Cbre office leasing market report 2014

Toronto Office
MarketView

CBRE Global Research and Consulting

Q4 2013

VACANCY
9.4%

NET RENT
$17.85 PSF

NET ABSORPTION
-195,090 SF

COMPLETIONS
903,699 SF

The arrows are QoQ trend indicators and do not represent a positive or negative value (e.g., absorption could be negative, but still represent a positive trend).

TENANT ACTIVITY SHIFTING, NOT SLOWING
Quick stats
Q4 2013

QoQ

YoY

9.4%





Lease Rates (psf)

$17.85





Net Absorption*

- 0.2M SF





New Supply

1.0 M SF





21.1%





Vacancy Rate

Sublet Availability

*The arrows are trend indicators over the specified time
period and do not represent a positive or negative
value. (e.g., absorption could be negative, but still
represent a positive trend over a specific period.)

Hot Topics






1

Vacancy rose by 70 basis points
quarter-over-quarter and 110
basis points year-over-year to
9.4% in Q4 2013.
Rising vacancy signifies a shift in
tenant activity, with demand
varying by lease type, tenant size,
market, and asset class.
Vacancy is expected to continue
rising in the coming quarters,
due both to new vacancies in
existing stock and to new
construction.

Absorption in the Greater Toronto Area
(GTA) was negative for the third
consecutive quarter, posting 195,090
sq. ft. of negative absorption in Q4
2013. Consequently, the GTA ended
the year at negative 322,426 sq. ft. of
net absorption. This is the first time
since 2003 that net annual absorption
was negative.
Given the amount of negative
absorption, it is no surprise that
vacancy continues to rise, up by 70
basis points quarter-over-quarter
(QoQ) and 110 basis points year-overyear (YoY) to 9.4% in Q4 2013.
Vacancy increased and absorption was
negative across all GTA markets.
The rising vacancy rate does not
necessarily signify an across-the-board
decline in tenant demand. It merely
signifies a shift in tenant activity, with
demand varying by lease type, tenant
size, market, and asset class.
First, while direct deals are on the
decline, the GTA remains rife with
renewal activity. In many markets,
vacancy may be high, but it consists of
fragmented or lower-quality spaces.
Consequently, large tenants are unable
to find suitable large blocks of space
for relocation and opt to renew their
existing premises instead. In other
markets, relocation costs are
prohibitively high, leading tenants to
make renewal decisions instead of
relocating.
Second, leasing activity differs by
tenant size. While many large tenants,
particularly those in the Central
market, have completed their deals in
recent quarters, smaller tenants
continue to drive leasing demand

throughout the city. This is primarily
due to the expiry profile of large
tenants and the fact that many large
tenants’ expiries tend to cluster in
cycles. Conversely, smaller tenants’
expiries tend to be more randomly
distributed, thus providing a more
constant source of leasing velocity.
Third, tenant activity differs by market,
with the Toronto West leading the GTA
in terms of the number and size of new
direct deals in the Q4 2013. Demand
continues being strong in the West and
the rising vacancy can be largely
attributed to new construction and
tenant densification. Conversely, new
deal activity is slower in markets such
as Toronto North and Midtown.
Finally, activity differs by asset class.
For example, while activity is slowing in
Financial Core Class A space, it is
nonetheless strong in Downtown West
Renovated and Converted (RC) space.
In the Suburban market, Class C space
remains popular with smaller and more
value-driven tenants while Class A
space attracts tenants looking for more
prestigious space. Consequently, Class
B space seems to be suffering at the
expense of Class A and Class C space
in those markets.
Vacancy is expected to continue rising
in the coming quarters, due both to
new vacancies in existing stock and to
new construction. Q4 2013’s new
construction contributed approximately
40 basis points to the 70 basis points
quarterly vacancy increase and the 2.1
million sq. ft. that are expected to be
completed in 2014 may add up to 80
basis points to vacancy, assuming
significant leasing does not occur prior
to completion.
© 2014, CBRE Limited, Real Estate Brokerage

Submarket

Inventory (SF)

Vacancy
Rate (%)

Sublease as
% of Vacant

4Q13 Net
Absorption (SF)

YTD Net
Absorption (SF)

4Q13
New Supply (SF)

4Q13 Under
Construction (SF)

Net Rent
($ psf/yr)

81,438,380

6.1%

23.1%

21,316

-174,958

740,000

5,056,230

$23.77

Downtown

66,783,377

5.9%

23.8%

214,587

-185,119

740,000

5,056,230

$25.40

Financial Core

24,407,998

6.2%

27.7%

-91,892

-419,816

0

1,923,546

$29.30

Greater Core

18,539,229

4.2%

22.0%

55,350

78,019

0

0

$21.63

Downtown South

4,096,442

5.0%

50.0%

-22,114

-94,607

0

2,385,103

$23.34

Downtown North

7,693,967

8.5%

17.8%

335,084

331,113

740,000

0

$27.33

Downtown East

2,595,707

6.0%

16.8%

-1,151

36,634

0

462,000

$19.03

Downtown West

9,450,034

6.5%

16.0%

-60,690

-116,462

0

285,581

$18.90

14,655,003

7.4%

20.8%

-193,271

10,161

0

0

$18.11

Bloor / Yonge

7,499,478

5.6%

16.6%

-21,597

57,686

0

0

$20.92

St. Clair / Yonge

2,118,893

5.7%

24.6%

-16,241

69,008

0

0

$18.28

Eglinton / Yonge

5,036,632

10.8%

23.2%

-155,433

-116,533

0

0

$15.50

SUBURBAN

69,996,235

13.1%

20.1%

-216,406

-147,468

163,699

1,645,839

$14.92

East

24,794,264

12.4%

13.7%

-104,147

-22,792

0

0

$13.40

Scarborough

3,609,408

13.2%

4.5%

64,082

59,428

0

0

$12.19

Mark. N. / R. Hill

7,449,132

11.0%

23.2%

-19,742

47,416

0

0

$15.97

Steeles / Woodbine

2,860,816

14.4%

4.4%

-69,162

-98,316

0

0

$13.18

E. York / D. Mills S.

2,695,747

10.2%

32.0%

-41,299

-43,116

0

0

$11.96

Don Mills North

2,707,278

8.0%

20.2%

7,115

23,350

0

0

$9.71

Consumers Road

3,862,867

15.8%

9.2%

-67,886

-67,606

0

0

$12.67

G. Baker / Vic. Park

1,609,016

17.3%

2.0%

22,745

56,052

0

0

$14.34

11,947,937

7.3%

35.1%

-79,097

-125,240

62,500

185,104

$17.49

North Yonge

7,707,955

7.5%

51.4%

-132,486

-165,477

0

75,000

$18.08

North York West

2,170,968

5.2%

0.0%

-8,816

2,484

0

0

$12.73

Vaughan

2,069,014

8.7%

4.5%

62,205

37,753

62,500

110,104

$17.29

33,254,034

15.7%

21.4%

-33,162

564

101,199

1,460,735

$15.55

Bloor / Islington

1,497,663

10.7%

6.4%

64,414

90,360

0

0

$15.73

427 Corridor

2,208,002

8.7%

21.2%

24,716

26,734

0

0

$15.35

Airport Strip

3,209,910

22.8%

15.1%

-24,158

-36,345

0

0

$13.62

Airport Corp. Centre

5,454,786

14.8%

44.4%

-111,319

-136,440

0

382,708

$14.37

Mississauga South

1,893,118

13.8%

14.4%

-43,004

-29,462

0

0

$16.15

City Centre

3,747,823

16.5%

16.2%

-65,631

-84,193

0

56,324

$16.57

Hwy 10 / Hwy 401

3,849,275

11.9%

41.9%

-29,613

11,905

36,199

689,594

$13.01

Meadowvale

4,041,272

15.0%

14.8%

164,415

79,861

0

159,761

$15.76

Brampton

1,277,281

27.7%

16.4%

15,733

137,171

0

75,000

$16.93

Oakville

2,832,177

16.5%

10.6%

-969

126,988

65,000

64,000

$17.51

Burlington

3,242,727

17.6%

12.9%

-27,746

-186,015

0

33,348

$16.05

151,434,615

9.4%

21.2%

-195,090

-322,426

903,699

6,702,069

$17.85

Midtown

North

West

2

GTA

Source: CBRE Limited Research, Q4 2013.


Toronto Office | MarketView

CENTRAL

Q4 2013

Table 1: Market Statistics

2

Submarket

Project

Developer

Expected
Completion

Size (SF)

% Pre-Leased

Mississauga Gateway Centre Phase II

HOOPP

146,863

Q1 2015

43%

ACC

Spectrum Square

HOOPP

128,788

Q1 2015

0%

Meadowvale

2455 Meadowpine Blvd

Dorsay Development Corp.

114,761

Q3 2014

0%

Vaughan

3100 Rutherford Rd

Lorwood Homes Incorporated.

65,000

Q2 2014

25%

Hwy 10/401

7020 Hurontario St

Kallo Developments

60,000

Q1 2015

0%

Hwy 10/401

Derrycrest Phase I

Kenaidan

47,000

Q2 2014

100%

Vaughan

9131 Keele Street

Melrose Developments

45,104

Q2 2014

0%

Hwy 10/401

Mississauga Gateway Centre Phase II

HOOPP

44,751

Q3 2014

0%

Burlington

1006 Skyview Dr

United Lands

33,348

Q3 2014

50%

Downtown East

Globe and Mail Centre

First Gulf Corporation

462,000

Q4 2016

39%


Hwy 10/401

Q4 2013

Table 2: Select Office Projects - Under Construction


Chart 1: Market Outlook
Absorption

New Supply

Vacancy

9%

2,000

6%

1,000

3%

0

0%

-1,000

Vacancy

12%

3,000
SF (000s)

4,000

-3%
Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014*

Q2 2014*

Q3 2014*

Q4 2014*

*FORECASTED
Source: CBRE Econometric Advisors

Chart 2: New Supply
Central
Suburban

1,200

SF (000s)

1,000

3

800
600
400

200
0
Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013


Downtown Toronto is currently in the midst of a construction
cycle that will add 5.9 million sq. ft. of space through 2017.
In Q4 2013 saw the commencement of this cycle with the
completion of MaRS Phase 2, adding 740,000 sq. ft. of new
supply to existing inventory and bringing current Downtown
space under construction down to 5.1 million sq. ft. In
addition to Downtown construction, three buildings totalling
163,699 sq. ft. were completed this quarter in the Suburban
market, bringing total quarterly GTA new supply to 903,699
sq. ft. These completions significantly impacted both
vacancy and absorption as they were delivered partiallyvacant, both increasing vacancy and contributing positively
to absorption. The largest impact was felt in the Downtown
North submarket, where the completion of MaRS Phase 2
contributed 5.2% to vacancy while also increasing
absorption by 337,920 sq. ft.

