YUKON TERRITORY Q2 2013 | RETAIL TERRITORY REPORT

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metro vancouver
colliers international | market report
NUNAVUT

CANADA
ALBERTA

british columbia
BRITISH COLUMBIA

Hudson Bay

Fort McMurray Vancouver Nanaimo Victoria Kelowna Surrey Edmonton

SASKATCHEWAN MANITOBA QUEBEC

Metro Vancouver Market Overview

ONTARIO

Despite uncertainty before the provincial elections in the second quarter of this year, the Metro Vancouver retail market has remained solid over the past six months. Activity took Calgary Saskatoon place metro-wide over the first half of 2013, with steady levels occurring in the downtown Mo Ottawa and inner suburbs, and with increased velocity in the outer suburbs. These opportunities to Winnipeg do deals are largely the result of the market being in a state of equilibrium.

BC MARKET: Colliers has five offices in British Columbia: Vancouver, Surrey, Kelowna, Nanaimo and Victoria.

million to $10 million range. Due to a lack of available supply, the market recorded only STATES 17UNITED investment transactions and one land sale of more than $5 million during the last six months equating to just over $194 million dollars. Among those transactions, the sale of Burli Lougheed Super Centre and the Aldergrove Village Shopping Centre made up 30.5% of the total sales figure, while sales between $5 million and $10 million comprised 42.1%. In the leasing market, the central business district continues in a state of flux, as retailers vie for positioning in emerging areas and around new big-draw retailers. This has resulted in a general shift eastwards in the downtown core, and is leaving owners of property on previously prominent retail blocks to re-evaluate their market strategy. Even with a steady volume of lease transactions, the inner suburban markets have generally seen steady to increasing vacancy due to the completion of speculative mixed-use product. In comparison, the outer suburban regions have recorded healthy leasing activity in both regional and subregional centres. This activity, combined with several prominent sales, has followed a push for major centres to realign their retail offerings around a growing population who have adopted the use of m-commerce and e-commerce, to shop for commodities, in their daily lives.
North Shore

Waterloo Region Toronto Retail investment demand has outpaced supply across the city particularly in the $3

Regina

market forecast indicators

VACANCY NET ABSORPTION new development rental rate cap rate

key highlights

Additional rent for retail tenants along the South Granville strip has skyrocketed due to rising property values on the west side of Vancouver. British Columbias consumer confidence over the last six months has been higher than Canadian figures; however British Columbia sentiment is down 4.8 points from May to June. Lougheed Super Centre and Aldergrove Village Shopping Centre sold for $29.85 million and $29.25 million respectively.

Vancouver / UBC

Burnaby / New Westminster

Tri-Cities Pitt Meadows / Maple Ridge

Richmond North Delta / Surrey / Langley / White Rock Ladner / South Delta / Tsawwassen

Miss

Vacancy Rent Construction

Abbots

www.collierscanada.com

market report | Q2 2013 | retail | metro vancouver

Market Demand Drivers

Consumer Sentiment

British Columbian vs. Canadian Consumer Confidence

140 120 100 80 60 40 20 0

British Columbias consumer confidence has recorded figures above those of Canadas throughout the measured five-year period except for July 2010 where it dipped 1.1 points below the national figure. The five-year average for British Columbia consumer sentiment is 92.8 compared to the Canadian average of 80.3. According to the Conference Board of Canada, British Columbia has recorded figures above this average since December 2012. British Columbia consumer sentiment was down 4.8 points from May to June 2013, the largest decline since December 2012; however, it is still the second highest confidence score, after the Prairies, in Canada.

Jun-08

Sep-08

Jun-09

Dec-08

Sep-09

Dec-09

Jun-10

Mar-09

Sep-10

Jun-12

Sep-12

Dec-10

Mar-10

Mar-12

Dec-12

Jun-11

Sep-11

Canada

British Columbia

Mar-11

Five Year Average

Source: Conference Board of Canada / Colliers International Market Intelligence

Canadian Dollar Strength vs. Cross Border Shopping

According to Statistics Canada, the total number of same-day trips to the United States from the Aldergrove and Pacific Highway border crossings, decreased by 6.0% over the three months to March 2013. However, these figures are up 8.8% over the previous year. The average CAD exchange rate over the past five years is 96 cents. During the first quarter of 2013, the CAD exchange rate dropped 1.7% in relation to the USD the largest decrease since December 2011.

