Market rebound expected for Lethbridge in second half of 2023

By Alejandra Pulido-Guzman - Lethbridge Herald on January 18, 2023.

Submitted photo The former Cavendish production plant was repurposed through renovations to be used as a recycling facility.

LETHBRIDGE HERALDapulido@lethbridgeherald.com

Avison Young has released its latest Lethbridge investment market report, and in it they anticipate a holding pattern in early 2023 for local investors, brought on by global economic uncertainty.

“What we’re projecting for 2023 is the market to be a little bit soft for the first half of the year and then we’re anticipating a really good turn around for the second half of 2023,” said Doug Mereska, managing director of the Lethbridge office.

He said this is in the overall commercial real estate market, but specifically industrial real estate, which is driven by agrifood production.

“We’re anticipating a rebound likely sooner than mid-year where there’s already lots of activity. Our city is driven by agrifood production, especially businesses like Richardson’s, Cavendish, and Frito Lay which are still growing,” said Mereska.

He said the clients that provide services to those companies are also growing which is great.

In the report, Avison Young predicts a holding pattern for 2023, and Mereska said that is mainly driven by the economies of the world more than it is Lethbridge and southern Alberta.

“What generally happens is that a lot of the decisions that are made by companies that are in southern Alberta are based on their global policies,” said Mereska.

As an example, he said some companies might decide not to open up any new locations in retail right now.

“Even though Lethbridge had a 2.3 per cent growth from July of 2021 to July of 2022, because the economy worldwide is quite slow right now, it affects our market a little bit as well,” said Mereska.

He said that the market is only affected a little bit because Lethbridge is heavily involved in agrifood production, and therefore we don’t really feel the slow down as much as other markets might.

“The high demand for commercial space has pushed local vacancy rates extremely low with 3.8 per cent vacancy in industrial space and three per cent vacancy in retail space,” said Mereska.

He said the vacancy rates are influenced by the cost of construction. If the cost of construction goes up, not much construction happens and if the demand increases the vacancy rate goes down.

“If the demand is going up, even if people are building new buildings, if the demand is higher than the construction, vacancies will go down as well,” said Mereska.

He said they do not expect the vacancy rate to ever be lower than three per cent, as there are industrial buildings that do not meet the demands of what tenants are looking for, like loading docks and high ceilings. But he said there are ways to repurpose some buildings across the city.

“A good example is the old Cavendish production plant on 2nd Ave. North. That building became obsolete for Cavendish about five years ago and they relocated to a new facility, and since then that building has been repurposed through renovations and is now being used by a plastic recycler,” said Mereska.

He said now is a great opportunity for investment in Lethbridge while the market is in a holding pattern.

“Whether you’re a user or a person who likes to rent out buildings, there are some great opportunities right now, because there’s not a lot of competition in the marketplace,” said Mereska.

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