3

Central
Suburban

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013


14%
12%
10%
8%
6%
4%
2%
0%

Vacancy in the GTA increased by 70 basis points,
representing the highest single quarter vacancy increase in
four years and the highest vacancy rate since 2010.
Vacancy increased in both Central and Suburban markets,
rising by 90 basis points and 40 basis points, respectively.
The rise in vacancy is due to two major factors. First, the
903,699 sq. ft. of completions in Q4 2013 came online
partially-vacant. The second contributor to rising vacancy is
decreasing direct deal activity. In the Suburban market,
tenant activity is strong for renewals with fewer direct lease
deals done in Q4 2013. In the Central market, tenants have
begun showing a slowdown in activity primarily due to their
position within the expiry cycle. With many large tenants
having already completed their deals in anticipation of the
new builds, there is a shortage of large tenants on the
market.

Q4 2013

Chart 3: Vacancy Rates


Chart 4: Rental Rates
Central
Suburban

$25

$ psf

$20
$15
$10
$5
$0

Average asking rental rates increased by $0.32 to $17.85
per sq. ft., rising most significantly in Class A space. The
highest increase was felt in the Central market, where
average asking rental rates increased by $0.52 to $23.77
per sq. ft. Rental rates in the Central market were most
significantly affected by the completion of MaRS Phase 2,
which pushed rental rates up by $8.65 to $27.33 per sq. ft.
in the Downtown North submarket. Interestingly, even
though vacancy is on the rise, landlords in the Central
market have not yet softened on asking rates or concessions.
Consequently, net effective rents have remained stable but
are expected to soften in the coming quarters as landlords
adjust their expectations. Conversely, in the Suburban
market, average asking rental rates decreased by $0.20 to
$14.92 per sq. ft. , driven by rate decreases in both the
North and the West markets.

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

Chart 5: Net Absorption

600

Central
Suburban

SF (000s)

400

4

200
0
-200
-400
Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013



As vacancy rates continue to rise, absorption remains
negative for the third consecutive quarter. The Q4 2013
195,090 sq. ft. of negative absorption bring the net annual
figure to negative 322,426 sq. ft. This is the first year since
2003 where the GTA has posted negative absorption. This
negative figure would have been even lower had this
quarter’s partially-leased completions not been included in
the numbers. Quarterly absorption was negative in all GTA
markets, with the exception of Downtown. However, a large
contributor to positive absorption in the Downtown market is
the completion of MaRS Phase 2. As previously noted,
absorption figures do not necessarily paint a complete
picture of the health of a market. While vacancies seem to
be outpacing leasing, the GTA remains healthy in terms of
renewal activity, particularly in the Suburban market.

4

The Downtown market exhibited the single largest quarterly vacancy increase
since the Q3 2009. Vacancy rose by 80 basis points QoQ to end the year at
5.9%. While this is the highest vacancy in three years, it is nonetheless below
the 10-year average of 6.9%.

After fluctuating around 6.0% during the course of 2013, vacancy in the
Midtown market is back up to 2012 levels, ending the year at 7.4% and rising
by 130 basis points from Q3 2013.

Leasing activity varies by class. Renovated and Converted (RC) product
continues enjoying strong tenant demand. Conversely, vacancy in Class A space
is on the rise as demand for large blocks of space diminishes. Class A sublease
vacancy continues rising, up by 140 basis points QoQ to 26.2% of all vacancy.
We anticipate vacancy to continue rising in the coming quarters and 2014 to be
a muted year for large tenant deals.
Vacancy increased in all submarkets, with the exception of the Greater Core.
The largest vacancy increase occurred in the Downtown North submarket, due
primarily to the addition of 402,080 sq. ft. of vacant space at the newlycompleted MaRS Discovery District’s 740,000 sq. ft. Phase 2.
The Completion of MaRS Phase 2 in Q4 2013 signalled the commencement of
the current Downtown construction cycle. An additional 5.1 million sq. ft. are
expected to be completed through 2017.

This vacancy increase comes on the back of 193,321 sq. ft. of negative
absorption in Q4 2013. Absorption gains in the first half of 2013 were all but
erased by negative absorption in the second half of the year, brining net annual
absorption to a mere 10,161 sq. ft.
The largest vacancy increase was felt in the Eglinton and Yonge Submarket,
where vacancy rose by 310 basis points QoQ to end the year at 10.8%. The
two largest contributors to this rise in vacancy are the Thomas Cook sublease at
75 Eglinton Avenue E and a number of new vacancies at 477 Mount Pleasant
Road.


MIDTOWN MARKET

Q4 2013

DOWNTOWN MARKET

Leasing activity throughout the entire Midtown market remains confined to the
sub-10,000 sq. ft. deals. In the St. Clair and Yonge submarket, this is caused
by a shortage of large blocks of space. In the Bloor and Yonge and Eglinton
and Yonge submarkets, this is caused by a lack of large tenants on the market.
Consequently, vacancy is expected to remain flat in the coming quarters.

Select Downtown market transactions this quarter include:
• LinkedIn leased 37,000 sq. ft. at 250 Yonge Street
• Shepell fgi expanded by 32,000 sq. ft. at 800 Bay Street
• CNW Group leased 22,000 sq. ft. at 88 Queens Quay West

Select Midtown market transactions this quarter include:
• Crowe Soberman renewed 33,500 sq. ft. 2 St Clair Avenue East
• Thomas Hannam Medicine Professional Corporation leased 21,500 sq. ft. at
160 Bloor Street East
• UNICEF renewed 15,000 sq. ft. at 2200 Yonge Street

FINANCIAL CORE

DOWNTOWN WEST

For the fourth consecutive quarter, vacancy in the Financial Core Submarket
increased, up 40 basis points QoQ to 6.2% in Q4 2013.

Vacancy in the Downtown West submarket continues its upward trajectory, up
by 70 basis points QoQ to 6.5% in Q4 2013. Absorption is back in negative
territory after posting moderate gains in Q3 2013, down to negative 60,690
sq. ft. in Q4 2013.

This quarter’s 91,892 sq. ft. of negative absorption brought the net annual
absorption figure up to negative 419,816sq. ft. This is the first time the
Financial Core submarket posted negative annual absorption since 2008 and is
the highest amount of negative annual absorption since 2003.
Sublease vacancy as a percentage of total vacancy continues rising, up by 210
basis points to 27.7%. This figure is expected to increase further as futuredated available space becomes vacant in the coming quarters.
Leasing activity has slowed somewhat, but demand factors remain. Lease expiry
profiles continue to drive deal activity and tenants continue to look for office
space.
Net effective rents are holding firm, with landlords not sensing much downside
risk yet. As more space comes on the market in future quarters, landlords’ Net
Effective Rent expectations may moderate.
Select Financial Core transactions this quarter include:
• Sentry Investments renewed and expanded to 46,500 sq. ft. at 199 Bay
Street
• CIBC subleased 45,000 sq. ft. at 130 Adelaide Street West
• Power Corp leased 17,000 sq. ft. at 161 Bay Street

The largest contributor to Downtown West vacancy is 277 Front Street West,
where 112,985 sq. ft. of space has come on the market. This is former Royal
Bank of Canada space, which the Bank is vacating to relocate into 180
Wellington Street West and RBC WaterPark Place.
While overall vacancy is on the rise, vacancy in RC Class space decreased by 30
basis points since Q3 2013. The last two years have seen RC vacancy at
historical lows, which speaks to the attractiveness of this class of space. Few
available large blocks and heightened tenant demand will likely see this class
of space continue to enjoy low vacancy rates.
Class A vacancy is also on the decline, decreasing by over half from 7.3% to
3.1% QoQ. The completion of QRC West in 2015 will alleviate this supply
crunch by adding 285,581 sq. ft. to inventory.
Select Downtown West transactions this quarter include:
• Shopify leased 28,500 sq. ft. at 80-82 Spadina Avenue
• John Street Inc. renewed 21,500 sq. ft. at 172 John Street
• Workplace One Consulting Inc. leased 20,00 sq. ft. at 901 King Street West

5

The vacancy increase was accompanied by 216,406 sq. ft. of net negative
absorption for 2013. This increase was largely concentrated in the Toronto
North market, due primarily to the 100,158 sq. ft. Proctor & Gamble sublease
at 4711 Yonge Street.
Despite the vacancy increase, leasing activity remains strong in the Suburban
market, particularly in the West market, which enjoyed a number of large
leasing transactions in Q4 2013.
Three buildings totalling 163,699 sq. ft. were completed in Q4 2013– two in
the West market and one in the North market. In addition to these
completions, eight new buildings were announced this quarter. These
announcements will see an additional 685,615 sq. ft. of space completed over
the next two years.
Select Suburban market transactions this quarter include:
• Compass Group Canada leased 63,000 sq. ft. at 1 Prologis Boulevard,
Mississauga
• Worley Parsons leased 62,000 sq. ft. at 1004 Middlegate Road,
Mississauga
• MPAC leased 15,000 sq. ft. at 100 Via Renzo Drive, Richmond Hill

Activity in the North market has slowed somewhat since Q3 2013, with vacancy
rising by 120 basis points QoQ to end the year at 7.3%.
Vacancy rose most significantly in the North Yonge Corridor submarket, due
primarily to the 100,158 sq. ft. Procter & Gamble sublease at 4711 Yonge
Street. This space is the main contributor to sublease vacancy in the North
market, which rose by 125 basis points to 35.1% of all vacant space. This is the
highest sublease vacancy of all GTA markets.
191 Creditview Road was completed this quarter, adding 62,500 sq. ft. to
competitive inventory. Since the building was delivered fully-leased, it also
contributed 62,500 sq. ft. to absorption. Without it, absorption in the North
market would have been negative 141,597 sq. ft. instead of the negative
79,097 sq. ft. actually posted.


Vacancy in the Toronto Suburban market increased by 40 basis points to
13.1% in Q4 2013. This is the highest vacancy this market has experienced
since Q2 2005.

NORTH MARKET

Q4 2013

SUBURBAN MARKET

Average asking rental rates decreased by $0.90 to $17.49 per sq. ft. , dropping
most significantly in Class A space in the North Yonge Corridor. This is due
primarily to a $3.50 asking rent decrease at 36 York Mills Road.
Select North market transactions this quarter include:
• Mackenzie Health leased 6,500 sq. ft. at 7880 Keele Street, Vaughan
• Money Express leased 5,500 sq. ft. at 5075 Yonge Street, Toronto
• Shell leased 5,000 sq. ft. at 90 Sheppard Avenue East, Toronto

EAST MARKET

WEST MARKET

Vacancy in the East market continues inching upwards, rising by 40 basis points
QoQ to 12.4% in Q4 2013. This vacancy increases comes with 104,147 sq. ft. of
negative absorption, the majority of which occurred in Class A space.

Vacancy in the West market rose slightly, up by 10 basis points since Q3 2013
to end the year at 15.7%. Quarterly absorption dipped back into negative
territory, registering at negative 33,162 sq. ft. and erasing gains seen in Q3
2013.

