Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL

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Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL
Industrial
Insight Report
Greater Montreal Area | Q2 2018
Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL
Table of Contents
Greater Montreal Overview     1

Submarkets

              East End        2

              West Island     3

              Lachine         4

              Saint-Laurent   5

              Laval           6

              North Shore     7

              South Shore     8

Contacts                      9

                                  1
Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL
Greater
Q2 2017                                                                                             Montreal Area
Industrial Insight

Strong demand continues to push vacancy and rental
rates into record territory
  • Strong consumer demand is leading to a high requirement for space                                                              Fundamentals                     Forecast
    from the manufacturing, transport, and distribution industries.                                                                YTD net absorption        2,447,413 s.f. ▲
  • Investment in speculative construction accelerates as landlords expect                                                         QTR net absorption        1,041,483 s.f. ▲
    demand to remain strong.                                                                                                       Under construction        2,082,085 s.f. ▲
  • Construction of a new light rail train project begins. It will connect a
                                                                                                                                   Total vacancy                    4.3 % ▼
    substantial amount of industrial inventory to the city center.
                                                                                                                                   Average asking rent (Net)   $6.19 p.s.f. ▲
An inflow of industrial users into the market, along with an expansion of the local                                                Tenant improvements             Falling ▼
economy, have meant three quarters of positive net absorption in the Greater
Montreal Area (GMA). And although the level of positive net absorption has slowed                                                  Supply and demand (s.f.)                       Net absorption
down in the last couple quarters, this has been due to a shortfall in available space                                                                                             Deliveries
                                                                                                                                   6,000,000
rather than a lack of demand. Contributing to this shortfall are the lack of new supply
coming to market in the quarter, and the vacancy rate decreasing 70 basis points
                                                                                                                                   4,000,000
quarter-over-quarter. Because Quebec’s economy is projected to grow by 2.0 percent,
we expect this shortfall to continue into the coming quarters as well. Landlords and
                                                                                                                                   2,000,000
investors are aware of this shortfall however, and several speculative projects are
under construction and planned.
                                                                                                                                             0
                                                                                                                                                   2014      2015       2016      2017     YTD
The industrial vacancy rate has reached a new record low of 4.3 percent. This record                                                                                                       2018
scarcity of space is a powerful bargaining tool that landlords are using in their favour.
They have increased their net asking rates to an average of $6.19 per square foot,
merely four months after rates surpassed $6.00 for the first time.                                                                  Total vacancy

Cryptocurrency enthusiasm is what most differentiated Montreal from other Canadian                                                    6.5%         6.1%        5.8%
cities during the first half of the year. Quebec’s attractive electricity rates brought                                                                                     5.4%
currency miners from across the world knocking on the province’s door. Initially                                                                                                          4.3%
enthusiastic, the provincial government sent a worldwide invitation to find customers
for their surplus of power. However, due to high interest, the government placed a
moratorium on new supply while the quantity of demand and the appropriate rates
were determined. The Cryptocurrency industry is still in its infancy and the                                                          2014         2015          2016          2017      Q2 2018
relationship between market participants and the government will continue to evolve
for years to come. The government’s decisions in the short term will determine how
much industrial space will be required by the cryptocurrency industry in the quarters                                              Average asking rents ($/s.f.)                      Net Rent
to come.                                                                                                                                                                              Additional
                                                                                                                                   $10.00
Outlook
Despite the volatile behavior of Canada’s largest trading partner (The United States)                                               $8.00
regarding trade, the economy continues to grow and business confidence is high. In                                                  $6.00
particular, we’re excited to see the growth of cryptocurrency and its impact on the                                                 $4.00
industrial market. The bid process to supply cryptocurrency miners is set to begin in                                               $2.00
July and will open the gate for the growth of this nascent industry.                                                                $0.00
For more information, contact: Guillaume Desjardins | guillaume.desjardins@am.jll.com                                                            2014     2015      2016        2017 YTD 2018

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL
East End
                                                                                                                                   Fundamentals                                      Forecast
•          Behind lingering demand, positive net absorption remains steady only                                                    YTD net absorption                           209,324 s.f. ▲
           diminishing slightly since last quarter.                                                                                QTR net absorption                            83,874 s.f. ▲
•          Average asking net rents remained stable as the vacancy decreased 50                                                    Under construction                           335,000 s.f. ▼
           basis points percent quarter-over quarter.                                                                              Total vacancy                                      3.9%

