In its Real Estate Market Study, Newmark Knight Frank Devencore reported that vacancy rates in downtown Montreal’s office buildings have fallen from 8.0 per cent to 6.1 per cent over the past 12 months as the market continues to recover from the 2008-2009 financial crisis. As a result of decreasing vacancies, asking rental rates could begin to edge upwards in the months ahead, and some landlords may be less inclined to offer the range of leasing inducements that were common at the end of 2009 and early in 2010.
“Over the past twelve months, nearly 900,000 square feet of office space has been absorbed in downtown Montreal and we are gradually returning to the market conditions that existed prior to the recession, when downtown occupancy rates were at the 95 per cent level,” said Jean Laurin, President and CEO of Newmark Knight Frank Devencore. “In fact, market conditions are such that we are beginning to see a variety of pre-development activity in the office market, something that hasn’t taken place on the island of Montreal since 2004, when Phase 2 of E-Commerce Place was delivered.”
At the present time, at least one office/condo development is underway, and Cadillac Fairview continues to seek anchor tenants for a proposed 500,000 square-foot office tower in the heart of downtown Montreal. Further, there are two large development properties being marketed around Place Victoria in the city’s Quartier International. Rio Tinto Alcan has also made it known that it may be relocating its Montreal headquarters, a move that could change the complexion of the downtown district’s office market significantly.
Across the rest of Canada, corporate real estate markets have remained relatively healthy in 2011. The overall vacancy rate in Class “A” and Class “B” office buildings in Canada’s major cities dropped from 6.8 per cent to 5.4 per cent over the first half of the year, and total vacant space fell from 14 million square feet to just over 11 million square feet.
“With almost daily swings in the various financial markets and national economies around the globe, anticipating real estate trends six months in the future is a risky proposition,” Mr. Laurin added. “However, in the Montreal office market, business confidence remains strong and tenants with leases coming up for renewal are wisely examining their options at least months in advance of lease termination.”