While relocation deals still exist, tenant activity in the East market continues
being skewed more heavily towards renewals than relocations. Given the relative
lack of inter-submarket tenant migration activity, landlords are aggressive in
seeking new tenants.
Despite the relative shortage of relocations, net effective rents remain stable.
Relocation costs are prohibitively high, allowing landlords to extract higher net
effective rents on renewals.

Construction activity remains muted in the East market, with no space under
construction for the third consecutive quarter. A number of planned projects are
expected to break ground in the coming quarters, particularly in the Markham
North/Richmond Hill submarket.
Select East market transactions this quarter include:
• Scotiabank leased 81,000 sq. ft. at 300 Consilium Place, Scarborough
• RBC renewed 78,000 sq. ft. at 260 East Beaver Creek, Richmond Hill
• MPAC leased 15,000 sq. ft. at 100 Via Renzo Drive, Richmond Hill


Despite the rising vacancy, leasing activity is accelerating in the West market.
The West market saw the highest number of large deals over 100,000 sq. ft. of
all GTA markets. However, since many of these tenants were densifying and
consolidating their space, the excess space they gave up contributed to negative
absorption for the quarter.
The completion of 7205 Hurontario Street and 3430 Superior Court added a
total of 101,199 sq. ft. of new supply to the Toronto West market in Q4 2013,
bringing overall 2013 completions to 505,911 sq. ft.
Given the recent high levels of leasing activity coupled with new supply, we
anticipate the Toronto West market to continue to experience increasing leasing
velocity.
Select West market transactions this quarter include:
• Royal Bank of Canada renewed 800,000 sq. ft. at 6880 Financial Drive,
Mississauga
• Samsung Electronics Canada Inc. leased 125,000 sq. ft. at 2050 Derry Road
W, Mississauga
• Ericsson Canada leased 69,500 sq. ft. at 2425 Matheson Boulevard E,
Mississauga

6

Q4 2013

CONTACTS
For more information about this Toronto MarketView, please contact:
Toronto Research
Masha Dudelzak, MBA
Senior Research Analyst
CBRE Limited
145 King Street West
Suite 600
Toronto, Ontario M5H 1J8
t: +1 416 815 2316
e: masha.dudelzak@cbre.com

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Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research,
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Disclaimer
7

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do
not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your
responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by
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permission of the CBRE Global Chief Economist.


CANADIAN MARKET OUTLOOK 2014 

SELECT A
MARKET
YUKON
TER RITORY

NORTHWEST
TER RITORIES

NUN AV UT

BRITISH
COLUMBIA
A L B E R TA

EDMONTON
S A S K ATC H E WA N
M ANITOBA

VICTORIA

VANCOUVER

CALGARY

WINNIPEG

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Steady and stable may be the overall conjecture for Canada’s commercial real estate market
in 2014, but that’s not to say there won’t be dynamic elements. In addition to tremendous
development in many industrial markets across the country, pockets of retail and office
space are expected to record increased demand for space in the coming year. For the first
time in decades, multi-housing construction is on the rise and rental stock is growing in
various markets across the board.


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AL OVERVIEW

With Canada in the midst of a new development cycle, it’s safe to say most markets and
property types are responding to healthy demand by building a significant amount of
new commercial real estate. While the full impact of this new supply won’t be apparent
for several years, the numbers are already impressive with some 6.0 million SF of office
space coming into the market in 2014. In the meantime, a lack of volatility in the Canadian
economy coupled with steady job growth continues to keep Canada on the radar for new
capital investment.

5

THE PLACE
TO KEEP INV
Indications are that the U.S. Federal Reserve will begin to unwind monetary stimulus in
2014 and interest rates will rise. But Canada is expected to remain a hotspot for foreign
and local investors nonetheless. With REITs pulling back on purchases, their retreat has
private equity and pension funds clamouring to fill the void. This trend suggests that there
is more depth and resilience to the purchaser pool than was initially expected.

“It won’t become any easier
to secure prime commercial
real estate assets because
domestic pension funds are
increasing their allocation to
real estate.”
Peter Senst

President Canadian Capital Markets


NVESTING
Indications are that the U.S. Federal Reserve
will begin to unwind monetary stimulus in
2014 and interest rates will rise. But Canada
is expected to remain a hotspot for foreign
and local investors nonetheless. With REITs
pulling back on purchases, their retreat has
private equity and pension funds clamoring
to fill the void. This trend suggests that there
is more depth and resilience to the purchaser
pool than was initially expected.
“We’re seeing the big global sovereigns
trying to find a way to come into this country
because we don’t have the volatility of
other countries,” says Peter Senst, President
of Canadian Capital Markets at CBRE
Canada. “It won’t become any easier to
secure prime commercial real estate assets
because domestic pension funds are upping
their allocation to real estate.” He believes
the search for stable income producing
investments will continue to attract capital
throughout 2014. He also advises against
“writing off” the REITs just yet. “The biggest
and best will flourish,” he says. “But there’s

no doubt we’ll still be delivering REIT offerings
into the market.”
Upcoming infrastructure development
will also be a key factor in determining
future capital investment in many sectors
of the country—and where commercial
development will take place. The growing
trend towards urbanization will be dependent
on solid transportation links, while ongoing
expansion in Western Canada will rely on
future oil sand development.

7

David Montressor

Executive Vice President, National Apartment Group

Multi-housing assets will continue to be appealing to
investors, but as in previous years, a lack of product could
be a challenge. “There’s a real appetite for ‘centre ice’ and
quality Class B multi-residential properties,” says David
Montressor, CBRE Limited’s Executive Vice President,
National Apartment Group. This continued strong interest
is due to the stable, predictable returns the asset class
offers. Capital preservation with steady annual returns
and debt repayment continues to be the driving force
that attracts capital to multi-housing. “Going forward,
interest in building purpose built rental is expected to
increase due to the lack available quality properties.”
Montressor thinks that there’s little that could shake this
market in 2014 unless central banks lose control and
interest rates skyrocket. That being said, if rates spike,
there will be no place to hide and multi-housing would
continue to be the best dirty shirt in the laundry basket,
with low vacancies allowing for the ability to generate
cash flow while building equity through debt repayment.

“There’s a real appetite for ‘centre ice’
multi-residential properties.”


A RETAIL EV
“Never before in Canadian
retail history has the
department store segment
been the subject of so
much focus or been so
heavily contested.”
Tom Balkos

Senior Vice President, Director, Retail Services Group


VOLUTION
On the retail front, more and more U.S. and
European retailers are looking at Canada as
their next go-to destination. With high-end
U.S. retailers like Nordstrom and Saks Fifth
Avenue setting up shop in the next few years,
big-anchor indoor mall concepts continue to
garner significant attention from investors
and tenants. “Never before in Canadian retail
history has the department store segment
been the subject of so much focus or been so
heavily contested,” says Tom Balkos, Senior
Vice President and a Canadian Director of
the Retail Services Group.
With Loblaws buying Shoppers Drug Mart,
and Sobeys purchasing Safeway, sources of
new demand for retail space and portfolio
restructuring efforts are already underway.
The past year has also shown the success
of dominant centres in secondary markets,
while second-tier retailers in the same arenas
are having a harder time. With supply tight,
those looking to enter the Canadian market
are expected to come in smaller private label,
store-in-store formats or by creating mall
space with their own private brands and
under their own banners.

“With all the trading of large block retail
space we’re witnessing, now is a unique
period of time that only happens every 30
years,” says Balkos. As the U.S. economy
continues to pick up speed, however, it’s also
becoming a bigger competitor for retailer
expansion dollars than we’ve seen in the past
several years. While Balkos says retail space
in Canada is highly sought after, he points
to the possibility of higher interest rates as a
potential game changer. “Interest rates will
affect consumer confidence and while I think
it will be a consistent year it may not be one
of great retail sales growth,” he says.

1
1

MORE OFFICE
MORE EFFICIE
While a downtown office construction
cycle is underway, many office tenants
are reducing the size of their real estate
footprint and embracing new workplace
strategies. “These tenants are reducing
square footage per employee and
redesigning the workplace to drive
collaboration and productivity,” says
John O’Toole, Executive Vice President
and Executive Managing Director at CBRE
Limited. “Economics are clearly a primary
driver but it’s also about tenants making
better use of their physical environment
- doing more with less.”
With these new builds offering a whole
different set of attributes in terms of
performance, O’Toole says older buildings

2010


will eventually have to be adapted to meet
new workplace models. “Right now we’re
keeping an eye on the new supply and
the old as they both have their place, but
it’s really a wait-and-see environment in
the office space for the next year as new
projects are completed,” he says.
Whether there is too much office
construction for the demand, as some
critics suggest, remains to be seen. The
development boom in the office sector
reflects a calculated bet on future demand
for space, steep competition for tenants
and the fact that investors hope to reap
more benefits from new construction than
purchasing what is already built.

2013

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E TOWERS,
ENT TENANTS

the meantime, the industrial sector
going strong and is expected to stay
at way in many parts of the country
rough 2014. The lack of modern, high
iciency space will continue to support
w construction, however prohibitive
velopment fees in some municipalities
ll continue to prompt developers to
vest in old buildings rather than build
w.

recent resurgence in manufacturing in
e U.S., coupled with a weaker Canadian
llar, also puts Canadian exporters in
better position to compete; however,
r manufacturing sector still needs to
tool and reinvest to thrive in today’s
ra-competitive manufacturing market.

“Tenants are reducing
square footage
per employee and
redesigning the
workplace to drive
collaboration and
productivity.”

2017

John O’Toole

Executive Vice President and Executive Managing Director, Toronto

THE TECHNO


OLOGY TREND
The cumulative effect of technology on
all aspects of the real estate market is not
to be discounted. In the office sector, the
condensed employee footprint is indicative
of a more mobile workforce that is using
technology to make business functions
feasible from any location.
In the retail market, the rise of online
sales is negating the need for as many
storefronts, and is also enabling standard
retail centres to act as mini-warehouses to

store the products that are being shipped
cross-country. The industrial sector too is
feeling the technology tug as retailers ramp
up their online sales divisions and expand
their fulfillment centres.
Technology is capable of driving change in
all sectors of the economy, but more than
at any time in recent memory, commercial
real estate decisions will be impacted by
technological advancements and changing
business practices.
15

VANCOU

UOCNAV

UVER

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VANCOUVER
“When it comes to investment,
Vancouver remains a highly
liquid market compared to
any other city in Canada,
particularly in the urban core.”
Mark Renzoni
2014 MARKET OUTLOOK

President & CEO, CBRE Limited

R MARKET
If a robust investment market is indicative of
confidence in overall economic and leasing
fundamentals, then 2014 looks promising
for Vancouver.
The investment market continues to thrive
as demand for core real estate downtown
and quality property in key suburban
nodes persists from local and foreign
investors. “When it comes to investment,
Vancouver remains a highly liquid market
compared to any other city in Canada,” says
Mark Renzoni, President and CEO of CBRE

Limited in Canada. “The money that comes
here is betting on strong fundamentals and
appreciation.” Further, Vancouver is one of
the most expensive multi-residential markets
in North America, and this market still
maintains its strong appeal to foreign, private
and institutional buyers. There continues to
be a shortage of investable product across
all asset classes and Renzoni is optimistic that
we’ll see at least as many trades in 2014 as
we saw in 2013.

