In its Real Estate Market Study, Newmark Knight Frank Devencore reported that vacancy rates in downtown Montréal’s Class “A” and “B” office buildings have remained fairly steady at 6.0 per cent over most of the past 12 months in a leasing market where demand slowed. Approximately 1.5 million square feet is currently vacant in the downtown Class “A” sector, and 1.3 million square feet is available in Class “B” buildings. However, with two new office towers underway and a host of other projects in the pre-development phase, the complexion of the downtown Montréal office market is about to change in a big way.
“For the first time in a decade there are new office tower projects in the development and pre-development phases in Montréal’s downtown district,” said Jean Laurin, president and CEO of Newmark Knight Frank Devencore. “Condo development is also on the rise downtown, and the success of the La Tour des Canadiens project should spur further activity and help to rejuvenate certain neighbourhoods in and around the downtown core over the long term. Additionally, we are seeing increasing interest from tenants and investors in the city for older spaces and properties outside the traditional downtown core. The uptick in demand for smaller, less traditional spaces is being driven by growing businesses in the cultural, multimedia, gaming industries, for which the lower cost and cachet of the older converted buildings is a real selling point.”
Corporate real estate markets across the country also showed a slower pace of growth in 2012. The overall vacancy rate in office spaces in Canada’s major cites fell from 4.7 per cent to 4.5 per cent over the course of the year, and the amount of available space declined by approximately 245,000 square feet. Approximately 9.6 million square feet of office space is currently available for lease or sublet in the country’s downtown areas.
“We anticipate a relatively healthy amount of leasing activity through the rest of 2013,” Mr. Laurin said. “There is a continuing demand behind the scenes for prime office space in downtown Montréal, and for less traditional office and loft space outside the core. The new development and pre-development activity currently taking place will provide tenants with somewhat more leverage. One or two leasing decisions by larger tenants seeking space in downtown Montréal could accelerate development activity in the months ahead.”