Edmonton.

Transcription

1 Edmonton $9.99

2 Released: October 2014 The Real Estate Investment Network Ltd Cr Langley, BC V4W 3W7 Tel (604) Fax (604) info@reincanada.com Web Page: Cover Photo Provided By: WinterforceMedia Important Disclaimer: This Report, or any seminars or updates given in relation thereto, is sold, or otherwise provided, on the understanding that The Real Estate Investment Network Ltd and their instructors, is not responsible for any results or results of any actions taken in reliance upon any information contained in this report, or conveyed by way of the said seminars, nor for any errors contained therein or presented thereat or omissions in relation thereto. It is further understood that the said authors and instructors do not purport to render legal, accounting, tax, investment, financial planning or other professional advice. The said authors and instructors hereby disclaim all and any liability to any person, whether a purchaser of this Report, a student of the said seminars, or otherwise, arising in respect of this Report, or the said seminars, and of the consequences of anything done or purported to be done by any such person in reliance, whether in whole or part, upon the whole or any part of the contents of this Report or the said seminars. If legal, accounting, tax, investment, financial planning or other professional advice or assistance is required; the services of a competent professional person should be sought. The following content has been researched and published in good faith without warranty or liability for any erroneous, incomplete or misleading information. All Rights Reserved. No part of this Report may be reproduced, or stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.

3 Economy Image Provided by: Bulliver Economy They say investing is about location, location, location, and Edmonton is at the centre of it all - literally. The geographic centre of Alberta, Edmonton is only three hours drive north of Calgary, the province s other major service centre; offers businesses with links to both the prairie provinces and Asia via the Yellowhead Highway; and is serviced by a growing international airport. In today s global economy, the movement of goods in an efficient and cost-effective manner is critical, and Edmonton is able to provide both. Businesses want to locate in areas where they can operate less expensively and more efficiently and can attract top personnel, and Edmonton is certainly a place that excels in these areas. In the centre of the province, Edmonton finds itself between one of the world's most politically stable oil supplies (the oil sands) and the United States the world's largest energy consumer. 97% of Alberta s oil is found in the Greater Edmonton service area 1. Not a bad place to be, economically. Often called the Gateway to the Oilsands, Edmonton is the major hub that services the Wood Buffalo (Fort McMurray) region, providing services and products for both commercial purposes and enhancing the quality of life of those that live and work there. Edmonton companies have made millions providing vital logistics, engineering, manufacturing and Research & Development services for the oil sands. With drilling activity ramping up, this sector will continue to provide Edmonton residents with a growing number of job opportunities. Edmonton s riches do extend beyond the wealth of the booming oil and gas industry. Part of Alberta s Industrial Heartland, manufacturing plays a big role in diversifying the city s economy. Edmonton s manufacturing sector accounted for 10% 0f the city s GDP in 2010 and employs over 40,000 people. In fact, the Greater Edmonton area is home to Alberta s largest manufacturing and processing centre. The city s manufacturing sector accounts for 40% of the province s manufacturing shipments 2. In addition to energy-driven manufacturing, the City of Edmonton also has dominant sub-sectors in fabricated metal, machinery, and food-processing 3 providing Edmonton with a wealth of economic spinoff and a continuous supply of new jobs. Edmonton is also home to numerous post-secondary institutions, offering a continuous supply of renters and contributing to the economic diversity of the city. Post-secondary institutions also act as an economic stabilizer for communities in both good and bad economic times. Many of Canada s brightest young people have chosen to study in the Edmonton area, leading to a large and intelligent labour pool. Anchored by the University of Alberta and the Northern Alberta Institute of Technology (NAIT), the city s ten public post-secondary institutions boast a combined enrollment of over 170,000 students 4. Both NAIT and the University of Alberta have projects currently under construction that will attract and provide education for more students 5. The reality