Industrial rental rates are continuing to increase. However, these increases are less dramatic than those seen in 2021 and 2022. Nonetheless, tenants are exposed to additional pressure on occupancy costs, namely an increase in realty taxes.
The vacancy rate rose to 2.1% in Q2 of 2023, from 2% in Q1 and 1.6% one year ago. The delivery of a record number of new speculative projects over the last 12 months has brought new supply on a tight market, especially for larger spaces in periphery.
Although the industrial projects currently under construction will add approximately 6,7 million square feet (msf) to the Greater Montréal area (GMA), the pace of speculative construction seems to be slowing down. The rise in financing costs has a material impact.
Net Rental Rates
While average asking rents are starting to stabilize across the market, increases continue to be significant for tenants who signed leases five or ten years ago. For these tenants, occupancy costs may double or even triple at their upcoming renewal.
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