Montreal Commercial Real Estate Outlook 2023

February 13, 2023 3 Minute Read

Montreal skyline at night

2023 Real Estate Outlook Series

Montreal, like most other Canadian markets, saw its downtown office vacancy rate inch up in the final quarter of 2022, to 16.0%.

And the city’s bustling industrial real estate market recorded its 15th consecutive quarter of positive net leasing activity in Q4.

What’s ahead for Montreal commercial real estate in 2023? CBRE's Quebec Managing Director Ruth Fischer tells us what she’ll be watching for.


I think we’re going to see office vacancy increase further in 2023. However I think it’s going to be a tale of two markets: high quality, well-amenitized space will be in high demand, versus Class B and C product, which will struggle.

A key focus will be around turnkey readiness, or the speed at which an occupier can move into a space. There is real concern around construction costs and  delays, not to mention the expertise needed for office space fit-out – and especially considering what the shorter-term occupiers are looking for.

It gets more complicated to make the numbers work if there’s a lot of work that has to go into making a space ready for use. Progressive landlords are realizing that and offering turnkey suites is one way to increase the transaction volume.


Montreal still has unbelievably low vacancy (1.2% in the fourth quarter of 2022) and we’ve had the highest rate of rental rate growth. I expect we’ll see that rate growth start to moderate this year; we haven’t reached the top but I think the growth is slowing.

We don’t have a huge amount of new product coming to the market this year. There will be some pressure release, but not enough to bring us to a more balanced market.

Throughout 2022 we saw third party logistics providers taking a lot of space. They were storing product that was coming in because it had been bottlenecked due to the pandemic.

As that stored product makes its way through the system, there are some outstanding questions. Will third party logistics providers still need the amount of space they’ve taken, or will they return some of that space back to the market and give us a little bit more breathing room? And then what will the uses be that come and take up that space? Those will be interesting trends to watch.

Progressive landlords are realizing that offering turnkey suites is a way to increase transaction volume - Ruth Fischer


We’ve been seeing increased demand for in-person shopping. And the show-rooming concept is interesting and will necessitate tech improvements. Historically a retailer would look at year-over-year in-store sales or sales per square foot to rate a store’s performance.

But now if a retail location is serving as a showroom – the shopper notes the style and size, then orders it on their phone or from home – the store might be just as productive, but how do you attribute those sales to that specific store?”


Construction costs and interest rates are going to be the big story for multifamily this year. All our cities need more housing. And looking at the pricing and rental rates in cities, you can see the desire, demand and need are there.

But the costs of construction materials and labour, plus rising interest rates, present big challenges. It will take a lot of creativity on the part of multifamily developers and I don’t know if it will all come together very frequently. We need interest rates to stabilize to allow for more certainty about where pricing will fall. And the labour market will also need to soften for the trades not to be as busy.

Then we’ll end up with an excellent environment for new product to come to market, or renovated existing space, which I love from an ESG perspective.

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