Calgary one of nation's most expensive cities to do biz

Calgary has become one of the most expensive Canadian cities in which to do business, second only to Vancouver, says a report released yesterday by accounting firm KPMG.

Toronto, which two years ago held the spot Calgary occupies today, now sits in fourth place, behind Chilliwack, B.C.

Rising labour costs and high property values are the main factors that have pushed up costs in Calgary since 2006, the last time KPMG issued the Competitive Alternatives study.

"The labour market is famously tight and quite aggressive in terms of inflationary pressures there," said Mark MacDonald, executive director of Competitive Alternatives, adding that property values in Cowtown have also gone up "dramatically" since the survey was last conducted.

The study measured 27 cost components, including labour, taxes, real estate and utility costs, and examined how they would impact business operations over a 10-year planning horizon.

MacDonald said much of the rise in costs is a natural consequence of the economic boom Calgary, as well as the rest of Alberta, has experienced over the past few years.

Strong economic growth, albeit at a slower rate, is expected to continue.

"On a net basis, I think Calgary is still doing quite well," said MacDonald, adding the city may be hurt economically by its increase in business costs.

However, he cautioned against dismissing the results of the KPMG study as insignificant.

Investors, he said, do compare costs of doing business before making a decision where to locate, especially among similar-sized cities.

Adam Legge, chief economist with Calgary Economic Development, said the cost increases, although potentially hurtful for smaller business, are of little concern overall and not surprising.

He said they are "natural increases in terms of a strong economy."

All hubs of economic activity, such as London and New York, he said, are characterized by relatively high business costs.

"Calgary is growing into one of those centres," Legge said.

Smaller Canadian cities, including Sherbrooke, Que., and Moncton, N.B., had the lowest business costs, the study says.

MacDonald said that's normal as cost structures are influenced by a city's size and population.

KPMG's study also compared costs among 10 countries. Canada, the U.S. and Australia were among the most competitive. Mexico took the top spot because of its low labour costs.