Over the past few years, Edmonton has witnessed a substantial transformation in new development within the downtown core.
The most notable development has been the construction of Rogers Place and the surrounding high-rise towers of the ICE District projects. The cranes have extended well beyond this district, however, in particular in the high-rise apartment rental sector.
Over the past two to three years the following projects have been built:
– The Oliver, 12230 Jasper Ave., 13 storeys, 207 units, ICM Group / Pangman;
– Mayfair North, 10803 Jasper Ave., 10 storeys, 237 units, ProCura;
– Hendrix, 9733 111 St., 29 storeys, 260 units, Edgar Developments; and
– Edgewater Towers, 8508 Jasper Ave., 26 to 30 storeys, 418 units, Regency Developments.
The preceding list represents more than 1,100 rental units within the downtown district and yet the current vacancy stands at seven per cent.
Edmonton downtown vacancy rates
According to the most recent vacancy report by CMHC, completed in the fall of 2017, the vacancy rates for the three zones in downtown were; 7.1 per cent (Downtown – Zone 1), 9.6 per cent (Hudson Bay Reserve – Zone 2), and 10.1 per cent (West Central – Zone 4), which would cover the popular Oliver District.
Highlights from this publication state, “The purpose-built apartment vacancy rate remained elevated as increased demand was largely offset by additional supply”. The publication further states, “Strong competition for tenants has pushed rents lower for a second consecutive year”.
Notwithstanding this, there is substantially more product being developed and/or in the pre-construction or planning stage. Currently under construction are the MacLaren (240 units – 124 Street/102 Avenue) and the Augustana (216 units – 107 Street/99 Avenue).
Also, just north of the downtown core is “The Vibe” at 10620 116 Street. This project was originally marketed as condominiums and struggled, so it has since been marketed as a rental project. The six-storey, mid-rise building comprises 173 units.
This project, as well as the recently constructed projects, have met with a great deal of success in terms of lease up and occupancy level. This is, again, occurring in a market with a healthy vacancy rate. These projects (MacLaren, Augustana and The Vibe) add another 629 units to the existing supply within the downtown district.
An elevated market vacancy and decreasing rents clearly hasn’t deterred developers from moving forward with new projects.
Supply of new product to continue
In a recent study/research conducted by Altus Group it is estimated that more than 400,000 square feet of land has been purchased or is pending sale within the downtown core (including Oliver), which represents more than $100 million in investment during the past year.
Based on the existing or average FAR (*Floor Area Ratio) of 6.0, a total buildable area would be forecast at 2.4 million square feet. Based on the average unit size for new projects, that represents about 3,400 units. This number just relates to land (acquired) within the downtown district.
It would be acknowledged that some sites might be developed with condominiums.
That said, what is not acknowledged in the preceding figures is the land that has been held by developers, but not recently purchased.
Further, there are a number of older/obsolete office buildings that are being postured for conversion to residential apartment units. This would include the Financial Building, Harley Court and Centre West.
Finally, we would recognize that applications will be made for the land recently purchased which will inevitably increase the density. Over the past few years it has become increasingly common for developers to apply for an increase in density beyond the average FAR of 6.0.
Developers believe time is ripe
Most developers believe it is time for some new rental product, that the existing inventory is old, dated, or obsolete with regard to floor plans and amenities.
Ultimately, the City of Edmonton and in particular the downtown core should be prepared for a considerable infusion of new rental inventory.
How much depth is there in this market? – It seems that there is plenty.
* Floor Area Ratio (FAR): The floor area ratio (FAR) is the relationship between the total amount of usable floor area that a building has, or has been permitted for the building, and the total of the lot on which the building stands. The potential developable building area of a site is calculated by multiplying the allowable FAR by the site area.