CAD Strength and Cross Border Shopping

$1.05 $1.00 $0.95 $0.90 $0.85 $0.80
Sep-08 Jun-08 Dec-08 Sep-09 Jun-09 Mar-08 Mar-09 Dec-09 Sep-10 Jun-10 Dec-10 Sep-12 Jun-12 Mar-10 Mar-12 Dec-12 Mar-11 Mar-13 Sep-11 Jun-11 Dec-11

1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000

CAD Value

Number of Shoppers

Greater Vancouver Regional District Retail Expenditure

Source: Bank of Canada/ Statistics Canada

The Building Materials and Garden Supplies sector demonstrated the largest amount of growth over the year to March 2013, with a 5.0% increase in consumer expenditure; followed by the Motor Vehicles sector (4.3%) and the Home Furnishing sector (3.3%) The Food and Beverage sector recorded the largest overall expenditure levels grossing almost $7 billion dollars over the 12 months to March 2013. From March 2012 to March 2013 the Electronics and Appliances sector recorded the largest decline in gross sales with $132 million less year on year. With sales decreasing by 8.4% this industry saw the second largest negative change, after Sporting Goods and Hobbies (9.1%).

Retail Expenditure in Metro Vancouver

Building Material and Garden Supplies Motor Vehicle Home Furnishings Food and Beverage General Merchandise Gasoline Stations Clothing Health and Personal Care Average Miscellaneous Retailers Electronics and Appliances Sporting Goods, Hobby, Books and Music
-10
Source: Statistics Canada

.0% -8.0% -6.0% -4.0% -2.0% 0.0%

2.0

4.0

Mar-13

Dec-11

6.0

Jun-13
%

market report | Q2 2013 | retail | metro vancouver

Street Front Retail

Robson Street, long considered the fashion high street in Vancouver, is currently experiencing a shift east. With the imminent arrival of Nordstrom and the TELUS Garden development (which will have a substantial street-front retail presence) retailers are looking to benefit from proximity to these soon-to-market draws. Robson, from Burrard to Thurlow, is also experiencing a renaissance of sorts, with a cluster of womens fashion and lifestyle flagship locations all opening on the same block. Victorias Secret, lululemon, and now Sephora will all be opening significant locations joining the recent debut of Forever 21. Competing neighborhoods experiencing disparate retail evolutions are Gastown and Yaletown. While Gastown continues attract new retailers (driving rental rates up while maintaining low vacancy) by leveraging its high daytime foot traffic and growing prominence as a high-end yet, hip shopping mecca, Yaletown is more and more defining itself as a nighttime destination. This has precipitated the shifting of street-front space uses from retail to dining as leases expire and are re-introduced to the market. By attracting users eager to leverage the neighborhoods renown as a nighttime destination, landlords have maintained lease rates and vacancy even as retail presence in the area dwindles. Conversely to Yaletown, a neighborhood distinctly known for its retail offerings, South Granville Street-front landlords are facing challenges beyond their immediate control. Due to rising property values on the west side of Vancouver, additional rent for retail tenants along the South Granville strip has skyrocketed. To offset this and prevent negative absorption, landlords have been forced to lower rents, thereby maintaining gross rent equilibrium. Lonsdale Avenue, the commercial heart of North Vancouver, is already experiencing high vacancy. There is a flurry of development activity underway along its blocks (Onni and Polygon are among some of the developers with mixed-use sites currently under construction) and these developments are expected to have a positive effect on the street-front market. Although they include substantial retail space, they consist primarily of large units which are, or will be, pre-leased by large format anchors. Therefore, these new developments wont flood the market and increase vacancy. Instead, they should act as draws to the area for existing residents and attract purchasers to the new residential units being developed. This will, over a three year horizon, alleviate the current downturn in the Lonsdale Avenue street-front market which will likely continue until the increased densification comes to fruition and the market has a chance to adjust.

