Calgary Economy

[Riise]

Originally Posted by geotag277

OPEC is kind of like a price fixing cartel. This kind of organization to fix prices would be illegal in many Western countries, but they supply a majority of the world oil so they somewhat can do what they want.

Although we do allow cartels to operate in professional sports (i.e. franchise-based leagues).

Originally Posted by Bokimon

Its a complicated topic I know but to me it seems there is an element where OPEC has a part to play in and maybe they might have some sinister side to all this. I don't even know if our gov. can even plea to OPEC to stop all this excess production. Sounds too wishful to be a reallity. All I know is they are in record production state while we are dead in our derricks.

Are we really in a position to tell other countries not to exploit other countries like we have in the past, which allowed us to establish our current way of life?

[ragerunner1]

I would think this is Russia planning for the worst. But if this plays out US and Canada oil industry is toast.

Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies
"Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 a barrel for another seven years.
Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec.
It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti."
http://www.telegraph.co.uk/finance/e...oil-price.html

[geotag277]

Originally Posted by ragerunner1

I would think this is Russia planning for the worst. But if this plays out US and Canada oil industry is toast.

Toast is a little extreme. The Fort Hills Suncor project has break even above 90 dollars a barrel and is going ahead as planned, since it has a 50 year production window. 7 years is a blip on the radar.

From my understanding of shale, I would expect it to potentially be even more impacted than oil sands, as from my understanding, they require constant drilling, capital expenditure, and infrastructure investments to keep up their supply numbers rising.

[lubicon]

Not sure where she is getting her information but if true this is extremely bad for Calgary. No recovery for four years and a 25% vacancy rate DT. I think many of us know next year is going to be bad in YYC (worse than 2015) but another few years on top of that could be devastating. From my perspective we are not seeing any signs of improvement and as a matter of fact it may be getting worse in recent weeks.

http://www.cbc.ca/news/canada/calgar...chuk-1.3375345

[Ramsayfarian]

Originally Posted by lubicon

Not sure where she is getting her information but if true this is extremely bad for Calgary. No recovery for four years and a 25% vacancy rate DT. I think many of us know next year is going to be bad in YYC (worse than 2015) but another few years on top of that could be devastating. From my perspective we are not seeing any signs of improvement and as a matter of fact it may be getting worse in recent weeks.

http://www.cbc.ca/news/canada/calgar...chuk-1.3375345

I've heard of one major O&G, with a 50 year plan, that is seriously contemplating laying off anyone that is non-essential. If they do this, the rest will follow.

[Full Mountain]

Originally Posted by Ramsayfarian

I've heard of one major O&G, with a 50 year plan, that is seriously contemplating laying off anyone that is non-essential. If they do this, the rest will follow.

That's got to be an interesting conversation...

IMO its time for adapt or die in the O&G business relative to carbon emissions.

[MasterG]

Originally Posted by lubicon

Not sure where she is getting her information but if true this is extremely bad for Calgary. No recovery for four years and a 25% vacancy rate DT. I think many of us know next year is going to be bad in YYC (worse than 2015) but another few years on top of that could be devastating. From my perspective we are not seeing any signs of improvement and as a matter of fact it may be getting worse in recent weeks.

http://www.cbc.ca/news/canada/calgar...chuk-1.3375345

Yikes, it's tough out there. 25% vacancy isn't far off. Any significant office construction - at least of the type that is common in downtown Calgary for mid-sized oil and gas companies with large floor plates - will probably become a distant memory. For a long while anyways. Brookfield may be the tallest office building in Calgary for many years.

But there are positives. Oil and gas isn't everything anymore. Us skyscraper nerds will still get our fix of towers from the condo and apartment sectors for the foreseeable future. This residential development is not entirely tied to oil and gas, it is a result of large institutional investments from the Toronto and Vancouver markets, a general macro-trend towards more urban living in Calgary and the rest of the developed world, and a real deficit in Calgary's housing stock in the inner city / apartment categories compared to other Canadian cities.

