The Retail Report Canada

SPRING 2012 - EDITION

Accelerating success.

Message from the National Retail Leader

The Retail Report you are about to enjoy is our answer to the retail industrys request for uncommon knowledge. Leveraging our vast retail resources, we have brought together professionals from across the country and across multiple disciplines to uncover information and insight to help you guide your business. With the recent influx of U.S. retailers into the Canadian market, our retail landscape is undergoing dramatic change. As a result, we have taken an in depth look at what is driving this trend and what it means for retailers as well as owners and developers of retail space. Additionally, we have taken a look at some of the fastest growing cities in Canada and some of the opportunities this growth creates. We hope you find the following information both insightful and helpful. At Colliers, we strive to accelerate the success of our clients through our spirit of enterprise. Whether you are a retailer, owner or developer, we access the right services to meet your retail space requirements. Our collaborative nature and our drive to discover uncommon knowledge ensures we provide our clients with industry leading solutions. We look forward to sharing our knowledge with you and your organization.

Drew Keddy Vice President | Canada Colliers International

Canadian Markets are Fertile Ground for Investment

The biggest stories in Canadian retail continue to be the chess game major U.S. department stores are playing at Canadian malls. It started 18 months ago with Target acquiring up to 220 Zellers leases, followed by Walmart picking up 39 of these Zellers leases in locations that did not meet Targets growth strategy. Lately, the industry has been abuzz because of Cadillac Fairviews purchase of three Sears leases for $170 million; and there is speculation surrounding how Cadillac would fill the vacated space at Pacific Centre Mall in Vancouver, Chinook Centre in Calgary and Rideau Mall in Ottawa three of the most productive retail properties on the continent. Cadillac Fairview had not announced an official plan at the time of writing, but prevailing opinion has a single U.S. department store such as Nordstroms or Macys taking over all three prime spaces. However, there is tremendous opportunity in each property, and the ultimate plans may include a variety of stores, redevelopment or even a mix of retail and non-retail uses. Target is but the most recent top-ten U.S. retailer to make a move into Canada. The department store behemoth will open its first block of stores in 2013 and will join other household names such as Walmart, Home Depot, Costco and Best Buy, all of which have operated Canadian stores for years. There are mixed economic signals coming out of the U.S., including several months of strong job growth mixed with continued worries about the housing industry. There are few economic drivers that can match the strength of a confident American consumer, and since 2008, Americans have been demonstrating their skill as savers rather than spenders. The fact that consumer spending represents approximately 70% of U.S. GDP means that consumer confidence is a key ingredient for sustained U.S. recovery. However, confidence is a rare commodity if a stable housing market (and the opportunity to leverage equity from it) is not present. As a result, major U.S. retailers are likely to continue to seek foreign opportunities for stable growth and network expansion. On a comparative basis, while Canadians population and spending growth rates averaged across the country are expected to continue at a steady pace, the value of the Canadian dollar, influenced largely by natural resources, could gain additional strength relative to the U.S. dollar in 2012. U.S. retailers looking for strong fundamentals based on steady population growth and solid employment have a number of Canadian markets from which to choose. Canada still represents the easiest international move for American business. Despite the challenges finding space and several operational differences that Canadian markets entail, in the eyes of an American retailer, Canadas retail sector has ample room to grow. The challenge for expanding retailers (and the opportunity for investors and developers) in many Canadian markets is a shortage of appropriate space. In Regina, Saskatchewan, for example, where mall vacancy rates have been close to 0% for months and retail development sites are virtually non-existent, retailers are flat out of luck if they are looking for space on the citys main commercial thoroughfare, Victoria Avenue East. Retailers and developers are looking to future developments, which are two to three years down the road, as the citys supply of readily available development sites has dried up, says Preston Babey, Sales Associate at Colliers Regina. Canadian vs. U.S. Mall Performance (1997 to 2011)
$700.00

$600.00

$500.00

$400.00

$300.00

$200.00

$100.00

$0

199

199

199

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00 2001 002 003 004 005 006 007 008 009 2010 2011 2 2 2 2 2 2 2 2
United States ($U.S./SF)

Canada ($ U.S./SF)

