Energy exploration propping up Alberta commercial real estate market: Cities and towns being shaped by oil and gas sector

CALGARY - Billions of dollars invested in unconventional energy exploration is dramatically affecting economic and commercial real estate activity in key North American exploration hubs, including Alberta, creating opportunities for both investors and developers, according to a new report from CBRE Group, Inc.

The report said the new airport terminal in Fort McMurray, the gateway to the Alberta oilsands, is a prime example of some of the changes that are underway.

“Expectations are changing for energy markets in Canada and across North America,” said Ross Moore, director of research for CBRE in Canada, in a statement. “With new technologies and some of the largest oil and gas reserves on the continent, Canadian energy markets are set to experience sustained investment over several decades instead of the traditional boom and bust cycle. This certainly bodes well for local economies and demand for commercial real estate where energy exploration is taking place.”

The CBRE report, Energy Revolution Impact on Americas Commercial Real Estate, said Calgary and Edmonton have been joined by a growing number of cities and towns in the province that are being shaped by the oil and gas sector.

“We continue to see oil and gas activity bolster operations markets like Calgary and Edmonton where low office vacancy rates and significant industrial construction are the norm. Smaller energy exploration markets are also undergoing significant changes,” said Moore. “Robust demand for hotels in Whitecourt and Grand Prairie reflect this, as do rising apartment rents in Cold Lake.”

Greg Kwong, executive vice-president and regional managing director of CBRE in Calgary, said the reliance on the oil and gas industry is still very strong in the local downtown office market.

“But the good thing is that the oilpatch is a lot stronger than it was say 20 to 30 years ago. We have a lot more head offices here and those head offices comprises large chunks of office space,” said Kwong.

“The reliance on the oilpatch has proven to be good historically. If you look at the last 10 years, Houston, Dallas and Calgary have consistently been top office market performers because of the oilpatch. Even during the recession in 2009, Calgary and Houston came out not so bad.”

According to Calgary Economic Development, energy sector employment in the Calgary Economic Region in 2013 was 72,200, a 73.6 per cent increase from 2004. During the same time period, employment across all sectors increased by 27.8 per cent.

Employment in the energy sector accounts for 8.7 per cent of all employment in the Calgary Economic Region.

There are 1,743 energy sector businesses in the region accounting for three per cent of all businesses.

There are 135 head offices in Calgary as the city registered 60.7 per cent growth in head offices from 2003-2012.

Calgary has the highest concentration of head offices in Canada with 10.3 per 100,000 population compared with Toronto which is next with 4.1 per 100,000 population.