Western Investor Prairie Horizons August 2010

Prairie Horizons

SPECIAL REPORT: Alberta, Saskatchewan, Manitoba

which notes that lower prices, higher migration and falling vacancy rates point to a solid, perhaps sudden, recovery.

Meanwhile, the demand for industrial properties in Edmonton and Calgary has rebounded nicely since the slower days of 2008 and 2009, according to recent market reports from Colliers International.

Colliers says industrial vacancy and availability rates have gone down in both of Alberta’s big-city markets. “The first quarter of 2010 turned months of optimism into reality with the first decline in vacancy since the third quarter of 2007, sparking new hopes that the worst is over for Calgary’s industrial market,� said Colliers. “Vacancy fell nearly half a percentage point from 6.38 per cent in the previous quarter to 5.89 per cent, as availability continues to decline at a marginally faster pace.�

Nearly one million square feet of space were absorbed in the Calgary market in the first quarter of 2010, according to Colliers.

The central Calgary market has the lowest vacancy rate at 2.73 per cent. Vacancy rates are more than double that amount in the northeast and southeast sectors of the city.

In the overall Edmonton-area market, industrial vacancy fell from 4.41 per cent at 2009’s end to 4.06 per cent at the start of April 2010.

The asking rate for space in the Edmonton market varies from $6.25 per square foot annually for space over 50,000 square feet to $12 per square foot in some space categories in St. Farmlands advance to the lakeshore in Manitoba, centre of the Prairies.

Albert in the northwest sector of the market and both tied to a huge spike in immigration.

Edmonton and Calgary are seeing rising area.

Winnipeg’s retail vacancy rate is a low 2.6 vacancy rates in the office sector, opening Colliers is predicting industrial land values per cent and regional malls are selling for a opportunities for those who see continued in the Calgary market will increase into 2011, record $146 per square foot. In Brandon, an strength in the Alberta economy. Tenants though they’ll stay below the peak of 2008, influx of foreign workers threatens to drive the can now rent prime office space in down- when fully serviced land in the northeast area apartment rental vacancy rate to 0.5 per cent, town Edmonton for $22 per square foot, was selling for up to $1.1 million per acre. It’s among the lowest in Canada. notes Avison Young: “the lowest level since now selling for around $800,000 per acre.◆ Edmonton and Calgary, now just scrambling 2006.� out of a missed-that-bullet recession, offer perIn Calgary, the giant Bow building is now haps the best buys for real estate players. With seen as a success story as its major tenant – oil prices back above $70 a barrel, a feared Encana Corp. – shares in the latest oil-patch provincial deficit cut by 75 per cent and the boom. oilsands jumping, commercial real estate valStill, office, industrial and retail space in Alberta: The new boom ues have yet to rally.

Calgary are all selling at discounted prices.

Saskatchewan: China calling Both of Alberta’s major cities have a glut of As for housing, Calgary is likely the best office space, with lease prices down sharply play in the country, according to the Alberta Manitoba: Mining leads from two years ago, based Real Estate Investment Network ,

3FBM FTUBUF QJWPUT PGG 1SBJSJF¤T QPXFS FRANK O’BRIEN WESTERN INVESTOR lberta, Saskatchewan and Manitoba will together post the highest economic growth in Canada this year and next, according to major forecasts.

"

The reasons are as varied as the Prairie landscape: the rising price of oil, global demand for potash and a surge in in-migration due to an abundance of jobs.

When commodity prices fell in 2009, it led to a downshift in the power of the prairies, but this year the big horizon is looking much brighter. All of which has made the Canadian plains a fertile hunting ground for real estate investors.

An example is Saskatoon, the biggest city in Saskatchewan, where industrial real estate investors have seen land prices jump more than 10 per cent in the past year. Industrial real estate rents are now higher in Saskatoon and Regina than nearly any Canadian city, with new buildings demanding up to $13 per square foot according to Colliers McClocklin Real Estate Corp.

Saskatoon is also seeing a $200 million riverfront development and a plan to build the province’s tallest office building.