Vancouver Investment Volume (millions)
$4,500.0

sector and the trend is expected to continue
through 2014.

$4,000.0
$3,500.0
$3,000.0
$2,500.0
$2,000.0
$1,500.0
$1,000.0
$500.0
$2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
P
F

The industrial sector hit an encouraging
note toward the end of 2013 with a distinct
upward trend in leasing and sale velocity.
“Our forecasts are showing that industrial
demand is continuing to increase,” says
Renzoni, noting that 2014 has the potential
to be a strong industrial market, which will
further support the current development
cycle for 2014 through 2016.

Source: CBRE Limited, RealNet Canada

Office tower construction is at an all-time
high in Vancouver, especially downtown.
Pent-up demand for new office product has
resulted in pre-leased rates of 70%—and
demand for new office space is expected
to continue in 2014. On the flip side, the
recent lack of job growth and interprovincial
migration has been disappointing, which
has impacted the office market in the shortterm. There has been an uptick in subleases
coming onto the market from the resource

Construction in downtown Vancouver

Robson St. , Vancouver

The retail sector is also an area of strength
as expansion in existing shopping centres
and a handful of new projects is resulting
in strong leasing activity. With Nordstrom
coming into the market in 2015, Renzoni
says there is a sense of urgency for retailers
to position themselves in the centre of the
action. “There’s lots of excitement with new
projects and existing expansions, which
should result in a very positive market in the


higher traffic nodes in urban and suburban
areas,” he says. “These new stores act as a
catalyst for change and rejuvenation.” We
will see continued success for the higher-end
retail concepts.

Perimeter Road, which are all expected to
positively impact the retail and industrial
sectors.

Substantial changes to key parts of metro
Vancouver’s infrastructure, include the
Evergreen SkyTrain Line, the completion of
the Port Mann Bridge and the South Fraser

PROJECTS TO WATCH
THE EXCHANGE OFFICE TOWER
PACIFIC CENTRE OFFICE DEVELOPMENT

PARK ROYAL SHOPPING CENTRE EXPANSION
YVR AIRPORT LUXURY OUTLET CENTRE

SOUTHEAST FALSE CREEK NEIGHBOURHOOD

21

CALGARY

YRAGLAC

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CALGARY MARKET
“We’re 100% leased by the grand opening
of a mall. That speaks to the fact that
disposable incomes in Calgary continue to
outpace the national average.”
Greg Kwong

Executive Vice President & Regional Managing Director, Alberta
2014 MARKET OUTLOOK

“While the outlook for Calgary’s commercial
real estate market is looking relatively
stable, ‘hot spots’ in the retail, industrial
and suburban office markets should keep
things hopping throughout 2014,” says Greg
Kwong, Executive Vice President, Regional
Managing Director for CBRE Limited’s
Calgary operations.
Alberta’s largest city is in the midst of a
development cycle encompassing some 6.3
million SF and is expected to last for the next
three to five years. In the interim, however,
demand for office space is low and there is
little expectation for any significant tenant
moves in the downtown core for 2014.

On the multi-residential side, the
development of Seton Village is expected
to have a positive impact on the downtown
core, drawing a whole new population of
people who are choosing a more urban
lifestyle. “It will certainly change what is now
deemed to be a tired and undesireable area,”
says Kwong.

Despite ongoing issues involving the approval
of the Keystone XL Pipeline Project, and talk
of a pullback in the energy sector, Alberta’s
largest city is still attracting up to 30,000 new
residents a year. Kwong says the slowdown
in the oil patch is a challenge and layoffs
are a reality, but he is confident the market
will bounce back as it has in previous years.
“The market here is pretty resilient,” he says.
Calgary Population Change
50,000
40,000
30,000
20,000

A notable infrastructure project that is
expected to impact the market is the
southeast ring road expansion, a network
of freeways, interchanges and bridges. The
expansion of the airport that is currently
underway is also significant and will include
a host of new hotels as well as one of the
longest runways in the country.
The Calgary retail market continues to show
positive growth with low vacancy in both
urban and suburban areas. “We’re 100%
leased by the grand opening of a mall,”
says Kwong. “That speaks to the fact that
disposable incomes in Calgary continue to
outpace the national average.”

10,000
(10,000)
(20,000)

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Population Increase
International Migration

Natural Increase
Interprovincial Migration

InterCity Migration

Nordstrom will open its first store in Canada
in Calgary’s Chinook Centre this year. “There
are some other major U.S. retailers looking
at Calgary and I suspect they are going to
wait and see how Nordstrom does in its first

Source: Conference Board of Canada


year,” says Kwong. And where there are
major retailers like Nordstrom setting up
shop, Kwong says that distribution operations
are likely to follow. In fact, major players
are expected to continue to open large
distribution centres in Calgary. As a result,
the area’s industrial market is expected to
maintain stable rental rates in 2014.

any other municipality in Canada, the
government controls 80% of developable
land in Calgary, and they distribute it as they
see fit,” he says.
Interest from Canadian and U.S. investors
in a variety of commercial property types
should stay strong. Calgary is holding to its
reputation as a good place to do business.

If there was one ongoing challenge in
Calgary’s industrial market worth noting,
it would be inadequate land supply and
construction costs, says Kwong. “Unlike

PROJECTS TO WATCH
QUARRY PARK – SUBURBAN OFFICE PARK

EAST VILLAGE
CALGARY’S CHINOOK CENTRE
CENTURY DOWNS RACETRACK AND CASINO IN BALZAC

KEYSTONE XL AND NORTHERN GATEWAY PIPELINES
CALGARY INTERNATIONAL AIRPORT $2.0 BILLION AIRPORT
DEVELOPMENT PROGRAM
27

EDMONT

TNOMDE

TON

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EDMONTON M
“I’m expecting 2014 to be as
good a year as the one just
past for the industrial market,
which was one of our best
years ever.”
Dave Young

Executive Vice President & Managing Director, Edmonton

2014 MARKET OUTLOOK

MARKET
Amidst modest expectations for the overall
commercial real estate market in 2014,
Canada’s energy powerhouse looks set to
buck the trend. Even with some challenges
facing Canada’s energy sector, Edmonton’s
industrial market is booming, multi-housing
development is increasing and suburban
office continues to show impressive growth.
“Global demand for our resources is
insatiable,” says Dave Young, Executive Vice
President and Managing Director of CBRE
Limited’s Edmonton operations. “It’s not just
extraction of raw materials which still is an
important contributor to the economy but

there is so much technology being developed
here in our research and development
facilities that is making energy extraction
better—it is a huge industry in its own right.”
The energy companies have made extremely
large and long-term commitments to the
region which will bode well for the overall
Edmonton economy.

Construction costs and labour shortages
aside, Young is confident the industrial
market will drive the commercial market
forward for the foreseeable future. Massive
development projects underway in the
central and northern parts of the province
are also making way for the companies
that service them. “As Fort McMurray and
Northern Alberta grow, Edmonton grows, the
province grows, the country grows,” believes
Young. “I’m expecting 2014 to be as good
a year as the one just past for the industrial
market, which was one of our best years
ever.”
North American Industrial Markets Ranked by Rent
(per SF per annum)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Market
SAN JOSE
SAN DIEGO
EDMONTON
OTTAWA
CALGARY
VANCOUVER
ORANGE COUNTY
HALIFAX
LOS ANGELES
WINNIPEG
PHOENIX
SEATTLE
DENVER
NEW JERSEY NORTHERN
HOUSTON
MIAMI
MONTREAL
SACRAMENTO
TORONTO
BALTIMORE
MINNEAPOLIS/ST. PAUL
NEW JERSEY CENTRAL
INLAND EMPIRE
WATERLOO REGION
CLEVELAND

Net Asking Rent ($CAD)
13.85
13.66
10.79
8.53
8.10
7.96
8.42
7.43
7.72
6.79
7.02
6.80
6.49
6.26
6.09
5.96
5.17
5.36
5.04
5.32
5.28
5.18
4.85
4.53
4.80

With the prevalence of construction,
engineering and service companies setting
up offices in Edmonton, Young expects
growth in the suburban office market to stay
positive in 2014, particularly on the south side
of the city. “We’re continuing to see growth
and demand in our suburban markets and
we expect vacancy to decline even with the
addition of new product to the inventory,”
he says.
The downtown office sector is a little more
challenging, not for a lack of growth but
because of the potential for excess supply.
“There are two or three prospective towers
downtown that could be potential game
changers,” says Young. “With the advent of a
number of new towers, current vacancy levels
could rise above 14.0% based on our 10-year
average annual absorption of 128,000 SF.
The new space is needed as large users are
unable to expand but there will be an impact
to vacancy in the core.”
With the construction of Edmonton’s new
Roger’s Place (future home of the Edmonton
Oilers), and the mixed-use development
surrounding the arena set to begin in 2014,
the city is poised to keep growing. “The
arena district will change downtown and will
be a catalyst for other development,” says
Young. “The opportunity for downtown after
5 p.m. will be massive.” Other infrastructure
projects, such as the expansion of the city’s
LRT and various highway extensions, are also

Source: CBRE Limited


expected to improve efficiencies and create
more effective access to all areas of the city.
On the retail front, the market is solid and
Young says this growth is largely in tandem
with the growth in the industrial and
manufacturing industries. GDP growth of
3.2% and disposable income growing at
3.4% per annum in Edmonton makes for
a very exciting environment for retailers.
There are many new entrants to this market

including, high-end retailers like Tiffany
& Co and Samsung who have chosen
West Edmonton Mall, Canada’s largest
enclosed mall, for the first time as a viable
place to set up shop. “Edmonton is a very
affluent city and with all of the development
in the region, we are forcast to lead the
country in growth again in 2014. The retail
business in the city will be strong and as the
economy continues to grow, tenants will reap
the benefits,” says Young.

PROJECTS TO WATCH

KELLY-RAMSEY BUILDING

ROGERS PLACE

KEYSTONE XL AND NORTHERN GATEWAY PIPELINES
FORT MCMURRAY ENERGY PROJECTS

33

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EPINNIW

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WINNIPEG MARKE
“We’re not growing at an
exponential rate but we have
a stable economy and that’s
spilling into most elements of
the commercial market.”
Trevor Clay

Sales Associate, Winnipeg

2014 MARKET OUTLOOK

ET
With a broad range of development projects
underway and a population that keeps
growing, the outlook for Winnipeg in 2014
is looking positive. “We’re not growing at
an exponential rate but we have a stable
economy and that’s spilling into most
elements of the commercial market,” says
Trevor Clay, Sales Associate for CBRE
Limited’s Winnipeg operations.
As a distribution hub for central Canada,
Winnipeg’s industrial market is revealing a
stark divide between demand for distributionfocused space versus manufacturing facilities.
“There has been significant uptake of space

in the distribution end of the market, but the
older buildings and larger manufacturing
spaces are tougher to fill,” he says. “We’re
just not seeing large-scale deals done with
manufacturing-focused tenants.”

