cmd uw
February 4th, 2006, 08:46 PM
I think the increased discussion on Edmonton deserved a new seperate thread.
Fire away boys....and gals.
Highrise potential looking up
Rising lease rates may spur new construction
Gary Lamphier, The Edmonton Journal
Saturday, February 04, 2006
A new office tower on Jasper Avenue? Edmonton hasn't seen one of those since Commerce Place was built, 16 years ago.
Although the Devonian Building -- at 112th Street and Jasper -- is being gutted to make way for Class A office space, and a Toronto developer recently filed plans to build a new tower at Petroleum Plaza, near the legislature grounds, no new office building has graced Edmonton's main strip since 1990.
But that may be about to change.
With Edmonton's office vacancy rates at their lowest level in recent memory, and local lease rates on a steady climb, the odds of seeing a developer break ground on a new office tower on Jasper are improving.
Skeptical? Consider Exhibit A:
Melcor Developments.
The 83-year-old Edmonton-based property developer, which is on track to report its best year ever in 2005, and has seen its share price zoom 600 per cent to nearly $140 over the past five years, is considering building a new tower west of the Royal Bank Building, at Jasper and 101st Street.
Melcor acquired the 15-storey, 135,000-square-foot Royal Bank tower -- along with the park-like lot to the west, and the five-storey parking garage across the lane, to the south -- for an undisclosed price last July. The seller was a numbered company owned by local and foreign investors.
At the time, Melcor said it had no immediate plans to build on the treed parcel of land next door. It's on the southeast corner of Jasper and 102nd Street, and kitty corner from the former Bay building -- the U of A's future downtown campus.
But with Edmonton's real estate market in overdrive, Melcor -- which already has a modest portfolio of office properties in Edmonton, Calgary and Regina -- is slowly warming up to the idea of developing the site.
"We're obviously not committing to anything today," says Melcor CEO Ralph Young, carefully choosing his words.
"Lease rates have to be up in the $25-a-square-foot range, or at least $10 above where we're at today. But we feel reasonably confident, based on the signs we're seeing today, that within 18 months to two years, we'd be ready to have a very serious look, or even start development on that site."
Melcor hasn't drawn up any plans yet, and Young says he's willing to consider all sensible options, including a possible mixed-used tower that would incorporate both offices and condos. Such developments are increasingly popular in cities like Vancouver, which has lost many large head offices in recent years, even as residents have continued to flock downtown.
"Some people would suggest that a building in that location would make a very good mixed-use building. A highrise could be 25 to 30 storeys, with maybe one-third office and two-thirds residential," says Young.
"That's a concept that hasn't been seen in Edmonton, but it's getting to be quite common in other major cities. And based on the market today, that would probably be the type of project that makes the most economic sense," he adds.
"Demand for office space is still fairly modest in Edmonton, and demand for condos is still relatively strong. But as I say, we haven't come to any conclusions yet, and we won't for at least another year."
Although the vacancy rate in the Royal Bank tower has actually risen a bit since Melcor acquired the property in July -- due to the relocation of one particular tenant -- Young says overall demand is firming up.
"We've had a number of interested parties looking at new space in that building.
"There's nothing concrete yet, but we see enough activity that we're not at all concerned about the potential to lease that up," he says.
Young isn't the only one who sees brighter days ahead for Edmonton's long-moribund downtown office market.
Although the $240-million Station Lands megaproject has failed to go ahead due to its gritty location and mammoth scale, most signs suggest a rebound is well underway.
In its recently released 2006 forecast, real estate broker Avison Young notes that Edmonton's downtown office vacancy rate slid to just 7.0 per cent by
the end of 2005 -- making it the third-lowest among Canada's major cities, and fifth-lowest among 75 downtown markets across North America.
Avison says it expects local vacancy rates to fall below 6.0 per cent this year.
Meanwhile, office lease rates jumped by more than $3 per square foot in 2005, it adds, and Avison projects average net rental rates in the city's Class A office buildings to top the "mid-teens" by the end of the second quarter.
All of that bodes well for future office construction in the city's downtown core.
"For the first time in nearly 20 years, landlords are positioning themselves for the potential of new supply entering our market in the event rental rates continue their climb, and the lack of space limits leasing opportunities for large tenants," Avison says.
glamphier@thejournal.canwest.com
Fire away boys....and gals.
