MONTRÉAL QUÉBEC COLLIERS INTERNATIONAL | MARKET REPORT www.colliers.com/montreal Canadian Market Overview The current economic outlook for Canada in 2011 remains cautious but stable. Canada’s monetary policy and particularly, the target of 2 percent inflation have steered the economy out of the recession. Economic growth in 2011 will be moderated through developments in its largest trading partner, the U.S., risks stemming from the European credit crisis, as well as the strong loonie. The Canadian GDP growth outlook remains around the 3.1 percent mark for 2011. The overnight interest rate remains at 1 percent, and is expected to rise to 2 percent, with the anticipated shift from stimulus to restraint in fiscal policy. Employment growth has improved recently, but the unemployment rate is still expected to remain in the 7.4 to 7.7 percent range. Business confidence has risen in the past six months where conservative spending and diligence through the recession paid off. There was a good rebound in the commercial property market in 2010 and into the first quarter of 2011. SPRING 2011 | INDUSTRIAL MARKET INDICATORS Spring 2011 VACANCY NET ABSORPTION INVENTORY RENTAL RATE GMA Industrial Market Overview While growth was more subdued than it had been at the end of 2010, the Greater Montreal Area (GMA) industrial real estate market continues to tighten as the economy comes back to life, and users make decisions they had long put off as they weathered the recession. Whereas the total absorption of 213,273 square feet in the first quarter of 2011 is less impressive than the numbers posted in the second half of last year, individual submarkets witnessed fewer extremes in occupied space. Modest increases appeared in the North Shore, East Island, and South Shore submarkets overpowered by smaller dips in the Saint- Laurent, West Island and Mid-Town sectors. The North Shore is the only submarket that can boast a postive three quarter absorption trend. In other areas of the GMA, the last nine months have been something of a rollercoaster ride. Nevertheless, the overall vacancy rate currently sits at a historic low of 6.1 percent. Though at first glance it seems counterintuitive, lease rates are following suit, hovering around $4 per square foot in many submarkets. The micro-markets that are causing this phenomenon however are not expected to resist macro-level trends much longer, as landlords regain the upper hand, and begin to exert pressure on industrial rents. QUEBEC NEWFOUNDLAND & LABRADOR NEW BRUNSW Waterloo Region Toronto Ottawa Montréal Mon
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MONTRÉAL QUÉBEC
cOLLieRs iNTeRNATiONAL | MARkeT RepORT
www.colliers.com/montreal
Canadian Market OverviewThe current economic outlook for canada in 2011 remains cautious but stable. canada’s monetary policy and particularly, the target of 2 percent inflation have steered the economy out of the recession.
economic growth in 2011 will be moderated through developments in its largest trading partner, the U.s., risks stemming from the european credit crisis, as well as the strong loonie. The canadian GDp growth outlook remains around the 3.1 percent mark for 2011.
The overnight interest rate remains at 1 percent, and is expected to rise to 2 percent, with the anticipated shift from stimulus to restraint in fiscal policy. employment growth has improved recently, but the unemployment rate is still expected to remain in the 7.4 to 7.7 percent range.
Business confidence has risen in the past six months where conservative spending and diligence through the recession paid off. There was a good rebound in the commercial property market in 2010 and into the first quarter of 2011.
SPRING 2011 | INDUSTRIAL
market indicators
spring 2011
vacancy net absorption inventory rental rate
GMA Industrial Market OverviewWhile growth was more subdued than it had been at the end of 2010, the Greater Montreal Area (GMA) industrial real estate market continues to tighten as the economy comes back to life, and users make decisions they had long put off as they weathered the recession. Whereas the total absorption of 213,273 square feet in the first quarter of 2011 is less impressive than the numbers posted in the second half of last year, individual submarkets witnessed fewer extremes in occupied space. Modest increases appeared in the North shore, east island, and south shore submarkets overpowered by smaller dips in the saint-Laurent, West island and Mid-Town sectors.
The North shore is the only submarket that can boast a postive three quarter absorption trend. in other areas of the GMA, the last nine months have been something of a rollercoaster ride. Nevertheless, the overall vacancy rate currently sits at a historic low of 6.1 percent. Though at first glance it seems counterintuitive, lease rates are following suit, hovering around $4 per square foot in many submarkets. The micro-markets that are causing this phenomenon however are not expected to resist macro-level trends much longer, as landlords regain the upper hand, and begin to exert pressure on industrial rents.