is, Edmonton has one of the most diversified economies in Canada. The city's largest employers are the Government of Alberta, Alberta Health Services, the City of Edmonton, and the University of Alberta 6. Some of Edmonton s other major industry clusters and sectors include: agrifood products & agriculture, construction, biotechnology, financial services, forest products, information & communication technologies, medical services, nanotechnology, retail, tourism, and transportation. Outlook Alberta will continue to lead in job creation over the next decade, with major new oil sands projects projected to drive job growth into Canadian crude oil production is expected to increase from 3.5 million barrels per day to 6.4 million barrels per day by As a manufacturing base for major oil companies, Edmonton will continue to see job creation in the energy services, The Real Estate Investment Network Ltd. 1

4 manufacturing, and transportation sectors. In fact, Edmonton s manufacturing sector is projected to grow an average of 4.2% per year through Oil and gas projects currently underway in the city include the Edmonton Energy and Technology Park, a 4,865-hectare eco-industrial park on the northwest side of Manning Drive that is expected to produce $18.4 billion a year in revenue when it is completed 10, and will create hundreds of job opportunities. Edmonton is also just minutes from Nisku Business Park, the 2 nd largest Industrial Park in North America and 45km from a $5.7 billion Bitumen Upgrader (North West Redwater Partnership). NWR broke ground on the project in the spring of 2013 and expects to employ over 8,000 people during peak construction. The facility is expected to be operational in While not located in Edmonton, the project will provide jobs for Edmonton residents, which will in turn stimulate the city s economy. While oil will continue to be an economic driver, the City of Edmonton is home to other industries that provide the city with economic growth and stability. One sector that stands to see substantial growth is the Information and Communications Technologies (ICT) sector. According to the Alberta ICT Industry Association, there are over 5,500 ICT companies in Alberta, producing over $10 billion in annual revenues. Of those, 33-40% are located in the City of Edmonton and the surrounding region. Edmonton already has its share of self-made ICT multi-millionaires, and experts believe this industry is just coming out of the starting gate 12. The majority of job seekers in the ICT field are young, and the City of Edmonton will certainly prove able to meet the needs of these Generation Y-ers with the city s low cost of living and excellent transportation links. Another project on the books that has the potential to significantly impact the city s economy and revitalize downtown Edmonton is the Edmonton Arena. The $604.5-million project includes the arena, a Winter Garden, a community skating rink, connections to Edmonton s LRT, and a pedestrian corridor. Construction began in March 2014 and will be completed in the fall of The arena is expected to be a catalyst for change in downtown Edmonton, transforming the area into a major retail and entertainment district for the city. This region will also benefit from the newly constructed Metro Line, which will open to the public at the end of One has only to look at the major projects that will be completed in the next couple of years to see the potential this area holds for investors. Edmonton remains near the top of all lists of best places in which to invest, whether you are talking provincial, national or world-wide. The region enjoys exceptional economic growth, one of the most diversified economies in Canada, and creates hundreds of job opportunities every year, making it one of the best places in which to work and live in the country. Demographics Population Growth According to the last Federal Census (2011), the population of the City of Edmonton was 812,201, an increase of 11% from 782,439 in The population increase between 2006 and 2011 was nearly double the growth rate experienced by the country during the same time period. The City of Edmonton recently released its 2014 Civic Census results, revealing that the population of the city has continued to grow at a rapid pace, reaching 877,926 in April The census report indicates that the city experienced an annual average growth rate of 30,000 between 2012 and 2014 the size of an entire town! And the city s population is expected to keep growing. By 2043, the City of Edmonton is expected to have a population of 1,145, This is wonderful news for investors. A rising population will lead to an increase in housing demand, which will in turn raise house values and average rents. The Edmonton Civic Census also provides landlords with valuable insights about where