Edmonton investment market report

01. Positive absorption continues

The Greater Edmonton office market recorded its fifth consecutive quarter of positive absorption in Q3 2024 totaling 13,677 sf, and leading to a 13 basis point (bps) decrease in the vacancy rate to 16.7%. Downtown recorded a slight increase in vacancy, up 5 bps to 18.3%, driven by 43,231 sf of negative absorption. Meanwhile, the suburban market saw stronger activity, with a 32-bps decline in vacancy to 14.9% following positive absorption of 56,908 sf. Vacancy trends varied across districts: in the Financial district, headlease vacancy expanded by 12,000 sf quarter-over-quarter (QoQ) and sublease vacancy grew by over 36,000 sf, while the Government district’s headlease vacancy contracted by more than 18,000 sf.

New key vacancies included a 49,804 sf sublease by Intuit at EPCOR Tower and 26,988 sf vacated by Ketek at 10457 184 Street, significantly impacting absorption. Without these two blocks of space, the market would have recorded positive absorption of 89,125 sf.
 

02. Number of concentrated vacancies

In the Financial district, the vacancy rate is 18.5%, with class A buildings seeing the highest vacancy at 22.6%. Meanwhile, trophy class show a low vacancy at 9.7%, and class C stands even lower at 7.7%. The Government district has a similar overall vacancy at 17.8%, with class A and B buildings leading vacancies showing similar values. Much of Downtown's vacancy is concentrated in class A spaces across these two districts.

While an overall Downtown vacancy rate of 18.3% may seem high, 14 properties make up 50% of the vacancy in the area. These 14 buildings represent only 26% of the total Downtown inventory, showing that the majority of vacancy is concentrated in a limited number of properties. Similarly, in suburban submarkets, 24 buildings accounting for 16% of the inventory hold 50% of the vacant space.

 

03. Edmonton investment volume slows

Following a strong surge in Q2 2024, Edmonton's office investment volume has cooled significantly in Q3 2024. In Q2 2024, the market recorded 14 sales, totaling $88.5 million and spanning 1.04 msf, with an average price of $85.40 psf. However, in Q3 2024, only three sales were recorded, amounting to $37.0 million across 302,526 sf. Despite the lower total dollar volume QoQ, these three Q3 2024 sales achieved a much higher average price of $122.22 psf, representing a 43% increase compared to Q2 2024.

Year-to-date (YTD), the market has seen 23 office sales, totaling $143.1 million and covering 1.5 msf, with an average price of $95.18 psf. While the number of transactions has slowed in the second half of the year, the rising price per square foot highlights growing interest in select office properties.

Recent interest rate cuts, with the latest drop from 4.25% to 3.75% and a further cut anticipated in Q4 2024, could support renewed investment activity in the market.