At the beginning of 2022, when the City of Montreal submitted its Downtown Strategy 2022-20301 project for consultation, the scale of the coming crisis for office buildings was not necessarily a major issue.
According to recently released data, the availability rate in downtown Montreal continued its upward trend observed since the pandemic. Thus, this rate reached 18.7% for the second quarter of 2023, even exceeding the rate for Greater Montreal (18.2%). Note that the same situation is found in Vancouver, Calgary and Toronto where the rate for the city center is higher than that for the region.
For Montreal, “not surprisingly, the availability rate is gradually approaching the peak of 20%, which has never been seen,” according to the firm Avison Young.
Unsurprisingly, since during a strategic forum organized by the Chamber of Commerce of Metropolitan Montreal last June, Mr. Jean Laurin, from Avison Young, mentioned that this rate could reach nearly 24% in 2025. If this prognosis is Turns out, we’ll often see “never seen” spikes.
This situation is worrying since, beyond the immediate impacts for the owners of these buildings, it also has consequences for the dynamism of the downtown area and, by extension, significant repercussions on the City’s finances.
In its recent study2 of so-called superstar cities, McKinsey reports that demand for office space, which has been declining since the start of the pandemic, will only get worse by 2030 in most of the cities studied. It would take decades to return to pre-pandemic demand levels.
This risks seriously jeopardizing the financial health of cities. For the Montreal agglomeration, this could result ceteris paribus in a negative tax impact of hundreds of millions of dollars.
In such a context, the opportunity cost for building owners for an appropriate transformation, including residential, could encourage many to look more closely at this option, especially for so-called category B and C buildings.
Several cities have mechanisms to encourage such conversions, including New York, Washington (DC), Philadelphia, Cleveland, Los Angeles, San Francisco, Denver, Calgary…
This solution is an additional tool that can contribute to strengthening the dynamism of the city center and increasing the supply of housing, but we must be aware that this cannot be a panacea, both for the housing crisis and for that affecting the buildings. of offices.
Various actions and measures will have to be deployed, and all players will have to be mobilised.
Montreal has a great advantage since its downtown is already a dynamic and diversified hub, which needs to be taken care of, its attractiveness strengthened and nothing taken for granted.
These are additional challenges and opportunities that the City of Montreal’s upcoming downtown strategy can address.