CBRE Market Outlook 2016

2O16
Canada
C O M M E R C I A L R E A L E S TAT E
M A R K E T O U T LO O K
CBRE Research
INTRODUCTION
NATIONAL OUTLOOK
Investment..................................................................................... 6
Office ............................................................................................. 8
Industrial .....................................................................................10
Retail ............................................................................................12
Multifamily ..................................................................................14
Hotels ...........................................................................................16
Seniors Housing ...........................................................................18
REGIONAL OUTLOOK
Vancouver .....................................................................................22
Calgary .........................................................................................24
Edmonton .....................................................................................26
Winnipeg ......................................................................................28
London & Kitchener/Waterloo......................................................30
Toronto .........................................................................................32
Ottawa .........................................................................................36
Montreal.......................................................................................38
Atlantic Canada ...........................................................................40
CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK
Progress is impossible
without change.
This truism summarizes the outlook for Canadian
commercial real estate in 2016. Investors, landlords
and occupiers face significant change in the year
ahead much of it out of their control. In this dynamic
environment, some will identify and seize opportunities,
while others will be left wanting.
For an industry known for its fixation on location,
far-reaching global trends will overtake fine-grained
details as the basis for real estate decisions in 2016.
More than ever, new technologies are poised to deliver
on the promise to alter the way we shop, ship, work and
play. The apparent end of the commodity supercycle has
curbed Canadas economic momentum and questions
around the nations growth prospects will need to
be answered. And while leasing activity has slowed
in Canada, stimulative monetary policy globally will
continue to supercharge the investment market.
Not to be lost in the cross currents of change is the fact
that Canadas commercial real estate fundamentals are
some of the healthiest in the world. No building is future
proof, no business model is infallible, no lease term is
indefinite, but Canada remains one of the best places to
confront technological advancements and the variability
of the business cycle. The relative safety, stability, and
reliability of returns offered by Canadian commercial
real estate will be welcome companions on the bumpy
road to progress.
NATIONAL OVERVIEWS
I N V E S T M E N T S E C TO R
the
The Canadian economy
$64,000
THIS COULD BE THE YEAR THAT
INTEREST RATES RISE, WHICH COULD
CAUSE INVESTORS TO RECALIBRATE
3D PRINTING
ECOMMERCE
WORKPLACE
STRATEGIES
TECH
BIG DATA
WORKPLACE
STRATEGIES
3D FRACKING
PRINTING
ECOMMERCE
TECH
FRACKING
CHANGE BIG DATA
MAINLAND CHINESE
INVESTORS WILL BE A
GROWING FORCE
is emerging from a slight

technical recession and the U.S.
Federal Reserve appears poised
to increase interest rates in the
near future; however, economic
volatility remains high. This
factor, combined with a low
Canadian dollar and relatively
strong property fundamentals,
should produce healthy demand
for Canadian commercial real
estate in 2016.
Investors seeking safe, stable
returns will likely become even

more selective in 2016. This
will further divide a market
that is already clearly split
between core and secondary
assets. As a result, super prime
assets in desirable areas could
conceivably attract higher
pricing and lower cap rates,
while reducing liquidity for
everything else.
This low cap rate environment
will put even greater emphasis

on development as a means
of enhancing return targets,
although caution will be
required as some sectors are
characterized by an oversupply
of new product.
The investment calculus has
changed most in Alberta,

especially for office properties
where rental rates have fallen
and the amount of sublet space
has risen to record levels.
Successful transactions will
need to bridge the gap between
buyer and seller expectations,
but little distressed selling
is expected in 2016. Low oil
prices would likely have to be
sustained into 2017 for lease
renewals and lender pressure to
force the hand of some second
tier asset owners.
In terms of specific commercial
Scrutiny of the REIT sector
asset classes, land will be

actively traded across the
country in 2016, especially infill
and development opportunities.
High-quality retail, office and
multifamily properties will also
be sought after, while coveted
industrial assets will remain in
short supply.
has increased and yet there is

a growing disconnect between
REIT pricing and the value of
the assets they hold. In 2016,
markets may increasingly
focus on the location and
performance of REIT holdings
to differentiate between the
different players in the sector.
Statistics
Transactions (in $ Millions)
2014
2015 F
2016 F
YoY
Office
$6,435
$5,034
$5,710
Industrial
$4,706
$4,404
$4,954
Retail
$6,532
$4,880
$4,680
Multifamily
$3,667
$4,966
$3,914
ICI Land
$3,785
$3,420
$3,104
Hotel
$1,010
$1,695
$1,264
Total
$26,134
$24,399
$23,625
Source: CBRE Limited
INVESTMENT
INVESTMENT
O F F I C E S E C TO R
The Canadian office market
OFFICE SPACE
IS NO LONGER
A COMMODITY
It is your brand,
culture and
competitive
advantage
FIRE
26%
13.2 million sq.ft.
16.9 million sq.ft.
CATCHING UP
TECH
20%
THE TECH SECTOR RANKED 2ND

IN TERMS OF SIGNIFICANT
OFFICE LEASES NATIONALLY
SINCE Q4 2012
LIFE
TIME
Guarantee
enters 2016 with vacancy rates

climbing to a decade-long high
following a prolonged landlords
market. With an additional
11.2 million sq. ft. under
construction in downtown
markets and 6.4 million sq. ft.
being built in the suburbs as
of Q3 2015, vacancy rates are
likely to remain elevated for the
foreseeable future.
While new supply has been the
Vacancy Rate
2015 F
2016 F YoY
8.5%
10.1%
11.1%
$25.84
$24.81
$23.71
1.52
(0.79)
1.46
New Supply (sq. ft. in millions)
3.52
3.47
4.47
Under Construction (sq. ft. in millions)
11.67
9.94
5.98
Vacancy Rate
13.4%
15.1%
15.4%
Class A Net Rental Rate (per sq. ft.)
$18.25
$17.92
$17.12
Absorption (sq. ft. in millions)
1.49
(0.34)
1.31
4.44
3.48
2.31
6.73
5.55
4.27
Vacancy Rate
10.7%
12.3%
13.0%
$21.62
$21.18
$20.37
3.01
(1.13)
2.77
7.97
6.95
6.78
18.40
15.49
10.25

WITH THE PACE OF CHANGE

ACCELERATING, DEVELOPERS
WILL ATTEMPT TO FUTURE
PROOF BUILDINGS
drivers seat, downtown markets

will continue to outpace the
suburbs from a leasing and
construction perspective, as
that is largely where the labour
pool for this sector is located.
Existing office stock will
attempt to appeal to innovative
users by defixturing traditional
office space and offering the loft
aesthetic and the style of work
that these businesses naturally
gravitate towards.
Statistics
2014
fastest growing segment of

the market, while the finance,
insurance and real estate sector
continues to account for the
largest proportion of significant
leases. Cities across Canada are
reporting increased demand
from growing tech companies
as the sector accounted for a
record 38.0% of significant
office leasing transactions
nationally in Q2 2015.
With tech companies in the
dominant factor shaping office

fundamentals, the demand
side of the equation will become
increasingly important in the
year ahead. With banks signaling
their intention to restructure
some operations and office users
generally moving to new efficient
workplace strategies, there is the
potential for a sustained rate of
absorption below historic norms.
Central
The technology sector is the
Suburban
Overall

The pace of
technological change
is putting increased
pressure on landlords
to ensure that their
properties are
adaptable and remain
competitive. Future
proofing will become
an increasing concern
and new buildings
will be structured so
that office space is
physically adaptable
without incurring
significant costs.
OFFICE
OFFICE
I N D U S T R I A L S E C TO R
BIG
While economic growth has
VS
SMALL
INDUSTRIAL DEMAND IS POLARIZED

BETWEEN LARGE DISTRIBUTION
CENTRES AND WELL-LOCATED
50,000 SF BUILDINGS
GREAT
EXPECTATIONS
Competitive Canadian
dollar fails to alter
industrial decision making
TIPPING TH
E
10.6
MILLION
SQ. FT.
BUILD-TO-SUIT
SCA
LE
1MILLION
1.5
SQ. FT.
SPEC
SPEC CONSTRUCTION EQUALS

52% OF INDUSTRIAL
DEVELOPMENT IN CANADA.
WELL BELOW 66% IN THE U.S.
been lacklustre and the office

and retail sectors are recording
higher vacancy rates, industrial
property fundamentals remain
strong. The industrial market
will outperform from a leasing
and investment perspective
in 2016, as a responsive
development pipeline maintains
a healthy balance between
supply and demand. Low
interest rates will support a
robust owner-user market.
Distribution and logistics
activities will remain the

primary driver of leasing and
investment activity in the
industrial sector. Retailers and
industrial businesses in general,
will attempt to differentiate
themselves with supply chain
enhancements that result
in cost savings and a better
client experience.Industrial
construction and redevelopment
is being polarized between two
trends:
The desire to consolidate
logistics operations in Canadas

major distribution markets,
Calgary and the Greater Toronto
Area, is spurring more frequent
construction of large buildings
and industrial parks nearing
the 1.0 million sq. ft. mark.
This is a mature trend, but the
Statistics
Availability Rate
Net Rental Rate (per sq. ft.)
combination of pent-up and new

demand for large-bay space will
make this an enduring factor
through 2016.
Ecommerce and same-day
delivery require proximity to

consumers, which is driving
demand for smaller ~50,000
sq. ft. buildings within close
proximity to major population
centres. This has the potential to
reinvigorate industrial properties
in the inner suburbs that were
formerly considered obsolete
for modern users; however,
these same locations will face
pressure to be put to higher and
better use in 2016 as the general
urban intensification process
continues.
Favourable foreign exchange
rates spurred hope of a

manufacturing and export
renaissance, but there has
been a negligible impact on
industrial property demand
thus far. This is not expected
to change in 2016 as Mexico,
China and other manufacturing
powerhouses are strong
competitors on a number of
fronts aside from exchange
rates.
2014 2015 F 2016 F YoY

