A 19,000 sf suburban building at $61 per sf against a 9,400 sf medical office at $148 per sf, and the math will not land the same way twice

What is the notice period on that renewal option, and is it long enough to backfill a 9,400 sf medical build-out?

The renewal option language is the whole game on the medical deal, agreed, but the number to get before anything else is what that 2021 rent resets to on exercise. If the option is fixed rate and the delta to 2029 market is, say, $8 to $10 per sf on 9,400 sf, that is $75K to $94K of annual income effectively given away for however many years the option term runs, and that haircut changes a 6.1 cap in a hurry. On the suburban side, $180K in capex against a $1.16M buy is real money, though at least that spend buys control of the asset rather than a dependence on one tenant making one phone call your way. Single tenant deals that looked safe have turned into 14 month vacancies at buildings with buildout so specific that nobody else wanted it, and the retenanting cost ate three years of NOI. What does the option actually reset to, fixed or CPI or fair market, and does the tenant have early termination rights buried in the same clause?

The gap between 6.1 and 7.4 looks like 130 basis points until you discount that renewal option, and then the two deals are probably trading at the same effective yield. Plateau corridor rents have moved hard since 2021, so by 2029 that tenant is sitting on a below-market option and knows it, which means what arrives is an exercise of the option rather than a renegotiation. Laval suburban with $180K in capital and a real leasing job is still a cleaner position than waiting on one phone call.

That below market renewal option is a 2029 problem being priced today at 6.1.

The $180K number in the physical is the one I would stress harder than the renewal language, honestly. With suburban office of that vintage the HVAC estimate has a way of growing once the contractor is actually into the east wing and finds out why the previous owner deferred it. Take a 2003 building in Brossard, 16,000 sf, where the physical says $140K on mechanical. By the time the contractor gets into the plenum, $310K is an entirely ordinary place to land with forced-air systems that have been patched for fifteen years, and it is well short of a horror story. Your 74% occupied building is also generating less revenue to absorb that hit, so the timing of the capital stacks on top of the lease-up risk simultaneously, and that combination is what actually squeezes an owner, far more than either one alone. On the medical side the thing people underweight sits past the renewal decision itself: what happens to the space if the tenant leaves. Medical build-out is not generic. There are plumbing penetrations and exam room configurations, sometimes lead-lined walls depending on the practice, and releasing it to a non-medical tenant means probably gutting $80-120/sf of specialized improvements that do not transfer. So the 2029 optionality is a repositioning question as much as a rent question if they walk. What type of medical practice is the single tenant?

The Laval suburban deal is the one I'd be picking apart harder than you are. What are the actual lease expiry dates on those two tenants, and are they rolling in the same 12-month window or staggered. Because 74% occupied with synchronized lease maturities in suburban Laval is not a two-tenant building, it's a potential 19,000 sf vacancy event on top of $180K in capital you've already committed. The medical office problem is dated and priced, the suburban problem is open-ended, and suburban general office re-leasing in that corridor right now means competing against landlords who are handing out 6 to 9 months free rent and TI packages that will eat your yield before you even find a replacement tenant.

At 9,400 sf purpose-fitted for one medical user, your re-leasing universe after 2029 is probably four or five realistic prospects in that corridor, not forty. What is the tenant improvement allowance situation if they walk and you need to gut and refit for someone with different clinical requirements?

The thing nobody talks about enough with below-market renewal options is how they interact with your exit. You are not just solving for hold period cash flow, you are solving for what a buyer sees in 2028 when you try to trade out of that medical office with a tenant sitting on a 2021-vintage renewal rate and a 2029 exercise window. That buyer is going to haircut your cap rate hard because they are buying your problem, not your income. I bought a single-tenant retail strip in Brossard in 2019, 100% leased, felt bulletproof, and when I went to refi in year three the lender's appraiser marked it down 11% purely on rollover risk from a below-market option clause I had not modeled into my exit. Cost me $60K in equity I had to bring to the table to close the refi. The option language is not a 2029 problem, it is a 2028 problem when you are trying to exit or refinance ahead of the decision.

The Laval building at 74% occupied is actually the one where you have something to work with if you know that market. I know Laval reasonably well and suburban office there has been moving in the right direction on small-to-mid tenants, especially anything adjacent to the health and professional services corridor near the autoroute. The $180K in deferred capital is real money but it is also a negotiating lever you have not used yet, and if you can get that building to 90% occupied with a second or third tenant you are manufacturing a cap rate compression exit that the medical office literally cannot give you because it is already fully baked. The medical office at 6.1 is priced for everything going right. The suburban deal at 7.4, normalized, is priced for some things going wrong