Good times for the oil industry drive commercial and retail construction
The boom in oilsands development in northeastern Alberta, which has seen $8 to $12 billion worth of industrial construction annually in recent years, has coincided with a residential and commercial construction boom. It's especially apparent in cities like Edmonton, Calgary, and Red Deer.
As for Fort McMurray, where rental rates for a modest two-bedroom apartment have hit as high as $3,000 per month, many regard it as the eye of an economic storm-and a case unto itself.
But what of the small northern communities of Peace River and Cold Lake, both long associated with heavy oil production? Neither region has any Athabasca-style open-pit oilsands mining and Lloydminster's brand of cold, heavy oil production began only very recently near Peace River, but each has a long-standing production facility, injecting steam underground to produce thousands of barrels of heavy oil daily.
Shell's Peace River Heavy Oil Complex has been in operation since the 1980s and now produces over 12,000 bbl/d.
Imperial Oil's Cold Lake facility began production in the late 1960s and now produces about 165,000 bbl/d. Both facilities are expected to increase daily production in future. Also, as long as the benchmark West Texas Intermediate crude oil price stays above US$50 or $60 per barrel, analysts expect further new heavy oil development in both regions. (Through 2007, the WTI price averaged US$72.30 per barrel, according to the U.S. Department of Energy. The price began 2007 at about US$55 per barrel, but zoomed north of US$90 after the greenback tanked.)
Officials from both Peace River and Cold Lake, however, are quick to point to their respective communities' drawing power as regional centres to account for some of the new construction, while acknowledging the role of the local heavy oil industry.
"In the last six to eight years, Peace River has changed dramatically," says Amy Murphy, the town's development officer.
"It used to be a government town, but it's now a trade and service centre for the region. Also, if you are going to be living somewhere in the North, it's a nice place to live. Peace River has lifestyle attractions and people want to come and live here. A critical mass has been reached that has turned Peace River into a regional centre."
The energy sector has also played a part in helping the town achieve a critical mass.
"Other producers [besides Shell] in the region have also made finds and are developing bitumen and tar sands projects," says Murphy, who believes the town's open-door approach to inquiries of all kinds helps foster a positive development climate.
Recent commercial additions to the town's retail mix include the Brick, Canadian Tire, and Mark's Work Wearhouse.
Some of the new commercial and retail developments suggest something of a transformation for the town of 7,000. A Wal-Mart is scheduled to open in April. Mirroring similar projects in other centres, an adjacent 84,146 sq. ft parcel of retail space is also slated for development with construction expected to be underway this summer.
Murphy says that there is a fairly typical pattern of development adjacent to a Wal-Mart store. Outlets of the American-owned retail giant tend to function as the anchor store in shopping malls-as Eaton's, Woodward's, and the Bay once did-with a cluster of adjacent, specialized retailers nearby.
"To date, it appears that Pennington's and Shoppers Drug Mart have committed to being tenants in the commercial retail development, as has Reitmans, which is already in town, but is apparently changing locations," Murphy says.
The arrival of a Wal-Mart in small-town North America is often something of a milestone for a local community. In the case of Peace River, it comes after about seven years of robust construction and development activity. Although most of the construction was done in 2007, the Wal-Mart permit to build was granted in 2006, one of the two biggest years in terms of the total dollar value of building permits for the town in the last few years.
Last year saw nearly $20 million worth of building permits for Peace River. Of this, residential construction accounted for $12.56 million, commercial/retail, $4.03 million, institutional with $2.93 million, and $357,000 for commercial demolition. 2007 did, however, mark a slight drop from the previous two years.
The value of permits peaked in 2005 with a $24.33 million total. In 2006, permit values totalled $23.38 million. There's no breakdown into construction categories-commercial versus institutional, for example-for years before 2007. But the 2005-07 period marked a sharp upswing from before.
Development activity before that had been steady, but hardly dramatic. In the four previous years, 2001 to 2004, the annual total value of building permits in Peace River never strayed above $9 million or below $8 million.
Looking towards the future
In concert with two local municipalities, the town is assembling about 15 quarter-sections for future development, with area structure plans already in place for a couple of the quarter-sections. Construction of two car dealerships and a Home Hardware should start this spring in the southeast corner of Section 35, Murphy says.
On the eastern side of the province at Cold Lake, new commercial development has been brisk in the last couple of years.
Doug Parrish, director of planning and development for the City of Cold Lake, points to several big projects for the community of just fewer than 12,000 and says, "There's been talk of a new hardware big-box expansion."
Projects on the books include a $5 million-hotel, a Shoppers Drug Mart, and Blockbuster Video with a combined permit value of $4.5 million. Another $3.75 million will likely be spent this year on a new Staples and two adjacent retail stores. Also, two car dealerships and a Canadian Tire store are upgrading and expanding their outlets.
Bonnyville, about 25 minutes down the road from Cold Lake, is also seeing a burst of commercial construction activity.
Between 80 and 90 per cent of this is "driven by oil," says Ryan Poole, the assistant chief administrative officer for the town.
He says Cold Lake's commercial and retail development is more "residential" focused, whereas that in Bonnyville emphasizes "business-to-business." Cold Lake, he points out, got a Wal-Mart while Acklands, a supplier of pumps and other equipment for the oil and gas sector, and NAPA, an auto and truck part supplier, recently set up regional outlets in Bonnyville.
The area's industrial activity is apparently spurring demand for more temporary accommodation. Two new hotels, each with 84 suites, are being built in Bonnyville. One is a Days Inn, the other, a Best Western.