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News release

Toronto

Energy Industry Driving Influx of Employment, Economic Growth in Alberta

Calgary and Edmonton bring Canada to the forefront of the energy sector


Toronto, August  20, 2014 – Seventy percent of the Central Business District in Calgary is occupied by oil and gas tenants, while Edmonton is home to more than 10,000 energy manufacturing jobs. As the lifeblood of these two cities, the energy sector touches every part of the region's economy and provides an important catalyst to the Canadian economy, according to JLL's recently-released 2014 Energy Outlook.

The energy sector brings jobs to the region, fueling the Albertan economy, and residents benefit from a fixed personal income tax and a healthy job market.

"The provinces low unemployment rate, high wages, and fixed income tax means that people in Alberta have a higher disposable income than in other provinces," said Andrew MacLachlan, Executive Vice President of JLL Canada's Downtown Agency team in Calgary. "Disposable income means high spending and a rise in demand for goods and services. This increased demand feeds the logistics and distribution sector and other supporting industries."

With a strong economy comes opportunities, and many companies are taking advantage of their growth and success to stay on the forefront of effective commercial real estate strategies. Energy companies are making the most of their spaces, MacLachlan said, and opting for prime locations, open floor plans and collaborative atmospheres – a trend that can be seen across the country.

"All companies are looking to increase their space efficiency", said MacLachlan. "For many energy companies, culture is one of the most important factors. They are willing to pay higher prices for flexible spaces in prime locations that will attract the best employees."

In Canada, energy companies primarily base their headquarters in Calgary, with manufacturing hubs in Edmonton. Their presence requires office space, industrial space and stimulates the hotel business. JLL's Energy outlook breaks down how different aspects of the industry are affected by the changing commercial real estate market.

Calgary Office

The CBD is approximately 70 percent occupied by energy tenants, with the top tier buildings in the area occupied by approximately 80 percent.

The average lease size of an energy tenant is 15,000 square feet.

Outlook for tenants:

  • Increasing office supply may result in a more tenant favoured market from 2017 onward.
  • Current sublease market conditions can provide cost effective opportunities for mid to large cap companies looking for full floor opportunities.

Outlook for landlords:

  • Alberta continues to lead the country in population growth with the highest net gain in interprovincial immigration.
  • Increased mergers and acquisitions activity may precipitate increased sublease vacancies and large scale relocations.

Edmonton Office

Approximately 6.5 percent of the market is occupied by energy tenants, with the top tier buildings in the area holding approximately seven percent.

The average lease size of an energy tenant is 15,000 square feet.

Outlook for tenants:

  • The high quality and quantity of new space coming to the market through 2014 and 2016 will create more options for tenants, especially large office users who previously had a limited pool of options for growth.
  • Financial district rents are expected to decrease as landlords are eager to lock in deals before the new constructions are completed.

Outlook for landlords:

  • Vacant space and new construction are putting downward pressure on rents.
  • Employment growth is expected to remain strong.

Calgary Industrial

The market is approximately seven percent occupied by energy tenants.

The average energy tenant lease size is 38,120 square feet, while the average facility size is 32,500 square feet.

There are 26,060 energy related manufacturing jobs in Calgary.

Outlook for tenants:

  • Wider range of choices are available across the market, particularly in Calgary's north sector.
  • Relatively stable asking rates are impacting the market and many new spaces available.
  • Tenants have the ability to strategically locate near new and efficient infrastructure project.

Outlook for landlords:

  • There has been expanded labour due to considerable growth in Calgary's population.
  • Advances in technology have minimized cost and expanded capabilities.
  • Landlords have capitalized on new developments and available land near the new ring road and logistics centers.

Edmonton Industrial

The average energy tenant lease size is 16,000 square feet, while the average facility size is 30,000 square feet.

There are 10,500 energy related manufacturing jobs in Calgary.

Outlook for tenants:

  • Tenants are being forced to make quicker decisions as product is being leased in a timely manner.
  • Lack of product is forcing tenants to consider outlying industrial parks such as Acheson, Nisku and Leduc.

Outlook for landlords:

  • Lack of product, especially in Southeast Edmonton, continues to support a landlords market.
  • Low vacancy rates, within Edmonton, have increased the importance of the covenant of the tenant and is one of the determining factors for landlords.

Calgary Hotel

Calgary has 84 hotels, which are home to 12,000 hotel rooms with a 66.9 percent average occupancy rate (2013) and the average daily rate is $144.62.

Outlook:

  • Hotel operating fundamentals continue to rise given increasing demand.
  • Institutional investors expected to pursue acquisitions and development.

JLL is Canada's fastest growing commercial real estate firm. JLL has two offices in Toronto, with the headquarters located downtown. The firm also operates in, Mississauga, Montreal, Ottawa, Vancouver, Calgary and Edmonton. JLL manages over 50 million square feet of facilities across Canada. The firm offers tenant and landlord representation, project and development services, investment sales, advisory and appraisal services, debt capital markets, and integrated facilities management services to owners and tenants in Canada. 

About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4 billion, JLL has more than 200 corporate offices and operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $48.0 billion of real estate assets under management. JLL is the brand name of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.