Montreal industrial construction plummeted in the third quarter of 2024, says a new Savills report.

Projects under construction declined by more than 5 million square feet year-over-year to 3.1 msf from 8.5 msf. However, deliveries have slightly increased, rising from 1.3 msf to 1.4 msf year-over-year.

The market has seen significant changes in construction and delivery trends over the past year, according to the commercial real estate services firm. But some aspects have remained the same.

The local sector posted negative absorption for the ninth consecutive quarter, culminating in a total contraction of 2.1 msf in 2024.

Inventory growth has been notable, with an increase of 9.8 msf year-over-year, bringing the total to 331 msf in the third quarter of 2024 from 321.2 msf a year earlier. This expansion has contributed to a significant rise in the vacancy rate, which climbed by 170 basis points year-over-year to 4.8% from 3.1%.

The average asking rental rate has seen a decline, decreasing 5.2% year-over-year to $15.8 per square foot from $16.01 psf. The drop further indicates a shift towards a tenant’s market, said Savills.

Large leasing deals have been notable in the evolving market landscape. Significant transactions include Meubles RD leasing 299,300 sf and Berlin Packaging securing 150,225 sf, illustrating active tenant interest despite broader market challenges.

Sales activity has been particularly strong in the Laval submarket. Noteworthy transactions included FTAI Aviation’s purchase of a 526,000-sf aircraft engine maintenance and repair facility in Saint-Laurent from Lockheed Martin for $53.3 million or $101 psf. KingSett Capital completed multiple acquisitions, highlighting investor confidence in specific submarket opportunities, said Savills.

As the market continues to adjust, tenants are finding more favourable conditions, while landlords navigate the increased inventory and rising vacancy rates. The overall market dynamics suggest that an adjustment period is underway as the supply-demand balance continues to evolve.

Pictured: Former Lockheed Martin aircraft engine maintenance and repair centre in the Montreal area.

Photo: Lockheed Martin