Melcor Real Estate Investment Trust (Melcor REIT) recently sold a Lethbridge industrial warehouse it purchased three years ago, turning a gross profit of more than $2 million on the deal.
The appreciation is not surprising, considering the recent strength of the industrial real estate market in the southern Alberta city, according to data from Avison Young.
The commercial agency notes that 50 per cent of the 80,000 square feet of new industrial space started in Lethbridge during the first quarter was pre-leased and another 42,000 square feet is under construction.
Average industrial lease rates increased 1.5 per cent, year-over-year. The Lethbridge industrial vacancy rate is rising, however, approaching 6.2 per cent in the first quarter of this year, compared to 4.5 per cent a year earlier.
Still, Avison Young said investments have increased.
“Sales have been strong on every front, from owner-occupiers acquiring land and existing facilities to the sale of industrial strata properties,” the agency said.
The average price for “base-build” industrial has increased to around $140 per square foot, according to Avison Young.
Melcor sold its Lethbridge Centre, which has 67,110 square feet of leasable space on a 2.9-acre site, for $8 million, or $118 per square foot. Melcor had bought the property for $5.9 million ($87.27 per square foot) in January 2014.
“We are freeing up capital for other opportunities while also achieving a good return on investment for unit holders. We bought LC Industrial, added value and then sold it for a 36 per cent premium to our purchase price. The property was also cash- flow positive while we held it,” said Andrew Melton, president and CEO of Melcor REIT.
Investors are active in Lethbridge. Recently, Cavendish Farms bought 286 acres in the Sherring Industrial Park, where it plans to build a $350 million food-processing plant.
“Lethbridge’s industrial market should accelerate throughout 2017,” Avison Young concluded.