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Edmonton investment sales rebound in first half of 2022

Slower times ahead but steady economy draws in buyers
Nexus REIT acquired 11250 189th Street NW, Edmonton, home to MTE Logistix, as part of a two-building purchase worth $91 million in the second quarter of 2022.

Strong demand for industrial assets gave a lift to investment activity in the Edmonton market during the first half of 2022.

Recently released figures from the Altus Group show that total transaction value in the period was up 68% over the same period of 2021, totaling $1.7 billion on a volume of 424 deals. Deal volume was also up, rising 16% from 365 a year ago.

Within the second quarter itself, 249 transactions closed worth $1 billion.

The top three deals in the quarter all involved industrial assets or development sites.

These included Nexus REIT’s acquisition of 14711 128th Avenue NW and 11250 189th Street NW for $91 million. The two warehouses total 555,689 square feet on 24 acres. The largest of the buildings is occupied by MTE Logistix, a growing tenant that also signed the largest industrial lease of the quarter with a deal for 548,000 square feet in Apex Business Park to the north.

Real Capital Solutions Inc., of Colorado paid $86.1 million for 8351 McIntyre Road NW, 13503 149th Street NW and 1705 90th Avenue, a portfolio of three industrial buildings on five acres.

On the development front, Air Products Canada Ltd. acquired a 150-acre parcel at 13004 and 13104 33rd Street NE from North Industrial Carriers for $60 million, or $339,733 per acre. The site will be the location for its a multi-billion-dollar net-zero hydrogen energy complex it says will make Edmonton “the centre of Western Canada’s hydrogen economy and set the stage for Air Products to operate the most competitive and lowest-carbon-intensity hydrogen network in the world.”

The activity underscored strong demand for industrial space in Edmonton, where CBRE Ltd. reports that the industrial availability rate fell to 5.6% in the second quarter and have held steady despite additions of new space. This is down from 8.4% a year ago.

“Industrial assets in the Edmonton market were far and away the most sought-after by investors with almost $594 million invested in 142 properties in the first half of 2022,” reported Andrew Petrozzi, director, commercial research for Western Canada with Altus. “The first half of 2022 marked the strongest six-month period of investment in terms of dollar volume in Edmonton’s industrial market since at least 2013 and comprised 35% of overall sale proceeds.”

One major industrial asset that has not traded hands is Oxford’s CityView Business Park.

“The park contains approximately 1.5 million square feet across 16 buildings, with an overall average vacancy rate of 8.4%,” Avison Young noted in its second-quarter report. “This would constitute one of the largest industrial building sale transactions in Edmonton.”

Oxford says it has no further updates on the property.

The activity on industrial sites was driven by institutional investors shifting allocations away from office and retail towards acquiring industrial assets.

Petrozzi said the trend has playing out in all Canadian markets, but the expanding role Edmonton’s industrial market is starting to play beyond supporting the traditional needs of Alberta’s energy industry is generating fresh interest in investment there, too.

Nevertheless, Altus’s investor sentiment survey found that Edmonton was the second-least favoured market for CRE investment in Canada among investors. The only market less favoured by investors was Calgary.

Outside industrial, Edmonton saw strong growth in multi-family residential investment, which surged 178% in the first half of 2022 to $448 million versus $161 million a year earlier.

Altus reported that the multifamily sales added up the third-highest tally of the past decade, after $547 million in the first half of 2020 and $480 million in the first half 2018.

“The region’s status as one of the most affordable major cities in Canada, combined with improving employment prospects and the lower risk associated with apartment properties, has proven attractive to investors,” Petrozzi said. “Many such investors may see the potential to achieve greater returns through improvements in rents generated by existing multi-family residential properties.”

Altus expects the activity to continue through the remainder of the year, albeit at a slower pace.

“While the focus for investors is expected to remain on industrial assets, ICI land and multi-family residential properties, investment activity is anticipated to slow in the back half of 2022 as investors continue to process the wide range of potential risks threatening to stall decision-making,” Petrozzi said.