5.4%
5.8%
5.8%
$6.09
$6.45
$6.59
$101.68
$117.43
$117.92
18.36
12.49
12.61
14.87
20.13
13.80
18.90
15.35
8.03
Sale Price (per sq. ft.)
INDUSTRIAL
INDUSTRIAL
11
R E TA I L S E C TO R
COSTCO
MAKES
GLUTTONS
OF MODEST
CANADIAN
CONSUMERS
The retail giant is
extracting higher
sales per person
and expanding a
single shop better
than any other
retailer
The Canadian retail market
will continue to recalibrate

following the demise of Target
and a challenging year for
mid-market retailers. In 2016,
foreign retailers will view
Canada as a worthy destination,
but will be more selective on
locations and roll out more
gradually. Canadas appeal
stems from store productivity
and less competition for new
entrants than some other hotly
targeted destinations.
The shopping mall has long
ANNUAL ONLINE SALES EQUATE

TO THE PRODUCTIVITY OF 9.8
YORKDALE MALLS
been at the centre of the

Canadian retail market, a
fact that will be underscored
in 2016. High-end retailers,
traditionally located on
Canadas high streets, will
gravitate towards the increased
luxury of super regional
shopping centres like Yorkdale
Mall in Toronto and CF Pacific
Centre in Vancouver. This is
part of a trend that will see the
tenant mix along Bloor Street in
Toronto evolve to include more
experiential retailers and highend entertainment.
while H&M, Zara and Forever 21

will continue to put pressure on
mid-market retailers.
In 2016, logistics will be as
important to retailers as the

bricks and mortar shopping
experience. Expect retailers
to increase the number of
locations at which consumers
can receive and return goods
that were purchased online.
Ecommerce will gain on
traditional retails sales, but
the physical distance between
retailer and consumer will
decrease as more distribution
points make for a more
convenient experience.
New technology and the rise
of the sharing economy will

continue to shape the retail
market in 2016. Brands will
attempt to deliver an overall
lifestyle to the Millennial
shopper. Online and in person,
retailers will appeal to the
consumers mind, body, and
soul.
Retail leasing activity will
INCREASED TOURISM IS HELPING

SPUR HIGHER RETAIL SALES DESPITE
LACKLUSTRE ECONOMIC GROWTH
become increasingly polarized

in 2016. Retailers will fixate on
urban locations and high-end
malls, while lingering vacancy
can be expected in second and
third tier malls. The department
store segment will remain
competitive with The Bay,
Nordstrom, and Saks all active,
Statistics
2014 2015 F 2016 F YoY
Retail Sales (YoY)*
4.6%
2.2%
3.8%
* Conference Board of Canada
12
R E TA I L
RETAIL
13
M U LT I FA M I LY S E C TO R
79% OF EXISTING
RENTAL STOCK
IS >35 YEARS
OLD AND
INCREASINGLY IN
NEED OF CAPITAL
INVESTMENT.
VACA
N
MULTIFAMILY FORMULA
FOR SUCCESS
NEW CONDOS
OVERSHADOW
PURPOSE-BUILT
RENTALS, BUT
HELP LIFT
RENTAL
RATES
The multifamily sector will
Alberta is the one province
The multifamily market
In 2015, there was a shift in
produce near record investment

volume in 2015, following a
period of constrained supply.
Strong pricing and deferred
maintenance are causing
owners to strategically reexamine their portfolios.
Demand for multifamily
product is so widespread and
fundamentals are so stable
that very little could derail
investment activity in this
sector in 2016.
continues to evolve and the
growing number of condos
entering the rental universe will
continue to shape the market
in 2016. Cap rates for Class A
high-rise apartments continue
to tighten and are now at the
lowest levels on record, which
will translate into higher prices
for investors and spur rental
rate increases and higher fees
for ancillary services such as
laundry and parking.
breaking from the overall trend

of stability. Vacancy rates are
climbing and rental rates are
under downward pressure
in Calgary and Edmonton.
Tertiary markets servicing oil
sand operations in the north
have been hit harder. Rental
occupancy rates could firm
if economic difficulties slow
household formation and create
challenges in the residential
ownership market.
the market as new purposebuilt construction increased
to the most significant level
in decades. Work on ongoing
projects will continue, but
much of the new supply in
2016 will likely be limited to
opportunistic situations as
owners of existing land are
looking to put it to higher and
better use.
Baby boomer demand for
seniors housing will peak

in more than a decade, but
in the interim, multifamily
buildings will benefit from a
wave of empty nesters looking
to downsize. Multifamily
property fundamentals will
also benefit from an increase
in new immigrants to Canada
and rising home prices will
bar many Millennials from
pursuing homeownership.
Statistics
Overall Vacancy Rate*
2014 2015 F 2016 F YoY

2.3%
2.8%
2.9%
*Canada Mortgage and Housing Corporation, CBRE Limited
14
M U LT I FA M I LY
MULTIFAMILY
15
H OT E L S E C TO R
The market and financial
Z
JFK YY
RK
NEW YO
JFK
RK
NEW YO
JFK
N
O PEARSO
TORONT
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TORONT
UNPRECEDENTED CROSS-BORDER
TRAVEL INTO CANADA IS LIKELY TO
CONTINUE
A DIVERSE GLOBAL BUYER

BASE AND WIDE-RANGING
CAPITAL SOURCES ARE
CREATING RECORD LIQUIDITY
performance of hotels in B.C.,

Ontario & Quebec, which
represent over 70.0% of the
industry in Canada, will show
strong improvement in 2016.
Properties in Vancouver,
Toronto and Montreal
specifically are poised for strong
top and bottom line growth.
The financial performance
for Alberta hotels, which
represents about 15.0% of
the Canadian inventory, has
suffered from the resource
downturn and overbuilding in
some markets, but the decline
has been decelerating. Expect
more stability with possibly
some signs of recovery in late
2016. In the balance of the
country, market and financial
performance for the hotel
industry will be positive, but
moderate.
INVESTMENT Although many Alberta and

ACTIVITY WILL EXPAND Saskatchewan markets are
FROM A FOCUS ON experiencing RevPAR declines
ICONIC HOTELS TO approaching 10.0% relative to
PORTFOLIO AND last year, most other markets
SINGLE ASSET across the country have posted
TRANSACTIONS healthy RevPAR increases.
Downtown Vancouver is leading

the way at 19.0% year-to-date
as of September 2015, fueled
by both ADR and occupancy
growth.
The 6.6% increase in inbound
overnight trips to Canada

year-to-date as of August
2015, according to Statistics
Canada, and overall rising
demand will support strong
hotel operating fundamentals.
The low Canadian dollar will
continue to entice visitors,
especially from the U.S. and
Asian countries. Vancouver,
16
Toronto and Montreal, as well

as the resort sector, will be
the prime beneficiaries of this
trend; however, staycation
activity will also bolster hotel
demand throughout the
country, particularly in markets
with economic uncertainty like
Alberta.
In 2015, hotel investors were
able to choose from the most

diverse range of available
product in recent memory. The
variety of available product
enticed a deep buyer pool,
especially for properties under
$30.0 million, with overall
investment volume forecast to
reach $2.2 billion in 2015, a level
of activity not seen since 2007.
We expect the level of activity
and demand for all product
types to continue to be strong
in 2016.
The typical deal profile in 2016
will likely involve core markets

like Toronto and Vancouver, and
a continuation of bundled or
portfolio deals. Buyers will also
be keen to acquire hotel assets
in redevelopment and value-add
possibilities. There will also
be a diverse buyer pool, with
growing interest from private
equity and institutional buyers.
Strong investor demand is
creating downward pressure on

hotel cap rates in Vancouver,
Toronto and Montreal. In
Alberta, Saskatchewan and
other resource dependent
markets, declining hotel cash
flows have tempered cap rate
increases as investors look
towards revised, more moderate
performance levels.
H OT E L
HOTELS
17
market has been a hotbed of

investment activity in recent
years starting with the entry
of U.S. REITs and culminating
with a wave of consolidation,
including the Ontario Teachers
Pension Plan Board/BayBridge
purchase of Amica in 2015.
While it will be a challenge
for the market to match the
same volume of transactions in
2016, sellers may want to take
advantage of current pricing.
DUCT
PRO
CERTIFIED
The Canadian seniors housing
UTIONAL GR
T IT
A
DE
IN
S E N I O R S H O U S I N G S E C TO R
SENIORS HOUSING
While cap rate compression was
AMICA SALE REVEALS DEEP POOL OF

