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Montreal investment climate shaken by corruption, politics

 

Montreal investment climate shaken by corruption, politics

MONTREAL - Corruption and politics are shaking investor confidence in Montreal, says a 2014 outlook which ranks Quebec’s key metropolis dead last among nine Canadian cities for commercial real estate growth potential.

“Whether it is related to construction, corruption, or politics, interviewees (surveyed) expressed uncertainty about investment in Montreal,” said the outlook compiled by PricewaterhouseCoopers LLP, a professional services giant.

The annual survey — which forecasts market trends and outlooks for different property types — also ranks commercial real estate markets in nine Canadian cities based on investment, rental and commercial property development and residential homebuilding potential..

The outlook is based on the views of 1,000 North American real estate industry experts surveyed or interviewed by PWC and survey partner, Urban Land Institute.

While the outlook does not refer specifically to the Parti Québécois, elected with a minority government in 2012, one interviewee referred to an anticipated spring 2014 election when saying: “Montreal faces major risks because of uncertainty relating to politics.”

In 2013, Montreal was ranked seventh out of nine markets in the survey and there were no remarks over politics or corruption.

In the 2014 ranking, Montreal came in ninth, behind Halifax.

PWC executives said they couldn’t elaborate on the political, or corruption fears raised by investors.

“Sitting in Ontario, this (corruption) is getting a lot of (airtime),” said Frank Magliocco, a partner in the PWC’s audit and assurance group. “That may have had some impact on individuals who were ranking Montreal.”

Deborah Dumoulin, a PWC partner, said she did not hear those same concerns voiced in Quebec: “This is not what would be coming from the Montreal market.”

While economic growth is expected to rebound in Montreal to 2.1 per cent next year, a saturated office and condo market — combined with a forecast of weak employment growth — mean the city’s development prospects are limited compared to Canada’s booming west.

The outlook on investment, a driver of tax revenues, comes at a time when Quebec Finance Minister Nicolas Marceau has already warned he might not be able to balance next year’s budget.

Mélanie Malenfant, a spokesperson for Marceau, said she could not comment on the outlook since she was just made aware of it by a reporter. She pointed to PQ efforts to combat collusion, such as Transport Minister Sylvain Gaudreault’s recent unveiling of a 16-point strategy to lower the cost of public contracts.

Bernie Marcotte, senior managing director of Cushman & Wakefield in Montreal, said there has been a slowdown in commercial real estate investments, but that’s mostly due to a weaker economy.

“We see deals taking longer to complete. We have seen investment by private individuals slow down,” Marcotte said.

“But the institutional investor, who’s there for the long haul, is still there.”

Two real estate veterans, however, told The Gazette that they are seeing large investors reducing their exposure to Quebec, while Montreal-based developers expand into other provinces. One said investors have been shaken by the Parti Québécois’s focus on reasonable accommodation, including its so-called Charter of Quebec Values: “The government is distracted by social issues, they’re not focusing on the economy.”

Source: The Montreal Gazette