This will compensate for the market deceleration seen last year
The Lethbridge investment market is likely to benefit from a surge in new developments in 2024, according to a new analysis by Avison Young.
This will represent a significant recovery from the deceleration in investment transactions seen last year, which Avison Young attributed to economic headwinds and a cautious market sentiment.
In the fourth quarter of 2023, the industrial vacancy rate stood at 4% (up from 3.8% in Q4 2022), while the office vacancy rate registered at 10.6% (down from 12.4% in Q4 2022) and the retail vacancy rate clocked in at 3% (virtually unchanged from Q4 2022).
“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 at 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.”
A persistent lack of supply in the Alberta market are likely to see activity continue at an elevated level in the province this year, says Pamela Pikkert of The Place to Mortgage.
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 17, 2024
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Avion Young said that the most likely investor trend in the region for this year will be a pragmatic approach to property valuation, taking into account the market’s steady rent growth, inflation, and local economic expansion.
“In response to higher interest rates and increasing cap rates, investor sentiment has begun to evaluate properties based on per-square-foot value compared to the cost of new builds,” Avison Young said. “After a slowdown in new builds, we are anticipating demand to drive new development in 2024 despite inflated construction costs.”
At the same time, Avison Young warned of potentially significant headwinds in the near future.
“Economists are anticipating a challenging first half of 2024,” Avison Young said. “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.”