INVESTORS PURSUING SENIORS
HOUSING ASSETS
common for quality commercial

real estate assets across Canada
in 2015, seniors housing
recorded a remarkable 75-100
basis point drop in average cap
rates for the highest quality
assets. The sub-7.0% average
cap rate for Class A assets
signifies the fact that high
quality seniors housing is now
being viewed as an institutional
grade investment. Low cap rates
are likely to endure for quality
assets as long as the buyer pool
remains deep and liquidity is
maintained. The pricing gap
between Class A and Class B/C
assets will likely widen slightly
in 2016.
Recent movements in pricing
will result in a period of

price discovery in 2016 that
requires disciplined disposition
processes to identify optimal
buyers and to maximize pricing.
There is no indication that
the development cycle will

end in 2016, following a wave
of new supply in recent years.
While new construction
has historically focused on
lucrative high-end assets,
this market has become
increasingly competitive. There
are significant opportunities
for new projects offering midrange pricing and services, as
this segment of the market is
expected to grow in the coming
years.
Merchant developers will be
more active and will act as

a supply conduit for larger
operators. Discipline will be key
to maintaining balance in the
market. Construction will need
to be strategic and will likely
occur outside of core markets in
pockets with future potential to
intensify.
MONITOR RESIDENTIAL
MARKET CONDITIONS A
KEY DRIVER OF SENIORS HOUSING
DEMAND
18
S E N I O R S H O U SSENIORS
ING
HOUSING
19
REGIONAL OVERVIEWS
21
VANCOUVER
Western Canada will be a study
INDUSTRIAL AVAILABILITIES
> 100,000 sq. ft.
216
10-49,999 sq. ft.
32
50 - 99,999 sq. ft.
634
0-9,999 sq. ft.
INVESTORS ARE
CONSIDERING
UNCONVENTIONAL
LAND LEASES TO ADD
B.C. PROPERTIES TO
THEIR PORTFOLIOS
of contrasts. Albertas economy

and property fundamentals are
expected to struggle, while B.C.
will outperform in spite of, and
in part because of, Albertas
challenges. Investor and tenant
demand in the region will
continue to shift to B.C. in 2016
and the province is likely to
outperform from an economic
and commercial real estate
perspective.
The Vancouver office growth
story will continue to be largely

positive with leasing activity
likely to exceed expectations.
The market will continue to
work through the 2.4 million
sq. ft. of new supply that was
delivered in 2015. While vacancy
will remain slightly elevated,
an active tech sector along with
other professional services will
help mitigate softness in the
resource sector.
Vancouvers importance as a
port city and key part of the

increasingly sophisticated
supply chain was underscored
by the California port strikes
in 2015. The subsequent spike
in demand for industrial space
was unexpected and despite
significant new supply in 2015,
little is scheduled for delivery
in 2016. Expect availability to
tighten and construction starts
to climb in 2016 as developers
respond to demand.
Investors and developers will
continue to build strategies

around inner submarkets
like Strathcona and Mount
Pleasant. These transitional
nodes are gaining momentum
and their long-term potential
for intensification more than
justifies the high land costs and
zoning hurdles.
Insatiable investors and
available capital pushed

Vancouver property prices to
record highs and cap rates
to record lows. This trend
will carry over into 2016 as
long as owners are willing
to sell and remain open to
unsolicited offers. Foreign
capital, especially from Asia,
will continue to pursue prime
assets, but local buyers will
remain competitive in the face
of low cap rates and may drive
demand for suburban assets as
product becomes limited in the
core.
VANCOUVER
Projects to Watch
TSAWWASSEN MILLS
SHOPPING COMPLEX
THE EXCHANGE OFFICE

TOWER
Located at Highway 17 and 52nd Street on

Tsawwassen First Nation Lands, Ivanho
Cambridges Tsawwassen Mills will include
approximately 1.2 million sq. ft. of retail, with
16 anchors, a unique mix of premium fashion
brands, factory outlets, restaurants and first
to market retailers, as well as a 1,100-seat food
court. Construction began in January 2014
and will be complete in fall 2016.
Credit Suisses $200.0 million venture

into B.C. is a 31-story speculative, LEED
Platinum, state of the art office tower with
cutting edge technologies in Vancouvers
financial district. It is scheduled for delivery
in 2017.
DEVELOPMENT OF
DOWNTOWN FRINGE, THE
MOUNT PLEASANT AND
BROADWAY CORRIDOR
Zoning changes have expedited the
transformation of these areas while
opening the door for a broader range of user
groups.
www.theexchangebuilding.ca
http://www.tsawwassenmills.ca/faq
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
6.8%
9.9%
9.8%
$31.77
$33.85
$33.50
(0.09)
0.89
0.14
4.75-5.25
4.25-5.00
Class A Cap Rate (%)
4.25-5.00
Availability Rate
2014
2015 F
2016 F YoY
7.0%
5.9%
6.0%
$8.06
$8.26
$8.45
$199.00
$231.90
$235.29
1.40
4.75
2.33
0.09
1.75
0.11
Class A & B Cap Rate (%)
2.09
0.47
0.71
2.41
3.03
2.58
1.96
3.93
1.35
Vacancy Rate
13.4%
13.2%
12.6%
$23.44
$21.87
$20.45
0.42
0.61
0.39
2014
2015 F
2016 F YoY
1.0%
0.8%
1.0%
Suburban

5.75-6.50 5.25-6.25 5.25-6.25
0.84
0.65
0.29
1.04
0.61
0.32
5.25-6.25 5.00-6.25 5.00-6.25
MULTIFAMILY
Apartment Cap Rate (%)
Overall
4.25-4.75 4.25-4.75 4.25-4.75

*Source: Canada Mortgage and Housing Corp., CBRE Limited.
Vacancy Rate
10.1%
11.5%
11.2%
$24.93
$27.10
$26.21
0.33
1.51
0.53
INVESTMENT
0.93
2.40
0.39
2014
2015 F
2016 F
3.13
1.08
1.03
Office
$434
$477
$1,630
Industrial
$814
$910
$956
RETAIL
Retail Sales (YoY)*
Neighbourhood Cap Rate (%)
2014
2015 F
2016 F YoY
6.9%
8.7%
4.6%
5.50-6.00 5.00-5.75 5.00-5.75
YoY
Retail
$886
$1,108
$1,163
Multifamily
$533
$950
$998
ICI Land
$438
$789
$500
Hotel*
$216
$511
$250
$3,321
$4,744
$5,496
Total
*Market and surrounding region
23
CALGARY
HIGH CONCENTRATION,
HIGH IMPACT Energy jobs as
percentage of
total workforce
5.5%
HOUSTON
1.1%
8.5%
DALLAS
1.1%
DENVER
50%
30%
10%
CALGARY
TENANTS
FEEL THE HEAT
SUBLET
PERCENTAGE
OF VACANT
SPACE COULD
TOP 50%
CALGARY HAS
THE 7TH
LOWEST
INDUSTRIAL
AVAILABILITY
RATE IN NORTH
AMERICA
24
The confidence within Calgarys

local business community has
only faltered slightly despite
the second largest drop in
oil prices in history and
the second most protracted
decline. The prevailing opinion
is that the market is facing a
man-made downturn in oil
prices, not a structural shift
that would undermine longterm investments. In 2016,
supply and demand dynamics,
including OPEC decisions,
will provide additional clarity
and allow tenants, owners
and investors to act with more
certainty.
While an anticipated rebound
in oil prices would put a floor

under office fundamentals,
capital expenditure and job cuts
are mounting. For 2016, this
will translate into a continued
rise in office vacancy rates, both
downtown and in the suburbs,
with an anticipated peak in
Q3 2016. It appears that the
bulk of downsizing has already
occurred which will allow the
pace of vacancy rate increases
and rental rate declines to slow.
There is good news in the
TH
Calgary marketplace. Even

within a challenged office
sector, accountants and law
firms remain active, and
engineering companies
are expected to benefit
from increased provincial
infrastructure spending. The
hotel and resort sectors are
also posting strong numbers
as Albertans vacation closer to
home and tourism from the U.S.
increases.
Leasing activity in Calgarys
industrial market has slowed,

but this sector has been
more resilient and reflects
the continued maturation
of Calgary as a distribution
and logistics hub for Western
Canada. Third party logistics
companies and distribution
activity will continue to act as
a hedge against the oil and gas
sector. Industrial construction
activity will also benefit from
a decline in construction costs
that is expected in 2016.
After a lean 2015, investment
volumes are likely to be

somewhat higher in 2016 as
there will be more clarity
around economic and energy
price forecasts. Smaller assets
from all property types are
likely to make up the bulk
of transaction activity, with
grocery anchored shopping
centres particularly in demand.
Lenders will be encouraged by
more realistic underwriting.
CALGARY
Projects to Watch
STONEY TRAIL/
CALGARY RING ROAD
ALBERTAS OIL AND GAS

