Montréal retail insight

Market News

• Retail sales in Montréal slowed in 2023. Decelerated growth is expected to continue this year given ongoing economic headwinds. While consumer spending has shifted away from home goods and electronics, there has been sustained sales growth in health and personal care, grocery, and general merchandise.
  
  
• With the recovery of tourism on the island, there has been an increased interest in hotel and entertainment projects.
  
  
• In the second half of 2024, Montréal will see the fulfillment of its long-awaited luxury shopping destination, Royalmount, along with the completion of new REM stations, enhancing public transit accessibility and retail opportunities.

Overall Montréal retail sales growth (y-o-y %)

Leasing market stabilizing

While effective retail leasing rates in Montréal showed a slight year-over-year increase, its growth rate was outpaced by Toronto, Vancouver, and the national average. The vacancy rate decreased and should continue to do so given the exorbitant cost associated with creating new retail supply. Asking rents should inch upward this year and make larger gains in 2025 as inflationary pressures subside.

Retail Sales Growth Slowing

The growth trajectory of sales in Montréal is tapering off, with an annual increase of 6.4% compared to 2022’s 10.8% growth rate. Stubborn economic pressures have prompted consumers to exercise restraint in their non-essential spending, signaling the end of the pandemic-era sales growth cycle. Despite this, sectors such as health and personal care, convenience, and grocery experienced robust sales growth. In contrast, traditionally strong sales-generating sectors including shoes and clothing failed to grow by at least 3%.

Tourism making strides

Despite facing economic challenges, the tourism industry made a remarkable comeback in 2023, indicating a strong recovery from the pandemic era. During the summer, the proportion of overseas travelers surged by 15% compared to 2019. Additionally, year-over-year air passenger traffic increased by 32%, surpassing 2019 levels by nearly 4%. The revival of Montréal’s tourism has in turn pushed hotel occupancy levels and revenues upward, exceeding 2022 levels.

Travel-worthy project pipeline

Given the return of tourism in Montréal, multiple projects have been greenlit to take advantage of improved travel dynamics. Loto-Québec announced it will create a 200-room hotel neighboring the Montréal Casino, set to deliver in a few years, which will add to the pull the casino already has on locals and tourists alike.

Similarly, a 7-storey, 200-room hotel neighboring the Olympic Stadium was recently announced and set to deliver in 2025. In the coming months, the stadium will start having its damaged roof replaced, which will allow the venue to host events year-round and regain its luster.

The upcoming completion of Royalmount by the year’s end will also boost tourism by featuring an aquarium and the city’s first-ever Rec Room.

Public transit ridership has wind in its sails

Montréal's public transit ridership witnessed significant growth in 2023, with a notable 23.8% year-over-year increase in overall metro station entries. Despite the improvement, ridership volumes in 2023 remain 24.2% lower compared to the levels seen in 2019. Analysis of downtown station entries reveals an even wider difference largely influenced by the widespread adoption of hybrid work models.

With phase 2 of the REM LRT project slated for completion in late 2024, downtown ridership is expected to receive a substantial boost. This phase will directly connect Midtown North, the West Island, and parts of the North Shore to the metro network, creating new commuting opportunities. The infrastructure and 18 stations for phase 2 have already been completed, with the remaining focus on finalizing the computer and control systems.

Mall owners focusing on densification

The upcoming arrival of the McGill REM station and Ivanhoe Cambridge's proposed expansion plan for Place Montréal Trust are set to boost sales in the coming years. With the addition of 13 floors spanning 250,000 square feet above the downtown mall, the incorporation of residential units holds the potential to generate a substantial increase in local foot traffic, greatly benefiting the mall and its retailers.

Cadillac Fairview is also addressing the housing shortage on the island, planning to create a 35-storey tower with 510 units adjacent to the Bell Center. The building will be the first to seamlessly connect to the retail-focused underground city, which is set to benefit from the boost in foot traffic and sales when delivered in 2026.

Outlook

Economic pressure has impacted the retail outlook in Montréal, resulting in consumers tightening their discretionary budgets. Additionally, it’s projected that real consumer spending will stagnate while personal incomes decline. However, there are still reasons to remain optimistic. The upcoming delivery of Royalmount and numerous REM stations in the second half of the year should incentivize sales growth, along with future downtown densification efforts led by retail stakeholders. Furthermore, tourism has recovered, encouraging hotel and entertainment-centric developments that will strengthen the city’s international pull.