Target’s decision to build a 1.3 million square-foot distribution site close to Highway 401 in Cornwall follows similar decisions by Walmart and Shoppers Drug Mart to build on 1.5 million square-foot and 600,000 square-foot properties respectively.
Meanwhile, large industrial parks around Montreal have lots of availability.
“We’re losing companies from Quebec,” says Jean-Marc Dubé, Vice President of Colliers International and a chartered real estate broker in Montreal. “You have towns just outside of Quebec in Ontario seeing booms. Cornwall is seeing an industrial development boom by companies that could have located in Quebec.”
Despite his worries about Montreal’s industrial market, Dubé says this year was the best he’s seen in two decades. Strong capital markets and few development projects kept lease prices in older industrial parks high.
Still, he expects business to flatten out in the next quarter, primarily because the user market has been dropping since late 2012. Pension fund managers are telling him they’re pulling out and traditional buyers now favour commercial, residential and retail investment.
In such circumstances, Montreal’s many old industrial buildings could pose a problem.
“It’s extremely expensive to redevelop these buildings or even raise the roofs,” says Dubé. “It doesn’t make any sense to add to them. We’re seeing a lot of low ceiling old manufacturing spaces being redeveloped downtown, primarily into condos. Where that’s not going to happen, they’re offering lower rents. Rents on these are going to get lower and lower.”
Note: This article appeared on page 22 in the Spring 2013 Real Estate Forum magazine, which can be read in it’s totality at: http://www.realestateforums.com/crefm/docs/!_REF_SPRING_2013_Montreal.pdf.