Saskatchewan, rich in uranium, oil and potash, should see the highest economic growth in Canada this year, the Conference Board of Canada concludes.

In Manitoba, despite widespread spring flooding that threatens the agriculture sector, economic growth is forecast at 3.2 per cent this year, second only to Saskatchewan.

Manitoba’s real estate action is centered in the two largest cities, Winnipeg and Brandon, the former in retail, the latter in multi-family

Photo: Travel Manitoba

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www.westerninvestor.com AUGUST 2010 WESTERN INVESTOR

FEATURE Signs are sprouting that a fresh oilsands energy – and real estate boom – may just be starting

"MCFSUB WESTERN INVESTOR he signs are everywhere – from packed red-eye flights between Fort McMurray and St. John’s, to the Alberta government’s recent discovery that its 2009-10 budget didn’t come near a projected $4.7 billion doom-and-gloom deficit.

5

Yes, Alberta appears headed toward another energy boom, if it isn’t in one already.

And while that boom – already responsible for shrinking the last deficit to only $1 billion – will undoubtedly be linked most closely to what happens in the oilsands industry centred in Fort McMurray but scattered throughout the north half of the province, it will also be connected to more traditional energy production regions on the plains. The irony is the energy may come not just from natural gas and depleting conventional oil production, but also from fuel sources such as cow manure.

Indeed, Alberta’s energy production biz is a busy place nowadays, with the lists of current and proposed energy projects growing, and progress on those projects inching or roaring forward, depending on their backers and market factors affecting biofuels and hydrocarbons.

QSPKFDUT In the oilsands business, for example, there are roughly 100 projects on the Alberta government’s list. They include the existing and proposed mega-mines near Fort Mac, but also increasingly successful in situ projects – ones that recover oily bitumen from hundreds of

metres below the surface through a variety of methods typically relying on steam to loosen the target product so it can be pumped to the surface through a network of wells.

The oil and gas industry has evolved now to the point where Fort McMurray is the undisputed production hub, and places like Peace Ninety-six per cent of potential oil is still trapped in the oilsands near Fort McMurray: 100 new projects are River, Cold Lake and planned to get it out. Encana alone plans to boost production by 400 per cent over the next decade.

Bonnyville are its most prominent kid brothers on the oil side. projects by 2015,� the ERCB predicts in its projects in the interim.

Yes, natural gas remains a significant player annual report. “We have been very rigourous in our in terms of employment, economic activity resource assessment and in developing our and government revenue in Alberta, particu- /FX QMBZFST 10-year business plan,� said Cenovus CEO larly around Grande Prairie and Medicine Hat, Expect Cenovus Energy to be a big contribu- Brian Ferguson. “We plan to build a finanbut the future is in oilsands, where, accord- tor to that trend. cially and operationally sustainable manufacing to the province’s Energy Resources Cenovus, Encana Corp.’s now-independent turing-style growth model. We believe this will Conservation Board (ERCB), production oil-heavy spinoff, has some significant goals put us on a path to doubling the net asset value will grow from about 1.49 million barrels of in terms of production. While it was averaging of the company in the next five years.� bitumen per day in 2009 to 3.2 million barrels net bitumen production of only 58,000 barrels per day in 2019. That’s a projected 10-year per day for the first quarter of 2010, it wants to $BMHBSZ increase of almost 115 per cent. Some of that blow that number out of the water in the next Only 21 months ago there was widespread new production will be upgraded in the prov- several years with further development at two concern the developer building The Bow, the ince – assuming upgrader proposals go ahead existing projects: Foster Creek and Christina new Calgary skyscraper that will eventually – while some will be shipped via pipeline to Lake in northeast Alberta and three other pro- be home to Cenovus and Encana offices in the hungry U.S. market. posed projects at Narrows Lake, Grand Rapids Calgary, would stop construction on Western Most of the oilsands production growth will and Telephone Lake.

