Speculators are betting big on Saskatoon's industrial market, starting 400,000 square feet of new space so far this year, according to Saskatoon-based Colliers McClocklin, a commercial realtor.
"We are seeing a shift from primarily owner-user developments to a greater emphasis on industrial investment, something uncommon [a few] years ago," said Tom McClocklin, president of Colliers International in Saskatoon.
All of the speculators may not see the returns they expect, McLouglin notes. Saskatoon's industrial vacancy rate has shot up from 2.12 per cent in the first quarter of this year, when most speculators were breaking ground, to 3.54 per cent in the third quarter. With an additional 450,000 square feet of owner-occupied space coming to market, "the wake may leave a sizeable amount of vacancy in existing industrial areas," he cautioned.
Investors are bouyed by a levelling of land prices, which now vary between $400,000 to $500,000 per acre for serviced industrial land in top tier sites, virtually unchanged from last year. Industrial lease rates for new product are also unchanged, at around $10.50 to $12.50 per square foot. "With considerable speculative construction, rental rates for existing space may face downward pressure," McClockin said, though he expects new rental rates to hold steady.
Saskatoon was recently named among the top 10 towns for real estate investors by Western Investor (see the report in the November issue), largely due to the strength of its industrial sector.
