We touched a nerve last week.
By suggesting the city of Edmonton has champagne tastes (which are being paid for by tax payers), we pointed to three areas to show city council’s propensity for spending:
1. Leasing the most expensive office building in Edmonton;
2. Building a $321M recreation centre;
3. Building a $210M bus barn.
We had a number of interesting responses.
One was from Councillor Knack, who respectfully clarified some of the math for the Lewis Estates recreation centre. The actual building will cost $179M with the remaining $142M required for land servicing and soft costs. While we feel the total cost is the best representation of the actual expense, we have a keen appreciation for Councillor Knack’s tact, and can see why he is well-liked within his constituency.
We also had feedback that reveals we may have written too much on the issue, with our last article being the proverbial straw that broke a back or two. But as strange as it may sound, we respect and welcome the criticism. While it would be more productive having a conversation when we know who is on the other end, at least a discussion is happening.
Our intent is not to denigrate our city, but judging by the amount of comments we had on last week’s article, there are a lot of people who are genuinely concerned about property taxes.
So let’s elaborate on the effect the increased spending & property taxes are starting to have on Edmonton’s commercial real estate market:
1. This spring market was one of the slowest in the past 10 years. And this isn’t our subjective opinion, there have simply been fewer sales in the entire market compared to most of the last decade.
2. There was a 22% decline in building permit applications compared to a year ago. This presents two problems: first, municipal revenue is already down $4.8M off the budget, and is expected to grow to $8.4M by the end of the year. Second, the tax base will not grow at the pace the City was forecasting. There will be a shortfall in immediate revenue due to the drop in permitting applications, followed by lower-than-anticipated tax revenue going forward.
Those two stats should be sobering for city council. There is less activity – both from a sales perspective and with new construction – yet there does not appear to be any meaningful discussion from council on how municipal costs can be brought under control. In what other organization, company or household can this type of pressure not evoke some type of change?
In Calgary, people are losing their minds over the recent tax increases, with some going so far as suggesting the province needs to intervene. You might find it interesting to learn that even with Calgary’s massive increases of late, their non-residential tax is still comparable to Edmonton’s (less than 1% difference). And worse, the residential tax rate is 36% higher in Edmonton than in Calgary. If businesses in Edmonton are mad, homeowners should be too.
|Non-Residential Tax Rate||21.8496||22.0217||-0.78%|
|Residential Tax Rate||9.0806||6.654||36.47%|
We want to stress that we are not trying to troll Edmonton city councillors or administration, but instead convey the message that a number of businesses and households are emphatically against dramatic increases in municipal spending. These costs – which have consistently exceeded population growth and inflation – are requisitioned from tax payers at a time when the economy is still struggling.
We write about this topic because it’s important to us. We simply want Edmonton to continue being a place we’re all proud to call home.
We write a blog on Edmonton’s commercial real estate market every Friday at 11:00 am. Subscribe to get the posts delivered right to your inbox and we’ll include a free copy of our ebook Leasing Commercial Real Estate in Edmonton.
Chad GriffithsPartner, SIOR, CCIM
Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.
Ryan BrownPartner, BCom, SIOR
Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.
Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.
EdmontonCommercial.com offers expert analysis and research in a weekly blog along with resources for landlords, tenants, sellers and buyers in the market. Seeking to buy or lease? We track every property available for sale and for lease in Greater Edmonton. Get the latest news and check the latest listings—anytime.