With a population of more than 1 million, Edmonton, Alberta, is Canada’s fifth-largest city. It is a major hub for Canada’s oil and gas industry, which produces more than 4.6 million barrels of crude oil per day. The surge of jobs in the energy sector has helped the city’s population grow by more than 9.5% during the past five years.
Edmonton is also a crucial part of Canada’s commercial real estate segment. According to “Economic Impacts of Commercial Real Estate in Canada, 2022 Edition,” published by the NAIOP Research Foundation, commercial real estate in Edmonton contributed $5.5 billion to Canada’s national GDP in 2021, including $2.2 billion in wages and salaries.
Anand Pye, executive director of NAIOP Edmonton, recently spoke to Development magazine about CRE trends in the Edmonton region.
Development: How are the market conditions for member companies in Edmonton?
Edmonton’s commercial real estate market is recovering from the COVID-19 pandemic, with a resurgence in both interprovincial and international migration underpinning growth. Alberta continues to attract investments and new residents because of its competitive business environment and low cost of living, coupled with strong job growth and high median incomes. (According to Statistics Canada, Edmonton’s unemployment rate was at 4.9% in July, the lowest since 2015.) Edmonton’s commercial real estate sector has also seen a significant inflow of out-of-province capital seeking higher risk-adjusted yields relative to those found in Ontario and British Columbia. These capital flows have kept pricing for high-quality industrial and multifamily assets stable.
Development: What are the challenges you’re facing in either the business or regulatory climate in your area?
The recent rise in both interest rates and construction costs has tempered transaction and development activity to a degree. Supply chain issues continue to persist, which affects project delivery timelines and makes project budgeting a challenge. The resurgence of activity in Alberta’s oil and gas sector, as well as a lack of in-migration during the COVID-19 pandemic, means access to labor continues to be a challenge for developers and tenants.
Edmonton’s taxation policies have pushed some commercial development to adjacent municipalities. Countering this, the city imposed a five-year property tax rebate grant on new residential projects started within the city core. New municipal councils in the Edmonton region have led to some uncertainty in land-use and development policy. However, we see this as an excellent opportunity for NAIOP to demonstrate the importance of commercial real estate, and new non-residential property taxes, to these new legislators.
Edmonton is surrounded by low-tax municipalities. To remain competitive, NAIOP Edmonton is working with the city to find ways to attract new industrial development. One of the main areas we continue to work on is permit timelines. Having the certainty to obtain all permits in a timely manner is key in the decision-making process. Given the delays that developers are facing throughout the entire project cycle, we believe that Edmonton needs to continue to commit resources to expediting permits and creating more certainty around timelines.
Development: What are the big opportunities in commercial real estate in your area right now?
Large-format industrial continues to be an area of growth in the market. Edmonton is emerging as a significant distribution hub, occupying a strategic inland location relative to the expanding Port of Prince Rupert in British Columbia, which offers the shortest shipping times between Asia and Chicago. An increase in spending on oil and gas supplies and services has also improved the fundamentals for energy-related tenancies. The industrial sector continues to see a positive correlation between inflation and lease rates.
The Edmonton International Airport recently announced that it will build a 2,000-acre international cargo-handling hub adjacent to the airport. This is expected to activate more industrial development in south Edmonton/Leduc/Nisku.
Despite almost 24 months of limited in-migration to the region, multifamily development has been strong throughout the pandemic. Much of this has been supported by developers being able to access loans through the Canada Mortgage and Housing Corporation’s MLI Select program, which offers up to 95% loan to cost and 50-year amortization periods. The end of pandemic-related travel restrictions has seen apartment vacancy rates drop significantly in all unit types, from high-end apartment to workforce housing.
Development: What are some of your legislative priorities?
As of October, NAIOP Edmonton’s advocacy committee has split into three separate committees, each with their own members and mandates.
The Industrial Committee is working with Edmonton to open up new industrial land in the city through major investments to make areas more accessible, as well as a new industrial cost-sharing infrastructure program to get other industrial land to market sooner. Making sure that investments are made in areas with a high property tax return for municipalities is a goal of NAIOP overall, and these investments will make our region even more attractive to large new tenants.
The Retail and Mixed-Use Committee is working hard on the new Edmonton zoning bylaw, which will streamline zones, make them easier to use, and put them more in line with the mix of uses and density desired by both developers and the city. This group is also working with the provincial and federal government to make sure that the new federal-provincial childcare agreement allows existing private daycares under construction to open.
Finally, NAIOP Edmonton is proud to be a founding member of the Edmonton Downtown Recovery Coalition, which is represented by some of our major members as well as more than 20 community leaders and non-profit organizations (Pye serves as co-chair). The group launched publicly in September and has been advocating for the past year on measurable improvements to safety and security; cleanliness and maintenance; and transformational projects and unique offerings downtown.
Early wins include the Edmonton/NAIOP Downtown Lighting Program, where the city will match private investments in lighting the public realm. This $1 million pilot program is expected to improve safety and create jobs.
Development: Education is an important part of NAIOP’s mission. Have there been recent educational sessions specific to your chapter recently?
NAIOP Edmonton is considering working alongside RECA (Alberta’s regulatory body for the real estate industry) and local post-secondary institutions to help provide programs to new entrants into the industry. NAIOP Edmonton is in an excellent position to lead these kinds of programs because our members can provide real-life case studies and insights from active developments. This program is in the early stages, and conversations are ongoing.
We are also looking forward to bringing back our popular case study competition, which allows university students to pitch development plans for a real site, judged by the actual owners of the development. Before the pandemic, this competition grew every year, with bigger events and more real-world subject matter experts. It is now open to universities outside of Alberta, and we look forward to announcing the competing universities, and the site, in January.
We are also restarting our university mentorship program in conjunction with the University of Alberta Real Estate Club. This program pairs mentors from our Developing Leaders board with mentees from the university — allowing for the transfer of knowledge and experiences from mid-career professionals to students who are just starting out.
Trey Barrineau is the managing editor of publications for NAIOP.