ROYALTY REVIEW
Construction of the southwest portion

of the ring road, scheduled to begin in
2016, will bring Calgary one step closer
to completing the 100 km highway. The
development will further unlock real estate
by providing access to land that is currently
only accessible via side roads and circuitous
routes.
Although the province has indicated it will

hold off implementing changes until 2017,
any modification to the detriment of the oil
and gas sector will negatively impact the
ability to attract and retain business.
www.energy.alberta.ca
www.transportation.alberta.ca
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
9.8%
16.3%
18.4%
Availability Rate
$33.03
$23.89
$18.81
0.52
(1.94)
(0.32)

5.50-6.00 6.00-6.50 6.00-6.50
2014
2015 F
2016 F YoY
4.7%
8.3%
8.2%
$8.40
$7.35
$7.25
$185.00
$176.00
$170.00
3.71
(0.43)
1.69
0.84
0.82
0.62
3.83
3.01
2.39
1.64
4.45
1.78
4.62
1.43
0.35
Vacancy Rate
13.1%
17.5%
17.7%
$25.59
$23.12
$18.20
0.60
(0.20)
0.30
5.75-7.25
6.00-7.75
6.25-7.75
2014
2015 F
2016 F YoY
0.98
0.90
0.44
1.4%
3.5%
3.7%
1.31
1.69
1.36
Vacancy Rate
11.0%
16.7%
18.1%
Suburban

5.25-6.75 5.50-7.00 5.50-7.00
MULTIFAMILY
Overall
4.25-4.75 4.50-5.00 4.50-5.00

INVESTMENT
$29.76
$23.59
$18.59
1.12
(2.14)
(0.03)
1.82
1.72
1.06
2014
2015 F
2016 F
YoY
5.14
4.70
3.75
Office
$709
$105
$267
Industrial
$639
$399
$432
RETAIL
Retail Sales (YoY)*
2014
2015 F
2016 F YoY
7.0%
(0.7%)
2.7%
5.50-6.00 5.25-5.75 5.00-5.75
Retail
$401
$299
$323
Multifamily
$202
$206
$144
ICI Land
$439
$332
$167
Hotel*
$148
$156
$80
$2,539
$1,497
$1,413
Total
25
E D M O N TO N
Edmonton, much like
$71.0 BILLION OF PROJECTS ARE

UNDER CONSTRUCTION ACROSS
ALBERTA
Calgary, is confronting
repriced oil and gas. The two
markets have weathered the
downturn differently and
their performance will vary
in 2016. Edmontons property
fundamentals will largely
outperform those in Calgary.
Both Edmonton and Calgary
INVESTORS WILL
HOLD ON TO CORE
ASSETS
face challenges in their

downtown office markets, but
Edmontons difficulties stem
from pending oversupply and
limited absorption in the core.
Expect the Edmonton office
tenant base to remain relatively
stable in 2016; however, new
leasing activity will be soft as
tenants wait for 1.8 million
sq. ft. of new supply to come
online downtown by 2018
before making any longer term
commitments.
Office property owners will
PRICING WILL REMAIN A

CHALLENGE DUE TO
THIN TRADING
26
Industrial property
fundamentals should benefit

from the fact that new supply
will drop by 50.0% in 2016.
Small bay properties will still
be in demand, while Class B
distribution properties will see
less activity. There will be a
flight to quality as new product
is delivered to the market,
which will occur at the expense
of less functional real estate.
Investment volume is unlikely
to change dramatically
in 2016 unless economic
conditions change significantly.
Institutional owners of office
space will face rental rate
erosion and there will be no
significant influx of quality
product for sale. Demand
will continue to be strong for
Class A industrial, retail and
multifamily properties, but
supply will be limited.
need to deploy stronger asset

management strategies as
the office market adjusts to
new supply. In this tenants
market, expect inducements to
increase as office users are in
a position of strength in lease
negotiations.
E D M O N TO N
Projects to Watch
EDMONTON ARENA DISTRICT
ANTHONY HENDAY RING ROAD EDMONTON LRT VALLEY LINE
This multi-billion dollar project by

Katz Group of Companies and WAM
Development Group spans 25.0 acres of
office, retail, hospitality, residential and
hotel properties revamping Edmontons
urban core.
The north east quadrant of Edmontons

main ring road is scheduled to be
completed by October 2016. When
complete, Anthony Henday Drive will total
78.0 km and provide seamless access to
surrounding arterial highway to enhance
market access for all industrial products.
www.ead.ca
www.northeastanthonyhenday.com
The 27.0 km Valley Line runs east to west,

linking Mill Woods to Lewis Estates. With
approval and funding in place for the 13.0
km leg from Downtown to Millwoods,
construction will commence in 2016
and is scheduled to be complete by 2020.
Densification along the line may attract
employees to work downtown.
www.edmonton.ca/SEtoWestLRT
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
10.0%
10.7%
17.5%
Availability Rate
$24.05
$23.90
$21.61
(0.04)
(0.14)
(0.06)
6.25-6.75 6.25-6.75 6.25-6.75
2014
2015 F
2016 F YoY
3.8%
7.8%
8.2%
$11.13
$11.20
$10.80
$144.09
$145.14
$123.37
3.64
(0.40)
1.13
0.00
0.00
1.17
1.42
1.78
0.60
2.87
4.19
1.74
2.68
1.74
0.25
Vacancy Rate
13.3%
14.5%
14.1%
$19.90
$20.99
$20.36
0.21
0.01
0.15
6.75-7.75
6.75-7.75
2014
2015 F
2016 F YoY
0.41
0.18
0.13
1.7%
3.0%
3.5%
0.38
0.28
0.16
Vacancy Rate
11.3%
12.2%
16.2%
$22.28
$22.52
$21.19
0.17
(0.12)
0.09
INVESTMENT
Suburban

6.75-7.75
MULTIFAMILY
Overall
5.50-7.00 5.50-7.00 5.50-7.00
5.00-5.50 4.75-5.25 4.75-5.25

0.41
0.18
1.30
2014
2015 F
2016 F
1.80
2.06
0.76
Office
$213
$62
$50
Industrial
$219
$83
$110
RETAIL
Retail Sales (YoY)*
2014
2015 F
2016 F YoY
6.9%
(1.1%)
2.7%
5.75-6.25 5.75-6.25 5.75-6.25
YoY
Retail
$262
$76
$140
Multifamily
$270
$395
$350
ICI Land
$817
$532
$450
Hotel*
$40
$35
$70
$1,820
$1,183
$1,170
Total
27
WINNIPEG
OVER A
BARREL
OIL
OILS IMPACT VARIES

ACROSS CANADIAN PRAIRIES
Winnipeg may not offer Alberta
boom times or the scale of

Vancouver or Toronto, but
when the tide goes out in other
markets, tenants and investors
are reminded of the stability
that characterizes Winnipeg.
Winnipegs appeal will likely
increase in 2016 due to its
relative economic resilience and
steady growth trajectory.
Winnipeg is one of the few
TOP 3
WINNIPEG HAS ONE OF
THE HIGHEST GDP GROWTH
RATES IN CANADA
office markets in Canada

where there is no downtown
office construction; however,
expect there to be more clarity
around proposed Class A
office construction projects in
2016. Tenant desire for quality
space and investors needing
to place capital has resulted in
significant office construction
cycles in other Canadian
cities and may spur new office
construction in Winnipeg as
well.
Traditionally, commercial
property in Winnipeg is tightly

held by long-term owners.
Investors have recently had a
rare opportunity to acquire
assets in Winnipeg as a result
of portfolio rebalancing and
generational turnover. Property
availability is expected to persist
and spur investment activity,
but investors will have to act
quickly when opportunities
arise in 2016 as demand is
expected to keep pace.
The 2016 investment volume

will be healthy and similar
to 2015 when the market
experienced an uptick in the
number of transactions.
Low energy prices and
DOWNTOWN REVITALIZATION
EFFORTS HAVE HAD SUCCESS,
BUT WILL AMBITIOUS NEW
PROJECTS TAKE SHAPE?
28
favourable exchange rates

are bolstering the Winnipeg
industrial market, especially
the manufacturing sector. Large
orders at New Flyer, a Winnipeg
based bus manufacturer, are
a harbinger of medium-term
industrial activity and property
demand. Construction of
modern industrial buildings,
with high ceiling heights and
efficient column spacing, will
also increase as new land is
prepared for development.
WINNIPEG
Projects to Watch
RBC CONVENTION CENTRE
SEASONS WINNIPEG
This $180.0 million project in downtown

Winnipeg will provide an additional
100,000 sq. ft. of multi-purpose space on
top of the existing 160,000 sq. ft. venue. The
expansion will meet LEED Silver standards
and will be the fourth largest publicallyowned convention centre in Canada.
Completion is scheduled for early 2016.
Positioned as Central Canadas premiere

shopping centre, this mixed-use
development will include residential
components, open air strip centres, an
enclosed outlet mall, two luxury car
dealerships and a hotel. Outlet Collection at
Winnipeg will be the citys first pure outlet
centre when it opens in spring 2017.
http://www.wcc.mb.ca/expansion-2016
http://seasonswinnipeg.ca/leasing
CENTREPORT CANADA
WATER TREATMENT FACILITY
Development of a new water treatment
facility within Centreport will enable
servicing of residential, industrial and
mixed-use land, and increase the velocity of
development within CentrePort. The facility
is expected to be operational in early 2016.
www.centreportcanada.ca
Market Statistcs
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
9.9%
11.7%
11.2%
Availability Rate
$17.17
$17.58
$17.60
0.08
(0.09)
0.04
5.50-6.00 5.50-6.00
5.25-5.75

