The market has been disproportionately affected by the remote-work upheaval seen during the pandemic
Availability in the Montreal office sector is gradually approaching an unprecedented peak of 20%, according to the latest market report by Avison Young.
With availability touching 18.2% during the second quarter, “two to three days a week in the office is establishing itself as the new norm” despite availability in top-quality buildings remaining tight, Avison Young said.
“We expect availability to continue to rise slightly and for market conditions to remain favourable for tenants for another two years,” the report noted.
Sublets accounted for 14.7% of all available space, up from 13.4% in Q1 2023. An estimated 20.3 million square feet of office space was available in the region as of Q2, up from 20 million sf in Q1.
Approximately 2 million sf of office space across nine projects was under construction in Montreal during the second quarter.
“This unprecedented upheaval of the workplace and the role of office space caused by the pandemic has led many companies to reduce their office areas by 10% to 20%, or even more,” Avison Young said.
Amidst ongoing discussions about remote & hybrid arrangements, it's crucial not to overlook the prospects of the #office market. Check out @CMPmagazine for more on the importance of quality spaces & their role in shaping the modern workplace: https://t.co/FI9WF2x1n5 #AYdifference
— Avison Young | Canada (@AY_Canada) June 13, 2023
In this environment, preserving the value of Montreal’s office spaces will be the overriding concern.
“The tightening of credit conditions, which has hindered investment activity across all categories of real estate assets over the past year, is felt even more in the office segment,” Avison Young said.
“Grappling with uncertain demand and record availability rates, property owners manage to stay competitive by offering generous leasing incentive programs while keeping their face rate at levels that preserve the long-term value of their assets.”
The region’s average gross asking rent per square foot was at $39.30 as of the second quarter, including $17.53 psf average additional rent.
“Investors advocating for a long-term holding strategy are ready to wait for the office market to regain strength before disposing of their assets, which partially explains low investment activity levels,” Avison Young said.
