Multi-family rental development rises to meet demand

Edmonton’s hottest commercial real estate sector, driven by unprecedented migration, is leading to opportunity for investors of all sizes.

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Record high migration along with favourable federal funding programs and new municipal bylaws governing zoning have sparked a multi-family rental boom in Edmonton. The recent Re/Max 2024 Commercial Real Estate Report notes that rental housing “is front and centre” in the city’s commercial real estate market, amid a shortage of supply.

It points to Canada Mortgage and Housing Corp. data, as evidence of the supply-demand imbalance, which shows that vacancy in Edmonton last fall was at 2.4 per cent, down from 4.3 per cent the year before.

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“It’s probably the strongest sector in the city right now,” says Shiva Narayan, realtor with Re/Max Excellence in Edmonton about purpose-built rental development in Edmonton. He points to the 202,000-plus additional people living in Alberta in 2023 that is driving demand for housing.

At the same time, increases in housing prices with the average price reaching $441,350 in May, up five per cent year over year, along with higher borrowing costs, have forced more first-time buyers to put purchasing on hold and rent instead.

“They can find a lot of choice among new build rentals in suburban parts of the city close to their work without the long-term commitment of a purchase,” Narayan adds.

As well, recent changes to Edmonton zoning for residential neighbourhoods, allowing for small-scale multi-development, have created new opportunities for investor buyers, says Dave Ozubko, realtor with Re/Max River City.

“It’s really changed the landscape of what you can do on these properties.” He points to one of his recent listings, featuring an 18,000-square-foot plot — essentially four lots with two existing homes — that is ideal for multi-family development in the city’s southeast.

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“There’s enough space to put a 24-unit development.”

The location is close to transit, retail and it’s within short drives to downtown, Anthony Henday Drive and Sherwood Park. Its proximity to many amenities reflects a broader trend noted in the Re/Max report taking place across Canada.

Ozubko adds new CMHC funding programs — like MLS Select — have made it easier for small-scale investors to get financing with a five per cent down payment as long as the development meets criteria for affordability, climate change mitigation and accessibility.

“And … with the city’s new zoning bylaws, you can take a 600-square-metre corner lot and get approval to build 10 units on that site with no consideration for parking.” He further notes the new rules reflect a recognition that more young adult renters do not own automobiles, preferring transit and riding sharing.

Re/Max’s report also highlights the CMHC construction loan program offering preferred borrowing rates, higher loan-to-value ratios and extended amortizations helping drive more large multi-family rental projects across Canada, including in Edmonton.

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Yet despite seeing 3,000 more units come to market in 2023, demand for rental and housing in general remains high, the report adds.

“It’s a booming market,” says Narayan, noting Edmonton will likely see more activity in the coming months. “And activity and interest are only going to increase as interest rates come down.”

In turn, listed properties ripe for redevelopment, like the multiple lot property in Fulton Place, are likely to see more interest from buyers in the coming months, Ozubko says.

“Right now, we several have buyers on the sidelines looking at this property as a possible entry point to the market, but they’re waiting for rates to come down,” he says.

“Overall, there is a big opportunity for builders, developers and investors in Edmonton.”

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