Canada’s tallest office tower. Now one of its be through in situ projects rather than through The company’s new 10-year business plan future tenants plans a four-fold increase in mining, says the ERCB. calls for it to hike its net oilsands production bitumen production. While The Bow will bal“Production from in situ projects is now pro- by 400 per cent in the next 10 years, while still loon the office space inventory in Calgary, it jected to surpass that of bitumen from mining piling up a list of approved but not developed will not leave other office complexes as ghost Photo: Price of Oil.com

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WESTERN INVESTOR AUGUST 2010 www.westerninvestor.com

Photo: Drake Landing

towns, as was feared not that long ago.

Cenovus is hiring, both in the field and in Calgary, and there’s talk of a lot more to come.

“The goal is to have an inventory of regulator-approved commercial projects with a total capacity of 400,000 to 500,000 barrels per day net to Cenovus by the end of 2015. These projects would be in various stages of development and production,” Cenovus outlined in a June news release.

While Cenovus is perhaps the shining star of the in situ bitumen-producing biz nowadays, longer-established Imperial Oil is also poised to announce plans to further expand its in situ operations near Cold Lake, just west of the Saskatchewan border. It would give Imperial another major construction project to go with its massive new mine, Kearl, north of Fort McMurray. That project’s first 110,000Widespread real estate recovery has spread into new Calgary-area homes. barrels-per-day first stage is the largest one the excess speculative development and sub- dicting less-spectacular growth, but its forecast currently under construction in Alberta. lease space that came into the market during for the next three years was anything but nega+VTU TUBSUJOH the recession, which prominently contributed tive when it was drafted before the news of the While conventional oil production is slowto the persistent rise of vacancy throughout smaller-than-expected 2009-10 budget deficit. ing down in Alberta despite the increase in “North America’s most advanced infrathe past years,” Colliers informed Calgary active wells each year, oilsands production structure will help enable a strong Alberta investors. is still just getting started, according to the The Canadian Mortgage and Housing economy. All sectors of the economy will be ERCB, with less than 4 per cent of proven Corp. (CMHC) echoed that sentiment with engaged and there will be a broad economic reserves already harvested. its spring forecast for the Edmonton housing base that limits the boom-bust cycles, which Looking ahead, the Alberta government market, announcing: “Increased net migra- inhibit robust economic performance. The expects the oilsands sector to carry the econ- tion, a return to job creation, falling unem- economy will be knowledge-based and driven omy forward, because it affects everything ployment and improved income growth will by entrepreneurial excellence,” Premier Ed from the re-emerging market for office space bolster demand for new housing throughout Stelmach’s government predicted. in downtown Calgary to the growing appe- the forecast period.”

Pie in the sky stuff? tite for industrial shop space in suburban Not really, if you look at the oil plays.

The city’s own building-permit numbers Edmonton and northern communities from show CMHC to be accurate, at least for 2010.

While there will be booms and busts in the Peace River and Fort McMurray to Lac La The value of Edmonton’s building permits oil patch and oil prices in the future, Cenovus Biche and Lloydminster. jumped almost 65 per cent overall for the first and other oilsands companies are big on cost five months of 2010 – even with institutional containment and lower operating costs these 3FBM FTUBUF VQ and industrial projects down somewhat. The days. Just ask Ferguson.

“We will draw upon our 14 years of experiA spring 2010 market report from Colliers huge hike reflected a 165 per cent growth in International on Calgary clearly reflects opti- residential building-permit values for the capi- ence as a low-cost bitumen producer and technology leader to unlock the value of our assets mism in Alberta that was rare a year ago. tal city.

“Market demand is starting to swallow up The Alberta government, for its part, is pre- for shareholders,” Ferguson said in June.

Translated: “We’re in the manufacturing business and we’re manufacturing a product the world wants, needs and will buy – energy.”

Of course energy doesn’t just come from renewable fuels.

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Biofuels are big these days in both the American Midwest and across the Prairies.

About $1.8 billion big, at least in terms of biofuels projects either under construction in Alberta or awaiting funding commitments.