                                                                                                                                                                                               ▼
                                                                                                                                   Average asking net rent                      $5.39 p.s.f. ▲
Lease activity                                                                                                                     Tenant improvements                              Falling ▼
The East End saw a slight decrease in positive net absorption in the second
quarter, moving down to 83,874 from 125,450 square feet. Unless developers                                                         Supply and demand (s.f.)                       Net absorption
begin increasing supply, net absorption is poised to remain low.                                                                    600,000
                                                                                                                                                                                  Deliveries

                                                                                                                                    400,000
Slightly more space was added to the market than was removed, providing
more options to potential tenants, but the highest quality spaces remain                                                            200,000
leased. Vacancy continued its downward trajectory with a drop of 50 basis                                                                   0
points quarter over quarter into record territory.
                                                                                                                                   -200,000
                                                                                                                                                   2014        2015     2016     2017     YTD
Rents
                                                                                                                                                                                          2018
Quarter-over-quarter, average asking net rents continue to hover around $5.40
per square foot. It is difficult for landlords to increase their rates as inventory in                                              Total vacancy
the East End is on average older than elsewhere in the Greater Montreal Area.
Users will be weighing higher rates on older inventory against the costs of
                                                                                                                                      5.9%
taking the state of the art facilities along the TransCanadian highway.                                                                             4.9%         5.0%          4.4%      3.9%

Sales
The second quarter was very busy in terms of sales activity. A total of $23.87
million changed hands, 44.0 percent more than last quarter and 297.0 percent                                                          2014          2015         2016          2017     YTD 2018
more than the quarter before. This stark increase can be attributed to Investors
Group’s sale of 1500 de Boucherville to Fiera Properties for $16.75 million.
                                                                                                                                   Average asking rents ($/s.f.)                      Net Rent
                                                                                                                                                                                      Additional
New construction                                                                                                                   $10.00
No new projects broke ground during the second quarter. The only major
                                                                                                                                    $8.00
current development remains XTL Transport’s 335,000 square foot facility being
                                                                                                                                    $6.00
constructed by Broccolini. The building will become operational during next
quarter. There remain large tracts of industrially zoned land bordering the                                                         $4.00

TransCanadian highway; and as the vacancy rate falls we expect new facilities                                                       $2.00
to spawn along the highway in the upcoming quarters.                                                                                $0.00
                                                                                                                                                 2014         2015      2016     2017 YTD 2018

    RECENT SALES COMPARABLES

    Buyer                                 Seller                         Location                          Intersection                         Size (s.f.)      Date                 Price/s.f.

    Fiera Properties                      Investors Group                1500 De Boucherville              Hwy 25/Notre-Dame E.                 176,401          04/04/2018           $94.95

    9374-7483 Quebec Inc.                 Construction Djl Inc.          5170-5250 D’Amiens                Industriel / Lacordaire              50,878           06/04/2018           $54.59

    RECENT LEASE COMPARABLES

    Type                          Landlord                                      Location                               Intersection                                   Size

    New                           Les Placements Wainberg Inc.                  4629-4665 Grandes-Prairies             Grandes-Prairies / Viau                        12,852

    New                           Loracon Construction                          9900 Louis-H. Lafontaine               Hwy 25/Bombardier Street                       25,570

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL
West Island
                                                                                                                                   Fundamentals                                    Forecast
   • The vacancy rate fell for the fifth quarter in a row as demand soaks up                                                       YTD net absorption                         366,893 s.f. ▲
     remaining supply.                                                                                                             QTR net absorption                         113,340 s.f. ▲
   • The majority of industrial land is owned by developers on the lookout for                                                     Under construction                          35,000 s.f. ▲
     built-to-suit or speculative opportunities.                                                                                   Total vacancy                                    3.4% ▼
                                                                                                                                   Average asking net rent                    $5.62 p.s.f. ▲
Lease activity                                                                                                                     Tenant improvements                            Falling ▼
Net absorption decreased from 253,553 to 113,340 square feet as the vacancy
                                                                                                                                   Supply and demand (s.f.)                      Net absorption
rate continued to tumble and options make themselves scarce. An increasing                                                                                                       Deliveries
number of companies in the West Island are experiencing space constraints                                                          1,300,000

