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Canada
C O M M E R C I A L R E A L E S TAT E
M A R K E T O U T LO O K
CBRE Research
INTRODUCTION

NATIONAL OUTLOOK

Investment..................................................................................... 6
Office ............................................................................................. 8
Industrial .....................................................................................10
Retail ............................................................................................12
Multifamily ..................................................................................14
Hotels ...........................................................................................16
Seniors Housing ...........................................................................18

REGIONAL OUTLOOK
Vancouver .....................................................................................22
Calgary .........................................................................................24
Edmonton .....................................................................................26
Winnipeg ......................................................................................28
London & Kitchener/Waterloo......................................................30
Toronto .........................................................................................32
Ottawa .........................................................................................36
Montreal.......................................................................................38
Atlantic Canada ...........................................................................40

2 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


Progress is impossible
without change.
This truism summarizes the outlook for Canadian
commercial real estate in 2016. Investors, landlords
and occupiers face significant change in the year
ahead much of it out of their control. In this dynamic
environment, some will identify and seize opportunities,
while others will be left wanting.

For an industry known for its fixation on location,


far-reaching global trends will overtake fine-grained
details as the basis for real estate decisions in 2016.
More than ever, new technologies are poised to deliver
on the promise to alter the way we shop, ship, work and
play. The apparent end of the commodity supercycle has
curbed Canadas economic momentum and questions
around the nations growth prospects will need to
be answered. And while leasing activity has slowed
in Canada, stimulative monetary policy globally will
continue to supercharge the investment market.

Not to be lost in the cross currents of change is the fact


that Canadas commercial real estate fundamentals are
some of the healthiest in the world. No building is future
proof, no business model is infallible, no lease term is
indefinite, but Canada remains one of the best places to
confront technological advancements and the variability
of the business cycle. The relative safety, stability, and
reliability of returns offered by Canadian commercial
real estate will be welcome companions on the bumpy
road to progress.

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 3


NATIONAL OVERVIEWS
I N V E S T M E N T S E C TO R

the The Canadian economy


is emerging from a slight
This low cap rate environment
will put even greater emphasis

$64,000 technical recession and the U.S.


Federal Reserve appears poised
to increase interest rates in the
on development as a means
of enhancing return targets,
although caution will be
near future; however, economic required as some sectors are
volatility remains high. This characterized by an oversupply
factor, combined with a low of new product.
THIS COULD BE THE YEAR THAT
Canadian dollar and relatively
INTEREST RATES RISE, WHICH COULD The investment calculus has
CAUSE INVESTORS TO RECALIBRATE strong property fundamentals,
should produce healthy demand changed most in Alberta,
for Canadian commercial real especially for office properties
estate in 2016. where rental rates have fallen
and the amount of sublet space
3D PRINTING
Investors seeking safe, stable has risen to record levels.
ECOMMERCE WORKPLACE
STRATEGIES returns will likely become even Successful transactions will
CHANGE BIG DATA
FRACKING
TECH

more selective in 2016. This need to bridge the gap between


WORKPLACE
BIG DATA

will further divide a market buyer and seller expectations,


ECOMMERCE

STRATEGIES that is already clearly split but little distressed selling


3D FRACKING
PRINTING between core and secondary is expected in 2016. Low oil
TECH assets. As a result, super prime prices would likely have to be
assets in desirable areas could sustained into 2017 for lease
conceivably attract higher renewals and lender pressure to
pricing and lower cap rates, force the hand of some second
while reducing liquidity for tier asset owners.
everything else.
In terms of specific commercial
MAINLAND CHINESE Scrutiny of the REIT sector asset classes, land will be
INVESTORS WILL BE A has increased and yet there is actively traded across the
a growing disconnect between country in 2016, especially infill
GROWING FORCE REIT pricing and the value of and development opportunities.
the assets they hold. In 2016, High-quality retail, office and
markets may increasingly multifamily properties will also
focus on the location and be sought after, while coveted
performance of REIT holdings industrial assets will remain in
to differentiate between the short supply.
different players in the sector.

Statistics
Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Office $6,435 $5,034 $5,710
Industrial $4,706 $4,404 $4,954
Retail $6,532 $4,880 $4,680
Multifamily $3,667 $4,966 $3,914
ICI Land $3,785 $3,420 $3,104
Hotel $1,010 $1,695 $1,264
Total $26,134 $24,399 $23,625

Source: CBRE Limited

6 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


INVESTMENT INVESTMENT

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 7


O F F I C E S E C TO R
The Canadian office market The technology sector is the
enters 2016 with vacancy rates fastest growing segment of
climbing to a decade-long high the market, while the finance,
OFFICE SPACE following a prolonged landlords insurance and real estate sector
IS NO LONGER market. With an additional continues to account for the
A COMMODITY 11.2 million sq. ft. under largest proportion of significant
It is your brand, construction in downtown leases. Cities across Canada are
culture and markets and 6.4 million sq. ft. reporting increased demand
competitive being built in the suburbs as from growing tech companies
advantage of Q3 2015, vacancy rates are as the sector accounted for a
likely to remain elevated for the record 38.0% of significant
foreseeable future. office leasing transactions
nationally in Q2 2015.
CATCHING UP While new supply has been the
dominant factor shaping office With tech companies in the
fundamentals, the demand drivers seat, downtown markets
16.9 million sq.ft.

13.2 million sq.ft.

side of the equation will become will continue to outpace the


FIRE TECH increasingly important in the suburbs from a leasing and
26% 20% year ahead. With banks signaling
their intention to restructure
construction perspective, as
that is largely where the labour
THE TECH SECTOR RANKED 2ND some operations and office users pool for this sector is located.
IN TERMS OF SIGNIFICANT generally moving to new efficient Existing office stock will
OFFICE LEASES NATIONALLY workplace strategies, there is the attempt to appeal to innovative
SINCE Q4 2012 potential for a sustained rate of users by defixturing traditional
absorption below historic norms. office space and offering the loft
aesthetic and the style of work
that these businesses naturally

LIFE Statistics gravitate towards.

TIME Central 2014 2015 F 2016 F YoY The pace of


technological change
Guarantee Vacancy Rate 8.5% 10.1% 11.1%
is putting increased
Class A Net Rental Rate (per sq. ft.) $25.84 $24.81 $23.71
pressure on landlords
Absorption (sq. ft. in millions) 1.52 (0.79) 1.46
to ensure that their
WITH THE PACE OF CHANGE New Supply (sq. ft. in millions) 3.52 3.47 4.47 properties are
ACCELERATING, DEVELOPERS Under Construction (sq. ft. in millions) 11.67 9.94 5.98 adaptable and remain
WILL ATTEMPT TO FUTURE Suburban competitive. Future
PROOF BUILDINGS Vacancy Rate 13.4% 15.1% 15.4% proofing will become
Class A Net Rental Rate (per sq. ft.) $18.25 $17.92 $17.12 an increasing concern
Absorption (sq. ft. in millions) 1.49 (0.34) 1.31 and new buildings
will be structured so
New Supply (sq. ft. in millions) 4.44 3.48 2.31
that office space is
Under Construction (sq. ft. in millions) 6.73 5.55 4.27
physically adaptable
Overall without incurring
Vacancy Rate 10.7% 12.3% 13.0% significant costs.
Class A Net Rental Rate (per sq. ft.) $21.62 $21.18 $20.37
Absorption (sq. ft. in millions) 3.01 (1.13) 2.77
New Supply (sq. ft. in millions) 7.97 6.95 6.78
Under Construction (sq. ft. in millions) 18.40 15.49 10.25

Source: CBRE Limited


8 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK
OFFICE OFFICE

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 9


I N D U S T R I A L S E C TO R

BIG
While economic growth has combination of pent-up and new
been lacklustre and the office demand for large-bay space will

VS
and retail sectors are recording make this an enduring factor
higher vacancy rates, industrial through 2016.

SMALL property fundamentals remain


strong. The industrial market
Ecommerce and same-day
delivery require proximity to
INDUSTRIAL DEMAND IS POLARIZED will outperform from a leasing consumers, which is driving
BETWEEN LARGE DISTRIBUTION and investment perspective demand for smaller ~50,000
CENTRES AND WELL-LOCATED in 2016, as a responsive sq. ft. buildings within close
50,000 SF BUILDINGS development pipeline maintains proximity to major population
a healthy balance between centres. This has the potential to
reinvigorate industrial properties
supply and demand. Low
in the inner suburbs that were
interest rates will support a formerly considered obsolete
GREAT robust owner-user market. for modern users; however,
EXPECTATIONS these same locations will face
Distribution and logistics pressure to be put to higher and
activities will remain the better use in 2016 as the general
primary driver of leasing and urban intensification process
investment activity in the continues.
industrial sector. Retailers and
industrial businesses in general, Favourable foreign exchange
Competitive Canadian will attempt to differentiate rates spurred hope of a
dollar fails to alter themselves with supply chain manufacturing and export
industrial decision making enhancements that result renaissance, but there has
in cost savings and a better been a negligible impact on
client experience.Industrial industrial property demand
construction and redevelopment thus far. This is not expected
TIPPING TH is being polarized between two to change in 2016 as Mexico,
E SCA China and other manufacturing
LE trends:
10.6
MILLION The desire to consolidate
powerhouses are strong
competitors on a number of
SQ. FT.
BUILD-TO-SUIT 1MILLION
1.5 logistics operations in Canadas
major distribution markets,
fronts aside from exchange
rates.
Calgary and the Greater Toronto
SQ. FT. Area, is spurring more frequent
SPEC construction of large buildings
and industrial parks nearing
SPEC CONSTRUCTION EQUALS the 1.0 million sq. ft. mark.
52% OF INDUSTRIAL This is a mature trend, but the
DEVELOPMENT IN CANADA.
WELL BELOW 66% IN THE U.S.
Statistics
2014 2015 F 2016 F YoY
Availability Rate 5.4% 5.8% 5.8%
Net Rental Rate (per sq. ft.) $6.09 $6.45 $6.59
Sale Price (per sq. ft.) $101.68 $117.43 $117.92
Absorption (sq. ft. in millions) 18.36 12.49 12.61
New Supply (sq. ft. in millions) 14.87 20.13 13.80
Under Construction (sq. ft. in millions) 18.90 15.35 8.03

