Marché d'édifices à bureaux de Montréal : actualités

[ErickMontreal]

 

Altus Insite Report :: Office Leasing Market, Major Trends & Issues

 

Un rapport très intéressant sur l`évolution du marché de bureau à Montreal au fil des années. Porter une attention particulière à la page 20, celle-ci traite des projets en "PRE-LEASING MODE".

 

500 De Maisonneuve W by Westcliff (385 000 S/F)

 

Place du Spectrum by SIDEV (440 000 S/F)

 

http://www.realestateforums.com/mtl/pdf/ML%20ppt/Session%20AA2%20-%20Sandy%20McNAir.pdf

[Habsfan]

Merci ErickMontreal. J'ai trouvé l'info très pertinente. Surtout l'info à la page 5. On peut voir que depuis la fin des années 80, le marché montréalais n'a vraiment pas vu beaucoup de nouvelles constructions...même aujourd'hui!

[blue_dragon]

Thanks for sharing that report, very interesting!

 

Any ideas what Place du Spectrum is? Is that the supposed Best Buy near MusiquePlus ?

[marco]

Thanks for sharing that report, very interesting!

 

Any ideas what Place du Spectrum is? Is that the supposed Best Buy near MusiquePlus ?

 

Yes it is, but 440000 sq/feet seems to be bigger that we saw on the renderings

[ErickMontreal]

 

NATIONAL COMMERCIAL REAL ESTATE VACANCY RATE FLAT; EXPECTED TO RISE SUBSTANTIALLY BY FIRST QUARTER 2010

 

At 3.9% Canada’s national downtown Class A office vacancy rate remained unchanged in the third quarter of the 2008 and is expected to remain near that level for 2008 and 2009. However, the coming year is the calm before the storm in terms of a low vacancy rate, because this will change dramatically at the end of next year as a substantial amount of new inventory is poised to be added to the market, driving the national vacancy rate up to about 5.9%, CB Richard Ellis Limited says in its third quarter 2008 report on the Canadian office market.

 

In the third quarter of 2009, approximately 3.1 million square feet of Class

A office space will be added to the Toronto downtown market while Calgary will add another 720,000 square feet in three buildings, one in the first quarter and others in the second and third quarters of 2009. These additions will skew the national Class A market vacancy rate because Toronto represents about 35% of the total office market in Canada while Calgary represents 12%. No sizable amounts of new space are projected to come on the market in the coming year in Montreal, Canada’s second largest market, nor in Vancouver. To put this in perspective, the last time a large supply of new office space came on the market in downtown Toronto was 1990-92 when 6.9 million square feet was added and drove the vacancy rate up to 18.6% in 1993.

 

Toronto’s downtown Class A office market is 34.3 million sf and the vacancy rate for this class of space is projected to reach 12% by the beginning of 2010, the highest it has been since 2004. The new space being added is close to9% of the total downtown Toronto Class A office market and clearly will impact on the availability of tenants to find plenty of space that suits their needs. Stefan Ciotlos, CB Richard Ellis Limited president, said that “The current low vacancy rates across Canada are making it difficult for tenants seeking officespace to find suitable space in many markets and we do not expect that to change before the end of next year. This is especially true in the large marketswhere the space in Vancouver, Calgary, Toronto, Montreal and Ottawa is extremely tight and tenants have little choice in finding sufficient space to meettheir requirements.

 

However, beginning in 2010 this will change as a substantialamount of existing and new space will be available, especially in downtownToronto where a large inventory will come on all at once and to a lesser degreein Calgary where the addition of the new space will be staggered over a longerperiod

 

“Beginning in 2010, both Toronto and Calgary especially will become a tenant market instead of an owner markets. There will be a sudden and dramatic increase in Class A office space in downtown Toronto but a slower one in Calgary because the new inventory will be added gradually.” In the third quarter of this year, Class A office markets were tight across the country except for London and the Waterloo Region. London saw its vacancy rate drop to 14.2% from 16.1% in the second quarter, a significant amount although it is a comparative small market; the Waterloo Region rose to 7.9% from 6.7% in the second quarter of the year. In the other markets, Calgary and Vancouver each recorded miniscule, almost un-measurable, vacancy rates of 2.1%. Calgary rose from 1.5% in the second quarter while Vancouver dropped from 2.9% in the second quarter. With vacancy rates this low there is virtually no space available for the majority ofcompanies seeking space so the statistical changes are not really significant,CBRE says.

