Canada Office MarketView Q1 2014

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1 ( s) Canada Office MarketView CBRE Global Research and Consulting VACANCY RATE 1.3% AVG. CLASS A NET RENT $21.2 per UNDER CONSTRUCTION 22.9 million NET ABSORPTION (1.5 million) Arrow indicates change from previous quarter. CANADIAN OFFICE MARKET SHOWS FURTHER SIGNS OF COOLING 1 Executive Summary The Canadian vacancy rate ended above the 1.% mark for the first time since Q2 21 and the highest since Q3 25. Occupied space decreased by 1.5 million in 214, of which 1. million was given back in the suburban markets. Market conditions continue to move towards favouring tenants, who over the last few years have had just limited options. Sublet space increased to 8.6 million in, and now represents 19.3% of total vacant space. Sublet space has nearly doubled since. There is currently 22.9 million under construction nationally, of which 9.3 million is expected to be delivered in 214. The spread between suburban and downtown Class A net asking rents contracted marginally in from a peak of $8.3 per in to $8.6 per Canadian office tenants collectively returned 1.5 million of office space in. This continues an almost uninterrupted period since the beginning of last year with 3.2 million vacated over the last five quarters, driving increasing vacancy across Canadian office markets. The vacancy rate ended above the 1.% level at 1.3%, the highest national vacancy rate since Q3 25. Most markets continue to see little new incremental demand for office space as tenants continue to adopt new workplace strategies and reduce their overall space needs. This rising trend is being done to improve efficiencies but also to align work environments more closely with new collaborative working structures. General weakness continues to be seen across many industries, with the exception of technology and new media, which remain key sources of growth. Figure 1: New Supply 3, 2,5 1,5 1, 5 Central New Supply Suburban New Supply Sluggish demand for office space is reflected in the latest employment data, which shows annual job growth remains weak, at just 1.1%, and has slowed slightly compared with a year ago when growth was 1.2%. Not to be confused with an absence of demand, Canadian corporate users continue to show a strong interest in upgrading their premises as lease s expire. This is reflected in the success of many of the country s office developments which continued to enjoy more preleasing this quarter. The Canadian office market remains very much in a state of flux, with a substantial amount of development arriving at a time when occupiers are highly uncertain about their future space needs. Market conditions continue to move towards favouring tenants, who over the last few years have had just limited options. Forecasted 211 Q2 Q2 Q Q

2 Canada Office MarketView Figure 2: Market Statistics Market Submarket Area Inventory Vacancy Rate (%) Rate Change BPS (Y-o-Y) Sublet Space (%) Net Absorption YTD Net Absorption Under Construction Class A Net Rent ($ per sq. ft.) Vancouver Downtown 21,836, % 16 bps 17.7% (5,435) (5,435) 2,157, $33.22 Suburban 21,377, % 5 bps 9.2% (16,317) (16,317) 1,544,861 $2.79 Total 43,213, % 11 bps 12.% (165,752) (165,752) 3,71,861 $23.37 Calgary Downtown 38,542,8 9.1% 34 bps 43.8% 22,728 22,728 4,67, $35.27 Suburban 22,378, % 16 bps 36.6% (198,154) (198,154) 1,569,753 $24.84 Total 6,92,37 1.9% 28 bps 4.4% (175,426) (175,426) 6,239,753 $3.24 Edmonton Downtown 14,727, % 15 bps 1.3% 1,743 1, $24.51 Suburban 9,199, % (1 bps) 3.9% (11,28) (11,28) 879,142 $21.76 Total 23,926, % 1 bps 7.5% (9,537) (9,537) 1,721,142 $23.97 Winnipeg Downtown 8,55, % 15 bps 3.3% (52,687) (52,687) 81,69 $15.81 Suburban 2,846, % 37 bps 12.7% (27,58) (27,58) 7, N/A Total 11,397, % 21 bps 6.2% (8,195) (8,195) 151,69 $15.81 London Downtown 4,398, % 17 bps.7% 35,682 35,682 - $13.41 Suburban 1,76, % 8 bps 3.5% 3,93 3,93 14,424 N/A Waterloo Region Total 5,475, % 15 bps 1.1% 39,612 39,612 14,424 $13.41 Downtown 5,7,59 8.7% (28 bps) 6.6% 67,424 67,424 - $12.19 Suburban 9,633,762 1.% 16 bps 19.5% (84,797) (84,797) 163, $13.93 Total 14,64, % 1 bps 15.5% (17,373) (17,373) 163, $13.42 Toronto Downtown 81,343, % 18 bps 24.1% (285,567) (285,567) 5,5,558 $27.8 Suburban 7,76, % 13 bps 18.% (15,212) (15,212) 1,918,497 $16.87 Total 151,419,55 9.6% 16 bps 2.2% (3,779) (3,779) 6,969,55 $2.64 Ottawa Downtown 18,674, % 25 bps 1.6% 26,551 26, ,835 $25.24 Suburban 2,678, % (1 bps) 12.7% 44,785 44,785 1,66,4 $14.53 Total 39,352, % 1 bps 11.8% 71,336 71,336 1,712,235 $19.2 Montreal Downtown 43,163, % 19 bps 21.2% (185,628) (185,628) 73,498 $21.73 Suburban 27,1, % 32 bps 13.5% (599,37) (599,37) 1,59,549 $14.47 Total 7,173, % 24 bps 17.2% (784,998) (784,998) 1,763,47 $18.3 Halifax Downtown 4,827, % (9 bps) 23.7% (52,895) (52,895) 372,135 $18.7 Suburban 6,745, % 41 bps 2.7% 15,89 15,89 12,123 $ Total 11,572, % 2 bps 9.7% (37,86) (37,86) 474,258 $17.28 National Downtown 241,7, % 2 bps 22.2% (428,84) (428,84) 14,522,95 $25.69 Suburban 191,21,26 13.% 14 bps 16.9% (1,32,834) (1,32,834) 8,387,749 $17.63 Total 432,91, % 17 bps 19.3% (1,46,918) (1,46,918) 22,99,844 $21.2

