MONTRÉAL - In its Real Estate Market Study published today, Newmark Knight Frank Devencore reported that vacancy rates in downtown Montreal's Class "A" and "B" office buildings continued to increase over the last half of 2014, and are now at 8.6%, up from 8% at the beginning of 2014. Availability rates--which take into account the office space that may currently be occupied but is available for lease or sublet--have increased to 16%.
"There are a number of reasons for the high availability rate," said Jean Laurin, President and CEO of Newmark Knight Frank Devencore. "First, the new office developments coming onto the market have boosted the total available inventory. Second, the ongoing redevelopment of industrial properties has attracted a certain category of tenant--often the creative class, or those companies seeking a more informal workplace or simply cheaper rents. And third, when relocating to new office spaces, tenants are reviewing their occupancy standards. Using space more efficiently can translate directly into reducing one's space needs, and hence lowering occupancy costs over both the short and long term."
Mr. Laurin also noted that, with availability rates at a decade-long high, tenant opportunities are abundant. "Tenant leverage is also greater, and many landlords are willing to negotiate very competitive leasing transactions," Mr. Laurin said. "However, tenants should recognize that the availability of office space is building specific, so the market must be researched. A careful needs analysis should also be undertaken, as the range of options includes new, state-of-the-art tower space, older space, and redeveloped space. For larger tenants, such an analysis should ideally take place three to five years before lease expiry; even smaller tenants should examine their needs at least three years in advance."
NKF Devencore's report also highlights the unprecedented construction activity that is currently taking place. More office developments and redevelopments are underway than at any time over the past 15 years, a downtown condo boom is in full flight, and much-needed infrastructure work has been initiated. These are all positive signs for the Montreal economy, and speak to both investor and developer confidence.
Most of Canada's largest cities have seen increases in office vacancy rates. In Calgary, where the energy sector drives the local economy, the combined Class "A" and Class "B" vacancy rate in office buildings jumped from 4.4% to 6.2% over the last six months of 2014. There were more moderate increases in vacancy rates in Toronto, Edmonton, Winnipeg and Halifax, while rates were essentially unchanged in Ottawa and Vancouver over the same period. One of the factors affecting the rise in the country's overall vacancy rates is the new inventory that continues to be built. Over 4 million feet of office space was added to the market inventory in 2014 alone.
About Newmark Knight Frank Devencore
As part of Newmark Grubb Knight Frank, one of the world's leading commercial real estate advisory firms, 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.
About Newmark Grubb Knight Frank
Newmark Grubb Knight Frank is one of the world's leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NGKF's 12,000 professionals operate from more than 330 offices in established and emerging property markets on six continents.
With roots dating back to 1929, NGKF's strong foundation makes it one of the most trusted names in commercial real estate. NGKF's full-service platform comprises BGC's real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com.
NGKF is a part of BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets. BGC's common stock trades on the NASDAQ Global Select Market under the ticker symbol (NASDAQ: BGCP). BGC also has an outstanding bond issuance of Senior Notes due June 15, 2042, which trade on the New York Stock Exchange under the symbol (NYSE: BGCA). BGC Partners is led by Chairman and Chief Executive Officer Howard W. Lutnick. For more information, please visit http://www.bgcpartners.com/.
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