No Match Found
Like Calgary, Edmonton’s real estate market is facing challenges not only due to the COVID-19 pandemic but also because of the struggling oil and gas sector. What can we expect for Edmonton real estate in 2021, and how can real estate companies navigate a changing business landscape?
The market has been very challenging to predict lately, particularly for areas like retail properties but also for other commercial real estate categories like offices. The Edmonton office market recorded 51,000 square feet of negative absorption in the third quarter of 2020, pushing vacancy to 19.9%, according to CBRE. Short-term deals and renewals are becoming more prevalent as tenants look for flexible options during these uncertain times.
This is especially true of industrial real estate which, like in other areas of Canada, is a best bet once again this year amid the rapid growth of e-commerce. According to CBRE, Edmonton’s industrial real estate market experienced 1.8 million square feet of positive absorption in the third quarter of 2020, in part due to the completion of two major properties: Amazon’s distribution facility in Border Business Park and Fountain Tire’s building in Route 60 Industrial Park. Many oilfield services companies that took a pause on activities in March at the start of the pandemic have resumed operations, while ongoing pipeline construction has also helped the industrial market.
We’re increasingly seeing winners and losers within asset classes. While grocery-anchored properties have generally been a bright spot in the struggling retail sector, in Edmonton’s housing market, more affordable homes valued at CA$350,000 or less have been the winners, particularly in the multifamily category.
We also see some notable differences from the national real estate trends. While this year’s national report looks at signs of a potential uptick in suburbanization in some areas of the country as people adapt to working remotely and seek more space, we’ve yet to see that happen in Edmonton.
This is partly because, for the past two decades, the city has seen a revitalization of the downtown core. A new arena, condominiums and office towers have brought back retail and hospitality-based businesses, making the downtown more attractive to residents. But while COVID-19 hasn’t reversed the urbanization trend, it has put a hold on some of the growth that was already taking place. We see this reflected in high vacancy rates in the downtown condo market. People may not be moving to the suburbs in significant numbers, but some are looking for more affordable housing options outside of the downtown core.
As for questions about the pandemic’s long-term impacts on offices, the outlook is also somewhat different in Edmonton and Calgary from the national trends. As my colleague Ian Gunn, PwC Canada’s Calgary Real Estate Leader, noted in his Calgary perspective, Albertans have been showing a greater interest in returning to offices than workers elsewhere in Canada.
While the motivation in Calgary and Edmonton has tended to be on the social aspects of the workplace, in both cities, we’re seeing some larger companies requiring employees to come back to the office due to the productivity benefits. Maintaining productivity was a significant concern for Albertans participating in our recent Canadian workforce of the future survey, with 43% citing this as a top work challenge since the disruption of COVID-19.
Many of these trends point to some of the opportunities in Edmonton’s real estate market despite the economic downturn. As they look ahead to an uncertain environment in the coming months, how can real estate players position themselves for success?
One of the key trends this year is an acceleration of repositioning portfolios. In the retail sector, we have yet to see much evidence of redevelopment and repurposing of properties in Edmonton, in part because government subsidies during the pandemic have helped many retail tenants survive the downturn so far. But retail property owners know those supports will come to an end, making it critical for them to plan for how they’ll adapt in the future. Office landlords, too, should get ahead of lease expiries to explore how they can work with tenants to adapt to a changing workplace.
Even as they’re being very careful in their investment decisions, real estate players have, by necessity, adopted digital solutions during the pandemic. They now have an opportunity to continue to add value by embracing digital solutions that address immediate needs, particularly when it comes to touchless technologies, products that increase efficiencies and opportunities to improve experiences through digitization of processes.
The real estate industry’s rapid adoption of property technology in recent months is just one example of how quickly it can adapt to sudden change. But we also know that many of the recent changes are here to stay, which makes it more important than ever for Edmonton’s real estate industry to get ahead of the accelerating trends we’re seeing in 2021 and beyond.