2014 YORKTON RETAIL VACANCY SURVEY

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1 2014 YORKTON RETAIL VACANCY SURVEY PREPARED BY KIMBERLY MABER, B.COMM, AACI, P.APP BRUNSDON JUNOR JOHNSON APPRAISALS LTD. # TH STREET WEST SASKATOON, SK S7M 0X1 TEL: FAX: WEB SITE: BRUNSDONJUNORJOHNSON.COM

2 CITY OF YORKTON Yorkton is located along the Trans-Canada Yellowhead Highway #16 in east central Saskatchewan between Saskatoon and Winnipeg. It is 188 km northeast of Regina on Highway #10,Yorkton is 85 km west of the Manitoba border and 322 km southeast of Saskatoon. Other highways intersecting the City are Highway #9 from Hudson Bay to the US border & Highway 52 from West Central SK. According to information provided by the City Economic Development Department, the current population is approximately 19,038 people representing a 3.32% growth over the past year. Yorkton serves the third largest trade region in the province servicing approximately 150,000 people. This indicates a very stable population base which is expected to continue to grow. Transportation facilities include two rail lines, STC and Greyhound Bus Lines, air services and over a dozen trucking firms. Yorkton is the distribution centre of east-central Saskatchewan. Communication services in the area include three radio stations, one TV station & cable TV services, two bi-weekly newspaper services plus daily newspapers from Regina, Saskatoon and Winnipeg. The area has good rolling arable land for the most part, ideal for mixed farming. In addition, the area is known for its production of pork, beef, chickens and turkeys, with most production coming from mixed farms. A few producers specialize and produce on a larger scale. There are two large abattoirs in Yorkton. The economic base for the city continues to be agriculture, but also includes: manufacturing, food processing, construction, information & cultural industries, professional, retail trade, and healthcare. Two canola crushing plants (JRI and LDM) are operational in Yorkton and area and have each built 70,000 metric ton canola crushing plants. Grain Millers of America processing Oats, has also added significantly to the value added work force in the City. The largest employers in the manufacturing industry in the city are Morris Industries Ltd. and Leon-Ram Enterprises Inc. Morris specializes in farm air seeding and tillage machinery manufacturing and Leon-Ram manufactures Leon agricultural equipment, RAM hydraulics, and RAMROD skid steer loaders. These types of industries are not large enough to offset major downturns in the agricultural sector, however, they are a very favorable influence on the city, helping to stabilize the economic base. Construction activity increased to $40.7 million in 2013 from $39.1 million in 2012, still a decrease from an all-time high of $66.1 million in The decrease was primarily due to a decrease in all permits, except residential. The City was constructing a new water treatment plant and a new fire hall building to manage the future growth and development, while maintaining service levels. These projects are already completed, resulting in a difference in total construction value between 2008 and 2013.

3 City of Yorkton Building Permits Year Residential $15,187,089 $16,444,953 $15,106,246 $17,699,820 $20,582,895 $10,955,615 $21,029,630 Commercial $23,831,289 $8,408,143 $27,766,550 $7,058,600 $10,113,471 $28,112,500 $15,322,231 Industrial $0 $25,056,204 $3,538,620 $76,000 $2,600,000 $0 $1,850,000 Institutional $4,707,500 $16,186,825 $1,960,000 $2,063,000 $1,210,244 $0 $2,513,650 According to the MLS service, an indicator of the real estate sales market, the 2013 residential gross sales volume of $115.4 million was up from $104.2 million in 2012, and the average house selling price was $174,373 in 2013, up slightly from 2012 at $152,151. This includes both urban and rural residential properties. FUTURE EDUCATION & POTASH MARKET DEVELOPMENT Saskatchewan s economic boom in mining, construction and value-added industries has created a need for more training capacity, specifically in the skilled trade s area. The recent increase in demand for skilled trades led Parkland College, a Yorkton campus, to expand its existing facility. The College is undergoing a 26,910 square foot expansion in order to meet the future training needs. The project is expected to open in September Mosaic, one of the largest potash producers in Canada, based in Esterhazy, Saskatchewan, completed its expansion in December 2011 of K1, K2, and K3 shafts. Over the next five years, 250 jobs will need to be filled as a result of retiring workers, and 250 new jobs will be created due to K3 expansion. With Potash Corporation of Saskatchewan (PCS) expanding their facilities, there is over $4.5 billion being invested in existing PCS mines. The mines are located near Esterhazy, approximately 90 kilometers south of Yorkton. The City of Yorkton, as the regional center, may be the first choice for most of the new workers as far as housing or conducting their other business is concerned. RETAIL AND COMMERCIAL MARKET The study was conducted as of March The overall vacancy in the city has increased from 2.2% to 14.7% between 2011 and The most significant vacancy is in the enclosed mall, which is experiencing 22.4% vacancy, largely due to the closure of Sobeys that occupied 31,370 square feet of space. The retail strip mall category is experiencing 5.9% vacancy, which is a healthy vacancy rate for the Yorkton market. Given the higher vacancy levels in Yorkton, tenants have more options and the overall rental rates are not expected to increase in the near future.

