Retail sales activity is heating up in Montreal, boosted by tourism and the re-emergence of the downtown, according to a recent report by commercial real estate firm JLL. 

“As expected, the Montreal leasing market has strengthened largely due to the government’s easing of pandemic-related restrictions. The reduction of travel restrictions combined with the arrival of summer was the perfect recipe for increased foot traffic and sales in the Greater Montreal Area. As retailers take advantage of these favourable conditions in the second half of the year, there is sustained upward pressure on rental rates and subsequently downward pressure on vacancies. This trend is expected to continue until there is a drastic change in consumer behaviour,” said the report.

“Effective rental rates have surpassed Q1 2020 levels and are inching their way up further QoQ. Overall, vacancy rates have yet to truly recover to pre- pandemic levels. Landlords and tenants are still agreeing to shorter lease terms than usual. The prevalence of vacant spaces and shorter leases have allowed prospective out-of-market retailers to experiment with pop-up shops to gauge consumer interest before committing to larger-scale investments.

“In order to garner more interest in their vacant spaces, some landlords have become creative and have leased out their traditional retail spaces as showrooms and for medical uses. Modifying interior spaces continue to be landlords’ last option given the lack of labour available in the market.”

Manon Larose, Senior Vice President, Retail with JLL, said she’s feeling positive about the Montreal retail market these days as it heads into the latter half of this year.

“The return of the tourists, the students that are back in school and more and more daytime population, more and more people going back to the offices, having in-person meetings, functions, weddings, all the events that were postponed in the previous two years, are now happening and we see it in terms of sales results,” she said.

“The other thing is that people were tired of staying at home. Now they are going out. There’s a lot of things pointing in the right direction.”

That’s good news, she said, for Montreal’s downtown as well as the shopping malls.

“I would say we will have continued growth (for the rest of the year). I would suspect that we would have a better Christmas than what we had before,” said Larose.

“There are some best in class brands with whom we are touring as we speak for locations on Sainte-Catherine Street.”

“The improvement of the retail situation in downtown Montreal cannot be overstated. Most businesses in the central business district have experienced rebounding sales thanks to a pronounced increase in foot traffic from residents, office workers, and tourists,” explained the report.

“Tourism has surely had a part to play in the urban core’s recovery from COVID-19 times, as air passenger traffic at the Montreal-Trudeau airport has finally rebounded this year and will soon eclipse Q1 2020 activity. Full- service restaurant activity has skyrocketed compared to last year’s figures. Limited-service eating places continue to benefit from elevated activity, thanks to increased online sales.” 

Both mall-based and Sainte-Catherine Street-based retailers in the urban core have recovered in 2022, but mall-based retailers had more lost ground to recover and were more severely impacted by COVID-19 restrictions, said JLL.

“The recovery and persistence of business activity in the urban core are noteworthy, and even more so when considering that most downtown workers are still working from home on a full or part-time basis. Despite this, foot traffic in the core for Q2 2022 is up almost 40 per cent compared to Q2 2021. This is further evidence that downtown Montreal is gradually reclaiming its identity as a prime destination for shopping, eating, and entertainment,” it said.

It said commercial construction costs have slightly increased once more and upward price pressures are being upheld in large part due to the higher cost of debt, raw materials, supply chain issues, and labour shortages. 

“These costs are not expected to decrease soon and therefore threaten to push back the deliveries of some larger commercial developments having already broken ground and planned projects further into the future. As a result, the supply of new retail space has continued to be constrained, thus putting upward pressure on leasing rates,” said JLL.

“With good fundamentals in place, retailers from outside the province are expressing interest in the Royalmount project. Over 200,000 square feet of retail space has been pre-leased since Q4 2021. The project will likely satisfy shoppers’ appetites, as 50 per cent of the pre-leased space will be occupied by new-to-market, best-in-class global brands.

“Fairview Pointe-Claire has also undergone a physical makeover during the pandemic. The mall moved its food court to the busier first floor near a future REM station and welcomed Simons and Uniqlo as its new anchor tenants. The upscale food court now occupies the former Sears location and is now welcoming new food and beverage operators such as Tommy Café, Poulet Rouge, and Lucille’s Oyster Dive.

“Sainte-Catherine Street is also bolstering its roster of notable tenants and reinventing itself. Nike has recently announced that it will build a large flagship store at the location of the former multi-level Gap store in the Eaton Centre by Q3 2023. Furthermore, fashion retailer Chlorophylle is also set to open a store in front of the Eaton Centre.

“Much like Royalmount and Fairview Pointe-Claire, the street is also undergoing its fair share of physical changes. The thoroughfare will be revitalized with the help of broader sidewalks and extra greenery lining the street between De Bleury and Mansfield Streets.”

When comparing the state of major malls in the GMA pre-COVID-19 and post-COVID-19, there was initially a significant decrease in sales, however, they are now recovering. There has also been a decrease in foot traffic, although the decline was softer for sales per square foot. Both conditions are expected to improve in the second half of the year, it said. 

“Interestingly, the number of sales per visit has increased, implying that consumers are now shopping with a set goal. This figure is expected to decrease slightly by the end of the year when more shoppers return to malls and are eventually satisfied with their updated wardrobes. Vacancy rates have also risen compared to pre-pandemic levels, but recovery should occur if consumers maintain their current shopping appetites,” said the report.

“The outlook for retail in Montreal is mostly positive. There have been vast improvements in key factors such as foot traffic, sales growth, and overall activity. There are still improvements to be seen in vacancy rates, however, momentum is trending in the right direction.”

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