 

Edmonton’s Class A vacancy rate was also extremely low in the third quarter, remaining about the same at 4.0% versus 3.8% at the end of the second quarter, again almost statistically insignificant. Winnipeg rose to 6.2 from 6.1%. Montreal, Canada’s second largest office market, also remained a exceptionally tight in the third quarter with the vacancy rate of only 4.3%, down from 4.4% in the second quarter.Ottawa’s vacancy rate for Class A space dropped to 2.0 from 2.2% while Halifaxrose to 4.4% from 3.5% at the end of the second quarter.

CBRE :: http://www.cbre.ca/NR/rdonlyres/9170577E-0351-4F28-97C1-6E1C0E4AB422/678974/CBRE3rdquarter2008final.pdf

[ErickMontreal]

 

NATIONAL COMMERCIAL REAL ESTATE VACANCY RATE FLAT; EXPECTED TO RISE SUBSTANTIALLY BY FIRST QUARTER 2010

 

At 3.9% Canada’s national downtown Class A office vacancy rate remained unchanged in the third quarter of the 2008 and is expected to remain near that level for 2008 and 2009(...)

 

Section Ressources ::

 

http://www.mtlurb.com/forums/showthread.php?t=7477

[ErickMontreal]

 

The Downtown and suburban markets going in opposite directions

 

:: MARKET SUMMARY ::

 

At the close of the second quarter, we had forecasted that the summer break would lessen the tightening of the Greater Montreal office market. In reality, the vacancy rate stood still at 6.6% with a small net absorption of 42,014 square feet at the end of the third quarter. This is the result of diverging downtown and suburban markets. The suburban market saw a negative absorption of 144,418 square feet, whereas the downtown market saw an absorption of 195,959 square feet of office space. In addition, occupancy costs paid by tenants have continued to slowly increase, in most markets, due to a reduction of free rent and tenant inducements given by landlords.

:: FORECAST ::

 

The market will continue to tighten in the next quarter but should nevertheless close the 4th quarter with a positive performance. An indication of this is that the majority of leasing transactions concluded this quarter were for smaller office spaces of less than 5,000 square feet. The Montreal office market is clearly in favour of landlords with vacancy rates well under 10% in the downtown area and 15% in the suburbs. For this reason, we will continue to see an increase in rental rates during the coming quarters, more specifically in the downtown market. As a result, tenants whose leases are expiring will need to take all necessary precautions in order to negotiate the most favourable rates.

 

:: DOWNTOWN ::

 

A total of 195,959 square feet has been absorbed this quarter in the downtown market. Although it fluctuated by 0.3%, the vacancy rate has remained stable. On the other hand, the rate for available vacant office space increased to 4.3% from 3.5%. In the Core Business District, with the absorption of 231,289 square feet, the vacancy rate dropped from 6.4% to 5.7%. This was largely due to five companies moving into their new offices: Quebecor World at 999 de Maisonneuve Blvd; Investissements PSP at 1250 René-Lévesque Blvd. West; BDO, Pictet and Lundbeck at 1000 de La Gauchetière. Consequently, the rate of available vacant office space decreased from 4.4% to 3.6%. Negative performance in the Downtown East market is the result of several small office spaces being vacated. Conversely, the negative performance of the Downtown West market is the result of one company vacating its premises, namely, BDO vacating 30,000 square feet at 4150 Sainte-Catherine Street West.

