Montreal's investment deal volume expected to slide in Q2 and the second half of 2020

Q4 overflow spurs Montreal investment deal volume

Monday, May 25, 2020

Montreal recorded soaring investment deal volume in the first quarter of 2020, with the number of trades up 33 per cent from last year’s fourth quarter and 59 per cent from the first quarter of 2019. Sales value topped $2 billion for the fourth consecutive quarter, albeit at a lower total than was achieved in the second to fourth quarters of 2019.

“Most of these transactions were reflective of the deal overflow from Q4 2019,” Altus Group’s recently released overview of Q1 activity concludes. Altus analysts also note “significant momentum has since been lost” and project COVID-19 fallout will be more apparent in second quarter and second half results.

Investors were particularly active in the office sector during the early months of 2020. Allied Properties REIT’s $276-million acquisition of the World Trade Centre at 747 & 751 Square-Victoria Street from Ivanhoé Cambridge was the single biggest trade in a quarter when office sales volume climbed 533 per cent from the comparable period in 2019. Group Mach and Group Petra’s joint $225-million purchase of 1100-1500 René-Lévesque Boulevard West from Oxford Properties followed closely in step.

Both these top-value transactions involved Class A downtown space that was more than 90 per cent occupied at the time of sale, and with weighted average lease terms of more than six years at the World Trade Centre and 5.5 years for the René-Lévesque Boulevard tower — giving the new owners some room to manoeuvre in current uncertain times.

“Slower economic growth has also led to higher unemployment rates and has investors reviewing their mitigation strategies to prepare for changes in tenant demand as they face challenges and medium to long-term pressures” Altus analysts observe.

The industrial and multifamily sectors also saw a jump in deal volume during the first quarter. Notably, Pure Industrial Real Estate Trust (PIRET) acquired seven industrial assets from Manulife in two separate transactions occurring in January and February. Together, the deals represent an $86.8-million expenditure for approximately 777,300 square feet of leasable space, and augment PIRET’s nearly $336-million investment in the Montreal market in 2019-2020.

In turn, Manulife was the purchaser in the quarter’s top multifamily deal, with the $108-million purchase of EQ8, a recently completed two-tower purpose-built rental housing complex. In total, multifamily sales valued topped $600 million for the quarter, falling short of the nearly $800 million in office trades, but surpassing all other sectors.

First quarter retail sales volumes dipped slightly from the comparable quarter last year, tallying just above $200 million. Residential and ICI land sales also dropped below Q1 2019 levels. Meanwhile, modest hotel transactions still exceeded Q1 2019 when no deals occurred.

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