EDMONTON REGION INVESTMENT REPORT

MID YEAR | 2020

Edmonton’s ONLY RE/MAX Commercial Office rcedm.ca | 780 757 1010

RE/MAX Commercial Capital | Ritchie Mill#302, 10171 Saskatchewan Drive

Edmonton, AB T6E 4R5

This report is published by RE/MAX Commercial Capital and reproduction in whole or in part is prohibited without prior written consent. The information provided in this report is deemed to be correct, however we cannot guarantee its accuracy. Data courtesy of The Network.

Scott Hughes, MBA, AACI, CCIM, SIORBroker/Owner | Investment Sales & Leasing587 525 8901 scott@rcedm.ca

Edmonton Region Real Estate Investment Sales SummaryMid Year 2020

Categories 2020 Mid Year 2019 Mid Year 2019 Year End# Sales $ Amount # Sales $ Amount # Sales $ Amount

OfficeDowntown 1 $6,500,000 3 $6,685,000 5 $837,485,000Suburban 6 $6,402,000 8 $16,682,500 19 $40,671,172Condominium 15 $13,250,539 24 $18,310,943 52 $45,605,139Subtotal 22 $26,152,539 35 $41,678,443 76 $923,761,311

RetailShopping Centre 5 $74,920,000 6 $41,642,000 20 $189,925,642General 18 $34,230,000 27 $67,830,050 54 $108,954,559Condominium 24 $25,202,106 20 $31,986,953 30 $44,707,498Subtotal 47 $134,352,106 53 $141,459,003 104 $343,587,699

IndustrialMulti-Bay 15 $68,255,000 12 $96,775,000 28 $334,986,191Single Tenant 2 $13,738,000 2 $11,862,600 21 $199,780,500Owner/User 40 $127,783,064 43 $120,165,075 102 $313,994,575Condominium 31 $22,514,328 45 $28,749,050 89 $54,318,960Subtotal 88 $232,290,392 102 $257,551,725 240 $903,080,226

ApartmentHighrise 4 $305,000,000 2 $49,460,000 3 $63,290,000Walk-up 25 $127,407,950 31 $192,029,212 57 $321,030,585Townhouse 1 $34,000,000 3 $52,968,500 3 $52,968,500Subtotal 30 $466,407,950 36 $294,457,712 63 $437,289,085

LandCommercial 20 $41,933,412 23 $93,965,161 40 $138,107,413Industrial 22 $39,848,390 30 $64,028,400 52 $107,772,225Urban/Agricultural 29 $52,557,461 28 $78,883,540 33 $129,335,631Multi-Family 18 $54,761,006 23 $61,371,521 48 $139,598,077Institutional/Special Purpose 2 $13,880,290 2 $13,425,872 6 $25,501,872Subtotal 91 $202,980,559 106 $311,674,494 179 $540,315,218

Hotel/Motel 3 $80,732,936 1 $5,000,000 4 $35,560,420

Special Purpose* 13 $173,683,100 4 $17,859,990 14 $90,297,586

Grand Total 294 $1,316,599,582 337 $1,069,681,367 680 $3,273,891,545*Auto dealerships, churches, schools, restaurants, mobile home parks, service stations, assisted living, golf courses etc.

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EDMONTON REGION INVESTMENT REPORT MID YEAR | 2020

MID YEAR SUMMARY

$1.3B of commercial real estate sales were recorded in the Edmonton Region for the first half of the year which surpassed mid year 2019 by $247M. However, the real story is what didn’t happen in the second quarter of 2020.

Sales started out of the gate very strong in first quarter 2020 with over $1B in volume. However when the global pandemic hit in mid-March the economy cooled rapidly, leaving second quarter sales to only reach $271M.

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No downtown office sales took place in the second quarter, with only a couple suburban office sales just over $1M selling between $230 - $260 per square foot. Vacancy is 18%, with tenants trying to rationalize their space utilization to the new “physical distancing reality” for the foreseeable future.

