Rent growth stalls as price reductions appear in top-tier submarkets

The Greater Montreal Area (GMA) has seen average rent decline slightly over the last four quarters. At the beginning of 2023, the market was at an all-time high, with asking rents of $16.75 per square foot (psf); however, by Q2 2024, rents had declined 8.2% to $15.37 psf. Despite the decrease in net asking rents, operating expenses have largely increased as property taxes are passed on to the tenant on net leases. Tax bills are experiencing significant jumps due to reassessments, as municipalities catch up to rising sale prices. Montreal’s industrial property taxes grew by almost 30.0% over the past five years, contributing to a significant rise in expenses, accounting for an average of 12.0% of a tenant’s total occupancy cost.

The decrease in rent prices is largely a reaction to market availability, as many landlords continue to offer better rates to attract more tenants. Price cuts can be observed in a few of the prominent submarkets. Year-over-year rent declines were recorded in Laval (8.0%), the West Island (14.0%), and Saint Laurent (4.0%) submarkets as vacancy continues to weigh on market prices.

Montreal’s market continues to decompress and inches closer to prepandemic norms, as vacancy continues to rise throughout 2024. This quarter, vacancy has reached 4.3% in the GMA; while including tertiary markets, blended vacancy is recorded as high as 4.7%. Tertiary markets’ increase in vacancy is caused by the deliveries of major Class A industrial assets, which remain to be filled.

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