Highlights - 2006 

On a city-wide basis, office vacancy decreased from 6.7% in January 2006 to 6.1% in January 2007. Vacancy in the downtown rental market dropped from 14.8% in January 2006 to 11.8% in January 2007. The suburban market also followed suit, with vacancy down from 4.4% to 3.4% over the same time frame. Vacancies in owner occupied and medical categories in the core are both higher in 2007 than 2006. The majority of the vacant owner occupied space, however, is in one transitional building, the main Post Office, and is expected to be short lived.

Inventory was added to almost all study categories for 2007. Some of the new inventory was constructed in 2006 and, if so, is added as new absorption. Other buildings that were added this year, for instance a group of engineering buildings (totalling more than 100,000 sq.ft.) that were constructed prior to 2006 but not previously included in the study as "office buildings" were added to inventory, but not to new absorption.

Positive absorption occurred in both the core and suburban markets, with almost 100,000 sq.ft. of space absorbed between the two sectors. The negative absorption figure in the owner occupant category is, again, due to the transitional building noted above. The negative absorption shown in the government category is also expected to be turned around in the short term.

Net effective rental rates are increasing in the good quality central core rental buildings and in most of the suburban markets. Operating costs are also increasing, although at a slower pace than in recent years. Decreasing property taxes for office properties in the core has helped keep costs down.

The most significant change in the office market resulted from renewals and expansions in the B and C Class rental buildings in the core. Over 42,000 square feet of space was absorbed in these two categories during the year, reducing vacancy from 28.7% and 25.6% in January 2006 to 13.2% and 21.5% in January 2007.

The suburban market has been strong over the past number of years with space being absorbed as fast as it is constructed. A significant vacancy at Innovation Place, included in last year's study, has been filled and vacancy is reduced from 7.1% to 1.1% year over year.

New construction has been ongoing for a number of years in almost all sectors of the Saskatoon market - retail, residential and industrial. The office market is finally starting to move, too, with three buildings under construction (or reconstruction) in the core and two in the suburban market, at January 1, 2007. Two of the three buildings in the core are being constructed by the private sector for government occupancy. The third is an owner occupant building. In the suburban market, the lions share of the new construction is at Innovation Place, with 151,000 sq.ft. to be ready for occupancy later this year.

Forecast - 2007 

The Saskatoon office market is stronger now than it has been in decades. Vacancies are down, rental rates are conservatively increasing, and tenant inducement packages are becoming a thing of the past.

With strong demand and limited supply, property values are increasing and capitalization rates are decreasing; a trend ongoing across the country.

Given the limited amount of new construction being added to this mix, rental rates are forecasted to continue to strengthen through 2007 with vacancies continuing to decrease.

Qualification 

Readers of the study are welcome to use the information as deemed appropriate, providing we are quoted as the reference source.  Brunsdon Junor Johnson Appraisals is a real estate appraisal firm providing a wide range of appraisal and consulting services, with the primary market being the north central portion of Saskatchewan.

Special recognition and thanks is paid to all the building owners, property managers, real estate agents and government agencies who assisted with information upon which this report is based.  Without their support this study would not be possible.