When Shane Asbell gets a call for commercial space in Fort McMurray, he gets on a plane and goes directly to the hub of Canada’s oil sands production.
“A client request for commercial space in Fort McMurray means you act and you act fast,” says Asbell, who is a partner at Cushman & Wakefield Edmonton.
With a miniscule vacancy rate and few options for retail and office tenants the Northern Alberta city is a shockingly expensive market with net rents two and a half to three times what they are in Edmonton, says Asbell.
“You’re looking at $68 to $73 a square foot, not including operating expenses as compared to similar properties in Edmonton that go in the low- to mid-30s,” Asbell says.
With land costs of up to a couple of million dollars a serviced acre, Fort McMurray developers are embracing mixed-use, higher-density developments.
Liam Construction sales and leasing agent Jiyoun Kin’s says main floor commercial and retail with residential units on upper levels is what people want. It’s all about the convenience.
Take East Village, Liam’s soon-to-be-opened mixed-use development which will 80,000 square feet of commercial space to the Fort McMurray market (image to the left). The development boats 20 commercial spaces that will house everything from a fitness centre, dry cleaner, insurance company florist shop and baby clothing and accessory store.
The company’s website promotes the proximity of the services to potential residents – “Wake up to the smell of Tim Hortons coffee, start your day with a quick meal. Hop on your company bus and head out to the plant.”
Designed to meet Fort McMurray’s extended stay market, Kin says the intent is to block lease the one- and two-bedroom, fully furnished apartment condos to companies affiliated with the oil sands industry.
“We started leasing the East Village commercial space last year and it was all leased out earlier this year, even before the completion of the building,” says Lin.
At Water’s Edge, another Liam mixed-use development expected to be fully completed by 2015, 80 per cent of the main floor commercial space has already been leased to NAPA Auto Parts for a retail store, warehouse and office space. A small restaurant and office space takes up the remainder of the five street-level commercial bays.
Another 70,000 square feet of commercial is also expected to come to the market in late 2014 or early 2015 with the development of Liam’s River Station.
Major tenants like Shoppers Drug Mart, Save-On-Foods, RBC, CIBC, Starbucks and the Canadian Brewhouse have already spoken for the new commercial space at Stoneycreek Village, Melcor Developments Ltd’s eight-acre site north of the Athabasca River that will see 150,000 square feet of new retail space and 130,000 square feet of second- and third-floor office space along with residential housing.
High costs present unique challenges
Though Fort McMurray residents eagerly welcome new retailers and services, Asbell says the scarcity of commercial space is not the only challenge.
With average house prices in the mid $700,000s, the service sector often struggles for staff, needing to offer higher wages along with perks such as gym memberships.
Asbell says some retailers report their Fort McMurray store is their highest volume outlet nationally, yet they’re not making money due to the higher operating and labour costs. Still, they’re there to keep their presence.
Edmonton also benefits from the buoyant Fort McMurray market.
Many companies choose to base their staff in Edmonton and transport them to and from Fort McMurray to control costs.
As for Lin, she says the challenge of her leasing career in Fort McMurray is ensuring those interested in leasing space fit the overall development and are equipped to master the challenges the boomtown economy provides.
“We want solid tenants.”