Rebalancing was overdue in this province and this recession could help, painful as it is. Oil and gas will become competitive at lower prices and other industries will benefit from the reduced cost pressures for labour, talent and materials

Another positive that I find personally important:

If the professional oil and gas sector is no longer gobbling up all educated and/or motivated young people, perhaps over time they can be the start of a generation of local businesses, restaurants and bars. Calgary is one of the least-entrepreneurial cities in Canada in this regard. So many young, passionate people are sucked into oil and gas early because of the high-pay and mindset that this is what people do With such wild incentives, who can blame them? They rarely start their own business, nor are there many family businesses to inherit as is common in other cities.

These young people that go to oil and gas are the same people in Montreal or Vancouver that are creating a new bars with friends or saving to open a business of their passion. The only difference is these cities force young people to be more independent and more innovative in their careers to compete because there isn't a giant sucking sound coming from one industry offering 70-100K a year straight out of university (unlikely / unheard of in nearly any other city).

No city is perfect, but the best ones are often the most balanced and resilient. Calgary can come out of this downturn stronger than ever.

[Policy Wonk]

Originally Posted by MasterG

No city is perfect, but the best ones are often the most balanced and resilient. Calgary can come out of this downturn stronger than ever.

Spoiler Alert: It won't. It will come out of the downturn with an even bigger persecution complex, corresponding chip on it's shoulder and convoluted narrative blaming the NDP, Trudeau I & II, Obama, OPEC and Whole Foods.

[Full Mountain]

Originally Posted by Policy Wonk

Spoiler Alert: It won't. It will come out of the downturn with an even bigger persecution complex, corresponding chip on it's shoulder and convoluted narrative blaming the NDP, Trudeau I & II, Obama, OPEC and Whole Foods.

The boomers, sure. The rest of us are sick of that and are ready to adjust to make the new realities work. Is the prolonged downturn in the O&G sector going to be easy? No, but saying it's the end of the world is short sighted and likely to get you left in the dust. Most of the world lives with a 10-15% commercial vacancy rate. There are benefits to higher office vacancy rates, the key one being a reduction in rates, this allows the money that would have gone to that to go to other items. It also provides the opportunity for other industries to get space at rates that they can afford, one of the challenges faced by non-O&G industries is that the O&G industry drives the price of everything up so much its hard for them to compete. Is Calgary going to change in the next 2-5 years? Absolutely but it won't be as negative as people think.

[ragerunner1]

It appears not only Russia but OPEC is preparing for a sustained downturn for years to come. Don't know if it will happen, but the players seem to be preparing for it.

OPEC Sees Demand for Its Crude Oil Falling for Rest of Decade
"The forecast underlines the struggle faced by the Organization of Petroleum Exporting Countries as it seeks to defend market share against a surge in output from rivals such as the U.S. and Russia. While OPEC is slowly taming the expansion of competitors, the collapse in oil prices means the financial costs of its strategy are immense. Brent crude futures touched an 11-year low of $36.04 a barrel on Dec. 21."
http://www.bloomberg.com/news/articl...rest-of-decade

It looks like wall street is placing some pretty big bets that prices will drop even more in 2016?!!

Extreme Oil Bears Bet on $25, $20 and Even $15 a Barrel in 2016
"Oil speculators are buying options contracts that will only pay out if crude drops to as low as $15 a barrel next year, the latest sign some investors expect an even deeper slump in energy prices.
The bearish wagers come as OPEC’s effective scrapping of output limits, Iran’s anticipated return to the market and the resilience of production from countries such as Russia raise the prospect of a prolonged global oil glut."
http://www.bloomberg.com/news/articl...barrel-in-2016

[artvandelay]

The amount of vacancy in the office and industrial markets right now is startling, but what's really cause for concern is the amount of space that is currently leased but not being used. It's a sad reality in the oil and gas world that is compounded by terrible governance in Edmonton. Here's hoping for a better 2016.