3 Sublet Space ( s) Sublet as % of Vacant Space ( s) Y-o-Y % Change Figure 3: Office Using Employment Mixed 9% 6% 3% % (3%) (6%) Finance, Insurance and Real Estate Professional, Scientific and Technical Services Source: Statistics Canada,. Employment increased by 42,9 jobs in March, and by 19, jobs year-over-year. As such the unemployment rate has decreased by 3 bps quarterover-quarter and year-over-year to 6.9%. It should be noted that the majority of jobs created in March were in the public sector, and in the 15 to 24 age range. With regards to office-using employment, Professional, Scientific and Technical Services (PSTS) continues to exhibit faster growth than FIRE (Finance, Insurance and Real Estate). Both increased by roughly 5,5 jobs in March 214, however, year-to-date, the PSTS sector is up by 4,8 jobs, or.4%, whereas the FIRE sector is coincidentally down by 4,8 jobs, or.4%. Regionally, Edmonton and Calgary remain the strongest job markets in Canada, with employment up 4.7% and 3.8% year-over-year, respectively. Canada Office MarketView 3 Figure 4: Net Absorption 2,5 1,5 1, 5 (5) (1,) (1,5) Figure 5: Sublease Space 1 1, 8, 6, 4, Central Suburban 211 Q2 Q3 Available Space Sublet Q2 Q3 214 % of Available Space 3% 25% 2% 15% 1% 5% % 1Y Avg. National occupied space declined by 1.5 million in, of which 1. million was given back in suburban markets while the remaining came from downtown markets. This represents a stark turnaround from when the downtown markets returned 3.2 million of occupied space while the suburban markets recorded positive 1.4 million of net absorption. Nationally there has been 2.9 million returned to the office market in the past four quarters. During, every market except Ottawa and London saw negative net absorption. Montreal and Toronto returned the most space to the market, with negative 784,998 and negative 3,779 of net absorption, respectively. Calgary and Vancouver also saw negative net absorption, although Calgary recorded positive net absorption downtown, at 22,728, the only market in the top four to see positive growth downtown. Sublet space increased by 7.7% quarter-over-quarter to 8.6 million in. This represents 19.3% of total vacant space. Sublet space has grown consistently over the past year, and has nearly doubled since, when 4.5 million was vacant. The current amount of sublease space is still well below the recorded peak of 11.4 million observed in Q2 23, which at the time comprised 2.1% of national vacancy. The Toronto market holds the most available sublet space, at 3. million, followed by Calgary with 2.7 million and Montreal at 1.4 million Calgary s sublet space represents 4.4% of total available space, exactly double the proportion for Toronto. Sublet space across most cities is divided relatively evenly between the downtown cores and the suburbs, with a national total of 51.2% of sublet space seen downtown. 3

