Investment Insights
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Investment Insights
Investment Insights Montréal | Q1-2015 Market insights for the real estate investor. In this report Economic Snapshot 4 Multi-residential 6 Office 7 Retail 8 Industrial 9 Land 10 Economic Snapshot With 2015 well underway, there is a renewed sense of optimism amongst investors, primarily driven by the long-awaited export-driven lift to Québec’s economy. A weakening Canadian dollar combined with the recent plunge in oil prices is offering new opportunities in this traditionally manufacturingbased economy. As a large importer of oil and an even larger exporter of a wide array of products, Québec’s manufacturing sector expects to see a significant growth in exports, in particular to the U.S. markets. Favourable market conditions will continue to drive growth in this sector which has already experienced a 6.5 percent sales increase in 2014, the biggest gain in 14 years. Québec will continue to see these widespread gains among export commodities, and economists project that advances in foreign trade will be a significant driver to the province’s economy in 2015 and 2016. According to Statistics Canada, the Montréal Census Metropolitan Area’s (CMA) GDP is expected to grow by 2.5 percent in 2015, a four-year high growth rate. This pace is predicted to continue well into 2018, varying between 2.1 percent and 2.3 percent. Unemployment saw a slight decline in the CMA; yet, in spite of a predicted 0.7 percent net decrease in 2014, JLL | Montréal | Capital Markets over 2 million people remained employed for the second consecutive year. It is expected that the resurgence of external trade will translate into a 0.9 percent improvement in 2015. However, the provincial unemployment will remain at 8.2 percent, well above the national average. From a development standpoint, the city of Montréal saw a flurry of construction and development activity in and around the GMA. The city will soon deliver the $1.3 billion MUHC super-hospital, a state of the art medical facility covering approximately 2.4 million square feet which will be the new home of the Royal Victoria, Montréal Children’s Hospital and the Montréal Chest Institute. In addition, the first phase of the $2 billion CHUM medical complex is set to be delivered in 2016. Located just a few kilometers from the downtown core, the new mega-hospital is set to be fully delivered by 2019 and will be home to the Hôtel Dieu, Notre-Dame Hospital and the Saint-Luc Hospital. It is no surprise that these two areas are seeing significant interest from potential developers as they look to benefit from the changes in these strategic locations. Investment Insights | Q1-2015 | Page 4 After a dip in 2013, residential construction posted significant growth in the CMA for 2014, supported strongly by new major condominium projects in downtown Montréal. In all, 14,000 multi-unit dwellings (including semidetached houses, row houses, rental apartments, condos, co-operative housing and seniors’ housing units) were started in 2014, representing an increase of 11.0 percent year-over-year. Of this, 9,500 were condominiums, which posted an 8.0 percent over 2013. Other major projects include the construction of a brand new Champlain Bridge, the overhaul of the Turcot interchange, a new Train-de-l’Ouest linking downtown Montréal to P.-E.-Trudeau International Airport (a $5 billion investment), as well as a significant number of office developments in the downtown core. In parallel with this activity, the provincial government announced a transformative new deal giving the Québec pension fund, JLL | Montréal | Capital Markets the Caisse de dépôt, control and responsibility over its future infrastructure projects. The deal will seek to unload some of the provincial government’s debt obligations and transfer them to the Caisse, who will only invest in projects that will be profitable to pensioners. Along with a changing skyline, Montréal’s economy is expected to see noticeable improvement over the next 12 to 24 months. The GDP will continue its upward trend in 2015 and, as mentioned above, will post a four-year high growth rate. The increase in the manufacturing sector should lead to new job creation and an overall increase in net exports. Significant activity in the construction sector and the