Oil prices have dropped by about one-third over the past three months and are hovering around $50 a barrel, prompting layoffs and economic uncertainty while slashing January housing sales by more than 40 per cent in the resource-reliant community of Fort McMurray, Alta.
But the Saprae Industrial Park, adjacent to the recently expanded Fort McMurray International Airport, seems to be providing one of the good-news stories in what has been one of the fastest-growing communities in Canada.
“This development represents the only industrial land available in the Fort McMurray market for immediate development,” said Ken Williamson, senior vice-president of national investment services for Colliers International, which is brokering the property.
“Fort McMurray is a market with strong demand and has had virtually no new supply within close proximity to the city.”
Two per cent industrial space availability
Williamson concedes contraction in new oil sands infrastructure development, which has had a negative effect on supporting suppliers and contractors, has resulted in a nominal increase in sub-lease space on the market and a small pullback in lease rates. But in an area with only two per cent industrial space availability, he doesn’t expect a significant impact on market rates.
The land comprising Saprae Industrial Park was originally and partially developed in the 1970s by the Province of Alberta and has been primarily used for outdoor storage since then. But it had become rundown with significant tree cover, about a dozen functionally obsolete buildings and limited drainage, power, telephone and natural gas distribution.
Property purchased and developed by Panattoni
Panattoni Development Company purchased the property for $28 million and invested a substantial amount to remove the trees, demolish the old buildings and remove debris left by former tenants in order to upgrade it into an industrial subdivision with 30 separately titled lots totaling 74.25 acres. Lot sizes start at 1.5 acres, with the largest being five, but they can be combined to form an area of about 30 acres. Sale, lease and build-to-suit options are available.
Privately held Panattoni was founded in 1986 in Sacramento, Calif. and has developed more than 200 million square feet of industrial and office space, including more than 65 million square feet of build-to-suit projects. It operates in the United States and Europe and moved into Canada in 2004. The Canadian head office is in Toronto and there’s a regional office in Edmonton.
The first phase of Saprae Industrial Park is sold out, the second phase is 45 per cent sold and the third phase is now being marketed.
“We are targeting larger industrial users with yard requirements for the phase three lands, as the lots are five acres in size and can be readily combined into a larger area,” said Williamson.
Various-sized lots available
Smaller lots also remain for small- to medium-sized companies.
“Our lot sales in the first two phases have been to owner/users and developers,” said Williamson. “We expect developer spec construction and user construction to commence this spring/summer, with the first building completion before the end of 2015. Planned uses include industrial and office/industrial buildings with yard components.”
Williamson said industrial land in the region sold for an average of $2.5 million an acre last year and reiterated that a shortage of such land is Saprae Industrial Park’s initial selling point. But he added it has more than that to offer potential tenants, which should add to the demand.
“Saprae Industrial Park offers industrial lots developed to the latest municipal standards at more economical prices. Unlike much of historic Fort McMurray industrial development, Saprae Industrial Park offers new and efficient construction built to well-considered development guidelines.
“We offer the opportunity to have low site coverage with large yards, with close proximity to major highways, the CN transmodal yard and the key regional transportation hub that is the Fort McMurray International Airport.
“Buyers who miss this opportunity will likely be waiting years to fulfill their land requirements.”