LETHBRIDGE, ALTA. – Avison Young’s latest report on Lethbridge’s industrial outlook indicates a landlords’ market by the end of 2024 with strong contributing lease rates.
Last year saw a lag in new developments due to conservative market sentiment, a release said, but predicted low vacancy and continued demand would create a competitive local market for class A and class B+ industrial space.
“2024 is already looking very different from previous years. For example, we used to see large-format users at significantly lower rates; now we are not seeing any industrial leases at rates less than $9.50 per-square-foot,” said Avison Young Lethbridge office senior associate Josh Marti.
Tenants should start planning for renewals early and anticipate higher rates, the release said, as lease rates for new builds are driven by inflated construction prices, and the cost for tenants to build-out their space is more than double pre-pandemic levels.
The report also advised landlords to “adjust their expectations and (they) may need to offer leasing incentives when asking for higher lease rates in existing spaces.”
Investment transactions in Lethbridge decreased in 2023, however, the pent-up demand and likelihood of a Bank of Canada interest rate drop mid-2024 will likely prompt investors to re-enter the market, the release stated.
“While investors have started to adjust their cap rate expectations in light of current market conditions, there is a bit of a disconnect from buyers who are still expecting the kind of cap rates we saw in 2022,” Avison Young Lethbridge office managing director Doug Mereska said.
New industrial developments in Lethbridge in 2023 were most frequently driven by users looking to take advantage of favourable lending terms to purchase their own space. According to the report, Avison Young is predicting increased interest in industrial land parcels in 2024 by both industrial owner-users and investors.
The report is available here.
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