[MasterG]

Originally Posted by Policy Wonk

Spoiler Alert: It won't. It will come out of the downturn with an even bigger persecution complex, corresponding chip on it's shoulder and convoluted narrative blaming the NDP, Trudeau I & II, Obama, OPEC and Whole Foods.

It changed more progressively last time we came out of the recession.

The poll they released yesterday shows that the NDP are statistically tied with the Wildrose and PCs in Calgary, down slightly from a peak honeymoon period after the election. Edmonton they are taking a large hit, but still well into the majority and twice and Wildrose/PC support. Rural they are dead, much like they were before. I'll post the link when I find it to the article for their popularity.

My question is, despite constant media slamming them, constant unroar in the privileged circles of downtown corporate life and daily slams on Twitter, forums and publicly, how can they possibly be polling still near what they were before after they "destroyed the exon and raised taxes on everything"?

The answer is, a large percentage of people still support what they do despite the near total control of media, oil companies and public mouthpieces that speak otherwise.

Enough to win another majority? Right now, probably not, but four years is a while from now. If they were as hated as some online posters suggest, I wouldn't expect them to be polling anywhere close to even with other political rivals.

All this is to say is that Alberta is a diverse place that it wasn't 25 years ago. Conservative? Sure. But it's not a hegemony of conservatism as the media and Internet pretend it still is. Plenty of people here like policies and things that the oil and gas sector may not. It's a testament to the diversity of our economy and population that is only growing more diverse.

[Policy Wonk]

Originally Posted by Full Mountain

The boomers, sure. The rest of us are sick of that and are ready to adjust to make the new realities work. Is the prolonged downturn in the O&G sector going to be easy? No, but saying it's the end of the world is short sighted and likely to get you left in the dust. Most of the world lives with a 10-15% commercial vacancy rate. There are benefits to higher office vacancy rates, the key one being a reduction in rates, this allows the money that would have gone to that to go to other items. It also provides the opportunity for other industries to get space at rates that they can afford, one of the challenges faced by non-O&G industries is that the O&G industry drives the price of everything up so much its hard for them to compete. Is Calgary going to change in the next 2-5 years? Absolutely but it won't be as negative as people think.

That is simplistic. For many people "adjusting to the new realities" is going to mean leaving. Cheap office space isn't a panacea to economic malaise. You might however get some interesting character lofts. (Looking at you Fording Coal building.)

The boomers are the ones who can stick around and piss and moan.

There is no doubt that the extent to which oil and gas and both residential and commercial real estate sucking all the air out of the room is negative to both individuals and businesses who don't directly benefit from that phenomenon, but the loss of that "price support" doesn't immediately make those idled human and capital resources available to others on their terms.

While whatever non-O&G company might find they're able to hire a mature receptionist for less than before, a lot of engineering, finance and IT types of people are going to be expecting nationally and internationally competitive salaries. If they can't get that in Calgary they will leave.

[Policy Wonk]

Originally Posted by MasterG

It changed more progressively last time we came out of the recession.

The poll they released yesterday shows that the NDP are statistically tied with the Wildrose and PCs in Calgary, down slightly from a peak honeymoon period after the election. Edmonton they are taking a large hit, but still well into the majority and twice and Wildrose/PC support. Rural they are dead, much like they were before. I'll post the link when I find it to the article for their popularity.

My question is, despite constant media slamming them, constant unroar in the privileged circles of downtown corporate life and daily slams on Twitter, forums and publicly, how can they possibly be polling still near what they were before after they "destroyed the exon and raised taxes on everything"?

The answer is, a large percentage of people still support what they do despite the near total control of media, oil companies and public mouthpieces that speak otherwise.

Enough to win another majority? Right now, probably not, but four years is a while from now. If they were as hated as some online posters suggest, I wouldn't expect them to be polling anywhere close to even with other political rivals.

