The office vacancy rate has been hovering close to 20 per cent in recent months, still under the 27 per cent Calgary hit in 2017, but well above the five and four per cent respectively in Vancouver and Toronto.
Building owners need to be open to changing space to meet the needs of some more nonconventional tenants, suggests Woods. He says the Silicon Valley-style open space with pillars and concrete floors and no cubicle or offices is popular in Vancouver and Toronto and has potential in Edmonton now that some B and C class towers downtown are facing.
“Certainly when your building isn’t leased up your attitude to what’s good and what’s bad changes," says Woods. “If somebody came up and said 'I want a floor and I want you to just blow it out,' I'm not sure there's anybody that'd say no."
While the vacancy situation has been challenging, the lease rates have stayed quite stable, say analysts, which indicates long term strategy on the part of the building owners.
Still, in comparison to other cities, lease rates are reasonable. Recent Avison Young figures show Triple A space asking $35 per square foot (this only includes three new downtown towers, the Epcor Tower, Enbridge Centre and Edmonton Tower). A class buildings are asking $20.75; B class $15.25. A class buildings in the government district are asking $16.75. In Vancouver and Toronto A class buildings have been asking net rent rates in the $30 range, according to CBRE real estate reports.
The downtown market for office buildings has a diversity of stock — from B and C class buildings to triple A — and it is changing hands at several price points. In 2017 notable transactions included 9888 Jasper which sold for more than $60 million, about $340 per sq. ft.; HSBC Place, which sold for $35 million, or $108 per sq ft. and Enbridge Place which sold for $25 million or $95 per sq. ft.
In the third quarter of 2017, Edmonton had 600,000 square feet of downtown office space under construction while Calgary had 430,000, according to City of Calgary economic development figures.
MORE PEOPLE LIVING DOWNTOWN
Boosters want to see more residential and multiuse development in the core, buildng on a city that already has a good start thanks to urban planning and happenstance.
O'Donnell suggests the pattern of slow development downtown, relative to, for instance, Calgary, has resulted in a vibrant mix. There are about 14,000 people living in the core now.
“The thing with Edmonton is we don’t have the conglomeration of office towers in the core so we’ve had the opportunity to put some more mixed use and residential spread throughout the core which I think, when we look back in another five, 10 years, really will be beneficial to activating many blocks in the core,” O'Donnell says.
Downtown has the capacity to take many more residents, says David Sanche, co-CEO of Westrich Pacific.