While there are reasons to be optimistic about Alberta’s economic recovery, certain statistics suggest we’re still deep in the recession. For example, industrial building permits in December were down an astonishing 48.2% year-over-year. While industrial was the hardest hit, all other sectors saw dramatic declines with residential down 31.2%, commercial down 21.5%, and institutional down 17.4%. As per the chart below, December marked the lowest amount of building permits issued in the past 5 years.
It’s important to note these declines, taken in isolation, do not tell the whole story. In September, we wrote an article about how the Province of Alberta was changing building codes. Those changes took effect on October 31st, 2016 and by the Province’s own admission, the new code would add to the cost of construction. Builders and developers acted to get permits in advance of the change, and correspondingly, building permits spiked 43.8% in October compared to October of 2015. Not that is was overly bold, but we predicted building permits would decrease for the following months.
Notwithstanding the dramatic swings month over month, 2016 as a whole was down 18.8% from 2015. While this could mean a slowdown in upcoming construction, we feel it’s healthy for a market in recession to avoid adding too much inventory. Anecdotal to the increased activity we are seeing, we are optimistic for 2017. If Edmonton’s market has positive absorption coupled with a slow down in new construction, we would expect lease rates to stabilize and vacancy to decline. We’ll continue to monitor building permit activity as it undeniably has a huge impact on Edmonton’s commercial real estate market.
Chad GriffithsSIOR, 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 Canada-wide since 2013.
Ryan BrownBCom, SIOR
Ryan is a partner with NAI Commercial Real Estate in Edmonton. He is currently ranked nationally as one of NAI's top advisors in Canada. Having executed in excess of $100 Million dollars 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 practicality for long term use.
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.
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