Edmonton rental market cooling as new units come online
Experts believe new downtown units will still do well, but some landlords will struggle to fill vacancies
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With migration to Alberta slowing and hundreds of rental units set to hit the Edmonton market, 2016 could be a good year for tenants and a tough one for landlords.
In the downtown alone, hundreds of purpose built rental units have or will come on stream in 2016 — the first large-scale build of such units in decades.
And the units are coming available just as the market is cooling, with vacancy rates doubling over the course of 2015, landing at 4.2 per cent at the end of the year.
John Rose, the city’s chief economist, said renters should find life easier as a result.
“The good news is that this really maintains housing affordability for Edmonton,” he said.
Jandip Deol, who specializes in multi-family construction projects with Colliers International, a real estate firm, said the towers about to open were commissioned at a time when the Alberta economy was demanding them.
“It’s something they already committed to two or three years ago when the oil price was so strong and there was a plethora of people moving in,” he said. “It’s really hard to pull back now.”
But George Schluessel, CEO of ProCura developments, which finished one rental building on Jasper Avenue at 109 Street last year, and will finish a second one with 238 units right next door this year, said there's still strong demand for good apartments in Edmonton.
“Most of the rental stock in Edmonton was built in the '70s so you look at it and it’s pushing 40 years old,” he said.
Schluessel said young renters are looking for a better class of rental building, with amenities more in line with a condominium.
“They don’t want to live in these stark old apartment buildings and it’s a flight to quality you might say."
Deol added that even with the economy slowing and vacancies rates rising, the rental projects are still good investments because they generate fairly regular and predictable revenue, which makes them attractive to investors.
“Even if things do hit 10 percent [vacancy], which some people are saying, you are still cash flowing,” he said. “It’s a much more stable asset class.”
But Rose said the rental construction market is already starting to pull back, as there have been few building permits issued for new multi-family sites.
“The development industry recognizes there is a slowdown underway,” he said.
Deol said landlords in the suburbs and outside of the core will face strong competition this year and he’s already seen them offering incentives and perks, but downtown will be somewhat insulated.
“A lot of people want to be downtown, they want to be close to all the amenities,” he said.
Schluessel said they have strong interest with people looking to rent in his buildings even before they are finished construction.
“We don’t go out asking for a reservation list, this came unsolicited.”