2014
2015 F
2016 F YoY
4.5%
4.8%
4.6%
$6.90
$7.34
$6.84
$87.06
$86.70
$89.14
(0.19)
(0.16)
0.29
0.00
0.08
0.00
0.08
0.00
0.00
0.16
0.10
0.15
0.14
0.08
0.00
9.2%
13.3%
n/a
n/a
0.14
(0.12)
6.50-7.50
6.50-7.50
6.50-7.50
2014
2015 F
2016 F YoY
0.00
0.00
0.00
2.5%
2.8%
3.0%
0.00
0.00
0.00
Vacancy Rate
9.7%
12.1%
11.6%
Suburban
Vacancy Rate
12.8%
n/a
0.01
Overall
6.00-7.50 6.00-7.00 5.75-6.75
MULTIFAMILY
5.00-5.75 5.00-5.75 5.00-5.50

$17.17
$17.58
$17.60
0.22
(0.20)
0.05
0.00
0.08
0.00
0.08
0.00
0.00
2014
2015 F
2016 F YoY
4.9%
2.0%
4.0%
RETAIL
Retail Sales (YoY)*
6.50-7.00 6.50-7.00 6.50-7.00

29
LO N D O N & K I TC H E N E R-W AT E R LO O
THINKING
SMALL COULD
HAVE A BIG
REAL ESTATE
IMPACT.
QUANTUM
NANOTECHNOLOGY
EMERGES AS
GROWTH SECTOR IN WATERLOO
REGION
LAND IS IN
DEMAND,
BODES WELL FOR
FUTURE GROWTH
In recent years, it has been
difficult to speak about

Southwestern Ontario as a
homogenous region, but both
London and Kitchener-Waterloo
will exhibit healthy leasing
and investment activity as 2016
unfolds, which is consistent
with positive momentum across
the regional economy.
Waterloo and London will
continue to see signs of

intensification in 2016 and new
development and investment
will revolve around this trend.
In Waterloo, the LRT is closer
to the 2018 completion date,
while Londons affordable core
with ample parks and amenities
is appealing to retirees and
spurring the construction of a
new 35-storey condo.
The industrial sector is one
LOCAL DEVELOPERS SPUR

MOST
CONSTRUCTION
IN THREE YEARS
30
of the most active parts of

the market, but a very modest
amount of this activity can be
tied to favourable exchange
rates. The market has retooled
since 2008 and industrial
decision making criteria in
2016 will largely be the same
as in the prior year when the
Canadian dollar was much
higher. There is limited
availability of industrial
properties >50,000 sq. ft. for
sale or lease in London, while
Waterloo is attracting industrial
tenants as an affordable
alternative to Milton and
Mississauga in the western edge
of the GTA.
Waterloo will continue to attract

and foster the development of
innovative businesses. Expect
significant announcements,
similar to the recent Shopify
expansion, which will result
in office absorption in 2016.
Londons office market will
experience a modest recovery
thanks to a growing tech sector,
which will be led by gaming
company expansions.
Waterloo Region will outpace
London in terms of overall

investment activity, but both
markets will post healthy
volumes. The region will benefit
as investors look for alternative
destinations outside of Alberta
and Asian capital will also have
an impact, albeit from mid-tier
investors. 2016 will not be a year
of large trades and instead will
be characterized by mid-market
activity.
LO N D O N & K I TC H E N E R-W AT E R LO O
Projects to Watch
TRANSITION OF LONDONS
SOHO DISTRICT
WATERLOO
REGIONAL LRT
REDEVELOPMENT OF
VICTORIA HOSPITAL
Planning constraints in the citys core

combined with increased demand for
creative space in heritage buildings
continue to rejuvenate Londons SOHO
district.
Demand is expected to be high and

retrofitting will take place around LRT
stations, in particular the Columbia Street
nodes which are located on the edge of
University of Waterloo.
The development community will get

clarity around the possibilities for the new
riverfront development south of Londons
downtown core. This will be the most
significant development opportunity in
London for the next decade.
www.rapidtransit.regionofwaterloo.ca
Market Statistics
OFFICE
Central
INDUSTRIAL
London
Kitchener/Waterloo
2015 F 2016 F YoY
2015 F 2016 F YoY
London
Vacancy Rate
15.5%
14.5%
10.0%
9.3%
Availability Rate
Class A Net Rental Rate (PSF)
$14.00
$14.00
$11.84
$11.75
Net Rental Rate (PSF)
0.06
0.07
Absorption (MSF)
0.05
0.04
6.50-7.50 6.50-7.50 6.00-7.00 6.00-7.50
Sale Price (PSF)
Kitchener/Waterloo
2015 F
2016 F YoY
2015 F
2016 F YoY
11.2%
9.9%
6.1%
6.1%
$4.15
$4.25
$5.07
$4.85
$65.00
$65.00
$65.04
$68.25
0.60
(0.23)
0.27
Absorption (MSF)
1.17
New Supply (MSF)
0.03
0.00
0.00
0.04
Under Construction (MSF)
0.00
0.00
0.05
0.15
New Supply (MSF)
0.16
0.10
0.61
0.33
0.10
0.20
0.33
0.43
Suburban
Vacancy Rate
Absorption (MSF)
9.0%
9.5%
n/a
n/a
0.10
0.05
12.0%
10.6%
$14.55
$14.50
0.05
0.13
0.09
0.07
0.13
0.00
0.07
0.09
0.00
0.22
Vacancy Rate
14.1%
13.4%
11.3%
10.1%
$14.00
$14.00
Overall
$13.69
$13.59
Absorption (MSF)
0.16
0.10
0.11
0.20
New Supply (MSF)
0.12
0.07
0.13
0.04
0.07
0.09
0.05
0.37
RETAIL
London
2015 F
Retail Sales (YoY)*
MULTIFAMILY
London
7.50-8.50 7.50-8.50 6.50-7.00 6.50-7.00
New Supply (MSF)
n/a
2016 F YoY
n/a
Kitchener/Waterloo
2015 F
n/a
2016 F YoY
n/a
Neighbourhood Cap Rate (%) 6.75-8.00 6.75-8.00 6.00-6.50 6.25-6.75
7.50-9.00 7.50-9.00 6.00-7.50 6.00-7.50

Kitchener/Waterloo
2015 F
2016 F YoY
2015 F
2016 F YoY
2.7%
2.7%
2.7%
2.8%
5.25-6.25 5.25-6.25 5.25-6.00 5.25-6.00

INVESTMENT
London
Transactions ($ M)
Office
Kitchener/Waterloo
2015 F
2016 F
YoY
2015 F
2016 F
YoY
$15
$30
$35
$43
Industrial
$25
$28
$185
$164
Retail
$30
$65
$141
$145
Multifamily
$70
$100
$133
$140
ICI Land
$15
$15
$19
$20
Hotel*
$55
$25
$21
$22
Total
$210
$263
$535
$533
31
TO R O N TO (Office)
AS VACANCY RISES, TENANTS
WILL HAVE MORE
NEGOTIATING
POWER
The 3.7 million sq. ft. of
LANDLORDS
T ENAN T S
downtown office space

scheduled for completion by late
2017 will face an unprecedented
rate of technological change
and the continued evolution of
workplace strategies. State of
the art buildings and existing
office stock will be challenged
to anticipate change and remain
competitive.
OFFICE
Expect a change in the
INDUSTRIAL
DECOUPLING USES WILL INCREASE

SUBURBAN OFFICE DEMAND
This trend will drive suburban office

demand in 2016
composition of preleasing
activity for the next office
construction cycle. With the
largest office tenants in the
market currently committed
to leases and office occupiers
moving towards more efficient
footprints, the next wave of
office towers will likely be built
with the backing of a mix of
larger tenants as opposed to
the traditional anchor or single
tenant.
New supply will continue to put

KING
Suburban and downtown
office vacancy rates will show

the greatest disparity in over
20 years in 2016; however,
the rising cost of downtown
office space combined with
enhanced regional transit and
household formation amongst
the Generation Y cohort, could
spur more economic activity
and demand for office space in
densifying areas of the suburbs.
A new phenomenon called
industrial decoupling will also

serve as a driver of demand for
suburban office space. Once
housed together, companies
are separating their industrial
and office uses and moving
the office component to more
traditional suburban office
nodes. Expect this trend
to continue as industrial
companies place office
employees in more appropriate
premises.
upward pressure on vacancy

rates in 2016; however, new
office buildings are expected to
be at least 80.0% leased upon
completion. Existing buildings
with vacant space to backfill
will feel pressure to complete
major upgrades and attract new
tenants that can replace lost
revenue. This is an opportunity
for the historical financial core
to reinvigorate itself.
ST
T
BAY S
T ST
FRON
OFFICE ACTIVITY CONTINUES TO

