If the Saskatchewan economy would hurry up and turn around already, businesses in Regina might find there’s sufficient demand to build a new office tower.
But there are signs the economy will worsen before it gets better.
According to a new report from CBRE, the vacancy rate for Class A office space in the Queen City has fallen below 3 per cent. That’s in sharp contrast to the Class C market, where vacancy sits above 25 per cent. Overall, Regina’s office vacancy fell to 13.16 per cent at the end of 2019.
“The market fundamentals [in Regina] remain strong. The office market continues to see tenants relocating from dated product to newer buildings. Government users continue to maintain the overall stability of Regina’s office market,” said Michael Bratvold, vice-president and managing director of CBRE Saskatchewan.
The situation is slightly better in the city’s suburban office market, where the vacancy rate sits at 12.45 per cent.
Significant office vacancy rates in both Class B and Class C assets in Regina continue to create uncertainty for owners while creating significant opportunity for tenants in the market, primarily because of the disparity between new and dated office assets in the city, Bratvold said.
There was no net new supply in Regina’s office market throughout 2019 as developers eye an uncertain future.
According to Avison Young’s Global 2020 Real Estate Forecast, Regina is being hit by a double whammy: “Declines in prices for crude oil, natural gas, potash and uranium and China’s temporary ban on imports of canola and soybeans are impacting the provincial economy.”
After a decline in 2019, government and business cuts could push office vacancies above 13 per cent in 2020, the commercial real estate agency said.
Retail has remained stable but the strongest activity is in the cannabis and liquor sectors, which may be a message about the economy.
Saskatoon’s office market gets the majority of attention in the province as two new towers have been causing all kinds of movement recently, led by the 13-storey East Tower at River Landing, which opened late last year, and the 18-storey Nutrien Tower, which is ahead of schedule and will welcome its first tenants next year.