The office vacancy rate has been hovering close to 20 per cent in recent months, still under the 27 per cent Calgary hit in 2017, but well above the five and four per cent respectively in Vancouver and Toronto.
Building owners need to be open to changing space to meet the needs of some more nonconventional tenants, suggests Woods. He says the Silicon Valley-style open space with pillars and concrete floors and no cubicle or offices is popular in Vancouver and Toronto and has potential in Edmonton now that some B and C class towers downtown are facing.
“Certainly when your building isn’t leased up your attitude to what’s good and what’s bad changes," says Woods. “If somebody came up and said 'I want a floor and I want you to just blow it out,' I'm not sure there's anybody that'd say no."
While the vacancy situation has been challenging, the lease rates have stayed quite stable, say analysts, which indicates long term strategy on the part of the building owners.
Still, in comparison to other cities, lease rates are reasonable. Recent Avison Young figures show Triple A space asking $35 per square foot (this only includes three new downtown towers, the Epcor Tower, Enbridge Centre and Edmonton Tower). A class buildings are asking $20.75; B class $15.25. A class buildings in the government district are asking $16.75. In Vancouver and Toronto A class buildings have been asking net rent rates in the $30 range, according to CBRE real estate reports.
The downtown market for office buildings has a diversity of stock — from B and C class buildings to triple A — and it is changing hands at several price points. In 2017 notable transactions included 9888 Jasper which sold for more than $60 million, about $340 per sq. ft.; HSBC Place, which sold for $35 million, or $108 per sq ft. and Enbridge Place which sold for $25 million or $95 per sq. ft.
In the third quarter of 2017, Edmonton had 600,000 square feet of downtown office space under construction while Calgary had 430,000, according to City of Calgary economic development figures.
MORE PEOPLE LIVING DOWNTOWN
Boosters want to see more residential and multiuse development in the core, buildng on a city that already has a good start thanks to urban planning and happenstance.
O'Donnell suggests the pattern of slow development downtown, relative to, for instance, Calgary, has resulted in a vibrant mix. There are about 14,000 people living in the core now.
“The thing with Edmonton is we don’t have the conglomeration of office towers in the core so we’ve had the opportunity to put some more mixed use and residential spread throughout the core which I think, when we look back in another five, 10 years, really will be beneficial to activating many blocks in the core,” O'Donnell says.
Downtown has the capacity to take many more residents, says David Sanche, co-CEO of Westrich Pacific.
The Ultima is a condo tower that is 100 full and is right next to Ice District. Shayne Woodsmith/EEDC
Westrich has two new condo towers on 102nd Street in the downtown, the 33-storey Ultima, 100 per cent full and the 43-floor Encore, which has sold 85 per cent of its units.
"It’s dramatically under-crowded," says Sanche. "You go to a movie — you’re sitting in a theatre with 10 other people. It’s never crowded. There’s just so many options."
Sanche thinks one reason there is slow absorption of more central housing options is Edmonton's suburban mentality of a big truck and a house with a yard. Westrich's Ultima condo designed with that bias to attract clients.
"We wanted to create a true feeling of an actual yard. You want to walk your dog. You want to sit at a fire pit and roast marshmallows. You want to have a barbecue. You want to sit in a hot tub. You want to have a true yard without the yard work. So we did that on a midtown amenity on the 10th floor — the sky garden. It’s overlooking Ice District, west to the treetops, south to the river valley, in the middle of the tower."
Most of the new high-rise residential construction in the downtown has been aimed at relatively affluent young professionals and older downsizing empty nesters. O'Donnell and Shewchuk said more student housing is needed. O'Donnell also thinks more family housing is needed.
Beljan's refit of the old YMCA building on 102A Avenue, which will be renamed Williams Hall after John Williams the founder of the YMCA, will be targeted at renters in their 20s and early 30s, in school or just out of school and starting their professional careers. Dulaba says Beljan hopes to keep the rental units in the $900 to $1,000 per month range.
These type of renters "don't have a car, don't need a car, don't want a car," Dulaba says. So the developer is supplying a bike parkade instead of a car parkade for the building.
MIXED USE AND NEW USE FOR OLDER BUILDINGS
Most new developments in the core have some element of mixed use. On 104th Street the condo towers built in the 1990s and early 2000s set the pattern with prominent street level podiums filled with boutique retail and independent restaurants.
Even hotels being built in the core now mix it up. The JW Marriott building rising in Ice District will encompass 22 floors of hotel space and 31 floors of condo residences.
With the high office vacancy levels of 2015 and 2016, Edmonton's business community turned its attention to converting office towers and underused buildings to new purposes, particularly residential.
While only limited numbers of buildings are suitable for conversion, there is some action on that front. Strategic Group is planning a conversion of the Centre West building in the government district and the Financial building in the same area has a conversion underway that will produce a mixed residential and office building.
Dulaba of Beljan, which specializes in repurposing and renovating old and sometimes historically designated buildings, admits it takes a lot of planning and effort to do a refit but there are advantages too.
"There are a lot of benefits, particularly time… if you were looking at redeveloping a project of a similar size (as the YMCA building) from the ground up, you would be looking at 15 to 18 months in construction including a basement and parkade, whereas we’re taking the building and in roughly 12 months you’ve up and running."