The number of new tenants is not enough to occupy current and incoming supply
Amid the continued construction of a new major riverside tower, Saskatoon’s downtown office vacancy rate might further increase over the next few years, according to a real estate company based in the city.
In its latest market analysis, ICR Commercial stated that this would be a continuation of the trajectory set almost two years ago, when the area’s vacancy rate stood at 15.6%.
Currently, the rate is at 16.7%, representing more than 400,000 square feet of unoccupied office space in the downtown.
This vacancy already includes the still-to-be-utilized space in the River Landing East Tower situated at the corner of Third Avenue and 19th Street. Slated to be completed very soon, the building is expected to see its first tenants begin occupation this fall.
However, the current rate has yet to account for 120,000 sq. ft. in the North Tower, which is still in the early stage of development.
“Once that additional vacancy [at North Tower] is accounted for, we will be reporting core area vacancy in excess of 20%,” ICR Commercial managing partner Barry Stuart said, as quoted by CBC News.
“The demand for new Class A inventory is coming from users already present,” he explained. “There are not enough new tenants entering the market and the flight to quality is projected to continue.”
This will mirror the trends that are projected to appear in Toronto and Vancouver, where office vacancies will double by 2023.
Per the findings of a recent study by CoStar Group Inc., vacancies in downtown Toronto’s offices will rise to about 6% in just four years, from a historic low of 2.9% in Q2 2018. Vancouver is also predicted to reach 6%, from a record 2% this quarter.
As with Saskatoon, new supply will also exacerbate the phenomenon. In the next five years, as many as 25 new office or mixed-use buildings are scheduled to be completed in downtown Toronto, along with 15 new towers in Vancouver.