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Retailers serve shoppers. Landlords serve retailers. Whereas U.S.-based retailers have been eagerly taking over existing Canadian floor space and building more of their own, it has largely been Canadian developers and pension funds providing and managing the space. That is changing, and Tanger Outlets, Simon Properties and Kimco from the U.S., as well as London-based outlet mall developer McArthurGlen, are all looking to establish or increase their Canadian presence. The preceding chart shows how the sales per square foot at U.S. shopping malls and Canadian shopping malls have compared to one another over the last 14 years. In 1997, Canadian shopping malls generated, on average, $442 of sales per square foot. Given that the Canadian dollar was worth about $0.72 U.S., the 1997 sales productivity rate was $319 expressed in U.S. dollars. At the time, U.S. malls were averaging sales of $354 per square foot, and consistently outperforming their northern neighbours, on average. By 2004, however, these performance rates converged at roughly U.S.$380 per square foot, and Canadian malls as a whole have, on average, been outperforming their U.S. counterparts by an increasing margin ever since. According to data from the International Council of Shopping Centers, between 2007 and 2010, the U.S. shopping centre square feet per 100 residents dropped from 2,391 square feet to 2,370 square feet. Over the same four-year period in Canada, the shopping centre square feet per 100 residents grew from 1,379 square feet to 1,453 square feet. There is little doubt that in the current economy, the U.S. has a significant oversupply of shopping centre space. Canadian productivity levels per square foot continue to rise. A recent dip in productivity in 2009 was followed by strong growth over the last two years. In 2011, Canadian malls were almost 50% more productive on a ($U.S.) sales per square foot basis. Canadian mall productivity levels will likely level off as new space is developed and consumers spending dollars are spread amongst an increased number of stores. The commercial development industry in the U.S. has dipped to its slowest pace in generations, and as long as consumer spending continues to rise, the result will be more productivity at shopping malls. The impact this will have on the Canadian retail landscape is that we will likely see an ever more Americanized commercial landscape. Outlet malls, which have not enjoyed the same degree of success in Canada as they have south of the border, will get more attention as U.S. developers bring their outlet knowledge to Canada. Finally, higher sales productivities translate to higher lease rates, which in turn translate to higher values for retail properties. Notwithstanding regional differences in Canadian economies, cap rates will likely stay fairly low if domestic pension funds and REITs continue to snap up revenue-producing properties, and are willing to exchange capital on-hand for long-term income.

Challenge for Retailers Spells Opportunity for Developers and Investors

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THE RETAIL REPORT SPRING 2012

The following chart shows the retail spending per capital in the U.S. and Canada since 1992, converted to U.S. dollars for comparison. For the last 18 months, this chart has illustrated why many U.S. retailers are looking to establish Canadian stores. However, despite the Canadian economys resiliency in the midst of the global recession, it is the U.S. consumer who has made great strides in the last year. Both countries have experienced population growth of approximately 1 percent, but while Canadas retail sales grew at a steady 3.6% from 2010 to 2011, U.S. retail trade grew by 6.8% over the same period. The exchange rate between the two currencies has been hovering close to parity, resulting in the comparable per capita spending of Canadians and Americans growing at a similar rate over the last year. Per Capita Retail Spending, U.S. and Canada Expressed in $U.S.
$14,000

$12,000

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$8,000

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$2,000

These high line performance and supply numbers are only part of the story. While the Canadian retail environment is certainly appealing to U.S. retailers and developers when they see significantly lower square feet per capita on the supply side and higher sales per SF in the shopping centers, we also have different tax structures, a more challenging development process and very sophisticated retailers, owners, and developers who have learned how to operate efficiently in this country.
2 199 3 199 4 199 5 199 6 199 3 199 7 199 8 199 9 20 00 2001 002 003 004 005 006 007 008 009 2010 2011 2 2 2 2 2 2 2 2
United States
June 2011 data

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199

Canada

Colliers International

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REVIEW OF 2011 FULL YEAR RETAIL FORECAST

Colliers Fall 2011 Retail Report for Canada included, for only the second time, a forecast of both full-year and December retail spending, and growth for the 10 major provincial markets. This forecast, made following the release of June retail trade data, is a trend forecast based on an ongoing review of provincial monthly and quarterly spending patterns over the last decade. The intent is simply to provide an alternative means of forecasting retail sales in Canadas provincial markets, which in turn, can help guide short-term expectations and help owners, developers and retailers fine-tune their approaches to Canadian retail expansion or development. A forecast is only valuable, however, if it is reliable and if users are confident in its outputs. Colliers Fall Report anticipated total 2011 retail sales for all retail categories (including automobile and gasoline sales) of roughly $454 billion. Actual national retail sales came in at just above $454 billion. Colliers forecast at the national level was off the mark, in volume terms, by roughly 0.04%. The degree of accuracy at the national level is largely driven by how close Colliers sales forecasts were for the Big 4 provinces, namely Ontario, Quebec, Alberta, and B.C., which together account for roughly 85% of the nations sales volume. Colliers forecast of roughly $385.5 billion for this key group, while actual 2011 sales came in at about $385.7 billion.

