Industrial Insight Report. Greater Edmonton Area Q1 2016

Transcription

1 Industrial Insight Report Greater Edmonton Area

2 Table of Contents Greater Edmonton Area Overview 1 Greater Edmonton Area Map 2 Submarkets Northwest 3 Southeast 4 Nisku / Leduc 5 Statistics 6 Contacts 7

3 Pricing Demand Supply Market Update Greater Edmonton Area How will Alberta s economic situation shape the industrial market? Lease activity Lease activity has continued to remain slow for the first quarter of. Companies remain hesitant in making decisions as they wait to see which direction the market will go. These companies have also begun to expect lower lease rates, when in reality rates they have only seen a slight drop. This hesitation combined with an abundance of sublease space coming onto market, are the main factors slowing down lease activity in the region. Rents The Greater Edmonton Area (GEA) started to witness a slight drop in rental rates during the first quarter of. This is largely due to the lack of demand and an increasing amount of supply in the market. Average net rental rates for the quarter are currently sitting at $9.89 per square foot. Sales and Construction Sales activity this quarter actually increased in comparison to the fourth. The region saw a total of 31 sales this quarter, with the three largest sales being a 66,795 square foot building at Street; a 71,207 square foot building at Inland Way; and, a 72,088 square foot building at Avenue. There were also a total of 11 land sales in the region, with the largest being a acre site that sold for $360,837 per acre. Economic outlook The Alberta industrial market continues to be affected by low commodity prices, and there is much uncertainty as to how quickly these prices will rebound. Certain oil experts see prices remaining low until the beginning of 2017, and others are projecting oil prices above $70 per barrel by the end of this year. Key market indicators 12-month dollar change $0.51 Arrows represent change from prior quarter Net new supply, net absorption, vacancy 3,000,000 2,000,000 1,000,000 sf 0-1,000,000-2,000,000 Average rental rate $11.00 $10.50 inventory 137,264,153 vacancy (%) 4.6% availability (%) 5.3% net absorption (243,439) net absorption 2,849,476 Average rental rate (nnn) $9.89 Net new supply vacancy Net absorption 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% As gets underway, we have witnessed vacancy rates rise to over 5.0 percent, which have more than doubled from a year ago. In almost any market in North America however, the GEA is still considered a healthy market. The other market trend which has continued, is the increased amount of sublease space consistently hitting the market on a weekly basis. $10.00 $9.50 2,257 $9.89 RECENT SALES COMPARABLES (sorted by square feet) Buyer Seller Location Size Date Price / sf MLS Property Group Ltd. Weatherford Canada Ltd Street, Nisku 66,795 01/20/ $92.07 Round Table Management Ltd. Jeld-Wen of Canada Ltd Inland Way, Edmonton 71,207 02/26/ $ Alberta Ltd. GE Oil & Gas Canada Inc Avenue, Edmonton 72,088 01/11/ $ RECENT LEASE COMPARABLES (sorted by square feet) Tenant Landlord Location Intersection Size West Pointe Building Services TBD A Avenue, Leduc - 9,936 KMS Tools WAM Sunwapta Business Park 184 th Street / 104 th Avenue 21,825 Badger Daylighting Remington South Central BP Building B 75 th Street / 68 th Avenue 26,087 Source: Altus Insite JLL Market Update Greater Edmonton Area Page 1

4 Market map MARKET CHARACTERISTICS Low velocity market for both lease and sale activity Abundance of sublease space coming to market on a weekly basis Slight decrease in rental rates Increased overall vacancy rates for the region MARKET STATISTICS Property type inventory vacancy (%) availability (%) total net absorption total net absorption Average direct asking rent ($ psf) Under construction YTD completions Light Industrial 132,234, % 5.3% (243,439) 2,891,533 $ , ,492 Medium / Heavy Industrial 5,029, % 0.3%% 0 (42,057) N/A 0 0 Industrial 137,264, % 5.3% (243,439) 2,849,476 $ , ,492 JLL Market Update Greater Edmonton Area Page 2

