Downtown Montreal: Commercial Real Estate Market Prices Down. If Quebec residential real estate is resisting all odds of the coronavirus pandemic’s economic consequences, it is different for the commercial real estate market. In downtown Montreal, for example, the impact is being felt. The pressures are down on goods such as commercial surfaces (stores, shops) and offices.
Commercial real estate market: shorter leases, lower rents in downtown Montreal
Times are tough for owners and tenants of commercial real estate. Businesses are experiencing a decline in their turnover. This often includes unpaid rents. The vacancy rate increased. According to La Presse, when a lease is signed at a lower price, its duration is often limited to 12 months. This gloomy picture is drawn up by the organization representing property owners and developers. It has, of course, a negative impact on the price of commercial real estate in Montreal.
Office rental in Montreal: a problematic market too
Office buildings are already under-occupied. The fad of telecommuting is unlikely to improve the situation as the light in the pandemic tunnel shines by its absence. Owners and managers have well-integrated this observation. This is why their balance sheets have already been subject to impairment of the value of their assets. For example, Cominar estimates that its office and shopping center portfolio’s value is down by more than $ 300 million. Same story with Ivanhoé Cambridge. Even if the trust did not wish to reveal the extent of its losses.
Stores and boutiques, the most affected Montreal real estate market
However, Montreal offices are doing much better than store and boutique rentals. Indeed, this type of property escapes the ravages of unpaid commercial real estate rents. There is a shortfall in underground parking lots. Or even a weak interest in the occupation of free spaces. But overall, the impact is limited.
Special measures for the commercial real estate market?
If many merchants cannot pay their rent for reasons beyond their control, the problem is the same for landlords—namely, a shortfall. And the new land roll that came into effect on January 1, 2020, only worsens the situation. Indeed, it is based on the registered value of the buildings in 2018. In short, the owners of Montreal will have to pay a tax calculated on an overvalued basis. And all this while the cash flow is under tremendous pressure.
This is why the Urban Development Institute of Quebec (IDU) asks Montreal to lower the tax on non-residential buildings in the city center. To argue its request, the institute recalls that the property tax has increased by more than 50% in 5 years in some cases.