How to de-risk your speculative CRE build in the commercial sector
As a brokerage, we track existing and new developments in each commercial sector and thereafter
will advise clients when and what to build.
For this discussion I’m going to focus on the Saskatoon industrial market.
As a brokerage, we track existing and new developments in each commercial sector and thereafter advise clients when and what to build.
Feet on the street
We are always communicating with prospective tenants who provide us with a wish list of specifications and features that they may require.
We do see trends emerge with common requests which can include specific ceiling heights, parking requirements, yard dimensions, office layout and clear span interior space.
We can filter this knowledge and advise developers who can then intelligently design and construct buildings that are most functional for current market demand.
Extent of new development
The greatest challenge is trying to assess what is currently on “the drawing board” and in “the pipeline” to be constructed “on spec” which is short for speculative.
Owner occupants who are building for their own use are not a factor here unless they are including extra space in the design with the intent of leasing out the surplus.
Our entire commercial sales team meets weekly to report what each sales associate is working on.
Because of our dominant market share, this usually provides a reasonable overview of what will be built in the coming months.
What we do not always know are those projects which other brokerage firms or private developers are working on.
Our current Saskatoon industrial market lack of supply can happen in any sector.
The cycle goes something like this: We first see strong demand and absorption because of a healthy economy.
Existing inventory is depleted and no longer able to keep pace with demand.
Many developers see an opportunity and jump in to try and satisfy that demand. Too much is then built, and an oversupply is created.
A knowledgeable commercial real estate broker can provide solutions to these market cycles.
The answer exists in collecting the current development data and projecting demand.
This intel is not free.
For a broker to share this market knowledge, it’s necessary for a developer to engage the broker to market the project if the developers decide to proceed with the recommendations provided.
Pondering a spec build commercial real estate project?
Why not sit down with one of our sales team and give us the opportunity to determine if the timing is correct for your development vision.