STREETFRONT LEASE AND VACANCY RATES

STREET
Robson Street Yaletown South Granville West Broadway West 4th Avenue Denman Street Gastown Alberni Street Lonsdale Avenue

Lease Rates $/SF*

150-200 40-65 40-75 30-65 35-55 45-70 35-55 125-180 20-45

Lease Rate Trend

Vacancy Rate Trend**

*For commercial retail unit of approximately 1,000 SF **Vacancy based on physically vacant street level retail units not within a shopping centre

market report | Q2 2013 | retail | metro vancouver

JANUARY 1 - JUNE 30 2013 NOTABLE LEASE TRANSACTIONS

ADDRESS
Fraser Way Place, #8 - 32451 South Fraser Way Fraser Way Place, 32465 South Fraser Way Garrison Village Shopping Centre, Vedder and Keith Wilson Road 11965 Fraser Street Oxford Market, 2020 Oxford Connector, Lansdowne Shopping Centre, 5300 No. 3 Road Lansdowne Shopping Centre, 5300 No. 3 Road
Central City Plaza, Surrey Club 16 recently signed a lease deal for 20,000 SF of space at the centre, taking over a space previouslyoccupied by a fashion retailer.

MUNICIPALITY
Abbotsford Abbotsford Chilliwack Maple Ridge Port Coquitlam Richmond Richmond Surrey Vancouver Vancouver Vancouver Vancouver Vancouver Vancouver

GLA (SF)
8,371 5,107 4,000 20,000 3,000 8,000 4,132 20,000 8,800 6,353 5,394 4,357 3,533 1,718

TENANT
Dollarama Megabulk Foods First West Credit Union Club 16 TELUS Insurance Corporation of British Columbia Tropika Club 16 Cross Dcor and Design White Spot Bank of Montreal Anytime Fitness Gyu-Kaku Pappa Roti

Central City Plaza, 10153 King George Boulevard 1198 Homer Street Unit 169, 6500 Hastings Street 6391 Fraser Street Maynards Block, 445 West 2nd Avenue #201 - 950 West Broadway 1505 Robson Street
Source: Colliers International

Notable transactions over the period have been dominated by service- oriented retailers. These types of tenants have been expanding, easing some of the vacancy issues arising from downsizing big box retailers.

market report | Q2 2013 | retail | metro vancouver

JANUARY 1 - JUNE 30 2013 NOTABLE SALE TRANSACTIONS

ADDRESS
Highstreet, 3122 Mt Lehman Road, Abbotsford Garrison Village Shopping Centre, Vedder & Keith Wilson Road Lougheed Super Centre, 101 Schoolhouse Street 1311 United Boulevard Aldergrove Village Shopping Centre, 26310 Fraser Highway Metropolis, 1202 Richards Street 13762-13766 72nd Avenue 3711 No. 3 Road 1100 Cambie Street 2067 Sumas Way Save On Meats, 43 W Hastings Street 850 S.W. Marine Drive 2999 Grandview Highway Kits360, 1777 West 7th Avenue 3284-3298 East Broadway 4956 Duchess Street 8723 & 8729 Heather Street 2828 Granville Street
Source: Realnet / Colliers International

MUNICIPALITY
Abbotsford Chilliwack Coquitlam Coquitlam Langley Vancouver Surrey Richmond Richmond Abbotsford Vancouver Vancouver Vancouver Vancouver Vancouver Vancouver Vancouver Vancouver

TRANSACTION SIZE (SF)

169,000 48,097 81,115 54,523 91,517 22,042 44,915 4,800 2 acres 58,000 20,500 45,621 35,232 14,126 21,340 16,470 19,672 2,012

TOTAL PRICE
$7,000,000 $11,750,000 $29,850,000 $8,300,000 $29,250,000 $16,840,000 $6,400,000 $7,100,000 $5,485,000 $7,500,000 $5,450,000 $12,925,000 $11,675,000 $9,000,000 $7,500,000 $6,700,000 $5,950,000 $5,345,000
Garrison Village Shopping Centre, Chilliwack The centre, located at Vedder and Keith Wilson Road, sold for $11.75 million.

