Steady job growth and strong in-migration have made Alberta among the most robust of Western Canada’s economies, but the impacts on real estate have been mixed.
Downtown office vacancies are stuck in the high double digits despite marked improvement relative to the rest of Canada. While broad tenant demand is strong, the right-sizing of space requirements to the hybrid work environment means older space will take time to lease up.
On the industrial side, a flight to quality has meant a rise in industrial vacancy rates as tenants move from older lease space into purpose-built facilities. While demand for space is steady, the uptick in vacancies points to a shift in the market.
Calgary saw industrial vacancies hit 3.5 per cent in the first quarter, nearly double the 1.8 per cent seen a year earlier, according to Colliers Canada statistics. In Edmonton, 15 quarters of positive absorption hasn’t stopped vacancies from rising to 4.5 per cent over the past year from 3.8 per cent a year ago.
A good example of how things have shifted is Amazon Canada, which recently capped a wave of construction with the opening of YYC 4, its new fulfilment centre in Calgary’s East Shepard industrial area.
Robotics play a central role at the 2.8 million-square-foot facility, where more than 1,500 staff work alongside automated systems to ship upwards of 950,000 units a day.
The facility follows on the February 2023 opening of YEG 2 in Edmonton’s Acheson industrial precinct. Then the company’s largest fulfilment centre in Western Canada at 635,000 square feet, it employed 1,000 workers alongside a reported 5,000 robots.
The new Calgary centre trumps it, the culmination of more than $40 billion worth of investments Amazon has made in Canada since 2010. (The cost of the new Calgary facility was reportedly $400 million, or 1 per cent of the total.)
“[It] allows us to ramp up our overall operations in Alberta, and obviously that supports the Canadian network as a whole,” Sushant Jha, general manager of YYC 4, told Western Investor.
The new Calgary facility incorporates roles from YYC 1, which Jha said continues to employ about 500 staff as it enters a retrofit period. Approximately 500 employees still work there.
“That facility has outlived the technology,” Jha said. “They’re going to go back inside it, retrofit and then go from there.”
The retrofit complete by the holiday shipping season, limiting any disruption to Amazon’s fulfilment operations.
Amazon currently operates two fulfilment centres in Calgary and three fulfilment centres in Edmonton, as well as five delivery stations and a sortation centre. Calgary is also home to a datacentre for Amazon Web Services.
Calgary’s workforce is an asset to the company, which has plans to grow employment in the province to 6,000 from 4,000 a year ago, but its location is also ideal for serving destinations across Western Canada.
“Having this facility in Calgary, it allows us to serve first and foremost the city of Calgary and within the province of Alberta but then extend … that speed logistically to B.C. and the Prairies overall,” Jha said.
While YYC 4 is the final new project of the current wave of construction, Amazon continues to invest in its facilities top keep pace with industrial space requirements.
“While the retrofit [at YYC1] is happening, Amazon as a business is also looking at what else the customer needs in the geographical location and how best to support that,” Jha said.