Automotive and distribution companies are
clearly driving the industrial sector. The recent
completion of CentrePort Way, a highway
in northeast Winnipeg is expected to be
a huge boon for trucking companies and
subsequent development in the CentrePort
area. “The plan for CentrePort is to have
that highway unlock large tracks of land for
industrial development and provide access
to rail transport as well,” he says.
North American Industrial Markets Ranked by
Availability Rate
Market

Availability Rate (%)

1

WINNIPEG

3.9

2

TORONTO

4.6

3

EDMONTON

4.7

4

ORANGE COUNTY

5.3

5

WATERLOO REGION

6.2

6

LOS ANGELES

6.2

7

HALIFAX

6.3

8

VANCOUVER

6.4

9

OTTAWA

6.5

10 DENVER

7.0

12 CALGARY

7.1

13 CINCINNATI

7.2

14 CLEVELAND

7.2

15 INLAND EMPIRE

7.6

16 MIAMI

7.8

17 MONTREAL

7.9

18 HOUSTON

8.2

19 CHICAGO

8.4

20 INDIANAPOLIS

8.5

21 PORTLAND

8.5

22 MILWAUKEE

8.6

23 COLUMBUS

8.7

24 SEATTLE

8.7

25 NEW JERSEY NORTHERN

9.5

Downtown, the $180.0 million expansion
of the RBC Convention Centre is slated
for completion in 2016 and is expected to
completely transform the southern portion of
the city centre. “With our airport completed
and our football stadium now ready, I think
the convention centre is the most substantial
public project underway in Winnipeg by far,”
says Clay.

6.8

11 MINNEAPOLIS/ST. PAUL

The primary drivers for the office sector are
less clear. “There’s really no one industry that
I would tag as being the next big thing for
Winnipeg on the office side,” says Clay. “It’s
basically a tenant shuffle from downtown
and back instead of new players coming into
the market.” Demand for Class A property
continues to be high with little vacancy,
whereas dwindling demand for other classes
is resulting in higher vacancy rates on the
lower end.


In terms of multi-housing, vacancy is
increasing slightly in the rental market due
to new supply. “As a lot of the older product
is renovated and rents are pushed up, this
has justified new construction,” says Clay.
“We’ve had a lot of exciting projects come
to Winnipeg in the last while as a result.”
With commercial property ownership
concentrated in the hands of a small number
of local owners, Clay says larger players have
little chance to break into the multi-housing
arena. “For now, interest rates are still at


attractive levels and there is lots of local
money looking for opportunities,” he says.
The foray of major retail anchors like IKEA
and Cabelas into Winnipeg has been a
positive force for the retail sector as a whole.
“The IKEA project at Seasons of Tuxedo has
attracted the attention of a lot of retailers
that hadn’t previously considered Winnipeg,”

says Clay. With the next closest IKEA location
some seven hours away in Minneapolis, Clay
says the furniture giant is luring significant
numbers of American as well as Canadian
shoppers. Polo Park, the city’s largest
enclosed mall, continues to draw significant
interest from major retailers as well.

PROJECTS TO WATCH
SEASONS OF TUXEDO
RBC CONVENTION CENTRE

CENTREPORT

39

LONDON
KITCHEN
WATERLO

OLRETAW

N&
NEROO

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LONDON &
KITCHENERWATERLOO REGION
“In this mature market, I see opportunity
ahead. No longer do I foresee anything that
could be described as bleak.”
Peter Whatmore

Senior Vice President & Executive Director, Southwestern Ontario

2014 MARKET OUTLOOK

N

When it comes to Southwestern Ontario’s
commercial real estate outlook for 2014,
it is a tale of two regions with very diverse
prospects, says Peter Whatmore, Senior
Vice-President and Executive Director of
CBRE Limited’s Southwestern Ontario
division.
In the Kitchener and Waterloo areas,
expectations are high that 2014 will be an
active and robust year. Despite ongoing
issues around one of the area’s biggest
technology companies, consolidation of
the tech sector is leading to growth in
other areas says Whatmore, noting that
it’s not a ‘gloom and doom’ scenario
for the region by any means. “This is
not a one-horse town and the reality
of the tech sector here is that we have

30,000 employees in 800 companies,”
he says. “In this mature market, I see
opportunity ahead not anything that
could be described as bleak.”
Urban growth in the Kitchener and
Waterloo area has been significant in
terms of multi-residential and office
developments, which is being largely
driven by the tech sector and is expected
to continue into 2014. In fact, there is an
anticipated 400,000 SF of office space
to be delivered in the next two to three
years.

In the industrial sector, growth of the
distribution market west of the Greater
Toronto Area has been positive and continues
to look promising for the coming year. A new
light rail transit system in the works from
north Waterloo to south Kitchener is also
anticipated to have a big impact on future
growth in Southwestern Ontario. “Wherever
there is going to be a transportation hub
there is the desire to acquire sites for future
high density development,” says Whatmore.

On a brighter note, with an abundance
of prime industrial space being added to
this sector, he says the future looks more
promising for the London area than it has in
a while. Whatmore points to the automotive
sector, which is the strongest it has been since
2007, as an example. “Today everybody
is at capacity, even if you look down the
road to Windsor,” he says. “So conditions
are certainly improving, but we still have
challenges in the region.”

Whereas investors are looking at KitchenerWaterloo as an area they can place bets on
the future, Whatmore says they are viewing
London with more trepidation. Plant closings
and unemployment will continue to impact
this market in 2014. “When the plants stop
closing and people stop losing their jobs
by the thousands, that’s when the stability
will set in,” says Whatmore. Right-to-Work
legislation in the U.S. also poses challenges
from a competitive standpoint across the
region. “We can’t ignore it and eventually
we’re going to confront this or we won’t be
cost-competitive.”

Following Kitchener’s lead, academic
institutions like Fanshawe College are
acquiring buildings in the core, which is
expected to bode well for urban growth. High
office vacancy rates in London’s core can be
attributed to several large retrofits, including
the conversion of the Citi Plaza shopping mall
into office space, but vacancies are expected
to improve over the medium term. “It’s like
new developments are being completed
when demand isn’t all that robust,” says
Whatmore.

Unemployment Rate
Canada

London continues to experience solid
demand from retailers. This largely stems
from ongoing residential development in the
area.

Ontario
Waterloo Region
London
0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Source: Statistics Canada, December 2013


The Tannery

PROJECTS TO WATCH

HANLON CREEK BUSINESS PARK

NEW INTERNATIONAL TRADE CROSSING BRIDGE
BETWEEN WINDSOR AND DETROIT
401 CORRIDOR ACCESS IMPROVEMENTS IN LONDON

KITCHENER/WATERLOO

KITCHENER – WATERLOO – CAMBRIDGE RAPID TRANSIT

45

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TORONTO MA
“We don’t know what business
sector will emerge to dominate
the market but we certainly see
a steady increase in demand
over the next five years as the
economy expands.”
John O’Toole

Executive Vice President & Managing Director, Toronto
2014 MARKET OUTLOOK

ARKET
It’s no secret that downtown Toronto is
experiencing the largest office construction
boom since the early 1990s. While
anticipation mounts, the full impact of this
building bonanza won’t be realized for
several years yet.
In the meantime, office sublet vacancy has
risen steadily and is expected to continue
increasing as the new buildings are
completed and tenants relocate into them.
With technology advancements and better
workplace strategies, many office tenants
are reducing their space per employee
and frequently require less space when

they relocate. “This is not a unique trend
to Toronto. We’re seeing this all over the
industrialized world,” says John O’Toole,
Executive Vice President and Executive
Managing Director at CBRE Limited. “Tenants
are trying to get better performance out of
their people and their buildings through
better space optimization.”

While many large office tenants have already
completed their renewal or relocation deals,
sources of demand are not yet fully depleted.
For one, small office tenants have typically
been a steady source of demand for Class
A downtown properties and this should
remain constant through 2014. There are
also those tenants with expiring leases who
are waiting on the completion of new builds
before making their real estate decisions.

New Build Pre-lease Activity

Million SF Leased

2009
10 Tenants Took an additional 764,000 SF of total space (31%)

3.2

2.4

Million SF Leased

Leasing

Giving Back

2014

trend for tenants moving downtown has
already begun and the potential for U.S.
companies moving into Toronto, and other
Canadian industries needing more space as
they grow, should not be underestimated. But
landlords haven’t reduced rents or provided
any notable concessions and aren’t expected
to do so, at least for the first part of 2014.
“The city has come a long way over the last
few years in terms of multi-use buildings and
amenities.”
With retail construction on the rise (Toronto
represents more than 50% of the total retail
space under construction across the country),
the Greater Toronto Area (GTA) continues to
rank in the top tier of most desirable locations
for foreign and domestic retailers. While
demand is high, large blocks of available
space remain a rare commodity.

15 Tenants Giving back 498,000 SF of total space (15%)

2.7
Leasing

3.3
Giving Back


With many large tenants having already
completed their deals, there is some
uncertainty as to where new sources of
demand will come from. “We don’t know
what business sector will emerge to dominate
the market but we certainly see a steady
increase in demand over the next five years
as the economy expands,” says O’Toole. The

Infrastructure developments like the Union
Station revitalization and Metrolinx bode
well for all sectors. For the industrial sector,
Metrolinx will have the single largest impact
on the way the GTA functions as it creates
more routes for the transportation of goods,”
says CBRE Limited’s Senior Vice President &
Managing Director John Haire.
From an investment point of view, he says
the Region of Durham has become an
unexpected hotspot for manufacturing and
the inevitable retail and residential growth
that is sure to follow. “We’ve seen a real


resurgence in land sales and that bodes well
for the east side of the GTA,” he says.
Vaughan and Mississauga are other suburban
industrial nodes that will continue to perform
well not only because of the available
industrial space in these municipalities, but
also due to their pro-business mentality.
However, all municipalities face development
barriers as Haire points to prohibitive
developmental charges that are prompting
developers to invest in existing older buildings
rather than building new.

Although availability is below 5% in the
industrial sector, Haire says landlords are
also struggling. “Rental rates have to increase
to the level that would make it economically
viable for landlords to build.”

PROJECTS TO WATCH
1 YORK, 100 ADELAIDE (ERNST & YOUNG TOWER),
BAY ADELAIDE CENTRE EAST AND RBC WATERPARK PLACE
THE BUTTONVILLE REDEVELOPMENT

WEST DON LANDS

UNION/SPADINA

METROLINX THE BIG MOVE (SEVERAL PROJECTS)
UNION STATION REVITALIZATION
51

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OTTAWA MAR
“A lot of U.S. retailers are
establishing themselves in
Ottawa before testing larger
markets like Montreal.”
Greg Clark

Vice President & Managing Director, Ottawa
2014 MARKET OUTLOOK

RKET
With the public sector continuing to relocate
some of its operations to the suburbs and
loosen their grip on the downtown market,
Ottawa’s office market continues to feel
the effects. “We’re certainly softening in
the core and while it won’t be catastrophic,
the impact will be most pronounced in the
Class B and C properties in 2014,” says Greg
Clark, Vice-President, Managing Director of
CBRE Limited’s operations in the National
Capital Region. “We’re in a tenant’s market
for the first time in 15 years.”

