Montral office and industrial real estate markets moved in opposite directions in Q2-2015: Colliers

The Montréal office and industrial commercial real estate markets began to move in opposite directions during the second quarter of 2015, with a slightly improving office market and a slowdown now being experienced in the industrial sector, according to the Q2-2015 Colliers International Montréal Office and Industrial Market Reports.

Office Report

The downtown Montréal office market showed positive absorption and a drop in the vacancy rate in the second quarter, now standing at an even 5.2 per cent, a drop of 0.4 per cent from the first quarter. The suburban office market’s vacancy rate in the second quarter dropped even further, declining by 1.2 per cent to stand at 9.4 per cent.

Of interest in the suburban office market was that no new supply of office space was experienced during the second quarter, as compared to the more than 461,000 square feet of new office space which came on stream in the suburbs in the first quarter of 2015. The suburban office market continues to grow rapidly due to its price and affordable rents.

“As the economy continues to pick up, we see the Montréal office market as one of stability at least until the next quarter with a possible acceleration in the fourth quarter of this year,” said Andrew Maravita, Colliers’ Managing Director in Montréal. “We believe tenants will continue with their operating cost reduction efforts, while most businesses remain cautious and are waiting to see the exact direction of the economy before making any further new investments.”

Industrial Report

The Montréal Industrial commercial real estate market is a completely different story as the Colliers report shows it has entered a slowdown phase across all major Montréal industrial regions. After one million square feet of industrial space were absorbed during the first quarter of 2015, only 19,392 square feet were positively absorbed in Q2-2015.

The ‘type of space’ inventory is key to the health of any regions’ industrial space and in Montréal, there is still an abundance of less recent buildings having an area of less than 300,000 square feet and clear building heights of 24 feet. Therefore, large companies may consider the need to custom build in order to meet their exacting requirements for industrial space.

“We see the level of activity, as well as investment, remaining stable in the Greater Montréal Area,” added Maravita. “We expect rents will not increase significantly and we forecast a slight increase in demand for industrial space in the third quarter.”

Looking forward, should forecasters be correct and the economy improves as the year progresses, this would boost industrial exports in many different industries by the end of 2015. This perspective would be beneficial, especially to the automotive, transport and warehousing sectors, which could stimulate the absorption of the industrial space which is currently available in the Greater Montréal Area.

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