Industrial Market Remains Balanced In Greater Montreal Area - GREATER MONTREAL AREA - Devencore
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Research
GREATER MONTREAL AREA
YEAR-END 2017 INDUSTRIAL MARKET
Industrial Market Remains Balanced
In Greater Montreal Area
1
Research
GREATER MONTREAL AREA
YEAR-END 2017 INDUSTRIAL MARKET
No Large Speculative Developments
Under way to Address Potential
Market Analysis – Greater Montreal Area (GMA)
Demand for Modern Industrial Space
Net Asking Rent and Availability
• The overall availability rate for industrial space in the Greater Montreal
Area (GMA) continues to track at a relatively low rate and was at 6.1% $6 8%
at the end of 3Q17. Estimated net asking rents have remained
7%
unchanged over the past twelve months, and currently average $5
$5.91/SF. Part of the reason for the stability of net asking rents is the 6%
quality of the available inventory, which generally falls into the Class B $4
and Class C categories. 5%
$3
• In the GMA as a whole, there is a total of 353 million square feet of 4%
industrial space. Only one major multi-tenant project is currently under
$2 3%
construction: a 216,000-square-foot building in Saint-Laurent that 3Q13 3Q14 3Q15 3Q16 3Q17
combines office and warehousing space.
Average Net Asking Rent (Price/SF) Availability (%)
• While there are no major speculative developments under way, a
number of businesses are in the process of building new facilities.
Molson Coors recently announced it is planning to move into a new Net Absorption
$600 million facility in Longueuil near the St-Hubert Airport, Ikea is
Square Feet, Thousands
constructing a one-million-square-foot distribution centre in
Beauharnois, and Costco is investing over $100 million in a 550,000- 3,000
square-foot distribution centre in Varennes. Structube also announced 2,000
the construction of a 600,000 square-foot building in Laval.
1,000
• For tenants seeking spaces with contiguous footprints of 10,000 square
0
feet or less, there is a broad selection of industrial inventory across the
GMA. However, much of this inventory is somewhat dated by modern -1,000
standards with lower clear heights (24 feet or less) and smaller loading -2,000
areas. They are also less energy efficient. -3,000
• Conversely, tenants who require larger footprints and modern 3Q13 3Q14 3Q15 3Q16 3Q17
amenities and features, including higher clear heights--28-foot-clear
heights are now considered a minimum and modern industrial Construction and Deliveries
standards are rapidly moving towards 36-foot-clear heights--have very Square Feet, Thousands
few options, as demand far outstrips supply. This presents a particular
challenge for the burgeoning e-commerce, warehousing and logistics 1,600
1,400
sectors, which need this more modern type of space.
1,200
• On the economic front, Montreal is seeing something of a renaissance. 1,000
The unemployment rate has dropped to 6.5%, the lowest it has been in 800
many years, and according to the Conference Board of Canada real 600
GDP should be in the 1.9% range for 2017. 400
• Economic growth in the GMA is being generated by a number of 200
industries, including warehousing and logistics, tourism, construction 0
3Q13 3Q14 3Q15 3Q16 3Q17
(as significant parts of the city’s infrastructure are being updated),
technology and the service sectors. Under Construction Deliveries
• The major infrastructure projects under way include the new Champlain
Bridge, the Bonaventure Expressway (which feeds into the downtown Market Summary – Greater Montreal Area (GMA)
core), and the Turcot Interchange, which channels traffic from the west
end of the island of Montreal. Other major infrastructure projects that
Current Prior Year Ago 12 Month
will be initiated over the next 12-24 months include the Réseau
Quarter Quarter Period Forecast
électrique métropolitain (REM), a commuter light rail network, and the
refurbishment of the Louis-Hippolyte Lafontaine tunnel, one of the links Total Inventory (SF) 353.4M 353.6M 353.4M
between the island and the South Shore.
Availability Rate 6.1% 6.1% 6.3%
Qtr. Net Absorption (SF) 95,604 1,245,136 1,550,269
Industrial Submarket Activity
Availability rates vary considerably in the GMA’s various submarkets. In Est. Net Asking Rent $5.91 $5.95 $5.83
Montreal East, the largest submarket with an inventory of approximately 78
Under Construction (SF) 29,600 292,210 1,389,463
million square feet, the total availability rate is currently 5.3%, up slightly
from six months ago. Net asking rents are approximately $5.32/SF. Much Deliveries (SF) 127,210 0 62,399
of the available inventory falls into the Class B and Class C categories.
Source: Altus Insite
2
Research
GREATER MONTREAL AREA
YEAR-END 2017 INDUSTRIAL MARKET
In Saint-Laurent, the GMA’s second largest submarket with 70 million as a part of a global consolidation effort.
square feet of industrial inventory, the total availability rate is at 6.8% and
net asking rents are in the $5.65/SF range. The St-Laurent Campus of Availability rates are lowest in Midtown South, at 2.2%, and asking net
Technoparc Montréal houses roughly 100 of the GMA’s advanced rents are $6.88/SF, the highest on the island. This submarket includes the
technology and research and development firms in sectors ranging from Mile End district, where a number of older industrial buildings have been,
aerospace and pharmaceuticals to information technology and and continue to be, converted into loft style office spaces.
nanotechnologies.
