q3/ industrial market report edmonton - avison young...location subdivision sale date property sale...
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The industrial market continues to weather economic uncertainty and is beginning to show signs of adapting to the "new norm" in oil prices. Since their decline in early 2015, rents have remained steady in most industrial submarkets.However, landlords are proving to be more aggressive with attractive tenant incentives, inducement packages and free rent. The recently completed final section of the $4.0 billion Anthony Henday ring road is expected to reinforce market access for distribution, warehousing and logistics. Simplifying transportation to Alberta’s Industrial Heartland, via easier access to heavy load corridors. Overall vacancy has remained steady for the third quarter of 2016, up 10 basis points from the previous quarter to 6.4%. Transaction velocity is starting to show signs of recovery as the gap in expectations between buyers and sellers begins to shrink. Developers with competitive land positions are delaying
development plans in the near term, awaiting the absorption of the remainder of speculative builds completed during the last 18 months. Just over 354,000 sf of new supply is expected to be delivered before the end of 2016, much of which is concentrated in the city's northwest industrial parks.
Current market conditions are creating opportunities for tenants who were previously priced out of desirable industrial locations such as Nisku and Leduc. The compression in rents and double digit vacancy rates has made it easier for firms less affected by commodity prices to take advantage of new opportunities.
Economic forecasts indicate 2017 will be a year of modest growth where markets begin to normalize. We expect the industrial real estate market to follow suit.
Market Overview
Q3/ Industrial Market Report
Edmonton
Market Facts
Vacant Space
9,607,034 SF*
Vacancy Rate
6.4%*
Overall Inventory
150,148,210 SF*
*Market includes the Greater Edmonton Area
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Location Subdivision Sale Date Property Sale Price Unit Price (psf) Vendor Purchaser
14401 - 128 Avenue Bonaventure Industrial 14-Jul-16 320,534 sf on11.47 acres $33,000,000 $102.95 psf York Realty Inc* Summit Ltd
26209 - TR 531A Acheson 4-Aug-16 38,912 sf on 30.93 acres $19,000,000 $488.28 psf Graham Group Ltd Forbes Bro. Real Estate Ltd
4104 - 78 Avenue Sherwood Business Centre 31-Aug-16 170,273 sf on
10.95 acres $16,000,000 $93.97 psf SREIT Ltd* Spire Sherwood Business Centre
6908 - 42 Street Leduc 27-Sep-16 31,362 sf on 5.08 acres $12,700,000 $404.95 psf BSG Real Estate Holdings Corp. 1976551 Alberta Ltd
9624 - 35 Avenue Strathcona Industrial Park 13-Jul-16 57,617 sf on 4.40
acres $7,900,000 $137.11 psf Bradken Canada Manufacturing Products Ltd 1976759 Alberta Ltd
Notable Building Sale Transactions (July, August, September)
Q3 / IndustrialEdmonton
Non-residential construction investment has slowed for the second year in a row, yet construction costs have not fallen as significantly as anticipated due to large infrastructure projects and downtown developments. Underground services are estimated to have decreased by 10% - 15% since their peak in 2014, and prices of concrete have slipped 30% in the last 18 months. Land developers are taking advantage of these cost savings, servicing sites for less. However, vertical costs have not decreased considerably and remain comparable to 2015.
As the unemployment rate inches to 7.0% the pool of available workers has grown to the largest it has been since 1978. Despite the wave of unemployment, construction labour costs have not fallen as fast or as dramatically as anticipated. The majority of job losses took place in the natural resources sector, and these workers would require re-education for losses to significantly affect construction labour supply. Costs of importing materials remains high as well, weakness in the Canadian Dollar and recent tariffs on drywall originating in, or exported from the U.S. could contribute to cost overruns and fixed contract constraints.
Overall, costs of construction remain steady, investment in public infrastructure and developing Edmonton’s downtown core is carrying the industry through difficult times, keeping construction companies in business.
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)
N O N - R ES I D E N T I A L B U I L D I N G C O N S T R U C T I O N I N V E S T M E N TA N N U A L ( D O L L A R S X 1 , 0 0 0 )
Calgary Edmonton Alberta
Source: Statistics Canada. Table 026-0016
Construction Costs Remain Steady Despite Sliding Investment
2009 Unemployment 2016 Unemployment
Edmonton Calgary Canada
6.5% 6.7%
8.4%
Edmonton Calgary Canada
6.9%
10.0%
7.0%
Source: Statistics Canada. Table 282-0129
If markets continue to show signs of stabilization and recovery, commercial construction investment should begin to trend upward. We expect this recovery to be more controlled and cautious than that of the credit crunch in 2008 as firms adjust cost structures to be profitable at lower prices of oil. Outlook for the fourth and final quarter of 2016 is cautiously optimistic.
