Montreal Real Estate Market – The demand for new LEED® certified space has caused the biggest office building construction boom in over a decade across Downtown Montreal. However, market conditions have been deteriorating for the last 18 to 24 months and owners of second generation buildings are now left with more large blocks of empty space. There will be a sustained upwards pressure on vacancy rates in Downtown Montreal until at least 2016 as tenants continue to rationalize space or look for more affordable options outside the central business district.
The recently completed Aimia Tower has been the first building in the new development wave to be added to the Downtown inventory. Aimia occupies four floors and another 128,000 square feet of office space remains vacant. The next project to be completed this year will be the mixed-use District Griffin – Ilot 10 complex built by Devimco. Its anchor tenant IBI Group has already opted to put one of its four floors up for sublease. Since its launch last summer, the historical Gare Viger redevelopment project has been able to secure Light Speed Retail as an anchor tenant. The company was previously located in the Midtown North market and has quadrupled in size by committing nearly 60,000 square feet to Gare Viger.
The Deloitte Tower was able to secure a second large tenant during 2013. Rio Tinto Alcan has leased 188,000 square feet on the top 8 floors of the new tower. In terms of mixed-use developments, the l’Avenue project finally broke ground during 2013. The landlord is still looking for tenants to occupy the 76,000 square feet of office space set to be added to the Downtown inventory in the beginning of 2017. A surprise redevelopment announcement was recently made by the Québec provincial government who will be consolidating 176,000 square feet of office space in the Carré Saint-Laurent project developed by the Société de development Angus.
On the proposed development front, Downtown Montreal has 6 major office development projects totalling nearly 4.8 million square feet of new space. All of these projects are looking for anchor tenants and with little growth currently forecasted in the Downtown office market we do not expect any of the projects to break ground in the next 12 to 18 months. In addition to these 6 major development projects, Jesta Group and Devimco are both planning a subsequent phase for their current confirmed projects. In the event a project was to sign on an anchor tenant and enter the construction phase we would see vacancy rise above 12.0 percent across Downtown Montreal past 2017.