Just The Beginning” as Alberta Industrial Demand Revs Up

Phil Brown Vice President Acquisitions & Leasing, Industrial Hopewell Development

Surging electronic-commerce driven demand for industrial development continues to boost Alberta’s economy, despite the coronavirus pandemic. “Expect industrial tailwinds like we’ve never seen before, during the next few years,” predicted Phil Brown. “Electronic commerce had already made industrial the best asset class. Then COVID-19 came along and multiplied that demand.” “This is just the beginning,” explained Hopewell Development’s vice President, acquisitions & leasing. “Large global commerce groups and retailers had long planned this. The pandemic accelerated their plans. Smaller groups will jump in next—local retailers who were forced to create electronic commerce platforms and swiftly add warehouse capacity.” “The shift away from oil and gas hasn’t really dented Calgary or Edmonton. We see few such tenants. We’ve already seen more 50,000+ sq.ft. users in 2020 than we did throughout 2019.”

Lots of land, less red tape

Alberta’s abundance of available land and dearth of development constraints gives Calgary and Edmonton an edge over Vancouver, Toronto and Montreal. Here, it typically takes just 18 months to buy land, establish entitlement, gain approval and complete construction.

“We can turn the taps on quite quickly for industrial—as well as for other products like office and multi-family—unlike other major markets, where timelines typically take three years and occasionally up to for six years,” he observed. Consistent absorption of new industrial properties continues to buoy Brown’s enthusiasm. “The shift away from oil and gas hasn’t really dented Calgary or Edmonton,” he reported. “We see few such tenants. We’ve already seen more 50,000+ sq.ft. users in 2020 than we did throughout 2019. “We’re constructing a new building in Calgary and aiming for another in Edmonton,” Brown continued. “Both our buildings are about 200,000 sq.ft., generally aimed at mid- and large-size distribution warehousing and electronic commerce fulfillment users who want more capacity.” Larger users prefer the swifter entitlement timelines in peripheral locations like Leduc and Balzac, where they gain greater tax savings, while smaller users like the amenities that Calgary and Edmonton offer. Despite the shift to higher ceiling heights during the last five years, Calgary remains competitive. “You wouldn’t build 300,000 sq.ft. today with less than 36 ft.,” he declared. “We’ve considered 40 ft., which we’ve witnessed in Toronto.

Construction continues apace

Another plus is that the pandemic hasn’t dented Alberta construction activity significantly.

“It has affected HVAC supply, and slowed delivery of steel and other products,” Brown acknowledged. Elsewhere, in the United States, Hopewell has seen costs fall, as construction slows.

“Building an industrial property is very different from an office cubicle farm,” Brown concluded. “We’ve seen very little inefficiency on our work site. We have a very strict COVID workplace safety program. Everyone has remained very respectful.”