Ottawa Downtown Vacancy Rate
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013


While the private sector is leading the
way in terms of office space efficiency, the
public sector is also making the shift by
implementing the Government of Canada
Workplace 2.0 Fit-up Standards and reducing
office space per government employee.
Clark says growth in private sector and its
corresponding demand for office space
in downtown Ottawa has been minimal.
However, some deals are still occurring
and, while several large companies are
relocating offices in the core, many are
simply recalibrating to make better use of
space. “Some of these companies have been
captive audiences just waiting for available
space but they’re not increasing their square
footage,” says Clark. Demand for condos
in the core has also been shrinking over the
past year.
In terms of investment, Clark expects the
appetite for Class A product to stay strong
despite the current softening in the market.

“I think that everyone believes that once
the budget gets nailed down, the federal
government will come back and bolster the
market,” he says.
Ottawa is constantly undergoing
infrastructure updates, but Clark says it’s
the $2.13 billion light rail transit now under
construction that has the most potential to
change where the future growth of the city
will occur. “Ottawa is currently a bus city,
but I see intensification and the creation of
mixed-use development around those LRT
stations,” he says. Highway 417, which is one
of Ottawa’s major highways, is also being
widened to ease traffic flow.
As a smaller market, Ottawa’s industrial
sector is expected to stay relatively stable
for the coming year. Ottawa’s industrial
inventory is aging, but continues to boast
some of the highest rental rates in the
country because of limited stock and


limited development. Pockets of space are
becoming available outside the greenbelt;
however, demand for this newer product is
still relatively low. “There are a lot of people
who would say Ottawa is suffering because it
doesn’t have an ample supply of strategically
located employment land,” says Clark.
The retail sector has proven solid over the
last while, and Clark says we can expect
that trend to continue in 2014. “A lot of U.S.
retailers are establishing themselves in

Ottawa before testing larger markets like
Montreal,” he says. The new Tanger Outlet
Mall, set to open in Kanata in 2014, is an
upscale project that has lured big name
retailers like Brooks Brothers and Nike.
Furthermore, Nordstrom will be launching
its Ottawa location in the Rideau Centre,
downtown, in early 2015. “It’s no longer just
Montreal that is the fashion destination in
the region,” says Clark.

PROJECTS TO WATCH

150 ELGIN

OTTAWA

OTTAWA LIGHT RAIL TRANSIT SYSTEM

TANGER OUTLET MALL/KANATA

57

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MONTREAL MA
“Montreal is committed to a number of
investments in infrastructure which are
expected to improve efficiencies and
continue to bring the population downtown
as these projects progress.”
Alexandre Sieber

Senior Vice President & Senior Managing Director, Quebec
2014 MARKET OUTLOOK

ARKET
Moderate growth across all real estate sectors
should result in an overall stable market for
Montreal in 2014.
With a number of large buildings trading
hands in 2013, and several office towers now
under construction, activity in the office sector
is expected to be modest over the coming
year. As in other Canadian centres, office
footprints are decreasing in the downtown
core as companies downsize and seek
alternate space elsewhere. The market is
watching closely as the volume of sublet
space approaches its highest peak since the

recession. However, downtown sublet space
as a percentage of overall vacant space, at
22.2% in Montreal, remains just below the
downtown national average of 23.5%.

Montreal Percentage of
Vacant Space for Sublet

30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Montreal Downtown All Classes

National Downtown All Classes


In the meantime, areas like midtown Montreal
are gaining momentum as “companies are
getting wiser about space utilization and
efficiency gains are becoming more and
more part of the strategic decisions,” says
Alexandre Sieber, Senior Vice-President and
Senior Managing Director of CBRE’s Quebec
operations. “If I’m a bank with seven floors,
do I need my back-office downtown or can I
relocate it to midtown?—that’s the question
tenants are considering,” says Sieber. On the
other hand, demand for downtown office
space is coming from new sources, such as
national and International banks, who are
setting up operations or coming back to the
core because they see it as one of the few
places left where they can still grow and take
market share from local players. He also
points to large tenants seeking to move from
older buildings to new generation space as
a trend that should continue in the coming
year.

As home to the second-largest aeronautic
industry in the world, Sieber says logistics and
transportation related spin-off companies
are finding a home in Montreal. He believes
IT outsourcing businesses and the gaming
industry, which has almost 100 companies
operating in the province, are other sources
of potential growth. With several large
transportation projects in the works, including
the reconstruction of the Champlain Bridge
and improvements to several major highway
access points, employment is on track to
keep rising.
In terms of research and development, the
fact that the area boasts four universities
and two mega hospitals close to completion
is another selling point for new business.
“These are all positives for our city,” says
Sieber. “Montreal is committed to a number
of investments in infrastructure which are
expected to improve efficiencies and continue
to bring the population downtown as these
projects progress.”
The retail and industrial sectors are expected
to remain stable on the back of moderated
growth in the Greater Montreal Area (GMA)
economy and ongoing employment gains.
Leasing activity is looking positive for the
industrial sector, but an aging building stock
is an ongoing issue.
While multi-family construction slowed in
2013, strong international migration has kept


the population growing and the recent condo
boom is expected to continue bringing new
people, investment and energy to downtown
Montreal.
Beyond quality product, Sieber says tenants
are also looking for solid leasing options. “It’s
no longer a price per pound mentality, but
whether there are viable long-term leasing
options available to them,” he says.

A number of negative factors have created
some headwinds in the GMA economy
generating sub-par growth (corruption
allegations, challenged economy worldwide,
tax modifications are a few examples).
With the Charbonneau Commission well
underway, stronger growth expected in the
U.S., increased manufacturing and exports,
the hope is the market will rebound in 2014
and surprise to the upside.

PROJECTS TO WATCH
NEW DOWNTOWN TOWER ANNOUNCEMENTS:
TOUR AIMIA, DELOITTE TOWER AND L’AVENUE TOWER

CHAMPLAIN BRIDGE
TWO MEGA HOSPITALS
TURCOT INTERCHANGE

GRIFFINTOWN
MONTREAL PREMIUM OUTLETS
63

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HALIFAX MARKE
“To move the downtown office
sector back into balance is going to
take years, it starts with more urban
residential density.”
Robert Mussett

Senior Vice President & Senior Managing Director, Halifax
2014 MARKET OUTLOOK

ET
Tightening vacancy in downtown office space
may be the norm in many major Canadian
markets, but Halifax is one metropolitan
area where the suburban office market
continues to hold more appeal than the more
established downtown core.
In fact, Robert Mussett, Senior Vice President
and Senior Managing Director of CBRE for
Atlantic Canada, says the suburban office

market is significantly outperforming the
urban one—and it is expected to stay that
way for a while. It is no surprise then that the
urban vacancy rate is expected to remain
high for the foreseeable future as well. “We
are not a head office market so the desire
or need to be clustered in the downtown
core is not as great as it is for other cities in
Canada,” he says.

Downtown vs. Suburban Class A Rents
(Halifax vs. National)
25.68

18.14

17.37

16.68

Downtown

Suburban

Halifax

Downtown

Suburban

National


The decades long increase in residential
suburban development also means having
offices in the suburbs is more conducive
to employee satisfaction. “Employee
recruitment and retention is important to
all users, and in many cases staff are saying
‘we can park for free and get there faster’ in
the suburbs,” says Mussett. That’s not to say
the city isn’t investing in the downtown core.
A new multi-sports facility is generating lots
of buzz, as are some large multi-residential
developments and proposed office towers.
“People like downtown and it’s a lively place,
but to move the downtown office sector back
into balance is going to take years, it starts
with more residential density,” he says.

On the plus side, employment opportunities
in the area and several large-scale projects
on the horizon, point to a potentially faster
growing urban housing market, which
should help spur office sector growth. As
the economic hub of Nova Scotia and
Atlantic Canada, job creation in Halifax is
looking better than in many other parts of
the country. With a breadth of institutions
and a large public sector that includes one
of the largest RCMP facilities in the country,
infrastructure investments are ongoing, albeit
more slowly due to recent fiscal pressures.
Projects such as The Bedford Waterfront
Development and government shipping
contract are expected to generate thousands
of future jobs. With the Deep Panuke offshore
natural gas field almost at full production,
the Gross Domestic Product (GDP) is forecast
to grow from 1.1% in 2013 to 2.9% in 2014.
Shell and BP have committed some $2.0
billion to oil exploration and drilling activities
starting in 2014, which in turn could result
in some demand for office space locally as
companies service these projects.
As a renter’s market primarily, with relatively
high levels of discretionary income, Halifax’s
retail sector continues to reap the benefits.
Mussett says, by and large, the retailers
do well because shoppers don’t have big
mortgages and therefore more disposable
income to draw from. With retail density
(SF per person) exceeding the Canadian


average, he expects the development of
large box retail centres is coming to an end
and will be replaced with small-box in-fill
opportunities.
The slowdown of REIT purchasing activity
in mid-2013 had a more dramatic effect in
Atlantic Canada than in other parts of the

country. “In smaller markets like ours, we are
very susceptible in that we are the first ones
to feel the pullback in investment by the REITs
and the last to feel the positive reactions,”
says Mussett. “However, we expect REITs will
be more active in 2014 as the outlook is for
continued rate stability.”

