Neil Evans has had more success renting out retail and industrial spaces than offices in downtown Saskatoon.
“It’s definitely slower in the downtown core for demand,” said the president of Pillar Properties.
Close to 14 per cent of Saskatoon’s office space was vacant in the latest quarter, according to a recent report from Colliers International Group Inc., and the number jumps to 20 per cent in the city’s downtown.
The trend appears to be in contrast to economic forecasts that suggest Saskatchewan is expected to be a key source of Canada’s economic growth this year.
The province’s natural resources have buoyed the economy through recent trade pressures with China and the United States.
Saskatoon’s overall vacancy rate for offices is in the middle of the pack of a dozen markets Colliers watches, with Calgary and Edmonton posting the highest rates at nearly 23 per cent and 17 per cent, respectively.
Regina, meanwhile, has maintained a steady rate of 12 per cent, with more tenants leasing space downtown over the past year.
The overall numbers in Saskatoon may obscure some underlying strength. Businesses aren’t necessarily bailing from Saskatoon’s downtown, but there is a glut of lower-tier listings.
Tenants are clearly willing to pay a premium for high rises since there’s no subleases or availability at River Landing, says Tom Deibert, a vice-president of Colliers in Saskatoon.
The downtown area saw the construction of some top-tier office properties in recent years. One high-rise building bears the nameplate Nutrien Ltd. for the massive potash producer headquartered on the riverbank.
“We haven’t had this big lurch forward in demand, but when we put quality supply into the market, it was absorbed,” Deibert said.
In a relatively small city like Saskatoon, a big office building makes an outsized impact.
“It doesn’t take much to cause the vacancy rate to jump. It’s a pretty small market area,” said Evans.
Saskatoon’s office market may still be adjusting to a post-COVID world. As of just last week, federal employees faced the latest return-to-work mandate, more than six years after the pandemic landed in Canada.
Deibert, the Saskatoon-area real estate sales associate, said tenants who were quick to renew leases in 2021 are now faced with the decision to stay put, upgrade or downsize.
“We’re still seeing the impacts of deferred decision-making,” Deibert said.
Federated Cooperative Ltd., for instance made its departure from Saskatoon’s downtown when it posted a more than 62,000 square-foot building for lease.
The Colliers report highlights the booming mining sector as one of the drivers of office leasing. But there aren’t many more of those spaces under construction in the city for the time being, based on the report.
Landlords don’t appear to be lowering the asking price of rent, either. Saskatoon, where office real estate generally goes for $20 per square foot, is one of the most expensive markets in the Canada-wide report after Vancouver, Toronto and Victoria.
Deibert says landlords aren’t willing to offer the same incentives they had previously put on the table to fill their spaces.
Evans said it may be only a matter of time before things rebound by population and economic growth.
“I think the demand will start ticking upwards just because of the quality of the city that we’re in.”
Nykole King is a journalist with the Financial Post, covering the biggest business news in Saskatchewan. She’s written in-depth features for local daily newspapers and covered breaking news for international commodity markets.
NyKing@postmedia.com