On Industrial Construction

Last week, I wrote a post on the consequences of a PQ government on the Montréal downtown market annual absorption (i.e. the difference between occupied space from one period to another). This time, I thought it would be interesting to look at the industrial building new supply across the different time periods as we have access to decades of data.

Economic cycles’ influence is very clear on industrial building new supply.

Here is the big picture: since the 70s, in the Greater Montréal Area (GMA), more than 200 million square feet of industrial space have been built. On the diagram below, I identified the party in power, as well as the economic shocks and the Québec sovereignty referenda.

Even if on average, there is an annual difference of about a million square feet in industrial deliveries during the PQ years and a notable slowdown after the two referenda, industrial construction follows the economic cycles. The early 2000s are a proof that the market can be healthy even if there is a PQ government in place.

There is room for worries however: after the 2008 financial crisis, the market never seemed to return to a healthy level. Speculative construction of industrial buildings is at its lowest since 1917! As we wrote in our 2012 first quarterreport, without new deliveries, “… aging buildings in the suburbs, built in the last fifty years, will continue to fill up gradually, despite their ceilings often being too low for current industry needs. Older, industrial loft-type buildings located in midtown and often dating from the early 20th century should continue to be converted into residential condos and Class B office space.”