Petroleum fuels prosperity in Canada's oil and gas capital
Skyrocketing oil prices have shaken economies throughout the world, but it is sweet music in Calgary, the oil and gas capital of Canada.
Elsewhere in the country developers are slowing down to let the market catch up to the heady pace of construction in the past decade, but in Calgary it is still boom time.
The evidence of happy times is that EnCana, the largest producer of natural gas in North America and the third-largest company in Canada, is building a 2 million sqft complex in the heart of downtown Calgary.
The US$455 million complex will have twin towers, one of them more than 60 storeys high, making it the tallest building in western Canada and the largest built in the country in two decades.
The new development is a product of Calgary's stunning petroleum prosperity. EnCana's 3,200 employees are now scattered among five different sites around the city and the office vacancy rate next year is forecast to be a record low of 1.7 per cent.
Because of the squeeze on available office space, several developers are confident enough to proceed with construction of new office towers with few if any leasing commitments.
The prosperity has had obvious ripple effects elsewhere in the province of Alberta, but Calgary as the engine of oil and gas development has been leading the way.
The city recently overtook Toronto as the most expensive business district in the country - an average of C$26.86 ($175.40) per sqft, compared with C$25.47 in Toronto, but still well behind C$36.82 in Manhattan.
But office construction is only part of the Calgary boom. Housing construction in the city of 1 million has been proceeding at a rate matched only during the late-1970s oil boom.
A different twist this time is that, according to a Toronto newspaper: 'The million-dollar knockdown has become the barometer of the real estate boom in Alberta.'
Houses selling for as high as C$2 million are being bought and knocked down so that a more expensive one can be built in its place, either for occupation or for sale for an anticipated C$4 million.
As one local builder said: 'There's definitely a shortage of executive houses.'
Another barometer of change over the past five years is that the Calgary Real Estate Board reported that in the 12 months up to September 2000, 14 homes in Calgary were sold for more than C$900,000. In the same 12-month period ending this September, 140 homes were sold for more than C$900,000.
The only bad news for Alberta came from RBC Financial Group, which reported that although the province was leading Canada in annual income growth, the sharp acceleration of house prices in the second quarter offset the effect of lower interest rates. The result was 'an across-the-board deterioration in affordability'.
For the country as a whole, RBC said the drop in mortgage rates last spring offset higher house prices. However, with the recent rise in mortgage rates, affordability was expected to deteriorate.
