The value of the market's new industrial spaces will likely match their cost of construction, Avison Young says
The average lease rates for industrial commercial real estate in Lethbridge, Alberta are expected to increase to drive new development, in turn easing tight market conditions and promoting a stronger local market, according to Avison Young.
New industrial spaces coming to the market are likely be priced higher to match the cost of construction, Avison Young predicted.
The market saw its average industrial rental rate increase by 4% in the last year, settling at $9.03 per square foot. However, prospective tenants can expect lease rates in new builds to reach between $12.50 and $13.50 per square foot.
Inflation and supply-chain issues will continue to play major roles in higher construction costs, leading to a slower pace of new developments in the region.
“This slowdown, coupled with high demand and low industrial inventory, has caused an imbalance in the Lethbridge market where tenants are facing limited options for space,” Avison Young said.
“Rent increases may challenge tenants initially, but overall, a rental correction will both contribute to the health and increase investment capital to rebalance the local market,” added Josh Marti, principal at Avison Young Lethbridge.
Ultimately, higher lease rates will provide much-needed certainty and capital to local investors, who remained in what Avison Young called “a holding pattern” since mid-2022.
“Now that the Bank of Canada has stabilized the overnight interest rate at 4.5% and inflation has begun to slow at 5.2%, higher lease rates would enable investors to bring new industrial CRE to market,” Avison Young said.
