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.
Overall Lethbridge's office market remains steady with pockets of growth and decline in different areas with average lease rates remaining at $12.60 psf. Suburban areas are seeing notable growth with a decrease in vacancy while Lethbridge's downtown is experiencing some difficulty bringing vacancy up to 11%.
The Struggle is partly a result of some political and social issues resulting in tenants relocating to different areas of the city. We expect the overall vacancy rate to slightly improve downtown over the next year as the community and City rally together to mitigate some of the issues the downtown is facing. We are finding an increased desire for tenants/businesses to own their own office space resulting in more redevelopments allowing for purchasable space.
Based on the past six months and the current activity in the market, retail leasing and sale volume will continue to increase over the next 12 months. There continues to be strong retail construction in the market as well as redevelopments of existing retail structures. Restaurant, financial, fitness, medical, health/wellness, beauty, discount retail, fuel, and grocery are the most active retail sectors in the Lethbridge market. Landlords and developers are being creative with ways to densify existing retail developments by incorporating mixed-use development, entertainment, and recreational use projects.
We anticipate the industrial market in 2020 to be selective in more specific areas and overall healthier than 2019. Industrial vacancy rose to 8.25%, this was mainly due to a large user (Cavendish) moving to their new location and the decreased interest in smaller bays from users under 3,000 sf.
Mid to large inventory still remains a tight and competitive market. Regional national users are looking for more affordable markets and are seriously considering Lethbridge as a viable option. Lethbridge has a well-educated and diverse work force and is conveniently located logistically to access broad markets. We also forecast that we will see a decrease in developers building on spec to accommodate the smaller users and transition to mid-size standalone purchase options as well as cater to larger manufacturing, wholesale, and logistics users. With the City of Lethbridge raising the benchmark pricing on 350 acres of Industrial land (I-B and I-G from $230,000 / acre to $299,500 / acre and I-H from $195,000 / acre to $230,000 / acre) we anticipate the demand for existing inventory will increase the average lease rates, which currently stand at $8.20 psf, and cause a decrease in vacancy.
Real estate throughout 2019 saw very little large investment activity. The CAP rates remained stable and occurred in spite of interest rates not rising; as had been predicted 12 months ago. This trend is expected to be unchanged in 2020. The economic conditions in Alberta have generally greeted lower than average interest in our market for investors outside of the province. Conversely, a local Lethbridge investment group closed on 61,028 square feet of warehouse space; a property that was previously owned by an Ontario investment company. An additional two retail centres, owned by a national REIT, are also for sale. The lack of interest for these assets outside of Lethbridge could equal great opportunities for local investors in 2020.