FALL 2017 OFFICE MARKET REPORT / GREATER MONTREAL
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FALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
PAGE 1 FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL
FALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
The Greater Montreal Area (GMA) Despite growing rental rates,
remains a stable market, with tenants of Class A buildings
vacancy decreasing by 50 basis Downtown Montreal have
points from the first quarter of shown more stability, as the total
the year, reaching 12.3% at the sublease availability is rapidly
beginning of the third quarter. decreasing. From 2013 to 2016,
Close to 1.4 msf (million square the percentage of the total
feet) have been leased in the GMA office inventory available for
over the past 12 months, bringing sublease consistently hovered
the availability rate down to 14.3%, between 1.5% and 2.5%. At
its lowest value since the end of the third quarter of 2017, only
2015. Currently 901,200 square 121,098 sf (0.5%) were available for
feet (sf ) of office space are under sublease Downtown Montreal, an
construction with 4.9 msf in the indication that the city’s economy
pre-leasing stage. is getting stronger as fewer
businesses are looking to reduce
The Montreal office market is their footprint.
still a tenants’ market. However,
with general vacancy steadily As in other metropolitan areas,
decreasing, landlords can expect there is a significant shift from
improving conditions by year-end. traditional office to more efficient,
The average gross rental rates unique work environments in
Downtown Montreal remained Montreal. While baby boomers
relatively unchanged over the past are slowly retiring, the demand
year, hovering around $33.00 per for more tech-friendly, open
square foot (psf ), while the Class A office space is growing. Younger
rental rates slightly increased from generations require more
$41.16 to $42.02 psf. Midtown interactive and collaborative office
areas such as Mile End and Mile-Ex space that brings people together
remain extremely competitive, and creates a sense of community.
with average gross rents of
Image Credit: Avison Young Québec Inc.
approximately $22.30 psf.
FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL PAGE 2
FALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
30.0%
25.0%
20.0%
AVAILABILITY,
ALL OFFICE CLASSES
15.0%
OFFICE SPACE BY SUBMARKET
GREATER MONTREAL AREA
Source : Altus InSite, Altus Group Limited
10.0%
0.0%
Downtown East End Laval Midtown South Shore West Island
Q3 2016 Q3 2017
MAKE WAY FOR ARTIFICIAL INTELLIGENCE
Social media giant Facebook In early October, international AI With Montreal’s growing
recently opened an artificial specialists Thales and DeepMind popularity as a hub for artificial
intelligence (AI) laboratory also announced they will be intelligence, we can expect the
in Montreal. The Facebook opening research laboratories industry to show an increasing
AI Research program (FAIR) in Montreal in the beginning of appetite for office space in the
currently employs ten specialists, 2018. Thales will partner with GMA, particularly in the Midtown
with expectations to triple that Université de Montréal’s Montreal sectors, which remain very
number by next year. Samsung Institute for Learning Algorithms attractive to IT and technology
also established an AI research (MILA) to develop AI applications firms. Montreal-based Element
team in Montreal last summer in for the aerospace, defence, AI recently leased the 4th and 5th
partnership with Université de security and transportation floors of 6650 Saint-Urbain Street
Montréal. The team focuses on sectors. Google’s DeepMind will in Midtown-North. The artificial
developing core algorithms for open their second Canadian intelligence research company
robotics, self-driving vehicles, office in Montreal, after opening was represented by Avison Young
translation tools as well as voice in Edmonton earlier in 2017. in the lease negotiation of 65,526
and visual recognition. The company will join forces sf of office space in the recently
with McGill University to provide converted industrial building that
funding for artificial intelligence now forms part of the O Mile Ex
research. project.
PAGE 3 FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL
FALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
8.0% $700.00
7.0% $600.00
6.0%
$500.00
CAPITALIZATION 5.0%
$400.00
RATES & PRICE
PER SQUARE FOOT 4.0%
$300.00
CLASS AA OFFICE SPACE 3.0%
DOWNTOWN MONTREAL
$200.00
2.0%
$100.00
1.0%
0.0% $0.00
Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Price per square foot Capitalization Rate
8.0% $700.00
7.0% $600.00
6.0%
$500.00
CAPITALIZATION 5.0%
RATES & PRICE $400.00
PER SQUARE FOOT 4.0%
$300.00
CLASS AA OFFICE SPACE 3.0%
DOWNTOWN TORONTO
$200.00
2.0%
1.0% $100.00
0.0% $0.00
Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
From an investment perspective, Several local and foreign investment In other investment news, McGill
Montreal has been a very busy groups expressed their interest in University is now the sole owner
market in 2017. Several major office this rare investment opportunity. of 680 Sherbrooke Street West
assets were sold in the past year, Downtown Montreal, having
including Cité du Multimédia (1350 Class AA office buildings purchased 50% of the building from
& 1360 René-Lévesque Boulevard Downtown Montreal currently sell Industrial Alliance for $262.50 psf for
West) and the SNC-Lavalin at capitalization rates ranging from a total price of $32.5 million.
