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High-energy market is a tough one to tap

By Steve Bergsman

Think of Calgary as the Houston of Canada. It sits in the middle of energy-rich Alberta province, home to the oil sands, which supplies 25 percent of the crude oil the U.S. imports. Though much of the oil is pumped elsewhere, all those energy companies are based in Calgary.

The city has exceeded the 1 million population mark, and some 25,000 to 30,000 new residents move in each year. Those kinds of numbers fill shopping carts, says Kevin Deeks, an associate vice president of the retail group at Cushman & Wakefield LePage, in Calgary. “The retail market is booming because we have a young population that has a lot of disposable income,” Deeks said.

Although most Alberta markets are doing well, Calgary is the province’s biggest city and attracts the most action. “Demand for retail space remains extremely high, with new projects being completely leased as fast as they are developed,” said Robert Walker, a vice president and partner at Colliers International, Calgary.

The existing market stands at about 22 million square feet, but a lot of new space is just around the corner. Colliers reports almost 6 million square feet of projects proposed or under construction; Cushman & Wakefield sets the number at closer to 8 million square feet.

Developers are erecting no new malls in Calgary, so most of the recent construction takes the form of neighborhood or power centers. The city is about to get its first lifestyle center, the 920,000-square-foot Deerfoot Meadows, developed by Calgary-based Heritage Partners and anchored by Wal-Mart. All this development has been attractive to American retailers. Home Depot has been active in Calgary and elsewhere in Canada for years, and Lowe’s will be entering the area this fall with four stores. There is talk, too, that Applebee’s, Cabela’s and Target are searching for space.

Actually, a number of American retailers have looked at Calgary and “walked away,” says Deeks, not because they did not want to be there but because unemployment is so low that finding workers is tough. Some fast-food restaurants have closed their sit-down areas and operate solely as drive-throughs because they lack the manpower, Walker says. And this with Subway sandwich shops paying C$14 ($12) an hour.

Real estate expenses have become painful too. An acre of land that cost C$400,000 five years ago now goes for C$1 million. Construction of a free-standing bank building once cost C$80 per square foot, but now it is C$200 per square foot. And High Street leases are on target to crack the C$100 per square foot mark this year.

No surprise, then, that Tiffany is scheduled to open its first store in Calgary. Real estate moguls will need a place to spend those hard-earned loonies.