newcomers are locating within the city, and consequently, where they would be interested in renting. We recommend investors take a look at these reports, available for every Edmonton neighbourhood. Immigration According to the 2014 Civic Census, the majority of Edmonton s new residents move from other areas of Alberta (13,034), with the remainder coming from other parts of Canada (13,569), or other countries (9,239) 17. Immigration will continue to support rental demand in Edmonton, as international and interprovincial immigrants tend to rent before putting down permanent roots in a new community. Median Age As of the 2011 Federal Census, the median age of the City of Edmonton was 36.0, right on track with the median age of the province (36.5) 18. The median age of the city has not changed significantly since the 2006 Census (36.1) 19, which means that young people continue to move into the city, counteracting the city s existing aging residents. Edmonton has a distinct advantage over other Canadian communities as it continues to attract younger families. In other words, as other areas age, Edmonton continues to renew itself. This will help drive the economy longer and farther than most other major centers in the country. Younger age groups also create more movement in the housing sector renting, buying, and selling as their life stages change. Working age residents also create more money through income taxes and younger people often consume more than their older cohort; the purchase of furniture, vehicles, electronics, more food, eating out etc. means more local economic stimulation. The Real Estate Investment Network Ltd. 2

5 Housing Rental Market Edmonton s employment growth and higher incomes continue to attract newcomers to the city, increasing demand for rental units in the city. With more people than ever looking for housing accommodations, vacancy rates have dropped, which has caused rental rates to rise dramatically over the last several years. The table below outlines the average rental rate by the housing type and number of bedrooms. # of Bedrooms Average Rents in Edmonton Average Price Lowest Price Highest Price House 2 $1,331 $825 $2,495 3 $1,740 $600 $3,295 4 $2,082 $500 $4,200 Room 1 $626 $420 $1,575 Basement Suite 1 $909 $500 $1,400 2 $1,085 $650 $1,750 3 $1,197 $645 $1,800 Townhouse 1 $1,136 $650 $1,424 2 $1,499 $500 $3,500 3 $1,486 $600 $3,495 Condo/Apartment 1 $1,095 $316 $2,900 2 $1,390 $725 $3,500 3 $1,429 $900 $2,495 Source: With a population of nearly 1 million, Edmonton is a city that cannot be painted with one brush. Edmonton investors have told us that tenant profiles vary greatly between different areas of the city. In older neighbourhoods, quality of properties can vary depending on the profile of the owner or tenant. Over the last decade, many older neighbourhoods have begun to witness revitalization, with new infills and owners making improvements on their homes with new siding, windows and landscaping. Values and rents will vary greatly in these neighbourhoods depending on the quality of the property. Investors must perform their due diligence in order to find neighbourhoods that match their preferred tenant profile. Sales Activity Out of all of Canada s major metropolitan centres, Edmonton consistently offers the most affordable housing prices. One of the Economic Fundamentals REIN looks at when determining a region s investment potential is the Housing Affordability Index. It is recommended that individuals spend no more than 25-39% of their monthly income on their mortgage payment. As of August 2014, the average Edmonton resident would need to allocate 35.2% of their monthly income to pay the mortgage on a standard two-storey home the lowest of all Canada s major cities 20. This higher income means people who don t buy, can on average afford to pay more rent. And while Edmonton remains the most affordable housing market of Canada s metropolitan centres, prices are beginning to rise, pushing more people out of the home ownership market, providing a larger pool of potential renters. According to the 2014 Civic Census, the City of Edmonton has grown by over 60,000 people in the past two years. This has significantly increased the demand for housing in the city, putting pressure on the city s housing market, shortening the time it takes to sell a home, and increasing the average sale price. The following table outlines the activity in the Edmonton real estate market over the past three years. As with other cities, different neighbourhoods command different selling prices and rent depending on their age and location. Keep in mind that both new and older inventory have pros and cons. It is often harder to cash flow newer properties, (although they may be more desirable to tenants), but repairs and maintenance will be lower and lower operation