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The COVID-19 pandemic has had quite an impact on commercial real estate worldwide, but reports indicate that the Saskatchewan CRE market remains stable and active.
Despite many businesses temporarily shutting down for much longer than expected and despite the many uncertainties of the last year, both office sectors and retailers in Saskatchewan’s biggest cities of Saskatoon and Regina proved to be resilient. Experts even forecast the continued stability of Saskatchewan CRE over the coming years.
The Resilient Office Sector in Saskatchewan
Throughout 2020, Regina’s downtown office vacancy increased ever so slightly, going from 13.02% to 13.27% by 2021. Suburban vacancies followed the same trend, entering the year with a slight vacancy increase to 12.6%.
The market in Saskatoon remained essentially unchanged in the face of the pandemic, hovering around 15% throughout the year, with the sublease market rising to 15.8%.
According to Aaron McDougall, vice president of leasing at Harvard Developments, the coming years won’t see significant changes in the Saskatchewan CRE market, with estimates that the vacancy rates will remain over 12% in the next five years.
While the office market remains stable, especially with major employers slowly returning to offices, there is one major shift in this sector – office leases are getting shorter.
Few businesses are closing long-term, 10-year lease deals, with most tenants going after 2- or 3-year ones. Still, office space remains in demand in Saskatchewan, which is great news for Canadian CRE investors.
Optimistic Prospects for Retailers
Despite the pandemic bringing a lot of uncertainty for retailers, Aaron McDougall and Barry Stuart, managing partner for ICR Commercial Real Estate, agree that brick-and-mortar stores face optimistic prospects.
Throughout 2020, vacancy rates in retail increased slightly from 6.4% to 6.7% in Regina, while in Saskatoon the vacancy rate declined to 5.18% from 5.5%, giving no cause for concern for either retailers or investors. Even the big-box category remained relatively stable, meaning that the entire retail sector will likely remain essentially unchanged over the coming years, with leasing rates showing no signs of significant increases.
Industrial Vacancies Keep Decreasing
A sector that truly started thriving during the pandemic and that will undoubtedly remain on a path to success is industrial CRE in Saskatchewan. For the first time in a decade, vacancy rates in the industrial sector in Saskatchewan dropped below 5%.
Although the industrial sector in Saskatchewan continues to prove to be the top-performer, office and retail CRE remains active and stable. With no expectations for dramatic changes across markets, investing in Saskatchewan CRE is expected to continue bringing stable, lucrative opportunities.