Montreal’s Commercial Real Estate Market is on Fire
21 Jan 2020
City’s office and industrial rebounded in 2019, while Toronto and Vancouver still dominate, the suburbs sizzle and Calgary industrial signals hope
Montreal’s office and industrial real estate markets are red hot, ending 2019 with record-setting leasing of commercial space, robust construction, and all-time high rents, according to CBRE’s new Canada Q4 2019 Quarterly Statistics Report. The resurgence of Montreal real estate helped drive down Canada’s overall national office vacancy rate to its lowest level in five years (10.9% in Q4) and pushed the national industrial rental rate to its highest level on record, $8.69 per sq. ft. (psf), up 12.3% year-over-year.
Montreal’s office market was at full throttle in 2019, with strong leasing activity removing 1.7 million sq. ft. of space from the market, dropping the overall office vacancy rate in the fourth quarter to 10.7%, down from 12.9% a year earlier. Meanwhile the Montreal industrial market’s availability rate plunged to 2.7% in Q4, a record low, with a total of 4.2 million sq. ft. of space absorbed in 2019. This makes Montreal North America’s third-tightest major industrial market after Toronto and Vancouver.
“Montreal is finally getting its due. Our talent base and available real estate are attracting new business and allowing existing companies to grow,” said CBRE’s Quebec Managing Director Avi Krispine. “Strong office demand is being driven by an evolving tech sector, which is pushing average downtown Class A net rents to an all-time high of $24.57 psf. And steady leasing in the Montreal industrial market has pushed average net rents to a new record: $6.59 psf.”
Montreal isn’t the only Canadian market showing strength heading into 2020. Here are other Q4 report highlights:
- Toronto reigns supreme, again: The Greater Toronto Area industrial market’s availability rate fell to its lowest-ever year-end level in Q4, 1.4%. This compares well to Vancouver, 2.4%, and Montreal, 2.7%. Toronto’s downtown office market is equally as tight, with vacancy falling to a new record low in Q4 2019, 2.2%, closely rivalled by the Vancouver office market, at 2.3%. Both markets continue to lead North America for lowest downtown office vacancy.
- Suburban surge: Despite downtown office space remaining the most sought-after, some of the largest improvements in Canadian real estate fundamentals took place in suburban office markets. Vancouver’s suburban office vacancy rate dropped to 5.2% in Q4, down from 7.4% a year earlier, thanks to nearly 571,000 sq. ft. of net absorption for the full year. In Edmonton, suburban office vacancy fell to 18.6%, with over 128,000 sq. ft. of net absorption in Q4 alone. Winnipeg suburban office vacancy ended the year at 5.7%, down from 9.5% at the start of 2019, propelled by more than 166,000 sq. ft. of net absorption. Waterloo Region’s suburban office vacancy ended the year at 9.5%, down significantly from 13.1% at year-end 2018.
- Calgary bifurcation: While Calgary’s office market vacancy remains elevated, at 24.7%, the city’s large bay industrial market recorded 2.0 million sq. ft. of net absorption in 2019 (nearly 747,000 sq. ft. in Q4) thanks to growth in e-commerce and associated infrastructure requirements. This strong absorption was recorded in spite of 3.2 million sq. ft. of new industrial supply coming to market in 2019. “Calgary’s industrial construction tap opened up in 2018 and 2019 for the first time since the energy-price downturn, and the continued positive absorption we’re forecasting should see continued rent growth and bolster investor confidence in Alberta’s industrial assets,” said CBRE Alberta Managing Director Greg Kwong. “But our market is still facing challenges.”
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