Downtown Montreal experienced a 0.4-per-cent decline in the office vacancy rate from Q1, with the rate dropping to 5.2 per cent in Q2, according to a recent Colliers report.
The suburban office market vacancy rate fell even farther, dropping 1.2 per cent over Q1 to 9.4 per cent in Q2, despite the fact that there was no new supply of office space this quarter, compared to more than 461,000 square feet of new suburban office space in Q1. Colliers attributed these figures to the affordable rents in suburban regions.
“As the economy continues to pick up, we see the Montreal 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 Montreal, in a press release. “We believe tenants will continue with their operating cost reduction efforts, while most businesses remain cautious, waiting to see the exact direction of the economy before making any further new investments.”
Meanwhile, Montreal’s industrial real estate market is experiencing a slowdown across all major industrial regions. In Q1, one million square feet of industrial space were absorbed; in Q2, only 19,392 square feet were absorbed.
Colliers pointed to “type of space” inventory as one possible reason for the slowdown. Since Montreal has many older buildings that measure less than 300,000 square feet in area and 24 feet in clear building height, large companies may need to custom-build to meet their requirements for industrial space.
“We see the level of activity, as well as investment, remaining stable in the Greater Montreal Area,” said Maravita. “We expect rents will not increase significantly and we forecast a slight increase in demand for industrial space in the third quarter.”
If the economy improves later in the year, as forecast, industrial exports over several industries will increase by the end of 2015, which would in turn benefit the automotive, transport and warehousing sectors in particular and stimulate the absorption of currently available industrial space.