The largest capital investment in the history of McCain Foods Ltd. is attracting new businesses and residents to Lethbridge, but the city’s industrial and office markets continue to chart their own course as conditions normalize following the upheavals of the past four years.
“Lethbridge sits at the heart of what we call Canada’s premier food corridor,” said Trevor Lewington, CEO with Economic Development Lethbridge. "Recent investments in the region like the $600 million expansion by McCain as well as the $220 million investment by NewCold underscore the importance of agrifood to our city as well as the bright prospects driving growth for the future.”
NewCold, a company from Europe that specializes in frozen storage and logistics, represents international diversification in a region whose manufacturing base also includes a Pratt & Whitney jet engine plant and Kawneer Co. Canada Ltd. aluminum plant among other ventures.
The breadth of activity has helped push unemployment down to five per cent even as the workforce has expanded by 15,000 people over the past two years.
“We’ve seen both the participation rate increase and total employment increase,” he said. “We’ve been able to absorb those 15,000 workers into the economy.”
There remain about 4,000 job vacancies in the region, primarily in the skilled trades.
While the 14,000 students at the University of Lethbridge and Fairview College fill most of the service-sector jobs, many leave on graduation as entry-level roles for graduates are rare.
Yet skilled workers are most in demand to keep the economy humming – instrumentation trades, electricians and heavy equipment operators.
They’ll be even more in need as industrial development ramps up after a lull following the sharp rise in construction and financing costs in 2021-22.
An owner-user has purchased two of the three lots available at Northpointe, a venture of Lethbridge-based Sumus Property Group within the 350-acre Sherring Business and Industrial Park, and will soon commence a 250,000-square-foot development.
Yet high servicing costs within the city have focused Sumus itself on 63 acres it acquired earlier this year in Frontier Business Park, a few minutes away in Lethbridge County.
Most of the space will likely be built to order for tenants with lower site servicing requirements attracted by the tax incentives in the county.
“From a servicing perspective, there’s a lot of operational efficiencies,” said Josh Marti, a principal and senior associate, industrial, with Avison Young in Lethbridge.
Demand among investors and tenants for land has picked up, and deals done today will bear fruit next year as space gets delivered to the market. Frontier in particular is a significant greenfield opportunity that’s attracting interest from larger industrial users.
On the office side, new, high-quality office space is in demand.
Vacancies in the market fell to 10 per cent in the second quarter, Avison Young reported, down from 11 per cent a year earlier. The improvement was shared evenly across individual buildings, which reported average vacancies of 9.5 per cent, whereas a year ago buildings were seeing vacancies above the market average.
The stronger leasing environment has helped push up base rents by 17.5 per cent to $18.59 per square foot.
However, the suburbs have been the main beneficiaries, with vacancies averaging half those of downtown despite leasing costs that are 30 per cent higher.
“Although downtown office spaces are close to amenities and are easily accessible, suburban spaces are typically newer and more appealing to office workers who reside in the surrounding areas,” Avison Young said. “Tenants are prepared to pay higher lease rates for these quality spaces.”
The relocation of Canadian Western Bank into the former Scotiabank building at 702 3rd Avenue South on Aug. 1 is an example of repurposing existing downtown office space, but Ashley Soames, a senior associate with Avison Young in Lethbridge, said landlords need to be attuned to emerging tenant requirements.
Many professionals now want main-floor space rather than upper-level space, Soames explained, driving demand for street-level retail units.
Tenants in the medical and support services realm have driven office leasing.
Avison Young is working with CASA Mental Health to secure a site for a purpose-built 30,000-square-foot facility, while member nations within the Blood Tribe have leased 10,310 square feet downtown for children’s support services and are negotiating the purchase of a 7,000-square-foot building for support services.
