Demand Increasing for Quality Investment Product in Edmonton Multi-Family Market
August 25, 2010
The Edmonton rental apartment market witnessed a rise in its overall vacancy rate to 5.2 per cent at mid-year 2010, up from 4.7 per cent a year ago. However, all signs point to a positive growth being just around the corner as the Ablerta Economy continues to gain momentum towards 2011, says Avison Young’s Mid-Year 2010 Edmonton Multi-Family Market Report.
The average price per door has increased 32 per cent from one year ago as investors scour the market for quality rental properties to add to their portfolios. Although the sizable price rise can be largely attributed to the sales of two high-quality complexes, overall investor demand is steadily increasing.
“Despite a higher vacancy rate, the Edmonton multi-family market is still considered to be in reasonably good health,” says Avison Young Principal Paul Chaput. “In the last six months, we’ve seen a strengthening demand for multi-residential investment properties as the Alberta economy continues to recover. It is expected that vacancy will move closer to four per cent in the next six months, which would mark the lowest level in Edmonton since year-end 2008. Improving market conditions have increased the appetite of many of the larger institutional buyers who are looking to add quality product to their portfolios.
“Over the past two years, the increase in apartment vacancy has led to softening rental rates in Edmonton. In addition to lowering rents, landlords across the city have been offering enticing incentive packages over the past 18 months to attract tenants to their properties.”
According to the report, the Edmonton multi-family investment marketplace lost its momentum leading up to the fourth quarter of 2007, when the credit markets began to tighten and landlords decided to take a wait-and-see approach before bringing their buildings to market for sale. As a result, sales transaction volume dropped significantly in 2008, and the trend has continued into 2010 with very few apartment building sales being completed.
Despite the lower transaction volumes, buyers are now actively seeking well-maintained and well-positioned buildings in a market with aging product. There are currently only a handful of new rental apartment buildings either under construction or in the planning stages, the report says.
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