Colliers 2011 Provincial Retail Forecast Review Full Year Forecast vs. Full Year Actual (All Retail Categories)
Forecast Rank/Province
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Saskatchewan Alberta Newfoundland New Brunswick PEI Manitoba Ontario Nova Scotia British Columbia Quebec Canada-Wide The Big 4 Maritimes Net Prairies

Colliers 2011 Forecast 2011 ($Billions)

$16.21 $63.66 $7.82 $11.12 $1.84 $16.40 $161.55 $13.01 $59.11 $101.16 $453.97 $385.49 $33.80 $32.60

Actual 2011 Results 2011 ($Billions)

$16.32 $64.08 $7.83 $11.11 $1.88 $16.48 $160.62 $13.08 $59.48 $101.56 $454.17 $385.74 $33.91 $32.80

% YOY
7.7% 6.4% 5.0% 5.0% 4.2% 4.1% 3.6% 2.8% 1.7% 1.5% 3.6% 3.2% 4.1% 5.9%

% YOY
8.4% 7.1% 5.1% 4.9% 6.3% 4.6% 3.0% 3.4% 2.3% 1.9% 3.6% 3.3% 4.4% 6.5%

Forecast vs. Actual Volume Differential

-0.71% -0.65% -0.12% 0.10% -1.98% -0.47% 0.58% -0.54% -0.61% -0.39% -0.04% -0.06% -0.31% -0.59%

Source: Colliers International, Statistics Canada

1 2

3-digit NAICS codes for major retail categories, as tracked on a monthly basis by Statistics Canada. The Canada-Wide total includes all of the provincial figures listed, as well as sales for unlisted territories.

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THE RETAIL REPORT SPRING 2012

Outside the Big 4 provinces, Colliers forecast of $33.8 billion in sales or 4.1% year-over-year growth for the Maritime provinces came close to the actual mark of $33.91 billion in sales or a 4.4% increase over 2010. As expected, Saskatchewan led the nation in year over year growth, though sales of $16.32 billion (8.4% higher than 2010) were very slightly better than the forecast, which called for $16.21 billion or 7.7% growth. Manitoba also edged out expectations, hitting $16.48 billion (+4.6%) rather than the forecast $16.4 billion (+4.1%). Of more relevance to the shopping centre industry is how Canadian provinces fared in 2011 in terms of retail sales net of automobile and gasoline sales. Colliers Fall 2011 Retail Report included a nationwide forecast of $297.28 billion or modest 1.0% year over year growth. The actual tally was $297.17 billion (+1.0%). Again, this was driven by quite accurate forecasts for the Big 4 provinces of Ontario, Quebec, Alberta, and B.C., which combined for $254.54 billion in sales, beating expectations ($254.03 billion) by a slim margin. The Maritimes also exceeded expectations for 2011, generating year-over-year growth of 1.2% on sales of $21.29 billion versus Colliers forecast of 0.9% growth on sales of $21.23 billion. 2011 also brought good news for the Prairie provinces of Saskatchewan and Manitoba, which more than met Colliers sales expectations for 2011 in the non-automotive and gas retail categories. As expected, Saskatchewan led the nation with yearover-year growth of 5.4% on sales of $9.68 billion (versus forecast growth of 4.6% on sales of $9.61 billion). Manitoba sales also beat expectations, reaching $10.73 billion in 2011 versus an expected figure of $10.61 billion.

