Alberta – and specifically Edmonton – will continue to boom as the Fort McMurray oilsands prepare to supply the world’s energy needs for at least the next 50 years. The Alberta government anticipates daily oil production to triple to 3,000,000 barrels a day by the year 2020. Ten years later in 2030, that number climbs to 5,000,000 barrels a day. To put that in perspective, bitumen production from the oilsands currently hovers around 1,000,000 a day.
Because of its strategic central location, Edmonton serves as a massive transportation hub for goods and supplies traveling to and from destinations such as Grande Prairie, Fort McMurray, northern British Columbia, the North-West Territories and even Alaska. Edmonton is the closest major city to Alberta’s oilsands and as such is home to many of the fabrication shops and manufacturers that provide goods, supplies, and service to the massive construction projects in the northeast portion of the province. Virtually every item, raw material, or person in Fort McMurray arrives there via Edmonton.
- Alberta is the world’s third largest supplier of natural gas
- Alberta is the holder of the world’s 10th largest coal deposit
- Alberta is home to the second largest proven oil reserves, second only to Saudi Arabia. Some estimate that this reserve could be as big as eight times LARGER than those found in Saudi Arabia.
- Alberta has 57% of all remaining investable energy projects on the globe
- Tightening oil supplies and expanding demand mean a global market for Alberta’s energy now and tomorrow
- Oilsands development likely to continue at rapid pace for foreseeable future
- Oilsands accounts for more than two thirds of investment in the province
- Over $100 billion worth of investment in oilsands will generate over $1 trillion worth of economic activity
In 2006, former Shell Canada President and CEO Clive Mather told 60 Minutes’ Bob Simon that they estimate there to be as much as TWO TRILLION barrels of oil in and around the Fort McMurray region. At the time of the interview, it was estimated that Saudi Arabia had 260 billion barrels in the ground waiting to be extracted. As Mather told 60 Minutes, “This is a very, very big resource.” (Where Gold and Riches Can Be Found In the Sand; 60 Minutes; June 25, 2006)
It’s not just industry insiders who anticipate Alberta becoming a major player in supplying oil to the rest of the world. A comprehensive 168 page report compiled by the European Union titled the WETO-H2 Study projects that by the year 2050, a barrel of oil will cost approximately $110 Canadian (this estimate may be conservative when you consider the current price of oil). That same EU study states that by 2050 Canada will be the largest producer of non-conventional oil (Fort McMurray’s oilsands) and that Canada will also be one of only four net producers of oil in the world. In addition to its oil forecast, the WETO-H2 Study suggests that coal will play a surprisingly large role in supplying electricity to markets all around the world. Wind, solar, and nuclear technology will be more wide spread but even the combination of all three technologies will be insufficient to meet global demand. In the year 2050, fossil fuels such as coal – of which Alberta has much of – will still be used to supply as much as 50% of
Why do people move to Edmonton? Over the next decade, upgraders, refiners, petrochemical manufactures and complementary industries will all need to be built in order to meet the demand. As construction workers flock to Edmonton looking for one of the many high paying jobs in the energy sector and as our city’s population grows, so too will the demand “normal” jobs like doctors, teachers, servers, bankers, taxi cab drivers, and almost any career you can think of.
And not only is there an increased requirement for workers in all fields, the following makes a move to Edmonton even more enticing:
- Alberta enjoys the lowest personal income tax rate in Canada
- Wages are steadily climbing
- When compared to other major Canadian cities, housing is still a bargain
Even after the explosive rise in average home prices, Edmonton remains one of the most affordable Canadian cities in which to live thanks to above average wages. According to a recent RBC Economics report (RBC Housing Trends and Affordability; November 2010) , the Affordability Index of a standard detached bungalow in Edmonton sits at 32.7%. This means that even with an average home price of almost $323,000, only 32.7% of a typical household’s pre-tax income goes towards home ownership costs. Compare this to a staggering 68.8% of pre-tax income going toward home ownership in Vancouver and you begin to understand why people are flocking to Edmonton.
According the to the Edmonton Sun, between April 2008 to April 2009, Edmonton’s population grew by more than 30,000 people (Edmonton Population Jumps By Over 30,000; Edmonton Sun; June 10th, 2009). To put that in perspective, as of 2008, the border city of Lloydminster had a population of 25,523 including both the Alberta and Saskatchewan sides.the planet’s electricity.
As people flock to Edmonton, the demand on existing infrastructure and housing market will continue to escalate and with this increase in demand and housing prices, affordability will begin to be a more prominent issue for new citizens. As a result, people will be forced to move further outside the current city core to find accommodations that fit their budget (either to rent or to buy). With this urban expansion comes the need for infrastructure and transportation improvements to provide connectivity to the city and its jobs.
With such unprecedented population gains as experienced over the past few years, infrastructure projects have been fast-tracked in Edmonton more than any other city in the country. The Anthony Henday Ring Road will provide a high capacity collector road system around the city with connections to major roadways leading into the heart of Edmonton. The expansion of the LRT system is designed to offer additional means of traversing this vast city, while reducing commute times and helping ease inner city congestion.
So what does this mean to the sophisticated investor?
Transportation improvements will deliver a 10% to 20% enhancement of real estate values in the most affected regions. In the future, these areas will outperform the rest. If the market goes up everywhere, these areas will increase by about 10%–20% more. If the Alberta values drop, these will drop by 10%–20% less.
With the completion of the Ring Road and the extension of the LRT, real estate prices in key neighbourhoods will increase more quickly than other regions of the city due to improved transportation linkages. Improved accessibility drives real estate demand. Values in older and more established neighbourhoods are impacted more significantly than in newer developments. In studies of the effect of transportation improvements on real estate in other jurisdictions around the world, it was found that real estate value increases occur for properties located within 800 metres of stations on the new transportation and 800 metres from exits on new major highway improvements. (Edmonton Transportation Report 2010 Edition)
- Edmonton is the northern starting point of the Edmonton-Calgary corridor
- Because of its strategic central location, Edmonton serves as a massive transportation hub for goods and supplies traveling to and from destinations such as Grande Prairie, Fort McMurray, northern British Columbia, the North-West Territories and even Alaska
- Edmonton’s population will continue to explode as workers from around the world are making their way west to claim their piece of the Alberta Advantage
- Infrastructure projects like the Ring Road, LRT expansions and the proposed downtown arena district all make Edmonton the obvious real estate investment choice
All this means massive cash injections and an abundance of well paying jobs. This in turn leads to people from all around the world flooding into the province to partake in the “Alberta Advantage.” While Alberta is awash in opportunity, it’s decidedly short on clean, well-managed rental properties for arriving workers and their families.
Albertans enjoy the lowest personal income tax rate in Canada. Employment, provincial in-migration and retail sales growth are all up. City council is spending funds on infrastructure needs such as the Ring Road. Vacancy rates and unemployment are both low. Oil and gas companies are set to invest billions of dollars north east of Edmonton on projects like refineries. The province is politically stable and economically strong.