Commercial real estate expected to bounce back this year: expert
As credit conditions return to normal and investors get better access to finance capital, Edmonton's commercial real estate investment activity is expected to recover in 2024.
With the potential of slashing interest rates later this year and after more than a 15 per cent decline from previous years, Edmonton, and many of the larger cities across Canada, are expected to see a definite improvement, according to Commercial Real Estate Services (CBRE) managing director Dave Young.
“The market is poised for some growth, especially in Alberta. I feel much more positive about Alberta than I have in a while. That goes for the two big cities (Edmonton and Calgary),” Young said in an interview with Postmedia. “We're seeing growth on the industrial side of things, and we're seeing less vacancy in the office space market.”
According to CBRE, mid-sized investment deals are expected to boost the rebound and drive transaction deals this year. Overall, Canadian real estate investment volumes are forecast to rise modestly this year to $ 52 billion, up five per cent over last year's total.
Commercial real estate has taken a major hit since the pandemic, and Young believes that businesses are still working through a business strategy that best fits the employer and employee needs.
“A lot of companies are still working through their workplace strategy. We're starting to see some of these older corporations move to 3-4 days a week of being back in the office,” said Young.
“It's still an adjustment as employers adjust to the new norms of what their employees want to achieve in the workplace.”
Young believes that real estate investors will need to up the ante and keep their building spaces flush with amenities to attract and retain tenants. With interest rates dropping and vacancy rates falling, it should make the market a lot more competitive, but also
beneficial for the tenants.
“Landlords will need to ensure their buildings have these amenities so that these tenants will want to come to the buildings and stay in these buildings,” said Young.
“There are some fairly attractive prices on some older buildings, which will be very helpful when buyers are looking to increase the amenities in these buildings.”
` RENEWED OPTIMISM'
According to CBRE, 2024 will be the year of industrial growth in Edmonton. Buildings may not be built at the same pace as previous years, but the availability will continue to fall and the rental growth rate is expected to rise in all categories of industrial space this year.
Gross domestic product in Alberta continues to lead the country, which will also benefit retailers across the province. New development will focus on infill opportunities to service areas as the residential market continues to expand.
“I have renewed optimism in the province. With the macro-economy starting to move in the right direction, that bodes well for the province and the city of Edmonton,” said Young. “Migration will continue to challenge places like Edmonton and Calgary, but we're in a place now in the province where there are a lot of tailwinds going on and that will benefit Edmonton immensely.”