Montreal real estate: Going big (and small) with megaprojects and microunits!

While the towers in Montreal largest projects may be big, the size of many of the units within them is shrinking.

Tidy grids of boxy small and medium-sized plexes may still dominate many urban neighbourhoods in Montreal, but the rising cost of land is spurring downtown developers to maximize their investment by building up (way up).

In the third quarter of 2018, three new “megaprojects” launched downtown, with 330 to 400-plus units each, and according to Altus Group real estate analyst Vincent Shirley, some projects in the pipeline this year are expected to launch with as many as 600 units per phase.

At about 400 units each, Quinzecent (by Brivia Group) and Victoria Sur le Parc (Broccolini) were the two largest to launch at the end of last year, with 330-unit Solstice (Consortium QMD-Ménard) not far behind. All three are in prime downtown locations, and include luxurious amenities designed to appeal to investors, young urban professionals and downsizing baby boomers.

Shirley said it wasn’t so long ago that projects of this size were considered very risky, but with increasing demand for condos from both local buyers and investors from outside Montreal, developers are discovering it pays to go big.

For buyers, megaprojects like these can offer a number of benefits: great views at higher floors, a feeling of greater security than living at street level, and often a larger and more luxurious set of amenities like in-house cinemas, rooftop terraces, nicer pools and fitness rooms and so on. Some buyers also feel a greater sense of security in buying from a developer with deep pockets and a proven track record.

According to Jean Langlois, marketing and communications director for Broccolini, the size and scope of projects like Victoria sur le Parc are influenced by location and land value.

“The location of this project is absolutely spectacular. You step out, on one side you’re in Old Montreal and the other side you’re downtown. You’re connected directly to a métro (Square Victoria Station) through the underground,” he said. “Land in a location like this comes at a premium. To make the pro forma viable, you need to build a certain amount of units to make the return on investment viable.”

But while the towers may be big, the size of many of the units within them is shrinking. Starting about four years ago, “microunits” under 500 square feet started to become a popular offering in some larger buildings, Shirley said, with some under 300 square feet.

Unit sizes at Victoria sur le Parc’s start at 470 square feet for a one-bedroom, while the smallest units at Solstice are 377 square feet. Quinzecent’s tiniest studio is just 325 square feet.

Benjamin Sternthal, whose real-estate development company Kodem is consulting on QMD Menard Consortium’s Solstice project, said while land cost is encouraging developers to build taller, it’s the cost of construction and new regulatory requirements that are causing prices to rise. By building smaller units, he said, developers can keep the price lower, which allows first-time buyers to gain a toehold in the market.

“A small space isn’t a bad space. It depends what your needs are. If a small size is designed properly it can still be a very nice home,” he said.

According to Alexandre Tazi, a broker with Londono Realty Group who specializes in new construction pre-sales, microunits are popular among not just first-time buyers but both local and foreign investors and as a pied-à-terre for businesspeople who live outside of the city but want the convenience of a place downtown.

“Three hundred to 400 square feet seems to be the sweet spot because the price can be under $300,000,” he said.

Microunits are also being snapped up by families with children attending Montreal universities, said Sotheby’s vice-president of brokerage Sacha Brosseau. Some intend to rent the units when not in use by their children, while others contribute money to their children for a down payment so their kids can start building equity even before they graduate. “It’s a very smart way to get kids into real estate,” Brosseau said.