Research & Forecast Report RETAIL

2018 A Positive Outlook for Saskatoon’s Retail Sector In 2017, Colliers reported that the average net rent in ­Saskatoon was $25.00 per square foot. In 2018 For some years now, the retail sector has been Saskatoon’s ­strongest ­average advertised rates have dropped to $23.00. New asset class, with healthy levels of vacancy and investor­ confidence. ­construction has an average asking­ net rent of $33.00. A Market activity over 2018 shows this year to be no exception.­ ­Leasing survey of leases completed by Colliers shows an ­average activity continued to be brisk, with ­approximately 170,000 square ­difference of 13% between advertised and effective net feet of space transacted. As in 2017, new construction­ ­continued rents (the true cost of the lease over the term); most of in many of the new residential ­neighborhoods, increasing­ retail this figure is made up of tenant improvement allowances. ­inventory by approximately 200,000 square feet, with a further­ 240,000 square feet expected to be brought to market in 2019. As in many mid-sized cities across Canada the closure of Sears New Development ­continues to have an impact on the Saskatoon market, ­however, New construction was significantly lower than previous malls such as Plaza and at Circle & Eighth years, with 195,000 square foot of space completed, just over have used the opportunity to renovate and relaunch their offering. 130,000 of which is accounted for by Meadows Market in The Meadows (see ‘New Tenants’ below). Dream Centres Saskatchewan contributed 21.9% to national retail sales growth, is expected­ to complete their 311,000 square feet Brighton third only behind Toronto and Alberta, respectively, according to the Marketplace in 2019. Anchored by Motion Fitness and Save ­Retail Council of Canada. Retail sales in the province grew 2.7%, on Foods this project is currently 80% pre-leased; and as with only a percentage point behind the national average and confirming most neighbourhood developments in recent years, is focused retail as an important economic driver. on food and service brands. Vacancy and Rental Rates The Centre at Circle and Eighth and Midtown Plaza are Nationally, the retail vacancy rate stands at 6.92% for 2018, ­undertaking considerable capital projects to rebrand as luxury ­according to a Colliers national survey. Saskatoon compares very and entertainment destinations after the loss of Sears and favourably with this at 5.23%, or 4.22% when the Sears vacancy Target. However, both these projects will be repurposing is excluded (see ‘Trending’), a drop of 0.33% from the same period space rather than breaking ground with new development. in 2017. Historical Performance and Forecast The enclosed mall vacancy rate averages at 8.5%, once the figures have been adjusted to account for the loss of Sears and Target, 17.4% including those losses.

Retail Sales Growth

Currently Under Average Rent Average Rent Retail Vacancy Vacant 2018 Construction Absorbtion Construction (Entire Market) (Asking New Constru ction) 5.23% 716,614 SF 310,760 SF 195,607 SF 128,993 SF $23 PSF $33.60 PSF

2 Research & Forecast Report | 2018 | Saskatoon Retail | Colliers International Trending r­etailing laws has allowed private vendors into the market, an opportunity taken up by most of the large grocery chains as well The collapse of Sears in 2016 left almost six million square as specialist vendors such as Urban Cellars and Metro Liquor feet of prime retail space vacant across Canada. The chain (see ‘Trending’). ­occupied very large spaces which has challenged landlords to be creative­ with their offering in the wake of the collapse. Economic Factors and Forecast Midtown Plaza, in the heart of downtown, has been left with Saskatoon’s Real GDP growth for 2018 is forecast to be 2.2%, ­approximately 166,000 square feet of vacant space spread over outperforming provincial levels. Levels of unemployment are three floors in anotherwise ­ fully-occupied mall. In November ­expected to remain above both national and provincial levels. 2018 it was announced­ that Mountain Equipment Coop would be with an expected 2018 rate of 7.8%. The Conference Board of leasing 20,000 square foot of space, currently occupied by the Canada believes this 21-year high is due to an expanded labour food court, which will be moved to the second floor of the Sears force, as job seekers gained confidence after the economic gains ­location. An estimated $80-million refurbishment of the Sears made in 2017. Construction, retail and health services continue space, reported­ by multiple media outlets, mirrors­ trends among to be the dominant industries in the city. other enclosed malls across ­Canada which are ­rebranding as Saskatoon’s population is again forecast to grow by over 2% in luxury shopping, dining and ­entertainment ­destinations in order­ 2019, ahead of the national 0.9% expected for the same period, to combat the online shopping revolution. further aiding the retail and housing sectors. The legalization of marijuana has been a major news ­story 2018 has been a quiet success story for the Saskatoon retail throughout 2018, however, there has been little ­measurable market. The city continues to punch above its weight in terms ­impact on the retail market. In total seven licenses to sell of retail sales and is tackling problems faced by retailers across ­marijuana were granted for Saskatoon. At the time of writing, Canada in a creative and positive manner. Service and food lines only two of these have translated into an active store. While not continue to dominate new construction, while the major malls are as extensively covered in the media, the relaxation of provincial turning to luxury branding and creating a retail ­‘experience’ for liquor retailing laws has had major impact on the retail landscape shoppers. Investor and public confidence in the local ­economy is of the city. It is estimated that approximately 150,000 square beginning to rise after the uncertainty of the last three years. It feet of space, both new and repurposed, has been or will be is expected that 2019 will build on the solid gains made in 2018 absorbed by liquor retailers, a positive trend that is forecast to to retain retail as Saskatoon’s strongest asset class for investors continue into 2019. and developers alike.

New Tenants Notable Retail Transactions Overall there has been little activity from national brands looking­ LEASED LEASED to enter the Saskatoon market during 2018. Those that have are ­focused on food and fitness, a trend previously noted by ­Colliers in 2017. In August 2018 Arbutus’ Meadows Market opened with

­Marshalls as anchor tenant, following the national (and wider North Industrial The Meadows North American)­ trend for discount and luxury brand expansion Mission Thrift Marshalls Leased 20,940 SF Leased 25,000 SF while mid-price retailers falter against online competition. In a 2018 report, Deloitte described this gap as the “great retail SOLD LEASED bifurcation’’. Taco Bell entered the Saskatoon market for the first time,opening ­ three locations on 8th Street East, West and Millar­ Avenue with a fourth in Stonebridge expected to open in early 2019. Planet Fitness continued its Canadian expansion with a new location of 23,000 square feet in the former Zellers space North Industrial Brighton Trafalgar Square Shopping Centre Landmark Cinemas at , which shuttered in 2012. Relaxation of liquor­ Sold 24,325 SF Leased 33,000 SF

Research & Forecast Report | 2018 | Saskatoon Retail | Colliers International 3 MARKET CONTACT: 413 offices in Richard Jankowski Managing Director | Saskatchewan 69 countries on +1 306 664 1644 [email protected]

6 continents Susie Lalonde Market Intelligence Coordinator | Saskatchewan United States: 145 +1 306 664 1241 Canada: 45 [email protected] Latin America: 23 Maxwell Lee Asia Pacific:86 Sales Associate | Saskatchewan +1 306 664 1649 EMEA: 131 [email protected]

CONTRIBUTORS: Tanis Macala | Marketing Coordinator

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