All this is to say is that Alberta is a diverse place that it wasn't 25 years ago. Conservative? Sure. But it's not a hegemony of conservatism as the media and Internet pretend it still is. Plenty of people here like policies and things that the oil and gas sector may not. It's a testament to the diversity of our economy and population that is only growing more diverse.

That comment was intended to be mostly sarcastic, but I don't believe Calgary has become significantly more resilient and better prepared for this existential oil crisis than previous ones. As long as the Blue-Eyed Sheik mentality persists all decision making of this kind is doomed no matter who is in power. Alberta's viability as a major oil producer is extremely tenuous, until that is widely recognized nothing will change.

[Full Mountain]

Originally Posted by Policy Wonk

That is simplistic. For many people "adjusting to the new realities" is going to mean leaving. Cheap office space isn't a panacea to economic malaise. You might however get some interesting character lofts. (Looking at you Fording Coal building.)

The boomers are the ones who can stick around and piss and moan.

There is no doubt that the extent to which oil and gas and both residential and commercial real estate sucking all the air out of the room is negative to both individuals and businesses who don't directly benefit from that phenomenon, but the loss of that "price support" doesn't immediately make those idled human and capital resources available to others on their terms.

While whatever non-O&G company might find they're able to hire a mature receptionist for less than before, a lot of engineering, finance and IT types of people are going to be expecting nationally and internationally competitive salaries. If they can't get that in Calgary they will leave.

Where is a fresh out of school engineer (~22 years old) getting six digits as a starting salary? New York? Silicon Valley?

[Trans Canada]

Avison Young released the 2016 Canada, U.S., U.K. commercial real estate forecast today.

Press release: http://www.newswire.ca/news-releases...565265501.html

Full report (76 pages): https://avisonyoung.uberflip.com/i/6...state-forecast

The page on Calgary:


Source https://avisonyoung.uberflip.com/i/6...state-forecast


The Herald reporting on the above:

Calgary office construction ranks fifth in North America
http://calgaryherald.com/business/co...-north-america
Mario Toneguzzi, Calgary Herald
Published on: January 14, 2016

Calgary is ranked fifth in North America for the most office space currently under construction, according to research by commercial real estate firm Avison Young.

In a report released Thursday, the company said Toronto was ranked seventh and of the 20 million square feet of office space under construction in Canada, 60 per cent of it comes from Calgary and Toronto.

[...]

Here are the North American rankings for overall office space under construction in square feet:

1. New York – 13,211,402
2. Houston – 9,657,209
3. Dallas – 8,083,127
4. Washington, DC – 8,033,630
5. Calgary – 6,485,300
6. Boston – 5,682,000
7. Toronto – 5,426,932
8. San Francisco – 3,774,680
9. Los Angeles – 3,731,700
10. Chicago – 3,255,464

[...]

“The effects [of oil prices] are widespread and have contributed to a dramatic decrease in office occupancy in Calgary’s downtown core; and will keep the office leasing market entrenched in negative absorption for at least the first two quarters of 2016,” said a report by commercial real estate firm Cushman & Wakefield.

In 2015, net office space absorption – the change in occupied space – was a record-breaking negative 2.5 million square feet compared to a positive 1.1 million square feet in 2014, said Cushman & Wakefield.

[Design-mind]

^^^Interesting article and facts. Thanks for posting!

[lubicon]

Another kick in the nuts for the Alberta economy. Post Media (Herald, Journal, and both Sun papers) cut 90 jobs nationally, about 60 of which were in Edmonton and Calgary.

[DizzyEdge]

Pretty soon most Canadian papers are just going to have enough staff to print Postmedia editorials from head office.

[suburbia]

http://www.cbc.ca/news/business/stoc...-oil-1.3411432

West Texas Intermediate crude closed at $26.55 US a barrel, down $1.90 or 6.7 per cent on the day. Western Canada Select crude had fallen to $14.50 US.