The province’s projects list includes 13 major projects, varying in estimated cost from $22 million to $400 million. The biggest project currently under construction is known as Growing Power Hairy Hill LP. It’s situated near the hamlet of Hairy Hill in northeast Alberta, and carries a price tag of about $100 million.

It’s the initiative of cattle feeders/entrepreneurs who are turning cattle manure into energy and high-starch wheat into ethanol. The residual material from the wheat is fed to cows at a nearby feedlot, and their manure is used to produce energy in the form of biogas.

Notes the Growing Power website: “The whole process is targeted to be the most costefficient method of producing fuel ethanol.”

The ethanol and biofuels business may become a geographically dispersed business as it powers up in Alberta, with the 13 major initiatives planned for 11 counties and urban centres from southern Alberta near Taber to the Peace River Country in the northwest.

A $400 million integrated biodiesel and ethanol refinery near Innisfail in Red Deer County is the biggest project proposed, but it’s still awaiting funding commitments.

The Growing Power project already generates enough electricity for a community of 1,200, with that number expected to grow to 5,500 as the rest of the project comes on stream and ethanol production increases.◆

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B20 Prairie Horizons

www.westerninvestor.com AUGUST 2010 WESTERN INVESTOR

FEATURE The world needs what Saskatchewan has: Potash, wheat, uranium, oil – and plenty of good jobs

0I 4BTLBUDIFXBO JOE RALKO WESTERN INVESTOR ropelled by a rebound in the potash sector, renewed interest in the oil patch, record farm revenues and a growing population, Saskatchewan is poised to lead Canada in economic growth this year and next.

“Expect Saskatchewan to lead all provinces in 2010,” said senior economist Warren Lovely in the Economic Insights Report from CIBC World Markets Inc. CIBC predicted GDP growth in Saskatchewan would climb 3 per cent in 2010 and 4.1 per cent in 2011.

“Saskatchewan entered 2010 with considerable potential,” said Lovely, noting that the province boasted a 1.5 per cent increase in employment and the country’s lowest jobless growth last year.

“Being closer to full employment, wage growth leads the nation [and] augers well for future consumer demand. Solid job prospects will continue to spur in-migration, with population growth stronger than at any time in the past 30 years.”

BMO is even more bullish, pegging Saskatchewan’s 2010 economic growth at 4.2 per cent.

“In Saskatchewan, many of the economic indicators declined slightly … whereas in other parts of Canada, the indicators were negative,” said Doug Elliott, who has published Sask Trends Monitor,which tracks social, economic and demographic trends in the province, for the past 25 years.

Photos: Province of Saskatchewan

1

TOP: PotashCorp’s projects will generate 11,000 new jobs this year, and the potash industry is investing more than $8 billion in expansion projects provincewide. RIGHT: Led by the Bakken play, oil land sales for the first half of 2010 hit $275.8 million, up from just $36 million at the same time in 2009.

“Take employment as an example,” he told Western Investor.

“Saskatchewan’s growth rate slowed to 1.5 per cent in 2009 but employment fell in seven of the other nine provinces and declined 1.6 per cent nationally.”

Elliot said there were three indicators that were surprisingly positive given the gloomy economic climate in North America and the world.

“The first was that the provincial population continued to grow [1.6%] as people moved to Saskatchewan from other provinces and countries to take advantage of the opportunities here. The second was the fact that investors were not deterred and capital investment intentions remained high in both the private and public sectors,” he said.

Statistics Canada recently reported that Saskatchewan continues to be one of

INDUSTRIAL INVESTMENT

the fastest-growing provinces, welcoming 3,711 people in the first quarter of 2010 to an all-time high of 1,041,729 people. This is Saskatchewan’s largest first-quarter population increase since 1972.

“The third was a long-overdue strong performance in the agriculture sector where net cash income reached a record $3 billion,” Elliott said.

Curtis Hemming of the Saskatchewan Chamber of Commerce is also optimistic.

“The Saskatchewan economy weathered the recent economic storm a lot better than most other jurisdictions in Canada,” he said.