due to foreign companies entering the submarket, leading to competition for                                                          800,000
industrial space. During the second quarter, there was over 2.4 times more
                                                                                                                                     300,000
space taken off the market than was added. In this competitive climate, we are
likely to see users bargain for longer lease terms in order to secure their real                                                    -200,000
estate.                                                                                                                             -700,000
                                                                                                                                                     2014    2015      2016     2017      YTD
Rents                                                                                                                                                                                     2018
Vacancy fell by 50 basis points since March while average asking net rents
                                                                                                                                    Total vacancy
increased for the sixth consecutive quarter. Rents increased only by only .004
                                                                                                                                                   8.5%
percent quarter-over-quarter and rental rate growth will likely remain restricted                                                     8.0%
unless additional modern facilities are built.
                                                                                                                                                               5.0%          4.5%
                                                                                                                                                                                        3.4%
Sales
The West Island saw approximately half as much sales volume as last quarter,
with $28.63 million changing hands over ten deals featuring 576,887 square feet
of space. The largest deal was the $10.25 million sale of 5650 TransCanada,                                                           2014         2015        2016          2017     YTD 2018
followed by the $3.25 million sale of 93-97 Hymus. The average price per square
foot was $49.64, less than half of last quarter’s value of $110.29 per square foot.                                                Average asking rents ($/s.f.)                    Net Rent
                                                                                                                                                                                    Additional
New construction                                                                                                                   $10.00
The only current construction project in the West-Island is a 35,000-square foot                                                    $8.00
facility in Dorval commissioned by K&Y Diamond. Among the submarkets                                                                $6.00
located on the Island of Montreal, the West-Island has by far the most                                                              $4.00
undeveloped land. Along the TransCanadian Highway and Highway 20, there                                                             $2.00
are good development opportunities for users in need of visibility and highway                                                      $0.00
access.                                                                                                                                         2014        2015      2016     2017 YTD 2018

  RECENT SALES COMPARABLES

  Buyer                              Seller                             Location                        Intersection                        Size (s.f.)        Date                 Price/s.f.

  Gestions Philhobar Inc.            WCB Realty Limited                 5650 Transcanada                Hwy 40/ Doyon                       223,035            05/11/2018           $45.96

  Kinmont Canada Inc.                Kesmat Investments Inc             93-97 Hymus                     Hymus/Delmar                        40,000             04/03/2018           $81.25

  RECENT LEASE COMPARABLES

  Type                            Landlord                                      Location                               Intersection                                 Size

  New                             Broccolini                                    21050-21100 Daoust                     Daoust / Sainte-Marie                        145,065

  New                             Anura Developments                            550 Morgan                             Morgan/Clark-Graham                          45,600

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Industrial Insight Report - Greater Montreal Area | Q2 2018 - JLL
Lachine
                                                                                                                                   Fundamentals                                    Forecast
•          Large blocks of space leased in 150 Montreal-Toronto and 1100 50e                                                       YTD net absorption                         473,130 s.f. ▲
           Avenue in the last quarter led Lachine to achieve the highest positive net                                              QTR net absorption                         283,914 s.f. ▲
           absorption in the Greater Montreal Area.
                                                                                                                                   Under construction                               0 s.f.

                                                                                                                                                                                              ▲
•          No sales took place in the submarket this quarter.
                                                                                                                                   Total vacancy                                    4.4% ▼
•          Older industrial inventory in the southern region of Lachine are providing
           opportunities for residential redevelopments.                                                                           Average asking net rent                    $5.30 p.s.f. ▲
                                                                                                                                   Tenant improvements                            Falling ▼
Lease activity
Positive net absorption was high in Lachine during the second quarter - it was                                                     Supply and demand (s.f.)                      Net absorption
                                                                                                                                                                                 Deliveries
over two times greater than that of the West-Island, the quarter’s second best                                                     1,000,000
performing submarket in terms of net absorption. Over 550,000 square feet of
                                                                                                                                     500,000
space were leased or otherwise removed from the market and only 280,000
were introduced. The largest lease was for a 159,046-square foot space within
                                                                                                                                             0
the 150 Montreal-Toronto, followed by a 91,517-square foot space on 50th
Avenue.                                                                                                                             -500,000
                                                                                                                                                     2014    2015      2016     2017      YTD
Rents                                                                                                                                                                                     2018
The second quarter had a tumultuous impact on indicators in Lachine. Vacancy
fell by 180 basis points, with the effect of pushing the average asking net rent up                                                 Total vacancy
by 3 percent quarter over quarter. Because of the high level of saturation of the
Lachine region, falling vacancy is expected to increase upward pressure on                                                            6.8%         6.8%
                                                                                                                                                               6.0%
                                                                                                                                                                             6.7%
rental rates. Tenant occupancy costs have reached a new record but average                                                                                                              4.4%
gross rates climbed to $9.15 per square foot.