:: DOWNTOWN FORECAST ::

 

Closing this third quarter, only 23 Class A and B buildings, or 14% of the inventory in these two classes, were showing a vacancy rate over 10%, a 3% drop from the rate seen in the second quarter. There are five large blocks of contiguous space, 50,000 square feet or more offered for lease, but only one is actually vacant. For this reason, vacancy rates are expected

to continue to drop for the remainder of 2008 and as a result, rental rates, which currently stand at approximately $20.00 per square foot, will increase.

Current rental rates far from justify the construction of new buildings. Furthermore, the tight credit conditions and the general state of the economy make this option even more remote. As such, an option for tenants in need of more office space is the mid-sized building projects that promoters are developing in collaboration with municipal authorities. These projects require converting industrial buildings surrounding the downtown market into quality office space at a lesser cost. The competition is becoming more serious as the difference in rental costs between the downtown area and the suburbs continues to widen.

:: SUBURBS ::

 

The overall suburban submarkets have seen their vacancy rates increase significantly. With the negative absorption of 144,418 square feet of office space, the rate jumped from 8.7% to 9.6% at the end of the quarter. As for the rate of available vacant office space, it now stands at 4.4%. The west markets (St-Laurent, West Island and Centre West) are primarily responsible for the negative performance in the suburbs. These markets alone accounted for 137,000 square feet of negative absorption, the result of a series of mid-sized office spaces (approximately 7,000 square feet) being vacated. In all three submarkets, the reasons given for the negative absorption are the shifting of activities to other markets in the metropolitan area or to buildings not in our inventory, a reduction of office space needed or the termination of some of the company’s activities.

[Gbx]

Vraiment intéressant, cet article!

[ErickMontreal]

Avison Young Montreal | 2008 Review and 2009 Forecast |

 

 

 

2008 In Review

 

At the start of 2008, a strong Canadian dollar negatively impacted the province’s export industry. However, Montreal still posted positive economic growth of 1.7% for the year.2008 was a challenging year for the Montreal economy. The combination of a strong Canadian dollar for most of the year and the recent financial crisis in the United States negatively impacted the province’s export industry. Quebec’s economy is positioned in industrial sectors that are lagging or in a slump, such as the clothing, forestry, furniture and manufacturing industries. However, despite all this, Montreal still posted positive economic growth of 1.7% in 2008. Employment grew by 1.3% in the year and is anticipated to increase by another 1.5% in 2009. Consumer spending remained high and has contributed tremendously to economic growth.

 

Office

Engineering firms, many of whom are expanding to support major infrastructure projects in the province, spurred demand for office space. Downtown office vacancy closed the year at 5.4%, a significant drop from 6.2% at the end of 2007 and 9% at the end of 2006. The decrease in vacancyrates in the downtown market was accompanied by only a slight increase in rental rates. The suburban office vacancy rate has remained stable over the past four years, and closed the year at 13.1%. In 2008, 400,000 square feet (sq. ft.) of space was absorbed in the market, significantly lower than the 2007 absorption of 1.37 million sq. ft. Absorption of office space has been modest due to lack of quality space. Certainly, what is left of quality office space in downtown Montreal is quickly being absorbed, and options for tenants are becoming increasingly limited.

 

Industrial

Montreal’s manufacturing sector has been strongly affected by the rise in the value of the Canadian dollar. As a result, the industrial market has moved away from manufacturing to logistics and distribution type industries that drove demand for industrial space in Montreal. These types of companies require smaller spaces with greater clear heights. Consequently, vacancy rates increased for large spaces of 100,000 sq. ft. and more, whereas spaces between 15,000 and 25,000 sq. ft. became increasingly more difficult to find. Buildings with clear heights of 24 feet are in great demand and have an extremely low vacancy rate of approximately 1%. The rental rates for these buildings have therefore increased. Limited availability of appropriate space motivated tenants to construct built–to-suit projects that provide the amenities they require. Many of the older, more obsolete buildings are being demolished or completely renovated by developers.