recent cut in interest rates will also continue to stimulate the economy and further increase activity in Montréal’s real estate investment market. Investment Insights | Q1-2015 | Page 5 Multi-residential Cap Rate Class A – high-rise Q1 2014: 4.75%-5.25% Class A – low-rise Q1 2014: 5.50%-6.00% Sales Volume Q1 2014: $169 M | Q1 2015: 4.75%-5.25% | Q1 2015: 5.25%-5.75% | Q1 2015: $151 M Number of Transactions Q1 2014: 57 | Q1 2015: 29 Notable Transactions The multi-residential investment market remained healthy in the GMA but experienced a slight decline in the first quarter of 2015. Total sales volume for the first quarter totaled approximately $151 million, a 9.0 percent decrease compared to the same time last year. There were 29 multi-residential properties that traded over $1 million this quarter, representing an average price per door of $102,025 across the GMA. The market saw a resurgence of REIT activity, which was responsible for the biggest transactions in the multi-residential sector. The most significant acquisition of Q1 2015 saw InterRent REIT purchase a 280unit high-rise building located in Côte-Saint-Luc. The purchase was completed in March at a purchase price of $32,400,000 representing $115,714 per door and a going-in capitalization rate of 5.6 percent. Another notable transaction was the 185-unit property located at 239 Deguire Boulevard in Ville-Saint-Laurent. Skyline Apartment REIT acquired the property for $19,100,000 or $103,243 per door. Vacancy rates on the primary rental market increased slightly in the GMA at 3.4 percent while average rents increased by 2.2 percent year-over-year. However, the increase in vacancy was only observed in one-bedroom apartments and mainly on the island of Montréal. In comparison, vacancy rates in most suburban sectors remained healthy and, in some cases, decreased. The total average rental rate for twobedroom apartments in the GMA sat at $739. However, this number varies greatly from one borough to another, ranging anywhere between $610 and $1,056. JLL | Montréal | Capital Markets 5501 Adalbert Avenue Vendor: 7037457 Canada Inc Purchaser: InterRent REIT Sale Price: $32,400,000 # of doors: 280 Price per door: $115,714 239 Deguire Boulevard Vendor: 9159-8151 Québec Inc. Purchaser: Skyline Apartment REIT Sale Price: $19,100,000 # of doors: 185 Price per door: $103,243 10231-10233 Saint Laurent Boulevard Vendor: Private Purchaser: 9293-5246 Québec Inc. Sale Price: $4,780,000 # of doors: 105 Price per door: $45,524 The market saw a resurgence of REIT activity, which was responsible for the largest transactions in the multiresidential sector this quarter. Investment Insights | Q1-2015 | Page 6 Office The office investment market experienced little activity in the first quarter of 2015 due to the absence of trophy assets trading hands. Approximately 1.1 million square feet of office space traded in Q1 2015 for a total approximate sales volume of $67 million and an average weighted price per square foot of $182.00. One of the larger transactions this quarter saw Cromwell Management acquire an 82,000 square foot office building located at 79 René Lévesque Boulevard East in Québec City. The multi-tenant property sold for $16.5 million or $200 per square foot. Major tenants include CIBC, Oracle and Morneau Shepell. CanPro Investments acquired a 38,000 square foot multi-tenant office building located at 20 Place du Commerce in Nuns Island for $11.1 million or $290 per square foot. The data centre includes tenants iWeb Technologies Inc. and Funio. Cap Rate Class A – Downtown Q1 2014: 5.75%-6.50% | Downtown Class B Q1 2014: 6.50%-7.25% | Sales Volume Q1 2014: $169 M | Number of Transactions Q1 2014: 57 | Q1 2015: 5.75%-6.50% Q1 2015: 6.50%-7.25% Q1 2015: $151 M Q1 2015: 29 Notable Transactions 79 René-Lévesque Boulevard East, Québec City Vendor: Fiducie globale des Régimes de retraite de la ville de Québec Purchaser: Cromwell Management Inc Sale Price: $16,500,000 20 Place du Commerce, Verdun Vendor: 9225‑2691 Québec Inc. Purchaser: CanPro Investments Sale Price: $11,100,000 9494 Saint-Laurent Boulevard, Montréal Vendor: PSP Investments Purchaser: Dayan Group Sale Price: $8,900,000 The office investment market was relatively quiet in the first quarter of 2015, due to the absence of trophy assets trading hands. JLL | Montréal | Capital Markets Investment