headquarters (455 René-Lévesque 4.5% to 5.5% and an average price
Boulevard West), both acquired by of $373 psf, which are record values Earlier this summer, Wafra
GWL Realty Advisors. for the Montreal market. However, Investment Advisory Group
these numbers remain affordable in purchased 1155 Robert-Bourassa
Ivanhoé Cambridge has recently comparison to Downtown Toronto, Boulevard for $57.9 million ($296.44
put 1000 De La Gauchetière Street where similar assets trade for psf ) at a 6.58% capitalization rate.
West up for sale. This potential $665.65 psf at a 4.2% capitalization The Class B office building currently
transaction could be the most rate. has a leasable area of 19,231 sf and
significant sale of 2017, as the a 69% occupancy rate.
municipal evaluation for the
skyscraper reaches $366 million.
FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL PAGE 4
Developers claim that 2017 has
been one of the busiest years
of the past decade, which is
observable through the number
of construction sites and
development projects across the
GMA. Most office buildings that
were recently delivered in the
Downtown Core have been well
absorbed by the market. There is
a growing demand for work and
play developments in proximity
of public transportation, such as
Solar Uniquartier in Brossard and
Espace Montmorency in Laval.
New projects have been
announced in the area
surrounding the Atwater metro
station just west of Downtown
Montreal, such as mixed-use
development project Square
Children’s, for which the
excavation work is expected to
start on November 1. Located on
the site of the former Children’s
Hospital, the six-tower complex
has been approved by the city’s
executive committee and will be
redeveloped by a partnership
formed by Devimco Immobilier,
Fonds immobilier de solidarité
FTQ and Fiera Private Lending.
Just across the street, 1100
Atwater Street, the 7-storey
building located at the
intersection of Atwater and
Tupper Streets in Westmount, will
be completely redeveloped into
Located across from Cabot Square and Atwater metro
an office building. The property
was purchased by Kevric Real
station, the Square Children’s mixed-use project will
Estate Corporation for include six towers on the former Children’s Hospital site.
$10 million from Oxford
Properties earlier this year.
Image courtesy of Devimco Immobilier - Square Children’s
PAGE 5 FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL
FALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
Further east, major mixed-used
project Humaniti is now under
construction and will include
60,000 sf of office space, 100% of
which is still available for lease.
The promoters (Cogir and Fonds
immobilier de solidarité FTQ)
recently announced that the
project will incorporate a Marriott
Autograph Collection Hotel in
addition to the 150 condominium
units, the 335 rental apartments
and the 15,000 sf of retail space.
Humaniti is currently the only
vertical development project
to include five different types
of usage in Montréal (rental
apartments, condominium units,
office space, a retail component
and a hotel).
Expected to be completed in
2020, the project aims for LEED
and WELL certifications.
The WELL certification was
launched in 2014 and encourages
employers to invest in the health
and wellness of their employees
by improving their workspace.
In Laval, the construction
of Espace Montmorency is
expected to begin later this
year. The mixed-use project
is valued at $420 million and
should be delivered by 2020.
The development will consist
of 10 buildings surrounding the
Montmorency metro station,
some of which will reach up to 20
storeys.
Image courtesy of Lemay and Cogir
FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL PAGE 6
SIGNIFICANT SALES, OFFICE
GREATER MONTREAL AREA
Address 455 René-Lévesque Boulevard West, Montréal
Buyer The Great-West Life Assurance Company
Seller SNC-Lavalin
Price $173,225,000 ($397.02 per square foot)
Total Area 436,318 square feet
Address 1265-1285 avenue-des-Canadiens-de-Montréal, Montréal
Buyer Sun Life Assurance Company of Canada
Seller L/Avenue Condominiums sur l’Avenue-des-Canadiens-de-Montréal
Price $85,936,000 ($708.00 per square foot)
Total Area 121,379 square feet
Address 1155-1185 Robert-Bourrassa Boulevard, Montréal
Buyer Wafra Investment Advisory Group Inc.
Seller 4003195 Canada Inc. & als. (Iscanco)
Price $57,875,000 ($296,44 per square foot)
Total Area 195,231 square feet
Address 4126-4160 Sainte-Catherine Street West, Westmount
Buyer Redbourne
Seller 4150236 Canada Inc.
