'It's a tenant's market right now': Fort McMurray commercial landlords slash rent
David Thurton | CBC News | Posted: November 26, 2016 6:07 PM | Last Updated: November 26, 2016
Rent for commercial space has dropped by up to 50 per cent, landlords say
One of Nelson Sturge's tenants recently came into his office to drop off their keys.
But there was still six months left on the commercial lease.
"One of the comments by them was, 'We can't even make payroll,'" Sturge said.
CBC News spoke with Sturge and other Fort McMurray commercial landlords who have all said they've reduced their asking prices by about half.
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When the price of oil was hovering at $100 a barrel in mid-2014, Fort McMurray's housing market was booming and commercial rental space was going at a premium. It wasn't uncommon to see the price per square foot of commercial space start at $50.
Now it's at $20 per square foot, Sturge said.
Some of Sturge's properties sit on one of Fort McMurray's industrial parks. It's not hard to spot "For sale" signs hanging along its streets.
Property owners like him, who bought or built warehouses and storage buildings during the height of Fort McMurray's boom, are now stuck paying high mortgages and collecting low rents.
"It puts us in a bit of a bind right now, especially with the market that's out there," Sturge said.
"It's a tenant's market right now."
Sturge says landlords have to be creative to attract tenants, by offering incentives like a free month's rent and free utilities.
Good news for renters
Colliers International real estate broker Ken Williamson remembers when potential commercial renters would approach him in mid-2014 desperate for space in Fort McMurray. At that time, he and his business partner would have less than a handful of options to offer.
"The market was that volatile and moved that fast," Williamson said.
Colliers International handles more than 50 per cent of Fort McMurray's commercial properties, he said.
Today, prospective renters have many options and they have weeks to make up their minds, he said.
In fact, he sees the changes in the market as positive.
Williamson has noticed small businesses are moving out of garages and kitchens and into office space they can finally afford. Existing tenants are also finding or negotiating cheaper leases and re-investing that money into hiring more staff.
Williamson also said businesses are taking the opportunity to upgrade their amenities with new sidewalks, windows and better floors.
Some commercial spaces in Fort McMurray can still get tenants through the door at $40 or $50 a square foot, Williamson said.
But that's only for brand new or well-maintained properties whose owners are willing to customize space to the needs of clients.
'We lost our customers'
Theresa Keeping isn't one of those owners that can charge high rents on her two properties. She's gone from collecting $50 to $10 a square foot, after she lost her tenants during the course of the economic downturn and the wildfire.
"A lot of businesses downsized or closed and we lost all our customers," Keeping said.
She's appealing on governments, especially at the municipal level, to reduce her taxes that run between $10,000-$12,000 a month. Right now, she's looking at all her options — including bankruptcy.
"We can't possibly continue to bear this kind of financial burden and expect to recover if we don't get assistance," Keeping said.
Relief in sight
Williamson said he expects Fort McMurray's economy will improve somewhat in February and March, when the city will be inundated with home builders and contractors.
It's estimated that the wildfire in May destroyed more than 2,400 homes. The workers who will be rebuilding those homes will need small and medium size commercial spaces, but not large ones, Williamson said.
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Commercial property owner Nelson Sturge is also somewhat confident things will look up, but he has his doubts.
The long term solution to Fort McMurray's economic problems is to build more pipelines to bring oil sands bitumen to tidewater, he said.
"I think we need to get our oil moving. I think that would help."