Commercial lease rates falling

By Geoff Lee

November 19, 2015 12:29 PM

The downturn in the oil economy has created a mini-glut in the local industrial lease market and is putting downward pressure on lease rates.
Lease rates have dropped about $1 to $2 per sq. ft. this year to as low as $8-9 sq. ft. compared to 2014 according to Keith Weinbender owner of Century 21 in Lloydminster.
“Stuff that was $12 a year ago is in the $11-12 range this year,” said Weinbender.
“It’s supply and demand,” he said.
“There’s more supply than there is demand, (so) if you’re going to be leasing, this is probably a good time do it because of the downward pressure on lease rates.”
Mergers and acquisitions in the oil sector by some of the larger companies, along with layoffs, has increased the inventory of leasable space.
“They don’t need as much space as they had before,” said Weinbender.
“It’s a lessors’ market right now (and) for people who want to get into leases this is a good time to jump in.”
He said when the market drops like it has, there are always people with cash ready to take advantage of good opportunities to buy or lease.
“I think that will happen, ” said Weinbender.
There still is money in our city so they’ll be people looking for deals.”
Over at Musgrave Agencies, general manager Scott Musgrave said he expects lease rates across the market for industrial space to drop “somewhat” this year.
However he stressed our strongest growth market this year is industrial.
Musgrave noted his company is having one of its busiest sales years with more listings available.
“There are companies that aren’t looking to expand; there are companies that have excess space — we have done more industrial sales this year than we have the last three years.
He said there are three industrial developments (parks) at the moment with sales opportunities in all three from one to 35 acres.
“Last summer if you were a business looking for a 5,000 sq-ft building, you couldn’t find one (but) this summer you could,” said Musgrave.
“We were able to find product for some of the pent-up demand.”
Weinbender said more and more commercial and industrial space is coming on the market and along with it added pressure to cut rates.
“As leases come due some of them are not being renewed,” he said from the San Diego airport where he was waiting for a flight home.
“There’s some that are being renewed, there’s pressure on the owners to reduce the rates,” he said.
“Most of the pressure for lower rates is on the industrial side.”
Musgrave added he doesn’t believe there’s an over abundance of commercial space for leases.
“For quite a few years we were waiting for new buildings to be built,” he said.
“It was all kind of leased even being prior to being built.”
“I am sure that isn’t the case right now — there’s more empty space that we’ve had in the last number of years for sure.”
He noted the inventory of buildings for lease ranges from small to large, and he doesn’t foresee a quick change to the inventory.
“I suggest it’s going to stay that way for awhile until the pressure’s off the oil,” Musgrave said.
“Right now there is downward pressure on the industry and some buildings may be difficult to lease.”

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