What that will produce in the long-term for the local economy remains to be seen.
Michael Kelly, the City of Lethbridge's director of real estate and land development, said that as of early August there was one industrial land sale pending to a petroleum servicing firm, but his department hadn't been deluged with inquiries from the oilpatch about locating in the city. Yet, the city recently optioned 40 acres of heavy industrial land in the Sherring Business & Industrial Park.
Lease rates
There has also been a fair amount of hype about the potential.
Jeremy Koot, an associate with Bankers Commercial Real Estate in Lethbridge, has certainly been hearing expressions of interest for city space.
"We've had a lot of inquiries, but nothing solid yet - I think it's a lot of feelers," said Koot.
One of the challenges for Lethbridge is that its largest southern Alberta rival, Medicine Hat, is already home to a well-developed oilfield service sector 165 kilometres away. Much closer Taber, only 50 kilometres east on Highway 3, also sports a significant batch of oilfield-related employers.
But a lot of the recent action looks to be immediately south and west of Lethbridge, setting the table for potential related growth.
Firms such as DeeThree Exploration Ltd. have fuelled optimism by announcing capital budget increases and improved production forecasts for the area in 2012. The company's current overall production is 4,000 barrels of oil equivalent per day (63 per cent crude and natural-gas liquids).
Koot certainly sees more development coming, as projects like Chinook Business Park on the east edge of the city have been attracting a variety of business, from hotels to office developments.
Lethbridge isn't an expensive place to lease commercial properties. The average annual lease rate for 2011 was about $11.52 per square foot, down marginally from a year earlier, according to Economic Development Lethbridge, whose numbers include the industrial, office and retail sectors.
While industrial space can be had for between $6 and $8 per square foot, downtown office space runs in the $14 to $18 per square foot range.
Top retail space is now leasing for $25 to $35 per square foot, with top rates for new commercial projects on the west side of the city, and in south-end power centres, Koot said. Save On Foods is the biggest new store to open in the city, locating in west Lethbridge.
Commercial real estate giant Avison Young certainly seems high on Lethbridge, concluding in its last annual forecast for the city that, "Strong investment activity is expected to continue through 2012."
The real estate firm notes the potential of drilling activity at the Bakken oil play. "If this project comes to fruition, it will put substantial pressure on landlords and developers to provide more locations for energy-specific uses."
Housing
Oil development doesn't appear to be driving building permits just yet. Lethbridge's permit values actually fell about $8.1 million for the first half of 2012, a decline of about 8.4 per cent from the previous year.
While the single-family home sector was up sharply, there were declines in values for commercial and industrial projects, not to mention a huge drop in multi-family permit values from just over $10 million to about $2.5 million.
Stephen Amonson, president of the Canadian Home Builders' Association's Lethbridge region, says there's room for optimism, even with lot prices up in a city where the local government is the largest land developer.
"A lot of the production builders seem to be reporting some good returns, and the custom builders are pricing and building stuff, so there seems to be good activity across the board," he said.
Activity picked up in late fall and early winter, and has continued into 2012.
Amonson can't help but mention the oil sector when talking about Lethbridge's economy, but acknowledges nothing is certain.
"Nobody knows how that's all going to play out," he said, though with agriculture and the agri-food sector doing well, and the steadying influence of the government sector in the city, no one is too worried about living in a boom-and-bust oil town.
Home builders are typically shelling out $70,000 for an entry level lot, and close to $100,000 for a mid-range lot, Amonson says. He expects those prices may jump another 10 per cent to 15 per cent in the next six months.
While lot prices are headed up, resale housing prices in the city and surrounding region have remained flat, according to John Bekkering, president of the Lethbridge and District Association of Realtors.
from Western Investor September 2012
