Industrial real estate now ‘landlord’s market’

The balance of power in Montreal’s commercial real estate markets is tipping toward landlords, according to CBRE, an international real estate management and investment firm.

Industrial real estate is now a “landlord’s market” for the first time in 20 years, says Avi Krispine, the managing director of CBRE Quebec.

That shift is being driven by ecommerce companies, who are renting more warehouse space for distribution centres.

For every $1 billion in online sales, one million square feet of warehouse space is required, Krispine said, citing a CBRE report released earlier this year.

Another factor, he said, is companies moving from office buildings in the downtown core to industrial buildings located outside of downtown. That pushed the percentage of industrial space available for rent to 6.8 per cent during the first quarter of 2016, the second-lowest availability rate in the past five years.

While the office real estate market isn’t a landlord’s market yet, Krispine said, it’s heading in that direction.

One sign of that is a 60 per cent decline in the amount of office space available for sublease, he said.

That decline will give landlords more power, he said, because office tenants who are subleasing their space are often in the middle of cutbacks and are frequently willing to accept less than they pay.

“It’s a tighter market; this is where you’re going to see landlords be way less flexible,” Krispine said.

He added the decline in subleasing and continued high demand for office space is a sign of strong economy in the city.