Industrial investment opportunities abound

Industrial investment opportunities abound December 21, 2021

Demand for industrial product in the Edmonton market is arguably at the highest level we have seen over the past five-plus years. As 2021 comes to a close, let’s recap what the current industrial landscape looks like and what opportunities exist in Edmonton for the foreseeable future.

Availability
Edmonton’s availability rate for Q3 2021 was 5.8%. Within the industrial market, this represents a relatively tight market for available space. 

Aging product
Since 2019, the average age year-built date of industrial product that has transacted is 1987. The aging product in the Edmonton market has resulted in increased interest in new builds with almost 20% of industrial sales since 2019 being buildings constructed in the last ten years. 

Sales
An analysis of industrial sales from 2019 to 2021 further demonstrates the current demand for product in the Edmonton market. Of all the transactions that occurred over the past 36 months, 43.4% of them involved industrial condo deals, which is a 7% increase in demand compared to the previous three years (2016-2018).

Buy or Lease? 
Due to the low interest environment, many groups have looked to own their real estate rather than lease it. Typically, the savings are substantial, as the difference between lease payments required to rent similar space and the actual mortgage payments provides additional cashflow.

Nothing is more expensive than a missed opportunity
With new condo builds under high demand, there is a brief timeframe to take advantage of an affordable, modern, and well-located industrial condo. 

Rising interest rates
The Bank of Canada has committed to keep its low interest rates on hold for now, however, it is predictable that borrowing costs will go up soon.

Supply shortage
Supply chain issues for construction projects increase the build time and causes the price to increase, leaving the finished product more expensive than anticipated. 

Advantage of buying early
Moving forward, as development projects for industrial condos are under construction, we are expecting to see an even greater demand to purchase new product before project completion. 

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Ownership Opportunities

Alberta

Element Business Centre Phase I and 2*
Pricing at launch: $195 psf - $210 psf
Pricing at completion: $210 psf - $215 psf
Increase of ~10%
Apex Phase I and II*
Pricing at launch: $180 psf - $190 psf
Current listing price: $230 psf
Increase of ~30%
 

Mississauga, Ontario

Legacy Business Centre (2 buildings)*
Pricing at launch: $310psf - $325 psf
Pricing at completion: $390psf - $400 psf
Increase of ~30%
From the time projects started to the subsequent completion 18-24 months later, the value for the
property increased 10-30%. Additionally, with an expected rise in interest rates and exasperated supply chain issues, we expect property value to surge substantially.

*Projects developed by Beedie

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Thomas Ashcroft, SIOR
Principal
+1 780.990.5364
[email protected]

Rob Iwaschuk
Principal
+1 780.907.0554
[email protected]

Ryan Zabloski
Principal
+1 780.993.7474
[email protected]