Montreal commercial real estate market activity continues torrid pace of 2019 but will likely change in second half of 2020

Published May 14, 2020

The Montreal market area continued to be a choice for investors, with a number of high profile commercial transactions closing in the first quarter.  Montreal investment volumes were up 59% in the first quarter from Q1 2019, registering $2.2 billion in activity. Deal volume climbed by 33% to 399 transactions in the first quarter to begin the year compared to the first quarter of 2019. Most of these transactions were reflective of the deal overflow from Q4 2019.

Montreal market area property transactions all sectors by quarter

Sectors recording the biggest increase in investment volume in the first quarter of 2020 were the office sector, which saw a 533% increase, and the industrial sector, which increased by 55% compared to the same quarter last year. According to the Q1 2020 results of Altus Group’s Investment Trends Survey, while Montreal investment activity started strong in 2020 with a slight compression in overall cap rates, significant momentum has since been lost as a result of the market pause from the COVID-19 pandemic and the impact will be better measured in the second half of the year.

Montreal market area cap rates Q1 2005 - Q1 2020

Notable Montreal investment transactions:

World Trade Centre Montreal, Ville-Marie – Office
Allied REIT’s acquisition of 747 & 751 Square-Victoria Street, from Ivanhoé Cambridge was the largest transaction registered this quarter, a Class-A office building for $276 million. The office and retail complex was nearly 91% occupied at the time of sale, with a weighted average lease term of over six years.

1100-1150 René-Lévesque Boulevard West, Ville-Marie – Office
This Class-A, 26-storey building was the second largest transaction recorded this quarter. The building was acquired for $225 million, a joint investment for Groupe Mach and Groupe Petra. This 565,000 square foot office tower was previously owned by Oxford Properties Ltd, and was over 90% occupied at the time of sale with a weighted average lease term of approximatively 5.5 years. The office building holds LEED Gold and BOMA Platinum certifications.

1611 Crémazie Boulevard East, Ahuntsic-Cartierville – Office
The Class-A, multi tenant office building was purchased by Galion Équité for $41 million. The 10-storey office tower was previously owned by Industrial Alliance. The Gold BOMA office building has an estimated total net rentable area of 214,189 square feet and was built around 1985.

EQ8 (Phases 3 & 4), LaSalle – Apartment
Manulife Investment Management acquired EQ8, located at 6790 & 6890 Newman Boulevard. This newly constructed purpose-built apartment complex contains 300 units and was acquired for $105 million. The two 16-storey towers are located in the borough of Lasalle and benefits from its close proximity to the Angrigon subway station. The construction of the complex was completed in January 2020 and was fully leased at the time of sale.

PIRET Portfolios, GMA – Industrial
Pure Industrial Real Estate Trust continued their strong interest in the Montreal market by acquiring a total of 7 industrial assets in January and February from Manulife in two separate portfolio transactions. The two portfolios were purchased for a total consideration of $86.8 million with a total leasable area of approximately 777,300 square feet. With these new acquisitions, Pure Industrial Real Estate Trust has been one of the most active investors in the Montreal industrial market, acquiring nearly $336 million of assets since 2019.

135 du Cheminot Street, Vaudreuil-Dorion Industrial
Another significant transaction in this quarter in the industrial sector was the purchase of 135 du Cheminot Street located in the outskirts of the Island of Montréal. The 200,442 square foot industrial facility was built in 2017 and expanded in 2019. The property contains approximately 24,000 square feet of office and has 34-foot ceilings in the warehouse portion. Fiera Real Estate purchased the asset for $28 million, with a long-term lease in place by Fastco Canada.

Montreal property transactions by asset class Q1 2019 vs Q1 2020

The first quarter of 2020 was solid for the Montreal investment market based on strong investment activity that occurred in the fourth quarter of 2019. A slowdown in deal volume is foreseen in the second half of the year, based on the market pause of the last couple of months. Slower economic growth has also led to higher unemployment rates and has investors reviewing their mitigation strategies to prepare for changes in tenant demand as they face challenges and medium to long-term pressures.

 

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MEDIA CONTACT:

Elizabeth Lambe
Manager, Communications
Altus Group
(416) 641 9787
elizabeth.lambe@altusgroup.com

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