New rental units in Edmonton are being snapped up

New figures from Canada Mortgage and Housing Corp. show more than 3,700 new rental units added to the Edmonton market last year.

“Ultimately, we’re in a situation right now in Edmonton where there are significant increases in supply and significant demand, and prospective tenants are taking advantage of the higher vacancy rate environment right now,” says senior analyst Taylor Pardy with CMHC.

CMHC shows the purpose-built rental market vacancy remained stable in 2021 at 7.1 per cent compared with the previous year, despite the increase in supply.

Helping drive demand was net positive migration to Alberta in the last few months of 2021 with Edmonton receiving a significant share of new arrivals, who often rent before buying a home, Pardy adds.

“We also saw in the third quarter international migration move up, getting a little bit closer to pre-pandemic levels,” he adds.

“From a population flow perspective, things are looking more positive.”

The secondary market consisting of investors renting out condominiums also saw its vacancy remain stable at about five per cent.

Pardy notes the lower vacancy among rental condominiums is due to the market being a fraction of the size of the larger purpose-built rental market in the city. He points to the purpose-built market consisting of almost 76,000 units whereas the secondary market for rental condominiums consists of less than 23,000 units.

Yet investor demand is peaking in the city, says one local realtor.

“I have seen investors rushing to the table to buy,” says Ron Dickson, senior vice-president with Sotheby’s International Realty in Edmonton. Key drivers of demand are a concern that prices will only continue to rise and increasing borrowing costs, he adds.

Adding more demand to the rental market is the fact many sellers are unable to find a home to purchase, Dickson says.

“So renting is really their only option.”

A positive for renters in the city is selection remains high. Pardy adds the high level of choice is partly reflected in the turnover rate last year.

“Last year among the purpose-built market turnover was 28 per cent, which is up from 25 per cent the year previous,” he says.

“To some extent that may be due to the fact that asking rents on the market were about 3.5 per cent lower than what was being paid on average among occupied units.”

More new apartments are coming to the market this year, too, he adds. Rents, however, are likely to rise due to growing demand as the economy recovers, resulting in higher migration.

Another tailwind for rent levels will simply be the renewal of purpose-build stock, as new product often charges higher rents, which increase the overall average, Pardy says.

“There are so many new projects getting underway on the purpose-built side, which speaks to the fact that demand has been fairly strong, and that’s a trend that should continue this year as migration patterns return to pre-pandemic levels.”