Investors must dig deeper to find solid deals in Montreal’s once hot multifamily market, as immigration has slowed and supply has increased.

To find successful investments in that asset class, “we need to go neighbourhood by neighbourhood, asset by asset,” said James Wilson, executive vice-president of Realstar. “You need to dig into a neighbourhood and dig into an asset to really find some special characteristics in order for you to be able to make that investment.”

Wilson was one of the speakers during a session on investment challenges, risks and opportunities in the region during the Montreal Real Estate Forum April 14-15 at the city’s convention centre.

He says investors will have to continue looking neighbourhood by neighbourhood for at least the next 12 to 18 months as the CMHC forecasts vacancy rates in Montreal will hit 4.5 per cent by 2028 compared to an average of about 2.5 per cent over the past 10 years. Vacancy for newer assets could hit 6.5 per cent in the city due to higher rents, less demand and higher supply.

“You look at that potential of 6.5 per cent vacancy and you really want to find an area where you’re not competing with new supply,” Wilson added. 

Realstar has about 23,000 apartment units across the country and looks for institutional class multifamily properties that are five to 15 years old. 

“Try to find nodes that are undersupplied and not seeing a lot of new construction. I think those are great opportunities.”

Wilson said Montreal was the best-performing market for Realstar last year and was not affected by affordability issues to the same extent as in Vancouver and Toronto. “There’s still rent growth at many of our properties” in Montreal.

Montreal an attractive retail market

Montreal and Calgary are the most desirable markets in Canada for open-air retail, according to Taylor Brown, principal and chief investment officer at Salthill Capital, which has about $3 billion under management, primarily in retail.

The company has acquired $115 million of open-air retail in Montreal in the last three years. “We love the market,” he said.

Montreal’s retail market is “very steady and resilient” but has lower rents than the rest of the country and trades at a lower price per square foot.

Salthill will continue to pursue retail as “we believe in the asset class, believe we can grow the rents.”

Pricing is now a stumbling point, however, and the market has become increasingly aggressive. “I think there’s been a movement of capital to retail in general, because the other asset classes are probably tougher to figure out,” Brown said. “It’s totally switched from where we were four or five years ago.” 

Fiera Real Estate likes the position of Montreal in the macro-economic cycle, according to William Secnik, the company’s senior managing director and fund manager. “We spend a lot of time on the research and see this market is coming out of a trough.” 

Fiera recently spent $45 million to acquire Faubourg Bois-Franc on Henri Bourassa Blvd. in the city’s Saint-Laurent borough, near the Bois-Franc REM (light rail) station. The 130,000-square-foot, food-anchored site includes a 57,000-square-foot IGA grocery store.

Secnik said Fiera liked the site’s comparison to replacement cost and its potential for income growth. 

Office is "no free lunch"

MTRPL is seeing lots of value in office in Montreal in the post-Covid world, says co-founder, Bryan Spatzner.

“We’re buying buildings for less than the price of the bricks. The catch is that often there’s a ton of vacancies. So, there’s no free lunch.”

Spatzner sees a lot of transactions in office and is more confident in his office holdings than in his residential holdings. “We see a lot more softening in the residential market because of political factors out of everyone’s control.”

The Montreal-based boutique real estate development shop specializes in mixed-used assets with an emphasis on retail but has recently made a push into office.

“Office is where we see a ton of opportunity. The catch is trying to raise the debt, trying to raise the equity and then of course executing and leasing the property.” 

Last September, MTRPL and Sailcap acquired the 258,167-square-foot office component of downtown Montreal’s historic Les Cours Mont-Royal at 1555 Peel St. and 1550 Metcalfe St.

In 2024, MTRPL and financial partner J&H Realties bought the nine-storey 4446 Saint-Laurent Blvd. from Allied Properties REIT, with 72,817 square feet of gross leasable office area and 7,251 square feet of gross leasable retail area.

The company’s office spaces are 100 per cent leased with the exception of Cours Mont-Royal. 

However, with the recovery in the office market, “we’re starting to see the window close on some of those really exciting or juicy deals,” Spatzner said. “It’s a double-edged sword because that means whatever we bought is performing well.”