CALGARY’S INDUSTRIAL REAL ESTATE BOOM

BY JOHN HARDY

The transportation and logistics industry are vital and dynamic components of Calgary business and Calgary’s overall economic strategy, and contribute billions of dollars to the city’s GDP. Now, industry insiders and commercial real estate professionals credit transportation and logistics for Calgary’s post-pandemic, industrial real estate boom.

Some are lighthearted, even Calgary – paraphrasing Buzz Lightyear’s trademark rallying cry: “To Balzac and beyond!” Primarily because, for various reasons, Balzac is proving to a very hot industrial real estate market for transportation and logistics.

Enthusiastic and aggressive are good ways to describe Calgary’s Real Estate & Development Services push of industrial real estate. Calgary officially boasts, “Buying real estate in Calgary gives businesses the regional connectivity, access, safety and service efficiency they need to succeed. With highly integrated transportation and logistics infrastructure, Calgary is a major transportation hub, well-suited to access warehouses and distribute goods. We’re also Western Canada’s biggest inland port and a designated Foreign Trade Zone.”

The city pitch touts the bait of specifics like, “rail, transport and highway access, a reliable and available workforce, police, street lighting and other security measures, opportunity to neighbour with trusted, complementary businesses including transportation and logistics and cleanly prepared and highly service lots.”

According to Calgary-based Adam Grisack, director of Valuation and Advisory Services with Colliers Canada, Calgary is definitely experiencing an industrial real estate boom. With tremendous growth in the global transportation logistics sectors and the rebound from three years of pandemic disruptions and complications, Calgary’s boom is not only exciting but inevitable.

“The pandemic has fuelled a rapid rise in e-commerce activity and demand for warehouse space, causing vacancy rates to tumble across the country, and creating much opportunity in the Calgary area,” he points out.

“WHILE KEY ASPECTS TO TRUCKING MAY SHIFT IN OUR FUTURE, I AM CONFIDENT IT WILL NOT BE REPLACED AS THE MOST RELIABLE MODE OF BULK TRANSPORTATION IN OUR COUNTRY. OUR EXTREME CLIMATES AND WIDESPREAD TERRAIN MAKE IT CHALLENGING FOR OTHER MODES OF DELIVERY TO RIVAL TRUCKING,” SAYS FAURE.

“Another reason for the increased demand for industrial space are global supply chain constraints, leading retailers to adopt a ‘just in case’ inventory strategy and seek out even more space to house additional products. So, transportation and logistics are booming.”

Grisack cites specific hot Calgary industrial real estate markets like Balzac, Dufferin and Point Trotter, to explain the draw and viability for transportation and logistics companies. “Truck drivers can drive for a maximum of 13 hours per day which allows the goods they transport to be distributed across a major area from Vancouver in the west and Winnipeg to the east. Likewise, major markets in the United States can also be accessed via Alberta’s southern border with Montana. This positive transportation trend has been ongoing for a number of years but rapidly began to accelerate about three years ago.”

The plugged-in and industry respected Matt Faure, president and CEO at Trimac Transportation is also upbeat about Calgary’s boom. “The concept of Calgary becoming a logistics hub excites me, to say the least. We are seeing the variety of product deliveries expand over the past few years. While the energy sector continues to thrive, it isn’t the only driver for our revenues in the province any longer. We are also seeing the tech sector boom create a ripple effect across many areas.

“For us,” he adds, “the uptick in construction is where we see the impact, as we haul many products that are used in the building and manufacturing industries in and around the city,” he says with enthusiasm.

Transportation is a key lynchpin in the logistics sector, and Matt Faure underscores the vital role of trucking. “It is and will remain an integral part of the equation to life in Calgary and Canada as a whole. Trucking is the backbone of our economy, responsible for moving 72 per cent of all goods we consume.

“While key aspects to trucking may shift in our future, I am confident it will not be replaced as the most reliable mode of bulk transportation in our country. Our extreme climates and widespread terrain make it challenging for other modes of delivery to rival trucking.”

With much experience and expertise, Faure explains that the logistics sector has evolved into a complex and sophisticated business science. “Logistics is more and more a ‘business science’. One thing we can’t deny is that customers demand and deserve full visibility of the service they are paying for. Gone are the days you can call a cab and wait and wonder when it will arrive to pick you up.

“It’s nearly common baseline expectation for a customer to know what the car will look like, the name of the driver, the colour of the vehicle, in addition to arrival time. We apply that to our business,” he notes, “by providing our customers real-time tracking and information on their deliveries. It’s become a logistics expectation, and we get it.”

Just as a compass’ needle always points north, for various reasons, the stats and the analysis of Calgary’s transportation and logistics good news also seems to point north, to Balzac, the bustling logistics area of Rocky View County. “One of the main advantages Rocky View County is our strategic location,” explains Crystal Kissel, the proud mayor of Rocky View County.

“We are an ‘inland port,’ with excellent access to major highways, rail lines and the Calgary International Airport. This has made us an attractive destination for businesses that require efficient transportation and logistics. Also, Rocky View County offers competitive tax rates and an abundance of reasonably priced land for large developments. Our high-quality water and wastewater utilities have also been a major draw for businesses.”

She underscores some impressive stats which track Balzac’s logistics hub transformation that likely started with the opening of the Walmart Food Distribution Centre in 2010 – a 400,000 square foot facility that was designed to be 60 per cent more efficient than other refrigerated warehouses in Walmart’s real estate portfolio.

“ONE OF THE MAIN ADVANTAGES

“Since then, Balzac has become the largest greenfield development in Alberta’s history, and we’re proud to say that our region is now a major player in the logistics and warehousing industry. Balzac has become home to many institutional investors and developers, like Highfield and Ivanhoe Cambridge, who have constructed massive warehouses, 500,000 square feet (seven football fields) or larger!”

Currently, Balzac’s large-bay users are the highest demand tenants and that large format warehousing serving the Western Canadian market is the most dynamic force driving investment.

“The Balzac business community is particularly wellpositioned for success,” Crystal Kissel says. “Located next to Highway 2 and the Calgary Ring Road, Balzac has access to a skilled and diverse workforce of 1.5 million people in the Calgary metropolitan area. In just a few short years, Balzac has grown from undeveloped pasture to a thriving business community with an estimated 90,000 jobs created in the area.”

Other factors are also boosting Calgary’s appeal in the transportation and logistics business world. “There are significantly lower rents per square foot, especially compared with Vancouver and Toronto,” Grisack says, “and it impacts the availability and values of Calgary industrial warehousing space.

“Vacancy rates are extremely low, which is putting upwards pressure on lease rates. Low supply of owner-user product and new condominiums has led to increased pricing. Values have increased but growth has been tempered by rising bond yields and correspondingly, interest rates.”

Calgary’s industrial real estate present and future are not only exciting and good, but, as Adam Grisack and other experts caution, maybe a bit too good. “Although Calgary has more than five million square feet under development, and it will help to ease demand in late 2023 and in 2024, Calgary’s industrial vacancy rates are projected to remain low over the next couple of years.”