However, sales have bounced back and output was up 75 per cent year over year in the firs quarter, as Canpotex – the offshore marketing agency for Saskatchewan potash producers – was exporting at maximum capacity.

Saskatchewan potash companies are betting billions of dollars on the future of their industry which will soon include Australia-basedBHP Billiton, the world’s largest natural-resources company, because potash, used as fertilizer, is needed to help feed a world population growing by about 75 million people a year.

Potash Corp.of Saskatchewan, the Mosaic Company and Agrium Inc. are investing about $8.4 billion to increase their total production capacity by 15.44 million tonnes by 1PUBTI QPXFS Last year, the Saskatchewan economy con- 2020. This will raise the companies’ total protracted by 6.3 per cent due to a steep decline duction capacity to about 36.3 million tonnes, in potash sales to China, the European Union or a 75 per cent increase over 2004 levels. and the U.S. The economic impact of expansion in the

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1415 ONTARIO AVE SASKATOON SK • 80,360 SF two-storey warehouse/ retail/office • Streets on three (3) sides of the bldg.

• Ample power and on-site parking • Basement suitable for underground parking Net Lease Rate: $8.50/SF List Price $5,950,000 Excl.

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INDUSTRIAL MANUFACTURING 240 - 103RD ST E SASKATOON SK • 36,353 SF main industrial manufacturing building • 11,440 SF Cover-All paint booth/blast room • 4.66 Acres in Sutherland Industrial area List Price: $5,360,000 (Incl. equipment) MLS® $4,300,000 (Excl. equipment) MLS®

3203 PRESTON AVE, SASKATOON SK • 5.0 acres on corner of Preston Ave. and Hunter Rd. List Price: $2,500,000 Excl.

2310 HUNTER ROAD, SASKATOON SK • 4.71 acres fronting Hunter Rd. List Price: $2,500,000 Excl.

• Combined for total of 9.7 acres in the heart of Stonebridge

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WESTERN INVESTOR AUGUST 2010 www.westerninvestor.com

omy is more dependent than ever on the price of commodities.”

Elliott said the rate of growth may slow as the economy in the rest of Canada recovers and fewer people move to the province from Alberta and Ontario.

“There is also a good deal of concern about the rural economy this year with the wet weather preventing much of the land from being seeded. So the best forecast is probably for a period of prosperity rather than a ‘boom.’”

)FMQ XBOUFE

There are challenges as a result of the new economic prosperity in Saskatchewan.

“A shortage of skilled workers and a lack of rental housing are two things that really concern us,” said Curtis Hemming, research coordinator with the Saskatchewan Chamber of Commerce.

“There are so many businesses in our province that want to hire people, yet our low unemployment rate means that there are just too few people to hire in many cases. We also need to get more people investing in the con#BLLFO QMBZ Meanwhile, the oil and gas sector, espe- struction of new rental housing because if we cially in the Bakken play in southeastern don’t have places for people to live when they Saskatchewan, also continues to improve. move here, it will be tough to meet our future The June sale of petroleum and natural gas labour needs.”

Housing prices in Saskatchewan are below rights generated $46.2 million in revenue, making it the second-highest June land sale the national average, but are up substantially on record. Revenue from land sales revenue over the past few years. In Saskatoon, the averfor the first half of 2010 totalled $275.8 mil- age price of a home sold in May was $294,516, lion, up from just $36 million at the same time up from less than $150,000 four years ago.

Meanwhile, the average price of a home durin 2009.

Sask Trends Monitor’s Elliott has a warning, ing the first half of this year was $253,723 in however.

Regina, where the average price of a home “In the short term, the outlook is positive only crossed the $100,000 mark for the first because we have a good deal of momentum time in 2004.

Rod Gantefoer, Saskatchewan’s minister heading into 2010, a backlog of major capital investment projects, and signs of a recovery in of finance, said that the strong economy has crude oil and other commodity prices,” he said. brought more people to the province.

“Over the long term, Saskatchewan’s econ“Over the past two years, Saskatchewan has

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Includes Building, Equipment, Inventory, and Goodwill.

Main product line includes step frames, railings, and deck railings.