 

Retail

Substantial consumer demand in Montreal created an active retail market in 2008, and retail sales rose by 5.5% in the year. In the downtown core’s central area, rental rates have quadrupled and vacancies are nonexistent. Rental rates closed the year at between $200 to $215 psf at the corner of Ste-Catherine and Peel Streets. Newcomers to Ste-Catherine Street include Apple Computer’s first Montreal retail location at 1321 Ste-Catherine Street West and H&M at the corner of Peel Street, with 20,000 sq. ft.

 

Investment

The financial crisis in the United States has softened the investment market in Montreal. Assets offered for sale require a longer exposure period. Investors using financial leverage as the basis for investment are having trouble completing acquisitions, thus diminishing the occurrence of successful

transactions. As a result capitalization rates increased by approximately 25 basis points this year. Despite this, many successful transactions were completed earlier in 2008. Industrial Alliance Insurance and Financial Services Inc. invested approximately $100 million to acquire a 50% interest in 1981 McGill College, together with a major financial partner that acquired the remaining 50%. Cominar REIT acquired 2001 McGill College for $165 million. Canderel and Proment sold the first Phase of the Bell Campus for $185 million to a German real estate investment fund.

 

 

2009 Forecast

 

Office

Montreal is the only city in Canada with no significant downtown office construction projects. Until recently, large tenants have been able to find suitable alternatives that were much less expensive than proposed new projects. However, as vacancy rates continue to plunge, the availability of quality space will become even more limited. Tenants will soon have no choice but to consider one of the new construction projects. Expect to see the beginning of one or two office construction projects in 2009. Potential office developments include Canderel’s development of 1201-1215 Phillips Square, Hines’ development of 900 de Maisonneuve, Magil Laurentienne’s office or mixed-use building at 701 University and Westcliff’s development of Phase 2 of Place de la Cité Internationale. Quebec’s 2008 budget aimed to stimulate business investment by eliminating tax on capital for manufacturers and by offering a tax credit for the purchase of manufacturing equipment and a tax credit for new information technology companies. Accordingly, the Province of Quebec agreed to provide investment banking giant Morgan Stanley with $60 million in tax credits for opening a new global technical support centre in Montreal. Morgan Stanley is currently searching for office space in anticipation of bringing staff levels to 500 or more. Phase 1 of the new Bell campus on Nun’s Island was officially opened in August of this year. Phase 2 is anticipated to be ready for occupancy in February 2009. It will comprise 235,000 sq. ft. of office space and amenities, bringing the total to 840,000 sq. ft. A third phase is also planned, thus bringing the campus total to approximately 1.4 million sq. ft. The downtown core office market has absorbed a large percentage of the space formerly occupied by Bell.

 

Retail

In 2009, Canadians will likely be faced with weakening job prospects, tighter credit conditions and economic uncertainty, thus leading to moderated consumer spending. Retail sales are expected to grow by only 3.5% in 2009, as opposed to the 5.5% growth seen in 2008. Demand for space on Ste-Catherine Street will slow dramatically in 2009. As a result, retail vacancy rates are anticipated to increase and if retail sales continue to lag, we expect to see some retailers walking away from stores that do not perform. This will give tenants the upper hand in lease negotiations.

 

Industrial

The diminishing strength of the Canadian dollar will benefit the export industry in 2009. Demand for industrial space will likely come from the logistics, distribution and aerospace industries. We anticipate the overall vacancy rate to increase, as more space comes to market and older buildings that lack required ceiling heights remain empty. However, the vacancy rate for smaller buildings with adequate clear heights will remain low. Rental rates for the older, more obsolete buildings will decrease and rates for newer, smaller spaces with adequate ceiling heights will remain flat. Industrial construction activity will continue to slow in 2009 as a result of financing difficulties coupled with high land and construction costs. However, industrial growth will continue off the island of Montreal due to lower land costs and higher availability.

