Historical and future rent trajectory in Edmonton

[matthewrlee]

Can anyone please help me track the historical and future rent trajectory of average bachelor, 1bdrm, and 2bdrm rents in an apartment building in Edmonton? (Say in QMP as an example)



I'm ramping up to do JV presentations, and given the "MF lift effect", this is a key element. Looking for the past 10 years, and the trajectory for the next 5 years.



This format would be perfect:



Year, Avg bachelor rent, Avg 1bdrm rent, Avg 2bdrm rent



2004, , ,

2005, , ,

2006, , ,

2007, , ,

2008, , ,

2009, , ,

2010, , ,

2011, , ,

2012, , ,

2013, , ,

2014, , ,

2015, , ,

2016, , ,

2017, , ,

2018, , ,

2019, , ,



If this is too much to ask, are there any resources that would get me this information? How accurate are the rents in the CMHC reports?



I'm trying to understand where rents will be in 5 years, so I can start modeling some projections.

 

[Thomas Beyer]

Here are a few numbers, for example: www.cmhc-schl.gc.ca/odpub/esub/64379/64379_2013_A01.pdf



We are coming off 2 years with 8-10% rent increases. That will not continue indefinitely. I'd say 3-4% the next two-3 years then inflation.



Your rent growth is highly dependent on upgrades. Slumlords will get less than prestigious landlords who actually invest in the asset. We have had 25% in one year, on average, then 10% .. then 4% for 0 then -4 during 2008-2009 for example in some smaller towns but +4% in Edmonton. Not a straight line.



I would model 2, 4 and 6% to show a range. More if you plan investments into the asset, far more.



MTO it. Minimum, Target, Outrageous. Or: conservative, expected, optimistic.

 

[Matt Crowley]

[quote user=matthewrlee]Say in QMP as an example


QMP is an interesting area because it is so heavy with rental product...Mainstreet Equity holds a number of buildings in that area (not less than 19), with a focus on ~20 suiter units. This makes the area a lot easier than some others in the city to normalize (it is even hard to tell apart the insides of many of the buildings owned in the area).



The average rents reported by CMHC are very close to what I'm seeing right now: ($1,064 for 2 bedroom and $910 for 1 bedroom, based on a survey I just finished today). This is for purpose-built rental product, including H/W, pets allowed for a fee, very few dishwashers, coin laundry, and energized stall provided.



[quote user=matthewrlee]I'm trying to understand where rents will be in 5 years, so I can start modeling some projections.


Past data will help make the projections more convincing perhaps but the neighborhood is going to be changing so much in the coming 5 years with the new Edmonton Arena District and the 5+ high-rises that are planned for downtown. Perhaps look to cities that have undergone similar downtown revitalizations? There could be a substantial upside here - Mainstreet Equity seems to be betting pretty heavy on it.

 

[Thomas Beyer]

People have drowned in rivers one foot deep on average (TM)



As such, the average rent matters little in a redeveloping area like QMP, as some units 1BR rent for $900 and some nicer ones will rent for $1250.



MTO it and show some evidence for your projections, say CMHC. If you are a heavy spender and smart landlord you should be on the high side of projections; if you are a slum lord spending nothing on the lower side. You cannot increase rents forever in an ugly asset as at some point you actually have to spend money on a new carpet, new doorhandles, new bathroom etc. //

 

[Cory Sperle]

[quote user=matthewrlee]Can anyone please help me track the historical and future rent trajectory of average bachelor, 1bdrm, and 2bdrm rents in an apartment building in Edmonton? (Say in QMP as an example)





What would be interesting would be for another line on the same graph for price per door for these units, from 2004 to 2014, and trajectory of this line from 2014 to 2019, as your lift effect will ultimately depend on the anticipated cap rate in the next 5 years.

 

[Thomas Beyer]

Indeed Cory !



I expect interest rates, and this CAP rates, to stay fairly flat until well after 2020 as weak economic growth worldwide will motivate most nations to keep their currency weak (relative to others) and to do that interest rates have to be low. I'd be surprised if prime rises even 1% between now and 2020.



If CAP rates rise somewhat, because interest rates rise somewhat, rents & NOI will rise too as the gap between buying an average condo and renting an average 2 BR will rise even further ! It is already around $800 according to CMHC stats. As such, apartment building owners are hedged !



If someone wants those 20 year rent charts or affordability gap between renting and owning for Edmonton (Calgary, Regina and Saskatoon) please drop me an email.