PROJECTS TO WATCH
TD CENTRE EXPANSION, NOVA CENTRE AND
WATERSIDE CENTRE
WEST BEDFORD SUBURBAN OFFICE

SHELL AND BP OFFSHORE OIL EXPLORATION

DARTMOUTH CROSSING
DOWNTOWN STREET FRONT RETAIL

69


MARKET


STATISTICS

 MARKET COMMENTARY

CANADA

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

6.1%

7.8%

8.4%

$25.28

$25.68

$26.73

Absorption (SF in millions)

2.47

(3.20)

2.60

Sale Price (psf)

New Supply (SF in millions)

2.43

0.88

4.48

Under Construction (SF in millions)

9.22

14.05

11.12

Class A Net Rental Rate (psf)

SUBURBAN

2012

2013

2014F

6.1%

5.8%

5.6%

$5.59

$6.00

$6.04

$97.34

$105.82

$108.61


19.16

19.86

16.52


15.38

16.68

13.38


Vacancy Rate

YoY

15.24

12.72

10.95

2012

2013F

2014F

Availability Rate
Net Rental Rate (psf)

2012

2013

2014F

11.4%

12.1%

13.1%

$17.68

$17.37

$17.77


1.74

1.53

1.03

TRANSACTIONS


3.23

3.31

3.46

Office

$9,284

$5,574

$5,513


8.72

7.40

5.11

Industrial

$5,058

$5,856

$5,647

ICI Land

$4,350

$3,891

$4,221

Retail

$4,931

$5,441

$4,821

$6,023

$4,293

$4,075

YoY

Vacancy Rate

OVERALL

YoY

INVESTMENT

2012

2013

2014F

8.4%

9.7%

10.8%

Multi-housing

$20.80

$21.00

$21.75

Hotel

$916

$1,781

$670


4.22

(1.68)

3.63

Total

$30,562

$26,836

$24,947


5.65

4.19

7.94


17.94

21.45

16.24

Vacancy Rate

YoY

(in $millions)


YoY


MARKET STATISTICS

VANCOUVER

OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

4.2%

6.1%

7.0%

$34.66

$33.12

$34.78

(0.16)

(0.43)

(0.06)

4.50-5.25

4.50-5.25

4.50-5.25


0.01

0.02

0.15

Class A&B Cap Rate (%)


1.46

1.68

1.91

Class A Cap Rate (%)

SUBURBAN

2012

2013

2014F

Vacancy Rate

12.2%

11.5%
$19.97

0.47

0.15

5.75-6.25

5.75-6.50

0.43

0.09

2.16

1.40

6.2%

$7.60

$7.96

$8.36

$179.00

$192.00

$195.00

3.72

2.43

1.62

5.50-6.25

5.25-6.25

5.25-6.25


2.56

2.31

1.45

1.99

2.28

2.08

2012

2013

2014F

1.8%

2.1%

2.2%

3.50-5.00

3.50-5.00

3.50-5.00


0.80


6.4%

Sale Price (psf)

5.75-6.50


6.6%


0.45

Class A & B Cap Rate (%)

2014F

$20.97


2013

Availability Rate

12.4%

$20.78

2012


Vacancy Rate

YoY

YoY

0.60


YoY

MULTI-HOUSING

Overall Vacancy Rate**
Apartment Cap Rate (%)

YoY

**Canada Mortgage and Housing Corporation

INVESTMENT
2012

2013F

2014F

$1,015

$482

$408

Industrial

$789

$711

$907

0.38

ICI Land

$607

$593

$843

0.11

0.95

Retail

$793

$1,347

$730

3.08

2.51

Multi-housing

$815

$475

$308

Hotel

$79

$141

$54

Total

OVERALL

$4,097

$3,747

$3,249

2012

2013

2014F

8.1%

8.8%

9.8%

$22.49

$22.79

$24.13


0.31

(0.28)


0.45


3.62

Vacancy Rate

YoY

Office

RETAIL
2012
Retail Sales (YoY)*
Neighbourhood Cap Rate (%)

2013

2014F

0.4%

4.4%
5.50-6.00

(in $millions)

YoY

3.7%

5.50-6.00

TRANSACTIONS

YoY

5.75-6.25

* Conference Board of Canada

73


CALGARY

MARKET STATISTICS
OFFICE

INDUSTRIAL
2012

2013

2014F

4.9%

7.1%

6.4%

$8.05

$8.10

$8.15

$150.00

$175.00

$180.00

3.58

0.28

2.59

5.50-7.00

5.50-6.75

5.50-6.75


3.82

3.09

1.90


DOWNTOWN

3.33

1.55

1.50

2012

2013

2014F

1.3%

0.8%

1.2%

4.50-6.25

3.50-5.25

4.00-5.25

2012

2013

2014F

5.0%

9.1%

9.5%

$40.58

$36.76

$37.25

2.06

(1.60)

0.61

5.00-6.25

5.00-6.00

5.50-6.25


1.90

0.00

0.84



1.66

4.67

3.83

Vacancy Rate

SUBURBAN

2012

2013

2014F

Vacancy Rate

10.8%

11.0%
$24.51

0.37

0.78

5.75-7.50

5.75-7.00

0.77

0.94

0.34


1.82

1.63

1.29

2012

2013

2014F

7.0%

9.8%

10.1%

$30.38

$30.32

$31.13


2.43

(0.82)

0.89


2.67

0.94

1.18


3.48

6.30


5.75-7.00


Sale Price (psf)

0.27



$25.00


Availability Rate

11.1%

$24.30

YoY

5.12


YoY

MULTI-HOUSING


INVESTMENT



2014F

0.3%

Retail Sales (YoY)*

2013
4.2%
5.50-6.25

2014F

$1,973

$1,148

$750

$626

$674

$750

ICI Land

$661

$368

$450

Retail

$733

$129

$225

Multi-housing

$486

$227

$300

$108

$293

$150

$4,587

$2,839

$2,625

4.8%

5.50-6.50

TRANSACTIONS
Office

RETAIL
2012

2013F

Industrial

YoY

2012

Total

Vacancy Rate

YoY


Hotel

OVERALL

YoY

YoY

5.75-6.25



(in $millions)

YoY


EDMONTON

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

8.3%

9.7%

10.4%

$24.54

$24.28

$24.50

0.25

(0.21)

0.13

5.50-7.00

5.25-7.25

5.25-7.25


0.00

0.00

0.25



0.25

0.25

0.60


SUBURBAN

2012

2013

2014F

Vacancy Rate

11.5%

11.8%

$19.91

$21.27

0.39

0.33

6.25-7.25

6.25-7.25

0.26

0.43

1.07

0.28

3.2%

$9.88

$10.79

$10.85

$133.33

$144.21

$145.00

2.39

4.33

3.68

5.50-7.25

5.50-7.00

5.50-7.00


3.35

4.48

2.28

1.66

2.28

1.67

2012

2013

2014F

1.7%

1.0%

1.3%

4.00-6.25

4.50-6.25

4.50-6.25


0.44


4.7%

Sale Price (psf)

6.25-7.25


4.7%


0.25


2014F

$21.00


2013

Availability Rate

12.9%


2012


Vacancy Rate

YoY

YoY

YoY

0.56

MULTI-HOUSING


YoY


INVESTMENT
2012

2013F

2014F

Office

$380

$385

$250

$23.61

Industrial

$324

$398

$330

0.12

0.38

ICI Land

$761

$1,463

$1,000

0.26

0.43

0.69

Retail

$570

$310

$250

1.32

0.53

1.16

Multi-housing

$122

$348

$300

Hotel

$159

$155

$50

Total

OVERALL

$2,315

$3,060

$2,180

2012

2013

2014F

9.5%

10.5%

11.4%

$23.72

$23.67


0.63


Vacancy Rate

YoY

RETAIL
2012
Retail Sales (YoY)*

2013

2014F

1.2%

4.8%
5.75-6.25

(in $millions)

YoY

4.5%

5.75-6.50

TRANSACTIONS

YoY

5.75-6.25


75


WINNIPEG

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

9.7%

10.8%

10.6%

Availability Rate

$16.06

$15.81

$16.31


(0.16)

(0.10)

0.09

6.00-7.50

6.00-7.50

6.00-7.50


0.00

0.00

0.08



0.08

0.08

0.04


SUBURBAN

2012

2013

2014F

Vacancy Rate

12.7%

14.1%
$12.37

0.19

0.15

7.00-8.00

7.00-8.00

0.10

0.21

0.21

0.07

2012

2013

2014F

Vacancy Rate

10.4%

11.6%
$15.81

0.03

0.05

0.10

0.21

0.29

0.15

2013

2014F

-1.0%

3.7%
6.50-7.00

0.27

0.03

0.20

6.50-7.50

6.50-7.50

6.50-7.50

0.24

0.42

0.23

0.37

0.13

0.10

2012

2013

2014F

1.7%

2.0%

2.2%

5.00-6.00

5.00-6.00

5.00-6.00

2.5%

6.50-7.50

$95.00

0.08

2012

$91.10

0.22


$69.25

0.27


$6.89

$16.31


$6.79

11.0%

$16.06

$6.58

0.04

OVERALL

4.1%

0.14


4.0%


7.00-8.00


3.5%


0.18


2014F

$12.41


2013

Sale Price (psf)

12.0%

$12.50

2012


Vacancy Rate

YoY

6.50-7.00

All Class Net Rental Rate (psf)


YoY

MULTI-HOUSING



YoY


YoY

RETAIL

Retail Sales (YoY)*

YoY

YoY




LONDON

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

Vacancy Rate

14.3%

16.4%

16.2%


$13.61

$13.36

$13.40

0.08

(0.06)

0.01

n/a

7.00-7.50

7.00-7.50


0.00

0.00

0.00



0.00

0.00

0.00


SUBURBAN

2012

2013

2014F

11.6%

12.2%
$12.20

0.00

0.01

n/a

7.50-8.50

0.00

0.02

0.04

0.01

2012

2013

2014F

Vacancy Rate

13.8%

15.6%

$13.61

$13.36


0.09


$4.03

$4.00

$57.30

$47.55

$50.00

0.81

1.27

0.24

n/a

8.25-9.00

8.25-9.00


0.35

0.35

0.13

0.36

0.08

0.25

2012

15.1%


$3.91

2013

2014F

3.9%

3.7%

3.3%

n/a

5.00-7.25

5.00-7.25


0.02

OVERALL

12.5%

0.01


12.8%

Sale Price (psf)

7.50-8.50


13.0%


0.03


2014F

$12.50


2013

Availability Rate

10.7%

$12.27

2012



YoY

Vacancy Rate
All Class Net Rental Rate (psf)

YoY

YoY

MULTI-HOUSING


YoY


INVESTMENT
2012

2013F

2014F

Office

$50

$12

$6

$13.40

Industrial

$11

$31

$22

(0.05)

0.04

ICI Land

$112

$6

$40

0.00

0.02

0.01

Retail

$62

$39

$22

0.04

0.01

0.02

Multi-housing

$272

$110

$30

Hotel

$55

$27

$20

Total

$562

$225

$140

YoY

RETAIL
2012

2013

2014F

Retail Sales (YoY)*

n/a

n/a

n/a

6.75-7.25

(in $millions)

YoY

n/a


TRANSACTIONS

YoY

6.75-7.25


77


WATERLOO REGION

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

8.1%

10.0%

10.2%

Availability Rate

$15.96

$15.26

$14.95


0.29

(0.07)

(0.01)

n/a

6.50-7.00

6.50-7.00


0.19

0.04

0.00



0.04

0.00

0.09


SUBURBAN

2012

2013

2014F

8.5%

9.0%
$13.72

0.01

(0.04)

n/a

6.50-7.50

0.03

0.09

0.08

0.16

6.5%

$4.33

$4.53

$4.59

$48.01

$57.98

$54.53

1.07

0.82

(0.04)

n/a

6.50-6.50

6.50-8.50

0.39

0.00

0.26

0.13

0.25

0.20

2012

2013

2014F

2.6%

3.0%

3.2%

n/a

4.75-6.50

4.75-7.00

0.33


6.2%


7.50-8.50


7.0%


0.06


2014F

$13.81


2013

Sale Price (psf)

11.3%

$15.69

2012


Vacancy Rate

YoY

YoY

0.07

Vacancy Rate

YoY

MULTI-HOUSING


YoY


INVESTMENT
2012

2013F

2014F

Office

$91

$46

$40

$14.16

Industrial

$45

$85

$88

(0.11)

