Montreal commercial real estate market update – Q4 2024
Our quarterly update on Montreal’s commercial real estate market, including overall cap rates and notable property transactions across asset classes.
Key highlights
The Montreal market saw strong investment volume in 2024, with $10.1 billion in dollar volume transacted, a 26% increase year-over-year
The retail sector observed the highest year-over-year growth, up 85%, as investors favoured food-anchored retail properties and redevelopment opportunities
Sales activity in the office sector decreased, down 31% year-over-year, as companies continued with rightsizing efforts
Multifamily remained a favoured asset class as rental market conditions remained tight, with nearly $4 billion in dollar volume transacted in 2024, up 42% year-over-year.
The industrial sector recorded $2.6 billion in dollar volume, up 34% year-over-year, as conditions eased with availability rates climbing to 7.8%, the highest in seven years.
The land sector recorded $1.2 billion in dollar volume, marking a 15% decrease year-over-year; residential land saw a 34% increase in interest, while ICI land declined by 32%
The Montreal market is on the mend, with transaction volume up 26% year-over-year
In 2024, the Montreal market delivered a resilient performance amid Canada’s economic slowdown, outperforming 2023 with $10.1 billion in dollar volume transacted, a 26% increase year-over-year. Five of the seven main property sectors reported positive year-over-year growth, with only hotel and ICI land sectors observing negative growth. Moreover, according to Altus Group’s latest Canadian Investment Trends Survey, multi-tenant industrial and suburban multiple-unit residential properties in the Montreal market were ranked the top two preferred product and market combinations by investors, respectively.
Figure 1 - Montreal property transactions – All sectors by year
The retail sector performed remarkably with $1.7 billion in dollar volume transacted, an 85% increase year-over-year. As Canadians adjusted their discretionary spending in response to rising interest rates and an increased cost of living during the first half of the year, investors began to favour properties with redevelopment potential. Investors also showed a preference for shopping centres and retail strips anchored by grocery stores and general merchandise retailers, reflecting the change in consumer behaviour. Following this trend, the Laval region observed the highest year-over-year increase, with notable regional shopping centre transactions such as CF Carrefour Laval and Galeries Laval, and a substantial number of retail strip transactions.
The multifamily sector posted nearly $4 billion in dollar volume transacted, a 42% increase year-over-year. Montreal’s rental market conditions remained tight in response to a booming rental demand outpacing available supply. While the reduction in interest rates and Montreal’s changes in municipal and provincial regulations managed to spur some positive sentiment for supply growth, development activity has remained tepid as expectations for more favourable financing conditions in the year ahead have kept investors on the sidelines. Despite the lagging supply, the multifamily sector remains a strong asset class with healthy long-term fundamentals.
Montreal’s industrial sector recorded $2.6 billion in dollar volume transactions, a 34% increase year-over-year, which was primarily attributed to a surge in activity in the second quarter as investors rushed to finalize deals ahead of the expected capital gains tax increase on June 25th. Otherwise, demand in the industrial sector has shifted from mid- to large-sized spaces to smaller spaces. According to Altus Group’s most recent Canadian industrial market update, Montreal’s industrial availability rate observed a 320-basis point increase year-over-year to 7.8%, the highest availability rate observed since Q4 2017, and its 6th consecutive quarter of negative absorption. In the fourth quarter, the market recorded 919,503 million square feet of new completions, with 94% of the space available for lease. In addition, nearly 1.1 million square feet of industrial product is under construction, with 63% of the space available for lease as pre-leasing activity has pulled back in response to softening conditions. While lower interest rates are expected to aid in the market’s recovery, rising geopolitical tensions primarily surrounding tariffs between Canada and the US may see businesses reassess their warehousing and distribution needs.
As companies continued to reevaluate their office space needs based on shifting workplace preferences and labour market conditions, investment activity in the office sector continued to experience declining transaction volume with sales activity down 31% year-over-year. A persistent trend in 2024 is the preference for higher-quality buildings, which has continued to widen the gap between Class-A and B office buildings. According to Altus Group’s most recent Canadian office market update, Montreal’s office availability rate flattened at 17.9%. Furthermore, one new fully leased mixed-use office building located at 1300 Sherbrooke Street West, totalling 77,392 square feet, was completed. In addition, one office building totalling 44,000 square feet is under construction, with 89% of the space available for lease.
