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Lethbridge investment activity to regain momentum in 2024: Avison Young report

Lethbridge January 16, 2024

Lethbridge, Alberta – Avison Young’s latest Lethbridge investment market report anticipates an increase in new developments in 2024, after last year saw a slowdown in investment transactions brought on by economic headwinds and cautious market sentiment.

“Buyers remain in our market, and the sales activity is there to prove it, although the mood around how and what to purchase may have changed,” said Doug Mereska, Managing Director in Avison Young’s Lethbridge office. “Investor sentiment plays such an impactful role in property transactions that, by accepting the market’s ‘new normal,’ we will see projects regain momentum in 2024.”

As investors begin to anticipate increased construction costs and higher interest rates, the per-square-foot (psf) value of an investment is an important tool to understand the viability of an investment as well as the cap rate. Considering a more practical valuation of an investment property over time, investors are factoring in steady rent growth, inflation, and local economic growth.

“While high construction costs and increased interest rates have caused a slowdown in our market, we are starting to emerge from a holding period into one of new development,” said Jeremy Roden, Executive Vice President in Avison Young’s Lethbridge office.

Average base rent rates for industrial and office real estate have increased in line with inflation, while retail real estate is polarized between high asking rents in new builds and moderate asking rents in existing retail space, particularly in the downtown. Although average rental rates in Lethbridge are still slightly below other comparable markets, Avison Young expects to see steady rate growth in the future, with significantly higher asking rents for new builds.

Multifamily housing is experiencing increased demand that will likely drive new development for investors for the foreseeable future. For industrial real estate, the slowdown in new builds in 2023 will become more apparent over the next year as demand catches up, driving asking rents and competition for space. Retail real estate investments are expected to see longer lease terms and more national tenants moving into small markets. Office vacancy is declining, largely due to non-traditional tenants who can utilize the partial office build-out. Finally, land sales have been strong towards the end of 2023 and have significant growth potential for investors in 2024 and beyond.

“We have seen heightened activity in land sales through the end of 2023,” said Roden. “These investment developments are well positioned for future growth where they may transact to owner-users or be retained as built-to-suit revenue-generating properties with long-term or national tenants.”

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