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Double-Digit Net Rental Rates: Shattering the Presumptions of Industrial Real Estate Values in the GMA


Some 3 or 4 years ago, industrial investors and landlords asked a recurring question: “Will we see double-digit net industrial rental rates in the Greater Montreal Area (GMA)?” Most industry experts, including myself, were consistent with a “yes, but” answer as we believed it would take a long time for the market to reach these rates.

Montreal had always been known as a $5 net market. Pegging rates for industrial buildings was fairly easy as they usually hovered between $4.50 net to $5.50 net. In 2018, the GMA industrial market saw an uptick in rents as, coupled with increased demand, vacancies dropped and new inventory remained undelivered. However, developers remained wary of the GMA due to years of flat availability and slow rental growth. This resulted in only a few speculative buildings being delivered over those next two years. By the end of 2019, demand continued to increase as did net rents, but double-digit rents were still far on the horizon.

Covid changed the game, entirely. Uncertainty swept over the real estate market at the onset of the Covid-19 pandemic (Q2 2020). The world had shut down, including non-essential warehouses and manufacturing. Even Montreal’s beloved construction industry was stopped in its tracks. Many adopted a wait-and-see approach or even took steps to mitigate risks in case the situation worsened. Plans for speculative buildings were shelved, tenants looked to their landlords for rent relief, and long-term owners of real estate were selling assets to retain liquidity under the assumption that the market would get worse. The record would soon tell a completely different story. In fact, the pandemic lit a fire under the industrial real estate market; a fire that is still raging today. The question had been answered in a different way: “Double-digit net rental rates are here, and they are here to stay”.

double digit graph 1

Contrary to other asset classes such as traditional office space and retail centers, the industrial market is as strong as ever. The above graph exhibits the rapid evolution from a year-over-year basis with a net rental rate increase of 48% compared to 2021. The vacancy rate is at a historic low of 0.55%, while the availability rate decreased to 1.23%. This cataclysmic shift illustrates how the pandemic significantly changed consumer behavior and the industrial market, by shifting and increasing needs. Consumers are now buying everything online from clothing, household goods and even groceries. There are food purveyors such as GOODFOOD that will deliver items to households within 30 minutes of the order. In the middle of cooking dinner and missing an ingredient? Go online and you’ll have it in your hands before you finish preparing your meal. Amazon Prime is also now a go-to for many people, with the platform promising next day delivery, even outside of the city core.

This dramatic increase in e-commerce directly impacted industrial vacancies and rental rates in an equally dramatic way. Within the past 3 years, Amazon alone has increased its footprint by almost 10x in the GMA, including Côteau-du-Lac, while other warehouse and logistics companies battle for any type of available rates. We are now seeing a phenomenon in Montreal that is common in the Greater Toronto Area (GTA) but new to this market: leasing newly constructed buildings prior to delivery. In 2021, a partnership between Triovest/Broccolini/Hydro-Quebec leased a multi-tenant building of approximately 400,000 square feet in Vaudreuil to two separate tenants four months before the speculative project was delivered. By the end of 2021, Rosefellow had rented its anticipated 325,000 square-foot building in Pointe-Claire seven months prior to delivery, which is scheduled for Q2 2022. 

The Reverchon project garnered much attention last year as it was one of the few on-island speculative industrial buildings to break ground in 2021. Developed by Skyline, FIT Ventures and Rosefellow, this commercial development in Pointe-Claire will span approximately 315,000 SF. Construction is expected to begin in July 2022. Due to the lack of available land sites, much of the new development is being pushed off island as far as Valleyfield and Côteau-du-Lac. Traditionally, these submarkets were for more specialized industries and manufacturing. Today, these submarkets are welcoming logistics and distribution users. Recently, Broccolini has built an approximately 500,000 square foot distribution center for Amazon in Côteau-du-Lac.

A relatively unknown industrial region until IKEA established a distribution center in the area, Beauharnois is now experiencing a construction boom including two large warehouses slated to be delivered prior to the end of 2022 as well as the new Beauharnois Industrial Park. Still in Beauharnois, Olea Dev’s new three-building project is another interesting development. The original plans were to purchase and develop this land site on Urgel-Charette Street for a specific user. When the contemplated transaction did not occur, Olea Dev decided to move forward with the acquisition and erect 3 class AAA industrial buildings on the site. The first phase is currently under construction and is slated for delivery by Q4 2022. It will span approximately 400,000 square feet, with clear heights of 40’ and a door ratio of 1:8000 SF. The second and third phase will follow in 2023, totaling approximately 444,000 SF. The expectation is that all three buildings will be fully leased prior to delivery.



