Future Cities
2022 North America Industrial Big Box Review & Outlook: Montreal
March 11, 2022 5 Minute Read
The Greater Montreal industrial market continues to outpace its Canadian counterparts with year-over-year rent growth of 32% in 2021 and nearly 100% from five years ago, making it a primary target for investors. After 11 consecutive quarters of positive net absorption, vacancy rate is now at just 1%. Investors and developers are aggressively seeking new development sites to build next-generation big-box facilities given the lack of supply to fulfill demand. There currently is 3 million sq. ft. of industrial space under construction, which likely will be absorbed by 3PLs and e-commerce users before completion.
Demographics
More than 5 million people live within a 50-mile radius of the market core, with an expected growth rate of 3.8% over the next five years. The region can reach more than 10 million people within 250 miles.
Figure 1: Montreal Population Analysis
Source: CBRE Location Intelligence.
The local warehouse labor force of more than 136,000 is expected to grow by 8.0% by 2030. The average hourly wage of a non-supervisory warehouse employee is C$16.97 (US$12.65), the lowest hourly wage of any other market in this report.
Figure 2: Montreal Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
*Median wage (1 year experience); non-supervisory warehouse material handlers.
Location Incentives
Over the past five years, there have been 86 economic incentives deals totaling more than $777 million at an average of $124,614 per new job in the Montreal metropolitan area, according to Wavteq.
According to CBRE’s Location Incentives Group, the extent, if any, of province and local incentives offerings for industrial projects in metro Montreal depends on location and scope of the operation.
Figure 3: Montreal Top Incentive Programs
Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.
Logistics Driver
Via the St. Lawrence River, the Port of Montreal provides a direct route to the Atlantic Ocean. This international year-round port handles cargo from more than 100 markets in Europe, central Canada and the Midwest and Northeast regions of the U.S. The port processes more than 18 million metric tons of cargo annually and provides the shortest route between North America and Europe. With its own rail line that connects to Canada's two largest railroads, Canadian National and Canadian Pacific, the port provides direct logistical access throughout North America.
Originating in Montreal, the St. Lawrence Seaway provides sea-bearing container ships from the Atlantic Ocean access to Lake Ontario and the upper Great Lakes. This series of locks, canals and channels extends from Montreal to Lake Erie and a series of approximately 40 on/off ramps along the way provide ample connectivity to the highways and railways of North America.
Via the St. Lawrence River, the Port of Montreal provides a direct route to the Atlantic Ocean.
Capital Markets
With surging occupier demand, investors are increasingly targeting industrial assets with short-term leases to capture future rent growth. While there is strong interest from a broad range of investors, the very limited supply of for-sale properties has raised prices to record highs. Moreover, Montreal has one of the smallest development pipelines among the major North American markets due to a scarcity of serviced and entitled land. Robust investor demand is forecast for 2022.
Figure 4: Cap Rate Comparison
Source: CBRE National Partners.
Supply & Demand
With 72 million sq. ft. of total inventory, Montreal is the second-largest big-box market in Canada. Like Toronto, the market is land constrained and has a vacancy rate of just 1.6%, the seventh lowest among markets in this report. The lack of available space increased the average taking rent to a record-high C$9.26 last year.
Developers delivered a much-needed 1.4 million sq. ft. of big-box facilities last year. Another 3.0 million sq. ft. is currently under construction, 61% of which is preleased. Like most port markets in North America, there is exceptional demand but a lack of available space. This will lead to increased taking rents in 2022.
Figure 5: Share of 2021 Leasing Activity by Occupier Type
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 6: Leasing Activity
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 7: 2021 Construction Completions vs. Overall Net Absorption
Source: CBRE Research.
Figure 8: Direct Vacancy Rate by Size Range
Source: CBRE Research.
Figure 9: Under Construction & Percentage Preleased
Source: CBRE Research.
Figure 10: Historical First Year Taking Rents (psf/yr)
Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.
Explore Big Box Insights by Market
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Southern New Jersey/Eastern Pennsylvania
March 11, 2022 5 Minute Read
The pandemic supercharged demand in the region, which ended 2021 with a supply shortage of large-format buildings driven by record preleasing activity.
