Montréal real estate markets: A strong activity despite the pandemic
In an uncertain context related to the pandemic, the real estate markets in Montréal are reacting vigorously for some and stabilizing for others. The industrial and multi-residential markets are booming, but what about the office market, which still raises so many questions?
Each quarter, the Groupe Alfid, specializing in property management, offers a detailed report, supported by macro and micro economic indicators to help you see clearly on the property markets.
Economic Overview: encouraging data
The whole world has gone through a public health crisis as well as an unprecedented economic crisis. Fortunately, the worst of the pandemic seems to be behind us. In this context, the Canadian economy has proven to be more resilient than expected and several factors indicate that it will rebound convincingly this year.
Real gross domestic product (GDP) increased 0.4% in February 2021, after advancing 0.7% in January 2021. This 10th consecutive monthly increase continued to offset the steepest declines on record in Canadian economic activity seen in March and April 2020. However, the overall economic activity was approximately 2% below the level observed in February 2020, before the pandemic.
In April, under the impact of the third wave of COVID-19, year-over-year growth in consumer prices increased at its fastest pace since May 2011 (+ 3.4%), mainly due to the marked drop in prices observed during the first months of the pandemic.
The unemployment rate in Canada fell 0.7 percentage points to 7.5%, representing the lowest rate since February 2020, but remains far from the front pandemic levels. That said, this rate is better in the province of Québec compared to the March 2021 figures.
Tenants favor certain categories of office buildings
In Canada, office vacancy is slowing down to emphasize the attractiveness of the properties of quality class A. While there is uncertainty in the market for the coming quarters, vacancy will however continue at a slower pace than in previous quarters. The city of Montréal showed a vacancy rate of 9.6% before pandemic, and 13% in April 2021, figure below the national average in Canada, which is 14.6%.
Net rents in downtown Montréal decreased by 2.5% compared to the previous quarter, while the suburb sector averages increased, particularly in Laval, on the South Shore and in the West Island. Rents in the city center declined moderately to the level of average net rents for category B buildings, bringing this drop to 3.7%, which once again accentuates tenants’ interest in buildings in categories A and above.
Residential real estate: Montréal, a better student than others in Canada
For the three largest metropolitan areas, the overall vulnerability of the housing market was high in Toronto, but remained moderate in Montréal and Vancouver. Declining international migration, the lack of in-person university classes, and the return of tourist rental apartments to the long-term rental market have all contributed to rising vacancy rates without reducing appetite of the investors for multi-residential buildings.
Outlook: a rebound expected for the start of the school year
While the battle against COVID-19 is not won, the deployment of the vaccine allows us to see bright spots in the real estate sector. Indeed, we expect a strong uninterrupted activity in some parts of the sector and a stabilization in others.
We will have to wait to see a stabilization in the office segment. Rental activities should resume in July 2021, while companies will formalize their strategies aimed at a more or less permanent return to the office.
Currently, it is especially important to know the long-term repercussions of working from home. While the latter is an integral part of the solution, the value of socializing, teamwork, spontaneous collaboration and face-to-face business cannot be understated.
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The company in brief:
The Alfid Group supports its private and public partners with its personalized investment services and 360-degree real estate management. The Alfid Group offers a diverse range of management services for office buildings, multi-unit buildings, commercial and industrial spaces ranging from purchase to sale, including security and maintenance. The Alfid Group also carries out brokerage activities and advises its clients on the most appropriate investment formulas. With 390 employees, the Alfid Group is well equipped to deal with a wide variety of management and real estate matters. Alfid currently manages several thousand apartments in Montréal and its suburbs, as well as nearly 4,000,000 square feet of office, commercial and industrial premises.