Edmonton retail insight – Fall 2022

Local Market

Net asking rents in Edmonton have continued to rise. This increase is mostly due to higher construction and labour costs, leading to increases in minimum net rents for new products.

Leasing activity remains robust. Lease deals are being negotiated and tenants are still moving into vacant spaces.

Total available space has been seeing a decline and net absorption has been growing as retail spaces continue to stay favourable. General retail, malls, neighbourhood centers, and power centers have all contributed greatly to the positive net absorption as they continue to get leased up.

The end of the pandemic, coupled with the summer holidays has created pent-up demand for retailers and consumers, providing a surge in retail sales.

The cost of goods has continued to rise. This influences spending at retail stores, as consumers are more frugal and are not willing to spend as much.

The lead times have increased on many items that retailers require to move into their spaces. This includes HVAC systems, underground fuel tanks, pizza ovens, glass, and many others. This has caused many retailers to struggle and has caused landlords to extend fixturing periods to provide tenants additional time in the result of delays.

The Valley Line Southeast LRT was expected to open in summer of 2022, but the opening was delayed. When completed, it will run 13 km from Downtown to Mill Woods, featuring 11 street-level stops. The Valley Line West LRT has also just begun construction and is estimated to be completed in 2028.

Recovery

The downtown core of Edmonton has been slow to recover, and traffic numbers still haven’t reached what they were pre-pandemic. The move to work-from-home has played a big role in the diminishing downtown traffic, as employees continue to work from the comfort of their homes. Employees are starting to head back into the office for the summer months, and it is likely that people will revert to more time spent in the office in the coming months.

Many Edmonton employers are now seeking workers to fill up spots that had recently been vacated. Retail in general saw the largest number of layoffs and is working to hire employees back. Having more employees return to the downtown offices will be healthy for downtown Edmonton retail.

New tenants are looking to sign longer-term lease deals because of the uncertainty in the market. Locking in the longer-term rates provides them with certainty during periods of instability. The many different contributing factors to the uncertainties in the market include news regarding a recession, inflation, and rising interest rates.

Construction costs continue to rise and are a hindrance for both landlords and tenants. Costs in labour have contributed greatly to this increase, making it more difficult to renovate and slowing the development process.

Food and beverage that had its activity hindered greatly during the past two years has come back stronger than most other retail categories. Quick service restaurants have been very busy, and there is a need for space for these types of retailers. This is due to a low inventory of vacant spaces and a supply of franchisee candidates looking to enter the business. Consumers found comfort in the ease of online purchasing, and QSR has been able to provide a similar experience with food options.