Edmonton’s downtown office market has the second-highest vacancy rate of any major market in Canada after Calgary, but the latest quarter saw some good news as new commitments pushed net absorption to a five-year high.
Downtown vacancies fell to 20.4 per cent while suburban vacancies declined to 17.4 per cent as net absorption totalled 165,000 square feet, Avison Young reported this week. It said this breaks the previous record, set in the third quarter of 2018 when 159,000 square feet was absorbed.
Demand was driven by educational institutions, with two taking 124,000 square feet in downtown and on the city’s south side. These include Classical Academy Charter School, which signed a five-year lease for 61,000 square feet in the former Service Alberta building at 3720 76th Avenue, and NorQuest College, which expanded its downtown footprint by leasing 63,000 square feet in the Intact Building on Jasper Avenue.
Avison Young said Norquest College’s expansion reflects strong demand from post-secondary institutions for downtown space. Six schools have downtown campuses, and collectively plan to add 15,000 students to the existing downtown student population of at least twice that many (numbers are difficult to pin down, but MacEwan University alone reports 18,366 students enrolled).
The uptake also signals opportunities for repurposing older, underutilized office space in the core for alternative uses. Edmonton has 5.4 million square feet of B and C-class space, which has borne the brunt of vacancies in office markets across the country.
Edmonton shared in the downtown condo boom many Western cities experienced 20 years ago, with Worthington Properties Inc. converting several older office properties in the inner city, including 10024 Jasper Avenue and the Cornerpoint building at 10177 105th Street.
The current surplus of older, obsolete office space is creating opportunities for a new downtown housing boom, Avison Young said.
“The abundant supply of vacant and functionally obsolete office buildings offers an opportunity to alleviate housing shortages, particularly for the growing student population and Edmonton's influx of new residents,” it said. “One notable benefit would be an increase in the downtown residential population, injecting vitality into an area that faces various challenges. This influx of residents would lead to higher property values and an expanded tax base.”
Two notable examples include the Empire and Milner buildings, located at 10080 Jasper Avenue and 10040 104 St NW, respectively. Westcorp Developments Inc. purchased the latter in 2019 with plans to redevelop the 12-storey property into a 200-unit residential apartment complex with retail at grade.
“We have an opportunity to meet the increased residential demand by converting office buildings that have complementary physical characteristics,” said Cory Wosnack, managing director with Avison Young in Edmonton. “In the early 2000s, 16 office buildings were converted to residential, which not only improved the office market by removing chronically vacant properties but, more importantly, drove up the number of residents living downtown and thereby igniting vibrancy at street level.”
In addition, some older office space is being transformed into flex space.
IWG plc has announced plans for new locations in the city, including a 17,000-square-foot Spaces-branded coworking location at the Peak (formerly Enbridge Tower), a 42-year-old building at 10201 Jasper Avenue, and a 15,713-square-foot HQ-branded space just outside the core in Park Plaza at 10611 98 Ave NW, which was built in 1986.
Both locations are set to open in early 2024.