Saskatoon currently has a gaping and growing vacancy rate spread between the downtown and its suburban markets, with the downtown at 21 per cent vacancy and the suburbs at 11 per cent, according to Barry Stuart, managing partner and senior sales associate with ICR Commercial, Saskatoon.
Stuart noted the gap began to widen, in the suburb’s favour, in 2020. In 2019, for instance, the vacancy gap was only 2 per cent, and it was the downtown which had the lower vacancy rate, at 16.5 per cent.
Downtown, the completion of the first offices at the $300 million River Landing complex by Triovest Realty Advisors has drawn a lot of core tenants to the new Class A space in a flight to quality, including to the new Nutrien Tower, the tallest office tower in town.
Other downtown tenants have also discovered that suburban offices are less expensive and often have free parking.
But, aside from costs, Stuart suggests, is a negative perception of public safety in the downtown – an issue that is vexing other western cities, including Vancouver and Edmonton – that has increased some movement to the suburbs.
“I see an unprecedented effort, evident at all levels of civic and provincial administrations, to provide solutions for a safe core area,” Stuart noted.
Saskatoon Tribal Council’s Saweyihtotan Outreach Program and the Saskatoon Community Support Team, in partnership with the Saskatoon Police, have positively impacted those struggling with addiction and homelessness, he noted in releasing ICR’s second-quarter report on the office market.
“Progress is being made; however, we have a long way to go to dissolve the negative view of the downtown area,” Stuart cautioned.
ICR’s Q2 2022 Office Vacancy Report indicates the average occupancy cost for downtown office is $14.25 per square foot. The average of the eight other office submarkets is $9.74 per square foot.. (It’s important to note the cost of heating and electricity can often be included in downtown office occupancy costs. In contrast, they are more commonly paid separately by the tenant in a suburban office.)
On a 5,000-square-foot office, the difference in lease rates amounts to $22,500 per year.
When you factor in the additional parking costs downtown, the attraction to suburban office becomes evident, ICR noted.
However, one should not be quick to write off downtown areas, Stuart said. The ICR report, in fact, suggests the Saskatoon office market is “at the beginning of a seven-year rest cycle.”
“With offices slowly resuming face-to-face operations, downtown spaces are expected to be back in demand. Businesses are returning to their spaces slowly and cautiously, while at the same time, employers are developing and implementing models for hybrid work,” the report concludes.