Sales
There was not a single industrial real estate transaction within Lachine during                                                       2014         2015        2016          2017     YTD 2018
the second quarter. Lachine is a central submarket benefitting from proximity
to dense population centers and phenomenal highway access. As such, most of                                                        Average asking rents ($/s.f.)                    Net Rent
the inventory is owned by institutional investors who are not inclined to sell                                                                                                      Additional
their assets.                                                                                                                      $10.00
                                                                                                                                    $8.00
New construction                                                                                                                    $6.00
Due to there being very little undeveloped land in this dense submarket, there                                                      $4.00
were no deliveries or projects under construction in Lachine. However, there                                                        $2.00
are valuable development opportunities along Norman street that could be
                                                                                                                                    $0.00
suitable for heavy-manufacturing facilities.                                                                                                     2014       2015      2016     2017 YTD 2018

    RECENT SALES COMPARABLES

    Buyer                           Seller                                Location                      Intersection                        Size (s.f.)        Date                 Price/s.f.

    Le 2100 Remembrance             9062-4602 Quebec Inc.                 2100 Remembrance              Remembr./21nd Avenue                120,770            02/08/2018           $56.31

    Immobilier Erimos Inc.          9306-4962 Quebec Inc.                 5150 Fairway                  Fairway / 52nd Avenue               29,111             11/27/2017           $51.49

    RECENT LEASE COMPARABLES

    Type                          Landlord                                      Location                               Intersection                                 Size

    New                           Groupe Mach                                   150 Montreal-Toronto                   Hwy 20 / Montreal-Toronto                    159,046

    New                           Dundee Industrial                             1700-1764 50th Avenue                  50th   Avenue / François-Cusson              91,517

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Saint-Laurent
                                                                                                                                   Fundamentals                                    Forecast
•          Vacancy fell to a new low while users accept higher rental rates to expand                                              YTD net absorption                         522,394 s.f. ▲
           their operations.                                                                                                       QTR net absorption                         -24,563 s.f. ▲
•          The success of Bentall Kennedy’s speculative venture on Griffith street is                                              Under construction                         216,000 s.f. ▲
           likely to open the gates for new developments.                                                                          Total vacancy                                    4.0% ▼
                                                                                                                                   Average asking net rent                    $5.70 p.s.f. ▲
Lease activity                                                                                                                     Tenant improvements                            Falling ▼
Net absorption was slightly negative at the end of the second quarter, but year-
to-date positive net absorption remains the highest of all submarkets.                                                             Supply and demand (s.f.)                      Net absorption
                                                                                                                                                                                 Deliveries
Approximately 16.0 percent more space was added to the submarket than was                                                          1,000,000
removed, suggesting that a higher than average number of leases will be
expiring within the year and that owners are looking for potential new tenants                                                       500,000
in advance. Because there is more demand from users than there is new supply
                                                                                                                                             0
of industrial space, net absorption is expected to increase in the coming
quarters.
                                                                                                                                    -500,000
                                                                                                                                                    2014     2015     2016      2017      YTD
Rents                                                                                                                                                                                     2018
After having fallen slightly over the course of the last quarter, the average asking
net rent increased .01 percent quarter-over-quarter to rest slightly below where                                                    Total vacancy
it stood at the end of 2017. Vacancy continued its downward trajectory, resting
at a new record low of 4 percent.                                                                                                                              5.8%
                                                                                                                                      5.3%         5.2%                     5.3%
                                                                                                                                                                                        4.0%
Sales
Sales activity reached its highest level since the first quarter of 2017: 929,507
square feet of space were sold for a total of $43.24 million. The average
transaction had a price per square foot of $95.78. The majority of purchases                                                          2014         2015        2016         2017      YTD 2018
were made by users. However, the large facility bearing the address 865-877
Hodge was purchased by a residential development company, suggesting that                                                          Average asking rents ($/s.f.)                    Net Rent
a potential redevelopment is on the horizon.                                                                                                                                        Additional
                                                                                                                                   $10.00
New construction                                                                                                                    $8.00
Bentall Kennedy’s 216,000 square foot facility remains under construction at                                                        $6.00
4305 Griffith. It is expected that the property will be ready to be occupied by
                                                                                                                                    $4.00
October. The level of success at this speculative development will determine
                                                                                                                                    $2.00
with how much gusto other builders will try their hand.
                                                                                                                                    $0.00
                                                                                                                                                 2014      2015      2016      2017 YTD 2018

