August 27, 2012
Retail building boom hits Edmonton
PAUL BEREZOWSKY, CAMERON DEVELOPMENT CORPORATION
Edmonton has often grabbed headlines for its retail chutzpah. Think back to 1981 when the largest mall in North America - West Edmonton Mall - opened for business.
That super mall still may be king of the continent, but this year Edmonton, the country’s retail capital, is in the news for another reason: more than 3.2 million square feet of retail is under construction, 2.5 square million of which will open this year.
To put that number in perspective, it nearly equals all of the retail construction across Canada in any one of the past few years, said Eric Slatter, senior associate, retail, Colliers International, Edmonton.
While retail development has gone cold in most Canadian cities, that is not the case in Edmonton this year.
The development boom there is led by big box centres such as the Currents at Windermere in southwest Edmonton.
About 700,000 square feet of the 1.1 million square foot power centre has been completed, said Cameron Naqvi, executive vice-president, Cameron Development Corporation.
The developer is a major player in the retail market in Alberta’s capital city, with a dozen retail developments on the go.
Another of its biggest projects is Manning Town Centre, an 800,000 square foot big box centre.
The retail boom, however, is showing cracks.
“In the last couple of months we have started to see shortages of labour and material costs have certainly gone up,” said Naqvi.
Slatter hears similar comments from other developers.
“They tell us that they continually have to revise their construction budgets because costs keep going up,” he said.
Naqvi said three well-known general contractors in Edmonton declined to bid on a sizable contract tendered by Cameron recently because they were over capacity.
“It is the first time since 2007 that we have seen this,” he said.
Unemployment in Edmonton hovers at 4.5 per cent, well below the Canadian average, said Slatter.
“What we’re starting to see on construction sites are signs — one telling you what is being developed, another saying who is doing the job and another ‘now hiring’ sign because there is such a huge demand for trades and labour,” he added
Rising materials prices such as steel and a scarcity of piling rigs are resulting from high demand as well in other sectors such as oil and gas, said Naqvi.
But, he believes that builders have learned a hard lesson from the hectic pace of 2007 when costs skyrocketed and labor was scarce.
“I think everybody (builders) is being a little more cautious in what they take on now,” he said.
He believes this might mean that some projects get shelved.
“We have to be a little more strategic about when we go to tender,” he said.
Slatter said the city’s retail vacancy rate is a low 2.4 per cent and retail sales remain high, compared to the rest of Canada.
And, while stats also indicate that Edmonton probably has more retail space per capita than elsewhere in Canada, Slatter doesn’t think that means the city is overbuilding.
“The vast majority of the current developments will be fully pre-leased before they are completed,” he added, so they won’t have much impact on the vacancy rate.
“The way we develop and build our stores is that they are significantly larger than other markets and retailers need more of them to capture the market here,” he said.
Those developments feed on growing residential developments sprawling in suburbia, he added.
There is another reason for the active retail market.
Edmontonians have lots of money and they like to shop, according to stats that show household incomes are considerably higher than the Canadian average as are its residents’ spending habits, Slatter said.
“Canadian retailers are noticing that it translates to increased profitability in their Alberta stores,” he notes, adding that American ones as well see the city as a good investment. Most new retail developments are big box centres or renovations of existing enclosed malls.
Gone are the days of the new enclosed mall. It’s too expensive to build and operate plus Edmonton is being well served by the type of tenants that regional malls offer, said Slatter.
PAUL BEREZOWSKY, CAMERON DEVELOPMENT CORPORATION
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