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Saskatoon's downtown office vacancy rate over 14% and rising, report says

A new report says Saskatoon's downtown office market vacancy rate could reach 20 per cent by the end of 2016.

The report by Colliers International showed that Saskatoon's Central Business District has a rising vacancy rate linked to the decline in the mining and resource sector.

"A lot of the impact is due to the slowdown of the resource sector," Tom McClocklin, managing director of Colliers International in Saskatchewan, said.

"A lot of the engineering firms have pulled back, junior mining companies. Just a bit of an impact from those."

In 2011, CBD was near full occupancy with only a two per cent vacancy rate and it sat at around eight per cent a year ago.

At the end of 2015, the office market had a vacancy above 14 per cent.

"From various leases that are coming up, we think it could increase as high as 18 to 20 per cent," McClocklin said.

A balanced market is considered between seven and nine per cent vacancy.

"Our downtown is quite a small office market compared to that of Regina or other cities, so it doesn't take a lot to make that impact," McClockin said.

"It wouldn't take one or two tenants of significant nature, taking up significant space, [to] make a dramatic difference in our vacancy rate."

McClocklin said that it is good news for tenants who have the opportunity to consider their situation and whether they would like to relocate to better suit their needs.

So far, there has not been a decline in rental rates but landlords may be a bit more flexible when it comes to other things like a tenant improvement allowance or a free rent period.

If the situation sustains for a period of time, lower rental rates could happen, according to McClocklin.

McClocklin said they expect to see improvements to the vacancy rate in 2017.