Looking Forward
With Ikea and Costco building major manufacturing and distribution In the coming months, there should be an increase in construction activity
centres on the South Shore, the region continues to be the fastest growing as the large-scale built-to-suit projects noted above get under way. The
submarket in the GMA. Its advantages include excellent rail and road major infrastructure projects currently being carried out will draw closer to
transportation access to routes east, west and south, a substantial amount completion, which should begin to improve the flow of traffic across the
of land that can be developed, and a strong local workforce. The total GMA. Additionally, in 2018 the light rail network should commence
availability rate is currently 8.7% and net asking rents are in the $6.64/SF construction; over the longer term, the REM may serve to attract more
range. businesses to the West Island. Activity on the South Shore should
continue to be robust as it solidifies its standing as an ideal warehousing
The total availability rate is highest in Vaudreuil-Dorion, which is located and distribution centre.
just off the west end of the island of Montreal, at 38.7%. Net asking rents
are also highest in this region, at $10.38/SF. It should be noted that the The amount of available industrial stock will likely remain stable for the
total inventory here is limited to only 1.4 million square feet, but the region foreseeable future, and the market should retain its landlord/tenant
has grown significantly over the past decade. At the end of 2016, Ericsson balance. The best opportunities are submarket and building specific, so
opened a $1.3 billion, 200,000-square-foot high-tech facility here, but tenants and their advisors must be prepared to analyze both the market
announced in October of this year that it would be vacating the premises and their needs thoroughly.
Greater Montreal Area (GMA) Statistics
Total Inventory Under Construction Total Availability Qtr. Absorption YTD Absorption Net Asking Rent
(SF) (SF) Rate (%) (SF) (SF) (Price/SF)
Laval 19,154,954 0 7.5 91,859 118,031 $6.35
Midtown North 52,411,026 0 4.8 66,138 189,825 $6.43
Midtown South 33,520,257 0 2.2 62,670 257,723 $6.88
Montreal East 77,823,201 29,600 5.3 -577,876 437,510 $5.34
North Shore Lanaudière 3,644,849 0 9.2 -40,818 -51,672 $6.11
North Shore Laurentides 5,589,199 0 9.2 166,818 255,611 $6.54
South Shore 19,130,957 0 8.7 -25,105 184,859 $6.64
Vaudreuil Dorion 1,339,150 0 38.7 28,372 -203,174 $10.38
West Island 46,155,078 0 6.8 308,373 543,614 $5.36
Lachine 24,957,355 0 6.8 284,193 284,839 $5.33
St-Laurent 69,652,465 0 6.8 -269,020 2,182 $5.65
Source: Altus Insite
Select Lease/User Transactions
Tenant Building Submarket Type Size (SF)
Getpaq Inc. 12345 Albert Hudon Montreal East New Lease 157,689
Auto Kool 2275-2305 52nd avenue Lachine New Lease 100,563
Goodfood Market 4600 Hickmore St-Laurent New Lease 83,183
RD International 2100 52nd avenue Lachine New Lease 72,415
Solutions Grand Format PDI Inc. 4000 Industriel, Laval Laval New Lease 54,670
Select Sales Transactions
Address Submarket Sale Price Price/SF Size (SF)
7101 Notre-Dame East East-End $15,704,000 $26 604,000
5500 Transcanada Hwy West-Island $41,275,773 $77 536,049
3015 Louis-A.-Amos Lachine $6,331,600 $44 143,900
3333 Douglas-B.-Floreani St-Laurent $6,050,000 $55 110,000
3025 Le Corbusier Laval $9,650,000 $89 108,200
3 Source: NKF Devencore ResearchResearch GREATER MONTREAL AREA YEAR-END 2017 INDUSTRIAL MARKET MONTREAL NKF Devencore Canadian Office Locations Devencore Ltd. Real Estate Agency 800 René-Lévesque Boulevard West Suite 900 Montreal, Quebec H3B 1X9 Canada Pascal Easton Director, Marketing and Brand Development Tel.: 514-392-9389 peaston@devencorenkf.com www.devencorenkf.com About Newmark Knight Frank Devencore As part of Newmark Knight Frank, one of the world's leading commercial real estate advisory firms, Newmark Knight Frank Devencore is the largest privately-owned corporate real estate advisor and broker in Canada. With offices across the country, Newmark Knight Frank Devencore offers its global clientele comprehensive services that are individually designed to ensure executive real estate decisions are supported by effective strategies and professional execution. To learn more about our capabilities, please visit www.devencorenkf.com. About Newmark Knight Frank Newmark Knight Frank is one of the world's leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NKF's 14,100 professionals operate from more than 400 offices in established and emerging property markets on six continents. With roots dating back to 1929, NKF's strong foundation makes it one of the most trusted names in commercial real estate. NKF's full-service platform comprises BGC's real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com. NKF is a part of BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets. BGC's common stock trades on the NASDAQ Global Select Market under the ticker symbol (NASDAQ: BGCP). BGC also has an outstanding bond issuance of Senior Notes due June 15, 2042, which trade on the New York Stock Exchange under the symbol (NYSE: BGCA). BGC Partners is led by Chairman and Chief Executive Officer Howard W. Lutnick. For more information, please visit www.bgcpartners.com. DISCLAIMER All information contained in this publication is derived from sources that are deemed to be reliable. However, NKF Devencore has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NKF 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 NKF Devencore, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.
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