Much has been made about Amazon’s recent announcement to build a 1M square foot fulfillment centre in Nisku.
While it’s undeniably good news for the region, is there a shady underbelly that hasn’t yet been explored? Let’s break out the pocket knife, cut the box open, and unpack this story a bit more.
First, Amazon stands to pay little to no taxes in Edmonton. It certainly won’t pay property taxes to the City of Edmonton, as the facility, which will be located immediately south of city limits, will instead be taxed by Leduc County (unless Amazon negotiated some sort of deal with the County, which is also probable). Furthermore, it’s a distribution facility, and therefore it does not collect and tax revenue in the traditional sense. The laws and accounting surrounding e-commerce sales itself is actually quite murky. Perhaps someone more knowledgable on Canadian tax law can provide some insight on how Amazon (or any e-commerce company based outside of Canada) will be taxed, but our guess is the system has not yet adapted to the changing retail landscape.
Notwithstanding the tax implications, let’s also compare the economic benefits of Amazon to one of its biggest competitors: Walmart.
Walmart has 19 locations in Greater Edmonton (not including additional locations in Westaskiwin, Drayton Valley, Edson, Hinton, Slave Lake, Camrose, Coldlake, Wainwright and Whitecourt, to name a few smaller markets with locations). The majority of Walmarts in the Greater Edmonton area are all Supercentres (which essentially means they include groceries), which are 187,000 square feet on average. Each one of these Supercentres also employs an average of 350 employees.
This means Walmart occupies roughly 3.5 M square feet of prime retail real estate in Greater Edmonton and accordingly subject to extensive taxable income for each jurisdiction. The difference in employment is also considerable as Walmart also employs approximately 6,600 people.
As an example of what Walmart is paying in property taxes, the property in South Common (1203 Parsons Road) is assessed at $46M for 2019. Assuming the tax rate is around 0.021 (this was the 2018 non-residential tax rate, 2019’s will be set in April), the amount Walmart pays just for that single property is in the vicinity of $965,000 / year. Each property will have a different assessed value, but multiplying that by the number of properties in Edmonton gives a ballpark on what Walmart pays just in property taxes.
Lastly, a Walmart store is typically a primer for further retail development (including the accompanying jobs and taxes). Look around any Walmart and you’re likely to see considerable activity in the immediate area.
It’s been said that retail is on the cusp of a transformational change, with some going so far as suggesting it’s in the midst of an apocalypse. While the true impact of the burgeoning e-commerce industry has yet to unfold, Walmart’s corporate numbers suggest it’s doing just fine. And by fine, their revenue last year of over $500B make it the largest company (revenue-wise) in the world. It’s also the world’s largest private employer.
Now we’re not suggesting that Walmart is the ideal corporate citizen. In fact, there are a number of anti-Walmart groups that suggest the company is the devil incarnate. But if we’re comparing an online retailer about to build a single warehouse facility to a bricks-and-mortar retailer with a 25 year history in Canada, it should be more obvious which one is a bigger driver of our local economy.
We’re also not suggesting this should be an either / or discussion, as competition and technological advancement are good for the consumer. We simply wanted to highlight that while Amazon and Walmart have a lot of similarities, there are still vast differences between the two.
Only time will tell if the sandbox is big enough for both.
Chad GriffithsPartner, SIOR, CCIM
Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.
Ryan BrownPartner, BCom, SIOR
Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.
Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.
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