Lethbridge investment market report

Q4 2023

Commercial real estate (CRE) investment transactions in Lethbridge have slowed overall in 2023 due to economic headwinds and cautious market sentiment. However, we are beginning to see a shift in the local market as investors are anticipating higher expenses and adjusting expectations accordingly. Although economists are anticipating a challenging first half of 2024, we are expecting to see our market regain momentum. Pent-up demand and general economic growth will continue to drive CRE transactions in Lethbridge, particularly in multi-family and industrial asset classes. Retail real estate has also seen continued demand and many projects are moving forward. There was also an uptick in land transactions near the end of 2023, which will support new development in 2024.

Vacancy rates have remained tight in most asset classes, with a notable decrease in office vacancy. Average base rent in existing space has increased in line with inflation, and rates in new space are much higher, representing the increased construction costs. However, with the projected cooling of the national GDP, many economists predict that both inflation and the Bank of Canada (BoC) overnight interest rate may begin to ease as early as Q3 2024. Although market outlook is conservative, real estate investment in smaller markets such as Lethbridge remains strong

3 key trends


01 – Cap rate vs. psf value 

In response to higher interest rates and increasing cap rates, investor sentiment has begun to evaluate properties based on per-square-foot (psf) value compared to the cost of new builds. When evaluating an investment property, factors such as steady rent growth, inflation, and local economic growth will determine profitability over time. 

02 – New development

After a slowdown in new builds, we are anticipating demand to drive new development in 2024 despite inflated construction costs. With a lag in new builds coming to market in 2023 and continued low vacancy, we are expecting industrial space to fall short of demand in the next 18-24 months. There is also very little retail vacancy, which positions Lethbridge for a significant increase in new retail development in 2024. Multifamily  properties have also had sustained demand and Lethbridge is expecting a shortage of approximately 1,400 new multifamily units over the next three years. Demand for class A office space remains strong, while class B and class C office space is being absorbed by non-traditional tenants who can use the partial build-out to keep costs down.

03 – National headwinds

Economists are anticipating a challenging first half of 2024. Although CPI inflation continues to trend down, overall costs remain high and debt spending is down. Banks are also continuing to tighten lending parameters for investment sales. In its December 6th, 2023, announcement, the BoC opted to hold interest rates at 5.0% into the new year, likely due to the reported contraction of the Canadian GDP from Q3 2023. Some analysts are predicting that GDP growth will continue to cool in 2024, and we may see the BoC begin to lower interest rates in response as early as the Q3 2024.

Industrial vacancy rate

up from 3.8% in Q4 2022


Office vacancy rate

down from 12.4% in Q4 2022


Retail vacancy rate

unchanged from Q4 2022


Average industrial base rent

up from $8.56 in Q4 2022


Average office base rent

per sf, per year, up from $15.15 in Q4 2022


Average retail base rent

per sf, per year, down from $22.69 in Q4 2022

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