5 Pricing Demand Supply Northwest Lease activity There has been a decrease in leasing activity for the Northwest. Several new developments have been completed in the area, and landlords have been successful in leasing the majority of the projects. All in all, numerous deals have taken place within these new developments over the last six months, which has taken a lot of pressure off developers. Rents Lack of demand, as well as the higher levels of activity in new construction projects has led to a slight decrease in rental rates. The Northwest submarket witnessed rental rates decrease from $9.30 per square foot to $9.21 per square foot this quarter. Sales and Construction Sales activity declined in the Northwest sector. In total, there were 11 sales transactions that took place in the submarket this quarter, of which only five were not condos. The largest sale in the Northwest was also one of the three largest sales in the entire region. This was the sale of Inland Way at 71,207 square feet, which was sold to Round Table Management Ltd. The second largest transaction to take place was a 52,592 square foot building on 17 acres at Street. The Northwest sector only had two land sales take place this quarter. The first one being a 1.39 acre site that sold for around $453,237 per acre, and the second being a 7.73 acre parcel that sold for $216,688 per acre. The total square footage currently under construction has decreased from 406,725 square feet in the fourth quarter of to 282,221 square feet in the first quarter of. Economic outlook The Northwest sector actually witnessed the availability rate decrease slightly over the first quarter from 5.9 percent to 5.6 percent. That being said, the region as a whole is experiencing a common theme of uncertainty and hesitance due to the national economy and low oil prices, and the Northwest submarket is no exception. Key market indicators 12-month dollar change $0.35 Arrows represent change from prior quarter Net new supply, net absorption, vacancy 1,000, ,000 sf 0-500,000 Average rental rate $10.50 $10.00 $9.50 $9.00 $8.50 inventory 57,765,736 vacancy (%) 6.2% availability (%) 5.6% net absorption 165,290 net absorption (27,875) Average rental rate (nnn) $9.21 Net new supply vacancy 2,257 Net absorption 8.0% 6.0% 4.0% 2.0% 0.0% $9.21 RECENT SALES COMPARABLES (sorted by square feet) Buyer Seller Location Size Date Price / sf Guardian Capital Real Estate Inc. No. 362 Cathedral Ventures Ltd A Avenue, Edmonton 41,349 02/10/ $99.16 PBR&R Holdings Ltd. Peter Kiewit Infrastructure Co Street, Edmonton 52,592 01/21/ $ Round Table Management Ltd. Jeld-Wen of Canada Ltd Inland Way, Edmonton 71,207 02/26/ $91.28 RECENT LEASE COMPARABLES (sorted by square feet) Type Tenant Location Size New Driven Sport Street, Edmonton New Cummins Western Canada Sunwapta Business Park 19,882 New KMS Tools Sunwapta Business Park 21,825 Source: Altus Insite JLL Market Update Greater Edmonton Area Page 3

6 Pricing Demand Supply Southeast Lease activity Leasing activity in the Southeast remains slow. New landlord developments have not had a difficult time being leased, and as a result, tenants are seeing that landlords are not particularly panicked - conversely, reduced rates are an expectation that tenants have held in the last couple quarters. One notable lease to take place in the quarter was the leasing of 26,087 square feet in the South Central Business Park (Building B). GWL welcomed Badger Daylighting as its new tenant. More sublease product continues to hit the market. Rents Much like the other submarkets, rental rates in the Southeast have fallen just slightly from $10.03 per square foot to $9.71 per square foot. The 12 month dollar change in rental rates was a negative $1.80. Sales and Construction Sales activity has also slowed in the Southeast sector, and we do expect to see prices decrease if this trend continues into the summer. There were 13 building sales in the Southeast, and only two of these sale transactions were over 20,000 square feet. There was only one land sale in Southeast that closed in the first quarter, which was a 3.68 acre parcel that sold for $471,467 per acre. Institutional landlords are continuing with projects that have already been under construction, but new construction has been limited. The amount of construction on a square foot basis has decreased from 273,930 square feet last quarter to 179,430 square feet. Key market indicators 12-month dollar change ($1.80) Arrows represent change from prior quarter Net new supply, net absorption, vacancy 1,000, ,000 sf 0-500,000 inventory 51,974,694 vacancy (%) 3.6% availability (%) 4.0% net absorption (172,707) net absorption (196,323) Average rental rate (nnn) $9.71-1,000,000 Average rental rate Net new supply vacancy Net absorption 4.0% 3.0% 2.0% 1.0% 0.0% Economic outlook Availability within this submarket rose by 0.8 percent to 4.0 percent since the end of. Much of the new product that was built in has now been leased; this has meant that landlords are not panicking, opposite to what many tenants might be thinking. We continue to witness more sublease product come to market, and there is simply not enough demand to absorb it. This is seen by the negative absorption of 172,707 square feet that was occurred in the Southeast submarket this quarter. $12.00 $11.00 $10.00 $9.00 $8.00 2,257 $9.71 RECENT SALES COMPARABLES (sorted by square feet) Buyer Seller Location Size Date Price / sf Alberta Ltd. David & Thomas Fath 5525 Gateway Boulevard, Edmonton 26,000 02/01/ $ Maria Magdalena Ingeborg Alberta Ltd. Ellwanger Street, Edmonton 29,170 01/04/ $ Alberta Ltd. GE Oil & Gas Canada Inc Avenue, Edmonton 72,088 01/11/ $ RECENT LEASE COMPARABLES (sorted by square feet) Type Tenant Location Size New Badger Daylighting South Central Business Park Building B 26,087 Source: Altus Insite JLL Market Update Greater Edmonton Area Page 4

