Building Magazine


Downtown Montreal office vacancy rates falling as business confidence returns

In its Real Estate Market Study, Newmark Knight Frank Devencore reported that vacancy rates began to decrease in downtown Montreal’s office buildings through the latter half of 2010 and in the first months of 2011 as business confidence returned. At the height of the recession in 2009, combined Class “A” and Class “B” vacancy rates had risen to 8.0 per cent, but have since fallen below 7.7 per cent. The absorption of space in the city’s downtown core has been most significant in the Class “A” sector, where vacancy rates have fallen from 8.0 per cent to 6.8 per cent.

“With the steadily increasing demand for office space, Montreal’s downtown market may soon begin to favour landlords,” said Jean Laurin, president and CEO of Newmark Knight Frank Devencore. “Early in 2010, higher vacancy rates led some landlords offer a range of leasing inducements, but now that space is once again being absorbed, they are less inclined to be as aggressive in marketing their properties. And because there are no new developments about to break ground, the downtown inventory will likely return to pre-recession levels in the months to come.” The Market Study also noted that tenant opportunities can vary substantially from one downtown business corridor to another.

“Tenants will face greater challenges in the coming year depending on where they are looking at leasing opportunities, Laurin added.”Even in areas where there is still considerable vacant space — along Rene-Levesque Boulevard, for example — much of the available space is found in only a few buildings. Over the latter half of 2010, a few districts experienced some fairly dramatic shifts in vacancy rates, so the complexion of the market is very different than it was a year ago.” Over the last half of 2010 and through the first quarter of 2011 the Canadian economy continued to strengthen. This was reflected in vacancy rate statistics. The overall vacancy rate in Class “A” and Class “B” buildings in Canada’s major cities fell from 7.1 per cent to 6.8 per cent over the last six months of 2010, even as the total inventory of Class “A “and Class “B” office space increased. “Should the economic recovery continue on its current path, Newmark Knight Frank Devencore expects that office vacancy rates should continue to decline across most of the country in the months ahead, and rental rates in some cities will likely begin to rise,” said Laurin.

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