0.05

ICI Land

$72

$29

$32

0.22

0.14

0.33

Retail

$237

$189

$184

0.13

0.16

0.16

Multi-housing

$480

$281

$328

Hotel

$20

$10

$8

Total

OVERALL

$945

$641

$680

2012

2013

2014F

8.4%

9.3%

11.0%

$15.80

$14.28


0.30


Vacancy Rate

YoY

RETAIL
2012

2013

2014F

Retail Sales (YoY)*

n/a

n/a

n/a


n/a

6.00-6.50

TRANSACTIONS

YoY

7.00-7.50



(in $millions)

YoY


TORONTO

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

5.0%

6.1%

7.3%

$27.03

$27.09

$28.18

0.22

(0.17)

0.54

4.75-5.75

4.75-5.75

4.75-5.75


0.21

0.74

1.59



3.54

5.06

3.47


SUBURBAN

2012

2013

2014F

Vacancy Rate

12.2%

13.1%

$16.91

$16.56

0.03

(0.15)

6.00-7.75

6.00-8.00

0.85

0.61

0.92

1.65

4.5%

$4.65

$5.04

$5.24

$87.47

$86.87

$90.24

3.45

8.42

6.90

5.75-7.50

5.75-7.50

5.75-7.50


3.26

4.51

6.35

6.41

5.49

4.75

2012

2013

2014F

1.7%

1.7%

1.8%

3.50-5.25

3.50-5.25

3.50-5.25


0.55


4.6%

Sale Price (psf)

6.00-8.00


5.2%


(1.38)


2014F

$17.23


2013

Availability Rate

15.7%


2012


Vacancy Rate

YoY

YoY

YoY

1.10

MULTI-HOUSING


YoY


INVESTMENT
2012

2013

2014F

Office

$4,113

$2,503

$2,378

$21.26

Industrial

$1,974

$2,845

$2,561

(0.32)

(0.84)

ICI Land

$1,277

$1,297

$1,232

1.06

1.35

2.14

Retail

$1,352

$2,447

$2,325

4.46

6.70

4.57

Multi-housing

$1,563

$1,615

$1,534

Hotel

$314

$663

$298

Total

OVERALL

$10,592

$11,370

$10,328

2012

2013

2014F

8.3%

9.4%

11.1%

$20.58

$20.51


0.26


Vacancy Rate

YoY

RETAIL
2012
Retail Sales (YoY)*

2013

2014F

-1.1%

3.8%
5.50-6.50

(in $millions)

YoY

5.0%

5.50-6.50

TRANSACTIONS

YoY

5.50-6.50


79


OTTAWA

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

6.1%

7.2%

8.5%

$26.31

$24.91

$23.72

0.02

(0.21)

0.68

5.00-6.00

5.25-6.00

5.25-6.00

0.00

0.00

1.01


1.01

1.01

0.00


SUBURBAN

2012

2013

2014F

9.1%

9.4%
$14.07

(0.04)

0.05

6.25-8.00

6.25-7.50

0.07

0.10

1.43

1.07

6.5%

$8.53

$8.53

$8.62

$122.53

$115.85

$125.36

0.02

0.01

0.05

6.00-7.75

6.00-6.25

6.00-6.25


0.11

0.11

0.06

0.05

0.03

0.00

2012

2013

2014F

2.5%

3.2%

3.0%

4.25-5.75

4.25-5.75

4.25-5.75


0.00


6.5%

Sale Price (psf)

6.25-7.50


6.4%


0.15


2014F

$14.12


2013

Availability Rate

8.7%

$13.87

2012


Vacancy Rate

YoY

YoY

1.07

Vacancy Rate

YoY

MULTI-HOUSING


YoY


INVESTMENT
2012

2013F

2014F

Office

$973

$252

$330

$17.70

Industrial

$212

$142

$140

(0.16)

0.83

ICI Land

$383

$332

$275

0.07

0.10

1.01

Retail

$244

$307

$285

2.43

2.07

1.07

Multi-housing

$768

$471

$325

Hotel

$54

$283

$15

Total

OVERALL

2,633

1,786

1,370

2012

2013

2014F

7.7%

8.4%

9.0%


$17.17

$17.22


(0.03)


Vacancy Rate

YoY

RETAIL
2012


2014F

1.0%

Retail Sales (YoY)*

2013
2.2%

3.0%

6.25-7.00

6.25-7.00

TRANSACTIONS

YoY

6.25-7.00



(in $millions)

YoY


MONTRÉAL

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

6.9%

8.2%

7.7%

$21.41

$21.71

$22.50

(0.19)

(0.47)

0.55

5.00-5.50

5.25-5.75

5.25-6.00


0.00

0.07

0.37



0.82

0.93

1.04


SUBURBAN

2012

2013

2014F

Vacancy Rate

12.8%

14.1%
$14.52

0.09

0.18

6.50-8.50

6.50-8.50

0.35

0.60

0.76

0.85

7.8%

$5.04

$5.17

$5.20

$56.51

$67.60

$66.00

3.29

1.90

0.67

6.25-8.75

6.50-8.75

6.75-9.00


1.20

1.03

0.52

0.69

0.56

0.20

2012

2013

2014F

2.8%

2.7%

2.5%

4.75-7.00

5.00-7.00

5.25-7.25


0.58


7.9%

Sale Price (psf)

6.75-8.75


8.1%


0.94


2014F

$14.60


2013

Availability Rate

12.4%

$14.57

2012


Vacancy Rate

YoY

YoY

0.22


YoY

MULTI-HOUSING


YoY


INVESTMENT
2012

2013

2014F

Office

$653

$813

$1,250

$18.57

Industrial

$867

$838

$750

(0.29)

1.50

ICI Land

$454

$353

$300

0.35

0.68

0.95

Retail

$665

$668

$700

1.58

1.78

1.25

Multi-housing

$1,355

$834

$850

Hotel

$119

$88

$65

Total

OVERALL

$4,114

$3,594

$3,915

2012

2013

2014F

9.1%

10.4%

9.5%

$18.07

$18.42


(0.10)


Vacancy Rate

YoY

RETAIL
2012
Retail Sales (YoY)*

2013

2014F

1.0%

5.6%
7.25-8.25

(in $millions)

YoY

4.3%

7.25-8.25

TRANSACTIONS

YoY

7.50-8.50


81


HALIFAX

MARKET STATISTICS
OFFICE

INDUSTRIAL

DOWNTOWN

2012

2013

2014F

Vacancy Rate

10.8%

8.3%

10.9%


$18.14

$18.14

$19.33

0.06

0.11

0.06

6.00-6.50

6.00-6.50

6.25-6.75


0.11

0.00

0.21



0.36

0.37

0.15


SUBURBAN

2012

2013

2014F

8.8%

11.1%
$16.68

0.24

0.06

7.25-8.50

7.25-8.50

0.36

0.22

0.22

0.28

5.9%

$7.44

$7.43

$7.55

$70.00

$80.00

$85.00

0.01

0.40

0.25

6.50-7.75

6.50-7.75

6.75-7.75


0.12

0.38

0.21

0.26

0.08

0.10

2012

2013

2014F

3.0%

3.5%

4.5%

5.25-6.50

5.25-6.50

5.50-6.75


0.26


6.3%

Sale Price (psf)

7.25-8.50


6.7%


0.07


2014F

$16.84


2013

Availability Rate

13.4%

$16.64

2012



YoY

YoY

0.15

Vacancy Rate

YoY

MULTI-HOUSING


YoY


INVESTMENT
2012

2013F

2014F

$37

$16

$100

Industrial

$212

$65

$100

0.14

ICI Land

$24

$54

$50

0.22

0.47

Retail

$277

$50

$100

0.66

0.30

Multi-housing

$161

$47

$100

Hotel

$8

$89

$10

Total

OVERALL

$718

$321

$460

2013

2014F

9.7%

9.9%

12.3%

Office

$17.65

$17.34

$17.92


0.30

0.18


0.47


0.58

Vacancy Rate

YoY

TRANSACTIONS

2012

RETAIL
2012


2014F

1.4%

Retail Sales (YoY)*

2013
4.5%

3.3%

6.25-6.75

6.25-6.75

YoY

6.50-7.00



(in $millions)

YoY

NATIONAL
Ross Moore

Director of Research, Canada

ross.moore@cbre.com

604.662.5101

Roelof van Dijk

Research Manager, Canada

roelof.vandijk@cbre.com

416.847.3241

Kevin Park


kevin.park@cbre.com

416.847.3263

Brett Llewellyn-Thomas

Research Analyst

brett.llewellyn-thomas@cbre.com

416.874.7274

Research Associate

kristen.morrill@cbre.com

250.386.0000


shaan.desai@cbre.com

604.662.5165


jeffrey.hurren@cbre.com

403.750.0519

Research Analyst

jayson.devera@cbre.com

780.917.4636

Research Associate

jeff.reinsch@cbre.com

204.985.1357

Research Associate

jaclyn.harrison@cbre.com

519.286.2024

cameron.woolfrey@cbre.com

519.340.2322

VICTORIA
Kristen Morrill

VANCOUVER
Shaan Desai

CALGARY
Jeffrey Hurren

EDMONTON
Jayson de Vera

WINNIPEG
Jeff Reinsch

LONDON
Jaclyn Harrison

WATERLOO REGION
Cameron Woolfrey

Research Associate

GREATER TORONTO AREA (GTA)
Masha Dudelzak - Office


masha.dudelzak@cbre.com

416.815.2316

Lynn Duong - Industrial


lynn.duong@cbre.com

416.495.6286

David Johnston

Sales Trainee

david.johnston@cbre.com

613.788.2760

Will Roantree

Sales Trainee

will.roantree@cbre.com

613.288.2048


lynn.johannesson@cbre.com

Research Associate

juliana.chong@cbre.com

OTTAWA
MONTREAL
Lynn Johannesson

514.849.6000 x 2236

HALIFAX
Juliana Chong

902.492.2078

This disclaimer shall apply to CBRE Limited, Real Estate Brokerage, and to all other divisions of the Corporation (“CBRE”). The information set out herein, including, without limitation, any projections, images, opinions, assumptions and estimates obtained from third parties (the “Information”) has not been verified by CBRE, and CBRE does not
represent, warrant or guarantee the accuracy, correctness and completeness of the Information. CBRE does not accept or assume any responsibility or liability, direct or consequential, for the Information or the recipient’s reliance upon the Information. The recipient of the Information should take such steps as the recipient may deem necessary
to verify the Information prior to placing any reliance upon the Information. The Information may change and any property described in the Information may be withdrawn from the market at any time without notice or obligation to the recipient from CBRE. CBRE and the CBRE logo are the service marks of CBRE Limited and/or its affiliated or
related companies in other countries. All other marks displayed on this document are the property of their respective owners. All Rights Reserved. Mapping Sources: Canadian Mapping Services canadamapping@cbre.com; DMTI Spatial, Environics Analytics, Microsoft Bing, Google Earth

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