While many industrial markets across Canada are cooling, Montreal’s industrial sector remains a dynamic and rapidly growing market. The city’s northern suburbs, including Laval and the North Shore, are at the forefront of this growth, attracting significant attention from developers and institutional investors.
A Flourishing Industrial Market
The Greater Montreal Area (GMA) has witnessed unprecedented industrial development activity since the pandemic began. Over 17 million square feet of new industrial space has been added to the market since 2020, with just 2 million square feet currently available for lease. This construction boom shows no signs of stopping, as an additional 4.5 million square feet of industrial space is currently under construction. This contrasts sharply with other Canadian cities where industrial construction has slowed.
- Speculative Development Leads the Charge: Speculative (spec) developments are driving much of Montreal’s industrial growth. Laval and the North Shore are home to eight spec projects totaling 2.8 million square feet, representing 40% of the GMA’s spec pipeline. Developers are leveraging lower land costs and the rising popularity of these suburban markets to deliver state-of-the-art industrial facilities.
- Shifting Development Trends: Of the 20 industrial projects tracked in the GMA, only one is located on the Island of Montreal. This shift underscores the growing appeal of suburban markets for industrial development.
Market Insights: Availability, Rents, and Sales
- Availability Rates Are Stabilizing The industrial availability rate in the GMA has steadily risen from its record low of 0.9% in late 2021 to 3.5% in Q1 2024. Experts predict that this rate will stabilize at around 6.0%, slightly below the pre-pandemic average of 7.3%. The market is recalibrating as new projects come online and factors like high interest rates and slower consumer spending temper demand.
- Rents Begin to Decline After an unprecedented 15 consecutive quarters of rent growth, the GMA experienced three quarters of decreasing net rents in 2023. By Q1 2024, average asking net rents had fallen to $16.03 per square foot, ranking Montreal as Canada’s third most expensive industrial market after Toronto and Vancouver. However, suburban markets like Laval and the North Shore continue to command higher rents, averaging $18.19 and $17.16 per square foot, respectively. Increased availability and new supply are starting to exert downward pressure on rents, forcing landlords to offer creative incentives to retain tenants.
- Sales Activity Remains Strong The industrial sales market in the GMA is thriving, with 113 transactions recorded across Laval and the North Shore in 2023, up from 95 in the previous year. Average sale prices per square foot increased significantly, with Laval seeing a 31% rise and the North Shore up 20%. Properties under 25,000 square feet dominated transactions, reflecting strong demand from users who prefer to own their real estate.Looking ahead, the acquisition market is expected to outperform. Many buyers view real estate ownership as a sound investment, particularly with interest rates projected to decrease later this year, enhancing buying power and sustaining demand.
A Promising Future for Montreal’s Industrial Market
Montreal’s northern suburbs are well-positioned to continue leading the region’s industrial market expansion. With a steady stream of speculative projects, stabilizing availability rates, and robust sales activity, the GMA’s industrial sector is poised for sustained growth. Developers, landlords, and investors are adapting to market dynamics, ensuring the region remains a top destination for industrial real estate.
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