Curious about where Edmonton industrial real estate prices are headed?
There are strong fundamentals that point to great long-term positioning – but what the next 6-12 months hold, I couldn’t tell you (I wouldn’t commit to it on paper, anyway.) Even Warren Buffet doesn’t make short term calls . . .
However, I can provide you with some insightful numbers of the past 5 years, 2004-2008. A birds-eye view of where we’ve been and we are now.
The Network has released their 2008 Commercial Real Estate Overview for Edmonton, and it focuses on three key metrics:
- Per Unit Price (Square Foot or Acre)
- Number of Transactions
- Dollar Value of Transactions
Between 2004 and 2008, Edmonton’s industrial market generally experienced:
- Increasing per unit prices (No drop in 2008 folks, as many have assumed).
- Increasing number of transactions from ’03-’07, a sharp spike upward in ’07, and a sharp drop in ’08.
- Increasing dollar volume of transactions from ’03-’07, a sharp spike upward in ’07, and a return to near normal values in ’08, in spite of the dramatic drop in the number of transactions.
This chart quickly shows the unit price metric over the 5 years, I recommend viewing the full data, including CAP rates, for all the industrial property types in the report (link provided below).
Myself, I was curious as to the role of investors and speculators over the five years, so I formatted the numbers into these pie charts below. Generally speaking, the blue portion will represent activity by user / owners, and the other colors combined make up what is typically investment properties. Of no big surprise, the red hot year of 2007 witnessed the highest involvement of investors, and 2004 saw strong investor activity as well. Typically, I see investor activity being a main driver behind the short term ups and downs. Most industrial owner / users are operating within a longer term business plan, with various obligations making their property less liquid. In Edmonton, I see the industrial values being more stable than many other market segments due to a pretty consistent 75% – ish involvement from user/owners. I don’t have the data to support it at my fingertips, but I have seen reports suggesting that the Edmonton residential inventory glut experienced in 07-08 was over 50% investment properties.
The full report from The Network which goes into greater depth, and includes analysis of other segments of Edmonton’s commercial market including CAP rates can be downloaded here.