MARKET OVERVIEW

Edmonton Investment Outlook 2011

• The Edmonton Investment market is characterized by a Strong demand for all types.
• Buyers however, are cautious on the marginal properties and will only pay a risk adjusted price for such assets.
• Quality properties will have numerous buyers with only those who are willing to stretch in their valuation, coming out the winning bidder.
• Larger assets will sell quicker than smaller ones as their remains large pools of funds from REITS, Public Companies and Pension Funds seeking quality acquisitions.
• No shortage of money but rather shortages of quality properties that attract the money will hamper deal flow.
• Good developable land is becoming more and more in demand in both the industrial, retail, office and multi-family areas.
• Problem properties and projects that were purchased in 2007/2008 at very aggressive levels with ill planned proformas will not be skated on side by resurgence in interest in acquiring Alberta properties. A bad deal in 2007/2008 will remain a bad deal in 2011.
• Foreclosures will be fewer than in 2010 however they will remain a factor in the market.
• Capitalization rates will range from 6% to 7% for quality properties to “no bid” situations on certain undesirable assets. Each property must be valued on its individual merits.

Retail Summary

• 2011 looks to be the bounce back year we have been looking for. With record attendance at the Whistler ICSC conference we are seeing the national retailers looking for space more aggressively. In addition, we continue to see the movement north from US retail chains such as, Target, Marshalls, and numerous others.
• In 2011 a number of new retail projects will begin and many developers have seen the renewed interest in our marketplace. Namao Centre, Manning Town Centre and Windermere are all set to add retail to our city.
• Vacancy in 2011 will drop, however rental rates will remain stable for existing properties on the majority of asset classes. New construction always provides a challenge but as long as the costs don’t skyrocket like in the last boom we should be in good shape.
• Developers and retailers alike would like to avoid a repeat of 2006-2009 with the dramatic increases in the costs to do business. A steady future will lead to better future for all.
• 2011 is in the early stages to long term growth in our province.

• With over $100 billion dollars worth of projects under way or slated to begin construction within the next two years in the oil sands alone Alberta is officially on its way to a recovery.
• Due to the increase of activity and the fact that very little spec buildings were built in 2010, industrial vacancies have decreased and will continue to do so for the first half of 2011. Current levels sit at approximately 4.2% and these levels will likely reach 3.7% before new product is completed and brought on the market. Groups such as Oxford, WAM, and Hopewell have already begun or announced spec projects and as the year goes on others will follow.
• Land activity has started off strong in 2011 after three years of little activity. Prices are currently $475,000 - $600,000 per acre but due to the amount of product available prices should remain stable.
• Lease rates will begin to move up slightly as vacancy levels decrease and demand increases.
• 2011 will be an active year as tenants, buyers and developers were on the fence in 2010, and will now begin to make decision to move their companies forward.