Several prominent sales transactions of centres... cumulatively contributed $77.25 million to the total sales for the first half of 2013.

market report | Q2 2013 | retail | metro vancouver

Shopping Centres
Over the six months to June, Metro Vancouvers shopping centre product experienced strong levels of activity in both investment and leasing. Several prominent sales transactions of centres throughout the area cumulatively contributed $77.25 million to the total sales for the first half of 2013. Two sales worth highlighting are that of the Lougheed Super Centre and Aldergrove Village Shopping Centre, which commanded sale prices of $29.85 million and $29.25 million respectively. On the leasing side, notable transactions over the period have been dominated by service-oriented tenants. These types of tenants have been expanding, easing some of the vacancy issues arising from downsizing big box retailers, and have allowed centres to realign themselves in their respective markets, thereby fostering a new experience for shoppers. Examples include new deals at the Lansdowne Shopping Centre, which includes 8,000 square feet (SF) of space taken by the Insurance Corporation of British Columbia (ICBC) along with 4,132 SF of space taken by Tropika a popular Malaysian restaurant. Central City Plaza also had a notable deal, with Club 16 taking 20,000 SF of space once occupied by a fashion retailer. Strong population growth forecasts have also led regional centres in the outer suburbs to adjust their retail offerings to attract more national tenants, as well as create more variety amongst local offerings. A lack of suitable land for retail development in these areas has augmented the importance of established retail hubs and with the growing trend of high-density suburban living, this importance will only amplify. Colliers Internationals survey of open, food-anchored shopping centres recorded an overall decrease in vacancy of 0.9%, from 3.5% to 2.6% further indication of increased leasing demand in the retail sector. The greatest absorption levels occurred in Richmond, down 3.9% to 0.8% and Delta down 3.4% from 5.3%. Maple Ridge/ Pitt Meadows/ Mission had the highest increase in vacant space up 1.4% to 3.7%. Rates for commercial units and pads remained steady in the majority of regions with most only reporting a slight increase in the spread.

OPEN FOOD-ANCHORED SHOPPING CENTRE SURVEY - 50,000 SF OR GREATER

REGIONS
Abbotsford/Langley/ Aldregrove Burnaby/ New Westminster Chilliwack Delta Maple Ridge/ Pitt Meadows/ Mission North Shore Richmond Squamish South Surrey/ White Rock Surrey - North Tri - Cities Vancouver (Open) Vancouver (Urban mixed-use) Total

NUMBER OF CENTRES
17 10 5 7 6 8 9 3 5 17 9 6 6 109

ANCHOR RATES
$10 - 30 $8 - 32 $12 - 20 $10 - 15 $15 - 20 $10 - 30 $6 - 20 $11 - 22 $15 - 30 $10 - 20 $13 - 30 $15 - 20 $18 - 28

CRU RATES
$14 - 35 $20 - 35 $15 - 25 $13 - 32 $20 - 35 $25 - 75 $17 - 45 $18 - 35 $30 - 55 $15 - 35 $20 -40 $22 - 52 $35 - 65

PAD RATES
$28 - 45 $20 - 45 $12 - 26 $30 - 35 $30 - 35 $35 - 60 $20 - 49 $22 - 35 $35 - 40 $25 - 30 $35 - 40 $35 - 55 N/A

GLA (SF)
2,290,629 1,725,309 436,665 689,615 1,206,481 927,200 855,720 213,344 1,457,015 1,809,281 963,637 497,290 582,321 13,654,507

