Clouds shade Edmonton’s hot multi-family sales

More than half the investor dollars spent in the city’s commercial real estate sector this year flowed into rental apartment buildings, at nearly $500 million, but the outlook is cloudy

By
Western Investor
August 19, 2020





Centurion REIT edmonton portfolio
— Centurion REIT paid $205 million for a portfolio pre-COVID-19

The multi-family rental sector is the bright spot in Edmonton this year, accounting for half of the total commercial real estate volume in the city, according to Canadian Investment Outlook Mid-2020 report from JLL Canada, released August 19.

The $495 million in transactions through the first half of 2020 have already surpassed annual totals for each of the past three years, the report noted.

But the performance for the rest of the year may be muted.

Virtually all of the deals had closed early in 2020 before COVID-19 arrived, according to JLL Canada. Since then, apartment building sales have virtually stopped.

“These were all pre-pandemic deals,” agreed Bradley Gingerich, senior managing director, investments with Marcus & Millichap, and a veteran of Edmonton’s multi-family arena.

Of the deals that closed this year, 75 per cent of the volume was due to real estate investment trusts (REITs), notably Centurion Apartment REIT and Canadian Apartment Properties REIT, with the purchase of primarily new concrete apartment building and portfolio packages.

Gingerich, whose team sold a $205 million, 834-unit rental building portfolio in January to Centurion, said the REIT action has slowed since.

“We have a number [of REITS] looking in Alberta, but B.C. is still the first choice for Western Canada,” he said.
Gingerich added that Edmonton’s rental vacancy rate, which Canada Mortgage and Housing Corp. pegged at 4.9 per cent at the end of 2019, is now closer to 8 per cent, and he expects it to go higher.

Despite COVID-19, Gingerich said that 98 per cent of residential tenants have been paying their rent. An Alberta moratorium on rental evictions ends on August 31.

The near-$500 million performance of the multi-family sector is in comparison to softening sales in Edmonton’s other commercial real estate sectors during the first half.

Retail property transactions totalled $97 million; office deals were worth around $200 million; and the industrial sales volume was $236 million, with all sectors down sharply from a year earlier, according to JLL Canada, which noted the real estate market is wrestling with both the pandemic and a global downturn in oil prices.


Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
Copyright © Western Investor

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