Lethbridge is set to see a steady construction and investment market in 2023, despite headwinds that will keep activity in check during the first half of the year.
“Avison Young is optimistic for Lethbridge as we move into 2023 with several new developments proposed and set to commence,” said Jeremy Roden, executive vice-president in Avison Young’s Lethbridge office. “We will see a complete redevelopment of Warehouse Square which is a retail and office development, as well as future residential and commercial phases at Crossings, and Frontier Business Park, which is an industrial development – to name a few.”
Projects set to complete this year include the new Lethbridge & District Exhibition Agri-Food Hub and Trade Centre, a $70.6 million event facility that will support the growth of the Alberta agri-food sector.
Avison Young notes that Lethbridge is insulated from the recessionary influences dogging other markets due to a diversified economy focused on agri-food production and benefitting from oil and gas projects.
According to the Alberta major projects inventory, Lethbridge has $173.1 million worth of projects under construction and $175.1 million worth in the planning stages.
The single largest project yet to commence is PIP International Inc.’s yellow pea processing facility, valued at $150 million. When complete, it will handle 126,000 tonnes of yellow peas annually from local and regional growers.
The project follows the opening of a pilot facility last year on the former site of Coulee Brewing Co.
High construction costs have dampened activity, however.
“The local market has cooled in response to increased inflation and interest rates,” said Doug Mereska, managing director for Avison Young in Lethbridge, noting that many developers have had to factor unexpected increases in costs into their construction budgets.
Some are addressing the issue by avoiding the use of steel, which has yet to see prices fall from their peak last summer, whereas the cost of drywall and wood have fallen.
“More buildings may be built with wood that would typically have been built with steel,” Avison Young reported.
While high construction costs are often passed onto purchasers or affect what tenants pay, commercial rental rates in Lethbridge remain lower on average than many other communities. This has made it an attractive destination for builders.
Base office rents currently average $15.15 per square foot while industrial space averages $8.56. Calgary space, by contrast averages $17.85 per square foot for office and $10.58 for industrial.