*Investment Sales
Location Commencement Size (sf) Tenant
9530 - 60 Avenue 1-Apr-18 124,569 sf Dover Canada ULC Dover Canada SRI (Alberta Oil Tool)
11771 - 167 Street 1-Sep-16 70,567 sf Fast Track Indoor Karting Inc
9450 - 17 Avenue 1-Jul-17 29,450 sf ALS Canada Ltd
Westpoint Corporate Centre 1-Sep-16 29,427 sf Goodman Company Canada
1302 - 10 Street 1-Sep-16 18,396 sf KBR Canada Equipment Compnay ULC
Notable Lease Transactions: Completed By Avison Young (July, August, September)
Edmonton Q3 / Industrial
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Feature ListingsSale or Lease
PARAGON BUSINESS PARK
100 Bethel Way, Sherwood Park
2,666 sf - 57,105 sf
• Attractive pre-sale pricing• Bay sizes starting from 2,666 square feet• 24' clear ceiling heights, grade loading and high efficiency T5HO lighting• Storefront and back signage opportunities• Easy access to major arterials Baseline Road and Broadmoor Boulevard
For Lease
MANCAL PROPERTY
53251 Range Road 232, Strathcona County
99,400 sf on 69.19 acres
• Large fully improved site• 99,400 square foot building with large spans, high ceiling heights and cranes• Well located in an area that will have outstanding transportation arterials• Medium industrial zoning, with proximity to CN rail line
Sale
ROUTE 60 LANDS
1-52510 Range Road 263A, Acheson
12.18 acres
• Exceptional exposure onto Highway 60• Fully serviced, stripped and graded• Can be subdivided• Excellent location in the Acheson Industrial Area with access to Highway 16 and 16A• All directional traffic controlled intersection at Highway 60 and Range Road 525A
Sale
WINTERBURN LAND
10820 Winterburn Road, Edmonton
6.23 acres
• Outstanding exposure fronting 215 Street• Located in Winterburn Industrial with great access to Yellowhead Trail, Stony Plain Road
and Anthony Henday Drive
Sale• 86,468 square foot modular and fabrication facility on 31.30 acres • 27,427 square foot two storey office building on 1.62 acres• Rare owner user or development opportunity within city limits • Able to accommodate large scale fabrication without significant upgrades or alterations• Excellent access to Sherwood Park Freeway
MODULAR & FABRICATION FACILITYOR REDEVELOPMENT
3300 76 Avenue, Edmonton
31.30 acres
Source: Statistics Canada. Table 282-0129
Edmonton Q3/ Industrial
Market By The Numbers
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E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
Total Inventory
Direct Vacancy
SubleaseVacancy
VacancyRate
Vacancy Direct
Vacancy Sublease
Serviced Land Cost
CITY OF EDMONTON
Southeast 52,129,033 2,811,746 758,317 6.8% 0.5% 5.4% 0.6% 1.5% (0.1%) $800,000
Northwest 57,838,145 2,653,565 312,483 5.1% (0.5%) 4.6% (0.6%) 0.5% 0.1% $750,000
Northeast 6,452,714 181,374 - 2.8% 1.4% 2.8% 1.5% - - - $600,000
Central 3,738,414 60,818 - 1.6% (1.5%) 1.6% (1.5%) - - - -
SURROUNDING DISTRICTS
Acheson 7,844,536 142,213 77,648 2.8% (1.0%) 1.8% (1.1%) 1.0% - - $450,000
Spruce Grove 2,210,000 139,860 - 6.3% 1.3% 6.3% 1.3% - - - $350,000
Stony Plain 1,105,700 145,290 - 13.1% (1.1%) 13.1% (1.1%) - - - $350,000
Sherwood Park 6,365,000 628,456 3,560 9.9% 3.1% 9.9% 3.3% 0.1% (0.1%) $600,000
Nisku/Leduc 12,464,668 1,528,857 162,847 13.6% 0.2% 12.3% (0.2%) 1.3% 0.4% $525,000
TOTALS
City 120,158,306 5,707,503 1,070,800 5.6% 0.1% 4.7% (0.1%) 0.9% (0.1%) -
Surrounding 29,989,904 2,584,675 244,055 9.4% 0.5% 8.6% 0.4% 0.8% 0.1% -
Overall 150,148,210 8,292,179 1,314,855 6.4% 0.1% 5.5% 0.1% 0.9% 0.1% -
Southeast Northwest Northeast Leduc/Nisku Sherwood Park Acheson
Net Asking Rent By Bay Size: Multi - Tenant Freestanding Multi - Tenant Freestanding Multi - Tenant Freestanding Multi - Tenant Freestanding Multi - Tenant Freestanding Multi - Tenant Freestanding
0 - 5,000 sf $10.00 $15.00 $9.50 $14.00 $9.50 $12.00 $10.00 $14.00 $12.00 $15.00 $11.00 $15.00
5,001 sf - 10, 000 sf $9.50 $13.00 $9.00 $11.00 $9.00 $10.00 $10.00 $12.00 $12.00 $14.00 $10.00 $15.00
10,001 sf - 20,000 sf $9.00 $11.00 $9.00 $10.00 $8.50 $10.00 $9.00 $11.00 $10.00 $12.00 $9.50 $13.00
20,001 sf - 50,000 sf $8.50 $10.00 $8.00 $9.00 $7.50 $10.00 $8.50 $10.00 $9.00 $10.00 $9.00 $13.00
50,001 sf & Up $7.75 $9.00 $7.50 $7.75 $6.50 $8.00 $8.00 $8.50 $8.00 $9.25 N/A $10.00
Grant RanslamPrincipal780.702.5853
Bryce Strilchuk, SIORPrincipal780.702.5829
Colin Ludwig, SIORPrincipal780.429.7562
Thomas Ashcroft, SIORPrincipal780.429.7571
David St.CyrVice President 780.702.5827
Jessica FaberExecutive Assistant - Licensed780.429.7558
Porcha PalmerExecutive Assistant - Licensed780.702.2025
Kevin GoeresResearch Manager780.429.7555
Ryan ZabloskiVice President780.702.0691
Rob IwaschukPrincipal780.429.7567
Bryce Williamson Sales Assistant - Licensed587.882.9755
Natasha Carroll Executive Assistant 780.702.0693