    RECENT SALES COMPARABLES

    Buyer                            Seller                         Location                         Intersection                           Size (s.f.)       Date                  Price/s.f.

    Dév. Immobilier Hodge            Gestion Manliteo inc.          865-877 Hodge                    Hodge / Houde                          269,604           05/16/2018            $37.23

    10621196 Canada Inc.             Inv. 3333 D-B.-Floreani        333 Douglas-B.-Floreani          D.-B.-Floreani / Cypihot               110,000           05/02/2018            $85.91

    RECENT LEASE COMPARABLES

    Type                          Landlord                                      Location                               Intersection                                 Size

    New                           Capital DC Inc.                               3400 Raymond-Lasnier                   Raymond-Lasnier / Beaulac                    204,907

    New                           London Life                                   2315 Cohen                             Cohen / Dobrin                               110,751

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Laval
                                                                                                                                   Fundamentals                                      Forecast
   • The average asking net rent saw a modest fall despite a 100 basis point                                                       YTD net absorption                           343,065 s.f. ▲
     decrease quarter-over-quarter in the vacancy rate.                                                                            QTR net absorption                            99,926 s.f. ▲
   • Both sales and leasing activity were relatively low.                                                                          Under construction                           210,000 s.f. ▲
   • Developer Montoni breaks ground on their second project in the
                                                                                                                                   Total vacancy                                     4.2 % ▼
     submarket. Both facilities are built-to-suit with excellent highway access.
                                                                                                                                   Average asking net rent                      $6.60 p.s.f. ▲
Lease activity                                                                                                                     Tenant improvements                              Falling ▼
Positive net absorption for the second quarter was a modest 99,926 square feet;
                                                                                                                                   Supply and demand (s.f.)                       Net absorption
it has consistently remained above zero since the end of 2016. There was 75.0                                                                                                     Deliveries
percent more space removed from the market than was added this quarter,                                                            1,200,000
                                                                                                                                   1,000,000
breaking the trend of the last two quarters, which saw more spaces added than
                                                                                                                                     800,000
removed. Laval is a submarket that is rich in undeveloped industrial land and
                                                                                                                                     600,000
active developers ready to increase the supply when the opportunity arises.                                                          400,000
                                                                                                                                     200,000
Rents                                                                                                                                      0
Vacancy fell 100 basis points quarter over quarter, continuing the downward                                                                           2015          2016        2017     YTD 2018
trend it has followed for the past four quarters. It currently rests at less than half
its 2015 level. The average asking net rent, contradictorily, fell by .01 percent
                                                                                                                                    Total vacancy
quarter-over-quarter. This fall is possibly due to certain landlords pulling down                                                     8.9%         8.6%
their asking rates after previously overestimating the rates at which they could                                                                                8.2%
                                                                                                                                                                               6.5%
lease their spaces.
                                                                                                                                                                                          4.2%
Sales
Laval saw very weak sales activity this quarter, with only $5.46 million worth of
industrial real estate changing hands. This is 70.0 percent less than last
quarter’s already weak activity of $18 million. Overall, eight properties changed                                                     2014         2015         2016           2017     YTD 2018
hands, with an average price per square foot of $60.61.
                                                                                                                                   Average asking rents ($/s.f.)                       Net Rent
New construction                                                                                                                                                                       Additional
The developer Montoni has begun construction on a 50,000-square foot facility                                                      $12.00
for kitchen products manufacturer Kayali. The property is strategically located                                                    $10.00
                                                                                                                                    $8.00
on Étienne-Lenoir street as to have quick access to highways 13 and 440. There
                                                                                                                                    $6.00
are two other major ongoing projects in the city, a 70,000-building developed by
                                                                                                                                    $4.00
Montoni for manufacturer Tornatech, and a 90,000-speculative project
                                                                                                                                    $2.00
developed by Loracon in the east end of Laval. Both facilities are expected to be                                                   $0.00
completed by the end of this year.                                                                                                              2014         2015     2016       2017 YTD 2018

  RECENT SALES COMPARABLES

  Buyer                           Seller                                     Location                     Intersection                       Size (s.f.)        D/ate                  Price/s.f.

