period, similar to other industrial markets throughout the country. Saskatoon's industrial market presently sits at a healthy state with vacancy in the low-to-mid 5 percent range; 5.1% as of March 31st, 2021. However, despite positive signs, the sentiment for the upcoming year anticipates continued strength in this sector, yet this optimism is cautious due to the unknown outcome of the pandemic. As a result, it is likely that the market will experience modest absorption and minor vacancy fluctuations in the upcoming year.

Sales activity gathered pace in 2020, and sales are forecast to continue in the coming year because of competitive sales prices. In 2020, industrial sales prices ranged as low as $92.92 per square foot for older warehouse inventory to as high as $275 per square foot for industrial condominiums; with the market average being $165.53 per square foot. Throughout this same period, cap rates ranged from as low as 4.97% to as high 7.33%; with the average being 6.12%. To learn more regarding the state of the different sectors of the Saskatoon commercial real estate market, don't hesitate to contact me today to learn more. Contact information:

C: (306) 716-2774

E: alvi.campos@century21.ca Download digital business card here.

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