The real estate community gathered Thursday to bury the hatchet with the city of Montreal and to inform them that the economy is doing well. However, the situation for office towers is going in the opposite direction. The pessimistic scenario presented by real estate experts sees the availability of office towers in the city center rising by as much as 25% by 2027.
Posted at 6:00 AM
Resolutely, the office is not finished suffering from the epidemic, even if workers quietly return to downtown.
Marie-France Benoit, director of market intelligence for Canada, at real estate agency Avison Young, warned that “there is work to be done to get people back downtown”. She was speaking to an audience of developers at the Montreal Real Estate Summit held at the Palais des Congrès Thursday morning.
Collaborated with Sylvain Leclerc, CEO of Groupe Altus. Together, they painted a picture of the Montreal real estate market two years after the pandemic.
In short, the residential rental sector and the industrial sector are doing great, while shopping centers and offices are taking a hit.
The office availability rate is currently approaching 17% in the city center. It was less than 10% before the epidemic.
The availability rate includes buildings that are vacant as well as other buildings that are immediately available for rental or subletting and for which the owner-manager continues to receive rent. In contrast, the vacancy rate is concerned only with vacant buildings that are not subject to a lease.
A higher availability rate is often a precursor to an increased vacancy rate.
Contrary to popular belief, Altus experts have found that office quality, A or B, hardly matters: Both classes, newer and older, suffer equally from post-COVID symptoms.
In the face of deteriorating market conditions, downward pressures on rents are increasing. The net effective rent, which remains in the owner’s pocket after he pays taxes, operating expenses, and rents to tenants to persuade them to sign the lease, is already declining. The price has come down to under $14 a square foot…and it probably isn’t out yet.
Mr. Leclerc plotted two scenarios for the next few years based on the popularity of remote work. The first stipulates that downtown office occupants will free up 20% of the occupied space at the end of the lease. His pessimistic scenario assumes a 30% free area.
Its two scenarios take into account employment growth equivalent to occupying 25,000 square meters2 offices per year. However, it is clear that it will remain insufficient to stem the upward trend in office availability.
According to the first scenario, the availability rate will increase to 21.4% in 2027. The worst case scenario pushes the availability to 25% of the total office stock in the city center.
By 2027, the National Bank will have acquired 100,000 square meters2 It will have completely abandoned the scattered offices in the city center which it currently occupies.
Mr. Leclerc clearly indicated that this was a simulation and that the reality may differ.
Remote job offers are on the rise
However, recent evidence suggests that the reality of working from home will survive the pandemic, whatever Elon Musk thinks.
According to an index provided by Marie-France Benoit, which surveys job offers on sites like Indeed, 15% of jobs posted in financial services are offered by telecommuting. In technology, this phenomenon affects nearly 3 out of 10 jobs posted. Before the pandemic, only 3% of jobs posted in these two sectors were working remotely.
“Even if the economy is doing well, even if there is job creation, this does not mean that the demand for offices will increase in the same proportions,” El-Sayed explained.I Show his audience.
Hybrid formula [combinant travail au bureau et en télétravail] “Here for good,” Mr. Leclerc added.
The good news is that Montreal’s economy has resumed growth. The increase in the number of jobs announced over the past two years in the technology sector was 29%. In Toronto, the jump was 62% and downtown didn’t do much better.
Employment growth is also seen in financial services. The number of job vacancies has increased by 39% over the past two years in Montreal. On the financial capital side of the state, the increase is 43%.
Reduced pedestrian traffic in the city center since the outbreak of the epidemic on May 23, 2022
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space for dialogue
In disagreements since the adoption of the Bylaw on Diversity (20-20-20), the developers and the City of Montreal shook hands at the Montreal Real Estate Summit Thursday morning.
The summit had invited Mayor Valerie Blunt to address the property developers on Thursday morning. Furthermore, Luc Rabouin, Head of Economic Development at the City Executive Committee, shared the platform during a workshop on collaborative partnerships with Laurence Vincent, President of Groupe Prével.
The poster he promised since ADI Vincent had made a noteworthy outing against the city at the end of April during a forum organized by the Montreal Chamber of Commerce where Mr. Raboin specifically participated.
In her speech, the mayor took pains to salute the initiative of the promoters who last Tuesday presented a common vision for the development of the Bridge-Bonaventure sector, which, however, differs significantly from the vision proposed by the municipal authorities.
“Condensation has its place,” she added. “The length and density are going to be there, if we want to build complete living environments,” she continued.
The mayor also noted the initiatives implemented by the city to make municipal services more efficient with regard to the real estate industry. The team talked about facilitating cells, a kind of consultation table responsible for making recommendations in this direction in the fall. It also highlighted the creation of a tactical team, including developers, to find solutions to build affordable housing.
“We have to keep talking to each other,” she agreed.
For his part, Luc Reboin, Mayor of Plateau Mont-Royal, expressed at the workshop his desire to move forward in the fall with the appointment of project managers whose job it is to become the city’s sole guarantor for developers. The project manager’s job is to diligently guide the project through the maze of municipal bureaucracy.
And so Mr. Rebwein is responding to a request from developers that Lawrence Vincent made public last April.
With Mr. Rebwein on stage, Lucy Caro, director of the City of Montreal’s Department of Urban Planning and Mobility, pointed to the possibility of opening a fast track to accept small real estate projects, so-called joints, with a view to speeding up the delivery of new housing.
Alternately, Mr. Robben and Mr.I Caro took advantage of the forum to expose the limitations that counties have on cities that contribute to administrative delays that the real estate community has denounced.
‘We have to work together’
The promoters did not stand idly by in front of this call in good faith for constructive dialogue.
“We have come to a time when we have to collaborate,” said Roger Plamondon, president of the Broccolini Real Estate Group, one of the city’s major developers and co-chair of the summit. “There are a lot of challenges to be faced, we all have to work together: the community, the private sector and the city. Recently, we have had very positive signals with initiatives from the city. […] We will not always agree, but we must be able to agree on a common core that allows us to move forward,” he hopes.
The challenges Mr. Plamondon refers to relate to the housing crisis, which has been exacerbated by the lack of new housing and the deterioration of housing affordability due to rising prices.
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