Colliers 2011 Provincial Retail Forecast Review Full Year Forecast vs. Full Year Actual (Retail Net of Auto and Gas)
Forecast Rank/Province
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Saskatchewan Alberta Newfoundland PEI Ontario Manitoba New Brunswick Nova Scotia British Columbia Quebec Canada-Wide The Big 4 Maritimes Net Prairies

Colliers 2011 Forecast 2011 ($Billions)

$9.61 $39.21 $4.85 $1.22 $109.95 $10.61 $6.79 $8.37 $40.00 $64.88 $297.28 $254.03 $21.23 $20.21

Actual 2011 Results 2011 ($Billions)

$9.68 $39.23 $4.88 $1.25 $109.57 $10.73 $6.76 $8.39 $40.62 $65.12 $297.17 $254.54 $21.29 $20.41

% YOY
4.6% 3.4% 2.7% 2.3% 1.6% 1.1% 1.0% -0.3% -0.3% -1.9% 1.0% 0.7% 0.9% 2.7%

% YOY
5.4% 3.5% 3.3% 4.7% 1.3% 2.3% 0.6% 0.0% 1.3% -1.6% 1.0% 0.9% 1.2% 3.7%

Forecast vs. Actual Volume Differential

-0.79% -0.06% -0.66% -2.24% 0.35% -1.15% 0.45% -0.26% -1.55% -0.37% 0.04% -0.20% -0.24% -0.98%

Source: Colliers International, Statistics Canada

3

Colliers nationwide December forecast is treated as a whole and is not a direct sum of the individual provincial forecasts. This is due to the fact that retail trade data for the unlisted territories are not readily available for all major categories.

Colliers International

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REVIEW OF 2011 HOLIDAY (DECEMBER) RETAIL FORECAST

When the rubber really hits the road in Canada is during the most important month of December, when retail property owners and retailers across the country ramp up their promotional events and make key shifts relating to operating hours and staffing. Though retailers in Canada are increasingly testing out earlier holiday sales promotions (following the U.S. lead with its post-U.S. Thanksgiving Black Friday shopping event), which have resulted in higher than historical November sales numbers, December sales remain the key to a successful retail year. If sales were distributed evenly from month to month, then each month would see 1/12th of the years spending or 8.3%. While this is certainly the case with a regular staple good such as gasoline (the national December sales of which represented 8.2% of the 2011 total), most non-automotive-related retail categories, with the exception of building materials and garden equipment dealers, see a pronounced holiday leap in December, as noted by the following Canada-wide examples: > Electronics and appliance stores: December 2011 sales of $2.07 billion (14.8% of annual 2011 sales) > Clothing and clothing accessories stores: December 2011 sales of $3.73 billion (14.5% of 2011 sales) > Sporting goods, hobby, book and music stores: December 2011 sales of $1.69 billion (14.9% of 2011) Colliers Fall 2011 Retail Report for Canada also provided a forecast of December retail sales for each of the provinces as a means of gauging the upcoming strength of the Canadian retail holiday season. A summary of our province by province December retail forecasts, alongside actual performance, appears in the table to the right.

Colliers 2011 Provincial Retail Forecast Review December Forecast vs. December Actual (All Retail Categories)
Forecast Rank/Province
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Saskatchewan Alberta Newfoundland New Brunswick PEI Manitoba Ontario Nova Scotia British Columbia Quebec Canada-Wide The Big 4 Maritimes Net Prairies

Colliers 2011 Forecast 2011 ($Billions)

$1.56 $6.27 $0.79 $1.08 $0.18 $1.60 $16.38 $1.28 $5.82 $9.20 $44.97 $37.68 $3.32 $3.16

Actual 2011 Results 2011 ($Billions)

$1.57 $6.43 $0.79 $1.08 $0.18 $1.64 $16.16 $1.30 $5.90 $9.55 $44.76 $38.04 $3.35 $3.21

% YOY
8.5% 5.8% 5.1% 5.7% 6.5% 4.0% 3.3% 3.5% 2.5% -0.3% 4.6% 2.7% 4.7% 6.2%

% YOY
8.9% 8.4% 5.3% 6.0% 10.3% 7.0% 1.9% 5.3% 3.9% 3.5% 4.1% 3.7% 5.8% 7.9%

Forecast vs. Actual Volume Differential

-0.38% -2.44% -0.21% -0.26% -3.41% -2.83% 1.32% -1.72% -1.35% -3.62% 0.47% -0.97% -0.99% -1.64%

Source: Colliers International, Statistics Canada

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THE RETAIL REPORT SPRING 2012

