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Multifamily dominates Edmonton investment activity

Cap rates compress as investor confidence returns
CX Hazelview
Hazelview Investments paid $332,075 per unit for CX, a 212-unit rental property that ranked as Edmonton's top apartment deal in the first quarter.

Edmonton’s investment market is gathering momentum as the economy reopens post-COVID.

The first quarter of 2022 saw investment transactions increase 19 per cent versus a year ago to $682 million on a volume of 177 transactions, according to new Altus Group data. This was a significant acceleration from growth in all of 2021, when aggregate deal value increased just 2 per cent.

However, the volume of transactions was down 12%, largely due to the surge in transactions at the beginning of 2021 as deals deferred by the pandemic came to completion. The actual number of transactions has held steady for three quarters at 177, give or take a deal.

Multifamily rental properties dominated activity, accounting for the largest segment of sales by value at 39 per cent as well as the strongest growth in the quarter.

The aggregate value of apartment sales in the quarter was $263.4 million, up 122 per cent from a year ago. The top deal, according to Altus data, was the $81-million sale of CX at 10022 110th Street NW.

CX is a newly constructed 212-unit apartment building that sold to Hazelview Investments at a price of $332,075 per unit, the highest per-unit sale price achieved in Edmonton since the The Mayfair on Jasper ($420,168) and Chartwell Emerald Hills ($468,750) sold in January 2020.

The second most-valuable asset class was industrial, with deals totalling $183.7 million the quarter, up 5 per cent from a year ago. However, with little available product, investment activity dropped from recent quarters.

The second-strongest growth occurred in the retail market, which claimed a smaller share of transaction value at $78.3 million, or just 11 per cent of the total. The aggregate value of transactions was up 50 per cent, while number of transactions totalled 23, up marginally from a year ago.

The weakest segments of the investment market were office, hotel and land for institutional, commercial and industrial (ICI) projects.

ICI land was the third-most active asset class in terms of both deals completed (46) and value (slightly less than $83 million) in the first quarter of 2022, but volume was down 13 per cent and value fell 34 per cent versus a year earlier.

Office transaction value was “anemic” at just $25.9 million, posting the largest decrease of any asset class versus a year earlier at 54 per cent.

Nevertheless, overall capitalization rates compressed across all asset classes, Altus reported, pointing to the return of investor confidence to the Edmonton market.

“A rebound in energy prices combined with an improvement in the province’s economic fortunes associated with the winding down of COVID-19 restrictions have led purchasers to increasingly see value and transact in an Edmonton market where investor confidence is on the rise,” Altus Group said, forecasting continued improvement through the remained of 2022. “[It] is likely to continue this trajectory as the province’s economic fortunes start to recover and the region’s affordability combined with improving employment outlook serves to draw people to the city.”