 

Investment

Banks have tightened credit significantly and consequently, financing is more difficult to obtain. Borrowers that lack liquidity will likely have difficulty acquiring assets. This, however, will leave the door open for REITs and international investors with capital at their disposal. In 2009, we anticipate a general slowdown in the investment market. The majority of investment sales deals in 2009 will be concentrated on a few portfolio deals; mostly smaller transactions involving retail and warehouse properties. Prices for commercial real estate product will likely decrease and cap rates will increase by 50 to 100 basis points.

 

http://www.avisonyoung.com/library/pdf/National/forecast2009.pdf

[ErickMontreal]

COLLIERS INTERNATIONAL

 

 

UN MARCHÉ SERRÉ ET QUI LE RESTERA EN 2009

 

:: SOMMAIRE DU MARCHÉ ::

 

Alors qu’il avait marqué le pas au troisième trimestre, c’est avec l’absorption de 264 000 pieds carrés que le marché de bureau du Grand Montréal termine le quatrième trimestre de 2008. L’activité s’est essentiellement déroulée dans les édifices de catégorie « B » du centre-ville, qui a vu l’absorption de 173 000 pieds carrés d’espace. Le marché de la banlieue a connu une absorption de 92 000 pieds carrés concentré à Laval, dans le Centre-Ouest et sur la Rive-Sud. Tel que prévu, cette performance positive du marché montréalais est le résultat d’un ensemble de transactions de moins de 10 000 pieds carrés. Depuis le début de l’année, le marché a absorbé 2 millions de pieds carrés, dont plus des trois-quarts dans le seul centre-ville. Il s’agit d’une performance exceptionnelle résultant de la mise en oeuvre de transactions conclues dans les deux ou trois années précédentes.

 

Dans le même temps, l’augmentation des coûts d’occupation défrayés par les locataires a connu un ralentissement dans l’ensemble du marché au cours du trimestre, les propriétaires profitant de la fragilité de la situation économique sans pour autant renoncer à obtenir de leurs locataires un prix qui correspond à la valeur réelle de leurs services.

 

:: PRÉVISIONS ::

 

À ce moment-ci, les économistes n’anticipent pas de récession pour la région du Grand Montréal, mais seulement un ralentissement, en particulier si les divers ordres de gouvernement parviennent à se coordonner pour lancer rapidement les grands projets de construction et de rénovation des infrastructures de la région. Compte tenu de ces prédictions et des taux d’inoccupation particulièrement bas que connaît le marché, nous prévoyons que le resserrement se poursuivra en 2009 à un rythme plutôt lent, et que l’année affichera un bilan d’absorption positif.

 

Le marché de bureau de Montréal dans son ensemble penche nettement en faveur des propriétaires avec ses taux d’inoccupation nettement sous les 10 % au centre-ville et sous les 15 % en banlieue. En temps normal, nous assisterons donc à une hausse marquée des taux de location au cours des trimestres à venir, particulièrement dans le marché du Centre-ville. Cependant, la volatilité de la situation économique agira comme un frein et ralentira l’envolée des prix des loyers, sans cependant lui imposer de marche arrière ni l’arrêter complètement, ralentissement qui retardera d’autant la construction de nouveaux édifices. C’est pourquoi les locataires dont les baux arrivent à échéance dans les prochains 24 à 36 mois devraient dès maintenant faire une évaluation de leur situation et planifier pour tirer le meilleur profit possible de la situation.