Loyers nets
Net Rents

Loyers bruts
Gross Rents









Baie D'Urfé




































Ville Mont-Royal
















































Furthermore, the scarcity of available land in the GMA is holding back vital development that could alleviate some of the need for space. This product rarity makes the GMA a market that resembles Vancouver’s more than Toronto. Where Vancouver is surrounded by ocean, mountains and the US border, the GMA is surrounded by agricultural land protected by the MAPAQ that is virtually impossible to rezone for development. There are currently dozens of developers and users (local and out-of-province) trying to acquire land sites for industrial uses. It has proven to be very difficult and the lucky ones that successfully negotiate acquisitions are facing record high land prices with asking prices now over $50 per square foot or $2.2M per acre.

double digit graph 2

Without necessary zoning changes on the Island of Montreal, developers are increasingly seeing the South Shore as the solution to the inventory dilemma. In 2021approximately 39.9 million square feet of industrial land sold across the GMA. The South Shore region led the pack with 26 million square feet, or 65%, of total land acquired. A notable transaction was Montoni and Alberta Investment Management Company’s (AIMCo) acquisition of 4.2 million square feet of land for $22 per square foot. The development will inject 1.6 million square feet of space into Saint-Bruno-de-Montarville's Industrial Ecopark.

Moreover, the lack of product is generating new leasing conditions that were previously unheard of in the Greater Montreal Area. For example, an interesting trend is seeing renewal transactions now being completed at higher rates than new lease transactions. Traditionally, new deals were always transacted at higher rates since landlords were required to invest more money in tenant improvements and real estate fees to secure ta lease. Today, the lack of available inventory leaves tenants little or no choice but to remain in their space. This has pushed renewal rates to be the same or higher than new deals as landlords feel they have a captive audience with their existing tenants.

Another interesting phenomenon is landlords not posting asking rates for industrial space. The belief is that the market is changing so rapidly that posting rates is negotiating against yourself. Rates will only be determined at the time of the offer. There is also chatter in the market about rates for new construction being determined only at the time of delivery. Simply put, a tenant signs a binding lease with no rates. These rates will be determined at the time of occupancy. It is certainly risky, but it allows the space to be secured. With inflation at a very high mark, some landlords are pushing annual increases to 5% or setting the increases to inflation but with a floor (minimum increase). All the above has led to major sticker shock for tenants in the GMA.

Finally, we are starting to see more in-field development: demolishing older and obsolete properties on the island of Montreal to replace them with state-of-the-art distribution centers. Mostly recently, Broccolini purchased a site on Norman Street in Lachine. The existing building was demolished and in its place is now a 360,000 square-foot Amazon distribution center.

Although the industrial market is firing on all cylinders in the greater Montreal Area, there are some worrying factors on the horizon. Fuel costs have not reached their record highs yet, labor costs are increasing rapidly with shortage of workers, rental rates are skyrocketing, and we are experiencing general inflation. These collective factors have a direct impact on the cost of goods. Industrial users are adapting: one exterior home decor company is now shipping its outdoor pillows flat from overseas and stuffing them here as its shipping costs had tripled over the last year.

How long can consumers support these cost increases and where does the breaking point sit? Only time will tell, but in the meantime, despite the high increases in the GMA, net rental rates still have room to grow as they currently remain below Toronto and Vancouver’s average $13.75 and $16.93, respectively. Indeed, the graph below exhibits the extent of Montreal’s growth as the market is close to bridging the gap back to 2016 levels of the GTA. Truly now, Toronto is within shooting distance.

double digit graph 3

One thing is for sure, double-digit rental rates are here, and they are here to stay.

Read on the Espace Magazine

For More Information, Please Contact:

Jean-Marc Dubé

Executive Vice President | Group Practice Lead | Chartered Real Estate Broker


Jean-Marc is a senior member of the industrial division of the Montreal Colliers International team and an accomplished executive with a proven ability to develop and implement strategies that support his customers’ business and financial objectives. His expertise includes tenant/purchaser representation, property listings (sale and lease), sale-leasebacks, built-to-suits and land development.

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