Some Edmonton developers are honing in on the construction of warehouse space in the wake of the Trans Mountain pipeline expansion project, suggests a new report tracking the area real estate market.
“I think that the market itself is stabilized, there are some areas that still may have a little bit more concern, but for the most part I believe we are through the worst of it. We’ve gone through a tough run, but we’re not going to evaporate,” Dave Young, executive vice president and managing director at real estate and investment services firm CBRE, said this week.
The pipeline expansion creates jobs, and jobs demand the need for space, said Young, adding the latest numbers are sparking cautious optimism.
Edmonton has 1.9 million square feet of industrial product currently under construction. In the second quarter, 672,802 square feet of new industrial space became available in Edmonton, the majority of which came with the completion of MTE Logistix’s 500,000-square-foot warehouse.
“In anticipation of significant demand for warehouse space resulting from the Trans Mountain pipeline expansion project, some developers are considering launching projects on a speculative basis,” notes the CBRE report.
And with an 8.2 per cent availability rate, “our industrial market is very healthy,” adds Young.
The National Energy Board (NEB) on Friday cleared the way for construction to resume on portions of the Trans Mountain project between Edmonton and metro Vancouver by re-validating all the orders and decisions it received before its permits were overturned last year.
But Edmonton is not a one-trick pony, notes Young.
“We’re only third to Toronto and Vancouver in terms of economic diversification,” he said, noting part of that diversification will come from fostering a network of locally-based tech companies.
The tech hubs of Vancouver and Toronto now share the title of North America’s hottest office markets. Vancouver’s office vacancy rate dropped to 2.6 per cent in the second quarter of 2019, from 4.7 per cent only a year ago. Toronto’s downtown office vacancy rate remained stable at 2.6 per cent amid a construction boom in the city’s core, shows the CBRE report.
“There needs to be that network or ecosystem that exists. Toronto, Vancouver, Montreal, they have that and continue to grow it. We’re now starting to see it. I can see in the future more tech companies choosing our market, not because of the price of office space, but because of the ecosystem,” said Young.
New technologies in the energy sector and in artificial intelligence in particular will be key to Edmonton, said Young. Research and human resources coming out of the University of Alberta, NorQuest, MacEwan University, and the Northern Alberta Institute of Technology (NAIT) are strengthening Edmonton’s prospects.
The report also shows increased interest from technology firms for quality downtown Edmonton office space, including interest from software and research and development companies. Many tenants are looking for newer, more efficient office space, making some older buildings obsolete. They’re also looking to locate beside similar and complementary companies — especially in the tech sector, said Young.
And while Edmonton’s overall office market vacancy rate increased, the report notes that more suburban office space was leased up — some 30,984 square feet — than was made available on the market in the second quarter of 2019.
“Building off last year’s momentum, when the market recorded its first annual positive absorption since 2015, there is renewed optimism for suburban assets,” states the report.