costs means just as much as higher rents when it comes to the bottom line. Investors will have to do their homework to discover neighbourhoods where the rental rates will cover the expenses of the property. Recent Residential Developments Residential building activity in Edmonton has trended up in recent years. In 2013, the city witnessed 10,634 homes begin construction, with 3,981 single-family homes started and 6,653 multi-family units started 21. As of July 2014, the City of Edmonton Sales Activity January - June 2014 YTD 2013 YTD 2012 YTD Single-Family Detached Total 4,323 3,843 4,012 Sales Average $438,852 $416,051 $398,365 Median $405,000 $380,000 $367,000 Condominiums Total Sales 2,526 2,166 2,017 Average $248,041 $241,327 $235,010 Median $229,900 $228,000 $220,000 Source: Edmonton Real Estate Board. The Real Estate Investment Network Ltd. 3

6 city had already witnessed 5,330 houses being constructed 22. New residential projects in the City of Edmonton include the 38-unit Bentley Condos, currently under construction at Avenue Northwest. Sales for available units range in price from $597,460 to $774,790. Starling at Big Lake is a new housing community currently under construction at 137 Avenue Northwest and 199 Street Northwest. Sales for available units start at $430, It is important for investors to remember that residential building permits are a reaction to demand in the past. What is important to take note of is if supply is keeping up with demand. A high level of inventory can diminish values and rents, giving renters and buyers too much to choose from, from an investor s point of view, while a low level of inventory means supply is lower than demand, which will increase prices as people compete for available units. Currently demand in Edmonton is outstripping supply, leading to a rise in both housing prices and average rent. Current economic conditions support job growth in Edmonton, and we should see housing demand remain high in the mid-term future. Infrastructure Infrastructure As the city s population continues to grow, Edmonton s leadership must ensure that the city s infrastructure keeps up with resident demands. Infrastructure is important to meet the needs of the residents. People will leave a city that doesn t have the capacity to educate its children, mend its ill-stricken, or arrest its bad guys. Hospitals, schools, emergency services, as well as water, sewer, and roads are of paramount importance. Here is what Edmonton has on its books as prioritized projects: The Federal Building and Centennial Plaza Project to meet future population needs. Includes a new public plaza, parkade, and increased public space at the Legislature grounds - $165 million (end of 2014) 24 New Mill Woods Library, Seniors and Multicultural Centre to accommodate population growth in Mill Woods neighbourhood - $33.8 million (end of 2014) 25 Kennedale Traffic Operations Building to provide administration offices, staff, and material storage facilities - $17.2 million (2015) 26 Waterdale Bridge Replacement to meet needs of future population growth - $125.8 million (2015) 27 6 new elementary schools (Lewis Farms, Heritage Valley, Summerside, Terwillegar Heights, Windermere, Ambleside) (Fall 2016) 28 New Junior High School (Lewis Farms) (Fall 2016) 29 High School Expansion (Lillian Osborne) (Fall 2016) 30 New Fire Station in Lewis Farms to meet population growth - $9 million (proposed) 31 Image Provided by: kevinmklerks Transportation In the summer of 2013, the City of Edmonton began construction on an interchange in south Edmonton, at the junction of Queen Elizabeth II (QEII) Highway and 41 Avenue Southwest. The project will include a road/rail grade separation of the Canadian Pacific Railway tracks east of the QEII and the construction of a new bridge over Blackmud Creek. This interchange will convert 41 Avenue Southwest into a continuous corridor with full access to and from QEII Highway 32. Construction on the project will be completed in This transportation improvement will benefit not only residents, but make it even more attractive for businesses to locate here, once again, creating jobs and stimulating the local economy. Anthony Henday Drive Designed to provide travelers with a quick way to pass through Edmonton, the Anthony Henday Ring Road is one of the two Ring Roads currently under construction in the Province of Alberta. As of September 2014, nearly 90% of the road was completed and open to traffic. The City of Edmonton s goal is to finish the entire Ring Road by 2016, if current schedules are adhered to. The Southwest, Southeast, and Northwest portions of Anthony Henday Drive have all been completed. The only portion of the Ring Road under construction is the Northeast. Although not slated to open until 2016, this portion of the Ring Road could prove to be the most important for the growth of the city of Edmonton. It will also provide the city planners with some unique opportunities to develop new residential neighbourhoods within a very near commute of new employment regions. The $1.81 billion project will include 27 kilometres of six and eight-lane divided roadway, nine interchanges, two road flyovers, eight rail crossings (flyovers), and two bridges across the North Saskatchewan River, for a total of 46 bridge structures. The Real Estate Investment Network Ltd. 4

