Downtown Edmonton developers would rather switch to rentals than fight with housing market

The Shift is an upcoming two-tower (38 and 35 stories) project by Edgar Developments on 106 Street in downtown Edmonton. Credit: Edgar Developments

A housing change is emerging in downtown Edmonton. The housing market has softened, according to an update from the Altus Group, market analysts who review real estate trends. Renting lately trumps buying.

“What’s happening is developers who may have gone to market with the intention to build condominiums are finding that pre-sales are a little bit more challenging to get, but there’s quite a bit more certainty from a rental perspective so they’re shifting into that tenure,” Altus VP of product management Matthew Boukall said in an interview.

He said the trend began almost three years ago, however, it really picked up in the last 12 months.

“What seems to be coinciding at the start of this year and the back half of last year is that the sales have been weaker. So we have seen a drop off in overall sales volume, and this is kind of encouraging developers to consider it more than they were in the past.”

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That’s why Boukall said developers give the market a test, and then readjust depending on what they see.

“What kind of changed in the past six months is we’ve seen projects actually launched sales, and the developers see if there is interest from before-sale market and decide after a couple of months of selling to actually take it off the market and then go after the rental opportunity.”

Helping the market shift are those who have rented for years, and are looking for an upgrade in quality. They’re moving to new layouts, with upgraded surfaces and added amenities.

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“Where a brand new rental apartment is going to have the whistles that you wouldn’t have built 20 years ago — sound insinuation, H-Vac, air conditioning if they’re putting that in — it’s going to be a better quality than those older buildings and that’s what is attracting those tenants over.

“There’s new interior technology. Something called luxury vinyl tile, which doesn’t sound very luxurious but what it is, it’s highly resilient flooring, so it doesn’t scratch, it doesn’t dent, it feels warm underfoot. Granite countertops, redesigned kitchens with galley kitchens with larger islands and more flexible eating space. It’s something you didn’t do 20-30 years ago that’s now fairly much more commonplace.”

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It’s creating a shift in demographics, Boukall said.

“They’re actually going to pay more because it’s going to be new but they’re also freeing up housing that can be more affordable for someone else to move into.”

Canada Mortgage and Housing Corporation reports housing starts in June almost doubled what we saw a year ago, and starts are up for all of 2019 compared to 2018 at 3,961 compared to 3,800 last year.

The average price of a single-detached home has also increased in 2019 compared to last year, according to CMHC, to reflect the market is just now starting to rebound after falling off for a couple of years. The average through June is at $546,000 compared to $535,000 a year ago.

What Altus Group is reporting hasn’t caught any of that optimism, although it is showing investment increases to get ready for an uptick, with money more so on the commercial side.

Boukall said major properties like the EPCOR Tower have spruced up common space, installing a restaurant off the lobby. Other recent examples include the Intact Insurance Building on 109 Street and HSBC Place on 101 Street, which is completely recladded and other amenities are being added.

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Boukall said other commercial buildings are being converted to residential by Strategic Group, including a couple of the government district north of the legislature.

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