Real Estate 2022: Trends and Developments

Written by Fredric L. Carsley, Aubie J. Herscovitch and Virginia K.H. Lam


Quebec’s commercial real estate industry will remember 2021 as both a year of COVID-19 clampdowns and a year of considerable growth in several asset classes.

The Quebec government imposed many restrictions to combat the Delta variant and then the Omicron variant, including evening curfews, restrictions upon both public and private gatherings, the prohibition of team sports and the closure of gyms. In an effort to entice the unvaccinated to reconsider their decision, vaccine passports were mandatory to enter government-controlled liquor and cannabis stores, and retail establishments of at least 16,000 square feet.

These measures had a significant impact on many businesses. Notably, the hospitality sector struggled, as restaurants faced ongoing operational challenges, exacerbated by the need to adapt to repeated government-imposed closures and reopenings due to fluctuations in the number of COVID-19 cases across the province. Staffing instability, constant uncertainty and sudden requirements, such as the obligation to authenticate vaccine passports, were just some of the challenges faced by business owners and staff.

Yet 2021 was fruitful for the real estate industry, as demonstrated by the announcement of the acquisition of the units of Cominar Real Estate Investment Trust for approximately CAD5.7 billion. Located in Montréal, Quebec City and Ottawa, Cominar’s 37.5-million-square-foot office, retail and industrial portfolio was acquired by a consortium led by Montréal-based Canderel, a major Canadian real estate company, with participation from both Canadian and US investors. Once regulatory approvals were obtained, the transaction closed on March 1 2022. The industrial properties were subsequently sold to Blackstone, and selected office and retail assets were then sold to the Mach Group, Montréal-based investors and managers.

As the discussion of the various asset classes will show, Cominar is a graphic example of both private and institutional investor confidence in the future of the Quebec commercial real estate market.


The industrial class is the current gem of Quebec commercial real estate. With widespread demand, a lack of available land that is not zoned “green” by agricultural land protection legislation, and the large fulfilment-space requirements of Amazon and other businesses, industrial rents have skyrocketed.

Agricultural zoning protection

A word on the protection of agricultural land is warranted, as agricultural protection is an important barrier to development. Over 15 million acres of Quebec land is zoned as agricultural, and may not be developed for non-agricultural purposes without the approval of the Commission de protection du territoire agricole du Québec (CPTAQ). CPTAQ approvals are extremely difficult to obtain, as a recently decided Amazon case illustrates. Amazon, which currently has three distribution centres in proximity to Montréal, has been searching for a suitable site south of Montréal. A site in Varennes, Quebec that was formerly used for industrial purposes was selected. As the zoning is now agricultural, permission was sought from the CPTAQ to allow the project to proceed. In January 2022, the permission was refused, despite the obvious economic benefits this type of investment would bring to the region. This is far from an isolated case, and many locally supported developments are stymied by the agricultural zoning restrictions.

The significant increase of rents and land values

A recent CBRE study pegs average net rental rates for industrial space at CAD10.47 per square foot. For tenants paying in the range of CAD5.50 per square foot, lease renewals are daunting, and relocating to another suitable space, if available, will still have them paying market rents.

Land values have also skyrocketed. CBRE is now reporting pricing at CAD200 per square foot, while just a year ago, average pricing was at the level of CAD175 per square foot. Nevertheless, not only are several industrial projects currently under construction, but at least one private REIT has publicly announced the sale of smaller industrial portfolios to redeploy the capital into a new high-ceiling product for large users, in partnership with industrial developers, some of which are based in Quebec.

Certain developers are adding industrial uses to their retail properties where the synergies are evident. As an example, Cadillac Fairview added a 130,000-square-foot gastronomical centre to the enclosed Promenades Saint Bruno mall, a regional shopping centre on the south shore of Montréal. The facility will feature restaurants, boutiques, a culinary demonstration facility and entertainment areas, all within a warehouse-type construction.


Quebec’s housing shortage, coupled with an explosion of single-family housing prices throughout the pandemic, has fuelled much multi-residential activity, both for the rental market and for the condominium/sale market.

In its 2021 market recap, the Urban Development Institute of Quebec (UDI) lists 13 rental projects and 14 condominium projects within the Greater Montreal area currently under construction. UDI also reports robust multi-residential activity in the Greater Quebec City area of rental and condominium projects being delivered in 2022 and 2023.

Centurion Apartment REIT recently acquired a two-thirds interest in a portfolio of 30 Greater Montreal-area apartment buildings, comprising a total of 3,678 apartments. This is the largest single multi-family transaction ever in the province of Quebec. It exemplifies investors’ confidence in the stability and growth potential of the multi-residential market.

The Office Industrial Market

The office market is in a state of flux. Throughout the pandemic, the Quebec government mandated working from home. The mandate ended March 7 2022 and businesses are now starting to reintegrate into their once-vacant offices.

Office tenants are reassessing their needs as they reintegrate, partially on-site and off-site. UDI reports that upon lease renewal, tenants are reducing space requirements by approximately 8% and that approximately 15% of the space available for leasing is on the sublease market.

High tech to the rescue

A bright spot is high tech. A recent Price Waterhouse Coopers survey of 19 North American cities ranked Montréal sixth in leasing of office space by high-tech tenants.

