The race for space in Edmonton's office market is expected to heat up very soon thanks to a resurgent oilpatch and the demand it is placing on office space in Alberta's capital. The result: rents could increase by up to 20 per cent.
According to Avison Young, while office vacancy actually jumped slightly in Edmonton for the first three months of 2012 to 9.7 per cent from 9.5 per cent, the fundamentals of the economy point to increased space demand.
"As [drilling] rig activity increases, administrative office requirements for energy companies grow, in addition to those for construction, engineering and professional service firms, which supply the energy sector," Avison Young noted in its 2012 Q1 Edmonton Office Report. "With strong rig activity expected to continue in Alberta, we are forecasting sustained demand for office space and consistent increases in lease rates."
There was net negative absorption in the first-quarter office market in Edmonton, according to Avison Young's figures, though that was linked primarily to the suburban and government sectors of the market.
Energy and pipeline companies such as Enbridge have been very active. In just over six months Enbridge has swallowed up over 223,000 square feet of space in three different buildings in the city's financial district, where asking base rents for the best space are in the $25-per-square-foot range.
Enbridge's space acquisitions have financial-district landlords looking at rent hikes in the range of 20 per cent, according to Avison Young. Without the pipeline giant's pickups in early 2012, the downtown financial district vacancy rate would have been 2 per cent higher in the first quarter.
Avison Young is predicting a "healthy and robust" Edmonton office market in the near term.
"Tenants should prepare for rising rental rates, and landlords can expect existing tenancies to expand while developers capitalize on market demand and build new office buildings, beginning in the suburbs," Avison Young predicted.
from Western Investor May 2012
