Is Montreal Making a Comeback?

The 1960s were a golden era for Montréal. As the commercial and cultural capital of Canada, Montréal was home to a thriving financial industry, driven by banks, insurance companies, stock exchanges and investment brokers. The city was home to the head offices of the Bank of Montréal and the Royal Bank of Canada, as well as insurance giant Sun Life. Both the Montréal Stock Exchange and the Canadian Stock Exchange served a large community of brokerage and investment firms. Montréal was not just the financial capital of Canada, it was also the most European of North American cities, half English-speaking but overwhelmingly French, profoundly cultured and elegant. Montréal was everything that Toronto, its rival, was not: suave, sophisticated, and a place where you could dine and dance long into the night. There was good reason Montréal earned the privileged title as the Paris of North America. But it was the World Exposition of 1967 that really put Montréal on the map. 50 million people visited Expo ’67 at a time when metropolitan Montréal was home to just 2.6 million residents. However, Montréal’s success could not be sustained, and after the notorious 1976 Summer Olympics that cost the city $1.6 billion (13 times overestimated costs), the once flourishing metropolis was plunged into debt that took over 30 years to pay off. Compounding on the financial issues were inflamed political tensions, as the threat of Québec separatism and strict French language requirements turned many key Canadian head offices away from Montréal and towards the burgeoning Toronto. What followed were decades of low economic growth for Montréal, as it was eclipsed by Toronto, Vancouver and Calgary as the key economic areas in Canada. Québec’s reputation for anti-business policies and excessive red-tape have not helped the city’s cause.

However, over the past several months, Montréal has been experiencing somewhat of a comeback. 2017 saw the Montréal real estate market’s best sales growth in a decade, and the first time since 1998 that its sales growth was higher than Toronto (–18%) and Vancouver (–10%), which both experienced declines in 2017. Notably, unlike Toronto and Vancouver, Montréal lacks a foreign buyers tax. As foreign buyer’s taxes in Toronto and Vancouver restrain demand and send purchasers away in quest for cheaper places to invest, Montréal seems far more appealing and is now spotted globally as the next booming housing market. Montréal is attractive for foreign buyers because the city provides a high quality of life, affordable housing (for now), low pollution and a university system that contributed to it being named as the best student city in the world. Direct and relatively inexpensive flights to major Chinese cities have also increased its foreign accessibility. Montréal’s real estate boom has been very unexpected, as many analysts believed that the new mortgage rules implemented in the fall of 2016 would impair the number of first-time buyers and reduce the total number of transactions. However, the best consumer confidence in 15 years and a high number of permanent residences stimulated demand and compensated for the new rules and higher mortgage rates. Experts are now forecasting another strong year in 2018 with the number of sales transactions estimated to increase 5%.

Part of this massive real estate growth can be attributed to Montréal’s booming tech sector. The tech sector has added 25,000 workers over the past 5 years, with its 5% annual growth far exceeding employment gains from other economic sectors. Specifically, Montréal is one of the most promising new hubs for AI research in Canada, if not the world. Microsoft has recently announced its plan to double the team at its Montréal AI research lab that was established over this past year. The facility is Microsoft’s largest natural language processing lab in the world, and will be led by renowned machine learning specialist Geoffrey Gordon. In addition, this past September Facebook announced its plans to invest $7 million by building its own Montréal AI lab facility. The same month, Samsung publicized its goal to launch its own AI lab in the city. In addition to mega tech firms, Montréal is also attracting many new startups. The 2016 Montréal Startup Ecosystem Report identified over 2,000 startups in Montréal, a tenfold increase over the past decade. Montréal currently leads Canada in venture capital dollars, as Montréal-based companies raised over $980 million in 2017, an immense 64% increase in VC investments compared to 2016. Highlighting the Montréal VC investments were the two largest investments made anywhere in Canada during 2017: the $205 million raised by point-of-sale software-maker Lightspeed in October and Element AI’s US$126 million raised in June. Additionally, the $111 million VC investment in Montréal’s ROOT Data Centre was the 5th largest VC investment in 2017. It comes as no surprise then that when the Government of Canada announced its plan to accelerate innovation in high-growth areas where Canada is a world leader, Montréal was targeted as a key innovation supercluster that will qualify for a $950-million investment. Even on the cryptocurrency front, the region is making waves. The process of Bitcoin mining is extremely power intensive, and the estimated power consumption of the entire network is more than that of all of Ireland. As a result, Bitcoin mining farms need to find cheap electricity, so they can maximize profits. To date, China’s affordable electricity has made it home to some of the world largest Bitcoin mining farms. The Chinese government, however, has been doing its best to subvert the industry, forcing miners to look for alternative locations. This coincides with HydroQuebec’s campaign to attract businesses that consume a large amount of electricity, a move spurred by a decrease in demand for electricity due to the implementation of more energy efficient electronics as well as the increased use of solar panels. BTC.Top, the world’s third-largest Bitcoin mining firm, has already announced it has plans to open mining farms in Canada, with Montréal a top potential target. HydroQuebec offers some of the lowest electricity rates in North America, and the cold Montréal winters would alleviate the need for expensive air conditioning units inside the farms. In addition, it is a renewable and sustainable source of electricity.

In addition to the availability of clean, renewable energy, newly elected Montréal Mayor Valérie Plante is focusing her policies on making the city move more efficiently, environmentally and sustainably. Plante is working to make the Société de transport de Montréal (STM) more accessible and affordable by lowering – and eventually eliminating – bus and Metro fares for seniors and children under 12. Additionally, anyone living under the poverty line will be allowed a 40% price-cut on STM fares. Madame Plante has stated that both these goals are achievable using existing provincial funding. She has also stated her long-term goal of a new 29km metro ‘pink line’ from Montréal North to Lachine, connecting some of the city's densest neighbourhoods. The stations would be named after prominent Montréal women. Plante also pledges to get 300 hybrid (biodiesel-electric) buses on the road by 2020. Hybrid buses are estimated to cut emissions by as much as 75% when compared to conventional diesel buses. More reserved bus lanes which would also help ease traffic woes. The plastic bag ban which began on January 1, 2018 shows the new mayor’s commitment to environmentally sustainable policies. Further, Plante wants to improve cyclist infrastructure in the city with a 140km network of bike paths on busy streets over the course of a four-year mandate in what is being dubbed le Réseau Express Vélo (REV). She also wants to increase social housing as real estate prices rise, and has promised to create a rule that will require builders to reserve 40% of units in new developments for social and affordable housing. Over the next four years, this will create about 12,000 social housing units. While Plante’s policies are extremely optimistic in their sustainable outlook, a proposed 3.3% increase in property taxes will not help in trying to entice business back to Montréal. As the city attempts to rediscover its former glory, a balance in policy is required to both entice workers and firms to Montréal in the short-term while guaranteeing long-term sustainable and environmentally friendly growth. If the city can strategically manage and sustain its unexpected real estate growth, while continuing to establish itself as a premier tech cluster, Montréal can most certainly make a comeback. While Montréal’s transition back to a world-class city will not happen overnight, there is no doubt that in a global economy that relies on cities as engines of growth, a thriving Montréal would be a blessing not just for Quebec and Canada, but also the world.