7 Construction on the project began in June 2012 and should be completed in the fall of Poli cal Climate Public Transit Today, the city s LRT system stretches from the Clareview Station in the northeast and runs southwest to Century Park Station at 23 Avenue NW and 111 Street NW. Light Rail travel is becoming more and more attractive in Edmonton as commute times increase due to a population explosion and subsequent auto congestion around the city and suburbs. Rental Rules Unlike other provinces in Canada, there are no controls on the amount of rent increases in Alberta. Rent may be increased if there has not been a rent increase within the previous 365 days or since the start of the tenancy, whichever is later. The landlord must give written notice in advance before he or she is able to increase the rent. For more information on province-wide tenancy laws, please click here. Construction was recently completed on a 3.3 km extension from Churchill LRT Station in downtown Edmonton northwest to the North Alberta Institute of Technology (NAIT). The project is the first segment of a planned LRT expansion to the Edmonton city limits near St. Albert. The first phase of the project will include three new stations: a stop at Grant MacEwan University, one at the Royal Alexandra Hospital, and a terminus station at NAIT. It is estimated that the addition of the North LRT line will add 13,200 weekday riders to Edmonton s LRT network. The line is expected to open to the public by the end of The Valley Line is a 27 kilometre low-floor urban line that will run from Mill Woods in Southeast Edmonton to Lewis Farms in West Edmonton. On March 11, 2014, the provincial government announced its funding commitment to the Southeast portion of Valley Line LRT Project, a 13 kilometer section from Mill Woods to Downtown Edmonton. This portion of the Valley Line has been put to tender and the successful team is expected to be selected by the end of There are 25 stops planned for the SE to West LRT as well as three stations (Wagner, West Edmonton Mall and the Misericordia Hospital). Major construction on the line should begin in 2016 and continue until completion in For more details on the impact that transportation improvements can have on real estate values, download Edmonton Transportation Effect here. The City of Edmonton encourages the development of secondary suites as a way to increase safe affordable housing options within the city. The city allows Secondary, Garage, and Garden suites in most single-detached residential zones throughout the city. To see which zones secondary suites are permitted in, please click here. In 2012, the City of Edmonton introduced Cornerstones II, the city s plan for affordable housing to The Cornerstones program includes grant funding for those looking to build secondary suites in the city. This is great news for investors! The city is taking a pro-active approach to its population growth and is actually encouraging rental units. Business Incentives Edmonton s economic opportunities secure it as one of North American s most desirable locations to for businesses. The city offers a cost-competitive business environment that stacks up well against global competitors. The city s competitive tax environment includes36: No machinery and equipment (M & E) tax Lowest non-income taxes of all major Canadian centres No municipal business taxes other than in selected business revitalization zones KPMG ranked Edmonton as the most tax competitive city among international cities in its Competitive Alternatives 2014 Special Report: Focus on Tax. The report compared the total tax costs faced by companies in 107 international cities including corporate income tax, property tax, capital tax, sales tax, local business tax, and labour-based taxes. Edmonton was found to offer the lowest tax costs overall37. The city s business-friendly environment continues to attract companies from all over the country, creating new job opportunities, and stimulating the local economy. Image Provided by: Hobolens The Real Estate Investment Network Ltd. 5

