A resurgent economy and improving household incomes boosted Edmonton’s multi-family market, according to Marcus & Millichap’s Q4 2019 local apartment report.
Demand remained stable during the third quarter, even as the oil industry is still showing signs of weakness with the loss of 9,200 jobs over the year ending in September.
Fortunately, while the workforce shrunk by 1.2%, “robust healthcare and financial sectors in the metro should help to ease challenges in other industries, fuelling the need for more rental units in Edmonton,” Marcus & Millichap stated.
Over the past year, rental vacancy rate went down to 5.3%, while average monthly rent grew by 2.6% annually to $1,155. During the same year-over-year period, nearly 1,300 apartments were built in Edmonton, while almost 2,200 purpose-built rentals were underway as of Q3 2019.
“Edmonton is anticipated to outpace most other metros in household growth over the next five years as more families and young professionals locate here,” the report noted. “Single-family home values have fallen year over year in spite of strong housing demand, down 2.1% to $371,200, leading to a roughly $400 gap between the monthly mortgage payment and the average rent.”
Together, these trends have made the city’s apartments among the most attractive assets for investors.
“Strong investor perceptions coupled with yields above many other major metros kept deal flow at elevated levels over the past year,” Marcus & Millichap added. “Robust investor demand compressed the market’s average cap rate 50 basis points to rest in the upper-4% to low-5% territory over the past four quarters. In more suburban locations of Edmonton, investors found assets with initial yields above 6%.”