An expected boom in Edmonton’s downtown population is being credited for driving residential construction and positive prospects for commercial leasing.
Colliers’ fourth-quarter 2018 office market report shows last year was the first year of positive office space absorption in Edmonton in the past four years. The majority of that absorption, 333,094 square feet, occurred downtown.
“We’re starting to see the office market stabilizing and we’re seeing people actually looking into the downtown core,” says Fahad Shaikh, vice-president office and healthcare real estate for Colliers in Edmonton. “There is a sense that more people means more vibrancy in the downtown. . . . There’s seven new (residential) high-rise starts under construction, or going to be done, in the next two or three years.”
The Colliers report also lists another seven residential high-rise projects in preliminary planning.
Despite the positive office absorption, the vacancy rate in downtown offices is still hovering at about 16 per cent However, the Colliers report notes a projected 88 per cent growth in Edmonton’s downtown population between 2016 and 2030 should improve the overall vitality of the core.
Tech sector part of downtown revival
“More people means more vibrancy. More vibrancy means more commercialization. We’re starting to see that. There’s more restaurants, more things to do — there’s the casino and there’s the arena,” says Shaikh.
Shaikh says companies are deciding to move downtown based on where their employees are living and likely to live. He particularly singles out the tech sector. Homegrown gaming company Bioware recently moved from the suburbs into the core and British gaming firm Improbable recently established an office in downtown Edmonton.
“The people (technology firms) attract are typically the ones that like that urban lifestyle. They like amenities nearby. They like their own ecosystem within walking distance,” says Shaikh.
Residential developers are responding quickly.
Seven residential projects under development
Projects under construction include condos such as Sky Residences and The Legends in the arena ICE District, and the Encore and the Symphony towers. They also include apartment rental market projects including the Augustana on 107th Street and a couple of office-to-residential conversions in the government district which will also be apartments.
Procura’s Mayfair apartment building, one of the first up and succeeding in the core, is designed with condo-quality construction and amenities to capture the modern market, says company CEO and president George Schluessel.
The projects listed in the Colliers report as under construction come onstream this year and next. Regency Developments’ proposed tower smack in the heart of the city’s financial district is targeted for 2022.
Raj Dhunna, Regency’s chief operating officer, seems unperturbed by the number of competing properties.
The company has two other projects also underway close to the downtown, one near the Brewery District and the other in the Oliver neighbourhood adjacent to the core. He says those experiences will help Regency stay flexible and learn what works and doesn’t work before finalizing the details on the 101 St. tower.
The as-yet-unnamed tower was expecting development permit approval as early as this month, Dhunna says.
The plan is to spend 18 months building an underground parkade on the former site of a BMO bank, and then start working on the above-ground portion which could include a 12-floor hotel and a 50-storey residential tower.
Differing views on downtown Edmonton
Dhunna is considering the possibility of that tower being purpose-built for the rental market.
“The millennials seem to not want to commit to the white picket fence or housing situation,” says Dhunna. “There’s a lot of potential for growth. ”
The most recent figures provided by Edmonton’s downtown business association indicate about 65,000 people work in the downtown, but only about 16,000 people live in the core.
Schluessel is a little less bullish on the market.
The next couple of projects his firm will break ground on are on the south side of the city. His firm is a minority partner in the 60-storey X Tower proposed for a property adjacent to the Hotel Macdonald in the city centre, but the project doesn’t yet have a development permit.
“We are cautiously going forward with some planning downtown,” says Schluessel. “I’m optimistic the business environment will improve this year, perhaps with the (provincial) election, and we have a federal election. I’m optimistic the politicians will wake up and make a change. If it carries on as it has since 2014, that’s not developer-friendly.”
He would like to see governments reduce property taxes and put more energy into attracting tech-sector firms.
“We need companies to come to Alberta. What we don’t need is musical chairs where companies move from one building to another building. That’s not positive growth or positive absorption,” says Schleussel.
Better mix of businesses, institutions
Shaikh also expresses some caution about too much downtown exuberance on the commercial office side of the equation.
“I think if we had to predict, we would say positive absorption in 2019. We’re still at a high vacancy rate. It’s not going to be drastic. But in 2019 I think we’ll be chipping away at that.”
The Edmonton numbers are more positive than Calgary, which is labouring under a close to 25 per cent office vacancy rate downtown. Shaikh credits a more diverse economic mix for the difference.
The provincial election adds a bit of uncertainty for the downtown market in Edmonton, says Shaikh, depending on who wins the spring vote and whether a new government decides to cut back the government sector.