Insights | Q1-2015 | Page 7 Industrial The industrial real estate market experienced growth both in terms of the total sales volume and the number of square feet traded in the first quarter of 2015. This growth was mainly attributable to a higher than usual number of user and vacant sales transacting between $1 and $4 million. However, investors’ appetite for investment grade industrial product remains high in Montréal. This was evidenced by two significant portfolio transactions this quarter, each surpassing the $30 million mark. Cap Rate Class A Q1 2014: 6.00%-7.25% | Class B Q1 2014: 7.25%-8.25% | Sales Volume Q1 2014: $148 M | Number of Transactions Q1 2014: 32 | Q1 2015: 6.25%-7.50% Q1 2015: 7.50%-8.50% Q1 2015: $199 M Q1 2015: 29 Notable Transactions There were close to 30 industrial transactions in the GMA totaling approximately $200 million in total sales volume and close to 2.3 million square feet of space (including both user and vacant sales). Of this, approximately 38.0 percent of the total volume this quarter were investment grade transactions. The most prominent transaction of the quarter saw Summit Industrial Income REIT acquire a 50 percent interest in a portfolio of six light industrial properties in the GMA. The acquisition was completed through a joint venture partnership with the Montoni Group, one of Montréal’s most prominent and well-respected developers. The properties are fully-occupied and have an average weighted remaining lease term of 13.1 years. The acquisition added 326,409 square feet to Summit’s portfolio and was purchased for approximately $39,400,000. As part of the financing, Montoni and Summit have arranged for a ten-year mortgage, totaling $25.7 million with an interest rate of 3.25 percent. Another significant investment transaction saw Triovest acquire five properties totaling 645,492 square feet from a joint venture partnership between KingSett Capital and AIMCo. The properties, located in Laval, were sold for a total approximate purchase price of $31.6 million. Post-quarter, the 800,000 square foot Aldo headquarters located in Ville-Saint-Laurent was acquired by CanPro Investments in a 20-year sale-leaseback transaction. The three-storey head office includes a sky-lit atrium and is connected to a 500,000 square foot worldwide distribution centre featuring 39-foot ceilings and over 16 kilometers of conveyors. JLL | Montréal | Capital Markets Six-property portfolio sale (50 percent stake) Vendor: Montoni Group Purchaser: Summit REIT Sale Price: $39,400,000 Five-property portfolio sale Vendor: JV – KingSett Capital & AIMCo Purchaser: Triovest Sale Price: $31,665,000 10050 de la Côte-de-Liesse Road Vendor: Abond Corp. Purchaser: Groupe Mach Sale Price: $6,950,000 Two significant transactions highlight demand for high-quality industrial investment product. Investment Insights | Q1-2015 | Page 8 Retail The retail investment market in 2014 proved to be particularly active for larger trophy assets including the approximate $1 billion portfolio disposition by Ivanhoé Cambridge, the two major transactions involving the iconic Quarter Dix 30 as well as First Capital Realty’s $100 million acquisition of Devimco’s retail development, located in the Districtsur-Peel in Griffintown. Although the market experienced a slowdown in these trophy assets in the first quarter of 2015, the retail investment market remained healthy with a balanced mix of transactions involving all property types and sizes. Approximately 1.4 million square feet of retail space traded, representing a total sales volume of $246 million for an average weighted price per square foot of approximately $149.00. Cap Rate Regional Shopping Centre Q1 2014: 5.50%-6.00% | Strip Centre (anchored) Q1 2014: 6.00%-6.75% | Sales Volume Q1 2014: $534 M | Number of Transactions Q1 2014: 67 | Q1 2015: 5.50%-6.00% Q1 2015: 6.00%-6.75% Q1 2015: $246 M Q1 2015: 37 Notable Transactions Five-property portfolio Vendor: RioCan Purchaser: Desjardins Asset Management Sale Price: $120,100,000 The most significant transaction this quarter was Desjardins Asset Management’s acquisition of a five-property portfolio from RioCan in Québec City. The properties totaled 747,892 square feet and sold for a total purchase of $120.1 million, representing a weighted average capitalization rate of 6.8 percent. Another notable