SHIFT TO THE SOUTH CORE
32
TO R O N TO (Office)
Projects to Watch
VAUGHAN METROPOLITAN
CENTRE (VMC)
METROLINX EGLINTON
CROSSTOWN LINE
BAY PARK CENTRE

DEVELOPMENT
This 442.0 acre area will continue to

be developed to include office, retail,
residential opportunities and a subway
connection, which will be completed in
2017. The KPMG Tower office development
is expected to be completed in 2016.
The Eglinton Crosstown Light Rail Transit

is a $5.3 billion investment that will run
across Eglinton Avenue between Mount
Dennis (Weston Road) and Kennedy
Station. It is part of a consolidated effort
to integrate transportation in the Greater
Toronto Area. The project will be complete
in 2021.
This Ivanho Cambridge project consists of

two office buildings and retail space, along
with a new GO Bus Terminal in partnership
with Metrolinx. Watch for a significant
pre-leasing announcement and the
commencement of construction in 2016.
www.vaughan.ca
www.ivanhoecambridge.com
www.thecrosstown.ca
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
5.9%
6.0%
7.1%
$28.41
$29.02
$30.47
1.68
0.22
1.31
5.25-5.75
4.75-5.25
4.50-5.00
1.59
0.29
2.39
3.47
3.74
1.35
5.83
4.58
5.44
7.00
7.21
5.02
Vacancy Rate
13.8%
16.0%
17.0%
$17.09
$17.30
$17.30
(0.18)
(0.78)
(0.30)
2014
2015 F
2016 F YoY
1.6%
1.7%
1.9%

Suburban
5.75-7.75 5.50-6.75 5.30-6.55
0.39
1.07
0.51
2.49
1.29
0.78
9.5%
10.7%
11.7%
$20.68
$20.81
$21.61
1.50
(0.56)
1.01
Availability Rate

2015 F
2016 F YoY
4.4%
4.1%
4.3%
$5.19
$5.33
$5.89
$88.45
$110.00
$112.50
5.57
6.90
3.60
5.25-7.50 5.00-7.50 5.00-7.00
MULTIFAMILY
Overall
Vacancy Rate
2014
4.50-5.25 4.63-4.88 4.43-4.68

INVESTMENT
1.97
1.36
2.90
2014
2015 F
2016 F
YoY
5.96
5.03
2.13
Office
$3,051
$3,337
$2,485
Industrial
$2,190
$1,827
$2,270
Retail
$2,616
$1,979
$1,704
Multifamily
$1,176
$1,603
$998
ICI Land
$1,426
$1,035
$1,226
Hotel*
$323
$754
$500
$10,784
$10,533
$9,183
RETAIL
Retail Sales (YoY)*
2014
2015 F
2016 F YoY
6.2%
3.2%
4.5%
5.50-6.50 5.63-5.75 5.43-5.55
Total
33
TO R O N TO (Industrial)
With one of the lowest
LABOUR
AND SUPPLY
industrial availability rates in
CHAIN
North America, the Greater
EFFICIENCY
Toronto Area (GTA) is likely
WILL BE KEY
to record an increase in
FACTORS IN
speculative construction activity
INDUSTRIAL REAL
in 2016; however, speculative
ESTATE DECISIONS
NEW RECORD
INDUSTRIAL
SALE PRICES
AND RISING
LEASE RATES
GO
WEST!
MILTON AND
GUELPHS
INDUSTRIAL
PROSPECTS
ARE ON
THE RISE
development yields no longer

provide as large a premium for
the risk the builders assume due
to rising development charges
and increased construction
costs.
The owner-user sale market
is coming off one of the most

competitive years on record.
A lack of product, rising
construction costs and readily
available financing are expected
to continue in 2016 and
produce another year of heated
competition amongst buyers.
For investors, high demand to
place equity in the industrial
sector is likely to force cap rates
to new benchmark lows.
In order to accommodate
ecommerce needs around

speed to market, there will be
increased demand for industrial
properties <50,000 sq. ft. within
a twenty minute drive of the
downtown core; however,
limited functional offerings
in South Scarborough, South
Etobicoke and North York will
force users to be creative with
their site selection criteria and
approach.
Leasing, investment and
construction activity in the

west end will outpace the rest
of the region. This area benefits
from the presence of superior
transportation infrastructure
and intermodal facilities, while
those with an eye to the future
anticipate highway widening
and new routes in the coming
decade.
Retailers will continue to
be the driving force behind

distribution centre activity in
2016. Consumers are not buying
more products as much as
they are purchasing products
differently through the omnichannel network concept.
Therefore, as the ecommerce
component of distribution
networks evolve, so too will
retailers industrial footprint.
34
TO R O N TO (Industrial)
Projects to Watch
DEVELOPMENT OF NEW 400
SERIES HIGHWAYS
INFILL DEVELOPMENTS IN
CORE MARKETS
CN INTERMODAL AND
LOGISTICS HUB IN MILTON
New highway construction and extensions

on existing highways will directly impact
land purchases and drive industrial users
to consider new markets.
Expect activity on older industrial facilities

in close proximity to core urban markets.
Cartteras HBC infill development and
the CP/Dream land development are two
examples of the trend to revitalize older
stock.
The $250.0 million intermodal and logistics

hub adjacent to its main line in the Town of
Milton will facilitate logistics development
while attracting more warehousing
distribution centres and employment.
www.mto.gov.on.ca
www.cn.ca
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
5.9%
6.0%
7.1%
$28.41
$29.02
$30.47
1.68
0.22
1.31
5.25-5.75
4.75-5.25
4.50-5.00
1.59
0.29
2.39
3.47
3.74
1.35
5.83
4.58
5.44
7.00
7.21
5.02
Vacancy Rate
13.8%
16.0%
17.0%
$17.09
$17.30
$17.30
(0.18)
(0.78)
(0.30)
2014
2015 F
2016 F YoY
1.6%
1.7%
1.9%

Suburban
5.75-7.75 5.50-6.75 5.30-6.55
0.39
1.07
0.51
2.49
1.29
0.78
9.5%
10.7%
11.7%
$20.68
$20.81
$21.61
1.50
(0.56)
1.01
Availability Rate

2015 F
2016 F YoY
4.4%
4.1%
4.3%
$5.19
$5.33
$5.89
$88.45
$110.00
$112.50
5.57
6.90
3.60
5.25-7.50 5.00-7.50 5.00-7.00
MULTIFAMILY
Overall
Vacancy Rate
2014
4.50-5.25 4.63-4.88 4.43-4.68

INVESTMENT
1.97
1.36
2.90
2014
2015 F
2016 F
YoY
5.96
5.03
2.13
Office
$3,051
$3,337
$2,485
Industrial
$2,190
$1,827
$2,270
Retail
$2,616
$1,979
$1,704
Multifamily
$1,176
$1,603
$998
ICI Land
$1,426
$1,035
$1,226
Hotel*
$323
$754
$500
$10,784
$10,533
$9,183
RETAIL
Retail Sales (YoY)*
2014
2015 F
2016 F YoY
6.2%
3.2%
4.5%
5.50-6.50 5.63-5.75 5.43-5.55
Total
35
OT TA W A
Welcome
to Ottawa 2016:
A year of discovery
L
C
NDP
22%
Downtown Ottawa will continue

the process of redefining itself
in 2016 and beyond. Much like
the suburban office market
struggled for a decade following
the burst of the tech bubble, the
downtown office market will
need to adjust as the federal
government rationalizes and
upgrades its office footprint.
The downtown economy and
office tenant base will need to
gradually diversify and bring
the downtown vacancy rate into
balance.
WINDS OF
POLITICAL CHANGE
COULD HAVE
IMPLICATIONS FOR
COMMERCIAL
The federal government
PROPERTY IN
continues to be the dominant
OTTAWA
reduction in total space is

only 10% complete
WORKPLACE 2.0 COULD
REDUCE THE FEDERAL
GOVERNMENT OFFICE
FOOTPRINT BY UP TO 1.8
MILLION SQ. FT. IF FULLY
IMPLEMENTED
force in Ottawa and the recent

change in government has given
the public service a renewed
sense of optimism. It remains
to be seen if the government
office footprint will continue to
decrease. A drastic change in
course is not expected in 2016
as it will take the government
time to implement new policies.
The Kanata office market,
with the support of a healthy

technology sector, will continue
to be a dominant force in
the leasing market. Kanata
represents approximately 14.0%
of Ottawas office inventory, yet
accounted for 39.0% of total
deal velocity through Q3 2015.
Expect Kanata and the tech
sector to remain active in 2016.
is not easily rectified and the

industrial sector will need to be
rewired to facilitate growth in
new areas over the long term.
Retail market activity will
focus on upgrades and growth

of Ottawas regional shopping
centres, including the expansion
and renovation of CF Rideau
Centre and Bayshore Shopping
Centre. The recent addition of
a Nordstrom and completion
of the Tanger Outlet reflect
the vibrancy of Ottawas retail
market and high disposable
incomes in this market.
Ottawa will attract investors
looking to diversify their

real estate holdings. Ottawa
is poised for an active sales
market as opportunistic office
owners attempt to maximize
property values and investors
seek to make strategic long-term
bets on the nations capital.
Additionally, value-driven
buyers will attempt to capitalize
on opportunities to reposition
obsolete office buildings. Retail
and multifamily property
will also be sought after by
investors, while industrial
trading activity is expected to be
muted.
Ottawas industrial sector
will continue to face growth

constraints in the east end.
With 40.0% of industrial space
located in the Belfast-Sheffield
industrial area, less than 2.0%
of land in that area is available
for development. This situation
36
OT TA W A
Projects to Watch
WESTBORO CONNECTION
(319 MCRAE AVENUE)
CIENA CANADA EXPANSION

