Edmonton sees increase in downtown office vacancy but growth in industrial market

Downtown’s office vacancy rates increased to Q1 levels of 14.9 per cent.

The report notes that landlords of high vacancy buildings are struggling to keep tenant incentives competitive against rising construction costs, however, it is expected that vacancy rates will decrease this year as a result of prospective deals being executed.

“When vacancies increase across various markets, there’s what we call a flight to quality and that’s really happened in the downtown market of Edmonton,” said Dave Young, managing director of CBRE Edmonton.

Since the pandemic began, the use of office space has changed, Young said, and now, large users in the office market are reviewing work-from-home strategies.

“They’re looking at how that impacts the workforce,” Young said. “I think a lot of big tenants are getting back into the office right now as it relates to trying to build culture, trying to coordinate training, etc. It’s kind of hard to do some of those things when you’re not with your teams. I think there’s going to be a flexible workforce in Edmonton on a go forward basis, just like you’ve seen any other major market.”

The overall availability rate dropped 1.4 per cent in Q4 to 7.0 per cent, mainly due to significant leasing activity in the northwest submarket.

“If you look at numbers across the country, we’re seeing the same thing in Edmonton and Calgary as we’re seeing in Toronto, Montreal, Vancouver and Ottawa,” Young said.

“The industrial business has been very active across all markets in Canada and Edmonton is no different.”

Development is also on the rise, with a seven-year high of 4.6 million square-feet of space under construction. Major projects include Panattoni’s 545,000 square-foot building in the northwest, the Monarch and Discovery Business Parks in Nisku-Leduc, and the 2.9 million square-foot Amazon fulfillment centre in Highlands Business Park.

“If you’re a big user, say in northwest Edmonton, there are very limited opportunities for you. So we anticipate there’ll be more speculative construction, so a landlord building buildings without a tenant because of the demand that’s there.”

Young said he’s excited for what 2022 will offer and anticipates seeing growth in all market sectors.

“The winner though, I think out of all this, will continue to be the industrial sector,” he said.

“Just given our location in Western Canada, our access to roadways, railways, and population. I’m looking for big things in the industrial market this year.”