Avison Young in Lethbridge
Since Avison Young opened its Lethbridge office in 2009, the company has since become a dominant presence in the Southern Alberta commercial real estate market. Over the last ten years, our team has played a role in over 760 commercial real estate transactions in the Lethbridge area.
The office was started by a team of highly-skilled professionals who had established themselves as very successful associates in both sales and leasing in Lethbridge and the surrounding area. The professionals in our office work closely with other Avison Young offices, particularly Calgary and Edmonton, to facilitate national and international sale and leasing transactions.
The Lethbridge office houses Avison Young and Avison Young Property Management, allowing us to better service the needs of our clients.
Lethbridge is the third-largest city in Alberta by both population and area. Located in Southern Alberta, Lethbridge is in the center of a trade area that serves over 340,000 people across parts of Alberta, British Columbia and Montana. The Lethbridge and area market registered growth in 2019 and this trend is expected to continue in 2020. Lethbridge recently hit the 100,000 population mark and we predict a strong year ahead.
Initially built around agriculture and coal-mining, Lethbridge now has a diverse range of key industries including commercial, financial, transportation and industrial. Additionally, Lethbridge is home to one university and two colleges.
The Lethbridge office market is starting to show the effects of the global pandemic, with many business owners feeling the financial squeeze. Downtown Lethbridge has been hit the hardest with a rise in vacancy to 15% compared to last year’s 11%. There continues to be an increased desire to relocate to suburban areas resulting in steady growth and a low suburban vacancy rate of 6%. Within a an extremely short period of time, many companies navigated through the process of working remotely which forced businesses to evaluate their needs as it comes to office space. It is predicted that office space will be downsized substantially in 2021, however, with social distancing requirements, the ability to downsize may not be an immediate option.
As we continue to proceed through this pandemic in 2021, we are faced with many areas of uncertainty as it relates to office space in the real estate industry. We do foresee vacancy rates continuing to rise as businesses downsize their offices, and we anticipate working from home to become increasingly popular among business professionals.
Lethbridge’s retail market has been hit the hardest of all CRE sectors in the past 8 months due to COVID-19. The pandemic was declared in our region in March, and during the first 4 months, retail transactions nearly halted completely, and many deals fell through due to the uncertainty of the situation. Recreation, hospitality, entertainment, restaurants, and many other retail businesses have faced great financial difficulty due to loss of revenue; many have been forced to close their doors permanently. These events have resulted in a notable increase in retail vacancy throughout the city, which is estimated to be about 5% in both downtown and suburban areas.
While we saw some resumed activity among fast-food restaurants throughout the summer and into the fall, most retailers will remain in a holding position through to the end of 2020 and into 2021. We expect to continue to see a rise in vacancy and a decrease in lease rates as Landlords become increasingly concerned with maintaining existing tenants and keeping them operating throughout the remainder of the pandemic. The Lethbridge retail market is likely to remain virtually the same in 2021, until the insecurity surrounding COVID-19 has been resolved and the economy begins to recover.
We anticipate the industrial market in 2021 to continue to be mildly affected coming out of the COVID-19 pandemic as businesses adjust to their new normal. In the Lethbridge market, smaller local businesses were more heavily affected as we saw decreased interest from users in smaller industrial bays under 5,000 square feet. Coming up to 2021, we still see that the mid to large inventory remains a tight and competitive market as national users take advantage of the low interest rates that the market has to offer. Overall, the vacancy in the industrial sector has been positively affected.
The total leasable vacancy rate fell from 8.25% in the beginning of the year to 7.15% currently as larger industrial properties were filled. This decrease in vacancy could be attributed to the Lethbridge industrial market being fueled by services that are considered essential, such as agricultural food production and construction. As vacancy rates shift slightly, coupled with lower than average interest rates, we expect average lease rates to stay the same as we navigate through the next 6 to 12 months.
Investment real estate in 2020 included three notably substantial investment transactions in Lethbridge, but otherwise remained steady. At the beginning of the year CAP rates remained stable, as we predicted, until the COVID-19 pandemic hit. Following the outbreak, buyers were asking for discounts while sellers were reluctant to give any concessions. The lack of transactional activity at the start of the pandemic made it difficult to determine whether there was a jump in the CAP rate. The subsequent drop in interest rates to all-time lows will ensure that interest.