Montreal trophy-class office availability is on a downswing, says a new Avison Young report.

Trophy-class availability dropped to 9.5% in the fourth quarter of 2023, states the report. That level represented a 50-basis-point decline from the first quarter.

Trophy-class options are becoming scarce as availability approaches the pre-pandemic mark of 8.2%, said Avison Young. Conversely, overall office availability has continued to increase, approaching 20% in the fourth quarter as all non-trophy space availability increased.

Net rents in “prestige” buildings appeared to reach a ceiling of $33.50 per square foot in the fourth quarter of 2023. But that level far exceeded the average class B rent ($19.11.)

Class A availability held steady at 19.4% in the fourth quarter of 2023, and class B availability surpassed that level.

Montreal’s core area is experiencing the flight to quality that is occurring in all major Canadian downtown markets, said Avison Young. With new high-end projects unlikely to break ground soon, the flight will change direction.

“It will be the turn of tenants in Class B buildings to be courted to fill the many vacancies in Class A buildings at very competitive costs,” said the company.

Tenants hold the upper hand in lease negotiations amid the high vacancy as private landlords face liquidity challenges and institutional investors seek to preserve long-term asset values.

The overall Montreal office market has seen availability rise 910 basis points to 19.4% in the fourth quarter of 2020 from 10.3% in March 2020, when COVID-19 pandemic lockdowns began.

Sublease availability rose 60 basis points year-over-year in the fourth quarter of 2023 to 15.7%.

“Over the past quarters, high-quality subleases have found takers, while others have gradually been taken off the market as they reached the end of their terms,” said Avison Young. “However, new subleases have been added at a sustained pace in 2023, suggesting that space rationalizations are not yet complete.”

Marie-France Benoit, Avison Young’s national director of insight and innovation, led the team that prepared the report.