Hudson Bay
NorthAtlantic Ocean
MANITOBA
ONTARIO
QUEBECSASKATCHEWAN
ALBERTA
BRITISHCOLUMBIA
NORTHWESTTERRITORYYUKON
TERRITORY
NUNAVUT
NOVA SCOTIA
NEWFOUNDLAND & LABRADOR
NEWBRUNSWICK
Nanaimo
Vancouver
FortMcMurray
Edmonton
Calgary SaskatoonWinnipeg
Regina
Kelowna
SurreyVictoria Waterloo Region
Toronto
OttawaMontréal
Burlington
Halifax
Moncton
CANADA
UNITEDSTATES
UNITED STATES
the market
The need for new industrial construction continues to challenge the GMA. Despite a slight rise in the first quarter, the vacancy rate in buildings with a clear height of at least 24 feet remains just above 2 percent, while the vacancy rate in the less functional, under-24-foot clear height building category continues to drop slowly, due to price and availability. interestingly, among the three submarkets that posted positive absorption throughout the first quarter, only the North shore saw a corresponding decrease in the 24-foot and up clear height category vacancy rate; elsewhere, most occupancy increases occurred in older, less functional buildings. early in 2011, smaller transactions were also responsible for the bulk of absorption, both positive and negative.
Whereas several submarkets experienced fluctuations in occupied space of more than 250,000 square feet in 2010’s third and fourth quarters, five-figure jumps were more common in the first quarter of 2011. in fact, with just under 125,000 square feet of positive absorption this quarter, the east end both cancelled out its third quarter negative absorption, and led the way in occupied space among all submarkets. Although consolidation resulted in the departure of some major tenants across the GMA, expansion was responsible for large chunks of absorption, particularly on the West island and the south shore, as companies, limited by prohibitive construction costs, took advantage of cheap lease rates.
Source: Colliers International, April 2011
new supply, absorption and vacancy rates
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mARkeT RePoRT | SPRING 2011 | INDUSTRIAL | MONTRÉAL
trends
From an overall market perspective, trends that began to emerge last fall are continuing and deepening. Both lease and vacancy rates continue to fall, reaching levels rarely seen in recent years. Meanwhile, demand is concentrated in smaller spaces of 20,000 square feet and less and the GMA industrial market continues to perform a delicate balancing act between growth-fuelled expansion, and the emptying of larger blocks due to consolidation and the swift pace of globalization. The West island’s woes are largely due to an exodus of multinationals from Montreal, and brokers report that it continues to be difficult to find small spaces in Laval. As widespread construction is
expected to spread outwards from the North shore, brokers are counseling end users to jump on attractive leases before the window of opportunity closes and it is no longer in landlords’ interest to offer generous incentives or lease rate in the $4.50 per square foot range. Another telling sign of the small versus large space divide is that some medium to large landlords are beginning to hire real estate agencies to help attract tenants. We will continue to monitor this trend as the general market health improves to see whether or not heavy demand for smaller spaces will shift upwards to larger blocks of space.
vacancy rates For Greater montrÉal
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GreaterMontreal
West Island St-Laurent Centre West East End SouthShore
Vacancy Rate Vacancy Rate (less 24') Vacancy Rate (min. 24')
Laval-NorthShore
Source: Colliers International, April 2011
colliers international | p. 3
mARkeT RePoRT | spRiNG 2011 | iNDUsTRiAL | MONTRÉAL
coNTAcT INfoRmATIoN
andrew maravita Managing Director Montreal Region +1 514 764 8180 [email protected]
480 offices in 61 countries• $1.9 billion USD in revenue
• 15,000 employees
• 2.4 billion square feet under management
• $154 billion USD in completed transactions over last three years
Information contained herein has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, express or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/ or its licensor(s). © 2011. All rights reserved. Colliers International (Québec) Inc.
www.colliers.com/montreal
investment
The investment market has remained stagnant over the past several months. Demand continues to outstrip supply and lease rates are hovering around $4.25 per square foot in several submarkets. Further dampening the investment market is limited supply creating fewer opportunities for investors than expected. prices of industrial investment product on both the North and south shore have also remained stable even throughout 2008 and 2009. As a result, there are very few deals to be found as the economy improves, and with construction costs at $70 per square foot, no industrial space is currently being built on speculation.
Forecast
Moderate but steady growth is projected for the rest of 2011. Mid-Town, saint-Laurent, and West island submarkets may see a return to positive absorption, while other markets should be able to hold onto their opening gains, as the strongholds of Montreal’s industrial economy, including aerospace and computer software, ramp up their businesses and may seek expansion. Despite the downsizing and outsourcing that continues to affect portions of the GMA industrial market, activity has intensified suggesting the pace of transactions is set to grow in the upcoming quarter. With the suburban market relentlessly tightening up, there may be room for both new construction and rising lease rates in 2011.
mARkeT RePoRT | SPRING 2011 | INDUSTRIAL | MONTRÉAL
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