Montreal’s CRE sector leads Canada, but can it continue: Altus

IMAGE: National Bank of Canada is building a million-square-foot office tower to house its new HQ in Montreal. (Courtesy National Bank of Canada)

National Bank of Canada is building a million-square-foot office tower to house its new HQ in Montreal. (Courtesy National Bank of Canada)

Montreal’s commercial and residential real estate sectors remain strong but it’s unlikely the city will continue to outperform Canada’s major markets as it did in 2018, Altus Group experts say.

“Although Montreal should have another solid year, it’s difficult to take any top spot for two years in a row – unless you’re the Golden State Warriors, and I predict they’re going down this year,” said Patricia Arsenault, executive vice-president, research consulting services at Altus Group.

She was participating in an Altus Group webinar on June 5 examining the prospects for Montreal real estate this year.

Altus made the “bold claim” that in 2018 Montreal’s real estate sectors outperformed Canada’s other major markets, namely Vancouver, Edmonton, Calgary, Toronto and Ottawa.

Arsenault said Montreal either led the pack or was among the top cities last year in growth areas such as as total dollars invested, investment property sales, industrial leasing, and land and non-land sales. As for the new condo market, “I don’t think there’s any real dispute on Montreal taking the 2018 crown.”

Why Montreal is the leader

Among the reasons: 

* The Montreal area reached its highest level of new condo apartment sales yet recorded by Altus with almost 8,200 units sold;

* Montreal was the only one of the major markets to post stronger new condo unit sales in 2018 compared to 2017;

* and Montreal increased its share of total combined new condo sales in the markets to 18 per cent from 12 per cent in 2017 (note this statistic does not include Ottawa sales).

The story is a little different in 2019. Montreal investment property sales were down 21 per cent in Q1 compared to Q1 2018. However, the other major markets averaged a 29 per cent decline with Vancouver (down 49 per cent) and Toronto (down 30 per cent) significantly slower. 

Sales in the major markets “dropped with a bit of a thud in Q1,” Arsenault said.

Montreal maintains investment momentum

Still, as of Q1, Montreal is the only one of the six markets in which investor interest has not declined during the past year, she said.

Investment volumes in the major markets will likely be down in 2019, Arsenault said, but Montreal investment could finish at nearly the same level as last year and might outperform the average. Montreal is also projected to perform near the average of the six markets in office and industrial leasing.

As well, relatively low and declining vacancy rates in Montreal so far in 2019 continue to accentuate the need for new supply from either purpose-built projects or condo rentals. While new condo apartment sales in most of the major markets are likely to be below those of last year, Montreal could come close to 2018 numbers.

The city’s condo market is “red hot” with about 15,000 units sold in the metropolitan area in the last two years. About half were in the downtown area according to Vincent Shirley, senior director of real estate and land development at Altus Group.

Condo prices up 30% in three years

Prices for condos downtown have increased by an average of 10 per cent annually for the past three years, he said.

Shirley says purpose-built rentals have become increasingly popular in the Montreal area as the demand from tenants increases and vacancy rates shrink. Vacancy rates have been cut in half during the past two years to the two per cent range.

Montreal is now seeing larger purpose-built rental projects with as many as 300 units and condominium-style quality and amenities. The new rental developments are not subject to rent control for five years, he noted.

Rents at new downtown projects are surpassing $3 per square foot and “expectations are even higher for upcoming projects.” There should be “significant pressure” on rents and prices in Montreal, he said. Starts will also remain vigorous based mainly on high demand due to immigration.

Given increasing downtown land prices, developers are maximizing density and selling at higher price points, resulting in “towers of unprecedented level of quality in Montreal.” Land for development is trading at an average of $80 per square foot buildable and the latest indications are often north of $100 per square foot.

Large office development pipeline

Jenny-Kate Sgarbi, the research manager of data solutions at Altus Group, added more than three million square feet of office space are in the city’s development pipeline. That includes the National Bank of Canada’s new headquarters with about one million square feet, which is scheduled for completion in 2022.

It “marks the first major bank head office built in decades outside Toronto,” she said.

Sgarbi said recent office leasing transactions in the city include 64,500 square feet for WeWork in the upcoming Humaniti project. WeWork will be the sole office tenant in the mixed-use development next to the convention centre.

Gross office rents are about $45 per square foot in Vancouver and $48 in Toronto, but range from $24 to $35 in Montreal.

While language and politics “can pose challenges for the newcomer, it is also precisely what protects our market from intense volatility,” Sgarbi said.

“Montreal has always been a stable market over a speculative one and decade over decade, we have seen slow and steady growth.”


Danny is a multiple award-winning journalist based in Montreal, who has written for about 75 magazines and newspapers in Canada and the U.S. His credits include The Globe and Mail,…

Read more

Danny is a multiple award-winning journalist based in Montreal, who has written for about 75 magazines and newspapers in Canada and the U.S. His credits include The Globe and Mail,…

Read more





Industry Events