What You Need to Know about the Edmonton Market
By Ben Myers
I really enjoy following on Twitter; he often links to very informative and educational articles and market news. What I cant help but notice is he has been linked to a lot of articles about Alberta lately, and all are extremely positive about the employment and housing prospects for the province.
Last year I started to take a preliminary look at the condominium apartment market in Edmonton and was surprised at how deep it was. According to McLeod Marketings McLeod Report, there were over 110 condominium projects in Edmonton last year (actively selling or currently marketing/announced). McLeod is reporting the active projects are approximately 58% sold, an increase from 55% in 2011, and above the long-run average of 49% (as tracked by Essex Appraisal in select years since 2001). This figure is quite interesting; much lower than I would have expected.
Most of my experience has been concentrated on the Toronto market, where the market is typically 80% sold. The pre-construction market might not be as big in Edmonton, but the buyers come out in droves when the project starts construction. You can cash in on this phenomenon by buying at the lower pre-construction prices.
The other major difference between the Edmonton market and other Canadian condominium markets is that the majority of the projects are not in the core or center of the city. According to Altus Groups Edmonton Multi-Family Market Update, in 2013, just 16% of multi-family projects were located in the center of the region. However, this figure is growing: the Q1-2014 figure was 17%, up from last year, and the 6% from 2008.
Altus also indicated that Q1-2014 multi-family sales were the highest first quarter result since they began tracking the market six years ago, 31% higher than Q1-2013 and 47% greater than Q1-2012! This strong sales activity has resulted in a 42% decline of completed and unsold condominium apartment supply from 499 units in May 2012 to just 291 units as of May 2014 per data from CMHC. Altus added there are no supply concerns within the new condominium market in their Q1-2014 Edmonton Multi-Family Market Update.
As the above data indicate, the Edmonton condominium market is hot – but at Fortress we very much believe in putting boots on the ground and I did so the day before I appeared as a guest speaker at a REIN event last year. I took a look at a couple of the sites that had been pitched to us – they were good – but I couldnt help but feel that the market was lacking in the downtown core. With the new arena district, burgeoning student population, and bustling job market, I concluded that the market could support a large-scale project with ample investor-ready suites.
When examining the MacLeod Marketing data on the downtown core, I was pretty shocked at the pricing for an Edmonton condominium in the central submarket, which clocked in at just under $500 per square foot (psf), with an average end-selling price of approximately $600,000. This reaffirmed the notion I had above: Edmonton needed a project willing investor and affordability-friendly smaller average unit sizes, a better level of interior unit finish, and better common amenities right in the downtown core. This could all be done in and around the going rate of $500 psf.
Not long after I cobbled together a report on the Edmonton high-density market did I learn that our long-time partner Brad Lamb of Lamb Development Corporation was actively searching for properties in Edmonton.
Lamb has had numerous successes in Toronto and Ottawa, and is breaking ground shortly on his first Calgary project. He was so bullish on the market that he bought not one, but two downtown projects. He is now marketing the first development called Jasper House, which is set to launch this fall.
We are pretty excited about the prospects for Jasper House, as every time I pick up a publication, there is more positive data coming out of Edmonton. In addition to data mentioned earlier, the April 2014 Altus Group Housing Report highlights several more extremely positive tidbits of data. The Edmonton Census Metropolitan Area (CMA) has averaged 16,600 new jobs annually from 2003 to 2012 and added 24,800 in 2013; Altus expects 25,400 more in 2014, more than both Calgary and Vancouver! More jobs equals more demand for housing.
Altus also points out that the Edmonton CMA resale housing market is performing well, with approximately 3,800 units transacted in Q1-2014, a 10% increase over Q1-2013. The months of resale inventory fell to 2.6 months from 3.2 at the same time last year. Resale pricing is up 4.8% year-over-year, which is above the 2013 (3.2%) and 2012 (2.7%) annual growth rates. This data was so compelling that weve also partnered with Averton Homes on the low-rise side.
Strangely on the high-rise side, housing starts were down significantly for condominium apartments in the Edmonton CMA in Q1-2014 compared to last year (554 vs 196). However, as the above data reveals, it is not because of a lack of demand causing lenders to be cautious, it is a lack of supply. As smart REIN investors, you know what strong demand and a lack of supply means!
Many of the Toronto condominium investors we deal with are looking to greater diversify their real estate portfolio and are looking for markets with greater upside price potential than the GTA, so Fortress is lucky to have Regina, Winnipeg, Calgary and Edmonton projects to meet their needs.
Make sure to follow Fortress on Twitter at @Fortressrdi for more info on the Edmonton market and for news on the Jasper House launch.
Fortress Real Developments partners with residential and commercial builders across Canada, and Ben assists in evaluating both the market conditions and projects that Fortress is active in. Follow his blog posts and commentary on the Canadian Housing Market at www.fortressrealdevelopments.com/news or follow him on twitter at @BenMyers29.