  Invs. Pg-Holdco inc.            Immeubles Nipan inc.                       825 Saint-Martin O           Saint-Martin / Fortin              16,194             05/10/2018             $83.76

  9279-9113 Quebec inc.           Cité des Aff. Boisé de L'Équerre           4440 Garand                  Garand / Dagenais                  52,097             05/14/2918             $22.83

  RECENT LEASE COMPARABLES

  Type                            Landlord                                      Location                               Intersection                                   Size

  New                             Crest Realties                                3555-5555 des Rossignols               Rossignols / Dagenais                          221,445

  New                             CBC Pension Board                             1340 Dagenais                          Dagenais / Garand                              81,500

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
North Shore
                                                                                                                                   Fundamentals                                     Forecast
•          Leasing activity remains similar to past quarters, with positive net                                                    YTD net absorption                          206,584 s.f. ▲
           absorption gradually eroding the excess supply of space.
                                                                                                                                   QTR net absorption                           73,333 s.f. ▲
•          Vacancy has fallen by half since the same time last year.
                                                                                                                                   Under construction                                0 s.f. ▲
•          A potential new speculative construction project could break ground near
           3055 Anderson in Terrebonne.                                                                                            Total vacancy                                     6.8% ▼
                                                                                                                                   Average asking net rent                     $6.43 p.s.f. ▲
Lease activity                                                                                                                     Tenant improvements                             Falling ▼
Absorption remained positive for the fourth consecutive quarter, but it has been
diminishing, which suggests an approach towards a new equilibrium level of                                                           Supply and demand (s.f.)                    Net absorption
                                                                                                                                                                                 Deliveries
vacancy. There was approximately 100,000 square feet of space, across seven                                                        2,000,000
buildings, added to the market, and 400,000 square feet across 16 buildings
removed. The average size of the leased spaces was 24,845 square feet.
                                                                                                                                   1,000,000

Rents
Vacancy fell by 80 basis points from 7.6 percent quarter over quarter and now                                                                 0
rests at half of what it was at the same time last year. Despite this, the average                                                                   2015          2016        2017     YTD 2018
asking net rents increased only by .001 percent quarter-over-quarter. An
explanation for the modest increase in rates is that, despite a rise in the scarcity
of space, users can look towards central submarkets rather than accept higher                                                        Total vacancy
rates to stay in the North Shore. As a result, North Shore landlords find                                                                          17.0%

themselves, on average, with a poor bargaining position. The average asking                                                           12.8%
                                                                                                                                                                11.0%
net rent is expected to remain steady over time because it is already elevated in                                                                                             9.2%
                                                                                                                                                                                         6.8%
comparison with the rest of the market.

Sales
Sales volume remained like last quarter’s, with $18.7 million worth of industrial                                                     2014          2015        2016          2017     YTD 2018
real estate trading hands in 16 transactions. The average property measured
47,000 square feet and the average price per square foot was $60.28. Most of                                                         Average asking rents ($/s.f.)                    Net Rent
these sales happened between owner-users, as institutional investors don’t                                                                                                            Additional
have a particularly strong presence in the North Shore.                                                                            $10.00
                                                                                                                                     $8.00
New construction                                                                                                                     $6.00
No new constructions broke ground this quarter, leaving the total amount                                                             $4.00
under construction at zero. Crest Realties have floated the idea of developing                                                       $2.00
an 80,000 to 120,000 square foot facility on the land behind their property at
                                                                                                                                     $0.00
3055 Anderson, but concrete plans and user interest have yet to materialize.                                                                      2014      2015     2016       2017 YTD 2018

    RECENT SALES COMPARABLES

    Buyer                              Seller                                 Location                           Intersection                     Size (s.f.)       Date               Price/s.f.