Colliers expectation of $44.97 billion in December retail sales (and 4.6% year-over-year growth ) for Canada as a whole was close to the mark, if not a tad bullish. Actual Canadian retail sales for December 2011 totaled $44.76 billion, for a similarly healthy increase of 4.1% over 2010 volume. The December 2011 retail story was also positive for non-automotive and gasoline purveyors, as Colliers national forecast of 3.9% year-over-year growth on sales of $32.75 billion exceeded actual results by a small fraction. Some notable holiday retail sales highlights included: > Saskatchewan and Alberta exceeding already high expectations, with actual year-over-year increases of 8.6% and 6.7%, respectively > Ontario, by far the largest retail market, very nearly hitting Colliers prediction of 2.9% growth over December 2010 (actual was 2.8%) > Manitoba and Quebec far exceeding December expectations with actual year-over-year growth rates of 7.7% (versus 2.7% forecast) and 2.7% (versus -0.6% forecast), respectively

Colliers 2011 Provincial Retail Forecast Review December Forecast vs. December Actual (Net of Auto & Gas)
Forecast Rank/Province
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Saskatchewan Alberta Newfoundland PEI Ontario Manitoba New Brunswick Nova Scotia British Columbia Quebec Canada-Wide The Big 4 Maritimes Net Prairies

Colliers 2011 Forecast 2011 ($Billions)

$1.02 $4.35 $0.56 $0.13 $12.29 $1.13 $0.74 $0.93 $4.34 $6.62 $32.75 $27.61 $2.35 $2.15

Actual 2011 Results 2011 ($Billions)

$1.03 $4.44 $0.57 $0.14 $12.28 $1.19 $0.75 $0.95 $4.40 $6.85 $32.71 $27.96 $2.41 $2.22

% YOY
7.6% 4.6% 3.5% 4.9% 2.9% 2.7% 3.6% 1.3% 1.7% -0.6% 3.9% 2.1% 2.7% 5.0%

% YOY
8.6% 6.7% 6.1% 10.3% 2.8% 7.7% 4.5% 3.9% 2.9% 2.7% 3.8% 3.4% 5.0% 0.0%

Forecast vs. Actual Volume Differential

-0.95% -1.92% -2.44% -4.91% 0.12% -4.62% -0.92% -2.54% -1.15% -3.27% 0.12% -1.23% -2.14% -2.92%

Source: Colliers International, Statistics Canada

4

Colliers nationwide December forecast is treated as a whole and is not a direct sum of the individual provincial forecasts. This is due to the fact that retail trade data for the unlisted territories are not readily available for all major categories.

Colliers International

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CANADAS GROWTH ENGINE SHIFTS WESTWARD

For retailers, owners and developers alike, the two key drivers of retail opportunity (beyond per capita spending power) are a markets size and its rate of growth its ability, on an ongoing basis, to attract new residents while maintaining as much as possible of its existing resident base. As the official Canadian Census 2011 population figures were released by Statistics Canada in early February, it is an opportune time to derive some big picture insights into the nations overall pattern of growth by region, review which municipalities are recording the strongest growth rates by market size, and provide an indication of retail market implications. Between 2006 and 2011, the Canadian population rose from just above 31.6 million to nearly 33.5 million, an increase of 5.9% (1.15% per year), which edged out the 5.4% change recorded over the 2001 to 2006 period. Immigration, which accounts for about two thirds of the nations population increase, has helped to make Canada the fastest growing country in the Group of 8 industrialized nations. Canada is also clearly reorienting away from Central Canada and toward the West, with resource-driven economic gains driving job growth, and drawing both national and international migrants alike. The population of Canadas Western provinces including British Columbia, Alberta, Saskatchewan and Manitoba has, for the first time, exceeded that of Quebec and the Atlantic provinces (30.7% versus 30.6% of the Canadian population, respectively). Even more telling is that while British Columbia, Alberta and Saskatchewan comprise only 27% of Canadas population, their combined average annual growth of 141,340 new residents over the 2006 to 2011 period accounted for 38% of the nations growth. Thus, while the Western provinces hit above their weight in terms of growth over the past five years, the Eastern giants did not fare as well: Ontario: 38% of Canadas population, 37% of 2006 to 2011 growth (down from 47% for 2001 to 2006) Quebec: 24% of Canadas population, 19% of 2006 to 2011 growth (little change from 2001 to 2006)

Canadian Population Growth Summary (2006 - 2011)

Province or Territory
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Alberta British Columbia Saskatchewan Ontario Manitoba Quebec Prince Edward Island New Brunswick Newfoundland and Labrador Nova Scotia Nunavut Northwest Territories CANADA

2011 Population
3,645,257 4,400,057 1,033,381 12,851,821 1,208,268 7,903,001 140,204 751,171 514,536 921,727 31,906 41,462 33,476,688