7 Pricing Demand Supply Nisku Lease activity More than the other submarket, lease activity in Nisku / Leduc has slowed considerably. Sublease space continues to hit the market on a weekly basis while demand remains stagnant. This has led to a significant jump in the availability rate from 12.6 percent last quarter to 16.9 percent this quarter. Rents The lack of demand and increased supply has taken its toll on the Nisku / Leduc submarket. Average net rental rates have decreased from $15.49 per square foot in the fourth quarter of to $12.92-per-square-foot this quarter. This is an even more drastic drop when comparing the current rental rates to where rates were at two years ago, when the submarket was in its peak at around $17 per square foot. Sales and Construction Like leasing activity, sales activity has remained stagnant in the Nisku / Leduc submarket. In total, only three building sale transactions took place this quarter. This included one large transaction of a 66,795 square foot building purchased for $6.1 million by MLS Property Group Ltd., and two smaller buildings at 19,810 square feet and 7,168 square feet which sold for $2.8 million and $1.3 million. The Nisku / Leduc submarket also saw two small land sale transactions take place. These include a 1.24 acre and 5.91 acre parcel, sold for $565,000, and $355,329 per acre respectively. Construction activity in the area remains limited due to the current amount of availability and the present economic conditions. Key market indicators 12-month dollar change $2.08 Arrows represent change from prior quarter Net new supply, net absorption, vacancy 200, ,000 sf 0-100, , ,000 inventory 9,797,734 vacancy (%) 8.7% availability (%) 16.9% net absorption (186,680) net absorption 223,029 Average rental rate (nnn) $12.92 Average rental rate Net new supply vacancy Net absorption 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Economic outlook Nisku / Leduc has been the hardest hit by the fall in oil prices and it could get worse. Vacancy is steadily creeping up and currently sits at 16.9 percent. The interesting thing about this is that only 24 months ago it was below 2.0 percent. If things do bounce back however, this will likely be the quickest market to rebound as well. With recent completion of infrastructure in the area, it is now a prime location for not only oil and gas, but also distribution. We have seen a couple of listings get reduced by as much as 40 percent, and yet, there were still only three buildings to trade and two land sales in the quarter. $20.00 $15.00 $10.00 $5.00 $0.00 2,257 $12.92 RECENT SALES COMPARABLES (sorted by square feet) Buyer Seller Location Size Date Price / sf Truck Central.Ca Inc Alberta Ltd Street, Leduc 7,168 02/01/ $ Bieko Investments Inc. Trinidad Drilling Ltd Street, Nisku 19,810 01/21/ $ MLS Property Group Ltd. Weatherford Canada Ltd Street, Nisku 66,795 01/20/ $92.07 RECENT LEASE COMPARABLES (sorted by square feet) Type Tenant Location Size New West Pointe Building Services A Avenue, Leduc 9,936 Source: Altus Insite JLL Market Update Greater Edmonton Area Page 5

8 Greater Edmonton Area statistics Property type inventory vacancy (%) availability (%) total net absorption total net absorption Average direct asking rent ($ psf) Under construction YTD completions Northwest Light Industrial 56,583, % 6.0% 165,290 14,625 $ , ,725 Medium / Heavy Industrial 1,182, % 0.0% 0 (42,500) N/A 0 0 Industrial 57,765, % 5.9% 165,290 (27,875) $ , ,725 Southeast Light Industrial 49,913, % 4.1% (172,707) (196,766) $ ,430 94,500 Medium / Heavy Industrial 2,061, % 0.0% N/A 0 0 Industrial 51,974, % 4.0% (172,707) (196,323) $ ,430 94,500 Nisku / Leduc Light Industrial 9,797, % 17.0% (186,680) 223,029 $ ,000 Medium / Heavy Industrial 0 0.0% 0.0% 0 0 N/A 0 0 Industrial 9,797, % 16.9% (186,680) 223,029 $ ,000 GEA Overview Light Industrial 132,234, % 5.3% (243,439) 2,891,533 $ , ,492 Medium / Heavy Industrial 5,029, % 0.3%% 0 (42,057) N/A 0 0 Industrial 137,264, % 5.3% (243,439) 2,849,476 $ , ,492 JLL Market Update Greater Edmonton Area Page 6

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