We have been inundated with negative headlines for the better part of two years. The story of plummeting oil prices garnered international attention but it was particularly difficult to keep reading here in Alberta as our economy undeniably hinges on the underlying price of the commodity. With the decline of oil prices came a rise in unemployment, corporate downsizing, reduced business activity and a corresponding downward pressure on commercial real estate activity.
Two major events happened this week which we believe will have a positive impact for 2017. First, the federal government approved Kinder Morgan’s Trans Mountain pipeline and Enbridge’s Line 3 pipeline replacement. The Trans Mountain pipeline has been in place since 1953 with the newly approved expansion will nearly triple the capacity, going from 300,000 barrels per day to 890,000 barrels per day. The pipeline transports crude and refined product from the Edmonton area (Sherwood Park) to Burnaby. At an estimated cost of $7.5 billion, the Line 3 pipeline replacement is Enbridge’s largest project in its history. Notwithstanding the large capital investment, the replacement pipe will be larger, resulting in efficiencies that will nearly double the capacity. Both projects are big steps in helping energy companies get oil to other markets.
Next, after 8 years of sitting on the sidelines, OPEC has resumed their role as price fixers after agreeing to cut production. Even more encouraging, Russia (a non-OPEC country) also seems amenable to cut production. This sends a clear signal that there is a concerted effort to boost prices by OPEC and other levels of government. Oil prices jumped 9% on Wednesday following this news.
As we wrote about a couple weeks ago, the energy industry is a big, complex machine so it will take time before this results in a meaningful impact. Nonetheless, it is great news on both accounts, and we expect it to be positive for the economy as a whole.
On completely unrelated news, there was an announcement today that a massive medical marijuana facility is slated for construction in Leduc. At 800,000 square feet, it will be by far the largest free standing commercial property in the Greater Edmonton area. It will be fascinating to watch this building go up.
Bloomberg, Reuters, BNN, Kinder Morgan, Enbridge
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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