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2020 North America Industrial Big Box Review & Outlook

Montreal
March 22, 2021

“Benefiting from its strategic location and strong infrastructure network, Montreal provides distributors with first-in-class sea, air, rail and highway transportation. The market boasts a highly skilled and educated work force that keeps businesses competitive. Demand for industrial space is surging, driven mainly by food, e-commerce, transportation and 3PL occupiers.”
Ryan Cymet – Senior Vice President

Demographics

More than 5 million people live within a 50-mile radius of the market core, with an expected growth rate of 5.3% over the next five years. The region can reach more than 10 million people within 250 miles.

Figure 1: Montreal Population Analysis

Source: Environics Analytics, 2020.

The local warehouse labor force of more than 80,000 is expected to grow by 29.2% over the next decade, the highest rate of any market in this report. The average hourly wage of a non-supervisory employee is C$16.97 (US$12.65), the lowest hourly wage of any other market in this report.

Figure 2: Montreal Warehouse & Storage Labor Fundamentals

*Average hourly wage rate (all levels of experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).
Source: Statistics Canada LFS (NOCs), Conference Board of Canada, CBRE Research, December 2020.

Location Incentives

Over the past five years, there have been 65 economic incentives deals totaling more than $350 million at an average of $64,757 per new job in the Montreal metropolitan area, according to Wavteq. According to CBRE’s Location Incentives Group, the extent, if any, of province and local incentives offerings for industrial projects in metro Montreal depends on location and scope of the operation.

Figure 3: Montreal Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.

Logistics Driver

Via the St. Lawrence River, the Port of Montreal provides the market with a direct route to the Atlantic Ocean. This international year-round port handles cargo from more than 100 markets in Europe, central Canada and the Midwest and Northeast regions of the U.S. The port processes more than 18 million metric tons of cargo annually and provides the shortest route between North America and Europe. With its own rail line that connects to Canada's two largest railroads, Canadian National and Canadian Pacific, the port provides direct logistical access throughout North America.

Originating in Montreal, the St. Lawrence Seaway provides sea-bearing container ships from the Atlantic Ocean access to Lake Ontario and the upper Great Lakes. This series of locks, canals and channels extends from Montreal to Lake Erie and a series of approximately 40 on/off ramps along the way provide ample connectivity to the highways and railways of North America. According to the Saint Lawrence Seaway Traffic Report, more than 35 million metric tons of cargo came through the seaway in 2019.

Capital Markets


"Industrial cap rates for both Class A and B assets continue to compress. With surging demand by occupiers, investors are once again targeting industrial assets with shorter-term leases to capture future growth. While there is strong interest from a broad range of investors (institutional, private and foreign), the supply of industrial investment opportunities remains very limited. This is raising prices to record heights. Moreover, Montreal has the smallest pipeline of new development of any major North American market due to a scarcity of serviced and entitled land. Robust investor demand is forecast for 2021."
Scott Speirs – Executive Vice President, National Investment Team, Capital Markets

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

With 71 million sq. ft. of total inventory, Montreal is the second largest big-box market in Canada. Like Toronto, the market is land constrained and has a vacancy rate of just 1.1%, the second lowest of any other market in this report. Transaction volume totaled 4.4 million sq. ft. in 2020, on par with 2019. The average taking rent increased by 9.7% year-over-year to $7.26 per sq. ft.

Montreal had no construction completions in 2020 and the 2.6 million sq. ft currently under construction is already 82% preleased, including all spaces of 750,000 sq. ft. or more. Like most port markets in North America, there is exceptional demand but a lack of available space. This will lead to a further increase in taking rents in 2021.

Figure 5: 2020 Occupier Transaction Market Share

Source: CBRE Research.

Figure 6: Transaction Volume

Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Data Comparison

Note: Taking Rents are in $CAD.
Source: CBRE Research.

Figure 8: Under Construction vs. Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Note: Taking Rents are in $CAD.
Source: CBRE Research.

Disclaimer: The Location Incentive text and charts are intended for general informational purposes only and should not be interpreted as legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should accept legal advice only from a licensed legal professional with whom you have an attorney-client relationship. We make no representations or warranties regarding the accuracy or completeness of this material.

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2020 North America Industrial Big Box Report & Outlook

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Contacts

James Breeze
Senior Director, Global Head of Industrial & Logistics Research
Research
+1 602 735 1939
Matt Walaszek
Director of Research
Research
+1 312 297 7686
John Morris
Executive Managing Director, Americas Industrial & Logistics Leader
+1 630 573 7020
Richard Barkham, Ph.D.
Global Chief Economist, Head of Global Research & Head of Americas Research
+1 617 912 5215
Spencer Levy
Global Chief Client Officer and Senior Economic Advisor
+1 617 912 5236