The city’s dream of diversification is becoming reality as Calgary’s location plays a pivotal role in transforming the city into a powerhouse transportation, distribution and manufacturing hub.
“A question you have to ask is how big a market can you reach in a 24-hour drive,” says David Crowe of the Calgary Economic Development Authority. The city is about midway between Vancouver and the Manitoba-Ontario border and, for trucks with two-person crews, within a day’s drive of the U.S. Midwest and northern California.
The city’s economy nosedived when world oil prices tanked in the early 1980s — and this prompted formation of the CEDA.
Today, Calgary is much better able to weather oil-price fluctuations, says Patrick Walters, a senior economist with the city.
The last time oil prices dropped to the $12 –14 range — from September 1998 to April 1999 — it caused something of a ripple, with an estimated 10,000 people laid off, but the city’s economy as a whole didn’t capsize.
“When we had expected a big drop in the economy, it didn’t happen.”
Oil and gas remain the biggest money-spinners for the city’s economy, but other sectors are catching up.
Walters says Statscan figures show gross domestic product (GDP) from a federally defined category that includes forestry, fishing, mining, oil and gas dropped 4.7 per cent from $5.4 billion to $5.2 billion in the period 1988 to 1999.
On the other hand, the warehouse, transportation/distribution and communications sector grew by 118 per cent in the same period, from a GDP of $1.6 billion to $3.5 billion.
Three other sectors grew almost as fast. Business services grew 108 per cent from $1.2 billion to $2.5 billion; tourism grew 106 per cent from $700 million to $1.4 billion; and manufacturing grew 78 per cent, from $1.6 billion to $2.9 billion.
A sector that includes finance, real estate, insurance and leasing is also a major player in the city’s economy. It grew about 42 per cent from 1988 to 1999, from GDP of $3.3 billion to $4.7 billion.
Walters notes that these GDP figures cover the city’s census metropolitan area, which lumps Airdrie and Cochrane in with Calgary.
The last year alone has seen both the arrival of new warehouse/distribution facilities and the expansion of existing ones, says Crowe. Last July, Sears opened a 500,000-sq.-ft. western Canada distribution centre in Dufferin Industrial Park. Also last summer, Scott Paper opened a 190,000-sq.-ft. warehouse and manufacturing facility in Foothills Industrial Park.
Wal-Mart’s new western Canadian distribution centre, opened last September, occupies almost one million square feet and replaces a 189,000-sq.-ft. facility the company outgrew after about six years. Canadian Tire is building a 600,000-sq.-ft. facility that will distribute product to stores from Victoria to the Lakehead.
Scott Paper’s main plant has been in New Westminster, B.C., for about 70 years, says the company’s operations manager for Calgary, Brent Martin. Shifting a bathroom-tissue production line to Calgary can cut transportation bills shipping to customers on the prairies.
He says this could double to two production lines “if we can find a ‘back-haul’ situation where we can utilize good rates” into the U.S., where the company sells a brand-name product line.
The city’s increasing strength as an airline, road and rail transportation hub enables manufacturers to reach markets in a cost-effective manner. Older niche sectors, such as furniture manufacturing, have expanded, with four or five new facilities in the last few years.
Also, new, highly specialized niche industries have sprung up. Mobilift is a case in point.
Launched about five years ago, the company builds mobile, self-propelled fall protection systems. Company president Jay Scott says major customers include Canadian National and Canadian Pacific Rail, General Motors and both the New York and Chicago transit authorities.
“Railway needs were the spur that got us to develop the device,” he says. Gross revenues for 2000 were about $3 million, compared to “less than $1 million for 1999.”
Tibbett and Britten, a U.K.-based company, provides distribution and logistics services for corporate clients. Lesley Eastveld is Calgary site manager for Supply Chain Management, a company set up by Tibbett and Britten to run Wal-Mart’s distribution activities in Canada.
She says the city’s “good transportation routes and good access to services and supplies” suggest strong growth potential for the warehouse/distribution sector.
A sign of the sector’s rosy future here perhaps is the fact that Mount Royal College recently asked Eastveld for input into development of a certificate program in logistics management. She says she’s heard that SAIT is also looking at providing courses in this area.
Also in Calgary are Tibbett and Britten’s distribution facility for Shopper’s Drug Mart, and an outlet that provides similar services for Safeway’s non-perishables.
She notes one negative for business in Calgary, however. “Electricity costs are a bit high.
“I got a bill yesterday that made me fall off my chair.”