Special Purpose Case Study

MARKET RENTAL ANALYSIS, CBD AND SUBURBAN

The Federal Government requested a Market Rental Analysis (MRA) to forecast market rent in Q1 2019 (completed Spring 2016) for existing space and Edmonton office (Classes A and B) and retail space in the CBD and Suburban markets, and feasibility of build-to-suit. Space consisted of single tenanted, contiguous office space (± 45,000 SF) in rural location. Space requirements included similar size, contiguous space fully built-out to government standards with 3 months fitout period and on a gross basis inclusive of janitorial.

Initial consultation with the client about property and MRA, which included reviewing the lease and custom spreadsheets relating to the MRA. Inspection and MRA. Follow-up discussions with the client.

Demand measured by net absorption rate and influenced by local, national and global factors. Supply comprised of existing (excludes proposed demolitions or conversions), planned (in the pipeline under construction) and proposed (weighted on probability); occupancy and vacancy rates; market rents, all districts; operating and parking costs; investment criteria (cap rates); surveys and publicly traded companies; and, space availability, CBD and suburban.

CBD: Office class AA to B lease indexes in Financial and Government Districts, included analysis and conclusions to base line. Suburban: Office class A & B and retail lease indexes in all Districts, analysis and conclusions to base line. Feasibility: no CBD, suburban possible.

Market Rental Analysis included discussion of the market and the property, demand and supply, occupancy and vacancy rates, market rents, operating and parking costs, investment criteria, market participant surveys, REIT’s, and space availability.

Concluded market went from expansion to over hyper-supply. Forecast softer rental conditions with lower net effective rents, slower leasing activity, net negative absorption and rising vacancy. Flight to quality may temper above for Class AA, balance of classes to have vacant pockets (exodus to Class AA) in CBD and force Landlords to invest in buildings, reduce rents, increase nducements, or ride out market (all could apply); Suburban like CBD but starting at higher vacancy. No feasibility in CBD for new build-to-suit but may be in Suburban. Variable in above was oil prices (demand). Government announced relocation from rural to urban market for a variety of reasons.

Want to know more?
Get in touch today!


Contact now