image

MONTRÉAL

Scroll down to read report

Last Updated: June 2020

Key Market Statistics

Downtown Montréal - All Office Classes (Q1 2020)

Major Developments

Click for more details

Market Pulse:

  • After a record year of absorption in 2019, the Downtown office market saw a more typical absorption in Q1 of 2020. The majority of the space was absorbed by tech companies that typically require large blocks of space.
  • Prior to the health crisis, Montreal had continued to consolidate its global leadership in sectors such as video games, visual effects and, more recently, artificial intelligence. This enthusiasm attracts several international companies to come and settle in Montreal to benefit from the quality and expertise of the workforce. The first quarter of 2020 was no exception, and investments have already been announced in the second quarter. The next analysis will give us more data on the impact of COVID-19 on this sector.
  • The impact of the COVID-19 crisis is yet to be reflected in the current statistics. Q1 saw a strong demand for office space as availability for both Class-A and Class-B kept going down. The Laval market saw an important dip in its vacancy as companies looked to set up satellite offices to counter the impacts of the closure of the Deux-Montagnes train.
  • The pandemic has put several transactions on hold; companies are trying to understand its impact on their operations to assess their new requirements in this context. A new temporary phenomenon has appeared in the form of short-term renewals to allow time to integrate the impact of COVID-19 on the workplace.
  • Everything indicates that general contractors are busier than before the crisis, given the high number of tenders (projects/sites not completed, delays as well as new requests). We can expect a significant increase in construction costs and delivery times.
  • With the health crisis forcing employees across virtually every sector to work from home, many companies are now reviewing their requirements for office space to allow for some degree of remote work in their workplace strategy. While this might mean less employees physically working from the office, the new distanciation recommendations might signal a trend towards increasing the amount of square footage per employee.

Major Transactions:

  • McCarthy Tetrault renewed 110,400 SF at 1000 De La Gauchetière West
  • Behavox Software (Canada) Inc. took on 49,900 SF at 900 de Maisonneuve Blvd. West
  • Groupe Petra and Groupe MACH have partnered to purchase the 1100 René-Lévesque West office tower
  • Allied Properties REIT announced the acquisition of the office tower located at 747 Square-Victoria (also known as the World Trade Centre Montreal)


Availability Rate (Class A and B) - Downtown Montréal

Source: Altus Insite (Q1 2020)

Average Gross Rents (Class A and B)- Downtown Montréal

Source: Altus Insite (Q1 2020)

Market Statistic (all office classes)

Source: Devencore Research (Q1 2020)

Market Commentary:
“Prior to the COVID-19 pandemic, the Montreal market had seen unprecedented levels of real estate activity driven by a phenomenal economy. The city was being transformed on all fronts and in all sectors. Now a few months into the health crisis, we are yet to see the real impact of the pandemic on the commercial real estate market.
One immediate effect of the lock-down has been the need for companies to quickly adopt telework as employees were forced out of their offices. While there are both positives and negatives to this rapid adoption within this unusual context, we expect to see an increase in office availability on the short term as companies rethink their workplace strategy. However, the health crisis has also forced distancing measures that will spur a need for additional space per employee in order to ensure the health and safety of working staff. In the end, the appetite for office space is likely to balance itself out, with a slight increase in availability rate on the medium term.
The pandemic has also caused delays in construction schedules for any ongoing development project. We can expect a significant increase in construction costs and delivery times. The economic impact of the crisis has also resulted in certain projects to be re-evaluated, especially those that involve a large portion of retail business.
As the crisis puts financial pressures on companies, there will be immense pressure on leaders to make decisions related to their workplace strategy. The majority of companies should maintain the full-time telework formula until the fall and some until the end of the year. This especially applies to the downtown core given the density of workplaces and the use of public transport by a significant portion of employees. As the situation evolves, there will be an ongoing reflection in regards to the adoption of telework on the long-term. Many companies will be tempted to make long-term decisions based on short-term challenges. In these difficult times, the best approach is to maintain a balanced perspective and to remain focused on the fundamentals.”

For more information

Richard Breton
Vice-President and General Manager
rbreton@devencore.com


514.392.9702


DISCLAIMER
All information contained in this publication is derived from sources that are deemed to be reliable. However, Devencore has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of Devencore. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient's choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of Devencore, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contai
ns.