JLL Canada’s Montréal Real Estate Outlook reports the commercial real estate sector is alive and well in the city

MONTREAL, February 22, 2023 – JLL Canada is seeing continuous momentum in Montréal commercial real estate growth, unveiling key trends and insights on recent activity. With a record year for the firm in Montreal with 382 brokerage transactions totaling over 15 million square feet, clearly 2022 was a year of growth for Montréal Commercial Real Estate activity.

With over 300 diverse professionals in its Montréal corporate office and managed properties, JLL services clients in various asset classes including Office, Industrial, Retail, Capital Markets, Debt, Property Management, Valuations and Project & Development Services.

Industrial Market Outlook

The Montréal Industrial investment sales market reached $3.3B for the year, a 53% increase over 2021 volumes, which were also a record. While sale volumes slowed sharply in the second half of the year as interest rates climbed, Montreal’s industrial market remains one of the most coveted asset classes in Canada from an investment standpoint. 

Rents rose an astonishing 112% from 2020 to 2022. This is the highest two-year increase in Canada and the second highest in North America, behind only California’s Inland Empire market.

With rising construction costs, labour shortages, and supply chain bottlenecks pushing the construction pipeline out, rents will continue to be high in the near-term.  The good news for tenants is that with nearly 7 million square feet of space currently proposed or under construction, vacancy has risen mildly over the past few quarters, now at 2%. 

Office Market Outlook

The office market has seen momentum shifting to the suburbs over the past few years, with nearly 1 million square feet of total net absorption since 2020. Transit-connected nodes such as Brossard and Saint-Laurent have benefitted most from this trend.

Montréal has seen sublease availability rise to 3.2 million square feet, as tenants continue to right-size their footprints.  As availability rises and build-out costs remain elevated, companies are increasingly able to capitalize on subleasing this space and accruing significant savings.

“Despite global economic uncertainties, the main economic indicators of the Montréal real estate market are showing signs of resilience. Certain parts of the market are in demand and are regaining strength resulting in interesting opportunities which JLL will continue to capitalize in 2023”, said François Létourneau, Senior Vice President & Managing Director, Montreal Office & Industrial.

Retail Market Outlook

Retail in the Québec market had its strongest year since 2014 with over $1.7B in investment sales. Asking rates and foot traffic have increased throughout 2022, and vacancy rates have decreased with each passing quarter. Malls have also seen their conditions improve throughout 2022, with foot traffic, sales per square foot increasing and vacancy rates declining, and inching their way closer to pre-pandemic levels. Mall landlords have been pleased with the results they’ve seen with specialty leasing and are increasingly creating rotational spaces that can convert pop-ups into permanent tenants. This tendency is likely to remain even if vacancy rates return to normal levels, as pop-up stores add excitement and a sense of urgency to visit, and the surge in foot traffic they cause is a tide that lifts all stores nearby.

Multi-Residential Market Outlook

For the Greater Montréal Area, Downtown rental vacancy spiked at over 10% in 2020 though it has since come back down to 4.3%. Rental vacancy fell from 3% in 2021 to 2%.

2022 was a banner year for multi-residential sales in Montréal at $3.4B doubling the previous market record in 2020. Multi-residential rents have increased by 15% over the past two years, behind only Ottawa and Halifax.

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