Non-residential investment: Profile of the Québec City CMA
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Non-residential vacancy rate for the Québec City CMA, 2016
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$8B of non-residential investment for more than 230 current and upcoming (within 10 years) projects
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Québec City’s non-residential sector generated $775.9M in investments in 2016, representing an 8.5% drop from 2015. This slide was expected, both by us and by most analysts. Last year, the sector experienced the completion of major projects and the absorption of new sites that remain unoccupied. The lull allowed the city to analyze the future needs of the market. Note that this is not an isolated case; capital expenditures dropped in several other large CMAs. It affected Quebec and Canada alike. Investments decreased by 4.6% and 1.2% (respectively) in 2016.
The institutional market invests an average of $175M annually in the Québec City CMA. This trend continued in 2016 with expenditures of $174.1M, representing a 7.2% increase from 2015. While the office space market has been very active lately, it ceded some space to recreation, tourism and cultural projects (hotels, Water Park, museums, etc.) and public infrastructures (airport, roads, armoury, etc.). All of these sectors will remain active in the future and will be supported by major healthcare (Hôpital de l’Enfant-Jésus, Hôtel-Dieu-de-Lévis), safety (police station) and transportation (Port of Québec) projects. While the vacancy rate for office spaces jumped from 4.7% to 8.6% over five years, it is still the lowest vacancy rate in Canada. The office space market is likely to regain its momentum as it grows to meet new market needs (expansions, laboratories, studios, etc.). Preparation for Le Phare and the potential held by the Lebourgneuf neighbourhood and the area around the Pyramide will lead to future projects. In conclusion, our data lists approximately one hundred current or upcoming institutional and public infrastructure projects. Investments for these projects total nearly $7B.
The commercial sector has generally remained stable at around $678M in investments over the past five years. 2016 was a mild year, with only $528.7M in investments, a 13% decrease from 2015. Major projects were underway, particularly in Sainte-Foy and Lebourgneuf. However, they were not able to counteract the effect of the completion of the Carrefour St-Romuald. That said, the lull is likely to be short-lived for the sector, which accounts for roughly 70% of total investments. Increased household income and retail sales, as well as the low rental vacancy rate, will likely help stimulate investments and attract new retailers. For example, the Duplessis neighbourhood is making a comeback with the IKEA project. Québec City’s approximately 70 current and upcoming projects are valued at more than $900M.
The industrial sector slowed somewhat in 2016. It generated $73M in real estate investments, a decrease of 5.6%. Fluctuations in the value of the Canadian dollar and uncertainties about the American economy likely led some companies to rethink their investments. Once again, however, this is likely a brief pause. Investments are expected to approach the $101M annual average of the past five years. The Innoparc in Lévis is starting to experience more activity, and the d’Estimauville area is preparing for the Medicago project. Additionally, the modernization of current facilities is proving to be essential for businesses looking to expand and remain competitive. Some 20 industrial projects are currently announced or underway. Investments for these projects could total more than $300M.
As Québec City steps back to evaluate its future non-residential needs, new projects can begin. As in previous years, discipline and good management will be needed to establish multiple investment projects. In doing so, the region will be able to reach average capital investments of $900M per year.