New economy industries, hydrogen drive Alberta industrial land market • RENX

December 28, 2023
4 mins read
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Gregg Maimann, senior vice-president of industrial sales and leasing for CBRE in Edmonton. (Courtesy CBRE)

Alberta’s hydrogen industry is poised for rapid growth in coming years, which is good news for the industrial real estate market in Edmonton and the northern part of the province.

“With a worldwide market estimated to be worth more than $2.5 trillion a year by 2050, hydrogen can be the next great energy export that fuels jobs, investment and economic opportunity across our province,” says the Alberta government in its Hydrogen Roadmap report.

Commercial real estate firm CBRE sees the availability of real estate as critical to the province’s emerging hydrogen sector.

Gregg Maimann, senior vice-president of industrial sales and leasing for CBRE in Edmonton, said the economy is being buoyed by local, regional and international companies in the hydrogen and non-traditional petrochemical industries.

“Real estate has become key to setting up and propelling the hydrogen economy forward,” he told RENX. “In everybody’s search for alternative fuels and lower emissions from all forms of energy, hydrogen is fast becoming a very good alternative in very many different applications and different forms.”

That includes so-called blue hydrogen made from natural gas, which can be used in zero-emission vehicles.

Large land sale for hydrogen facility

Maimann recently sold 152 acres of northeast Edmonton land to U.S.-based Air Products, which manufactures hydrogen net-zero fuel stations and infrastructure. The company is building a $1.6-billion complex that will utilize Auto Thermal Reforming (ATR) technology to convert natural gas to hydrogen.

Air Products isn’t the only group making moves in Northern Alberta. Suncor and ATCO are building plants northeast of Edmonton for hydrogen and petrochemical activity not related to traditional oil and gas production.

Instead, the multi-billion-dollar hydrogen and carbon capture and sequestration (CCS) project will capture and store over 90 per cent of CO2 produced (over two million tonnes annually), produce over 300,000 tonnes of hydrogen annually, and reduce emissions at Suncor’s Edmonton refinery by 60 per cent, said CBRE.

“Alberta is in an enviable position because we’re the most affordable market in all of Canada from a housing standpoint, but also from industrial land,” Maimann explained. “The net migration, the population flow, into Alberta is real and a lot of it is from Toronto and Vancouver, just based on the cost of living.

“But there are also companies migrating here because they can’t find warehousing. Like in Vancouver, you can’t really find large blocks of warehouse space anymore and if you do it can easily be over $20 a square foot net, where here we’re half that.

Alberta also boasts the lowest corporate tax rate in Canada, he noted.

“So the relative metrics of the health of our industrial market are quite good and that includes ongoing typical sales and leasing but also absorption of land. Land is selling here for companies to buy land and build  buildings,” Maimann said. “When things are soft in any given industrial or commercial economy, land is the first thing that stops trading.

“In spite of all the headwinds and the federal government’s dislike of our energy sources, things are actually reasonably good here.”

Small, mid-sized industrial space in demand

Tenants supporting these hydrogen activities are boosting demand for mid- to small-sized industrial spaces.

CBRE has been assisting energy companies in securing land to build plants and distribution centres to supply their facilities over the long term.

“There’s a big, bright future in this,” Maimann said, “and companies are starting to position themselves as the ones to facilitate, find, buy and warehouse these items. It’s a specialized form of logistics.”

Maimann is also working on a 150,000-square-foot build-to-suit distribution and long-lead-time logistics centre to serve hydrogen and petrochemical plants. The distribution centre will stock parts to ensure expanding companies like Suncor, Dow and Air Products can sustain decades of maintenance, repair and operation.

He said some areas are enjoying real growth in the Edmonton/Calgary corridor.

The Edmonton/Leduc industrial strip has land available for $550,000 to $600,000 an acre, good value compared to potentially millions of dollars per acre in Vancouver or the Greater Toronto Area.

“When land is trading it speaks to the health of the commercial real estate market and investor belief in future growth,” Maimann said, “and land is still trading here, both small parcels and sometimes large swaths.”

Maimann is also working with Varme, a waste-to-energy firm which develops and owns facilities with integrated carbon capture and storage, and bioenergy assets.

“Varme is excited to be developing waste-to-energy with carbon capture projects in the Alberta Industrial Heartland and across Canada. These facilities will provide a sustainable waste solution that delivers clean energy and captured carbon into the local economy,” Rory Wheat, Varme’s VP of development. said in a statement.

“Our ambition is to eliminate the need for new landfill development for handling our municipal solid waste and in doing so, preserve the economic, environmental and social value of our landscape.”

Alberta Carbon Trunk Line expansion

In another major new economy development, Wolf Midstream Canada plans to extend its Alberta Carbon Trunk Line (ACTL) through the core of the Alberta Industrial Heartland to the Edmonton region.  The ACTL Edmonton Connector will support both existing and new industrial facilities in the region in reducing greenhouse gas emissions.

Wolf Midstream also reached an agreement with Air Products Canada to transport CO₂ from the under-construction net-zero hydrogen facility via the connector.

At full capacity, the ACTL Edmonton Connector is to transport approximately seven million metric tons of CO₂ per year, the firm said.

A report by Barclay Street Real Estate said year-to-date, the number of industrial real estate transactions in the Edmonton region fell to 93 in Q3 2023 from 97 last year, with the total dollar volume also dropping to $564 million from $704 million. 

The report said owner/users accounted for 72 per cent of the year-to-date acquisitions and were most active among properties measuring 20,000 square feet or less. 

Barclay Street said strong demand was shown for IM (industrial manufacturing)-zoned properties, which comprised over half of the property trades. Slightly less popular were IB (industrial business)-zoned properties, with 25 sales completed.

They achieved average prices per square foot of $177 and $178, respectively.

This metric remains notably lower than it tracked through 2017, when average per-square-foot prices exceeded $200 in these categories, the report noted.

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