•Building Size: 8,400 sq.ft.; •Site Size: 24,236 sq.ft.

Artistic Iron Works has been in operation for 46 years and sales have averaged in excess of $840K over the past 4 years, good growth potential for hands on manager.

grown by nearly 30,000 people – the fastest try,” Gantefoer said. pace of growth since the early 1950s,” he said “That’s more than twice as much as in his provincial budget address.

Ontario.”

The Saskatchewan Chamber of Commerce’s $IJOB UPQ CVZFS Hemming is hopeful that the economy will Gantefoer acknowledged that the breakdown diversify. in potash sales to China in 2009 was a subject “Saskatchewan’s economy is going to keep most Saskatchewan residents had heard about growing at a rapid rate, but hopefully it will in the media. also undergo some important changes as well,” “What people may not know is that while we he said.

“While oil, potash, uranium and grain will struggled to sell potash to China, the Chinese were actually buying a lot more of our other continue to play a vital role in our economic products,” he said. “In 2009, canola sales to growth, it is important for us as a province to China were up by 80 per cent to $553 million. look at ways to further diversify our economic Sales of peas were up by 51 per cent to $105 activities over the long term. Commercializing million and linseed sales were up by a whop- new Saskatchewan technologies, expandping 341 per cent to $69.4 million.” ing the existing corporate headquarters of Similar trends were also evident in Saskatchewan-based companies and encouraging more young entrepreneurs to take the Saskatchewan’s trade with India.

“Last year, Saskatchewan sold $975 million initiative in starting new businesses are all worth of goods to India, which amounted to 45 things that we should be doing more of here,” per cent of all Canadian trade with that coun- Hemming said.◆

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China and India are now major buyers of Saskatchewan wheat.

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Photo: Mansoto

Saskatchewan potash industry is enormous.

PotashCorp’s projects alone will create 11,000 new jobs in Saskatchewan this year, comprising the company’s peak construction period, according to an economic impact study undertaken by SJ Research Services of Regina.

The study predicted PotashCorp’s expansion work will generate 14,583 new direct and indirect jobs, which will be sustained over the lifetime of the mines.

Once the projects have fully ramped up in 2014, the study said, they’d produce about $3.8 billion in provincial GDP each year – that’s about 7.4 per cent of Saskatchewan’s 2007 GDP. Earlier this year,BHP Billiton Canada Inc. made two major moves totalling more than half a billion dollars into Saskatchewan’s potash industry. It announced plans to buy Saskatoon’s Athabasca Potash Inc. (API) for $341 million, just a week after unveiling plans to invest $240 million in its Jansen potash project.

Prairie Horizons B21

Railway Avenue and 2nd Street, Weyburn, SK Total Gross Building Area: - 28,391 sq. ft.

Site Size: - 156’x130’= 20,280 sq.ft.

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2000 sq ft condo warehouse unit in the Light Industrial Park of Fort Sask.

Quality project, paved parking, fenced storage, 12x14 overhead door & 20’ ceiling height. #4—11128—83 Ave $368,500 30 Acres fully fenced on Boysdale Camp Road. 60x80 main shop with additional 20x70 office & mezzanine space, 27x100 cold storage and 40x50 second shop. Fully developed 1.5-storey with 2000 sq ft of living space. $2,290,000 Newer 13,800 sq ft warehouse/service shop on 2.02 Acres in the Light Industrial Park. 3 drive through bays, one in a 20x120 wash bay, 5 ton crane & service pit in 4th bay.

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B22 Prairie Horizons

www.westerninvestor.com AUGUST 2010 WESTERN INVESTOR

FEATURE Top economists bullish on the province’s bright future, but view gets muddier on the ground

.BOJUPCB WESTERN INVESTOR anitoba emerged virtually unscathed from the recent global economic downturn, but a combination of flooding conditions across the southwest this spring and an over-reliance on transfer payments from the federal government is keeping any unbridled enthusiasm in check.

.

