Industrial commercial real estate (CRE) remains the most desirable asset class for Canadian investors. In Lethbridge, strong fundamentals and stable performance continue to support industrial CRE investment. Owner-users have also been extremely active in industrial CRE purchases and now make up a larger percentage of occupiers than tenants in Lethbridge. Owner-users have taken advantage of the low interest rates of the pandemic and opted to purchase instead of leasing their space which offers them the ability to control their costs and build equity. Tenants in Lethbridge are encountering a tight vacancy rate of 3.9%. Due to the inflated costs of construction, coupled with increased interest rates, not enough new inventory is being built in Lethbridge to meet the demand. Industrial lease rates will have to increase to rebalance the market and support local development.
Three key trends:
01 - Low vacancy and high demand in Lethbridge
The sustained demand for industrial real estate since 2020, especially from owner-users, has left the market inventory extremely tight. Nationally industrial vacancy is below 1%. In Lethbridge, the industrial vacancy rate may seem high, at 3.9%, but that number represents a very small amount of useable square footage with most of it being aged or obsolete.
02 - Rental rates vs. construction costs
Due to a cost deficit between inflated construction costs and low rents, new development coming to market has been slow. Lethbridge has been below the market average for industrial rents in similar communities. While tenants may be challenged initially, higher rents will stimulate development and rebalance the local market.
03 - Labour and employment
Lethbridge population grew by almost 3,000 new residents in 2022. New development and large format industrial projects will continue to support the growth of Lethbridge and area in 2023.
10.11 M SF
Estimated total industrial inventory in the Lethbridge market
Overall Lethbridge industrial vacancy rate
Total industrial area currently under construction in the Lethbridge market
Average base rent
Average base rent for Lethbridge industrial buildings
Average gross rent
Average gross rent for Lethbridge industrial buildings
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