Overall, there have been many improvements in Montréal’s retail sector as vacancies have decreased with foot traffic and sales continuing to climb, says a new retail report by commercial real estate firm JLL.
It said consumers are starting to feel the effects of the Bank of Canada’s interest rate hike campaign. However, notable retail-friendly developments are currently underway, which will serve to facilitate and encourage commercial activity on the island and beyond.
Jesse Provost, Associate Vice President of the Retail Advisory Group for JLL, said the retail scene is exciting in Montreal these days with new projects such as Royalmount with new to market retailers coming to the city.
There’s also quite a bit of activity on the iconic Sainte-Catherine Street with many retailers looking to locate on that busy retail area.
“By and large, I would say it’s pretty exciting and a good time for retailers generally in Montreal. That being said, obviously the economy is what it is. We’re seeing interest rates continuing to increase. So people are being more cautious with their spending. Retailers are very well aware of this,” said Provost. “They’re trying to navigate those choppy waters for the next couple of quarters until we really see results of all of this at the end of it all.”
Retailers continue to be attracted to Montréal.
“Montréal is culturally a very attractive city. For some brands they do want to bank on that reputation that Montréal has of being a city of culture, a city of fashion. The prominence of Sainte-Catherine Street. If you’re going to open in Montréal you’re going to want to be on Sainte-Catherine Street eventually. It might not be your first stop, but obviously it’s something you’ve got to keep in mind,” said Provost.
“I think in the past Sainte-Catherine Street has had notable vacancy. With the way the retail market is today and how some retailers have been quite successful coming out of the pandemic, I think it’s a great opportunity for them to start looking and settling in our beautiful city. Definitely something all retailers should be doing.”
The JLL report said air travel in Montréal has seen a remarkable uptick, reaching levels rivaling pre-pandemic times. Hospitality data in Montréal paints a similar picture. According to AHGM and Tourisme Montréal, hotel occupancy in Q4 2022 stood at 68.4 per cent, a mere 1.5 per cent lower than in Q4 2019. It’s worth noting that the current cost of renting a room in Montréal is 22 per cent higher than in 2019, indicating a robust comeback for tourism, as well as sightseers’ willingness to spend money in search of experiences in the city, said the report.
“Thanks to a renewed interest in experiences, Montréal restaurants enjoyed a marked surge in visits in 2023. OpenTable data reveals that Montréal has outperformed both Toronto and Vancouver in terms of restaurant reservations, with a notable 12 per cent increase between Q2 2022 and Q2 2023. In contrast, Toronto and Vancouver only experienced modest growth, each showing a mere one per cent increase during the same period,” said JLL.
“The growth in downtown foot traffic can also be attributed to the increased frequency of college and university students attending school onsite. Between Winter 2022 and Fall 2022, the proportion of in-person learning vs virtual learning increased by nine per cent, reaching 96 per cent. The positive momentum spans multiple semesters and has enabled students to physically attend school at a pre-pandemic pace.”
While downtown Montréal has witnessed the return of tourists and students to levels comparable to pre-pandemic times, the reintegration of office workers into their workplaces has been notably slower, indicating a lasting presence of hybrid work models, explained the report.
“According to Altus, the adoption of fully onsite working policies among employers has experienced significant growth between Q1 2022 and Q1 2023, almost tripling from five per cent to 13 per cent. While the YoY increase is noteworthy, there is still vast progress needed to reach pre-pandemic workplace attendance levels. Unless office workers revert to their pre-2020 levels of workplace attendance, substantial growth in future foot traffic in downtown Montréal remains unlikely,” it said.
The increase in foot traffic has meant improved retail leasing activity in the market. The vacancy rate is still above pre- pandemic levels, however, progress has been made in recent quarters.
Citing Statistics Canada data, JLL said net effective rents have rebounded and are now 3.8 per cent higher than they were in 2019. Compared to Toronto and Vancouver, rental rate growth in Montréal has been tamer, with these cities seeing increases of 5.5 per cent and 8.8 per cent respectively over the same period.
“It’s expected that rents will increase in the coming quarters, however, the Bank of Canada’s fiscal tightening campaign may limit growth potential,” added the report.
JLL said that recently the developers of Royalmount – Montréal’s upcoming shopping and dining destination unveiled new updates about its tenants and development. Several luxury brands including Yves Saint Laurent, Jimmy Choo, and David Yurman will be establishing their first-ever stand-alone stores in Quebec. Furthermore, Michael Kors and TAG Heuer will also join Montréal’s next luxury hub in 2024, which will include over 170 stores and 60 restaurants once complete.
Seeking to boost its connectivity to Montréal’s transit system, Carbonleo has begun construction on a footbridge spanning over 200 metres that will connect the shopping district to the De la Savane metro station. Once complete, the pedestrian bridge is expected to accommodate nearly 10 million pedestrians annually and encourage car-free foot traffic, added the report.
“In late July, Montréal saw the long-awaited arrival of its most anticipated transit endeavor since 1966 – the REM LRT network. This significant milestone brought forth a portion of the network, linking the South Shore section via five stations to downtown Montréal. As a result, South Shore suburbanites can now access the heart of the city within 18 minutes,” said the report.
“Next year, the REM project will add more than a dozen new stations, significantly improving connectivity between the suburbs and Montréal’s downtown core. Among these stations, the McGill REM station is projected to be the network’s second busiest, accommodating around 25,000 commuters daily. The future station is expected to provide a boost to foot traffic and sales to both the Eaton Centre and retailers along Sainte-Catherine Street.”
According to JLL’s Sainte-Catherine Street Retail Analysis, the street has adapted to changing spending habits. The street has seen an increase in its share of clothing and footwear operators on a 900-metre span between 2019 and 2023, which bodes well as these categories have been trending well in the GMA for the past few years.
“Between Q2 2022 and Q1 2023, Montréal Centre Ville reported a two per cent decrease in the street’s vacancy rate, while the urban mall vacancy rate experienced a more substantial drop of seven per cent, reaching 12 per cent. Furthermore, pedestrian activity surged by an impressive 115 per cent along three prominent intersections between Q1 2022 and Q1 2023, indicating a positive recovery in foot traffic,” said the report.
“These positive trends are expected to continue, supported by recent and upcoming developments. The opening of the new Nike store, the introduction of future REM stations, and an ongoing redevelopment project aimed at widening sidewalks and adding street furniture between Mansfield Street and Atwater Avenue will likely contribute to the continued growth and attractiveness of the area.”