The Edmonton skyline is seen on a warm weather day from Forest Heights Park in Edmonton, on Friday, Jan. 25, 2019.
Ian Kucerak / Postmedia
The Edmonton International Airport, a proposed southwest Edmonton hospital, and the Valley Line LRT expansion are driving long-range commercial real estate trends, says a report from the real estate firm CBRE.One of the largest outside commercial and economic drivers is the Edmonton International Airport (EIA) expansion, says the 2019 Canadian Real Estate Market Outlook, released Thursday.The report notes that the EIA continues to develop its available land to expand flight operations as well as to grow its commercial footprint. In 2018, a new Costco warehouse, the Premium Outlet Collection mall and an 800,000-square-foot Aurora Cannabis production facility opened at the EIA. Other projects slated for completion in 2019 include the 135-room Fairfield Inn by Marriott hotel as well as Century Casino’s race track and entertainment facility.Within the city, CBRE cites the impact of the Valley Line LRT project, to expand Edmonton’s LRT with a 27-kilometre route between Mill Woods in the southeast and Lewis Farms in west Edmonton via the downtown. The 12-stop southeast portion of the line is currently under construction and to operate by the end of 2020. The province has committed $1 billion to help fund the 16-stop second phase of the expansion, the Valley Line West.The proposed southwest Edmonton hospital, the city’s first new hospital since 1988, is also poised to impact the market. Proposed for the Ellerslie area at 127 Street, the 320-acre site is to house between 350 and 500 in-patient beds. Construction under the current NDP government is scheduled to start in 2020.CBRE says that while there continues to be strong investor demand locally for industrial and multi-family assets — with Class A properties in both sectors trading at pre-recession yields — office investment activity is expected to remain flat this year as demand becomes more selective.And its tax differentials — between $1 and $2 per square foot — that will continue to push industrial tenants from Edmonton’s core to areas like Nisku, Leduc, and Acheson.Beyond taxes, other key trends noted in the CBRA report include:• A resurgence of the downtown core, attributed in part to Rogers Place and ICE District development. “The renewed vigour is attracting tenants and will support strong office leasing activity in the area,” notes the report.• Uncertain political landscape, with the provincial election expected to be called any day and a federal election slated for later in the year. As the provincial capital, the public sector accounts for a large portion of Edmonton’s office market. The outcome of the elections could put pressure on government sector occupancies and shape the future of the region’s energy sector.• Trophy office space — that classified as Class AA office space — is in demand, with tenants no longer viewing building amenities as a mere commodity but instead a necessity in order to hire and retain top talent.• Conversion opportunities abound as tenants relocate into higher quality office buildings and vacancy rises among the older office inventory. Due to functional inefficiencies, some owners are reviewing conversion opportunities as a viable option to repurpose obsolete buildings. Recent projects in Edmonton included multi-family and hospitality conversions.• The private investor market will continue to be the most active in 2019, stresses the CBRA. Strong investor demand for industrial and multi-family assets continues. In fact, Class A properties in both sectors continue to trade at pre-recession yields or even more aggressively in certain scenarios. On the other hand, office investment activity is expected to remain relatively quiet as demand becomes more selective in 2019. Similarly, institutional demand for larger retail properties has been muted while assets under $10 million are sought after and backed by abundant private capital.