2006 Population
3,290,350 4,113,487 968,157 12,160,282 1,148,401 7,546,131 135,851 729,997 505,469 913,462 29,474 41,464 31,612,897

% Change (2006 - 2011)

10.8% 7.0% 6.7% 5.7% 5.2% 4.7% 3.2% 2.9% 1.8% 0.9% 8.3% 0.0% 5.9%

Average Annual % of Canadas Increase in Annual Population Growth

70,981 57,314 13,045 138,308 11,973 71,374 871 4,235 1,813 1,653 486 0 372,758 19.0% 15.4% 3.5% 37.1% 3.2% 19.1% 0.2% 1.1% 0.5% 0.4% 0.1% 0.0%

% of Canadian Population (2011)

10.9% 13.1% 3.1% 38.4% 3.6% 23.6% 0.4% 2.2% 1.5% 2.8% 0.1% 0.1%

Source: Statistics Canada Census figures, 2006, 2011.

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THE RETAIL REPORT SPRING 2012

Saskatchewans turnaround is particularly notable, after having lost an average of 2,169 residents per year over the 2001 to 2006 period, and having gained an average of more than 13,000 net residents per year over the most recent Census period a story tied to a sustained rise in commodity prices and related economic activity.

MUNICIPAL GROWTH LEADERS

While a look at the provincial level can offer some important insights into regional growth patterns, it is the municipal growth leaders within these provinces that are the true drivers of economic activity, population growth, and ultimately, development and expansion opportunities. Of the top five municipalities with more than 300,000 residents, the fastest growing is Brampton, Ontario, whose population very nearly hit 524,000 in 2011. For a Canadian city of this size to record a growth rate approaching 4% a year is an impressive feat. Not far behind is Surrey, British Columbia, a municipality that recorded nearly 3.5% average annual growth rate over the 2006 to 2011 period and is fast approaching half a million residents. Ontario placed a second significant municipality in the top five, with Markham, Ontario nearly hitting a 3% growth rate for the period. Alberta also saw its two major cities eclipse the 2% annual growth threshold, combining to attract an average of nearly 38,000 net new residents per year.

Top Cities Over 300,000

1. 2. 3. 4. 5. 6. 7. Brampton (Ontario) Surrey (British Columbia) Markham (Ontario Edmonton (Alberta) Calgary (Alberta) Laval (Quebec) Ottawa (Ontario)

2011 Population
523,911 468,251 301,709 812,201 1,096,833 401,553 883,391

2006 Population
433,806 394,976 261,573 730,372 988,812 368,709 812,129

Annual Average Growth Rate %

3.85% 3.46% 2.90% 2.15% 2.10% 1.72% 1.70%

Annual Average Growth Rate #

18,021 14,655 8,027 16,366 21,604 6,569 14,252

Source: Statistics Canada Census figures, 2006, 2011.

High growth rates such as these have significant implications for a municipalitys retail sales potential and thus, its ability to attract interest from both developers and retailers. Significant metro areas such as these are prime expansion markets for major retailers requiring significant trade area populations (of 100,000 to 250,000 residents).

Colliers International

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The retail market impact of such large, fast-growing markets can best be explained with an illustrative look at a specific retail category such as clothing/apparel as calculated for the top five municipalities with a population of more than 300,000:

Retail Implications of 2006-2011 Growth Rate Municipalities over 300,000 Population - Illustrative Clothing/Apparel Spending Impact
Municipality
1. 2. 3. 4. 5. Brampton (Ontario) Surrey (British Columbia) Markham (Ontario Edmonton (Alberta) Calgary (Alberta)

Average Annual Per Capita Expenditure*

$1,294 $1,375 $1,527 $1,771 $2,184

Average Annual Growth Rate (#)

18,021 14,655 8,027 16,366 21,604

Increase in Annual Clothing Spending ($M)

$23.3 $20.2 $12.3 $29.0 $47.2

Warranted Annual Retail Floor Area**

51,000 38,000 27,000 51,000 83,000

Source: * Environics 2011 household spending estimates. Colliers per capita calculations. ** Based on assumed 100% illustrative capture of incremental growth, est. sales productivity rates

