Despite the millions invested by the Quebec government and the efforts made by business people to encourage workers to return to downtown, office towers in the Montreal area continue to empty.
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According to the latest data from real estate agency CBRE, the vacancy rate in downtown towers reached a record 17.4% in the third quarter. This represents an increase of 8% (or 1.3 percentage points) compared to the 16.1% in the same quarter of 2022.
“We are not out of the woods yet. There is still a lot of work to be done,” admits Glen Castanheira, CEO of Downtown Montreal. “Evidently, the ship is difficult to turn around. We have not yet succeeded, but I feel that it is heading in the right direction,” reacted Michel Leblanc, CEO of the Chamber of Commerce of Metropolitan Montreal (CCMM).
In the suburbs of Montreal, the situation is no better, on the contrary. In the third quarter, office spaces also had an increasing vacancy rate, reaching 18.3% in the third quarter of 2023. At the same time last year, the vacancy rate was 17%.
A Failure?
Since 2021, the Ministry of Economy and Innovation has granted $14.5 million to the CCMM to contribute to the economic recovery of downtown Montreal. Of this amount, approximately $3.5 million has been allocated to 14 artistic projects aimed at revitalizing downtown.
Among them, the erection of a 30-meter steel ring on the esplanade of Place Ville Marie will certainly have been the most remarkable work of the “I love working downtown” project. The Chamber contributed $500,000 to it, while Quebec added $1.5 million to the project.
Does the ongoing deterioration of the situation in offices prove the failure of the strategies implemented over the past two years to convince employers and employees to turn away from telecommuting?
Not at all, according to Michel Leblanc, who believes that work is still ongoing. “To conclude that it is a failure would presuppose that things would have been the same if we had decided to do nothing. On the contrary, I hope that despite the work that remains to convince more people of the benefits of returning to the office, it is a success,” he said.
Ivanhoe Cambridge, the National Bank of Canada, and Desjardins have all required increased presence at work from their employees in recent months. Currently, according to the CCMM, two-thirds of major companies in Montreal currently require office attendance “two to three days a week,” on average.
Among the Worst Major Cities
The situation is not unique to the metropolis. All major cities in America face the same challenge, says Glen Castanheira. As an example, he mentions that downtown Calgary has a vacancy rate of 30.9%.
However, it is also worth mentioning that if there are worse rates elsewhere, the vacancy rates in downtown Toronto (15.8%), Ottawa (14.2%), and Vancouver (11.8%) are all much lower than those seen in Montreal (17.4%).
That being said, David Cervantes, Senior Vice President of CBRE in Montreal, insists on the importance of qualifying these averages. According to him, Class B and C buildings tend to significantly tarnish the overall picture. Taken separately, Montreal’s Class A buildings have a more desirable vacancy rate of 14.5%.
“We observe that while companies generally tend to reserve restricted spaces now, they also generally take the opportunity to move to better-maintained buildings in higher categories such as double A and triple A.
For example, the Manulife House, a prized tower located on de Maisonneuve West in Montreal, currently has a vacancy rate of only 1.4%. A reality that is light-years away from the average vacancy rate of downtown towers.
Office Vacancy Rates in Downtown (Third Quarter of 2023)
- Vancouver: 11.8%
- Calgary: 30.9%
- Toronto: 15.8%
- Ottawa: 14.2%
- Montreal: 17.4%
Source: CBRE
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