Lethbridge industrial market report

The Lethbridge Industrial Market Report highlights a stabilization in the local industrial real estate sector, with key metrics showing minimal changes year-over-year. The industrial vacancy rate remains low at approximately 4.13%, increasing by less than 0.1% since Q1 2024, despite the addition of 170,000 square feet to the total inventory.

Although the market faces challenges such as high construction costs and economic uncertainties due to US/Canada tariffs, the positive momentum from investment transactions in 2024 continues into 2025. With the lowering of the Bank of Canada’s key interest rate and the increase in Lethbridge’s market lease rates, investment property metrics continue to perform strongly. This is evidenced by an uptick in land transactions in the last two quarters, indicating that profit margins are robust enough to support new development in 2025. However, the majority of planned industrial builds are pre-leased or built-to-suit, reflecting sustained demand; speculative builds represent an estimated 3.4% of new development.

Additionally, industrial tenants have demonstrated a preference for clean, modern spaces with high ceilings and ample yard space. Overall, this competitive market is expected to remain favorable for landlords, with much of the 4.13% vacancy consisting of aged or irregular spaces. Market rents have normalized at average asking rates of $10+ per square foot (psf) in existing spaces. Although these market rents have significantly increased over the last five years, rates are now more typical for a market of this size. Consequently, tenants renewing existing leases can expect a substantial increase in lease rates as they align with market standards. Asking rates in new builds could be as high as $15+ psf, escalating.

Three key trends:

01 – Lethbridge industrial market is normalizing

The rapid increase in Lethbridge market rents since 2020 is now stabilizing at an average rate of $10+ per square foot in existing spaces, indicating a shift towards a more balanced market. Tenant and landlord expectations are more closely aligned, and demand for space remains strong.
 

02 – Low industrial vacancy continues

With vacancy increasing by less than 0.1% from Q1 2024, Lethbridge remains a "landlord's market," characterized by robust tenant activity and continuing demand amid low vacancy. Tenants are showing a marked preference for modern industrial spaces with high ceilings and ample yard space.
 

03 – Resilient investor sentiment

Despite uncertainty regarding the potential impact of Canada/US tariffs, the improvement in investor sentiment in 2024 is likely to continue into 2025. This optimism is driven by Lethbridge’s strong industrial market, the lowering of the key interest rate, and the normalization of market lease rates.