 

:: CENTRE -VILLE ::

 

Le marché du Centre-ville termine le quatrième trimestre avec un taux d’inoccupation de 4,9 % . Du côté de l’offre, la situation n’a presque pas changée depuis la fin du troisième trimestre : on compte près de 760 espaces de bureau offerts et dont la dimension moyenne est de 5 000 pi. ca.,

alors que la dimension médiane est de 2 700 pi.ca. Le taux de sous-location vacant est à 0,3 %, soit 158 812 pi.ca. , une légère baisse de 0,1 % depuis le trimestre précédent. Seulement 45 locaux sont offerts en sous-location, et pour la majorité, l’échéance se situe dans les 24 prochains mois. Le marché du Centre-ville a donc connu une absorption nette de 171 935 pieds carrés au cours du trimestre, concentrée dans les édifices de catégorie « B » où 173 000 pieds carrés d’espace ont été absorbés, principalement dans les secteurs du Centre-des-affaires et du Vieux-Montréal. Il s’agit de la conclusion de transactions de moyennes dimensions. Se démarque du lot l’emménagement de SAP Lab dans son local de 36 700 pieds carrés du 700, rue Wellington. Le taux d’inoccupation a perdu 0,6 % pour terminer le trimestre à 4,9 %. Pour ce qui est des espaces inoccupés disponibles, le taux s’est maintenu à 4,3 %.

 

:: PRÉVISIONS POUR LE CENTRE-VILLE ::

 

Toute aussi technique et légère que l’on qualifie la récession qui attend le Québec, et tout aussi optimiste que l’on soit sur la capacité de la région montréalaise à faire mieux que le reste de la province, avec une variation positive du PIB en 2009, il n’en reste pas moins que plusieurs entreprises du Grand Montréal éprouveront des difficultés dans les mois qui viennent et en particulier en deuxième moitié d’année. Certaines devront probablement procéder à des mises à pied. Cette perspective en conduit plusieurs à entrevoir la résurgence d’un important marché de sous-location au centre ville, un peu comme lors de l’éclatement de la bulle des technologies en 2000.

 

Il ne nous semble pas que nous nous dirigions vers un tel scénario. Rappelons qu’en 2000, à la veille de la catastrophe, le centre- ville affichait des taux d’inoccupation de 12 %, causés par l’arrivée massive de nouveaux édifices sur le marché. Par ailleurs, la crise était concentrée dans un seul secteur économique, les technologies de l’information où plusieurs compagnies ont dramatiquement réduit leurs activités, quand elles n’ont tout simplement pas fait faillite, mettant sur le marché de la sous-location de grands blocs d’espaces dotés de baux dont l’échéance était assez loin dans le futur et concentrés dans un nombre restreint d’édifices.

 

Le marché de Montréal aborde cette nouvelle période difficile en meilleure position, avec un taux d’inoccupation autour de 5 %. De plus, nous n’assisterons pas à la saignée d’un seul secteur, c’est l’ensemble de l’économie qui connaîtra des difficultés. Certaines entreprises feront faillites, un plus grand nombre encore réduira son personnel. S’il est raisonnable d’anticiper des mises à pied représentant de 10 % à 20 % du personnel, cela ne libère toujours que de 700 à 1 400 pieds carrés chez un locataire moyen du centre-ville qui occupe environ 7 000 pieds carrés. En conséquence, le marché présentera une constellation de petits et moyens espaces disséminés sur l’ensemble du marché, avec seulement quelques espaces d’importance. Sans compter qu’il est possible que devant les coûts que la sous-location implique, certains décident de conserver ces espaces qu’ils auront besoin lorsque les conditions économiques redeviendront favorables.

 

Même si 1 million de pieds carrés étaient offerts en sous-location, cela n’ajouterait que 2 % au taux d’inoccupation du marché, le ramenant à 7 % ou 8 %, soit toujours bien en deçà du point d’équilibre de 10 % et loin des valeurs que nous avons connues lors des crises passées. En tout état de cause, cet ajout d’espace de sous-location aura comme effet de retarder la mise en chantier de nouvelles tours. Les taux de location sont toujours loin de justifier une nouvelle construction et l’assombrissement de la situation économique générale repousse encore plus loin cette éventualité, ce qui signifie qu’à court terme, il n’y aura pas de nouvelles constructions dans le centre-ville.

