The asset class has benefited from a "significant appreciation" in prices over the last few years, says a new report
Montreal’s industrial rental rates are continuing to increase, although at a “less dramatic” pace than observed in 2021 and 2022, according to Avison Young.
As of the second quarter, the industrial net price per square foot in the region stood between $16 and $19.
“Nonetheless, tenants are not immune to further shocks that could exert additional pressure on occupancy costs,” Avison Young said. “Property values and taxes have skyrocketed in many municipalities, which reflects the significant appreciation in industrial assets that has taken place over recent years.”
In particular, industrial assets slated for roll-out between 2023 and 2025 have exhibited a surge in property values of 60.5%, “making industrial properties the asset class with the most significant increase in value in Montreal,” Avison Young added.
Michel Durand, Founder and CEO of MCommercial, said that while the commercial sector continued to labour under familiar struggles from 2022, there was room for optimism on the horizon.https://t.co/BDngGPTZL7#mortgagenews #commercialmarket #mortgageinsights #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 15, 2023
At the same time, the Bank of Canada’s interest rate hikes have yet to affect industrial investment activity.
“Transaction volumes even increased slightly, from $437.8 million in Q1 2023 to $449.5 million in Q2 2023,” Avison Young said. “The repercussions of the most recent key rate hike will probably be felt before the end of the year.”
However, while current industrial construction projects are projected to add approximately 7 million square feet to the Greater Montreal area, the pace of building appears to be slowing down.
“Construction costs are indeed stabilizing, but financing costs for new industrial projects are increasing,” Avison Young said. “The scarcity and high prices of land, as well as cities’ concerns around the best use of their remaining developable sites, are among the main factors contributing to this slowdown.”