    Équipements Spm inc.               Transport Tfi 2, S.E.C.                1314 de la Gare                    De la Gare/Bombardier            26,121            05/14/2018         $106.95

    Gestion Immobilière S.E.T.         Gestion Radu Paul inc.                 1120 l’Express                     L’Express / Lévis                8,900             06/29/2018         $45.33

    RECENT LEASE COMPARABLES

    Type                          Landlord                                      Location                               Intersection                                  Size

    New                           Olegna Holdings Inc.                          1825 Lionel-Bertrand                   Lionel-Bertrand / Hwy 640                     130,000

    New                           3788679 Canada Inc.                           420 de la Côte-Sud                     Hwy 15/de la Côte-Sud                         22,500

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
South Shore
                                                                                                                                   Fundamentals                                    Forecast
•          Average asking net rents remain steady as net absorption turns negative                                                 YTD net absorption                        -146,143 s.f. ▲
           and vacancy spikes up.
                                                                                                                                   QTR net absorption                        -223,066 s.f. ▲
•          Sales volume was very strong compared to previous quarters, suggesting
                                                                                                                                   Under construction                          2,272,322 ▼
           that users are purchasing space rather than leasing it.
•          Construction activity remains high, with new projects sprouting and major                                               Total vacancy                                    6.4% ▼
           facilities inching closer to delivery.                                                                                  Average asking net rent                    $6.70 p.s.f. ▲
                                                                                                                                   Tenant improvements                            Falling ▼
Lease activity
Absorption in the South Shore turned negative during the second quarter.                                                           Supply and demand (s.f.)                      Net absorption
                                                                                                                                                                                 Deliveries
Additionally, more space was added to the market than removed, suggesting                                                          1,200,000
that negative absorption could carry onto the next quarter. Most of the spaces
                                                                                                                                     700,000
leased were very small, averaging 8,772 square feet. Conversely, the spaces
added are on average twice as large, at 16,670 square feet.
                                                                                                                                     200,000

Rents                                                                                                                               -300,000
Vacancy jumped sharply by 110 basis points quarter over quarter as users                                                                           2014      2015     2016      2017      YTD
vacated their space to move towards the island of Montreal. The average asking                                                                                                            2018
net rent remained steady at its highest level since the same time last year.
Negative absorption and a rising vacancy rate during a single quarter do not                                                        Total vacancy
constitute a sufficient reason for landlords to significantly adjust their asking                                                                  7.2%        7.2%
rates, and most have not done so.
                                                                                                                                      6.5%                                              6.4%
                                                                                                                                                                             6.3%
Sales
In contrast to leasing activity, sales activity was very strong in the second
quarter: $ 24.62 million worth of transactions took place in 16 deals involving
518,098 square feet of space. The average property measured 37,000 square                                                             2014         2015        2016          2017     YTD 2018
feet and the average price per square foot was $84.84.
                                                                                                                                   Average asking rents ($/s.f.)                    Net Rent
New construction                                                                                                                                                                    Additional
The South Shore maintains its position as the most active submarket in terms of                                                    $12.00
construction activity. During the quarter, Quintcap broke ground on a 13,000-                                                      $10.00
square foot single-tenant building at 8845 du Quartier, near a larger project of                                                    $8.00
theirs at 4000 Place Java. IKEA’s 1,200,000 square foot distribution center is well                                                 $6.00
                                                                                                                                    $4.00
under way and will bring new vitality to Beauharnois’ budding industrial park.
                                                                                                                                    $2.00
Molson Coors have purchased the 6,000,000-square foot lot of land in Longueuil
                                                                                                                                    $0.00
that will house their new state of the art brewery.                                                                                             2014      2015      2016       2017 YTD 2018

    RECENT SALES COMPARABLES

    Buyer                             Seller                            Location                     Intersection                         Size (s.f.)        Date                   Price/s.f.

    Reddee Properties Inc.            Transcontinental inc.             1376 Marie Victorin          Marie Victorin / Sagard              ± 60,000           04/20/2018             $103.22

    9369-4438 Quebec Inc.             Sol. d'Air Déshumidifié           1385 Coulomb                 Coulomb / Volta                      58,620             04/30/2018             $63.97

    RECENT LEASE COMPARABLES

    Type                          Landlord                                      Location                                   Intersection                             Size

    New                           Shapiro Group                                 2270-94 de la Province                     De la Province / Guimond                 57,240

    New                           Quintcap                                      2850 Matte                                 Matte / Taschereau                       20,139

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
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