Avison Young reports stabilization and growth in the Lethbridge industrial market

Lethbridge, Alberta – Avison Young’s latest report on the Lethbridge industrial commercial real estate market reveals a trend towards a stable market, with strong tenant demand for quality spaces. Since 2020, market rents have rapidly increased in Lehbridge but are now stabilizing at an average of $10 per square foot (psf) for existing space and $15+ psf for new builds, indicating a shift towards a more balanced market and more typical asking rates for a market of this size. 

“Our major market indicators were nearly flat year-over-year, suggesting that the local market is normalizing,” said Doug Mereska, Managing Director in Avison Young’s Lethbridge office. “With both construction expenses and interest rates coming down, the margin between input costs and market rental rates is strong enough to encourage new construction and to begin easing some of the tight vacancy in Lethbridge.”

The industrial vacancy rate remains low at 4.13 per cent, increasing by less than 0.1 per cent since Q1 2024, even with the addition of approximately 170,000 square feet (sf) to the total industrial inventory. Industrial tenants are showing a preference for clean, modern spaces with high ceilings and ample yard space. 

“Lethbridge will still need to add inventory to meet continuing demand,” noted Vinko Smiljanec, Associate in Avison Young’s Lethbridge office. “The tight vacancy rate reflects very little usable space but mostly represents either irregular, or class B and C spaces. With most industrial operators showing a preference for flexible features such as high ceilings and good yard space, many available spaces just aren’t feasible to a wide range of users. With few spec builds in our market, there will still be a need for space in 2025.”

Despite challenges, such as high construction costs and economic uncertainties due to tariffs, lower interest rates and the increase in Lethbridge’s market lease rates have helped maintain strong investment property metrics. This is evidenced by an uptick in land transactions in the last two quarters of 2024, indicating that profit margins are robust enough to support new development in 2025.

“After a holding period in 2023, the uptick in the number of land transactions in the past two quarters means that we will see new development in 2025, regardless of tariff pressures, with most investment builds already pre-leased,” said Josh Marti, Principal and Senior Associate in Avison Young’s Lethbridge office.

The positive momentum from 2024 investment transactions, including a notable increase in land deals, will continue into 2025. With most new leasable industrial space either pre-leased or built-to-suit in the planning stages, Avison Young predicts sustained demand that will continue to support new development.