Montreal real estate: Commercial investment on the rise

It isn’t just home and condo sales that are booming in Montreal. Investment in land, retail, hotel, industrial properties, and apartment buildings are also picking up.

Briana Tomkinson, Special to the Montreal Gazette, Updated: May 13, 2019

Record-breaking residential sales in Greater Montreal continued in April, increasing for a 50th consecutive month, according to the latest numbers from the Quebec Professional Association of Real Estate Brokers. But it isn’t just home and condo sales that are booming. Investment in land, retail, hotel, industrial properties and apartment buildings is also picking up.

As analyst Vincent Shirley and co-author Jenny-Kate Sgarbi note in an Altus Group Montreal Flash report released last week, while total sales of investment property across Canada declined last year because of softening markets in Vancouver and Toronto, here in Montreal, investment volume jumped 18 per cent, to the tune of $6.5 billion in sales.

The bulk of investment dollars went into apartment buildings in 2018, Shirley said, with the value of sales increasing 22 per cent compared with 2017 figures, to a total of $2.1 billion or about one-third of all real estate investment activity in the Montreal area. But the most notable increase, Shirley said, was in the industrial sector, which posted the largest absolute year-over-year dollar increase, rising $474 million to $1.2 billion.

Shirley said there had not been much activity in industrial real estate over the past decade, but the need for large-scale, automated distribution centres to keep up with demand from online shopping has retail giants looking to the outskirts of the city, where big parcels of industrial land are still available at a relatively affordable price per square foot.

While the main demand for investment property is coming from institutional investors and pension funds based in Quebec or other parts of Canada, Shirley said there are signs that foreign interest in Montreal apartment buildings, hotels and retail projects is increasing.

“Overall, the main demand is still local, but it is growing nationally and recently it is becoming global as well,” he said. “It’s all new for Montreal, but if Montreal aspires to be a city of the world, a world-class city, you have to expect the interest from the rest of the world. It’s a part of the game. It’s not a bad thing.”

According to the Altus report, foreign investment in Montreal real estate increased sharply last year, rising 183 per cent compared with 2017. The bump was largely due to what CBRE vice-president Marc Hetu characterized as an “acquisition binge” of apartment buildings by Sweden-based Akelius, which owns more than 50,000 apartments in five countries.

Akelius first entered the Montreal market in 2014, and has acquired a suite of properties in and around the downtown area. In 2018, the company bought three more: Peel Plaza and Regency Apartments in Golden Square Mile, and Le Montfort in Shaughnessy Village.

Hetu said a notable entry into the Montreal market in 2018 was that of U.S.-based Blackstone Property Partners, which he said was one of the largest and most powerful real estate investment firms in the world.

Blackstone partnered with Toronto-based Starlight Investments last June for its first investment in Canadian multi-family properties, purchasing a portfolio of six buildings: five in the Toronto area and one in Montreal.

Hetu said a company like Blackstone would be unlikely to settle for just one smaller property upon entering the Montreal market and predicted they’ll soon be looking to grow their interest in Montreal.

CBRE, an international commercial real estate and investment firm, provides market research, information and statistics to investment heavyweights worldwide. Hetu said international investors have been asking for information on Montreal for years, but until recently that interest hasn’t generated much action.

“We’ve seen a lot of tire-kicking, a lot of studying, but little execution, with a few exceptions,” he said.

Hetu said the growth in well-paid jobs, strong economic growth, new investments in infrastructure and apparent political stability, coupled with the comparatively lower prices of Montreal real estate, are a potent draw for investors.

“We’re still playing catch up in Montreal. We’ve been undervalued for a very long time,” Hetu said.

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