One years worth of combined growth in these five cities alone could support an additional 250,000 square feet of clothing-related retail space. With Canadian consumer tastes increasingly aligned with American consumer tastes, this level of growth offers expansion opportunities for both Canadian and U.S./international retailers. A similar review was carried out to determine the fastest growing municipalities in both the medium (100,000 to 300,000 population) and smaller (50,000 to 100,000 population) ranges, as these markets offer a wealth of opportunity for both existing and new retailers covering a broad range of categories. Though the top three growth leaders in this range hail from Ontario, with both Ajax and Vaughan approaching annual growth rates of 4%, a number of Western cities also made the list, three of which are in British Columbia (Langley, Coquitlam and Burnaby). These medium-sized B.C. cities contributed an average annual population increase of more than 8,500. Not to be taken lightly, the fastest growing municipalities in the smaller range are also worth noting, offering numerous opportunities for growth in a host of retail categories. Such centres are significant not only for their ability to attract new residents and spending potential, but also for their movement toward important population thresholds for various types of retailers. While Milton, Ontario led the top 10 in this size range, four of these smaller, highgrowth centres are in Alberta and two are in British Columbia again reinforcing the increasing importance of growth in the west. Population thresholds of 50,000 and 100,000 are significant milestones that can put a municipality on a retailer or developers radar.

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THE RETAIL REPORT SPRING 2012

Top Cities 100,000 to 300,000

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Ajax (Ontario) Vaughan (Ontario) Richmond Hill (Ontario) Terrebonne (Quebec) Langley (British Columbia) Coquitlam (British Columbia) Oakville (Ontario) Burnaby (British Columbia) Saskatoon (Saskatchewan) Whitby (Ontario) Kelowna (British Columbia) Gatineau (Quebec)

2011 Population
109,600 288,301 185,541 106,322 104,177 126,456 182,520 223,218 222,189 122,022 117,312 265,349

2006 Population
90,167 238,866 162,704 94,703 93,726 114,565 165,613 202,799 202,408 111,184 107,035 242,124

Annual Average Growth Rate %

3.98% 3.83% 2.66% 2.34% 2.14% 1.99% 1.96% 1.94% 1.88% 1.88% 1.85% 1.85%

Annual Average Growth Rate #

3,887 9,887 4,567 2,324 2,090 2,378 3,381 4,084 3,956 2,168 2,055 4,645

Source: Statistics Canada Census figures, 2006, 2011.

Top Cities 50,000 to 300,000

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Milton (Ontario.) Wood Buffalo (Alberta) Grande Prairie (Alberta) Blainville (Quebec) New Westminster (British Columbia) Chilliwack (British Columbia) Strathcona County (Alberta) Lethbridge (Alberta) Aurora (Ontario) Brossard (Quebec) Fredericton (New Brunswick) Maple Ridge (British Columbia)

2011 Population
84,362 65,565 55,032 53,510 65,976 77,936 92,490 83,517 53,203 79,273 56,224 76,052

2006 Population
53,889 51,496 47,107 46,493 58,549 69,217 82,511 74,685 47,629 71,154 50,535 68,949

Annual Average Growth Rate %

9.38% 4.95% 3.16% 2.85% 2.42% 2.40% 2.31% 2.26% 2.24% 2.18% 2.16% 1.98%

Annual Average Growth Rate #

6,095 2,814 1,585 1,403 1,485 1,744 1,996 1,766 1,115 1,624 1,138 1,421

Source: Statistics Canada Census figures, 2006, 2011.

Colliers International

P. 11

Major Market Data

The data in the following table came from Colliers brokers and research specialists in each represented market. It is a survey of expert opinions and is not represented as actual data. The information below was collected in response to Colliers understanding that national chain retailers are looking for a single source of information on lease rates, vacancy rates and recent trends for major markets across the country. This table is a retailers first step in market analysis; the second step is calling a local Colliers office for more specific information and assistance.

Retail Rental & Vacancy Rates by Major Market and Centre Type
Market City
Victoria Vancouver Kelowna Calgary Edmonton Saskatoon Regina Winnipeg Toronto Ottawa Montreal Halifax High Low High Low High Low High Low High Low High Low High Low High Low High Low High Low High Low High Low

Neighbourhood Net Rent

$43 $15 $35 $22 $30 $20 $40 $22 $38 $25 $30 $22 $26 $23 $26 $18 $22 $28 n/a n/a $23 $15 $24 $16

Regional 6 Month Trend Net Rent

$65 $30 $135 $30 $90 $50 $200 $40 $150 $30 $40 $30 $32 $28 $60 $30 $145 $60 n/a n/a $44 $25 $74 $25