Source: CBRE Limited

10 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


INDUSTRIAL INDUSTRIAL

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 11


R E TA I L S E C TO R
COSTCO The Canadian retail market while H&M, Zara and Forever 21
MAKES will continue to recalibrate will continue to put pressure on
GLUTTONS following the demise of Target mid-market retailers.
OF MODEST and a challenging year for
CANADIAN mid-market retailers. In 2016, In 2016, logistics will be as
CONSUMERS foreign retailers will view important to retailers as the
The retail giant is Canada as a worthy destination, bricks and mortar shopping
extracting higher but will be more selective on experience. Expect retailers
sales per person to increase the number of
and expanding a locations and roll out more
single shop better gradually. Canadas appeal locations at which consumers
than any other stems from store productivity can receive and return goods
retailer and less competition for new that were purchased online.
entrants than some other hotly Ecommerce will gain on
targeted destinations. traditional retails sales, but
the physical distance between
The shopping mall has long retailer and consumer will
been at the centre of the decrease as more distribution
Canadian retail market, a points make for a more
fact that will be underscored convenient experience.
in 2016. High-end retailers,
traditionally located on New technology and the rise
Canadas high streets, will of the sharing economy will
ANNUAL ONLINE SALES EQUATE continue to shape the retail
gravitate towards the increased
TO THE PRODUCTIVITY OF 9.8 market in 2016. Brands will
luxury of super regional
YORKDALE MALLS attempt to deliver an overall
shopping centres like Yorkdale
Mall in Toronto and CF Pacific lifestyle to the Millennial
Centre in Vancouver. This is shopper. Online and in person,
part of a trend that will see the retailers will appeal to the
tenant mix along Bloor Street in consumers mind, body, and
Toronto evolve to include more soul.
experiential retailers and high-
end entertainment.

Retail leasing activity will


become increasingly polarized
INCREASED TOURISM IS HELPING in 2016. Retailers will fixate on
SPUR HIGHER RETAIL SALES DESPITE urban locations and high-end
LACKLUSTRE ECONOMIC GROWTH malls, while lingering vacancy
can be expected in second and
third tier malls. The department
store segment will remain
competitive with The Bay,
Nordstrom, and Saks all active,

Statistics 2014 2015 F 2016 F YoY


Retail Sales (YoY)* 4.6% 2.2% 3.8%

* Conference Board of Canada

12 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


R E TA I L RETAIL

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 13


M U LT I FA M I LY S E C TO R
The multifamily sector will Alberta is the one province
79% OF EXISTING produce near record investment breaking from the overall trend
RENTAL STOCK volume in 2015, following a of stability. Vacancy rates are
IS >35 YEARS period of constrained supply. climbing and rental rates are
OLD AND Strong pricing and deferred under downward pressure
INCREASINGLY IN maintenance are causing in Calgary and Edmonton.
NEED OF CAPITAL owners to strategically re- Tertiary markets servicing oil
INVESTMENT. examine their portfolios. sand operations in the north
Demand for multifamily have been hit harder. Rental
product is so widespread and occupancy rates could firm
fundamentals are so stable if economic difficulties slow
that very little could derail household formation and create
VACA
NT
+ investment activity in this
sector in 2016.
challenges in the residential
ownership market.

The multifamily market In 2015, there was a shift in

= MULTIFAMILY FORMULA
FOR SUCCESS
continues to evolve and the
growing number of condos
entering the rental universe will
the market as new purpose-
built construction increased
to the most significant level
continue to shape the market in decades. Work on ongoing
in 2016. Cap rates for Class A projects will continue, but
NEW CONDOS high-rise apartments continue much of the new supply in
OVERSHADOW to tighten and are now at the 2016 will likely be limited to
PURPOSE-BUILT lowest levels on record, which opportunistic situations as
RENTALS, BUT will translate into higher prices owners of existing land are
HELP LIFT for investors and spur rental looking to put it to higher and
RENTAL rate increases and higher fees better use.
RATES for ancillary services such as
laundry and parking.

Baby boomer demand for


seniors housing will peak
in more than a decade, but
in the interim, multifamily
buildings will benefit from a
wave of empty nesters looking
to downsize. Multifamily
property fundamentals will
also benefit from an increase
in new immigrants to Canada
and rising home prices will
bar many Millennials from
pursuing homeownership.

Statistics
2014 2015 F 2016 F YoY
Overall Vacancy Rate* 2.3% 2.8% 2.9%

*Canada Mortgage and Housing Corporation, CBRE Limited

14 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


M U LT I FA M I LY MULTIFAMILY

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 15


H OT E L S E C TO R
The market and financial Toronto and Montreal, as well
Z performance of hotels in B.C., as the resort sector, will be
JFK YY
N
O PEARSO
TORONT
RK JFK
NEW YO
Ontario & Quebec, which the prime beneficiaries of this
represent over 70.0% of the trend; however, staycation
N
O PEARSO
TORONT
RK JFK
NEW YO

industry in Canada, will show activity will also bolster hotel


strong improvement in 2016. demand throughout the
Properties in Vancouver, country, particularly in markets
Toronto and Montreal with economic uncertainty like
UNPRECEDENTED CROSS-BORDER specifically are poised for strong Alberta.
TRAVEL INTO CANADA IS LIKELY TO top and bottom line growth.
CONTINUE The financial performance In 2015, hotel investors were
for Alberta hotels, which able to choose from the most
represents about 15.0% of diverse range of available
the Canadian inventory, has product in recent memory. The
suffered from the resource variety of available product
downturn and overbuilding in enticed a deep buyer pool,
some markets, but the decline especially for properties under
has been decelerating. Expect $30.0 million, with overall
more stability with possibly investment volume forecast to
A DIVERSE GLOBAL BUYER some signs of recovery in late reach $2.2 billion in 2015, a level
BASE AND WIDE-RANGING 2016. In the balance of the of activity not seen since 2007.
CAPITAL SOURCES ARE country, market and financial We expect the level of activity
CREATING RECORD LIQUIDITY performance for the hotel and demand for all product
industry will be positive, but types to continue to be strong
moderate. in 2016.

INVESTMENT Although many Alberta and The typical deal profile in 2016
ACTIVITY WILL EXPAND Saskatchewan markets are will likely involve core markets
FROM A FOCUS ON experiencing RevPAR declines like Toronto and Vancouver, and
ICONIC HOTELS TO approaching 10.0% relative to a continuation of bundled or
PORTFOLIO AND last year, most other markets portfolio deals. Buyers will also
SINGLE ASSET across the country have posted be keen to acquire hotel assets
TRANSACTIONS healthy RevPAR increases. in redevelopment and value-add
Downtown Vancouver is leading possibilities. There will also
the way at 19.0% year-to-date be a diverse buyer pool, with
as of September 2015, fueled growing interest from private
by both ADR and occupancy equity and institutional buyers.
growth.
Strong investor demand is
The 6.6% increase in inbound creating downward pressure on
overnight trips to Canada hotel cap rates in Vancouver,
year-to-date as of August Toronto and Montreal. In
2015, according to Statistics Alberta, Saskatchewan and
Canada, and overall rising other resource dependent
demand will support strong markets, declining hotel cash
hotel operating fundamentals. flows have tempered cap rate
The low Canadian dollar will increases as investors look
continue to entice visitors, towards revised, more moderate
especially from the U.S. and performance levels.
Asian countries. Vancouver,

16 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


H OT E L HOTELS

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 17


S E N I O R S H O U S I N G S E C TO R
The Canadian seniors housing Recent movements in pricing
UTIONAL GR market has been a hotbed of will result in a period of
S T IT A
investment activity in recent price discovery in 2016 that
IN

DE
years starting with the entry requires disciplined disposition
CERTIFIED

PRO

of U.S. REITs and culminating processes to identify optimal


DUCT

with a wave of consolidation, buyers and to maximize pricing.


including the Ontario Teachers
SENIORS HOUSING Pension Plan Board/BayBridge There is no indication that
purchase of Amica in 2015. the development cycle will
While it will be a challenge end in 2016, following a wave
for the market to match the of new supply in recent years.
same volume of transactions in While new construction
2016, sellers may want to take has historically focused on
advantage of current pricing. lucrative high-end assets,
this market has become
While cap rate compression was increasingly competitive. There
common for quality commercial are significant opportunities
real estate assets across Canada for new projects offering mid-
in 2015, seniors housing range pricing and services, as
recorded a remarkable 75-100 this segment of the market is
basis point drop in average cap expected to grow in the coming
rates for the highest quality years.
assets. The sub-7.0% average
cap rate for Class A assets Merchant developers will be
signifies the fact that high more active and will act as
quality seniors housing is now a supply conduit for larger
being viewed as an institutional operators. Discipline will be key
AMICA SALE REVEALS DEEP POOL OF grade investment. Low cap rates to maintaining balance in the
INVESTORS PURSUING SENIORS are likely to endure for quality market. Construction will need
HOUSING ASSETS to be strategic and will likely
assets as long as the buyer pool
remains deep and liquidity is occur outside of core markets in
maintained. The pricing gap pockets with future potential to
between Class A and Class B/C intensify.
assets will likely widen slightly
in 2016.