 

Cette situation maintiendra donc la pression sur l’offre d’espace. Les locataires en besoin d’agrandir leurs locaux pourraient être tentés par les projets de dimension moyenne que les promoteurs cherchent à mettre sur pied avec l’appui des autorités municipales. Ces projets consistent généralement en conversion d’anciens édifices industriels situés dans la couronne entourant le centre-ville en espaces à bureau, permettant ainsi d’offrir des locaux de qualité à moindre coût. Cette compétition devient d’autant plus sérieuse que l’écart des coûts entre le centre-ville et la banlieue va en se creusant.

 

_________________________________________________________________________________________

 

CB RICHARD ELLIS

 

 

:: MarketView Montreal Office ::

 

Hot Topic

The office rental market is holding on amid the current economic troubles.

• There has been an increase in available sublease space, especially in Class A buildings. This can be linked to companies cost-cutting initiatives. We expect the trend to continue over the next few months.
  

• New suburban completions struggle to attract tenants.
  

• Montreals market is expected to feel the impact of the economic difficulties by mid-year 2009.
  

 

The office market in the Greater Montreal Area (GMA) showed positive absorption in the second half of 2008, after recording negative absorption in the first half. Overall, demand for office space returned to the more modest and sustainable levels experienced in 2004 and 2005. The overall vacancy rate continued to decline and now stands at 8.2%, down from 9.4% one year ago. This decrease is evident mainly in Class B downtown space and in Class A suburban markets; however, current economic conditions will surely cause vacancy rates to rise in 2009. The Central Business District (CBD) had 461,562 SF of positive absorption in 2008. This is one third of last years extraordinary absorption of 1,358,647 SF. Net and additional rents have steadily increased, and the average asking lease rate (AALR) was $16.74 psf at the end of the fourth quarter, versus $15.68 psf at the end of 2007. Class A space, which experienced an increase in the AALR, has offset the decrease in Class B AALR. Average taxes and operating costs were $15.23 psf in the CBD as of the fourth quarter, which has risen from $13.90 psf at the end of 2007.

 

The Laval market continues to display strength and stability, with the vacancy rate down almost 300 basis points (bps) in three years. At the end of the fourth quarter, the vacancy rate for Class A buildings was 7.7% and 7.4% for Class B properties. New construction has been modest and is leased prior to completion. Despite the high demand for office space in Laval, rental rates have increased only moderately, with an AALR of $12.39 psf overall. The East End submarket remains firm, with vacancy rates in the 4.3% to 5.0% range for 2008. Rental rates declined marginally over the course of the year, largely due to the removal of the Olympic Stadium space from the market. Midtown ended the year on a strong note with 160,000 SF of sublet space coming off the market, resulting in a vacancy rate of 15.4%. The biggest story for Midtown is the completion of the 840,000 SF Bell Campus on Nuns’ Island.

 

After a strong first half, the South Shore market is now struggling with new supply that remains vacant. The vacancy rate rose from 4.0% at year-end 2007 to 8.0% at year-end 2008. Class A and B AALRs have also increased due to the asking rates for new buildings at 4605 and 4805 Lapinière Boulevard. The West Island submarket performed modestly in 2008, even though vacancy increased at year-end. The vacancy rate now stands at 16.4%, up from 14.7% in the first quarter; however, this is over 200 bps lower than in 2006 and 2007. The popularity of the West Island will ensure that rental rates slowly increase. The lack of new downtown office construction and solid demand should help downtown landlords maintain tenants and revenues; however, suburban office properties are more at risk, with a number of new properties struggling to sign new leases. In the meantime, some tenants are in the process of reorganizing or relocating their operations to minimize costs.

