Edmonton Downtown office vacancy finally breaks, but it might not last
'It sure is nice to see something that doesn't start with a two,' said CBRE Edmonton's managing director, Mark Anderson.
With office, industrial, and residential reports released recently from commercial real estate services company CBRE and from the Realtors Association of Edmonton (RAE), respectively, key indicators for Edmonton's real estate market show some promise.
As housing starts augment the city's housing stock and office vacancy comes down, the various markets sit in a comfortable position after the second quarter, but the fate of the rest of the year remains unclear as the housing market cools off in the summer and U.S. tariffs fuel uncertainty.
Although average housing prices are still up year-over-year in the greater Edmonton area, the price increases over 2024 have come down compared with previous months this year. RAE board chairwoman Darlene Reid said the market is edging toward more stability.
'We're starting to shift more into a balanced market. I would say we're still on the cusp of a seller's market, but at the bottom. Like, we're a few points away from switching over to this balanced market,' said Reid.
In June, sales were up 1.2 per cent over last year with residential average prices also climbing nearly six per cent. However, signs of a balanced market come from year-over-year comparisons in housing inventory, with a 15 per cent increase at the end of June over 2024.
The rising inventory and the cooling activity will be good news for buyers, said Reid.
'As a buyer, you want a little more choice, and you don't want to have the pressure of having to make offers that are conditionless to compete. Now, people can take a little more time do their due diligence,' she said.
Reid said a decline in market activity often happens during summer as people take vacations and have kids at home, leaving them less time to sell or look for property. The increase in inventory can be attributed to an ongoing home building frenzy in the city. Housing starts are up more than 22 per cent from last year.
With 88,000 square feet of positive absorption, Edmonton's Downtown office vacancy has dipped to 19.3 per cent.
The positive change was aided by a recent Canadian Mental Health Association Centre lease on 102 Avenue that helped eat up a significant amount of vacant inventory.
'We've been bouncing around at about 20 to 21 per cent vacant for a little while. So it's nice to see that we finally crest a little bit below that,' said Anderson.
While one big lease helped with the quarter's absorption, Anderson also highlighted office conversions as contributing to the decrease in vacancy, which he expects to continue going forward.
With many of the city's top office towers like Edmonton Tower, Stantec, and Enbridge filling up, Anderson noted that a few 'C' class buildings with high vacancy continue to be a drag on the market as a whole.
'There's a lot of buildings that are kind of in that bucket, which we would kind of deem to be functionally obsolete,' said Anderson.
'It's unfortunate that they skew our statistics as much as they do, because the reality is, if you are a company that's looking for space, you're generally not going to be even considering these as options.'
As the flight to quality office space persists, Anderson said those older spaces over time will likely be sold or redeveloped.
Despite the strong quarter, Anderson warned that the core is still expecting to finish the year on a negative absorption note that will likely push vacancy back into the 20 per cent range.
'This will not be a surprise,' he said.
Anderson said CBRE has been tracking 'shadow vacancies' Downtown, which are spaces that are still under a lease but are actually vacant. He said as these businesses sign new leases toward the end of the year, many will be downsizing their office capacity to unload the unused space.
'Everything else is quite strong. It's just that there's a couple of these really big tenants that are going to rationalize some of the underutilized office space they've been sitting on for the last 10 years. And unfortunately for us, that means that the vacancy rate might pop up back up into the 20s (per cent).'
According to Anderson, the second quarter of 2025 was the first time the Edmonton area had negative absorption in the industrial market for some time, but he said it's nothing to be concerned about.
In all, net absorption for industrial space in the quarter was down nearly 282,000 square feet.
'It doesn't take a lot to see why that's that's the case. There's a lot of tariff uncertainty still when it comes to the way that Canada interacts with our biggest trade partner just south of the border,' said Anderson.
'Those are the folks that are producing the widgets that go across the border, and so they're the ones most impacted by that.'
As a 'decidedly' industrial town, Anderson said uncertainty around the tariffs has an outsized effect on the city's industrial market. Still, with a vacancy rate below three per cent and an availability rate of 5.2 per cent, he said the city is maintaining an active market and is not far from balanced. Given the size of industrial lots, just a few vacant spaces — like those currently empty near Nisku and Leduc — can skew the numbers, he added.
'It's just these larger-bay industrial properties that are having a more challenging time finding tenants to occupy their space. Small and mid-sized industrial companies — they're in a very tight market right now.'
The canary in the coal mine for the market, said Anderson, is the smaller-bay industrial centres, and those remain strong.
One such example was the Tuesday announcement from Van Houte Coffee Services, which recently opened a brand new 26,000-square-foot office and distribution space in Edmonton that will help the company serve western Canada.
zdelaney@postmedia.com
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