4 STUDY AREA AND INVENTORY The study area is the retail space contained either in strip malls or the enclosed mall in the city. Excluded from the analysis were retail buildings that had two or less units, free standing buildings (owner occupied and big box retail), and multi-story mixed use buildings. The survey only includes the primary retail strip located along or within a couple blocks of Broadway Street. The strip retail area is concentrated on or within one block of Broadway Street, which runs the entire length of the city in an east/west direction. This highway commercial strip was anchored on the west end by the West Broadway Mall site, the mall was demolished in 2001 and this is the site of the new C-Store Gas Bar and the new casino complex. The east end of Broadway is anchored by the Parkland Mall, and all the new Big Box Retail. The downtown core situated approximately halfway between these. The total inventory included in this study for 2014 is 502,710 square feet. RETAIL MALL SPACE OVERVIEW The Yorkton market has a relatively small strip and enclosed mall component, with slightly less than 505,000 square feet. As a result, the addition of any retail development, 10,000 square feet or more, can have an impact on the vacancy over the short term. Establishing absorption figures over a period of time is one of the objectives of the study and will come into play in the future as historical information is available. The information gathered and summarized on the following table is effective as of March The West Broadway Mall was removed from the survey calculations in 2000 as it was closed and then demolished in The following table summarizes vacancy for Yorkton since Retail Mall Vacancy Survey March 2014 Category Area Area Vacant Vacancy (SF) % (SF) Enclosed Mall 267,360 53% 59, % 6.2% 17.6% 2.5% 2.5% 2.0% 3.4% 4.0% Retail Strip 235,350 47% 13, % 1.8% 7.1% 7.1% 5.0% 6.5% 10.0% 21.5% Total 502, % 73, % 2.2% 12.6% 4.7% 3.6% 4.2% 6.5% 11.9% The overall vacancy is 14.7% with 5.9% in the strip mall category and 22.4% in the enclosed mall category. The vacancy rate has increased significantly from three years ago. The enclosed mall has the highest vacancy rate largely due its thirteen vacancies totaling 28,599 square feet and the recent Sobey s grocery store vacancy of 31,370 square feet (representing approximately 52% of the enclosed mall vacancy). If Sobey s had not vacated, the enclosed mall vacancy would be near 11% and is at the higher end of normal

5 vacancy for a single building in a community the size of Yorkton. As such, the effect of a large single tenant or construction of a large retail building can have a significant impact on overall vacancy. In addition, the mall has suffered vacancies over the past couple of years largely due to the big box development occurring within the area. That being said, some newer tenants have relocated into the mall more recently. On an overall basis, there is a significant amount of vacancy to be absorbed in the Yorkton market, which may impact future asking rates in this mall and may slow other retail growth. The retail strip market also saw increases in vacancy to 5.9% in March 2014 up from 1.8% in The strip retail market is also being influenced by the new retail construction. The 13,797 square feet of vacant space available in the retail strip malls, although up from previous years, is considered a healthy vacancy level for a community the size of Yorkton. That being said, though, Yorkton s entire vacancy market must be considered when analyzing this sector. The high vacancy in the enclosed mall is having an influence on the retail strip malls as some tenants that were previously located in these retail strips have relocated into the enclosed mall. As such, the overall market vacancy of 14.7% is the highest experienced since 2008, and the retail sector is expected to experience a slow down until a more healthy level of vacancy is achieved. RENTAL RATES Rental rates for the newer strip malls are in the $15.00 per square foot to $20.00 per square foot range, which appears to be well in line with retail developments in other cities in the province, except Regina and Saskatoon. The rental rates in existing malls appear to be in the $8.50 per square foot to $12.00 per square foot net range. Leasing inducements, which can include rent free periods and/or tenant improvements, have been minimal to non-existent over the past several years. This trend may change over the coming year with the higher vacancy levels in the Yorkton market. ACKNOWLEDGEMENTS Our sincere appreciation is extended to Brent Haas and Jennifer Gillis of Remax Blue Chip Realty of Yorkton, who provided significant information for this study.