MONITOR RESIDENTIAL
MARKET CONDITIONS A
KEY DRIVER OF SENIORS HOUSING
DEMAND

18 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


S E N I O R S H O U SSENIORS
ING HOUSING

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 19


REGIONAL OVERVIEWS

21
VANCOUVER
Western Canada will be a study Vancouvers importance as a
of contrasts. Albertas economy port city and key part of the
and property fundamentals are increasingly sophisticated
expected to struggle, while B.C. supply chain was underscored
will outperform in spite of, and by the California port strikes
in part because of, Albertas in 2015. The subsequent spike
challenges. Investor and tenant in demand for industrial space
demand in the region will was unexpected and despite
continue to shift to B.C. in 2016 significant new supply in 2015,
and the province is likely to little is scheduled for delivery
INDUSTRIAL AVAILABILITIES outperform from an economic in 2016. Expect availability to
and commercial real estate tighten and construction starts
perspective. to climb in 2016 as developers
8
> 100,000 sq. ft.
32
50 - 99,999 sq. ft. The Vancouver office growth
respond to demand.

story will continue to be largely Investors and developers will


positive with leasing activity continue to build strategies
216
10-49,999 sq. ft.
634
0-9,999 sq. ft.
likely to exceed expectations.
The market will continue to
around inner submarkets
like Strathcona and Mount
work through the 2.4 million Pleasant. These transitional
sq. ft. of new supply that was nodes are gaining momentum
delivered in 2015. While vacancy and their long-term potential
will remain slightly elevated, for intensification more than
an active tech sector along with justifies the high land costs and
INVESTORS ARE other professional services will zoning hurdles.
CONSIDERING help mitigate softness in the
UNCONVENTIONAL resource sector.
LAND LEASES TO ADD
B.C. PROPERTIES TO Insatiable investors and
THEIR PORTFOLIOS available capital pushed
Vancouver property prices to
record highs and cap rates
to record lows. This trend
will carry over into 2016 as
long as owners are willing
to sell and remain open to
unsolicited offers. Foreign
capital, especially from Asia,
will continue to pursue prime
assets, but local buyers will
remain competitive in the face
of low cap rates and may drive
demand for suburban assets as
product becomes limited in the
core.

22 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


VANCOUVER
Projects to Watch
TSAWWASSEN MILLS THE EXCHANGE OFFICE DEVELOPMENT OF
SHOPPING COMPLEX TOWER DOWNTOWN FRINGE, THE
Located at Highway 17 and 52nd Street on Credit Suisses $200.0 million venture MOUNT PLEASANT AND
Tsawwassen First Nation Lands, Ivanho into B.C. is a 31-story speculative, LEED BROADWAY CORRIDOR
Cambridges Tsawwassen Mills will include Platinum, state of the art office tower with Zoning changes have expedited the
approximately 1.2 million sq. ft. of retail, with cutting edge technologies in Vancouvers transformation of these areas while
16 anchors, a unique mix of premium fashion financial district. It is scheduled for delivery opening the door for a broader range of user
brands, factory outlets, restaurants and first in 2017. groups.
to market retailers, as well as a 1,100-seat food
www.theexchangebuilding.ca
court. Construction began in January 2014
and will be complete in fall 2016.
http://www.tsawwassenmills.ca/faq

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 6.8% 9.9% 9.8% Availability Rate 7.0% 5.9% 6.0%
Class A Net Rental Rate (per sq. ft.) $31.77 $33.85 $33.50 Net Rental Rate (per sq. ft.) $8.06 $8.26 $8.45
Absorption (sq. ft. in millions) (0.09) 0.89 0.14 Sale Price (per sq. ft.) $199.00 $231.90 $235.29
Class A Cap Rate (%) 4.75-5.25 4.25-5.00 4.25-5.00 Absorption (sq. ft. in millions) 1.40 4.75 2.33
New Supply (sq. ft. in millions) 0.09 1.75 0.11 Class A & B Cap Rate (%) 5.25-6.25 5.00-6.25 5.00-6.25
Under Construction (sq. ft. in millions) 2.09 0.47 0.71 New Supply (sq. ft. in millions) 2.41 3.03 2.58
Suburban Under Construction (sq. ft. in millions) 1.96 3.93 1.35
Vacancy Rate 13.4% 13.2% 12.6%
Class A Net Rental Rate (per sq. ft.) $23.44 $21.87 $20.45 MULTIFAMILY
Absorption (sq. ft. in millions) 0.42 0.61 0.39
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 5.75-6.50 5.25-6.25 5.25-6.25
Overall Vacancy Rate* 1.0% 0.8% 1.0%
New Supply (sq. ft. in millions) 0.84 0.65 0.29
Apartment Cap Rate (%) 4.25-4.75 4.25-4.75 4.25-4.75
Under Construction (sq. ft. in millions) 1.04 0.61 0.32
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.

Vacancy Rate 10.1% 11.5% 11.2%


Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$24.93
0.33
$27.10
1.51
$26.21
0.53
INVESTMENT
New Supply (sq. ft. in millions) 0.93 2.40 0.39 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 3.13 1.08 1.03 Office $434 $477 $1,630
Industrial $814 $910 $956

RETAIL Retail $886 $1,108 $1,163


Multifamily $533 $950 $998
2014 2015 F 2016 F YoY
ICI Land $438 $789 $500
Retail Sales (YoY)* 6.9% 8.7% 4.6%
Hotel* $216 $511 $250
Neighbourhood Cap Rate (%) 5.50-6.00 5.00-5.75 5.00-5.75
Total $3,321 $4,744 $5,496

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 23


CALGARY

HIGH CONCENTRATION, The confidence within Calgarys engineering companies


local business community has are expected to benefit
HIGH IMPACT Energy jobs as only faltered slightly despite from increased provincial
percentage of the second largest drop in infrastructure spending. The
total workforce oil prices in history and hotel and resort sectors are
the second most protracted also posting strong numbers
decline. The prevailing opinion as Albertans vacation closer to
5.5%
is that the market is facing a home and tourism from the U.S.
man-made downturn in oil increases.
HOUSTON prices, not a structural shift
1.1%
that would undermine long- Leasing activity in Calgarys
DALLAS 8.5% term investments. In 2016, industrial market has slowed,
but this sector has been
supply and demand dynamics,
1.1% including OPEC decisions, more resilient and reflects
CALGARY will provide additional clarity the continued maturation
DENVER and allow tenants, owners of Calgary as a distribution
and investors to act with more and logistics hub for Western
certainty. Canada. Third party logistics
companies and distribution
While an anticipated rebound activity will continue to act as
50%
TENANTS in oil prices would put a floor a hedge against the oil and gas
under office fundamentals, sector. Industrial construction
FEEL THE HEAT capital expenditure and job cuts activity will also benefit from
30% SUBLET are mounting. For 2016, this a decline in construction costs
PERCENTAGE will translate into a continued that is expected in 2016.
10%
OF VACANT rise in office vacancy rates, both
After a lean 2015, investment
SPACE COULD downtown and in the suburbs,
volumes are likely to be
with an anticipated peak in
TOP 50% Q3 2016. It appears that the somewhat higher in 2016 as
bulk of downsizing has already there will be more clarity
occurred which will allow the around economic and energy
pace of vacancy rate increases price forecasts. Smaller assets
and rental rate declines to slow. from all property types are
likely to make up the bulk
CALGARY HAS There is good news in the of transaction activity, with
THE 7TH Calgary marketplace. Even grocery anchored shopping
LOWEST 7 TH
within a challenged office
sector, accountants and law
centres particularly in demand.
Lenders will be encouraged by
INDUSTRIAL firms remain active, and more realistic underwriting.
AVAILABILITY
RATE IN NORTH
AMERICA

24 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


CALGARY
Projects to Watch
STONEY TRAIL/ ALBERTAS OIL AND GAS
CALGARY RING ROAD ROYALTY REVIEW
Construction of the southwest portion Although the province has indicated it will
of the ring road, scheduled to begin in hold off implementing changes until 2017,
2016, will bring Calgary one step closer any modification to the detriment of the oil
to completing the 100 km highway. The and gas sector will negatively impact the
development will further unlock real estate ability to attract and retain business.
by providing access to land that is currently
www.energy.alberta.ca
only accessible via side roads and circuitous
routes.
www.transportation.alberta.ca

