Recent financial reports from Canada’s largest commercial real estate owners suggest that retailers and employers are starting to make the move back to in-person work.
What’s happening in Edmonton?
Lease signs still hang from many storefront windows, but a significant number of commercial landlords are seeing growing demand for retail space as COVID-19 subsides. This is especially evident in recently released 2022 Q1 data for Edmonton (CBRE).
- The downtown class A submarket witnessed 44,000 sq. ft. of net absorption and a vacancy rate decline of 60 basis points (bps) from Q4 2021.
- Increasing traffic across the city, coupled with hybrid work arrangements, have resulted in greater occupancy and activity within the downtown and suburban submarkets.
- Overall, the office market has maintained a stable momentum throughout the pandemic and is showing signs of improvement.
- Several occupiers enacted their return-to-office plans this quarter, fueling an uptick in leasing activity.
- New generation space in the downtown core continues to see an increase in tenant demand.
- Lease terms in the suburban and downtown submarkets are becoming more flexible for tenant needs.
The downtown Class A submarket experienced 44,000 sq. ft. of positive absorption this quarter, with several deals being completed in the core. The biggest transaction this quarter was Covenant Health leasing the entire North Tower at One Twelve Business Campus. With restrictions easing and downtown employees returning to work, market activity is improving within the central business district.
While the harshest public health restrictions lifted months ago, many businesses have been hesitant to open or expand brick-and-mortar locations after suffering bruising revenue losses during lockdowns and facing high inflation.
Market Challenges and Trends
Supply chain shortages continue to fuel rising construction costs and delays, which is an important issue for tenant improvement plans. Landlords continue to focus on offering high quality office space, with some renovating their existing assets to attract and retain tenants.
Rotational in-office schedules is a prominent trend that has arisen from the hybrid working movement. Based on this, tenants are optimizing the way they use their office and desk space.
This trend is projected to continue throughout the year, from the CBRE’s latest Edmonton Office Figures Q1 2022.
With the return-to-office movement beginning the first quarter of this year, the suburban and downtown markets are both showing signs of stabilization. Downtown absorption was flat while the suburban submarket continues to trend positively with 92,000 sq. ft. of net absorption.
Restrictions are now lifted, offering a clearer line of sight compared to last year. Tenants are more comfortable making concrete decisions and are approaching leases with a greater level of confidence.
This trend indicates a higher sense of certainty for market participants.
Tenants are testing hybrid workplace strategies to better grasp the new normal and understand their office needs. These needs are expected to continuously change in 2022 as tenants determine which strategies work best. Downtown tenants with larger office footprints are considering downsizing their spaces to better meet their hybrid working needs. For suburban office space, non-traditional uses are being applied, which is expected to lower the suburban vacancy rate in 2022. Landlords in all submarkets continue to offer attractive market rates and flexible leasing options for office tenants.
Founded in 2001 by Richard Crenian, ReDev Properties is a leading real estate investment management firm with an exceptional track record of successfully owning, developing and managing over $2.5 billion in real estate properties across Canada..
We focus on commercial real estate which enables us to have deep expertise and knowledge in the industry. We have a hands-on approach and are committed to creating value in properties in regions that are sometimes overlooked. We invest our capital alongside our partners in every deal we do, ensuring that our interests are fully aligned with our investors at all times.