As we enter the sixth month of this pandemic multiple retailers are closing stores and seeking creditor protection. The Retail Council of Canada estimates that one in five stores are now vacant across all types of malls, plazas and big-box centres. Some prominent names include Reitmans, Aldo, DavidsTea, Mendocino, Army & Navy, Pier 1, Carlton Cards, Victoria Secret and Bath & Body Works. Only $28M of retail changed hands in the second quarter. Two sales of note, include a fully leased Tim Horton’s/Shell Station selling for $5.775M based on a 5.25% cap rate and a stand-alone Bank of Montreal drive-thru selling for $3.550M or $696 per square foot. Grocery, hardware stores and banks are robust. Quick service restaurants with drive through locations are a highly sought after attribute.

$92M of industrial buildings sold in the Edmonton Region within the second quarter. A local pension fund sold a two building portfolio for $11M at a 7.55% cap/$122 per square foot. Imperial Equities picked up a $7.068M single tenant building at a 6.92% cap/$99 per square foot. On the owner/user side, a 249,021 square foot facility at 6020-20th Street was acquired at $23.750M/$95 per square foot by Groupe Touchette Real Estate. A large 12,556 square foot condo sold at Element Business Park for $3.130M. The industrial market is at a 7% vacancy overall with logistics and distribution services seeing increased demand due to the growth of e-commerce during the pandemic.

Apartment occupancy through the second quarter was stable at over 94%. However, from a sale perspective, multiple deals have been put on hold with only 9 sales recorded in the second quarter registering a total of only $15M - shocking really, when you consider the first quarter there were $451M in sales. Demand will continue as tenants and seniors prefer to rent rather than own in this cycle but we may see some upward pressure on vacancy with over 1,900 units currently under construction. Top sales completed in the 2nd quarter were a 48 unit selling in Inglewood for $4.850MK at a 6% cap and a 24 unit selling in Lansdowne for $3,174M at a 5.1% cap. As the economy recovers, we should see more sales take place in the second half of 2020.

$106M in land sales took place in the second quarter 2020, consistent with first quarter volume which bodes well as a leading economic indicator for future projects coming on board. The City of Edmonton eliminated minimum parking requirements from the zoning bylaw, and development bonds will be accepted in lieu of a letter of credit or cash security for service agreements. Both changes will make proformas more inviting.

Top commercial land sales in the second quarter included the future Heritage Valley Town Centre lands of 12.78 acres fronting onto James Mowatt Trail which sold for $10.224M and a $3.458M retail land purchase of 2.47 acres, to be known as Royal Centre Keswick, consisting of 25,000 square feet over multiple commercial buildings.

157 acres was acquired for $8.658M in Strathcona County for future residential development. 4.94 acres was bought for $880k per acre for the construction of 177 units in two apartment buildings. 3.51 acres for a $3.617M multi-family corner site. 7.68 acres of a graveled industrial yard for $4.657M, complemented by a rail spur.

www.rcedm.caEdmonton’s ONLY RE/MAX Commercial Office rcedm.ca | 780 757 1010

RE/MAX Commercial Capital | Ritchie Mill#302, 10171 Saskatchewan Drive

Edmonton, AB T6E 4R5

Scott Hughes, MBA, AACI, CCIM, SIORBroker/Owner | Investment Sales & Leasing587 525 8901 scott@rcedm.ca

ALBERTA’S COMEBACK

It’s a good bet that the third quarter sales will be significantly affected as the economy is still in restart mode with no vaccine imminent.

Currently, there are more than 165 vaccines being developed around the world, with 28 vaccines in the human trial stage. www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html

As the world economy continues its comeback, the price of oil continues to climb. At the time of this writing WTI and Brent crude are comfortably over $40 per barrel and WCS is at $30 per barrel.

Hopefully the school restart will be successful and an effective vaccine will be available soon. Although I’m going out on a bit of a ledge here, Oilers should have a better playoff run in 2021 :) Until then take care and enjoy the rest of summer!

Life is like a game of cards. The hand that is dealt you represents determinism; the way you play it is free will. - Jawaharlal Nehru, first Prime Minister of India

QUOTE OF THE QUARTER

EDMONTON REGION INVESTMENT REPORT MID YEAR | 2020