By Erika Siegert, Senior Analyst, National Research Insights | August 20, 2020

Industrial and land remain the preferred asset classes among investors in struggling Edmonton market

The second quarter of 2020 saw the resulting impact of the rapid spread of COVID-19, and the massive shut-down that was necessitated in response. During this quarter, the Edmonton commercial real estate market recorded 79 transactions representing an investment value of $249 million, bringing the total for the first half of 2020 to $1.3 billion. Despite the pandemic impacts, the first half of 2020 is up slightly from the $1 billion recorded in the first half of 2019. This is due to a relatively strong first quarter to begin 2020, but also indicative of the additional market pressures that Alberta has faced prior, and now in addition, to the pandemic. Still, the 79 total transactions this quarter saw a drop from the 108 transactions recorded in Q2 2019, and 132 in Q1 2020. Pressures such as the turbulent global energy market and constraints on the ability to supply the market with Canadian oil are all contributing to slowdowns within the energy sector and continue to affect Edmonton’s commercial real estate market – effects that may have a longer lasting impact on the local economy than the pandemic itself.

(Edmonton property transactions – all sectors by year)

Edmonton property transactions all sectors by year - H1 20202

The bulk of activity in Q2 2020 was attributed to the industrial and ICI land asset classes, commanding a 35% and 33% share, respectively. The industrial market saw 24 transactions representing $88 million in value. Industrial demand remains relatively strong as Q2 2020 was up 22% over Q2 2019. ICI land has performed consistently in Edmonton for the past several years, demonstrating continued demand for all types of commercial land. Q2 2020 saw 29 ICI land transactions totalling $84 million in value. Activity in the office sector was negligible with only 4 transactions at a total of $9 million. The retail sector has been facing unique challenges from the pressure of e-commerce and online shopping, coupled with new challenges from tenant defaults, rising vacancies, and adapting to COVID-19 protocols. Overall, 9 retail transactions were recorded in the second quarter, totalling $36 million in value. Still, retail performed better in the first half of 2020 at $155 million compared to $130 million in the first half of 2019. Lastly, the apartment sector had the lowest quarter on record since Altus Group began tracking the market, with only 6 transactions worth $14 million in value. According to Altus Group’s Investment Trends Survey for Q2 2020, the market is facing upward pressure on cap rates across asset classes, along with most of the country. Edmonton also remains negative on the buy/sell ratio of investor preference, with overall decreasing momentum.

(Edmonton market area cap rates – Q1 2005 to Q2 2020)

Edmonton overall capitalization rates Q2 2005 - Q2 2020

Notable Edmonton investment transactions:

6613 & 6615 Sparrow Drive (Leduc) – Retail
Located in Leduc, 6613 & 6615 Sparrow Drive is an automotive facility containing five vehicle wash bays. It is operated by Go Auto, who is also the purchaser in this transaction. The estimated building size is 40,739 square feet and the property includes 6.512 acres of land.

6020 20th Street NW – Industrial
6020 20th Street NW is a 249,021 square foot warehouse and distribution centre located in Edmonton’s southeast industrial park. The property was sold by KingSett Capital to tire distributor Groupe Touchette.

 53274 Range Road 225 – Residential land
Qualico Communities acquired this 157-acre parcel from an individual vendor for $55,000 per acre. The land is designated for agricultural use and is located in Strathcona County, northeast of the urban service area of Sherwood Park.

Edmonton property transactions by asset class H1 2019 vs H1 2020

(Edmonton property transactions by asset class – Q1 2019 vs Q1 2020)

The beginning of the COVID-19 shutdown effects has been observed in Q2 with a steep drop in market activity seen quarter to quarter. However, the first half of 2020 has still fared relatively well when compared to the first half of 2019. Some of this is due to the struggles the market was facing before the compounding effects of the global pandemic. The easing of restrictions and phased relaunches will hopefully restore some aspects, but with the ongoing concerns in the larger provincial and world economy, it’s shaky ground ahead.

 

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ABOUT DATA SOLUTIONS

Data Solutions connects the Canadian real estate industry through the delivery of data with unparalleled breadth, integrity and relevance.  We cover new homes, investment transactions and commercial market inventory in key markets, and also provide intelligence on the national housing market and consumer home buying and borrowing patterns.

Our solutions are used by real estate industry stakeholders to gain market intelligence, identify and validate opportunities, benchmark, strategically plan, manage risk and more.

Data Solutions is part of Altus Analytics, the software and data solutions business of Altus Group, where our focus is to empower real estate clients and partners to work collaboratively to enhance decision making, drive performance and optimize transactional efficiency. Our solutions enable firms to better organize and manage data and connect with the right information and analytics to help them gain a complete picture of real estate assets, portfolios and transactions.

For more information on Data Solutions, please visit www.altusgroup.com/data.

 

ABOUT ALTUS GROUP LIMITED

Altus Group Limited is a leading provider of independent advisory services, software and data solutions to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants across a variety of sectors.  Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.

For more information on Altus Group, please visit: www.altusgroup.com.

 

MEDIA CONTACT:

Elizabeth Lambe
Manager, Communications
Altus Group
(416) 641 – 9787
elizabeth.lambe@altusgroup.com

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