Edmonton’s Suburban Land Rush
30 Jun 2022
There’s a suburban land rush underway in Edmonton as developers snap up a limited supply of multifamily land for purpose built rental projects.
CBRE’s Cody Nelson, a land and development advisory specialist, is right in the thick of it. “We’re tracking the highest land sales per month since 2014 right now.”
The Edmonton Metropolitan Region recorded a total of 20 multifamily land sales in 2019, before the pandemic. In 2020, despite COVID shutdowns, 13 sites sold. In 2021 sales ramped up considerably to 23 sites.
The momentum continues to build with 18 multifamily land sales in the first half of 2022. “And we have another seven sites pending that will close this year, in addition to a number of off market or direct sales” says Nelson.
Downtown apartment sites had a moment several years back, notes Nelson, amid all the excitement surrounding the opening of the new Rogers Place arena and development of the surrounding Ice District. “Everyone was jockeying for a position downtown to take advantage of the momentum.”
But rising construction prices require equally strong rental rates to justify high-rise development in the city centre. The growing mismatch is part of the reason for the shift towards suburban or urban midrise land purchases and development.
“There’s an expectation for relative affordability of rental in Edmonton relative to ownership and availability of single family options. With a mental ceiling on rents and raising construction costs, urban land hasn’t been moving all that well in recent years,” says Nelson.
Meanwhile in the suburbs, while single family subdivisions had long been the predominant form of development, there was a lot of multifamily land left sitting dormant as merchant builders exited the market when oil prices crashed in 2016.
“If you came to me a few years ago and said I need a three-acre, four-storey apartment site I would have had 15 that were ready to go,” says Nelson.
In 2020 CMHC introduced rental construction financing for the development of rental apartments in a bid to boost rental housing supply. A new group of multifamily buyers soon emerged.
With financing available and much talk about migration to Edmonton spurred by new federal government programs, before long most of the quality sites were snapped up.
“Developers are banking on the return of prosperity,” Nelson says, “a lot of them are seeing green shoots and trying to have housing ready ahead of the influx of migrants. And most of these sites have been going into production.”
The King Edward infill assembly, a 22,473 sq. ft. development opportunity.
Diversifying Economy, Widespread Optimism
Confidence in the Edmonton multifamily market is underpinned by a local economy that has taken significant steps to diversify over the past decade, with particularly strong job growth in tech.
The energy sector is mounting a comeback and has taken the last six years to innovate, notes Nelson, and new jobs are being created in the hydrogen and natural gas sectors.
And logistics and distribution businesses are looking to locate in Edmonton as a strategic alternative to Vancouver.
All of the activity is providing thousands of those arriving in the province with opportunities for gainful employment. “Plus you can buy a home here and have your kids go to a good school,” Nelson notes. “The Canadian dream is achievable in Edmonton Region.”
“The biggest thing holding back growth in this market has been lack of jobs,” he adds. “There were 13,000 new businesses created in Alberta in the first quarter this year and unemployment is down sharply from last year. Things are looking up. ”
It bodes well for the multifamily market, and Nelson anticipates a trickle of sites coming to market from land developers. There’s just one small issue. “If the demand for land holds and immigration ramps up as expected,” he says, “pretty soon it will far outpace supply.”