Among these are data centre operators. The pandemic has dramatically accelerated the expansion of the digital environment and cloud services needed for the operation of businesses, institutions and governments. Data centres require energy-intensive buildings equipped with specialised building, mechanical and electrical infrastructure. Multi-tenant data centres (for colocation) remain in demand. Increasingly though, single-tenant data centres are sought-after by large tech companies and cloud providers looking to consolidate operations and for the installation of specialised sophisticated equipment in a secure facility.

The Greater Montreal area is a leader in life sciences/biotech. Biotech City, the hub for this activity, is located in the city of Laval, just north of Montréal limits. Biotech City includes world-renowned biopharmaceutical firms and research institutes employing over 5,000 employees within approximately 13 million square feet of technologically advanced space. A recent CBRE communiqué on life-sciences leasing reports that many landlords are seeking advice on building or converting space to labs. Either operation will be upfront-capital-intensive in creating the highly specialised space required for this sector. The success of Biotech City as a hub for this industry coupled with strong financial covenants from tenants should help balance out the risk/reward metrics.


A Cushman and Wakefield study reports that Quebec retail sales reached record highs in 2021. Amazon, in particular, capitalised on the “stay-at-home” culture. Large retailers such as Walmart, Costco and the major supermarkets contributed to this growth, introducing hybrid shopping, online and in stores, and delivery options to consumers.

What about the shopping centres? Grocery and pharmacy-anchored projects performed well, as did well-anchored power centres. Downtown Montréal was bleak, largely due to the absence of office workers, university and foreign students, and government restrictions. Even the Montréal Canadiens, playing in the Stanley Cup final for the first time in many years, were only allowed 3,500 fans in the Bell Centre, a facility that seats 21,032.

Property management saw a major change in 2021. Ivanhoe Cambridge, the real estate subsidiary of the Caisse de dépôt et placement du Québec (CDPQ), the Quebec government pension fund, transitioned the operation of its Canadian shopping centre portfolio to Jones Lang LaSalle (JLL), in order to focus upon its core business as an investor. Together, JLL and Ivanhoe Cambridge will develop a “Centre of Excellence for Sustainability (COES) in Quebec, and an accompanying team, to accelerate the transition to sustainable development and implantation of current and near-future technologies” (joint press release of August 24 2021). This is consistent with the ESG goals of the real estate industry and the requirements of lenders and institutional investors.


Repositioning and densification

The government-imposed Covid-19 restrictions posed a number of challenges to enclosed malls. Class B and C malls suffered greatly, although this issue predates the pandemic.

Many developers of older properties are repositioning into mixed-use projects, often with residential towers and ground floor retail spaces suited to the needs of the residents. Zoning, urban planning, traffic circulation and lease obligations to existing tenants are among the myriad of issues to address when redeveloping an existing property. In instances where the retail space and the residential space are owned by different groups, a useful structure that can be implemented is to horizontally “condominiumise” the land, and then create vertical condominiums to separate the residential from the retail spaces.

We can draw a further example of such repositioning and densification from Prevel’s Esplanade Cartier development project, located directly below the historic Jacques Cartier Bridge and facing the St. Lawrence River. What was once the site of industrial-zoned land, which had essentially been used for parking purposes for the past 20 years, is being developed into a multi-phase mixed-use project that will incorporate residential units (both condominium and rental) as well as social housing, commercial and office spaces, and community components. The adoption of Montréal’s bylaw to improve the supply of social, affordable and family housing has also made its way into practice, as residential development projects of 4,843 square feet or more, such as the Esplanade Cartier development, are required to incorporate a fixed ratio of social, affordable and family housing.


Much of the repositioning is TOD-supported (Transit-Oriented Development), and CDPQ Infra, a division of the CDPQ, is building and funding the Réseau express métropolitain, otherwise known as the REM. The REM is a light-rail rapid transit system currently under construction. Through the REM’s 26 stations, the system will link downtown Montréal, the airport and the Greater Montreal area.

Construction is currently in progress with a 2024-targeted completion date. Many of the repositioning projects are situated at or near REM stations, providing quick and easy access. The REM is also planned to integrate with the existing metro (underground subway system), with a view towards increasing the use of energy-efficient and climate-control-friendly public transit.

Expropriation legislative reform

Ever since work on the project began, many property owners and tenants were, and still are, expropriated for its construction – all the more so since procedures for phase two of this project, the REM de l’Est, located in the eastern part of the city, are in motion and set to commence within the coming months. Quebec’s Expropriation Act is the framework law on expropriation in the province. However, to facilitate the construction and operation of the REM, the government of Quebec sought to balance the limits to owner’s rights imposed by the Act with the needs of the REM.

The need to adopt such a special law for the realisation of this major project has highlighted the necessity to reform the Expropriation Act, which will celebrate its 50th anniversary this year. This imminent reform will have to allow for a modernisation of the expropriation procedure in order to adapt it to the new realities of the Quebec real estate market, while simultaneously taking into account the difficulties encountered by both public bodies and private parties in the course of this process.


Quebec is and continues to be an attractive target for real estate investment in both existing and new projects. At least once a week, the press reports a new project being announced, or a significant trade being completed, as the right metrics are in place for this: low levels of unemployment, a skilled workforce, a diverse economy and less competition for products than is found in Toronto or Vancouver. As we emerge from the pandemic and its government-imposed restrictions, we foresee continued real estate growth.