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Pipeline company building auction could show strength of Red Deer industrial market

Many closely watching upcoming auction of NTL Pipelines Inc.’s Red Deer property

The upcoming auction of a Red Deer County pipeline company’s former home will be watched closely, predicts a Red Deer commercial realtor.

NTL Pipelines Inc. shut down operations last month, and Ritchie Bros. Auctioneers is selling off hundreds of pieces of equipment, as well as large buildings in Grande Prairie and in the Burnt Lake Industrial Park, west of Highway 2.

The equipment will be sold in Grande Prairie over four days next week and an online auction for the real estate is set for Dec. 8 in Edmonton.

Brett Salomons, a partner with Salomons Commercial, said the nine-year-old, 8,800-square-foot offices and 13,400-square-foot shop located on 5.2 acres of prime industrial land has caught the eyes of many potential bidders.

“There’s quite a bit of interest, even just to see where the thing sells. It’s going to be a good litmus test for the industrial market here.”

While the long energy industry downturn has seen a number of very visible businesses, such as BJ Services and the Finning Canada Centre of Excellence shutter their Red Deer operations, the commercial and industrial real estate sector is hot.

“There’s a perception out there among the general public that things are way worse than is the reality,” said Solomons. “The last five or six quarters, we’ve seen positive absorption.

“We’re under 10 per cent vacancy with industrial right now. Vacancy for industrial is our strongest performing sector.”

That is not to say the commercial and industrial sectors are not feeling the impact of the lingering downturn. Lease rates and sale prices are down, which on the positive side, means there are some deals to be had.

“Oilfield services, specifically, is definitely down. There’s no secret there. But there are other industries taking advantage of lower lease rates and everything else.”

NTL’s site is an example. Salomons predicts it will likely be sold for a little over $3 million, which considering the offices and shop were built for $5.5 million in 2011, would be a pretty good deal.

Building new would likely cost in the $6 million range.

While that is likely not the price the owner would want, it would be a reasonable return, considering the pandemic and economic downturn, said Salomons.

Salomons expects that lease rates will begin to rise again soon. Construction costs have been climbing sharply because of the spiking price of lumber, which is up 70 per cent his year.

That means more businesses are looking at leasing existing space.

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