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 9.8% 16.3% 18.4% Availability Rate 4.7% 8.3% 8.2%
Class A Net Rental Rate (per sq. ft.) $33.03 $23.89 $18.81 Net Rental Rate (per sq. ft.) $8.40 $7.35 $7.25
Absorption (sq. ft. in millions) 0.52 (1.94) (0.32) Sale Price (per sq. ft.) $185.00 $176.00 $170.00
Class A Cap Rate (%) 5.50-6.00 6.00-6.50 6.00-6.50 Absorption (sq. ft. in millions) 3.71 (0.43) 1.69
New Supply (sq. ft. in millions) 0.84 0.82 0.62 Class A & B Cap Rate (%) 5.25-6.75 5.50-7.00 5.50-7.00
Under Construction (sq. ft. in millions) 3.83 3.01 2.39 New Supply (sq. ft. in millions) 1.64 4.45 1.78
Suburban Under Construction (sq. ft. in millions) 4.62 1.43 0.35
Vacancy Rate 13.1% 17.5% 17.7%
Class A Net Rental Rate (per sq. ft.) $25.59 $23.12 $18.20 MULTIFAMILY
Absorption (sq. ft. in millions) 0.60 (0.20) 0.30
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 5.75-7.25 6.00-7.75 6.25-7.75
Overall Vacancy Rate* 1.4% 3.5% 3.7%
New Supply (sq. ft. in millions) 0.98 0.90 0.44
Apartment Cap Rate (%) 4.25-4.75 4.50-5.00 4.50-5.00
Under Construction (sq. ft. in millions) 1.31 1.69 1.36
Overall *Canada Mortgage and Housing Corporation, CBRE Limited
Vacancy Rate 11.0% 16.7% 18.1%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$29.76
1.12
$23.59
(2.14)
$18.59
(0.03)
INVESTMENT
New Supply (sq. ft. in millions) 1.82 1.72 1.06 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 5.14 4.70 3.75 Office $709 $105 $267
Industrial $639 $399 $432

RETAIL Retail $401 $299 $323


Multifamily $202 $206 $144
2014 2015 F 2016 F YoY
ICI Land $439 $332 $167
Retail Sales (YoY)* 7.0% (0.7%) 2.7%
Hotel* $148 $156 $80
Neighbourhood Cap Rate (%) 5.50-6.00 5.25-5.75 5.00-5.75
Total $2,539 $1,497 $1,413

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 25


E D M O N TO N
Edmonton, much like Industrial property
Calgary, is confronting fundamentals should benefit
repriced oil and gas. The two from the fact that new supply
markets have weathered the will drop by 50.0% in 2016.
downturn differently and Small bay properties will still
their performance will vary be in demand, while Class B
$71.0 BILLION OF PROJECTS ARE in 2016. Edmontons property distribution properties will see
UNDER CONSTRUCTION ACROSS fundamentals will largely less activity. There will be a
ALBERTA outperform those in Calgary. flight to quality as new product
is delivered to the market,
Both Edmonton and Calgary which will occur at the expense
face challenges in their of less functional real estate.
downtown office markets, but
INVESTORS WILL
HOLD ON TO CORE Edmontons difficulties stem Investment volume is unlikely
ASSETS from pending oversupply and to change dramatically
limited absorption in the core. in 2016 unless economic
Expect the Edmonton office conditions change significantly.
tenant base to remain relatively Institutional owners of office
stable in 2016; however, new space will face rental rate
leasing activity will be soft as erosion and there will be no
tenants wait for 1.8 million significant influx of quality
sq. ft. of new supply to come product for sale. Demand
online downtown by 2018 will continue to be strong for
before making any longer term Class A industrial, retail and
commitments. multifamily properties, but
supply will be limited.
Office property owners will
need to deploy stronger asset
management strategies as
the office market adjusts to
PRICING WILL REMAIN A
new supply. In this tenants
CHALLENGE DUE TO
market, expect inducements to
THIN TRADING
increase as office users are in
a position of strength in lease
negotiations.

26 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


E D M O N TO N
Projects to Watch
EDMONTON ARENA DISTRICT ANTHONY HENDAY RING ROAD EDMONTON LRT VALLEY LINE
This multi-billion dollar project by The north east quadrant of Edmontons The 27.0 km Valley Line runs east to west,
Katz Group of Companies and WAM main ring road is scheduled to be linking Mill Woods to Lewis Estates. With
Development Group spans 25.0 acres of completed by October 2016. When approval and funding in place for the 13.0
office, retail, hospitality, residential and complete, Anthony Henday Drive will total km leg from Downtown to Millwoods,
hotel properties revamping Edmontons 78.0 km and provide seamless access to construction will commence in 2016
urban core. surrounding arterial highway to enhance and is scheduled to be complete by 2020.
market access for all industrial products. Densification along the line may attract
www.ead.ca
employees to work downtown.
www.northeastanthonyhenday.com
www.edmonton.ca/SEtoWestLRT

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 10.0% 10.7% 17.5% Availability Rate 3.8% 7.8% 8.2%
Class A Net Rental Rate (per sq. ft.) $24.05 $23.90 $21.61 Net Rental Rate (per sq. ft.) $11.13 $11.20 $10.80
Absorption (sq. ft. in millions) (0.04) (0.14) (0.06) Sale Price (per sq. ft.) $144.09 $145.14 $123.37
Class A Cap Rate (%) 6.25-6.75 6.25-6.75 6.25-6.75 Absorption (sq. ft. in millions) 3.64 (0.40) 1.13
New Supply (sq. ft. in millions) 0.00 0.00 1.17 Class A & B Cap Rate (%) 5.50-7.00 5.50-7.00 5.50-7.00
Under Construction (sq. ft. in millions) 1.42 1.78 0.60 New Supply (sq. ft. in millions) 2.87 4.19 1.74
Suburban Under Construction (sq. ft. in millions) 2.68 1.74 0.25
Vacancy Rate 13.3% 14.5% 14.1%
Class A Net Rental Rate (per sq. ft.) $19.90 $20.99 $20.36 MULTIFAMILY
Absorption (sq. ft. in millions) 0.21 0.01 0.15
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 6.75-7.75 6.75-7.75 6.75-7.75
Overall Vacancy Rate* 1.7% 3.0% 3.5%
New Supply (sq. ft. in millions) 0.41 0.18 0.13
Apartment Cap Rate (%) 5.00-5.50 4.75-5.25 4.75-5.25
Under Construction (sq. ft. in millions) 0.38 0.28 0.16
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 11.3% 12.2% 16.2%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$22.28
0.17
$22.52
(0.12)
$21.19
0.09
INVESTMENT
New Supply (sq. ft. in millions) 0.41 0.18 1.30 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 1.80 2.06 0.76 Office $213 $62 $50
Industrial $219 $83 $110

RETAIL Retail $262 $76 $140


Multifamily $270 $395 $350
2014 2015 F 2016 F YoY
ICI Land $817 $532 $450
Retail Sales (YoY)* 6.9% (1.1%) 2.7%
Hotel* $40 $35 $70
Neighbourhood Cap Rate (%) 5.75-6.25 5.75-6.25 5.75-6.25
Total $1,820 $1,183 $1,170

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 27


WINNIPEG

OVER A Winnipeg may not offer Alberta Traditionally, commercial


boom times or the scale of property in Winnipeg is tightly
BARREL Vancouver or Toronto, but held by long-term owners.
when the tide goes out in other Investors have recently had a
markets, tenants and investors rare opportunity to acquire
are reminded of the stability assets in Winnipeg as a result
OIL that characterizes Winnipeg. of portfolio rebalancing and
Winnipegs appeal will likely generational turnover. Property
OILS IMPACT VARIES
ACROSS CANADIAN PRAIRIES increase in 2016 due to its availability is expected to persist
relative economic resilience and and spur investment activity,
steady growth trajectory. but investors will have to act
quickly when opportunities
Winnipeg is one of the few arise in 2016 as demand is
office markets in Canada expected to keep pace.
where there is no downtown
office construction; however, The 2016 investment volume
expect there to be more clarity will be healthy and similar
around proposed Class A to 2015 when the market
office construction projects in experienced an uptick in the
TOP 3 2016. Tenant desire for quality number of transactions.
space and investors needing
WINNIPEG HAS ONE OF to place capital has resulted in
THE HIGHEST GDP GROWTH significant office construction
RATES IN CANADA cycles in other Canadian
cities and may spur new office
construction in Winnipeg as
well.

Low energy prices and


favourable exchange rates
are bolstering the Winnipeg
industrial market, especially
the manufacturing sector. Large
orders at New Flyer, a Winnipeg
DOWNTOWN REVITALIZATION
based bus manufacturer, are
EFFORTS HAVE HAD SUCCESS,
a harbinger of medium-term
BUT WILL AMBITIOUS NEW
industrial activity and property
PROJECTS TAKE SHAPE?
demand. Construction of
modern industrial buildings,
with high ceiling heights and
efficient column spacing, will
also increase as new land is
prepared for development.

