Quebec City and developer Immostar will join forces to launch an industrial real estate pilot project for high-tech firms that will aim to combine best global practices in the industry.

“We will work with Immostar to develop something different,” said Loubna Sefrioui, director of Quebec City’s economic development service for major projects.

Sefrioui was one of the speakers during a session on The strong demand in the industrial market and high-tech parks: Where is it heading? during the Quebec City Real Estate Forum, held May 4 at the city’s convention centre.

“We want to work with you to develop differently,” she told the audience, noting municipal regulations will be adapted for the project. The pilot project will be located on 15 million square feet of land recently acquired by Immostar.

Industrial development vs. natural spaces

In a speech earlier at the forum, Quebec City Mayor Bruno Marchand had said the old days of tearing down vast swaths of forests to create industrial parks are gone and new solutions must be found to create additional industrial spaces.

“We want to develop differently, inspired by best practices elsewhere,” Sefrioui said, envisioning spaces where workers could drop their children off at daycare, and cycle on a bike path for lunch to a favourite restaurant – all within a 15-minute radius.

Natural spaces will be a major component of future spaces, along with improved access to public transit. “All of our future projects will be sustainable, and the circular economy will be at the heart of our concerns,” she said.

Sefrioui said Quebec City has a shortage of land to respond to current and future demands for industrial spaces. Given that only four per cent of the land in Quebec City’s 20 industrial parks and industrial zones is vacant, existing industrial parks will have to be densified and optimized, she said.

Industrial vacancy in Quebec City below 1%

Patrick Soucy, senior vice-president at Colliers in Quebec City, said industrial real estate in the city has exploded during the pandemic, with demand much higher than supply. The industrial vacancy rate in the city is 0.95 per cent.

Industrial buildings that were selling at $100 per square foot before the pandemic are selling for $150 to $200 per square foot, while land sold for $12 per square foot pre-pandemic is fetching $25 “and we’ll be around $30 soon.” Average industrial rents are $10.69 per square foot.

While rent increases make some happy, they also cause hurt to the bulk of the mom-and-pop small- and medium-sized industrial businesses which comprise much of Quebec City, he said.

Virginie Roussin, director of leasing and business development at the family-run Société immobilière Bruno Roussin, said many of these operators fear they will not be able to increase their prices to compensate for rent hikes. As a result, some of these businesses will likely be lost and replaced by others.

Steven Bouffard, senior vice-president, asset management at Pure Industrial, said industrial rent hikes are a worldwide phenomenon linked to the rise of Amazon and e-commerce.

In Canada, industrial rent increases started in Vancouver before making their way to Quebec City.  “In Quebec City, we have the opportunity to see these things coming, so it mitigates the impact a bit,” he said.

Montreal leasing rates surpass Quebec City

Soucy noted Groupe Dallaire has announced it will build two buildings on spec at the Espace d’Innovation Chauveau east of the Henri-IV highway and wondered whether other developers in Quebec City should go the spec development route.

Roussin said it’s a question she asks every day, “but the telephone isn’t ringing that much. It’s surprising,” she said. “Occupants want to expand, but we don’t have many new arrivals. Are big companies coming to Quebec City?”

Bouffard said development on spec in Quebec City is an excellent idea if the site is well-positioned. Land located inside city limits is “hyper-strategic,” he said.

Speculative development isn’t a bad idea if inflation and other costs can be forecast, added Jerôme Jolicoeur, general manager of Groupe commercial AMT, a Quebec City real estate manager, builder, and property owner.

Given the lack of land available near Quebec City, businesses are shopping for space in the outskirts of the city or even in central Quebec, Jolicoeur said.

“It’s a challenge we must address because we want to have major job-generating businesses (in the city). What we risk having in years to come are rent increases and we’ll lose businesses.”

Editor’s note: A quote was removed from this article because it was inadvertently attributed to the wrong speaker. RENX apologizes for the error.