Fort McMurray Real Estate Case Study 2020 - Investing Success Near the Alberta Oilfields
The extraction industries in Alberta have provided an economic boost to the province as well as to the entire country. The oilfields have provided steady jobs to tens of thousands of Canadians, and they contain the third-largest oil reserves in the entire world after Venezuela and Saudi Arabia.
All of this indicates an economic driver that is going to continue to surge forward, but one that requires careful management from a social, cultural and economic standpoint. The oil industry in Alberta is here to stay for quite some time and has generated around $25 billion a year for years now. This has propped up real estate in places such as Fort McMurray for quite some time.
As with many primary industries like extraction, oilfields typically spring up in areas that are not near major urban centers. More “remote” cities and towns can come under some strain when there’s an influx of recently hired new arrivals. This means that supply chains can get stressed and housing markets can get even tighter than they already were.
The housing of workers is one of the most challenging aspects of the oil and gas industries in both the United States and in Canada, and Alberta is no different, as it requires housing for 140,000 oil workers. This is where Fort McMurray starts to shine.
Having a better understanding of how rental markets work near the Alberta oilfields and in Fort McMurray is a must for any real estate investor interested in the area. Read on for an overview that can help you get started figuring out how you might fit into this picture.
But first, if you want to learn how to properly finance real estate in Fort McMurray and surrounding the Alberta Oilfields, click the link below for a free strategy call.
Fort McMurray Real Estate, Alberta Case Study
The Athabasca Oil Sands are a massive deposit of bitumen (extremely heavy crude oil). In fact, it is the world’s largest, which makes it the largest one in Alberta of course. The amount that’s considered recoverable by extraction methods is about 10 percent, meaning that this single area could produce 178 billion barrels of oil – a massive number. All of this oil means that many thousands of workers are needed to help extract it, which means that all of them need housing and services as well.
As with many surging industries throughout history, the oil industry in Alberta has led to the rise of boomtowns. Most prominent among these is Fort McMurray, which has seen its population nearly double from 39,000 in 2001 to over 75,000 in 2018. Albertans still make up about half of this population, but immigrants from other provinces and around the world have also contributed to this growth – a survey from as far back as 1986 found that about 17 percent of Fort McMurray residents hailed from Newfoundland and Labrador, for example.
All of these arrivals from home and abroad can put a real pinch on a town that is building as fast as it can to keep up with the demand. As a result, home prices here are quite high – the average single-family home is listed for around $375,000. While this is still lower than the average in Canada as a whole (around $480,000) this is still a higher number than might be expected for a community of this size. Sault Ste. Marie in Ontario, for example, is about the same size and home prices there are almost half that – the average home price there in July 2020 was about $196,000.
It’s important to note here that these prices in “Fort Mac” are lower than they had been in recent years – the market went crazy in the first part of the decade, hitting a peak $660,000 average sale price in May 2012 until a massive fire in 2016 destroyed 2,000 homes and staggered the city.
There is a chance for real estate investors to get creative here as prices continue to climb back up. The right investor with good capital could possibly find value by starting new construction, or by bringing in temporary housing that might appeal to oil workers who are not planning on putting down permanent roots in the area.
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Temporary Housing in Fort McMurray and Surrounding Areas
As was mentioned above, temporary housing is an increasingly popular option in the areas near oilfields. Companies have produced thriving businesses that are centred around the production and rental of these facilities to both oil companies and their workers. Far more luxurious than the trailers that many people might picture, these are more apartments on wheels. They can come as “double-enders,” which contain both a working space for someone like an engineer while also having a full kitchen, a private bathroom, and sleeping quarters.
They also come in smaller, simpler versions that might be better suited for workers who do all of their work in the field and think of their living quarters as a place to relax, cook and sleep. Some of these are quite large – some models sleep as many as 11 workers, offering an efficient solution to housing challenges near oilfields.
All of this is to say that real estate investors should look into getting involved with one of these companies. By providing capital to them, you’re gaining equity in an industry that has shown its adaptability and responsiveness to several housing crunches. The trailers are easy to transport and easy to maintain, so they can go anywhere at the drop of a hat – a perfectly suitable solution to the questions of rental housing near Alberta oilfields.
Housing near remote extraction fields in markets such as Fort McMurray is not a new challenge. Humans have always wrestled with how to house and care for the people who work in places like mines and other resource extraction sites, and the modern boom in the Alberta oilfields follows in this same tradition.
Real estate investors who are looking for a unique opportunity might do well to look into acquiring rental units or even investing in or starting a company that rents mobile temporary housing at these sites. However, it should be noted that booms can end just as quickly as they began, so investors should be prepared to assume some risk if they go down this road, as there’s, unfortunately, no telling when the good times might end.
Finally, if you are planning on buying real estate in Fort McMurray and other regions near the Alberta Oilfields, click the link below for a free strategy call today.