28 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


WINNIPEG
Projects to Watch
RBC CONVENTION CENTRE SEASONS WINNIPEG CENTREPORT CANADA
This $180.0 million project in downtown Positioned as Central Canadas premiere WATER TREATMENT FACILITY
Winnipeg will provide an additional shopping centre, this mixed-use Development of a new water treatment
100,000 sq. ft. of multi-purpose space on development will include residential facility within Centreport will enable
top of the existing 160,000 sq. ft. venue. The components, open air strip centres, an servicing of residential, industrial and
expansion will meet LEED Silver standards enclosed outlet mall, two luxury car mixed-use land, and increase the velocity of
and will be the fourth largest publically- dealerships and a hotel. Outlet Collection at development within CentrePort. The facility
owned convention centre in Canada. Winnipeg will be the citys first pure outlet is expected to be operational in early 2016.
Completion is scheduled for early 2016. centre when it opens in spring 2017.
www.centreportcanada.ca
http://www.wcc.mb.ca/expansion-2016 http://seasonswinnipeg.ca/leasing

Market Statistcs

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 9.9% 11.7% 11.2% Availability Rate 4.5% 4.8% 4.6%
Class A Net Rental Rate (per sq. ft.) $17.17 $17.58 $17.60 Net Rental Rate (per sq. ft.) $6.90 $7.34 $6.84
Absorption (sq. ft. in millions) 0.08 (0.09) 0.04 Sale Price (per sq. ft.) $87.06 $86.70 $89.14
Class A Cap Rate (%) 5.50-6.00 5.50-6.00 5.25-5.75 Absorption (sq. ft. in millions) (0.19) (0.16) 0.29
New Supply (sq. ft. in millions) 0.00 0.08 0.00 Class A & B Cap Rate (%) 6.00-7.50 6.00-7.00 5.75-6.75
Under Construction (sq. ft. in millions) 0.08 0.00 0.00 New Supply (sq. ft. in millions) 0.16 0.10 0.15
Suburban Under Construction (sq. ft. in millions) 0.14 0.08 0.00
Vacancy Rate 9.2% 13.3% 12.8%
Class A Net Rental Rate (per sq. ft.) n/a n/a n/a MULTIFAMILY
Absorption (sq. ft. in millions) 0.14 (0.12) 0.01
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 6.50-7.50 6.50-7.50 6.50-7.50
Overall Vacancy Rate* 2.5% 2.8% 3.0%
New Supply (sq. ft. in millions) 0.00 0.00 0.00
Apartment Cap Rate (%) 5.00-5.75 5.00-5.75 5.00-5.50
Under Construction (sq. ft. in millions) 0.00 0.00 0.00
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 9.7% 12.1% 11.6%
Class A Net Rental Rate (per sq. ft.) $17.17 $17.58 $17.60
Absorption (sq. ft. in millions) 0.22 (0.20) 0.05
New Supply (sq. ft. in millions) 0.00 0.08 0.00
Under Construction (sq. ft. in millions) 0.08 0.00 0.00

RETAIL
2014 2015 F 2016 F YoY
Retail Sales (YoY)* 4.9% 2.0% 4.0%
Neighbourhood Cap Rate (%) 6.50-7.00 6.50-7.00 6.50-7.00

* Conference Board of Canada

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 29


LO N D O N & K I TC H E N E R-W AT E R LO O
THINKING In recent years, it has been Waterloo will continue to attract
SMALL COULD difficult to speak about and foster the development of
HAVE A BIG Southwestern Ontario as a innovative businesses. Expect
homogenous region, but both significant announcements,
REAL ESTATE
London and Kitchener-Waterloo similar to the recent Shopify
IMPACT. will exhibit healthy leasing expansion, which will result
QUANTUM and investment activity as 2016 in office absorption in 2016.
NANOTECH- unfolds, which is consistent Londons office market will
NOLOGY with positive momentum across experience a modest recovery
EMERGES AS the regional economy. thanks to a growing tech sector,
GROWTH SECTOR IN WATERLOO which will be led by gaming
Waterloo and London will company expansions.
REGION continue to see signs of
intensification in 2016 and new Waterloo Region will outpace
development and investment London in terms of overall
will revolve around this trend. investment activity, but both
In Waterloo, the LRT is closer markets will post healthy
LAND IS IN to the 2018 completion date, volumes. The region will benefit
DEMAND, while Londons affordable core as investors look for alternative
BODES WELL FOR with ample parks and amenities destinations outside of Alberta
FUTURE GROWTH is appealing to retirees and and Asian capital will also have
spurring the construction of a an impact, albeit from mid-tier
new 35-storey condo. investors. 2016 will not be a year
of large trades and instead will
The industrial sector is one be characterized by mid-market
of the most active parts of activity.
the market, but a very modest
LOCAL DEVELOPERS SPUR amount of this activity can be
MOST tied to favourable exchange
rates. The market has retooled
CONSTRUCTION since 2008 and industrial
IN THREE YEARS decision making criteria in
2016 will largely be the same
as in the prior year when the
Canadian dollar was much
higher. There is limited
availability of industrial
properties >50,000 sq. ft. for
sale or lease in London, while
Waterloo is attracting industrial
tenants as an affordable
alternative to Milton and
Mississauga in the western edge
of the GTA.

30 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


LO N D O N & K I TC H E N E R-W AT E R LO O
Projects to Watch
TRANSITION OF LONDONS WATERLOO REDEVELOPMENT OF
SOHO DISTRICT REGIONAL LRT VICTORIA HOSPITAL
Planning constraints in the citys core Demand is expected to be high and The development community will get
combined with increased demand for retrofitting will take place around LRT clarity around the possibilities for the new
creative space in heritage buildings stations, in particular the Columbia Street riverfront development south of Londons
continue to rejuvenate Londons SOHO nodes which are located on the edge of downtown core. This will be the most
district. University of Waterloo. significant development opportunity in
London for the next decade.
www.rapidtransit.regionofwaterloo.ca

Market Statistics
OFFICE INDUSTRIAL
London Kitchener/Waterloo London Kitchener/Waterloo
Central 2015 F 2016 F YoY 2015 F 2016 F YoY 2015 F 2016 F YoY 2015 F 2016 F YoY
Vacancy Rate 15.5% 14.5% 10.0% 9.3% Availability Rate 11.2% 9.9% 6.1% 6.1%
Class A Net Rental Rate (PSF) $14.00 $14.00 $11.84 $11.75 Net Rental Rate (PSF) $4.15 $4.25 $5.07 $4.85
Absorption (MSF) 0.05 0.04 0.06 0.07 Sale Price (PSF) $65.00 $65.00 $65.04 $68.25
Class A Cap Rate (%) 6.50-7.50 6.50-7.50 6.00-7.00 6.00-7.50 Absorption (MSF) 1.17 0.60 (0.23) 0.27
New Supply (MSF) 0.03 0.00 0.00 0.04 Class A & B Cap Rate (%) 7.50-9.00 7.50-9.00 6.00-7.50 6.00-7.50
Under Construction (MSF) 0.00 0.00 0.05 0.15 New Supply (MSF) 0.16 0.10 0.61 0.33
Suburban Under Construction (MSF) 0.10 0.20 0.33 0.43
Vacancy Rate 9.0% 9.5% 12.0% 10.6%
Class A Net Rental Rate (PSF) n/a n/a $14.55 $14.50 MULTIFAMILY
Absorption (MSF) 0.10 0.05 0.05 0.13
London Kitchener/Waterloo
Class A & B Cap Rate (%) 7.50-8.50 7.50-8.50 6.50-7.00 6.50-7.00
2015 F 2016 F YoY 2015 F 2016 F YoY
New Supply (MSF) 0.09 0.07 0.13 0.00
Overall Vacancy Rate* 2.7% 2.7% 2.7% 2.8%
Under Construction (MSF) 0.07 0.09 0.00 0.22
Apartment Cap Rate (%) 5.25-6.25 5.25-6.25 5.25-6.00 5.25-6.00
Overall
*Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 14.1% 13.4% 11.3% 10.1%
Class A Net Rental Rate (PSF) $14.00 $14.00 $13.69 $13.59 INVESTMENT
Absorption (MSF) 0.16 0.10 0.11 0.20
London Kitchener/Waterloo
New Supply (MSF) 0.12 0.07 0.13 0.04
Transactions ($ M) 2015 F 2016 F YoY 2015 F 2016 F YoY
Under Construction (MSF) 0.07 0.09 0.05 0.37
Office $15 $30 $35 $43

RETAIL Industrial $25 $28 $185 $164


Retail $30 $65 $141 $145
London Kitchener/Waterloo
Multifamily $70 $100 $133 $140
2015 F 2016 F YoY 2015 F 2016 F YoY
ICI Land $15 $15 $19 $20
Retail Sales (YoY)* n/a n/a n/a n/a
Hotel* $55 $25 $21 $22
Neighbourhood Cap Rate (%) 6.75-8.00 6.75-8.00 6.00-6.50 6.25-6.75
Total $210 $263 $535 $533

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 31


TO R O N TO (Office)
AS VACANCY RISES, TENANTS The 3.7 million sq. ft. of Suburban and downtown
WILL HAVE MORE downtown office space office vacancy rates will show
NEGOTIATING scheduled for completion by late the greatest disparity in over
POWER 2017 will face an unprecedented 20 years in 2016; however,
rate of technological change the rising cost of downtown
and the continued evolution of office space combined with
workplace strategies. State of enhanced regional transit and
the art buildings and existing household formation amongst
office stock will be challenged the Generation Y cohort, could
T ENAN T S LANDLORDS to anticipate change and remain spur more economic activity
competitive. and demand for office space in
densifying areas of the suburbs.
Expect a change in the
composition of preleasing A new phenomenon called
activity for the next office industrial decoupling will also
OFFICE

construction cycle. With the serve as a driver of demand for


INDUSTRIAL
largest office tenants in the suburban office space. Once
market currently committed housed together, companies
to leases and office occupiers are separating their industrial
moving towards more efficient and office uses and moving
DECOUPLING USES WILL INCREASE footprints, the next wave of the office component to more
SUBURBAN OFFICE DEMAND office towers will likely be built traditional suburban office
This trend will drive suburban office with the backing of a mix of nodes. Expect this trend
demand in 2016 larger tenants as opposed to to continue as industrial
the traditional anchor or single companies place office
tenant. employees in more appropriate
premises.
New supply will continue to put
upward pressure on vacancy
rates in 2016; however, new
ST office buildings are expected to
KING
be at least 80.0% leased upon
completion. Existing buildings
with vacant space to backfill
will feel pressure to complete
major upgrades and attract new
BAY S

tenants that can replace lost


T

T ST revenue. This is an opportunity


FRON for the historical financial core
to reinvigorate itself.
OFFICE ACTIVITY CONTINUES TO
SHIFT TO THE SOUTH CORE

