Just about every economic forecast these days identifies liquefied natural gas (LNG) as the key variable in B.C.’s future.
The government’s official pledge is for three processing plants to be operating by 2020, a hope that underlies projections of new jobs and a host of economic benefits. Kelowna-based BigSteelBox Structures Ltd. and other companies are preparing to meet the demand for temporary worker housing, while highrise developers anticipate rising demand for city homes from newly affluent workers.
Meanwhile, hopes are high that when final decisions regarding projects start being made later this year, the office market will start to recover from its worst run since 2009.
A surge in new office construction has led many to wonder if LNG companies will take the space, and recent announcements from Petronas, the Malaysian partner in the international consortium behind Pacific NorthWest LNG, have added further uncertainty.
But speakers participating in a panel discussion commercial real estate association NAIOP hosted earlier this year indicated that whatever companies ultimately decide, LNG activity has already meant big business for B.C.’s real estate markets.
According to KPMG Canada, more than $1 billion has been spent in B.C. on due diligence for the 14 projects proposed to date.
“LNG is here,” Fazil Mihlar, assistant deputy minister, oil and strategic initiatives, with the B.C. Ministry of Natural Gas Development, told NAIOP. “They have set up offices here in downtown, they are investing in buying land, they are doing the geotechnical work, the environmental assessment work, the engineering work.”
But if LNG-related leasing is occurring, local brokerages aren’t seeing it.
“So far there has been a minimal impact on the downtown office leasing market,” Norm Taylor, executive vice-president and managing director in Vancouver with CBRE Ltd., told Business in Vancouver following the NAIOP discussion. “Our office leasing brokers are anxiously waiting to see if it grows into something more significant.”
The total amount of leasing activity attributable to the sector stands at between 50,000 and 100,000 square feet, estimated Glenn Gardner, a principal specializing in office leasing with Avison Young in Vancouver.
Most of that activity is for what Gardner calls service offices, usually no more than a floor; some companies have even contented themselves with packaged offices.
“No one is really making a full commitment until they know they’re going to make a full commitment on the actual LNG plants themselves,” Gardner said.
And even then, when projects go ahead, he expects it to be mostly companies new to the market that establish a significant presence in Vancouver.
“The larger oil and gas companies that are already based out of Calgary will probably continue to have their large presence in Calgary,” he said.
Mary Hemmingsen, a partner with KPMG Canada, told NAIOP that the ability to secure skilled labour – locally or from overseas – will factor into companies’ decisions to invest in and open offices in B.C.
“They’re still considerable steps away from making the final investment decision,” she said. •
