The region is still at little risk of oversupply, new Avison Young report says
The Montreal industrial market continues to enjoy strong demand despite a slowdown in online sales this year, according to a new analysis by Avison Young.
“Vacancy rates remain historically low and new supply can’t keep up with occupier demand,” Avison Young said. “Investor appetite for industrial assets is not waning while leading industrial developers are active, building on spec high clear height and larger facilities that today’s tenants require. For now, rising rental rates continue to justify the increased construction and financing costs.”
Montreal’s industrial vacancy rate stood at 1.7% as of the end of the second quarter, placing the region at little risk of oversupply.
Still, “recession on the horizon could slow down manufacturing activity as well as online sales and reduce demand for space,” Avison Young cautioned.
Read more: Which Canadian cities are seeing home prices fall the fastest?
The average asking industrial rent rate in Montreal was at $15 per square foot in Q2, and even reaching nearly $20 psf for spaces deemed strategically located.
“These rates are driving occupiers further away from the island, to more affordable options,” Avison Young said.
“Rising financing costs and the looming recession, combined with record-high land prices, may cause developers to slow the pace of new supply. The options on the leasing market will therefore remain limited, to the advantage of owners.”
