Building Magazine


Increased development activity in the downtown Montral office market is improving tenant leverage

In its Real Estate Market Study published today, Newmark Knight Frank Devencore reported that vacancy rates in downtown Montréal ‘s Class “A” and “B” office buildings have risen slightly over the past six months from 6.0 per cent to 6.8 per cent, which represents a negative space absorption of just over 400,000 square feet. Currently, 3.2 million square feet of Class “A” and Class “B” office space is available for lease or sublet.

“While vacancy rates in the corporate sector are creeping up in downtown Montréal, real estate activity continues to take place at a pace we haven’t seen for many years,” said Jean Laurin, president and CEO of Newmark Knight Frank Devencore. “There are a number of new projects currently being developed, and other projects that are either about to begin construction or are in the pre-leasing stage. In addition, a number of areas are being redeveloped. In Griffintown, for example, there is a good deal of rejuvenation taking place in both the commercial and residential sectors. Other parts of the city with condo, retail and commercial projects include the area surrounding the Bell Centre; the Mile End, Jean Talon and Avenue du Parc neighbourhoods; and the Quartier des Spectacles development. As the revitalization projects proceed, these neighbourhoods will become more attractive to landlords and developers, as they offer prime real estate in close proximity to the downtown core.”

Laurin also noted that the investment and construction activity will significantly change the face of the downtown business district as well as the bordering areas over the next few years. “The new developments being built and planned, as well as the rejuvenation projects that are transforming what were once industrial zones into neighbourhoods that artfully combine condo, office and retail developments, are providing tenants with more leasing opportunities, and more negotiating leverage, than they have enjoyed in a number of years,” he said.

In Canada’s major cities, the combined Class “A” and Class “B” vacancy rate edged up from 4.5 per cent to 5.9 per cent in 2013. However, construction activity remains strong across the country and new towers are being built in virtually every city. The appetite for this premium space also remains strong. In most instances, space in the new towers, most of which are LEED-certified, is being fairly rapidly leased.

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