Abundant cash flow in the oil industry has yet to manifest better growth prospects for commercial property markets in Canada’s oil patch, according to a Reuters analysis.
Strong global prices and production quotas in Alberta are the main factors impelling this trend. Surplus funds this year alone will be in the $13-billion mark, pushing oil producers to likely their highest earnings in half a decade.
Furthermore, ARC Financial analyst Jackie Forrest predicted that the sector’s cash flow will amount to as much as $52.7 billion this year, also the highest in five years.
However, the current policy regime is encouraging companies to instead use the extra funds to buy back shares and pay off debt. This is a significant roadblock in many firms’ plans for business expansion and acquisition of more commercial space in the region.
“There’s no point growing with the Alberta production curtailment in place and the lack of egress opportunities,” MEG Energy chief executive Derek Evans said, adding that his company will be spending its reported $98 million in added cash during Q1 2019 to repay debt.
Market recovery from the oil price crashes of years past is proceeding at a robust clip. Indeed, Western Canada’s major markets are now seeing much lower rental housing vacancies, CMHC figures showed.
Alberta rental home vacancy fell from 7.5% in 2017 to 5.5% in 2018. Similarly, a CBRE Ltd. analysis indicated that tenants are steadily returning to Calgary’s offices, considerably pulling down the vacancy rate from 27.8% in Q2 2018, to 26.5% in Q1 2019.
CBRE credited much of the improvement to the region’s oil and gas sectors finally putting a halt to the crippling depletion of their talent pool.
“They’ve just stopped the four or five hundred people being laid off like we saw a year or two years ago, where large companies like Cenovus and Suncor and basically all the major oil companies were laying off in droves — we don’t see that happening right now,” CBRE Alberta regional managing director Greg Kwong told CBC News.
Ephraim is currently a journalist at Mortgage Broker News, Real Estate Professional and Canadian Real Estate Wealth.
Ephraim is a highly accomplished news reporter whose work has been published across North America and the Asia Pacific region. Before joining Key Media, Ephraim spent eight years working as a journalist with Reuters TV. His areas of expertise include real estate, mortgage, and finance.
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