32 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


TO R O N TO (Office)
Projects to Watch
VAUGHAN METROPOLITAN METROLINX EGLINTON BAY PARK CENTRE
CENTRE (VMC) CROSSTOWN LINE DEVELOPMENT
This 442.0 acre area will continue to The Eglinton Crosstown Light Rail Transit This Ivanho Cambridge project consists of
be developed to include office, retail, is a $5.3 billion investment that will run two office buildings and retail space, along
residential opportunities and a subway across Eglinton Avenue between Mount with a new GO Bus Terminal in partnership
connection, which will be completed in Dennis (Weston Road) and Kennedy with Metrolinx. Watch for a significant
2017. The KPMG Tower office development Station. It is part of a consolidated effort pre-leasing announcement and the
is expected to be completed in 2016. to integrate transportation in the Greater commencement of construction in 2016.
Toronto Area. The project will be complete
www.vaughan.ca www.ivanhoecambridge.com
in 2021.
www.thecrosstown.ca

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 5.9% 6.0% 7.1% Availability Rate 4.4% 4.1% 4.3%
Class A Net Rental Rate (per sq. ft.) $28.41 $29.02 $30.47 Net Rental Rate (per sq. ft.) $5.19 $5.33 $5.89
Absorption (sq. ft. in millions) 1.68 0.22 1.31 Sale Price (per sq. ft.) $88.45 $110.00 $112.50
Class A Cap Rate (%) 5.25-5.75 4.75-5.25 4.50-5.00 Absorption (sq. ft. in millions) 5.57 6.90 3.60
New Supply (sq. ft. in millions) 1.59 0.29 2.39 Class A & B Cap Rate (%) 5.25-7.50 5.00-7.50 5.00-7.00
Under Construction (sq. ft. in millions) 3.47 3.74 1.35 New Supply (sq. ft. in millions) 5.83 4.58 5.44
Suburban Under Construction (sq. ft. in millions) 7.00 7.21 5.02
Vacancy Rate 13.8% 16.0% 17.0%
Class A Net Rental Rate (per sq. ft.) $17.09 $17.30 $17.30 MULTIFAMILY
Absorption (sq. ft. in millions) (0.18) (0.78) (0.30)
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 5.75-7.75 5.50-6.75 5.30-6.55
Overall Vacancy Rate* 1.6% 1.7% 1.9%
New Supply (sq. ft. in millions) 0.39 1.07 0.51
Apartment Cap Rate (%) 4.50-5.25 4.63-4.88 4.43-4.68
Under Construction (sq. ft. in millions) 2.49 1.29 0.78
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 9.5% 10.7% 11.7%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$20.68
1.50
$20.81
(0.56)
$21.61
1.01
INVESTMENT
New Supply (sq. ft. in millions) 1.97 1.36 2.90 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 5.96 5.03 2.13 Office $3,051 $3,337 $2,485
Industrial $2,190 $1,827 $2,270

RETAIL Retail $2,616 $1,979 $1,704


Multifamily $1,176 $1,603 $998
2014 2015 F 2016 F YoY
ICI Land $1,426 $1,035 $1,226
Retail Sales (YoY)* 6.2% 3.2% 4.5%
Hotel* $323 $754 $500
Neighbourhood Cap Rate (%) 5.50-6.50 5.63-5.75 5.43-5.55
Total $10,784 $10,533 $9,183

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 33


TO R O N TO (Industrial)
LABOUR With one of the lowest In order to accommodate
AND SUPPLY industrial availability rates in ecommerce needs around
CHAIN North America, the Greater speed to market, there will be
EFFICIENCY Toronto Area (GTA) is likely increased demand for industrial
WILL BE KEY to record an increase in properties <50,000 sq. ft. within
FACTORS IN speculative construction activity a twenty minute drive of the
INDUSTRIAL REAL
ESTATE DECISIONS in 2016; however, speculative downtown core; however,
development yields no longer limited functional offerings
provide as large a premium for in South Scarborough, South
the risk the builders assume due Etobicoke and North York will
NEW RECORD to rising development charges force users to be creative with
INDUSTRIAL and increased construction their site selection criteria and
costs. approach.
SALE PRICES
AND RISING The owner-user sale market Leasing, investment and
LEASE RATES is coming off one of the most construction activity in the
competitive years on record. west end will outpace the rest
A lack of product, rising of the region. This area benefits
construction costs and readily from the presence of superior
available financing are expected transportation infrastructure
MILTON AND to continue in 2016 and and intermodal facilities, while
GUELPHS produce another year of heated those with an eye to the future
INDUSTRIAL competition amongst buyers. anticipate highway widening
GO PROSPECTS
ARE ON
For investors, high demand to
place equity in the industrial
and new routes in the coming
decade.
WEST! THE RISE sector is likely to force cap rates
to new benchmark lows.

Retailers will continue to


be the driving force behind
distribution centre activity in
2016. Consumers are not buying
more products as much as
they are purchasing products
differently through the omni-
channel network concept.
Therefore, as the ecommerce
component of distribution
networks evolve, so too will
retailers industrial footprint.

34 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


TO R O N TO (Industrial)
Projects to Watch
DEVELOPMENT OF NEW 400 INFILL DEVELOPMENTS IN CN INTERMODAL AND
SERIES HIGHWAYS CORE MARKETS LOGISTICS HUB IN MILTON
New highway construction and extensions Expect activity on older industrial facilities The $250.0 million intermodal and logistics
on existing highways will directly impact in close proximity to core urban markets. hub adjacent to its main line in the Town of
land purchases and drive industrial users Cartteras HBC infill development and Milton will facilitate logistics development
to consider new markets. the CP/Dream land development are two while attracting more warehousing
examples of the trend to revitalize older distribution centres and employment.
www.mto.gov.on.ca
stock.
www.cn.ca

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 5.9% 6.0% 7.1% Availability Rate 4.4% 4.1% 4.3%
Class A Net Rental Rate (per sq. ft.) $28.41 $29.02 $30.47 Net Rental Rate (per sq. ft.) $5.19 $5.33 $5.89
Absorption (sq. ft. in millions) 1.68 0.22 1.31 Sale Price (per sq. ft.) $88.45 $110.00 $112.50
Class A Cap Rate (%) 5.25-5.75 4.75-5.25 4.50-5.00 Absorption (sq. ft. in millions) 5.57 6.90 3.60
New Supply (sq. ft. in millions) 1.59 0.29 2.39 Class A & B Cap Rate (%) 5.25-7.50 5.00-7.50 5.00-7.00
Under Construction (sq. ft. in millions) 3.47 3.74 1.35 New Supply (sq. ft. in millions) 5.83 4.58 5.44
Suburban Under Construction (sq. ft. in millions) 7.00 7.21 5.02
Vacancy Rate 13.8% 16.0% 17.0%
Class A Net Rental Rate (per sq. ft.) $17.09 $17.30 $17.30 MULTIFAMILY
Absorption (sq. ft. in millions) (0.18) (0.78) (0.30)
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 5.75-7.75 5.50-6.75 5.30-6.55
Overall Vacancy Rate* 1.6% 1.7% 1.9%
New Supply (sq. ft. in millions) 0.39 1.07 0.51
Apartment Cap Rate (%) 4.50-5.25 4.63-4.88 4.43-4.68
Under Construction (sq. ft. in millions) 2.49 1.29 0.78
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 9.5% 10.7% 11.7%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$20.68
1.50
$20.81
(0.56)
$21.61
1.01
INVESTMENT
New Supply (sq. ft. in millions) 1.97 1.36 2.90 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 5.96 5.03 2.13 Office $3,051 $3,337 $2,485
Industrial $2,190 $1,827 $2,270

RETAIL Retail $2,616 $1,979 $1,704


Multifamily $1,176 $1,603 $998
2014 2015 F 2016 F YoY
ICI Land $1,426 $1,035 $1,226
Retail Sales (YoY)* 6.2% 3.2% 4.5%
Hotel* $323 $754 $500
Neighbourhood Cap Rate (%) 5.50-6.50 5.63-5.75 5.43-5.55
Total $10,784 $10,533 $9,183

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 35


OT TA W A
Downtown Ottawa will continue

Welcome
is not easily rectified and the
the process of redefining itself industrial sector will need to be
in 2016 and beyond. Much like rewired to facilitate growth in
to Ottawa 2016: the suburban office market new areas over the long term.
A year of discovery struggled for a decade following
the burst of the tech bubble, the Retail market activity will
downtown office market will focus on upgrades and growth
need to adjust as the federal of Ottawas regional shopping
government rationalizes and centres, including the expansion
upgrades its office footprint. and renovation of CF Rideau
The downtown economy and Centre and Bayshore Shopping
office tenant base will need to Centre. The recent addition of
WINDS OF gradually diversify and bring a Nordstrom and completion
L
POLITICAL CHANGE the downtown vacancy rate into of the Tanger Outlet reflect
C COULD HAVE balance. the vibrancy of Ottawas retail
NDP IMPLICATIONS FOR market and high disposable
COMMERCIAL The federal government incomes in this market.
PROPERTY IN continues to be the dominant
OTTAWA Ottawa will attract investors
force in Ottawa and the recent
change in government has given looking to diversify their
the public service a renewed real estate holdings. Ottawa
sense of optimism. It remains is poised for an active sales
to be seen if the government market as opportunistic office
office footprint will continue to owners attempt to maximize
decrease. A drastic change in property values and investors
course is not expected in 2016 seek to make strategic long-term
as it will take the government bets on the nations capital.
time to implement new policies. Additionally, value-driven
22% reduction in total space is buyers will attempt to capitalize
only 10% complete The Kanata office market, on opportunities to reposition
with the support of a healthy obsolete office buildings. Retail
WORKPLACE 2.0 COULD technology sector, will continue and multifamily property
REDUCE THE FEDERAL to be a dominant force in will also be sought after by
GOVERNMENT OFFICE the leasing market. Kanata investors, while industrial
FOOTPRINT BY UP TO 1.8
represents approximately 14.0% trading activity is expected to be
MILLION SQ. FT. IF FULLY
IMPLEMENTED
of Ottawas office inventory, yet muted.
accounted for 39.0% of total
deal velocity through Q3 2015.
Expect Kanata and the tech
sector to remain active in 2016.

