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Student protests took bite out of downtown rentals in 2012

Student protests took bite out of downtown rentals in 2012

 

Student protests took bite out of downtown rentals in 2012
 

Last year's student protests contributed to weaker demand for downtown Montreal rentals in 2012, a new report says.

Photograph by: ALLEN MCINNIS, THE GAZETTE , The Gazette

Quebec's student strike against higher tuition fees contributed to weaker demand for downtown Montreal rentals in 2012, a blip in what was a record-breaking year for multi-residential deals, a sector outlook to be released by CBRE Limited on Thursday says.

The outlook, timed to the start of the Montreal Real Estate Forum this week, is forecasting $1 billion in multi-residential deals this year - a decline from last year's record-breaking $1.4 billion in investments - largely because of a lack of supply rather than demand, said Alexandre Sieber, a senior vice-president with the commercial real estate services firm.

Low interest rates and demand for stable returns made 2012 a record year for multi-residential market deals in six Canadian cities, including Toronto with $1.6 billion and Vancouver with $815 million in investments.

Bolstered by three major deals worth a total of more than $500 million - including the sale of the Olympic Village apartments - Montreal's multi-residential investment volume was 43 per cent higher in 2012 than during the previous peak of $946 million in 2008, CBRE said.

And despite fears by landlords, the rental sector was not hard hit by the low-interest rate-fuelled housing boom, including two years of record condo construction in Greater Montreal, the report said.

Yet the student strike, estimated in media reports to have cost Quebec taxpayers $90 million in police overtime, repairs and extra security, is believed to have also contributed to the rise in the vacancy rate last year of Montreal bachelor units, from 3.5 to 4.4 per cent, the outlook said.

These smaller units "have been most attractive to students."

"Owners have reported softer demand in general in areas around post-secondary institutions," CBRE said. "It has been more difficult to fill units and increase rents in these typically strong areas - 2012 was certainly a more challenging year in this regard."

Weaker demand for bachelor apartments was the main contributor to the increase in Montreal's overall vacancy rate, which grew slightly from 2.5 per cent in 2011 to 2.8 per cent in 2012, the outlook said, citing the Canada Mortgage and Housing Corp's latest rental market report.

The "stability in the education sector" this year "could solidify demand from younger renters," the outlook noted.

Demand by students and new arrivals will offset the growing number of condominiums being built and purchased by investors for use as rentals, the outlook says. While more than half of the units at certain downtown Montreal towers are being purchased by investors, only about 11 per cent of the city's 130,691 existing condos are now being rented out.

The number of newly constructed but unsold condos - which are more likely to be rented - dropped to 1,764 in February from a four-year high of 1,894 units in January, CBRE said.

Competition from the condo sector - where owners generally charge tenants 40 per cent higher rents - will have a greater impact on the luxury rental sector, than on most multi-residential buildings, Sieber said.

alampert@ montrealgazette.com

Twitter: @RealDealMtl