IN KANATA
LEBRETON FLATS
REDEVELOPMENT
This mixed-use development located in

Ottawas west-end embodies the live,
work, play model and features 116,304 sq.
ft. of office space, 32,165 sq. ft. of retail
space, and 141 rental apartment units. The
building will be completed at the close of
Q4 2015 and tenants will take possession in
January 2016.
In late 2014, Ciena firmed up a 13-year

lease deal at 5050 Innovation Drive
totaling 170,500 sq. ft. The site was built
for Blackberry and was sold to Spear
Street Capital and subsequently sold
to Crestpoint. Ciena has kicked off two
new office buildings on the adjacent site
Building B will be ~152,000 sq. ft. and
Building C will be ~102,000 sq. ft.
The National Capital Commission (NCC)

has pre-qualified four groups to propose
plans for the redevelopment of LeBreton
Flats. Among these is a proposal from the
Ottawa Senators to build a major sporting
and event centre.
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
8.8%
9.3%
9.5%
$24.20
$23.00
$23.00
0.09
(0.11)
(0.04)

5.25-6.00 5.25-6.00 5.25-6.00
Availability Rate
2014
2015 F
2016 F YoY
6.4%
6.6%
6.6%
$8.83
$8.75
$8.70
$126.17
$130.81
$135.00
0.28
0.15
0.08
0.42
0.00
0.00
0.00
0.00
0.00
0.26
0.23
0.07
0.17
0.06
0.06
Vacancy Rate
10.4%
11.2%
11.4%
$16.51
$16.20
$16.25
0.06
(0.09)
0.06
6.25-7.75
6.75-7.25
6.90-7.40
2014
2015 F
2016 F YoY
0.29
0.17
0.10
2.6%
2.3%
2.0%
0.19
0.21
0.32
9.6%
10.3%
10.5%
Suburban

MULTIFAMILY
Overall
Vacancy Rate
6.00-7.50 6.25-6.75 6.25-6.75
4.75-5.50 4.75-5.50 4.75-5.50

$19.44
$19.04
$19.07
0.16
(0.20)
0.02
INVESTMENT
0.71
0.17
0.10
0.19
0.21
0.32
Office
Industrial
RETAIL
Retail Sales (YoY)*
2014
2015 F
2016 F YoY
4.7%
2.6%
3.3%
6.25-7.00 6.00-6.75 6.00-6.75
2014
2015 F
2016 F
YoY
$261
$261
$325
$78
$139
$145
Retail
$152
$101
$140
Multifamily
$397
$359
$335
ICI Land
$98
$335
$325
Hotel*
$84
$33
$158
$1,071
$1,227
$1,428
Total
37
MONTREAL
THE CITY OF MONTREAL HAS

ALLOCATED $1.5 BILLION
TO ROAD REPAIR
OVER THE
NEXT THREE
YEARS
URBAN POPULATION GROWTH

ACCELERATION
Population growth within a 1.0 km radius
of Peel and Rene Levesque West
TOWN MONTR
EA
2010 36,189
2015 42,956
2020 49,471
38
The local industrial economy
The office sector will have 2016
As for investment dynamics,
and public sector investment

and an improving economic
outlook will help Montreal to
continue on its path to renewal.
As construction across the
region suggests, the city is
a work in progress, but the
groundwork is being laid for a
bright future.
THE CHAMPLAIN BRIDGE AND

TURCOT INTERCHANGE ARE
HELPING TO MODERNIZE
MONTREAL
N
OW
In 2016, the alignment of private
to digest the vacant space in

two downtown office towers
that have been completed as
part of the ongoing 1.5 million
sq. ft. development cycle. Three
office buildings are slated for
completion in 2017, Manulife,
Desjardins, and LAvenue,
which makes economic growth
and preleasing in 2016 all the
more important. Despite an
increase in office vacancy rates
due to new supply, the new
stock of modern office towers is
essential for Montreal to remain
a competitive destination for
businesses and be a worldclass city. As for the suburban
office markets, they may
benefit as U.S. companies seek
out competitive labour and
occupancy costs.
continues to be dominated by
demand for distribution space,
as retailers pursue supply chain
enhancements. Downtown
street front retail remains
dynamic as more international
retailers move in to fill
vacancies left by some local
retailers who have struggled.
Montreal will gain further
attention as competition for
core assets in Vancouver and
Toronto has become intense.
Comparatively reasonable
pricing and relative economic
stability should attract investors
to Montreal in 2016. In the
absence of trophy assets, expect
more Class B and C properties
to trade hands.
Montreal continues to rapidly
densify as it plays catch-up with

other major Canadian cities
in this regard. Griffintown
and the area around the Bell
Centre remain examples of this
process as condo and apartment
development support a growing
urban population.
MONTREAL
Projects to Watch
ROYALMOUNT
RETAIL PROJECT
PRIVATE SECTOR
INVESTMENT
The $1.7 billion project located at the

intersection of Highways 15 and 40 offers
1.6 million sq. ft. of retail, 900,000 sq. ft. of
restaurants and theatres, 1.5 million sq.
ft. of office and two hotels. This has the
potential to capture retailers from other
Midtown locations like Rockland Centre.
Significant private companies are

committed to building new corporate
headquarters. Ericsson and ABB will be
active in the suburbs, while Manulife and
Desjardins will be active downtown.
VACANCY AT THE ROYAL

VICTORIA, CHILDRENS AND
SHRINERS HOSPITALS
Situated on prime downtown real estate,
these three sites have the potential to
become part of the new urban fabric of
Montreal.
http://www.carbonleo.com/en/project/royalmount-3/
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
10.4%
10.7%
10.4%
Availability Rate
$22.36
$23.45
$24.00
(0.62)
0.30
0.15
6.00-6.50 5.50-6.00
5.25-5.75


2014
2015 F
2016 F YoY
7.0%
7.5%
7.1%
$5.18
$5.29
$5.23
$61.68
$65.95
$68.00
3.91
0.88
2.22
0.37
0.50
0.00
0.58
0.75
0.75
1.37
2.67
1.31
1.72
0.33
0.30
Vacancy Rate
16.3%
16.7%
17.4%
$15.30
$15.14
$15.50
(0.04)
0.03
0.28
6.25-8.00
6.00-7.75
5.75-7.50
2014
2015 F
2016 F YoY
0.93
0.17
0.58
3.4%
3.9%
4.2%
1.07
1.08
0.80
Vacancy Rate
12.7%
13.1%
13.2%
Suburban
6.00-8.25 5.75-8.00 5.50-7.75
MULTIFAMILY
Overall
5.25-6.00 5.00-5.75 4.75-5.50

$19.06
$19.27
$19.53
(0.66)
0.33
0.43
INVESTMENT
1.30
0.67
0.58
2014
2015 F
2016 F
1.65
1.82
1.55
Office
$1,400
$600
$800
$608
$800
$800
Industrial
RETAIL
Retail Sales (YoY)*
Retail
2014
2015 F
2016 F YoY
2.5%
2.8%
4.0%
7.25-8.00
7.00-7.75 6.75-7.50
YoY
$1,945
$1,117
$850
Multifamily
$813
$1,110
$750
ICI Land
$399
$304
$350
Hotel*
$116
$105
$115
$5,282
$4,035
$3,665
Total
39
AT L A N T I C C A N A D A
Atlantic Canada is working
MOST CRANES AND CONSTRUCTION
ACTIVITY IN THE PAST 20 YEARS
Halifax will break from one
GROWTH OF
POPULATION AND REAL
ESTATE DEMAND TO
SHIFT TO DOWNTOWN
HALIFAX FROM THE
SUBURBS
significant national trend in

2016, while falling in line with
another:
The region has largely
been spared the negative

consequences of depressed
energy prices. The low cost
of offshore oil production,
especially projects that are
already producing, continues to
attract exploration investment
in the region. The regional
mining sector also continues to
expand and support economic
growth, with significant
projects in Newfoundland and
Labrador.
LOW CANADIAN
DOLLAR
SUPPORTING
RECORD CRUISE
SHIP TRAFFIC
AND AN INFLUX
OF TOURISTS
>$30
PER B AR RE L
from a base of relative stability

with Halifax, Moncton and St.
Johns among the five fastest
growing Census Metropolitan
Areas in Canada from a GDP
perspective. 2016 will present
interesting opportunities for
business and investors in the
region.
<$20
Halifax had been one of the
PER B AR REL
OIL PRODUCTION COSTS GIVE

