As employees type from laptops at kitchen tables or spare bedrooms, Saskatoon’s downtown vacancy rate isn’t showing many signs of tightening up.
The most recent analysis of the market from ICR Commercial shows a vacancy rate of just under 15.5 per cent, which is more than double the ideal rate, according to Josh Walchuk.
“I don’t envy any tenant that’s really got to think about their office needs right now,” said Walchuk, a partner with ICR Commercial.
The over-supplied market predates the COVID-19 pandemic. Walchuk said the construction of new offices at River Landing led to a “flight to quality.” Sluggish commodity markets have also hurt interest, he said.
While the pandemic didn’t create the high vacancy rate, it impacts employers looking to renew their office spaces. It’s particularly challenging given commercial leases can last five or 10 years, and employers don’t know what the future work landscape looks like.
Trevor Jacek, chief financial officer with Mid-West Group of Companies, said he’s seen a few examples of companies downsizing. One 25-year tenant disclosed plans to downsize from 40,000 square feet to 15,000 square feet, citing work-from-home upsides and COVID-19 safety.
“That’s not an insignificant shrink in the amount of real estate you’re renting,” Jacek said.
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At the same time, business owners are grappling with how to maintain and develop a workplace culture.
“A lot of companies put a lot of value on culture, and certainly it’s harder to create that if you have ten employees and they’re at ten different locations,” said Brent Penner, the executive director of Downtown Saskatoon.
Penner said before COVID-19’s arrival, 18,000 to 20,000 people worked downtown. The number has fluctuated amid the pandemic, but it is currently lower than it was in the fall, he said.
A widespread and permanent shift to working from home would hurt, in part, because many small businesses have set up shop downtown for strategic reasons.
“If you’re a coffee shop or a tailor shop or a retail shop, you’re making those decisions based on what’s around you,” Penner said.
He also noted a robust downtown working population is needed to support future downtown infrastructure like a new central library, arena and bus rapid transit.
Penner said downtown workers “are basically giving downtown the pulse that it needs.”
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