Edmonton office market report

01. Absorption trends reverse as vacancy rates tick up

Market dynamics shifted in Q4 2024 as five consecutive quarters of positive absorption gave way to 121,651 sf of negative absorption. This contributed to a 0.49% quarter-over-quarter (QoQ) increase in the overall vacancy rate, now at 17.2%. Downtown experienced the bulk of this shift, with 122,950 sf of negative absorption driving its vacancy rate up 0.86% to 19.2%. Suburban markets fared better, reporting 1,299 sf of positive absorption and a more modest 0.12% QoQ rise in vacancy to 15.0%.

Within Downtown, Government class A and B buildings experienced the largest vacancy increases, rising 3.25% and 2.64% QoQ, respectively. Suburban submarkets were more varied: Eastgate recorded the largest vacancy jump at 3.12%, while the West End saw the most significant improvement, with vacancy decreasing by 1.84%. These localized shifts reflect varied tenant dynamics across Edmonton’s office landscape.
 

02. Interest rates spur investment activity

The Edmonton office market saw a surge in investment activity in Q4 2024, recording seven sales totaling $105 million at an average price of $199.48 psf. This marks a substantial increase from Q3 2024, when only three sales were recorded, totaling $37 million with a lower average price of $122.22 psf. The Bank of Canada’s decision to reduce its interest rate to 3.25% has contributed to this momentum, making financing more accessible and reinvigorating investor confidence.

Of the Q4 transactions, six were investment sales totaling $102.2 million at an average of $195.80 psf, while a single owner/user sale achieved $2.8 million at $221.56 psf. For 2024 overall, 29 office sales were completed, totaling $220.1 million at an average price of $174.10 psf. Suburban markets dominated owner/user activity, while Downtown saw limited sales, reflecting ongoing trends in buyer preferences.

 

03. Decentralization of office preferences

Edmonton’s office market continues to exhibit a preference for suburban office space over Downtown locations, driven by accessibility, cost efficiency, and changing workplace dynamics. Vacancy rates in suburban markets further highlight this trend, standing at 15.0% compared to Downtown’s 19.2%, a consistent 2% to 3% disparity in recent years.

The sustained demand for suburban office space also aligns with broader urban development patterns. As Edmonton expands outward and residential growth continues in peripheral areas, suburban office markets are positioned to attract both new businesses and established tenants seeking cost-effective alternatives to Downtown spaces.

In contrast, Downtown landlords face increasing pressure to compete with suburban offerings. Enhancing building amenities, optimizing lease structures, and exploring adaptive uses are becoming critical strategies for retaining and attracting tenants in a more competitive landscape.