By Scott Larson, The StarPhoenix, March 14, 2014 - Despite the busy construction activity of the last few years, the Saskatoon retail market still needs more space, especially prime spots, says the latest ICR Commercial Real Estate report.
“Right now, it is a landlord’s market,” said Alvaro Campos, ICR’s market analyst and author of the report. “The demand is very high for prime real estate.”
ICR conducted a study to understand how many additional square feet the market could sustain at a healthy level. The report indicates the city could sustain an additional 1.2 million square feet over the next few years.
But Campos said added square footage should be built at a measured rate — about 250,000 square feet per year.
“There is no doubt that the market is currently underserved as this lack of supply is reflected by the market’s vacancy which continues to hover around 2.5 per cent,” Campos said. “Healthy standards for a market the size of Saskatoon would fall in the five per cent range, this would therefore provide a competitive balance between supply and demand; currently demand heavily outweighs supply.”
Last year, the University of Saskatchewan published a report that indicated Saskatoon’s retail market was underserved by an estimated 600,000 square feet.
In the last three years, the city has averaged 239,000 square feet of new inventory.
“The last few years have been a great example of healthy growth,” Campos said.
That added retail space will be located in areas like Stonebridge, expansion of Blairmore’s Smart Centre where Lowe’s and Boston Pizza have targeted possible locations, along with Preston Crossing and developments in the emerging neighbourhoods of Holmwood, Hamptons and Kengsington.
“The opportunity for retail growth is there, but you have to grow the market in a very healthy way,” Campos said. “It will interesting to see what will happen in the next two or three years.”
The study analyzed factors such as retail sales growth, population growth, market demand and historical vacancy in order to have a projection of what a competitive growth rate for the city would be.