The Greater Montreal area has the distinction of being one of the hottest real estate markets in the country right now. Residential sales have increased for a 50th month in a row. This according to statistics from Quebec Professional Association of Real Estate Brokers released earlier this month.
But Montreal isn’t just leading in residential sales. The total amount of investment in land, industrial and commercial real estate is on the rise too. According to a report by Altus Group, the Montreal Market Area saw a rise of activity of 18% in investment properties. This captures 2018 and compares on a year-over-year basis. The total reached $6.5 billion in sales.
The majority of those investment dollars went towards the apartment sector. Sales for 2018 increased by 22% on a year-over-year basis, totaling $2.1 billion.
Montreal commercial real estate is booming
The most significant increase was seen in the industrial sector, which saw its largest absolute year-over-year dollar increase. In 2018 it rose from $474 million to $1.2 billion. Let’s look at some of the reasons for this. Firstly, the increase in demand for additional space outpaced the amount of new supply added in 2018 (which was just under 880,000 sq. ft.). As a result, the overall vacancy rate for industrial space fell to 3.6% by the end of 2018.
As of the end of 2018, there were around 1.2 million sq. ft. of new industrial space under construction. Most of it will be occupied by a new IKEA distribution centre.
Office space has also seen a huge increase in demand. In 2018, only around 355,000 sq. ft. of new office space was added to the Montreal Market Area. This was a significant decrease from 2017’s 2 million sq. ft. As expected, demand quickly outpaced new supply. However, the overall vacancy rate in the office market remains historically high, at around 12%.
Most of the Montreal commercial real estate demand comes from Canadian investors. However, there are signs that Montreal is attracting the attention of foreign investors.
“Overall, the main demand is still local, but it is growing nationally and recently it is becoming global as well,” said Vincent Shirley, the co-creator of Altus’ report. “It’s all new for Montreal, but if Montreal aspires to be a city of the world, a world-class city, you have to expect the interest from the rest of the world. It’s a part of the game. It’s not a bad thing.”