transaction this quarter was the sale of Loblaws-anchored Plaza Delson in the South Shore of Montréal. BTB REIT acquired the 145,546 square foot shopping centre from First Capital Realty for approximately $21.5 million or $148 per square foot. In February, EconoMalls Management Corporation acquired Place LaSalle, a grocery anchored shopping centre including major tenants Super C, Pharmaprix, SAQ, Dollarama, Tim Hortons, McDonalds and movie theatre Cineplex Odeon. The complex sold for a total purchase price of $20.7 million. From a development front, the approximately 250,000 square foot industrial building located at the intersection of the Decarie Expressway and Highway 40 was acquired by the Dynamite Group. The transaction will likely be the key piece for the eventual $1.6 billion Quinze40 Mega Mall set to be developed at the heavily populated intersection. The project’s details are set to be announced later this spring. JLL | Montréal | Capital Markets 15-41 Georges Gagné Boulevard, Delson Vendor: First Capital Realty Purchaser: BTB REIT Sale Price: $21,500,000 7800-8000 Champlain Boulevard Vendor: Place Lasalle Property Corporation Purchaser: EconoMalls Management Corporation Sale Price: $20,700,000 As part of RioCan’s program to recycle capital into the acquisition of higher growth assets, it completed the sale of five shopping centres located in Montréal and Québec City. Investment Insights | Q1-2015 | Page 9 Land The market for land acquisition remained relatively healthy, with a total sales volume for land transactions totaling approximately $121 million in the first quarter of 2015. The most significant transaction this quarter saw Société immobilière Huot, one of Québec City’s largest developers; acquire 505,000 square feet of land in Les Rivières, Québec, for a total purchase price of $25.7 million or $51.00 per square foot. Another notable transaction on the island of Montréal was the approximately 45,000 square feet of residential land acquired for the development of residential project Gallery Lofts sur le Canal located in Griffintown. The purchase price was $6.9 million, representing approximately $154.00 per square foot. Sales Volume Q1 2014: $211 M | Number of Transactions Q1 2014: 39 | Q1 2015: $121 M Q1 2015: 24 Notable Transactions de la Roselière Avenue, Les Rivières Vendor: Capitale Helipro Inc. Purchaser: Les Developpements Aventura Inc. Sale Price: $25,700,000 25th Avenue, Saint-Eustache Vendor: Les Projets Et Immeubles Sm Inc. Purchaser: 9316-5280 Québec inc. Sale Price: $14,978,587 Olier Street, Montréal, QC Vendor: Cornell Christopher Purchaser: Galerie sur le Canal Inc. Sale Price: $6,924,787 Land acquisitions slowed in Q1 2015, but remained relatively healthy with a total sales volume for land transactions totaling approximately $121 million. JLL | Montréal | Capital Markets Investment Insights | Q1-2015 | Page 10 Helping you maximize your real estate investments. For more information, please contact: Prepared by: Mark Sinnett Executive Vice President Real Estate Broker +1 514 667 5696 [email protected] Robert A. MacDougall Senior Vice President Chartered Real Estate Broker +1 514 667 5654 [email protected] Scott Speirs Vice President Real Estate Broker +1 514 667 5663 [email protected] Joseph von Maltzahn Associate Vice President Real Estate Broker +1 514 667 5699 [email protected] Armen Markarian Associate Commercial Real Estate Broker +1 514 667 5695 [email protected] Yann Charles Associate Commercial Real Estate Broker +1 514 667 5697 [email protected] Sebastien Gatti Associate Commercial Real Estate Broker +1 514 664 5682 [email protected] Jones Lang LaSalle Real Estate Services Inc. Real Estate Agency 1 Place Ville Marie, Suite 2121 Montréal, Québec, H3B 2C6 Tel. +1 514 849 8849 For further infomation, please visit our website: www.jll.ca About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $55.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com. About JLL Research JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without prior written consent of Jones Lang LaSalle IP, Inc.
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Investment Insights
Jones Lang LaSalle Real Estate Services Inc.
Real Estate Agency
1 Place Ville Marie, Suite 2121
Montréal, Québec, H3B 2C6
Tel. +1 514 849 8849
For further infomation, please visit our website: www....