8 Economic Development Investors should always be aware of how friendly a community s Economic Development team is, because how they treat you is how they are likely to treat potential employers looking to move into the region. The Edmonton Economic Development Corporation has a fantastic website that both businesses and investors will find easy to navigate. The team is quick to respond, and was able to answer any questions we had. Just one look at the initiatives currently underway in the city for businesses, and it s easy to see that this forward-thinking economic development team has ensured Edmonton will continue to attract businesses for years to come. Image Provided by: Hobolens Investment Ra ng Economic Risk 11/12 Yield Growth Poten al 10/12 Local Poli cs Conducive to Business 7/8 Access to Transporta on 8/8 Investors Insights 9/10 Total 45/50 The Real Estate Investment Network Ltd. 6

9 Sources 1. Invest in Canada. (2012). Edmonton. Government of Canada. Retrieved from 2. City of Edmonton. (2014). Export Potential. Retrieved from the City of Edmonton online industrial_development/export-potential.aspx 3. Edmonton Economic Development Corporation. (2012). Manufacturing. The City of Edmonton. Retrieved from 4. Edmonton Economic Development Corporation. (2012). About Edmonton. City of Edmonton. Retrieved from 5. Government of Alberta. (October 2014). Inventory of Major Projects. Retrieved from 6. Edmonton Economic Development Corporation. (2012). About Edmonton. The City of Edmonton. Retrieved from 7. BuildForce Canada. (2014). Alberta Leads Canada Through Next Wave of Construction. Retrieved from BuildForce Canada online CAPP. (June 2014) Crude Oil Forecast, Markets and Transportation. Retrieved from CAPP online default.aspx 9. City of Edmonton. (2014). Growth potential. Retrieved from the City of Edmonton online industrial_development/growth-potential.aspx 10. Edmonton Economic Development Corporation. (2012). Oil, Gas, & Petrochemicals. City of Edmonton. Retrieved from Alberta Industrial Heartland. (2013). Project Status. Retrieved from option=com_content&view=article&id=130&itemid= Hicks, G. (June 2012). Hicks: Tech industry 3rd most valuable in Alberta. Toronto Sun. Retrieved from hicks-tech-industry-3rd-most-valuable-in-alberta 13. City of Edmonton. (2014). Arena and Entertainment District. Retrieved from downtown-arena.aspx 14. Statistics Canada Edmonton, Alberta (Code ) and Division No. 11, Alberta (Code 4811) (table). Census Profile Census. Statistics Canada Catalogue no XWE. Ottawa. Released October 24, City of Edmonton. (April 2014) Civic Census Results. Retrieved from the City of Edmonton online city_government/facts_figures/municipal-census-results.aspx 16. Capital Region. (March 2009). Capital region population & employment projections report. Retrieved from sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0cb0qfjaa&url=http%3a%2f%2fcapitalregionboard.ab.ca%2f-%2freports% 2Fappendix1_population_e.pdf&ei=fV4kVNSxGcXOigLwYHIBg&usg=AFQjCNFFrxIzh1aplpmUB8urJxJAMBi5RQ&sig2=oPYOlySbFXj9_NIWvTy_dQ 17. City of Edmonton. (April 2014) Civic Census Results. Retrieved from the City of Edmonton online city_government/facts_figures/municipal-census-results.aspx 18. Statistics Canada Edmonton, Alberta (Code ) and Division No. 11, Alberta (Code 4811) (table). Census Profile Census. Statistics Canada Catalogue no XWE. Ottawa. Released October 24, (accessed September 25, 2014). 19. Statistics Canada Edmonton, Alberta (Code ) (table) Community Profiles Census. Statistics Canada Catalogue no XWE. Ottawa. Released March 13, RBC. (August 2014). Housing trends and affordability. Retrieved from CMHC. (January 2014). Housing Now - Edmonton CMA. Retrieved from CMHC online lang=en&cat=70&itm=51&fr= CMHC. (August 2014). Housing Now - Edmonton CMA. Retrieved from CMHC online lang=en&cat=70&itm=51&fr= BuzzBuzzHome. (2014). All new construction homes in Edmonton. Retrieved from BuzzBuzzHome online canada/alberta/edmonton 24. Government of Alberta. (October 2014). Inventory of Major Projects. Retrieved from Ibid 26. Ibid. 27. Ibid. 28. Ibid. 29. Ibid. 30. Ibid. 31. Government of Alberta. (October 2014). Inventory of Major Projects. Retrieved from City of Edmonton. (2014). QE II Highway and 41 Avenue SW Interchange. Retrieved from the City of Edmonton online transportation/road_projects/qe-2-hwy-41-avenue-interchange.aspx 33. Government of Alberta. (18 May 2012). Northeast Anthony Henday Drive. Retrieved from Edmonton Transit System. (2014). North LRT to NAIT. City of Edmonton. Retrieved from north-lrt-stations.aspx 35. City of Edmonton. (2013). Valley Line (SE to West LRT): Mill Woods to Lewis Farms. Retrieved fro lrt_projects/southeast-to-west-lrt-mill-woods-to-lewis-farms.aspx 36. City of Edmonton. (2014). Economic fundamentals. Retrieved from the City of Edmonton online industrial_development/economic-fundamentals.aspx 37. City of Edmonton. (2014). Cost Advantages. Retrieved from the City of Edmonton online industrial_development/cost-advantages.aspx The Real Estate Investment Network Ltd. 7