Price $37,600,000 ($273.15 per square foot)
Total Area 137,653 square feet
Address 50% of 680 Sherbrooke Street West, Montréal
Buyer McGill University
Seller Industrial Alliance
Price $32,500,000 ($262.55 per square foot)
Total Area 123,785 square feet (50% of the property)
PAGE 7 FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL
SIGNIFICANT LEASING TRANSACTIONS, OFFICE
GREATER MONTREAL AREA
Address 455 René-Lévesque Boulevard West, Montréal
Tenant SNC-Lavalin
Total Area 375,975 square feet
Type New lease (sale-leaseback)
Address 1350 René-Lévesque Boulevard West, Montréal
Tenant The Great-West Life Assurance Company
Total Area 115,584 square feet
Type New lease
Address 620 René-Lévesque Boulevard West, Montréal
Tenant Canadian National Railway Company
Total Area 81,067 square feet
Type Expansion
Address 333 Chabanel Street, Montréal
Tenant Canada Post
Total Area 70,000 square feet
Type New lease
Address 6650 Saint-Urbain Street, Montréal
Tenant Element AI
Total Area 65,526 square feet
Type New lease
FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL PAGE 8
GREATER MONTREAL AREA FALL 2017
ABSORPTION OFFICE MARKET REPORT / GREATER MONTREAL
2,400
2,200
2,000
1,800
1,600
TOTA L O F F I C E A B S O R P T I O N ( 000 S F )
1,400
1,200
1,000
800
600
400
200
0
-200
-400
-600
-800
-1,000
-1,200
Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
GREATER MONTREAL AREA
INVENTORY AND AVAILABILITY
55,000 25.0%
50,000
45,000 20.0%
40,000
TOTA L O F F I C E A R E A ( 0 0 0 S F )
35,000
15.0%
AVA I L A B I L I T Y
30,000
25,000
10.0%
20,000
15,000
5.0%
10,000
5,000
0 0.0%
Downtown Montreal East End Laval Midtown South Shore West Island
Inventory, Q3 2016 Inventory, Q3 2017 Availability, Q3 2016 Availability, Q3 2017
Source : Altus InSite, Altus Group Limited
PAGE 9 FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL
FALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
The building located at 355 Sainte-Catherine Street West
is currently undergoing major renovation work, which
includes the installation of a new curtain wall. The building is
home to MusiquePlus, Groupe V Média and GSM Project.
Image Credit: Avison Young Québec Inc.
At Place des Festivals, Îlot Balmoral is slowly taking shape as
the installation of the curtain wall is well underway. The new,
13-storey building will be home to the National Film Board of
Canada at its completion in 2018.
Image Credit: Avison Young Québec Inc.
FALL 2017 OFFICE MARKET REPORT | GREATER MONTREAL PAGE 10The excavation work at Carré Saint-
Laurent is complete and the building
is slowly rising from the ground.
The new 260,000-sf development,
slated to open in 2019, will house the
Centre d’Histoire de Montréal on the
second floor, and 900 Quebec government
employees on the 8 floors of the South tower.
Image Credit: Avison Young Québec Inc.
At the intersection of De Bleury and Viger
Streets in the Central Business District, the
construction of the Humaniti project has
started. Located at 1040 De Bleury Street, the
major, mixed-use project will include 60,000
square feet of office space, a 15,000-square-foot
retail component as well as a 193-room hotel, 150
condominium units and 335 apartment units.
Image Credit: Avison Young Québec Inc.
PAGE 11 FALL 2017 OFFICE MARKET REPORT | GREATER MONTREALFALL 2017
OFFICE MARKET REPORT / GREATER MONTREAL
$45.00
$41.07 $40.99 $40.75 $40.75 $42.02
$40.16
$40.00
$35.00
$19.75 $19.87
$30.00 $19.99 $21.03 $21.45 $21.94
OCCUPANCY
COSTS $25.00
OFFICE SPACE
DOWNTOWN MONTREAL $20.00
$15.00
Source : Altus InSite, Altus Group Limited
$10.00 $21.32 $20.17 $21.12 $19.72 $19.30 $20.08
$5.00
$0.00
Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Net Rent Additional Rent
1.8% 0.7%
12.0% 0.5%
2.4%
10.0%
TOTAL 8.0% 0.8% 1.7%
AVAILABILITY
OFFICE SPACE
6.0% 12.1% 11.9%
DOWNTOWN MONTREAL 11.5%
10.3%
4.0% 7.3%
Source : Altus InSite, Altus Group Limited
7.7%
2.0%
0.0%
Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Direct Available Rate Sublet Available Rate
YO U H AV E Q U E S T I O N S O R C O M M E N T S ?
C O N TA C T U S TO D AY :
Avison Young Québec Inc. Denis Perreault, MBA, Adm.A
Commercial Real Estate Agency Principal, Managing Director
avisonyoung.com 1200 McGill College Avenue Chartered Real Estate Broker
Suite 2000 514.905.0604
Montréal, Québec H3B 4G7 denis.perreault@avisonyoung.com
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