Industrial rents bleeding SMEs dry

Montreal’s industrial market is seeing the highest rent increases in the country. The market entry of the Americans has something to do with it, industry observers believe. SMEs whose rent doubles or even triples when their lease is renewed pay the price.

Posted at 6:00 am

Andre Dubuc

Andre Dubuc
The press

“I have a tenant who occupies 25,000 square meters [2300 mètres carrés] in Longueuil of a major landlord: his rent went from $6.50 to $19 per net square foot,” says Paul-Éric Poitras, senior partner at agency NAI Terramont Commercial, specialist in the South Shore industrial market.

“There are fewer vacancies, the agent explains, and landlords are taking the opportunity to raise rents. Businesses don’t know where to “pitch” after that because there really isn’t much availability. »

“I find it difficult for SMEs today,” he continues. I have clients who have said to me, “The rent increase takes all my profits.” I have many clients in Longueuil and Boucherville looking to Saint-Césaire and beyond. They tell me, “I’m out of funds or my winnings are going away.” »

The tenant, whose rent in Longueuil has risen from $6.50 to $19 per square foot, has declined to testify publicly to avoid damaging his relationship with his landlord.

This case is anything but unique. “In our business resources department, we have received cases from entrepreneurs who have complained that their rent has increased significantly during contract renewals,” says François Vincent, Vice President for Quebec of the Canadian Confederation of Independent Businesses, which is dedicated to defending the interests of SMEs Has .

Real estate is the second largest expense item for companies after salaries.

I’ve seen businesses in the Quebec area that have been evicted or taken hostage and their rent has doubled on renewal [du bail].

Louis Veilleux, owner of Métal Bernard in Saint-Lambert-de-Lauzon, near Lévis

“Today, with what we’re seeing in rents, we’re happy to have taken the prudent route of owning our own buildings,” he welcomes. Our usage costs are controlled by ourselves. »

Broker Paul-Éric Poitras makes his mea culpa. “For years I have advised my clients to keep their money, invest in their business and pay rent. “If the roof leaks, call the owner.” Today, SMEs that own their premises cannot be kicked out while others can. As tenant representatives, we tear our hair out. »

Rents up 15% in three months

Industrial rents have risen by 90% since the pandemic began, up 62% in the last year alone, putting Montreal “among the fastest growing markets in the country,” says agency CBRE in its latest report Study of the Industrial Market in the Region Montreal, published in July.

As of mid-2019, the average net asking rent was $6.12 per square foot. At the end of June 2022 it was $13.40.

“Lenders have revised their rates; the average in-place rent continued to climb to new heights in the greater Montreal area. [L’augmentation a été de 15 % au deuxième trimestre 2022 par rapport au prix moyen demandé au premier trimestre 2022.] Rents are showing no signs of slowing down. While metropolitan landlords reassess the asking price for their available products on a daily basis,” writes CBRE in its report.


With the acquisition of the industrial portfolio of Quebec real estate company Cominar effective March 1, 2022, Blackstone has become a leader among industrial property owners in the province with 190 buildings totaling 1.4 million square feet.

From Quebec Cominar to American Blackstone

At least three industry players have pointed to the arrival of America’s Blackstone as a factor that partially explains the accelerated rise in industrial rents in 2022 that will set Quebec apart from the rest of the country.

With the acquisition of Quebec real estate company Cominar’s industrial portfolio on January 1,ah As of March 2022, Blackstone has become a leader among industrial property owners in the province with 190 buildings totaling 1.4 million square meters (15.3 million square feet).

The market context was already favoring owners, Blackstone, through Pure Industrial, was able to quickly implement its methods imported from the United States.

It is certain that when buyers of Cominar’s industrial properties became owners, they immediately began pushing for rents more than other owners in Quebec. It’s an American company that came into the market to make money. The other owners followed.

Ian Quint, president of Brasswater, a real estate company that just acquired $100 million in the Saint-Laurent industrial park

“Blackstone, of course they have their way of doing things,” replies one broker when asked to describe the American’s impact on the market. He does not want to be named so as not to damage his relationship with the market leader.

These practices include automatic annual rent increases and shorter leases in order to adjust rents to market levels as quickly as possible.

“Previously, the same agent explains, leases ran for 10 years with a fixed rent of $5.50 per net square foot. [avant frais et taxes] for five years, then by the sixth year the rent increased to $6.50. Today, an annual increase is the highest between 2-3% and the CPI [indice des prix à la consommation]. »

“Pure [gestionnaire de Blackstone] created something that other landlords were quick to emulate, said another agent, who agreed to speak on condition of anonymity. The context is favorable for Pure to implement its methods. Of course it fits all other owners. »

Pure fights back

When asked to comment on these claims, Pure denied them. In her opinion, rents are increasing because of market conditions that favor landlords. Additionally, by controlling just 5% of total inventory, Pure isn’t powerful enough to influence the market, she argues.

“Pure is proud to have honored all leases assumed by Cominar and we have hired over 60 Cominar employees to manage these assets,” said David Owen, Pure Industrial’s chief operating officer, in a written statement. Since the Cominar transaction, Pure has opened two offices in Montreal and Québec City and hired additional staff, bringing the total to 75 employees in the province. Pure employs approximately 185 people across Canada. »

“Building long-term relationships based on highly responsive and personalized service to our tenants is a top priority for Pure Industrial,” he continues.

In 2018, Pure Industrial REIT was privatized by Blackstone and Caisse de Depot et Placement du Québec’s real estate subsidiary, Ivanhoé Cambridge, and became Pure Industrial.

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