VACANCY RATE
3.2% 1.5% 10.1% 1.9% 3.7% 1.5% 0.8% 3.4% 3.9% 3.8% 1.5% 0.2% 0.1% 2.6%

*For commercial retail unit of approximately 1,000 SF **Vacancy based on physically vacant street level retail units not within a shopping centre

market report | Q2 2013 | retail | metro vancouver market report | Q2 2013 | retail | metro vancouver

Outlook
The retail outlook for the second half of 2013 is mixed. Although demand fundamentals have been steady for the majority of the first half of this year, speculation around the end of quantitative easing has created some instability in demand projections for the short term. From a supply perspective, short-term forecasts are expected to be moderate, with continued demand for space from tenants and investors alike placing the Metro Vancouver retail market in a position for growth over the mid- to long term. The last seven months have seen British Columbia consumer confidence index figures above 100, the longest period of continued confidence since May 2008; however, we are cautious in forecasts over the next six months. Recent fluctuations in bond yields have created some concern among consumers, wary of increasing interest rates. Although the index still remains above 100, it decreased by almost five points over the month to June 2013 and this could continue to drop over the short term due to speculations of the phasing out of quantitative easing. While this could negatively affect retail demand, it is too early to make any specific predictions as to its effects. Strong tenant demand within Metro Vancouver is anticipated to continue over the medium term, leading to overall decreased vacancy levels throughout the Greater Vancouver area on a local level, this will be patchy, with prime retail areas in inner suburban markets seeing the largest decrease in vacancy rates. As such, Colliers International expects these markets will see stabilization in inducements and rental rates over the next six months. A continued trend towards mixed-use developments in inner suburban areas is also anticipated as baby boomers continue to downsize from the family home and Generation Y purchasers look to affordable accommodation options with good civic amenities. This shift in retail space has already sparked new strategies among big box retailers, such as grocery stores, forced to adopt new business models in order to fit the spaces being designed a trend set to continue long term. Unlike inner suburban counterparts, which are transferring to a more mixed-use model, major regional centres in the outer suburbs will continue to be the retail hub for their region over the long term. However, due to the increasing popularity of higher density accommodation, and limited suitable areas for further retail development, Colliers International expects these regional centres to attract more national and international tenants which in turn will cause increased foot traffic. In turn this will increase the value of these assets, supporting continued low capitalization rates. Due to the tightly held nature of retail assets, Colliers International anticipates the Metro Vancouver retail market will see continued high demand for all asset types, especially in the $3 to $10 million range due to the ease of entry into this asset class. Investors currently in the market are savvy and vendors must be conscientious that their asset is fairly priced in order to attract purchasers. While Colliers International predicts increased demand, a premium will be paid for those assets which are either fully leased with strong credit and/or strategically located. Pent-up demand in the Metro Vancouver market, due to lack of supply, will keep capitalization rates low over the next year, although they may rise nominally with interest rates.

Metropolis, 1202 Richards Street This property was sold by Colliers International for $16.84 million in the second quarter of this year.

Short-term forecasts are expected to be moderate, with continued demand for space from tenants and investors alike placing the Metro Vancouver retail market in a position for growth over the mid- to long term.

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Accelerating success.

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contact information
Retail Team:
Joe Genest Mike Grewal Brent Heed Kelvin Luk David Knight Doug Le Patourel Owen Louis Ted Mildon Sean Ogilvie Casey Pollard* Matt Saunders Sheldon Scott* Sherman Scott

Kirk Kuester

Managing Director | Vancouver Brokerage DIRECT: +1 604 661 0814 kirk.kuester@colliers.com

James Lang

Market Intelligence Manager | Vancouver DIRECT: +1 604 661 0868 james.lang@colliers.com

Margaret Bowden

Market Intelligence Intern | Vancouver DIRECT: +1 604 662 2677 margaret.bowden@colliers.com

Vancouver Downtown Office 200 Granville Street, 19th Floor Vancouver, BC V6C 2R6 MAIN +1 604 681 4111 FAX +1 604 661 0849 www.collierscanada.com
This report has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, express 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). 2013. All rights reserved. *Personal Real Estate Corporation. PO11568