| |
Posted Jan 27, 2008, 10:55 PM
|
 |
Registered User
|
|
Join Date: Jun 2006
Location: Grand Bay-Westfield :: NB
Posts: 3,075
|
|
|
Cb Richard Ellis Q4 2007 :: Montreal Office Market View
CB RICHARD ELLIS Q4 2007 :: MONTREAL OFFICE MARKET VIEW
______________________________________________________________________________________________________________________
“The market has transformed to become a landlord's market especially with the lack of available space in the Central Business District.”
The office market had an exceptional fourth quarter in terms of absorption and experienced a positive absorption of 938,581 SF for the Greater Montreal Area. The vacancy rate fell below 10% to 9.4% compared with 11.9% during the same period last year, thus a decrease of 2.6%. It wasprimarily Class "A" buildings in the Central Business District that enjoyed the most activity. The vacancy rate for Class ''A'' buildings in the Central Business District dropped 3.9% compared to the last quarter of 2006. This sector has experienced, during the last quarter of 2007, a positive absorption of 557,111 SF. This represents more than half of the 959,307 SF absorbed last year in that submarket. The Class "B" buildings in the Central Business District have also performed well this quarter with positive absorption of 150,781 SF for a grand total of 399,340 SF in 2007. The vacancy rate dropped from 11.9% last year to 9.6% at the end of 2007. In the Central Business District the average asking gross rent was surveyed to be $36.50 psf for Class "A" and "B" buildings combined, the highest level since the second quarter of 2005. An historical peak was also recorded for Class ''B'' buildings with an average asking gross rent of $24.40 psf, the highest level in the last ten years. Landlords have been very aggressive in the last quarter, which allowed several to find tenants to lease complete floors which had been on the market for several months. That was particularly the case for Class "AAA" buildings where major transactions occurred in the fourth quarter of 2007. The three Class "AAA" buildings experienced 249,461 SF of positive absorption. The vacancy rate dropped from 17.1% in the third quarter to 6.2 % during the last quarter. These three buildings experienced a total absorption of 340,041 SF in 2007, which represents 25% of the positive absorption recorded in 2007 in the Central Business District for Class "A" and "B" combined.
Class "A" buildings reached historically low vacancy rates in the Central Business District, at 4.9%, levels which have not been seen in Montreal in the last ten years. Class "B" buildings in the same sector have also recorded historical lows in vacancy rates, reaching 9.6%, which is a 1.5% decrease from the second quarter of 2007. The vacancy rate in the suburbs also recorded its lowest rate in ten years to stand at 14.1% for Class "A" and "B" buildings combined. The last quarter of 2007 was exceptional in terms of absorption mainly in the Central Business District where 707,892 SF was absorbed, which represents 38% of the total annual absorption for the Greater Montreal Area. Absorption in the last quarter of 2007 accounted for nearly half of the annual absorption in the suburbs for the whole year. During the last quarter, two buildings totalling 175,000 SF were delivered in the Laval and Midtown submarkets. Currently, two projects are in the construction phase, first in the Central Business District submarket with 100,000 SF and 71,500 SF underway in South Shore submarket. With vacancy rates so low in certain submarkets, 2008 should be a crucial year for announcements regarding construction projects to provide the market with new office space. There is still 840,000 SF under construction by Canderel for the Bell Campus on Nuns’ Island which should be delivered during the third quarter of 2008.Despite a drop in asking rates from $14.17 psf to $13.69 psf over the last year, the overall asking rates have been rising in all sub-markets in the Greater Montreal Area mainly due to lack of space. This trend is expected to continue in coming years if no new construction projects are undertaken.
With a market so tight, one would be inclined to believe that developers would step forward with the aim of providing a new building for the downtown area to relieve the pressure currently affecting the market. However, only one project will bring new space and that project will not be completed until the first quarter of 2009. This is the old Gazette building, which will beredeveloped into a multifunctional building that will include 100,000 SF of brand new office space. This space will be a part of the new Westin Hotel in the international district which is currently being developed by Atlific Hotels and Resorts. Four other projects are also proposed and could become reality in the next several years, but these projects will not start until developers reach a critical level of pre-leasing from anchor tenants. The list of projects includes 900 de Maisonneuve with SITQ and Hines, 701 University Street with Desjardins Sécurités Financières/Weloga and Magil Laurentienne, 1215 Philips Square with Canderel and finally Place de la Cité Internationale by Westcliff and The The Canapen Group with two towers totaling 753,200 SF, which could be completed within 15 months following the start of construction. In the suburbs, the situation has improved this year with positive absorption of 489,837 SF, compared to the 18,489 SF of negative absorption witnessed in 2006. The vacancy rate stands at 14.1% for all sectors compared with 15.5% in the last quarter of 2006. The vacancy rate is still high, most notably in the West and East Island submarkets. For the West Island submarket, the gross rent decreased from $25.09 psf recorded during the last quarter of 2006 to $24.11 psf during the current quarter. For the East Island submarket, the high rate can be explained by the presence of vacant space in the Olympic Stadium tower, which accounts for 313,000 SF of vacancy. The vacancy rate in the South Shore submarket continues to decline, reaching 4.0%. Several construction projects will commence in 2008. Only one project is currently in its implementation phase, with 72,500 SF of new space. IWP and F. Catania et Associes will start construction during the second quarter of 2008. This will bring fresh supply to a market that has experienced vacancy rates below 5.0% since the first quarter of 2007. Other submarkets remained stable.The market has transformed to become a landlord's market especially with the lack of available space in the Central Business District. In 2008, increases in net asking rates as well as an increase in operation costs are more than likely to occur.
The economies of Quebec and Montreal have remained relatively steady in 2007. Real GDP growth has occurred this year, with increases from 1.7% in 2006 to 2.0% in 2007 for the province and 1.6% in 2006 to 2.1% in 2007 for Montreal. The Conference Board of Canada predicts increases in GDP for Quebec and Montreal to 2.6% and 2.7% for 2008 respectively. Although employment decreased in December, Quebec's employment growth was stronger in 2007 than in 2006. This province's growth rate was above the national average, at 2.4%, the best in five years, as the unemployment rate hit a 33-year low.The manufacturing sector continues to lag, due to the increased job losses in 2007 and a high Canadian dollar. The high dollar has affected exports, energy costs and local companies abilities to compete on the international market. The anticipated gradual reduction in the value of the dollar through 2008 will help this sector recover from a few years of instability. Domestic demand in such service sectors as retail, insurance and finance and wholesale and retail trade, continue to be strong in Quebec, helping to offset the struggles of the manufacturing industry. Consumer spending continues to bolster the economy. Overall, the outlook for Montreal and Quebec in 2008 remains positive. An expected improvement in the manufacturing sector, due to a slowly decreasing dollar value and improved efficiencies, and continued strong growth in the service sector and retail trade, will maintain stability.
TOP MONTREAL LEASE TRANSACTIONS
______________________________________________________________________________________________________________________
Size (SF), Tenant, Address
113,775 SF PricewaterhouseCoopers 1250 René-Lévesque Blvd. West
100,000 SF PSP Investments 1250 René-Lévesque Blvd. West
49,798 SF Morris & MacKenzie Inc. 400 de Maisonneuve Blvd. West
49,961 SF BDO Dunwoody 1000 de la Gauchetière St. West
44,126 SF SNC Lavalin inc. 1801 McGill College Avenue
39,000 SF Canoe Inc. 800 Square Victoria
25,498 SF GMP Securities 1250 René-Lévesque Blvd. West
Complete report :: http://www.cbre.ca/EN/Our+Offices/Quebec/Montreal/
|
|
|
Prev
Linear Mode
