Edmonton industrial property transactions and leasing sectors are brisk as vacancy rates remain low, according to real estate experts in the region.
“Anecdotally, this is the most $10-million-plus sales I’ve seen in the Edmonton region in a long time and we’re only half way through the year,” Chad Griffiths, partner with NAI Commercial Real Estate in Edmonton, told RENX.
“There’s still a lot of uncertainty with interest rates, but that’s not scaring buyers away who are still picking up these assets.”
Low as those vacancy rates are, they still provide some leasing opportunity which is missing in the Vancouver and Toronto markets where vacancies are negligible. However, the bulk of investment activity in the industrial market has involved trading by local players, with only a few large institutional or national sales on the books for the last six months.
Who is buying, selling and leasing?
Dave Young, managing director at CBRE Edmonton, said larger institutional activity has sometimes been due to sellers looking to free up capital or investment funds dealing with sunset clauses that present a timing issue.
But large high-net-worth family offices in Alberta are taking advantage of opportunities, he suggested.
“You might see pricing impacted, valuations drop a bit, because it’s private sector deals under $30 million. But I think some of these family offices are going to venture out into larger opportunities,” Young said. “For the right product, there are multiple players looking at offerings in the market."
One factor creating churn in the market is a flight to quality from B and C buildings to new construction. Richard Darling, managing director at Colliers Edmonton, said new industrial buildings in the 25,000-square-foot-and-up category are attracting buyers due to features such as higher ceilings, more efficiency and better environmental sustainability.
“I think that’s the reason some of the owner-investors are changing over some of their product, because there’s a big capital expenditure expectation in terms of improving their buildings,” he explained.
Young said Edmonton is maturing as a distribution market thanks to ample transportation routes and intermodal hubs in the city and direct rail to the international port at Prince Rupert in neighbouring British Columbia. Competitive land prices and lease rates are also driving growth, he added.
Stable lease rates make market attractive
Prices have been stable for some time in the Edmonton region.
“We’re probably the only market that hasn’t seen a big increase over the last 10 years,” Griffiths said. That’s unlikely to change much unless interest rates continue to rise, or there’s volatility in oil prices, he added.
Lease rates have also been stable, making Edmonton’s industrial properties attractive to renters.
Darling says the average lease rate is $10.45 per square foot in 2023, up from $9.40 in 2020. By contrast, Vancouver has no inventory and lease rates are starting in the $18 range, he said.
There is some upward pressure on lease rates, say some experts, particularly for larger-scale requirements.
Edmonton-area leasing, sale activity
Some new construction is leasing up even before completion.
Other news in Edmonton's industrial sector:
- Five-building portfolio: CBRE is marketing five industrial buildings with a total of 540,000 sq. ft. in Edmonton’s west end and south side. Two of the buildings are multi-tenant and three are single-user facilities. All are fully leased. There is no list price or bid date on the portfolio and there’s flexibility for offers on the entire group or parts of it, according to the CBRE marketing brochure.
- Loblaws distribution centre: CBRE is also the broker for a leaseback sale offer from Loblaws for its 365,000-square-foot food distribution centre at 16104 121A Ave. in northwest Edmonton. The property comes with a 10-year fixed lease term with Loblaws.
- Edmonton-based Nearctic Property Group recently sold two $2- to $3-million buildings and has five more buildings in the same price range that are under contract and expected to sell, Nearctic Property Group President and COO Sean McCullough told RENX.
- Two industrial parks in the Edmonton region were sold early in the year in the portfolio deal between Healthcare of Ontario Pension Plan’s subsidiary HOOPP Realty and Skyline Commercial Real Estate Holdings of Guelph, Ont. One was the Rampart Industrial Park in Leduc at $67,750,000 and the other comprised five buildings in Wilson Industrial in Edmonton for $94 million.
- The 375,000 square foot Aurora Polaris Cannabis warehouse and production building in Leduc sold to an unnamed buyer for $15 million in January according to The Network, an Edmonton real estate information service. The building was originally valued at $50 million when it was built in 2019.