Residential and ICI land sales recorded a total of $1.2 billion in dollar volume transacted, a 15% decrease year-over-year. Residential land posted $506 million, while ICI land posted $742 million, a 34% increase and a 32% decrease year-over-year, respectively. The residential land sector garnered renewed interest in the second quarter and recorded a pick-up by the end of the year after a brief downturn in the third quarter. Demand for ICI land has decreased as developers reevaluated their industrial development plans due to the market's industrial availability rates leveling off at an elevated rate.
Figure 2 - Montreal property transactions by asset class (2023 vs. 2024)
Notable transactions for Q4 2024
The following are the notable transactions for the Q4 2024 Montreal commercial real estate market:
Norgate Apartments (1200-1600 Décarie Street & 1205-1595 Ouimet Street), Saint-Laurent - Apartment
KingSett Capital and Starlight Investments sold 74 low-rise apartment buildings in Montreal’s highest-value apartment transaction of 2024. Located in Saint-Léonard, the 1,108-unit portfolio sold to a group of private investors for $197.5 million, representing a price per unit of $178,249. This portfolio transaction represents the largest single apartment transaction in Montreal since Ivanhoe Cambridge sold a six-building portfolio to Investors Group and Minto Apartment REIT for a consideration of $268 million, in May 2019.
Galeries Laval (1535 Le Corbusier Boulevard), Laval - Retail
In early December, the Fonds de Solidarité FTQ sold their 100% ownership interest in the Galeries Laval shopping centre to Jadco Group for $126 million. Located on Le Corbusier Boulevard in Laval, the shopping centre contains nearly 600,000 square feet of space, including more than 67,000 square feet of office space. Retail assets garnered significant attention in 2024, particularly due to the sales of CF Carrefour Laval ($553.2 million) and Les Galeries de la Capitale ($325 million), along with the opening of the new 824,000-square-foot Royalmount mall.
Candev Industrial Portfolio (4555 & 6325-6475 des Grandes Prairies Boulevard & 9350-9450 Langelier Boulevard), Saint-Léonard - Industrial
This five-building, 369,464-square-foot small bay industrial portfolio was acquired by KingSett Capital and Candev for a total consideration of $59 million, representing a price per square foot of $160. 2024 saw a flurry of investment activity in Montreal industrial assets for KingSett, which also divested from approximately $160 million of industrial properties through four major transactions. This included a seven building, 313,511 square foot industrial portfolio which was sold to a joint venture by Woodbourne Capital Management and Epic Investments.
CAPREIT Apartment Portfolio, Ville-Marie - Apartment
In late November, CAPREIT acquired two newly constructed apartment buildings from Montreal-based developer Mondev, each for equal consideration of $52.1 million. Both buildings are located just two blocks apart in Ville-Marie and contain a total of 253 residential units. Prior to this portfolio transaction, Mondev also sold one of their other recent developments in Ville-Marie, the 20-storey, 248-unit apartment building named Alba, for a consideration of $107 million. Mondev and partner Hillcrest Capital sold Alba to InterRent REIT and Crestpoint Real Estate Investments Ltd. in mid-October.
Figure 3 - Montreal OCR trends across 4 benchmark asset classes
In 2024, investment volume in the Montreal market exceeded the previous year by nearly $2.1 billion as interest rate relief and pent-up demand strengthened transaction activity, primarily in the multifamily and industrial sectors (e.g., rental apartments, small-bay industrial). The outlook for Montreal in 2025 is one of cautious optimism as leasing fundamentals saw gradual improvements throughout 2024 and investors have shown their willingness to deploy capital despite the uncertainties that lie ahead.
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Authors
Jennifer Nhieu
Senior Research Analyst
Stephen Robinson
Market Analyst
Authors
Jennifer Nhieu
Senior Research Analyst
Stephen Robinson
Market Analyst
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