MONTRÉAL - In its Industrial Real Estate Market Report published today, Newmark Knight Frank Devencore reported that there was positive space absorption in Montreal's industrial real estate sector through most of 2012 and overall availability rates fell into the 5% range, down 0.5% over the previous twelve months. At present there is an abundance of available industrial space in older buildings and in buildings with clear heights of less than 24 feet; conversely, there is a shortage in the market of more modern industrial properties and buildings with clear heights of 24 feet and more. Montreal's industrial real estate market is the second largest in the country, behind only Toronto.
In the city's specific industrial markets vacancy and rental rates can vary significantly. With a total inventory of approximately 146 million square feet, the West Island is the largest submarket in the city. Vacancy rates are currently in the 5.5% range, which represents a total vacant area of just over 8 million square feet. In St-Laurent, approximately 3.4 million square feet are available. On the South Shore, which is a market in growth mode, vacancy rates are tracking slightly higher than 11%, while in Laval vacancy rates are in the 6.0% range.
"One of the interesting characteristics of the current market is that there is a continuing demand from investors for industrial properties in the Montreal region, but the inventory of available spaces is relatively low," said Jean Laurin, President and CEO of Newmark Knight Frank Devencore. "Additionally, some tenants are also seeking to purchase existing premises in order to take advantage of low interest rates and avoid the escalating costs of new construction."
For 2013, Mr. Laurin anticipates steady activity in the industrial real estate market in the Montreal area. "Asking rental rates shouldn't increase to any significant degree, though operating costs will likely continue to rise," Mr. Laurin said. "In general terms, more modern spaces with ceiling heights of 24 feet and higher will remain in demand, while availability will be greater in the more dated industrial spaces. In these instances, landlords may be willing to negotiate upgrades and improvements. However, because leasing opportunities and rental rates can vary significantly in different submarkets throughout Montreal and the North and South Shores, tenants must evaluate their space needs very carefully and secure a broad-based understanding of the dynamics in the various submarkets."
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As part of one of the largest commercial real estate service firms in the U.S., Newmark Knight Frank Devencore is Canada's largest corporate real estate advisor and brokerage, exclusively representing corporate, industrial and retail space users. With offices across the country, Newmark Knight Frank Devencore offers its global clientele comprehensive services that are individually designed to ensure executive real estate decisions are supported by effective strategies and professional execution. To learn more about our capabilities, please visit www.devencorenkf.com.
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