Demand strong in commercial real estate despite tough economic climate: Re/Max

Regina’s commercial real estate market has softened slightly as a result of the downturn in the commodities sector, but demand remains strong for multi-tenant retail properties, multiple-unit residential buildings (like apartments), and industrial properties, according to a Re/Max commercial real estate report.

While feeling the impact of low oil prices, Regina’s commercial real estate market is far from depressed, unlike some communities in the heart of the oilpatch.

“The good news is we’re going to have a strong farm economy this year,’’ said Mack MacDonald, a commercial real estate broker with Re/Max in Regina.

“Commercially it’s still a very good market. It’s not like a depressed market.”

Development land in the city is in short supply and properties with good leases typically sell quickly. Retail properties, particularly strip malls with good tenants, are in highest demand. The average price has remained stable yearover-year, sitting at approximately $18 to $20 per square foot for existing space, and just over $20 for a new space.

Multi-family apartments saw a rise in vacancy rates in the first half of the year, shifting from just under three per cent in 2015 to approximately six per cent, as a result of layoffs in the resource sector. Prices have remained fairly stable, however, at roughly $115,000 per door for buildings with eight units or more.

Investors from out of province and new immigrants, primarily from China, Korea, Eastern Europe, the Middle East and South Asia are important drivers of demand in Regina’s commercial property market, the report said.

The first half of 2016 also saw increased interest in Regina’s commercial property market from real estate investment trusts (REITs). REITs are typically looking to invest in multi-family apartment buildings, as well as office buildings with low vacancy and rental rates that are relatively affordable compared with other parts of the country.

There remains significant inventory of office space stemming from new product that came to market in recent years, such as Agriculture Place on the 1800 block Hamilton Street, which created some vacancy in the downtown core.

“The biggest glut we’re seeing is in the office market,’’ MacDonald said.

However, this space is starting to be absorbed, as vacancy rates fell in the first half of 2016 to 13 per cent in the city centre, down from 20 per cent to 25 per cent during the same period last year.

There is strong demand for fairly priced office buildings with good leases, the report said.