Development Group is one of at least 15 purpose-built rental projects started since 2022 in Alberta's capital city. Comprising 363 luxury apartments in a slim 36-storey tower, the project’s first phase is expected to welcome its first tenants in February, 2025.Maclab Development Group
Over the past two years Alberta’s purpose-built rental market has bloomed, driven by international and interprovincial migration.
To meet the demand from a steady influx of newcomers (Alberta’s population has expanded by 4.36 per cent since July, 2023), an unprecedented 30,364 purpose-built rental units broke ground between the first quarter of 2022 and the third quarter of 2024 in the prairie province. Roughly 95 per cent of these units are concentrated in Alberta’s largest cities, Calgary and Edmonton.
“In the last two years, we’ve seen significant migration, both internationally and interprovincially,” says Bill Blais, president and CEO of Maclab Development Group, an Edmonton-based developer. “We have seen a lot of people moving from the Vancouver and Ontario markets, as they’ve been priced out with a run-up in both rents and for sale housing.”
Erected on the site where El Mirador stood for close to nine decades, Maclab’s The Parks in downtown Edmonton is one of at least 15 purpose-built rental projects started since 2022 in Alberta’s capital city. Comprising 363 luxury apartments in a slim 36-storey tower, the project’s first phase is expected to welcome its first tenants in February, 2025.
“We have a strong base of potential renters with both MacEwan University and Norquest College expanding,” Mr. Blais says, noting that interest in The Parks has been strong.
“We’ve certainly benefitted from all those people moving to Alberta.”
But demand for purpose-built rentals could be about to shift.
To release some of the pressure on the country’s housing market, the federal government has introduced new limits to the number of international migrants who can enter and stay in Canada, including workers and students. Because newcomers typically rent upon arrival, the effect of these measures should impact the rental market first.
“Typically, the first thing immigrants do when they come into Canada is look for a rental before they purchase,” says Raymond Wong, vice-president of data operations at Altus Group. “It’s anywhere from six to 12 months before newcomers figure out where they want to be, where they want to live, and whether or not to keep renting.”
After the federal government’s announcement in September, asking rental rates dropped across Canada for the first time in three years, and Alberta was no exception. In October, the average rental rate for available units in the province was $1,786, or about 1 per cent lower than the month prior.
However, Mr. Wong believes Alberta is unlikely to experience significant rent decreases in the coming year, as the relative affordability of Calgary and Edmonton continues to attract people from more expensive regions, and supply lags behind demand.
“Alberta always gets its fair share of the percentage of immigrants coming into the country, and that’s still going to continue,” he says. “Alberta also has the added benefit of interprovincial migration.”
Maclab’s vision for The Parks includes an ambitious 1,000 apartments upon the compound’s completion, but the developer won’t be moving onto next phase of the project for at least a year.Maclab Development Group
Since 2022, Alberta has received more than 348,000 new residents; interprovincial migrants, or people who have moved to Alberta from other provinces, represent roughly one-quarter of the province’s total net migration.
“Alberta has seen the benefits of housing affordability and employment,” Mr. Wong says. “The shift in immigration won’t severely impact the rental market until we solve this undersupply issue.”
Last year, CMHC projected the housing supply gap in Alberta would reach between 130,000 and 170,000 units by 2030; that is, about as many dwellings as have been completed since 2018 – though only 15 per cent of these completions are purpose-built rentals.
“I don’t think we’re going to see a massive decrease in rents because of supply,” Mr. Wong says. “We may see a flattening out, or a marginal increase in rents, but I don’t see Alberta having a huge oversupply on the purpose-built rental stock.”
Maintaining Alberta’s affordability advantage, however, depends on the sustained availability of government incentives, says Scott Fash, CEO of Alberta’s Building Industry and Land Development Association, pointing at CMHC’s Apartment Construction Loan Program, which offers low-cost financing to support the construction of purpose-built rentals, and MLI Select, a loan insurance product that provides multifamily developers with longer amortization periods and lower premiums.
“If programs like these were to end, I think you would see purpose-built rental construction almost grind to a halt in Alberta,” he says. “Projects that already had the programming, or were under construction would go ahead, but nothing new would.”
Indeed, for Henry Edgar, president of Autograph Group, a real estate developer based in Edmonton, the availability of CMHC-backed financing can make or break a rental project, rather than changes to immigration levels, as low-cost loans and longer amortization periods can mitigate the risks associated with rising construction costs and stalling rents.
“We’ve seen significant cost escalation in the market, specifically when you think about building high-rise towers in the city of Edmonton,” he says. “When you couple that with the level of income that we believe is feasible from rents, the cost-benefit just isn’t there right now. Towers are expensive to build.”
Next year, Mr. Edgar plans to begin construction on a purpose-built rental project located three blocks west from Maclab’s The Parks, in downtown Edmonton. Capitalizing on the City of Edmonton’s investment to revitalize Warehouse Park, Autograph Group’s proposed 300-unit building would cater to the higher end of the rental market.
“We’re looking at CMHC’s MLI Select program,” Mr. Edgar says. “That program is really propping up the purpose-built rental business. It’s very challenging to make the economics work on these apartment buildings without utilizing CMHC financing right now, just due to the costs and the revenue model.”
Mr. Edgar’s vision, however, is significantly different to the initial plan for the site, which included two high-rise towers and 780 rental units. “We just feel that [300 units] is a more appropriate level of density to build on the site,” he says. “With the demand we’re forecasting, we feel really optimistic about the success of a building of that size.”
Similarly, while Maclab’s vision for The Parks includes an ambitious 1,000 apartments upon the compound’s completion, the developer won’t be moving onto next phase of the project for at least a year.
“We’ll finish this phase and go through a lease up period for a number of months,” Mr. Blais says. “Then we’ll evaluate and determine how we proceed with the next phases.”
In October, Edmonton’s average rental rate for available units recorded an 8 per cent increase relative to the year prior. By contrast, Calgary’s average rental rate dropped by 5 per cent, as more than 8,000 new rental units flooded the city’s market in the first three quarters of 2024.
Despite this, developers are bullish on the city’s rental market because Calgary continues to attract young professionals.
According to Cole Richardson, managing principal at Bankside Properties, a Calgary-based real estate developer, Calgary’s weak demand for condos is propelling construction in the rental market.
“The existing condo stock isn’t trading at a price-point that incentivizes new construction,” he says. “Right now, we think that there’s a lot of opportunity in the rental sector.”
For this reason, Bankside Properties acquired two lots in Calgary’s trendy East Village, which the company intends to develop as a mid-rise rental complex.
“We’re going to build approximately 80 residential units in two buildings,” Mr. Richardson says. “We are targeting a segment of the market that’s not in the high end, but in the middle, because we think there’s a larger pool of tenants that are looking for that.”
By the time Bankside Properties completes this project in 2026, Canada’s population should have contracted by 0.2 per cent, but Mr. Richardson is confident that Calgary’s rental market will remain strong, even if rental rates drop further.
“We’re coming off of such a volatile period of rent growth, that we actually think this is a good thing,” he says. “Because the affordability issue is not being solved tomorrow, Calgary is still a very attractive option for a lot of people.”