Power Centre 6 Month Trend Net Rent

$42 $25 $75 $25 $40 $30 $40 $18 $23 $16 $35 $26 $32 $26 $28 $20 $30 $22 $30 $25 $30 $20 $25 $15

6 Month Trend

Vacancy Rate
20% + 0% 3% 1% 4% 4% 3% 2% 3% 3% 4% 1% 8% 7% 6% 0% 9% 5% 2% 2% 3% 3% 15% 14%

6 Month Trend

Vacancy Rate
1% 0% 8% 0% 3% 2% 2% 2% 1% 1% 3% 2% 0% 0% 8% 0% 3% 1% 1% 1% 4% 3% 2% 1%

6 Month Trend

Vacancy Rate
14% 0% 5% 0% 3% 3% 1% 1% 2% 1% 2% 1% 1% 1% 2% 0% 5% 2% 3% 3% 4% 2% 5% 2%

6 Month Trend

Notes: Neighbourhood shopping centre lease rates are for a 2,000-square-foot, in-line unit with 10 to 12 foot ceilings and ground-floor entry. Enclosed regional shopping centre lease rates are for a 4000-square-foot unit. Power centre lease rates are for a 5,000 to 10,000-square-foot unit, which could be on a pad site, in a cluster of CRUs or in-line in a strip.
This document/email has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and /or its licensor(s). 2012. All rights reserved. This communication is not intended to cause or induce breach of an existing listing agreement. Colliers Macaulay Nicolls Brokerage Inc. (Vancouver).

P. 12

THE RETAIL REPORT SPRING 2012

Report prepared by:

James Smerdon, Director, Retail and Consulting DIRECT +1 604 685 4808 james.smerdon@colliers.com James has 15 years of consulting experience, specializing in retail trends, strategy and forecasting. His consulting clients include Mountain Equipment Co-Op, Walton International, Brookfield Residential, Genstar Developers, and Stantec. James is co-chair of the organizing committee for the 2013 Whistler ICSC Conference, and is a past presenter on the retail outlook panel at this event.

David Bell, Senior Associate, Planning and Retail Consulting DIRECT +1 604 694 7243 david.bell@colliers.com David brings to Colliers a wealth of experience in strategic retail planning garnered over his last 15 years in the industry, including Canadian and international work on shopping centre repositioning, commercial land demand analysis for major planning nodes, and retail strategies for urban inner-city mixed-use districts. David recently completed a comprehensive retail strategy update for Calgary Municipal Land Corporations East Village project in Calgary a major inner-city mixed-use redevelopment effort that is now enjoying positive momentum.

Colliers International Consulting (CIC)

Colliers International Consulting (CIC) is an independent consulting group based in Vancouver, British Columbia. CIC specializes in strategic real estate analysis for Private and Public Sector clients both domestically and abroad. Our project experience spans a range of specializations in: Strategic Advisory Acquisition/Divestiture Strategies Asset & Portfolio Management Competitive Assessment Consolidation Advice Feasibility Analysis Highest & Best Use Studies Merchandising Pro Forma Development Retail Inventory Analysis Retail Locational Analysis Retail Potential Analysis Revitalization/Redevelopment Studies Site Selection and Ranking Strategic Planning Strategic Positioning Trade Area Analysis Development Management Facilities Planning Project Budgeting/Scheduling Tenant Improvements First Nation Advisory Community Planning Economic Development Governance Public Consultation Urban Planning Municipal Approval Process Site Planning & Concept Development Community Consultation Community Workshops & Consultation Focus Groups Market Analysis Absorption Analysis Competitive Assessment Demand Assessment Demographic Modeling Demographic Profiling Market Impact Assessment Residential & Commercial Market Analysis

Nanaimo Victoria Vancouver Kelowna Calgary Edmonton Saskatoon Regina Winnipeg Toronto Burlington Waterloo London Ottawa Montreal Moncton Halifax

+1 250 740 1060 +1 250 388 6454 +1 604 681 4111 +1 250 763 2300 +1 403 266 5544 +1 780 420 1585 +1 306 664 4433 +1 306 789 8300 +1 204 943 1600 +1 416 777 2200 +1 905 333 8849 +1 519 570 1330 +1 519 438 4300 +1 613 567 8050 +1 514 866-1900 +1 506 870 2700 +1 902 422 1422