Commercial vacancy rate report shows ‘resiliency’ in local economy

Commercial vacancy rate report shows ‘resiliency’ in local economy

Amount of industrial land being bought and leased stays strong in third quarter

Central Alberta’s construction industry is likely to remain sluggish until the gap narrows between the cost of buying or leasing space, versus building something new, says a commercial realtor.

“That spread between resale, existing properties and new construction is probably the largest it’s been in a while,” said Salomons Commercial partner Brett Salomons.

As an example, the former Westridge Cabinets, which folded in July, is up for sale at $88 per square foot.

“You wouldn’t be able to build close to that number,” he said.

The Westridge price is discounted because of its enormous size — 130,00 square feet. But even at more usual industrial prices — about $120 to $150 per square foot — it’s cheaper to buy or lease a used property than build new.

“Unless you really want a brand new building for a specific use, or for a special reason, you can get something a lot cheaper,” he said.

Salomons recently released a detailed third-quarter review of the local non-residential property markets that showed some encouraging signs.

“There’s still activity happening,” he said. “Overall, especially on the industrial side of things, there has been positive absorption, which is nice to see.”

The industrial market has had positive absorption — more property sold or leased than new square footage being listed — for three consecutive quarters.

By the end of the year, the amount of property finding new owners against new listings is expected to be on the positive side by 170,000 square feet.

In 2015, the last year statistics are available, the opposite was true, with 190,000 more square feet coming on the market than traded hands. The information was not collected between 2016 and 2018, but those years likely reflected a similar trend, he said.

In downtown Red Deer, there was positive absorption when counting all property types. In the third quarter, more office space became available than was leased or bought — about 28,000 square feet — but that was mainly because of a large 44,000-square-foot building hitting the market.

Salomons supports the city’s ongoing review of its zoning with the eventual goal of providing more options for office space.

Retail property sales and leases have mostly been flat, he said. Through nine months, there is nearly 128,000 more square feet on the market than has been sold or leased.

“It’s been hard for retailers. Overall, I think the Amazons of the world, and Skip the Dishes with the restaurant sector, combined with the economy, has really hit the retailers.”

New construction may have slowed, but it has not stopped. Salomons pointed to a four-storey office building under construction on Taylor Drive, and Ing and McKee Insurance is nearing completion of a 27,000-square-foot building across from Westerner Park, among other projects.

City building permits reflect the construction slowdown.

In the January to November period, $114.7 million in local building permits were issued, compared with $222.4 million during the same time frame in 2018.

“We’ll see after this quarter,” Salomons said. “This, to me, is going to be the make-or-break quarter. That will set up where 2020 goes.”

Salomons believes the “heartburn” of the federal election and the Liberal win, and a general lack of optimism, continue to hold growth back.

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