Ottawas industrial sector


will continue to face growth
constraints in the east end.
With 40.0% of industrial space
located in the Belfast-Sheffield
industrial area, less than 2.0%
of land in that area is available
for development. This situation

36 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


OT TA W A
Projects to Watch
WESTBORO CONNECTION CIENA CANADA EXPANSION LEBRETON FLATS
(319 MCRAE AVENUE) IN KANATA REDEVELOPMENT
This mixed-use development located in In late 2014, Ciena firmed up a 13-year The National Capital Commission (NCC)
Ottawas west-end embodies the live, lease deal at 5050 Innovation Drive has pre-qualified four groups to propose
work, play model and features 116,304 sq. totaling 170,500 sq. ft. The site was built plans for the redevelopment of LeBreton
ft. of office space, 32,165 sq. ft. of retail for Blackberry and was sold to Spear Flats. Among these is a proposal from the
space, and 141 rental apartment units. The Street Capital and subsequently sold Ottawa Senators to build a major sporting
building will be completed at the close of to Crestpoint. Ciena has kicked off two and event centre.
Q4 2015 and tenants will take possession in new office buildings on the adjacent site
January 2016. Building B will be ~152,000 sq. ft. and
Building C will be ~102,000 sq. ft.

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 8.8% 9.3% 9.5% Availability Rate 6.4% 6.6% 6.6%
Class A Net Rental Rate (per sq. ft.) $24.20 $23.00 $23.00 Net Rental Rate (per sq. ft.) $8.83 $8.75 $8.70
Absorption (sq. ft. in millions) 0.09 (0.11) (0.04) Sale Price (per sq. ft.) $126.17 $130.81 $135.00
Class A Cap Rate (%) 5.25-6.00 5.25-6.00 5.25-6.00 Absorption (sq. ft. in millions) 0.28 0.15 0.08
New Supply (sq. ft. in millions) 0.42 0.00 0.00 Class A & B Cap Rate (%) 6.00-7.50 6.25-6.75 6.25-6.75
Under Construction (sq. ft. in millions) 0.00 0.00 0.00 New Supply (sq. ft. in millions) 0.26 0.23 0.07
Suburban Under Construction (sq. ft. in millions) 0.17 0.06 0.06
Vacancy Rate 10.4% 11.2% 11.4%
Class A Net Rental Rate (per sq. ft.) $16.51 $16.20 $16.25 MULTIFAMILY
Absorption (sq. ft. in millions) 0.06 (0.09) 0.06
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 6.25-7.75 6.75-7.25 6.90-7.40
Overall Vacancy Rate* 2.6% 2.3% 2.0%
New Supply (sq. ft. in millions) 0.29 0.17 0.10
Apartment Cap Rate (%) 4.75-5.50 4.75-5.50 4.75-5.50
Under Construction (sq. ft. in millions) 0.19 0.21 0.32
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 9.6% 10.3% 10.5%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$19.44
0.16
$19.04
(0.20)
$19.07
0.02
INVESTMENT
New Supply (sq. ft. in millions) 0.71 0.17 0.10 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 0.19 0.21 0.32 Office $261 $261 $325
Industrial $78 $139 $145

RETAIL Retail $152 $101 $140


Multifamily $397 $359 $335
2014 2015 F 2016 F YoY
ICI Land $98 $335 $325
Retail Sales (YoY)* 4.7% 2.6% 3.3%
Hotel* $84 $33 $158
Neighbourhood Cap Rate (%) 6.25-7.00 6.00-6.75 6.00-6.75
Total $1,071 $1,227 $1,428

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 37


MONTREAL
In 2016, the alignment of private The local industrial economy
and public sector investment continues to be dominated by
and an improving economic demand for distribution space,
outlook will help Montreal to as retailers pursue supply chain
continue on its path to renewal. enhancements. Downtown
As construction across the street front retail remains
THE CHAMPLAIN BRIDGE AND region suggests, the city is dynamic as more international
TURCOT INTERCHANGE ARE a work in progress, but the retailers move in to fill
HELPING TO MODERNIZE groundwork is being laid for a vacancies left by some local
MONTREAL bright future. retailers who have struggled.

The office sector will have 2016 As for investment dynamics,


THE CITY OF MONTREAL HAS to digest the vacant space in Montreal will gain further
ALLOCATED $1.5 BILLION two downtown office towers attention as competition for
TO ROAD REPAIR that have been completed as core assets in Vancouver and
OVER THE part of the ongoing 1.5 million Toronto has become intense.
NEXT THREE sq. ft. development cycle. Three Comparatively reasonable
YEARS office buildings are slated for pricing and relative economic
completion in 2017, Manulife, stability should attract investors
Desjardins, and LAvenue, to Montreal in 2016. In the
which makes economic growth absence of trophy assets, expect
and preleasing in 2016 all the more Class B and C properties
URBAN POPULATION GROWTH more important. Despite an to trade hands.
ACCELERATION increase in office vacancy rates
Population growth within a 1.0 km radius due to new supply, the new
of Peel and Rene Levesque West stock of modern office towers is
essential for Montreal to remain
N TOWN MONTR a competitive destination for
EA
D OW L businesses and be a world-
class city. As for the suburban
office markets, they may
benefit as U.S. companies seek
out competitive labour and
occupancy costs.

2010 36,189 Montreal continues to rapidly


densify as it plays catch-up with
2015 42,956 other major Canadian cities
2020 49,471 in this regard. Griffintown
and the area around the Bell
Centre remain examples of this
process as condo and apartment
development support a growing
urban population.

38 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


MONTREAL
Projects to Watch
ROYALMOUNT PRIVATE SECTOR VACANCY AT THE ROYAL
RETAIL PROJECT INVESTMENT VICTORIA, CHILDRENS AND
The $1.7 billion project located at the Significant private companies are SHRINERS HOSPITALS
intersection of Highways 15 and 40 offers committed to building new corporate Situated on prime downtown real estate,
1.6 million sq. ft. of retail, 900,000 sq. ft. of headquarters. Ericsson and ABB will be these three sites have the potential to
restaurants and theatres, 1.5 million sq. active in the suburbs, while Manulife and become part of the new urban fabric of
ft. of office and two hotels. This has the Desjardins will be active downtown. Montreal.
potential to capture retailers from other
Midtown locations like Rockland Centre.
http://www.carbonleo.com/en/project/royalmount-3/

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 10.4% 10.7% 10.4% Availability Rate 7.0% 7.5% 7.1%
Class A Net Rental Rate (per sq. ft.) $22.36 $23.45 $24.00 Net Rental Rate (per sq. ft.) $5.18 $5.29 $5.23
Absorption (sq. ft. in millions) (0.62) 0.30 0.15 Sale Price (per sq. ft.) $61.68 $65.95 $68.00
Class A Cap Rate (%) 6.00-6.50 5.50-6.00 5.25-5.75 Absorption (sq. ft. in millions) 3.91 0.88 2.22
New Supply (sq. ft. in millions) 0.37 0.50 0.00 Class A & B Cap Rate (%) 6.00-8.25 5.75-8.00 5.50-7.75
Under Construction (sq. ft. in millions) 0.58 0.75 0.75 New Supply (sq. ft. in millions) 1.37 2.67 1.31
Suburban Under Construction (sq. ft. in millions) 1.72 0.33 0.30
Vacancy Rate 16.3% 16.7% 17.4%
Class A Net Rental Rate (per sq. ft.) $15.30 $15.14 $15.50 MULTIFAMILY
Absorption (sq. ft. in millions) (0.04) 0.03 0.28
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 6.25-8.00 6.00-7.75 5.75-7.50
Overall Vacancy Rate* 3.4% 3.9% 4.2%
New Supply (sq. ft. in millions) 0.93 0.17 0.58
Apartment Cap Rate (%) 5.25-6.00 5.00-5.75 4.75-5.50
Under Construction (sq. ft. in millions) 1.07 1.08 0.80
Overall *Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate 12.7% 13.1% 13.2%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$19.06
(0.66)
$19.27
0.33
$19.53
0.43
INVESTMENT
New Supply (sq. ft. in millions) 1.30 0.67 0.58 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 1.65 1.82 1.55 Office $1,400 $600 $800
Industrial $608 $800 $800

RETAIL Retail $1,945 $1,117 $850


Multifamily $813 $1,110 $750
2014 2015 F 2016 F YoY
ICI Land $399 $304 $350
Retail Sales (YoY)* 2.5% 2.8% 4.0%
Hotel* $116 $105 $115
Neighbourhood Cap Rate (%) 7.25-8.00 7.00-7.75 6.75-7.50
Total $5,282 $4,035 $3,665

