Lethbridge Review: Strength in Stability

Mainstreet-Equity-Apartments-Lethbridge

Times are tough in Alberta. Amid a slowdown in the province’s energy sector and the election of the new provincial NDP government, there is a high level of uncertainty surrounding the fortitude and future of many major rental markets in the province.

Geopolitical turmoil, supply concerns, and a low pricing environment for oil have resulted in the shutdown or suspension of numerous projects and, correspondingly, layoffs province-wide. Furthermore, the newly elected government brings with it the prospect of changes to rent control policy. To say there is much trepidation over the impact these factors will have on Alberta’s rental market (specifically the exposure to sustained low oil prices) would be an understatement.

Yet, among Alberta’s major rental markets is Lethbridge. This city in Southern Alberta is home to roughly 93,000 residents and boasts a number of key characteristics that differentiate this market from others in the province. Most notable, is its diversified economy, which is not driven by oil. Although growth in Lethbridge is not as strong as its more northerly counterparts during boom times, in times such as these, the city proves to offer a more stable investment climate. Here are 10 reasons why:

1.     Less dependent on Oil & Gas industry

2.     Advantageous tax environment and low cost of doing business

3.     Stability in primary industries – Agriculture, Health Care, Education, and Government

4.     Agri-food – core wealth-generating industry with a number of major food processing plants and government R&D facilities located in the city and surrounding area

5.     Closest city in Alberta to the U.S. – strategic location with trading area that serves 275,000

6.     Home of two post-secondary institutions that enroll approximately 13,000 students (14% of the City’s total population) and have recently announced $256 million in expansion projects.

7.     Highly educated population (one of the highest PhD per capita rates in Canada)

8.     Tight labour market (4.6% unemployment as of April 2015)[if !supportFootnotes][1][endif]

9.     Stable and consistent growth in both GDP and population

10.  Recent growth in Information Technology sector – specifically geospatial technology

Mainstreet-Equity-Corp
University of Lethbridge

 

Alberta is headed toward a recession this year, with the province’s economy projected to contract by 0.7% in 2015[2]. However, if history serves as any indicator for the rental market in Lethbridge, performance should remain stable. According to CMHC, rent in Lethbridge continued to rise, while vacancy remained stable, during 2008 and 2009 following the financial crisis. It was not until a pullback in public sector spending in 2010 affected the market and caused a contraction in rent and a jump in vacancy. Economists anticipate the current recession to be short-lived, with forecasts indicating a return to positive growth for the province in 2016. Lethbridge should ride out the recession with minimal impact.

The City of Lethbridge may not generate returns anywhere near comparable to Calgary or Edmonton during periods of strong economic growth; however, for companies currently looking to deploy capital in stable, lower risk environments, Lethbridge is certainly worth considering.

[1] Statistics Canada – Labour force characteristics, unadjusted, by economic region (3 month moving average)

[2] Conference Board of Canada

Mainstreet Equity Corp. is a publicly traded (TSX: MEQ) residential real estate company in Canada. Mainstreet currently owns and operates properties in Surrey, BC; New Westminster, BC; Abbotsford, BC; Calgary, AB; Cochrane, AB; Edmonton, AB; Fort Saskatchewan, AB; and Saskatoon, SK.

Mainstreet provides affordable, renovated apartment suites to Canadians, and is committed to creating real value without diluting shareholder interests.

About the Author
Graham Coe

Graham is responsible for market research, identifying accretive buying opportunities, and facilitating the acquisition of new assets.

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Comments
  1. Robert W MayMarch 21, 2016

    Great article Graham. Lethbridge real estate is stable and seems to always offer stable investment.

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