Latest Q2 market report 2024
Market Outlook
The Greater Montreal Area (GMA) office sector ended 2023 with negative 1.3M square feet in net absorption as tenants continue to assess their workplace strategy options.
The overall office vacancy rate in Montreal increased to 15.2%, reflecting a year-over-year (YoY) rise of 81 basis points (bps). Midtown experienced the highest level of negative absorption of all three markets, totaling -709,981 square feet for 2023. Tenants continue to flock towards quality Downtown product, keeping the demand for net asking rates steady at a 2.7% YoY increase to $20.01.
In Q4, the vacancy rates for Class A buildings in the Downtown sector had a quarterly increase of 60 bps, reaching 13.8%. The increase can be attributed to 236,000 square feet of occupied space in the Downtown Core which became vacant. Despite the increase in vacant space for Class A, Class B vacancy decreased 30 bps to 16.4%. As the office market continues to adapt in this new cycle, the flight-to- quality trend has expanded into Downtown Class B market. Tenants are motivated to relocate due to the appeal of lower rental costs, enhanced amenities, and improved access to public transportation.
In 2023, tenants chose to centralize their operations in the Downtown Core, comprising 31% of all leased deals. The average size of lease transactions was 6,206 square feet, while sublets had an average deal size of 9,595 square feet. The Suburban market continues to be attractive and ended 2023 with just under 1 million square feetleased, a 22% yearly increase. As a result, the vacancy rate dropped 100 bps YoY to 15.8%
Sublet activity continues to impact the market, with availability increasing 14.4% YoY to 3,083,787 square feet. Despite National Bank adding 136,000 square feet of sublease space to the market, the volume of sublet listings coming to market has been steadily decreasing.
Once Broccolini’s Saint-Jacques project is fully delivered in early 2024, the GMA will be left with a scarce amount of office product under construction. With a lack of new supply in the2024 forecast, tenants will be focused on having turnkey spaces on their wishlist. As it stands, Downtown and Suburban markets remain the most attractivefor tenants.
