TORONTO — Global commercial real estate adviser, Avison Young, recently released its Q2 industrial report for Montreal which found average asking rents fell to levels last seen in 2022 and more favourable market conditions are in sight.
The report found there may be a possible shortage of industrial space projected for 2026, unless new projects are launched before the end of this year.
As construction activity decreased over the past year, the area under construction at Q2 dropped from 6.8 msf in 2023 to 3.6 in 2024. Projects currently under construction should be completed by late 2025, while 8.5 msf of industrial space are available for pre-lease.
Developers who take the risk of launching a project on a speculative basis will take the wind out of the sails of their competitors at the first signs of an upturn in demand. However, it will be necessary to adapt supply to tenants’ appetite for smaller spaces.
The report also found:
- Total available space continues trending up, with an additional 2.4 msf on the leasing market since last quarter. Sublets have however stabilized slightly.
- The vacancy rate for multi-tenant properties has reached the 5.0 per cent threshold in 2024, while single-tenant is approaching 3.0 per cent. In Q2 of 2023, these rates were at 3.9 per cent and 1.3 per cent respectively.
- Overall vacancy (14.0 msf) is driven by the larger Saint-Laurent and East End submarkets, which account for 38 per cent of total inventory and a little more than one-third of all vacant space.
- Negative absorption combined with new supply pushed availability rates further up this quarter. Nearly 2.7 msf of new supply are slated for completion by year end.
- Vacancy rates are approaching the 5.0 per cent threshold for all properties over 100,000 sf. Smaller properties, which were pointing to lower vacancy rates in Q1, are seeing a new uptick in vacancy in Q2. The number of available spaces over 100,000 sf rose from 47 to 57 with these new options representing a 2.6 msf increase in new availability.
- Rising vacancies are impacting net asking rents, which now stand at $15.70, down from a peak of $16.80 for the same quarter of last year. Asking rents are back to mid-2022 levels.
- Rental rates for spaces with clear heights of 23-26 feet have fluctuated the most since the last quarter, from $15.76 to $14.46, a reflection of the challenges faced by large industrial property owners.
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