Edmonton’s commercial real estate market is undeniably tied to the price of oil. We illustrated this in September when we compared the price of oil over the past few years to the stock price of Melcor, which is a publicly-traded real estate developer with heavy exposure to Alberta. You’ll see Melcor’s stock price was rising steadily until oil prices starting falling. At that inflection point, Melcor’s stock price has move in nearly lock step with oil prices.
As we near the end of 2017, we’re looking for signals for oil prices in 2018 as an indicator on how the commercial real estate market will perform. A few weeks ago we made a prediction (read: guess) that oil prices will rise above $70 in 2018, but even ignoring the price of oil for a moment, there are reasons to be optimistic for next year.
Most noteworthy, the Keystone Pipeline just cleared an important regulatory hurdle as Nebraska’s Public Service Commission voted to approve a route through the state. There are still issues and uncertainty on whether it will still go forward, but it’s a lot closer to happening than anytime in the past decade.
Outside of pipelines, research consultants Spears & Associates are anticipating that drilling in Canada will be at the highest levels since 2014. Drilling activity provides an economic stimulant as it leads to new jobs, growth in other industries and naturally an increase in demand for commercial real estate.
We also attended the Sequeira Partners Energy Services Symposium last week and were particularly intrigued about the number of mergers, acquisitions and consolidations happening in the industry. Following are some of the larger examples:
- Gibson Energy sold Canwest Propane to Superior Propane for $412 million;
- Trican purchased Canyon Services Group for $637 million;
- Rockwater Energy Solutions Inc. and Crescent Cos merged in a $207 million transaction;
- Select Energy then merges with Rockwater for $470 million;
- Nabors Industries acquied Tesco Corp for $216 million;
While there were a number of other mergers and acquisitions, these 5 transactions alone accounted for nearly $2 billion worth of activity.
On the back of all this positive news, oil prices are currently at a 2 year high. While there is always the possibility of a pullback, we are optimistic prices will continue to rise into 2018, and Edmonton’s commercial real estate market will be a main benefactor.
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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