ATLANTIC CANADA THE EDGE
few major Canadian cities

with suburban real estate
activity significantly outpacing
the downtown core. This is
poised to shift, with renewed
residential development, a new
library and convention centre,
and an overall desire to have
an urban experience leading to
a rebalancing of the market in
favour of the Halifax Peninsula.
The outlook for leasing activity

is favorable, with office users
beginning a shift towards
the downtown market. The
industrial sector is poised to
benefit from the combination
of a low Canadian dollar and
growing U.S. economy, as well
as Irving Ship building activity
and offshore oil exploration
a winning combination for
Atlantic Canada.
Atlantic Canadas super
regional shopping centres

are receiving significant
investment and tweaks to
their tenant mix in order
to maintain their position
amongst the top 20 most
productive shopping centres in
Canada.
Investors are increasingly
looking to Atlantic Canadas

leading markets as an
alternative destination for
capital due to higher yield.
There should be opportunity
to purchase assets in 2016
as owners rebalance their
portfolios. Commercial
property in Atlantic Canada
continues to offer an attractive
combination of reliable returns
and solid fundamentals, which
should appeal to disciplined
investors at this stage in the
investment cycle.
AT L A N T I C C A N A D A
Projects to Watch
MARITIME LINK PROJECT
TRANSCANADA ENERGY
EAST PIPELINE
The Maritime Link will allow Nova Scotia to

import hydro electricity from the Muskrat
Falls generating station in Labrador, which
is being developed by Nalcor Energy as part
of the Lower Churchill Project. The 35-year
investment is in exchange for 20.0% of the
electricity from Muskrat Falls.
If approved, this 4,600 km pipeline will

carry 1.1 million barrels of crude per day
from Alberta and Saskatchewan to the
Irving Oil refinery in Saint John, the largest
and most advanced refinery in Canada.
Construction of a new tank terminal in
Saint John could also increase industrial
activity in the area.
www.emeranl.com/en/home/themaritimelink/overview.aspx
www.transcanada.com
Market Statistics
OFFICE
INDUSTRIAL
Central
2014
2015 F
2016 F YoY
Vacancy Rate
13.6%
14.6%
14.7%
Availability Rate
$19.61
$19.61
$19.50
(0.07)
(0.04)
0.12
6.00-6.50 6.00-6.50 6.00-6.50

2014
2015 F
2016 F YoY
7.7%
9.7%
8.5%
$7.61
$7.61
$7.65
$80.00
$80.00
$80.00
0.01
(0.14)
0.41
0.22
0.01
0.15
0.16
0.15
0.03
0.17
0.11
0.30
0.04
0.13
0.08
Vacancy Rate
13.7%
14.8%
13.6%
$16.80
$16.74
$17.00
0.17
0.03
0.24
7.00-8.25
7.13-7.31
7.00-7.50
2014
2015 F
2016 F YoY
0.37
0.13
0.20
3.8%
4.1%
4.3%
0.23
0.32
0.22
Vacancy Rate
13.7%
14.7%
14.0%
Suburban

6.50-7.75 6.50-7.75 6.50-7.50
MULTIFAMILY
Overall
5.75-6.25 5.38-6.00 5.00-5.50

$18.70
$17.93
$18.08
0.10
(0.00)
0.36
INVESTMENT
0.59
0.14
0.35
2014
2015 F
2016 F
YoY
0.39
0.47
0.25
Office
$61
$140
$80
Industrial
$38
$36
$50
RETAIL
Retail Sales (YoY)*
Retail
2014
2015 F
2016 F YoY
3.4%
(0.5%)
4.5%
6.25-6.75 6.25-6.75 6.50-8.50
$55
$30
$150
$121
$140
$100
ICI Land
$93
$60
$50
Hotel*
$38
$28
$45
Total
$405
$434
$475
Multifamily
National
Contributors
Regional
Contributors
National Research
Contributors
Ross Moore
Director of Research, Canada
Ross.Moore@cbre.com
Regional Research
Contributors
Investment
Vancouver
Peter Senst
President, Canadian Capital Markets
Peter.Senst@cbre.com
Norm Taylor
Executive Vice President and Managing Director
Norm.Taylor@cbre.com
Paul Morassutti
Executive Vice President, Managing Director
Paul.Morassutti@cbre.com
Calgary
Roelof van Dijk

Research Manager, Canada/GTA
Roelof.VanDijk@cbre.com
Greg Kwong
Executive Vice President and Regional Managing Director
Greg.Kwong@cbre.com
Christina Cattana
Research Team Lead
Christina.Cattana@cbre.com
Jeffrey Hurren
Senior Research Analyst
Jeffrey.Hurren@cbre.com
Edmonton
Ishita Abbott
Research Analyst
Ishita.Abbott@cbre.com
Edmonton
Retail
Tom Balkos
Director, Retailer Services
Tom.Balkos@cbre.com
Dave Young
Dave.Young@cbre.com
Industrial
Andrew Wright
Executive Vice President, Managing Director
Andrew.Wright@cbre.com
Winnipeg
Hotels
Bill Stone
Sale Representative, Executive Vice President
Bill.Stone@cbre.com
Seniors Housing & Healthcare

Matthew Burnett
Sale Representative, Associate Vice President
Mathew.Burnett@cbre.com
Stephen Hiscox
Valuations and Advisory Services, Vice President
Steve.Hiscox@cbre.com
Sean McCrorie
Valuations and Advisory Services, Vice President
Sean.McCrorie@cbre.com
John OToole
Executive Vice President and Executive Managing Director
John.OToole@cbre.com
Multifamily
Ross Moore
Director of Research, Canada
Ross.Moore@cbre.com
Matthew Boddy
Research Team Lead
Matthew.Boddy@cbre.com
Calgary
Jayson de Vera
Senior Research Analyst
Jayson.deVera@cbre.com
Winnipeg
Ryan Behie
Vice President and Managing Director
Ryan.Behie@cbre.com
Christian Denny
Research Analyst
Christian.Denny@cbre.com
Southwestern Ontario
Southwestern Ontario
Peter Whatmore
Senior Vice President and Executive Managing Director
Peter.Whatmore@cbre.com
Jaclyn Harrison
Research Associate
Jaclyn.Harrison@cbre.com
Toronto
Greater Toronto Area
(Office)
John OToole
Executive Vice President and Executive Managing Director
John.OToole@cbre.com
Roelof van Dijk

Research Manager, Canada/GTA
Roelof.VanDijk@cbre.com
Adrian Lee
Adrian.Lee@cbre.com
Ottawa
Toronto
Office
Christian Denny
Research Analyst
Christian.Denny@cbre.com
Vancouver
(Industrial)
Werner Dietl
Werner.Dietl@cbre.com
Ottawa
Shawn Hamilton
Vice President and Managing Director
Shawn.Hamilton@cbre.com
Montreal
Daniel Niedra
Research Analyst
Daniel.Niedra@cbre.com
Montreal
Lynn Johannesson
Research Team Lead
Lynn.Johannesson@cbre.com
Halifax
Kara Hobbs
Researcher
Kara.Hobbs@cbre.com
Alex Sieber
Senior Vice President and Senior Managing Director
Alexandre.Sieber@cbre.com
Atlantic Region
Robert Mussett
Senior Vice President and Senior Managing Director
Robert.Mussett@cbre.com
www.cbre.ca/marketoutlookcanada
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CBRE Market Outlook 2016

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CBRE Market Outlook 2016

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CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

The Canadian economy

CHANGE BIG DATA

is emerging from a slight

Investors seeking safe, stable

returns will likely become even

This low cap rate environment

will put even greater emphasis

The investment calculus has

changed most in Alberta,

In terms of specific commercial

Scrutiny of the REIT sector

asset classes, land will be

has increased and yet there is

Source: CBRE Limited

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

13.2 million sq.ft.

16.9 million sq.ft.

THE TECH SECTOR RANKED 2ND

enters 2016 with vacancy rates

While new supply has been the

New Supply (sq. ft. in millions)

Under Construction (sq. ft. in millions)

Class A Net Rental Rate (per sq. ft.)

Absorption (sq. ft. in millions)

New Supply (sq. ft. in millions)

Under Construction (sq. ft. in millions)

Class A Net Rental Rate (per sq. ft.)

Absorption (sq. ft. in millions)

New Supply (sq. ft. in millions)

Class A Net Rental Rate (per sq. ft.)

WITH THE PACE OF CHANGE

drivers seat, downtown markets

fastest growing segment of

With tech companies in the

dominant factor shaping office

The technology sector is the

Under Construction (sq. ft. in millions)

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

While economic growth has

INDUSTRIAL DEMAND IS POLARIZED

SPEC CONSTRUCTION EQUALS

been lacklustre and the office

Distribution and logistics

activities will remain the

The desire to consolidate

logistics operations in Canadas

combination of pent-up and new

Ecommerce and same-day

delivery require proximity to

Favourable foreign exchange

rates spurred hope of a

2014 2015 F 2016 F YoY

Absorption (sq. ft. in millions)

New Supply (sq. ft. in millions)

Under Construction (sq. ft. in millions)

Sale Price (per sq. ft.)

Source: CBRE Limited

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK

CBRE RESEARCH | 2016 CANADIAN MARKET OUTLOOK