Highrise potential looking up
Rising lease rates may spur new construction
Gary Lamphier, The Edmonton Journal
Saturday, February 04, 2006
A new office tower on Jasper Avenue? Edmonton hasn't seen one of those since Commerce Place was built, 16 years ago.
Although the Devonian Building -- at 112th Street and Jasper -- is being gutted to make way for Class A office space, and a Toronto developer recently filed plans to build a new tower at Petroleum Plaza, near the legislature grounds, no new office building has graced Edmonton's main strip since 1990.
But that may be about to change.
With Edmonton's office vacancy rates at their lowest level in recent memory, and local lease rates on a steady climb, the odds of seeing a developer break ground on a new office tower on Jasper are improving.
Skeptical? Consider Exhibit A:
Melcor Developments.
The 83-year-old Edmonton-based property developer, which is on track to report its best year ever in 2005, and has seen its share price zoom 600 per cent to nearly $140 over the past five years, is considering building a new tower west of the Royal Bank Building, at Jasper and 101st Street.
Melcor acquired the 15-storey, 135,000-square-foot Royal Bank tower -- along with the park-like lot to the west, and the five-storey parking garage across the lane, to the south -- for an undisclosed price last July. The seller was a numbered company owned by local and foreign investors.
At the time, Melcor said it had no immediate plans to build on the treed parcel of land next door. It's on the southeast corner of Jasper and 102nd Street, and kitty corner from the former Bay building -- the U of A's future downtown campus.
But with Edmonton's real estate market in overdrive, Melcor -- which already has a modest portfolio of office properties in Edmonton, Calgary and Regina -- is slowly warming up to the idea of developing the site.
"We're obviously not committing to anything today," says Melcor CEO Ralph Young, carefully choosing his words.
"Lease rates have to be up in the $25-a-square-foot range, or at least $10 above where we're at today. But we feel reasonably confident, based on the signs we're seeing today, that within 18 months to two years, we'd be ready to have a very serious look, or even start development on that site."
Melcor hasn't drawn up any plans yet, and Young says he's willing to consider all sensible options, including a possible mixed-used tower that would incorporate both offices and condos. Such developments are increasingly popular in cities like Vancouver, which has lost many large head offices in recent years, even as residents have continued to flock downtown.
"Some people would suggest that a building in that location would make a very good mixed-use building. A highrise could be 25 to 30 storeys, with maybe one-third office and two-thirds residential," says Young.
"That's a concept that hasn't been seen in Edmonton, but it's getting to be quite common in other major cities. And based on the market today, that would probably be the type of project that makes the most economic sense," he adds.
"Demand for office space is still fairly modest in Edmonton, and demand for condos is still relatively strong. But as I say, we haven't come to any conclusions yet, and we won't for at least another year."
Although the vacancy rate in the Royal Bank tower has actually risen a bit since Melcor acquired the property in July -- due to the relocation of one particular tenant -- Young says overall demand is firming up.
"We've had a number of interested parties looking at new space in that building.
"There's nothing concrete yet, but we see enough activity that we're not at all concerned about the potential to lease that up," he says.
Young isn't the only one who sees brighter days ahead for Edmonton's long-moribund downtown office market.
Although the $240-million Station Lands megaproject has failed to go ahead due to its gritty location and mammoth scale, most signs suggest a rebound is well underway.
In its recently released 2006 forecast, real estate broker Avison Young notes that Edmonton's downtown office vacancy rate slid to just 7.0 per cent by
the end of 2005 -- making it the third-lowest among Canada's major cities, and fifth-lowest among 75 downtown markets across North America.
Avison says it expects local vacancy rates to fall below 6.0 per cent this year.
Meanwhile, office lease rates jumped by more than $3 per square foot in 2005, it adds, and Avison projects average net rental rates in the city's Class A office buildings to top the "mid-teens" by the end of the second quarter.
All of that bodes well for future office construction in the city's downtown core.
"For the first time in nearly 20 years, landlords are positioning themselves for the potential of new supply entering our market in the event rental rates continue their climb, and the lack of space limits leasing opportunities for large tenants," Avison says.
glamphier@thejournal.canwest.com