Regardless of the challenges, the Big Six banks are calling for Manitoba to churn out economic growth roughly in line with the national average. The Royal Bank is the most bullish on the province’s prospects with a forecast of 3 per cent real GDP growth this year, trailing only Saskatchewan (3.9 per cent) and British Columbia (3.2 per cent). CIBC is at the opposite end of the spectrum, projecting GDP growth of 2 per cent, tied for sixth in the country. The remaining big banks predict 2.1 per cent (Toronto-Dominion Bank), 2.3 per cent (National Bank of Canada), 2.4 per cent (Bank of Montreal) and 2.6 per cent (Bank of Nova Scotia).

Observers have long credited the province’s diverse economic base for its ability to weather the storms better than most, but constant rain in both May and June resulted in a number of flood warnings being issued – the Assiniboine River Valley will be flooded from the Shellmouth Dam to Brandon, about 200 kilometres, with the river cresting by early July – literally drowning the agricultural sector for the third-consecutive year. That means

between 15 and 30 per cent of farm acres in southwestern Manitoba will likely not be harvested this fall.

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“I’ve never seen it worse. We’re losing acres every day. I don’t think we’ve seen a poorer situation at this time of year in living memory,” said Ian Wishart, who is the president of Keystone Agricultural Producers (KAP).

He said KAP, which was already predicting farm incomes would fall this year because commodity prices were down at the same time as input prices were up, had feared a drought until the middle of May. It’s not just the farmers who are going to suffer, he said, as the communities they traditionally patronize will hear cash registers ringing less often.

“It’s going to be tough on rural areas. If you take 30 to 40 per cent of the crop value out of the community, that’s a lot less business that will be done. Farmers buy less and the whole cycle just dries up,” he said.

Wishart said excessive rainfall has wreaked havoc with the province’s farmers over the past three years. Last spring was wet, too, while 2008 was fine up until the fall, when a barrage of storms hit, preventing farmers from harvesting.

“The crops just lay there in the field and rotted,” he said. “Most people simply don’t budget for three disasters back-to-back-to-back.

It will absolutely force some farmers out [of business]. I expect farmers in the Interlake to be especially hard hit. For some of these guys, this is the third year in a row with no crop.”

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Photos: Travel Manitoba

GEOFF KIRBYSON

More than six out of 10 Manitobans live in Winnipeg, where massive public spending is leading a recovery.

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The mood is considerably more optimistic in Manitoba’s mining sector, which is showing new signs of life with news of new projects and rising commodity prices.

“After what the sector has gone through in the last 18 months, these are much better times. It isn’t the time to break out the champagne or anything but people are seeing some relief now with some price stability,” said Ed Huebert, executive vice-president of the Mining Association of Manitoba.

Huebert said capital has been harder to come by lately due to the economic slowdown, a sharp contrast to the free-spending environment of 2006 and 2007. One of the leading areas is Snow Lake, about 650 kilometres north of Winnipeg, which may hold the larg-

est gold reserves in Canada. This year, $74 million will be spent on mining exploration throughout the province.

“That’s respectable but it’s still half of wha it was in 2007, which was an all-time high,” he said.

John McCallum , a finance professor at the I.H. Asper School of Business at the University of Manitoba, says the provincial economy is performing “quite well” quarterto-quarter thanks largely to low interest rates and massive stimulus spending by both the federal and provincial governments. Looking out into the medium term, however, things start to look at little “murky.”

“What happens when interest rates get back to more normal levels and the government removes the spending and deficit stimulus,

Prairie Editorial

More Prairie editorial coming in the September issue Regional Roundups feature: s -EDICINE (AT !LBERTA s 2EGINA 3ASKATCHEWAN s 3POTLIGHT ON /KOTOKS !LBERTA Advertising deadline August 16th

Prairie Horizons B23

WESTERN INVESTOR AUGUST 2010 www.westerninvestor.com

Crops – like canola – remain a Manitoba mainstay, but three years of flooding have put farm incomes at risk. Some see declines of 30 per cent this year.

both of which are absolutely unsustainable?

