 |
 |
 |
 |
|
| Population 205,000 | ||||
| Employment 113,000 | ||||
| Unemployment Rate 4.1% | ||||
| Retail Sales $4.1 billion | ||||
| Consumer Price Index 3.4% | ||||
|
||||
| ↓ | Office | ↑ | ||
| ↓ | Industrial | ↑ | ||
| ↓ | Retail | ↑ | ||
| Overall Cap Rates ←→ |
||||
| Source: DTZ Barnicke | ||||
| 2007 | 2008e | 2009f | 2010f | |
|---|---|---|---|---|
| Real GDP* | 2.6% | 4.9% | 3.2% | 2.9% |
| Population* | 1.4% | 1.9% | 1.6% | 1.1% |
| Employment* | 0.2% | 4.2% | 2.3% | -1.0% |
| Unemployment Rate | 4.9% | 4.1% | 4.6% | 4.7% |
| Personal Income per Capita | $37,222 | $38,991 | $40,238 | $40,922 |
| Total Housing Starts | 1,400 | 1,440 | 1,200 | 1,210 |
| Retail Sales* | 10.8% | 9.5% | 6.8% | 4.9% |
| CPI* | 2.6% | 3.4% | 2.8% | 1.9% |
| Source: Conference Board Canada | *Percentage Change from Previous Year | |||
Market overview
Regina’s economy posted solid GDP growth of roughly 4.9% for 2008, one of the strongest in the country, benefiting from the provincial boom. The rapid increase of Regina’s population, due to a balance of inter-provincial and international in-migration brought on by tremendous growth in construction and employment opportunities, is reflected in housing market activity. Regina’s long term growth plans, capitalizing on its resource rich lands and its central location, have resulted in a number of projects including a $120 million investment into the municipal wastewater treatment plant; renovations to IPSCO Place; a $93 million multimodal hub and infrastructure project; and a $1.9 billion expansion of the Consumers’ Co-operative Refineries operation in Regina.
It is expected that GDP growth will pull back to 3.2% in 2009 and average 2.6% between 2010 and 2012 as migration activity moderates. In 2009 and moving forward, economic indicators such as housing starts, retail sales and total employment will return to more sustainable levels of growth, but will still exceed the average levels experienced by other Canadian cities.
Regina is a growing, progressive community, with a strong, diversified economy and a quality of life that is exceptional.
Regina Regional Economic Development Authority
Office
As growth continued to be the story in Saskatchewan, office vacancy declined further in 2008 to end the year at 2.4%. Much of the growth came from the expansion of existing tenants and is expected to continue through 2009 with growing demand from existing and new tenants from professional service, information technology, energy and resource firms. A moderate level of growth will also come from provincial and federal government organizations.
Despite labour shortages, the construction of new developments is moving along well, only a few months behind the original scheduled completion dates. During 2008, the Broad Street Crossing’s office building was completed, bringing an additional 27,000 square feet to the office market. In 2009, the Regina Research Park Provincial Lab will bring 68,000 square feet of space to tenants specializing in the energy sector and the former Superstore on 1621 Albert Street will be converted into a multi-use development with the potential for 99,000 square feet of office space depending on the tenant mix. Already, 100% of the Broad Street Crossing building is leased and 40% of the buildings set for completion in 2009 have been pre-leased. In addition, it is likely two new developments will be announced in 2009.
Low vacancy and rapid pre-leasing will have rental rates rising throughout 2009 in this landlord market.
Industrial
Industrial vacancy fell to 2% and average net rental rates rose to approximately $7 in 2008. Tremendous growth in Saskatchewan, as a central transportation hub in Western Canada, spurred by the CP intermodal hub and Loblaw’s eventual 1 million square foot distribution facility (500,000 square feet of initial development) has driven demand for industrial space in Regina.
Four new building completions in 2008 brought 250,000 square feet of new industrial space to the market with five buildings scheduled for completion in 2009 bringing an additional 300,000 square feet of space to market. With a shortage of leasing opportunities in excess of 50,000 square feet, expect more growth in new construction in 2009.
In order to meet the demand for industrial space, Regina has annexed two large parcels of land in the northwest and west quadrants of the city. The land is predicted to have the capacity to satisfy industrial land demand until 2030. The Saskatchewan Government announced an unprecedented $1.5 billion commitment to infrastructure in the province that will help make the development of the parcels of land possible.
| Office Inventory | 3.2 million sq ft |
| Office Vacancy | 2.5% |
| CBD Class A Vacancy | 0.7% |
| Industrial Inventory | 14.7 million sq ft |
| Industrial Vacancy | 2.0% |
| Source: DTZ Barnicke and Conference Board Canada | |
Investment
Saskatchewan’s diversified mix of resources including oil, potash, steel, minerals and agriculture has allowed Regina a level of immunity to the global economic downturn, however softened commodity prices are a downside risk. Buyers are abundant, but sellers have been holding their assets, making 2008 a relatively quiet year for investment activity. Record low levels of vacancy have landlords quite content with steady guaranteed revenue streams. Consequently, willing sellers are opting to hold their assets, knowing there are very few opportunities to reinvest in quality product.
While all asset classes are in equal demand, the market is dominated by local cash rich buyers that can mobilize quickly on promising buying opportunities, giving REITs and large institutions less opportunity.
Cap rates for all assets ranged between 8% and 9% in 2008 and are anticipated to remain stable in 2009. Expect 2009 to be another challenging year for buyers, where demand far exceeds supply.
Retail
Retail sales in 2008 reached a high of roughly of $4.1 billion, a 9.5% increase from 2007. After a three year average growth rate of 9.6%, retail sales are expected to slow in 2009 to 6.8%, in keeping with economic conditions. However, there is a upside risk of stronger than estimated sales due to the recent provincial budget announcement, including historic tax cuts, debt reduction, and record spending on health care, schools and infrastructure. Tax breaks and government investment should further boost consumer spending in 2009.
In order to meet consumer demand, two large mixed use developments are currently under development and pre-leasing. The first is by Harvard Developments in Regina’s Grassland Community and the second is Century West Developments’ City Centre complex.