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 39


AT L A N T I C C A N A D A
Atlantic Canada is working The outlook for leasing activity
from a base of relative stability is favorable, with office users
with Halifax, Moncton and St. beginning a shift towards
MOST CRANES AND CONSTRUCTION Johns among the five fastest the downtown market. The
ACTIVITY IN THE PAST 20 YEARS growing Census Metropolitan industrial sector is poised to
Areas in Canada from a GDP benefit from the combination
perspective. 2016 will present of a low Canadian dollar and
interesting opportunities for growing U.S. economy, as well
business and investors in the as Irving Ship building activity
region. and offshore oil exploration
a winning combination for
GROWTH OF Halifax will break from one Atlantic Canada.
POPULATION AND REAL significant national trend in
ESTATE DEMAND TO 2016, while falling in line with Atlantic Canadas super
SHIFT TO DOWNTOWN another: regional shopping centres
HALIFAX FROM THE
SUBURBS are receiving significant
The region has largely investment and tweaks to
been spared the negative
their tenant mix in order
consequences of depressed
energy prices. The low cost to maintain their position
LOW CANADIAN amongst the top 20 most
of offshore oil production,
DOLLAR productive shopping centres in
especially projects that are
SUPPORTING Canada.
already producing, continues to
RECORD CRUISE
attract exploration investment
SHIP TRAFFIC Investors are increasingly
in the region. The regional
AND AN INFLUX
mining sector also continues to looking to Atlantic Canadas
OF TOURISTS
expand and support economic leading markets as an
growth, with significant alternative destination for
projects in Newfoundland and capital due to higher yield.
Labrador. There should be opportunity
to purchase assets in 2016
>$30 <$20
Halifax had been one of the
few major Canadian cities as owners rebalance their
PER B AR RE L PER B AR REL with suburban real estate portfolios. Commercial
activity significantly outpacing property in Atlantic Canada
the downtown core. This is continues to offer an attractive
poised to shift, with renewed combination of reliable returns
residential development, a new and solid fundamentals, which
library and convention centre, should appeal to disciplined
and an overall desire to have
investors at this stage in the
an urban experience leading to
a rebalancing of the market in investment cycle.
OIL PRODUCTION COSTS GIVE favour of the Halifax Peninsula.
ATLANTIC CANADA THE EDGE

40 CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK


AT L A N T I C C A N A D A
Projects to Watch
MARITIME LINK PROJECT TRANSCANADA ENERGY
EAST PIPELINE
The Maritime Link will allow Nova Scotia to If approved, this 4,600 km pipeline will
import hydro electricity from the Muskrat carry 1.1 million barrels of crude per day
Falls generating station in Labrador, which from Alberta and Saskatchewan to the
is being developed by Nalcor Energy as part Irving Oil refinery in Saint John, the largest
of the Lower Churchill Project. The 35-year and most advanced refinery in Canada.
investment is in exchange for 20.0% of the Construction of a new tank terminal in
electricity from Muskrat Falls. Saint John could also increase industrial
activity in the area.
www.emeranl.com/en/home/themaritimelink/overview.aspx
www.transcanada.com

Market Statistics

OFFICE INDUSTRIAL
Central 2014 2015 F 2016 F YoY 2014 2015 F 2016 F YoY
Vacancy Rate 13.6% 14.6% 14.7% Availability Rate 7.7% 9.7% 8.5%
Class A Net Rental Rate (per sq. ft.) $19.61 $19.61 $19.50 Net Rental Rate (per sq. ft.) $7.61 $7.61 $7.65
Absorption (sq. ft. in millions) (0.07) (0.04) 0.12 Sale Price (per sq. ft.) $80.00 $80.00 $80.00
Class A Cap Rate (%) 6.00-6.50 6.00-6.50 6.00-6.50 Absorption (sq. ft. in millions) 0.01 (0.14) 0.41
New Supply (sq. ft. in millions) 0.22 0.01 0.15 Class A & B Cap Rate (%) 6.50-7.75 6.50-7.75 6.50-7.50
Under Construction (sq. ft. in millions) 0.16 0.15 0.03 New Supply (sq. ft. in millions) 0.17 0.11 0.30
Suburban Under Construction (sq. ft. in millions) 0.04 0.13 0.08
Vacancy Rate 13.7% 14.8% 13.6%
Class A Net Rental Rate (per sq. ft.) $16.80 $16.74 $17.00 MULTIFAMILY
Absorption (sq. ft. in millions) 0.17 0.03 0.24
2014 2015 F 2016 F YoY
Class A & B Cap Rate (%) 7.00-8.25 7.13-7.31 7.00-7.50
Overall Vacancy Rate* 3.8% 4.1% 4.3%
New Supply (sq. ft. in millions) 0.37 0.13 0.20
Apartment Cap Rate (%) 5.75-6.25 5.38-6.00 5.00-5.50
Under Construction (sq. ft. in millions) 0.23 0.32 0.22
Overall *Canada Mortgage and Housing Corporation, CBRE Limited
Vacancy Rate 13.7% 14.7% 14.0%
Class A Net Rental Rate (per sq. ft.)
Absorption (sq. ft. in millions)
$18.70
0.10
$17.93
(0.00)
$18.08
0.36
INVESTMENT
New Supply (sq. ft. in millions) 0.59 0.14 0.35 Transactions (in $ Millions) 2014 2015 F 2016 F YoY
Under Construction (sq. ft. in millions) 0.39 0.47 0.25 Office $61 $140 $80
Industrial $38 $36 $50

RETAIL Retail $55 $30 $150


Multifamily $121 $140 $100
2014 2015 F 2016 F YoY
ICI Land $93 $60 $50
Retail Sales (YoY)* 3.4% (0.5%) 4.5%
Hotel* $38 $28 $45
Neighbourhood Cap Rate (%) 6.25-6.75 6.25-6.75 6.50-8.50
Total $405 $434 $475

* Conference Board of Canada *Market and surrounding region

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK 41


National Regional National Research Regional Research
Contributors Contributors Contributors Contributors
Ross Moore
Investment Vancouver Director of Research, Canada
Vancouver
Peter Senst Norm Taylor Ross.Moore@cbre.com Matthew Boddy
President, Canadian Capital Markets Executive Vice President and Managing Director Research Team Lead
Roelof van Dijk
Peter.Senst@cbre.com Norm.Taylor@cbre.com Matthew.Boddy@cbre.com
Research Manager, Canada/GTA
Paul Morassutti Calgary Roelof.VanDijk@cbre.com Calgary
Executive Vice President, Managing Director
Greg Kwong Christina Cattana Jeffrey Hurren
Paul.Morassutti@cbre.com
Executive Vice President and Regional Managing Director Research Team Lead Senior Research Analyst
Retail Greg.Kwong@cbre.com Christina.Cattana@cbre.com Jeffrey.Hurren@cbre.com
Tom Balkos Ishita Abbott
Edmonton Edmonton
Director, Retailer Services Research Analyst
Tom.Balkos@cbre.com Dave Young Ishita.Abbott@cbre.com Jayson de Vera
Executive Vice President and Managing Director Senior Research Analyst
Christian Denny
Industrial Dave.Young@cbre.com Jayson.deVera@cbre.com
Research Analyst
Andrew Wright Winnipeg Christian.Denny@cbre.com Winnipeg
Executive Vice President, Managing Director
Andrew.Wright@cbre.com Ryan Behie Christian Denny
Vice President and Managing Director Research Analyst
Hotels Ryan.Behie@cbre.com Christian.Denny@cbre.com
Bill Stone Southwestern Ontario Southwestern Ontario
Sale Representative, Executive Vice President
Bill.Stone@cbre.com Peter Whatmore Jaclyn Harrison
Senior Vice President and Executive Managing Director Research Associate
Seniors Housing & Healthcare Peter.Whatmore@cbre.com Jaclyn.Harrison@cbre.com
Matthew Burnett Toronto (Office) Greater Toronto Area
Sale Representative, Associate Vice President
Mathew.Burnett@cbre.com John OToole Roelof van Dijk
Executive Vice President and Executive Managing Director Research Manager, Canada/GTA
Stephen Hiscox John.OToole@cbre.com Roelof.VanDijk@cbre.com
Valuations and Advisory Services, Vice President
Steve.Hiscox@cbre.com Adrian Lee Ottawa
Executive Vice President and Managing Director
Sean McCrorie Adrian.Lee@cbre.com Daniel Niedra
Valuations and Advisory Services, Vice President Research Analyst
Sean.McCrorie@cbre.com Toronto (Industrial) Daniel.Niedra@cbre.com

Office Werner Dietl Montreal


Executive Vice President and Managing Director
John OToole Werner.Dietl@cbre.com Lynn Johannesson
Executive Vice President and Executive Managing Director Research Team Lead
John.OToole@cbre.com Ottawa Lynn.Johannesson@cbre.com

Multifamily Shawn Hamilton Halifax


Vice President and Managing Director
Ross Moore Shawn.Hamilton@cbre.com Kara Hobbs
Director of Research, Canada Researcher
Ross.Moore@cbre.com Montreal Kara.Hobbs@cbre.com
Alex Sieber
Senior Vice President and Senior Managing Director
Alexandre.Sieber@cbre.com

Atlantic Region
Robert Mussett
Senior Vice President and Senior Managing Director
Robert.Mussett@cbre.com

www.cbre.ca/marketoutlookcanada
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