 

The amount of sublet space should be monitored in 2009. A number of tenants with regional offices in the GMA are already feeling the pinch and are looking to reduce space. As a result, quality space with favourable terms could become available for sublease. Significant ownership changes during the year included the sale of 1155 Rene-Levesque West to a group led by Jolina Capital, the sale of two ECommerce Place buildings and the acquisition of the Bell Campus by Kanam Grund, a German-based fund. 1981 McGill College was sold to Industrial Alliance and 2001 McGill College was sold to Cominar REIT. The Montreal market is still showing strong fundamentals and has not been detrimentally impacted by the global economic turmoil; however, the real challenge for Montreal’s office market should come over the next few months.

 

Canadas economy began to contract in 2008 due to the weakening global economy coupled with currency and oil price volatility. The outlook for the world economy has deteriorated significantly during the past few months and the global recession will be significantly deeper than previously anticipated. Canadian economists predict either negative or small growth for Canada in 2009. The national current account balance (imports vs exports) is expected to post its first deficit in a decade.

 

Over 1.0 million SF of new product was delivered in 2008. This number is significantly higher than in the past five years. A large portion of the new space can be attributed to the Bell Campus, which is 840,000 SF. Smaller 30,000 SF office projects were completed in Laval and Brossard. Landlords seem to be struggling to attract new tenants to recently completed suburban properties and the buildings now sit vacant. There are only four projects currently under construction in the GMA. One of which is the 250,000 SF l’îlot Voyageur project in the Berri-UQAM submarket of downtown, which has been on hold for more than a year. Plans for new downtown towers will remain on the drawing board until the economic uncertainty passes and major tenants can be signed.

 

Vacancy rates continued to decline throughout 2008, both in Class A and B buildings. The relative scarcity of new space in urban areas and low vacancy rates are expected to offset some of the impact of the economic downturn that is expected in early 2009. The amount of available sublet space should be monitored over the next year, especially in Class A buildings. Since businesses are reorganizing and downsizing, a substantial amount of quality space is expected to come on the market. The Bell Campus move to Midtown has opened up some new large blocks in Central Core Class A buildings; however, this space will not be available until Bell completes its move in July 2009. Currently, sublet space represents 10.7% of the total availability. Gross asking rents are holding steady at $25.87 psf for the GMA. The CBD experienced an increase in both net and additional rents, while the rents decreased slightly in the suburbs. Class A gross asking rents in the CBD tended to rise the most over the past year and reached $40.00 psf. On the other hand, Class B buildings are undergoing a small decrease in average asking lease rates. A significant rise in sublet space may cause landlords to decrease asking rents in an attempt to compete with the discounted price of sublets. Surburban office space seems to follow a similar rental rate trend, with Class A net and addtional rents increasing and Class B rates declining over the past twelve months.

 

Absorption decreased significantly in 2008 after an exceptional year in 2007. The current amount of absorption is similar to the amount of absorption recorded in 2004 and 2005. The CBD had 107,764 SF and 353,798 SF of absorption in 2008 for Class A and Class B properties respectively. Suburban absorption was 280,479 SF and 27,075 SF in 2008 for Class A and Class B respectively. Overall, there was 461,562 SF of absorption in the CBD and 307,554 SF of absorption in the suburbs. Only three submarkets had negative absorption for the year, Old Montreal, Berri-UQAM and Atwater Westmount, which are all in the CBD. Strength in the Central Core, Downtown South and Downtown West markets offset weakness in other areas.

 

Top Lease Transactions

 

49,500 Inspec-Sol Inc. Vertu, Saint-Laurent

49,500 Videotron 800 de la Gauchetiere W., Montreal

57,000 Morneau-Sobeco 800 Square Victoria, Montreal

59,000 United Parcel Service Inc. (sublessee) 105 Marcel-Laurin, St-Laurent

99,000 Hydro Quebec (sublessee) 700 de la Gauchetiere W., Montreal

13 000 Nouvelle Autoroute 30 S.E.N.C. 21025, autoroute Transcanadienne

17 600 1501, Avenue McGill College

3500 Bombardier Transport, 1570, rue Ampère

3500 CCLC Computer Library Inc.

2555 9955, rue Catania