Manitoba can’t indefinitely spend more than $500 million a year that it doesn’t have,” he said.

McCallum said agriculture is less important to Manitoba than it used to be but it’s still a major part of the provincial economy. Other drivers include financial services, utilities, aerospace and manufacturing. The construction sector has been strong of late, too, thanks to a pair of monster projects on the go: a new terminal building at the Winnipeg airport and the Canadian Museum For Human Rights.

“Diversification is a real help if the diversifiers perform the way you expect them to, meaning that they don’t all get hammered at once. We took a bit of a hit the last few years on

shares McCallum’s concerns over transfer payments and predicted the Manitoba government would tighten its belt this year.

“They’ve already hinted to that by telling the civil service to be wary and public institutions dependent on government money not to expect the increases they were getting in the past,” he said.

On the plus side, Bennaroch said he’s optimistic manufacturing will rebound this year, particularly after sagging so dramatically in 2009. But he’s not expecting any industry to break away from the pack in 2010.

“I don’t think we’re going to see many sectors hitting above their weight, especially in the first half of 2010. Those parts of Manitoba that are dependent on exports are going to be a little slow. There’s still a fair bit of uncertainty globally,” he said.

“The housing market remains strong, consumer spending remains strong and Manitoba has held its own in income growth. I think we’ll have fairly balanced growth across the economy and Manitoba will make a bit of a comeback [next year].”

the manufacturing and agriculture sides. That’s $FOUSF1PSU $BOBEB continuing but the government has stepped in Those numbers could inch upward if one of as the offset to the diversifiers,” he said. the most-hyped developments in Manitoba takes flight as hoped. CentrePort Canada, 'FEFSBM TQFOEJOH a corporation created by the province two Just how long the federal government can years ago, is gearing up to run an inland port, continue to foot the bill through transfer pay- concentrating export-oriented manufacturments – which represent about 40 per cent of ing, warehousing and multi-modal distrithe province’s budget – is a major question bution activities around the Richardson mark, however.

International Airport.

“I can’t believe it’s sustainable. When that Thus far over $400 million in infrastrucunwinds, as I believe it has to, where does the ture and other support has been invested in province find the offsetting money? These projects to develop the port. The most signifikinds of things can be years coming to a head cant is $212.5 million for the construction of or days. This is pretty gloomy stuff,” said CentrePort Canada Way, a high-speed corriMcCallum. dor connecting the inland port to the Perimeter Michael Bennaroch, dean of business and Highway that surrounds Winnipeg. economics at the University of Winnipeg, One of CentrePort’s main objectives is to

entice overseas companies to ship goods to Manitoba, where they can be stored without duty costs before being sent on to the U.S. This includes the potential of exports through the increasingly ice-free Hudson Bay. Jim Hrichishen, director of economic and fiscal analysis for the province, said CentrePort should contribute to Manitoba’s economic growth for the next decade. That shouldn’t come as a surprise considering the importance of the transportation sector to Manitoba, he said.

“No province in Canada has a higher share of GDP related to transportation and storage than Manitoba. It’s very important to us and more important than in any province in Canada. The whole notion of Winnipeg being an intermodal hub is one that will become more concrete over the next decade or so as CentrePort and other initiatives take hold,” he said.

CentrePort’s president and CEO is confident its goal of developing its entire parcel of land and making the maximum economic impact will be felt long into the future.

“I think you’ll see the entire footprint built out in 50 years. We needed 20,000 acres because we didn’t want to have a 10-year or 20-year inland-port development. We were building something with space available for growth in the future as well,” said Diane Gray.

Hrichishen said Manitoba’s trade profile will ensure consistent growth into the future, as well. One half of the province’s exports are destined elsewhere in Canada while the other half is shipped around the world. The average province exports 60 per cent of its goods internationally.

“We have the most stable economy in Canada over the last decade in terms of GDP growth. We don’t have as great a reliance on foreign markets as other provinces do,”Hrichishen said.◆

B24 Prairie Horizons

www.westerninvestor.com AUGUST 2010 WESTERN INVESTOR

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