4 24 Vacancy Rate (%) 24 Rental Rate ($) Canada Office MarketView Figure 6: Downtown vs. Suburban Net Rents $3 $25 $2 $15 $1 $5 $ Spread Downtown Suburban Figure 7: Downtown vs. Suburban Vacancy 18% 15% 12% 9% 6% 3% % Spread Downtown Suburban The spread between suburban and downtown Class A net asking rents contracted marginally in, declining from a peak of $8.3 per in to $8.6 per The current spread is nearly double what was observed in mid-26. National downtown Class A asking rents increased only slightly quarter-over-quarter to $25.69 per in, setting a record price for downtown space. National suburban Class A asking rents declined marginally from a peak of $17.93 per in Q3 to $17.63 per in. As the market cautiously observes the arrival of significant new supply, rental growth is likely to be suppressed. Although vacancy rates have now crept up, substantially in some cases, rental rates have experienced strong upwards pressure due to the exceptionally low vacancy rates experienced over the past few years. The Canadian national office vacancy rate reached 1.3% in, a 6 bps increase quarter-overquarter driven by slow tenant demand and the arrival of 1.1 million The current national vacancy rate has surpassed the recent high of 1.1% reached in the, but remains 43 bps below the peak observed in Q3 22. Downtown properties have been able to sustain a higher level of occupancy than their suburban counterparts. The spread between the two vacancy rates reached 48 bps in, a significant climb from the historic low of 241 bps seen in Q2 26. Toronto s office market has seen the largest spread between downtown and suburban vacancy rates, of 68 bps, followed by Montreal and Vancouver, with a spread of 66 bps each. Ottawa and Edmonton have some of the tightest vacancy spreads at 6 bps and 22 bps, respectively. 4 Figure 8: Scheduled Delivery of Space () H1 214* H2 214* Vancouver 468,5 58, Calgary 253, , ,39 Edmonton 464, 566,142 Toronto 126,92 414,124 2,3,745 Ottawa ,4 645,835 Montreal 24, 1,268, ,431 National 1,134,268 4,178,314 5,161,216 * Projected Canada saw 1.1 million of new supply in 214, which was down from 1.6 million in the previous quarter but up significantly from 389, sq. ft. in. There is currently a total of 22.9 million under construction nationally, of which 9.3 million is expected to be delivered in 214. Toronto has 2.4 million scheduled for completion in 214, or 25.9% of the national total, followed by Montreal and Calgary, at 1.5 million sq. ft. or 16.4% and 1.1 million or 12.3%, respectively. As a percentage of inventory, downtown Calgary has the highest amount of space under construction at 12.1%, which equates to 4.7 million, whereas downtown Toronto will only see a 6.2% bump to its inventory as a result of the newest wave of construction, accounting for 5.1 million

5 Figure 9: Select Office Lease Transactions Canada Wide Size () Tenant Tenant Industry Address 925, ** Husky Oil Energy Western Canadian Place, 7 9 th Avenue SW & 77 8 th Avenue SW, Calgary, AB 3, Trans Canada Pipelines Energy Services Fifth Avenue Place West, th Avenue SW, Calgary, AB 281,18 *** Sun Life Financial Canada Finance, Insurance, Real Estate 1 York Street, Toronto, ON 25, * Mitel Networks Corporation Information Technology 35 Legget Drive, Ottawa, ON 233,767 Meloche Monex Inc. (TD Bank) Finance, Insurance, Real Estate 5 Creamzie West, Montreal, QC 194,972 AMEX Canada Inc. Finance, Insurance, Real Estate 2235 Sheppard Avenue East, Toronto, ON 147, Athabasca Oil Corp. Energy PennWest Plaza West, th Avenue SW, Calgary, AB 134,558 Bayer Inc. Pharmaceuticals 292 Matheson Boulevard East, Mississauga, ON 77,111 AECOM Professional, Scientific and Technical Services West Campus, Edmonton, AB 31, BMO Financial Group Finance, Insurance, Real Estate 595 Burrard Street, Vancouver, BC * Renewal ** Renewal & Expansion *** Pre-lease Canada Office MarketView CONTACTS For more information about this Canada Office MarketView, please contact: Canada Research Ross J. Moore Director of Research CBRE Limited t: e: ross.moore@cbre.com Roelof van Dijk Research Manager CBRE Limited t: e: roelof.vandijk@cbre.com FOLLOW US Global Research and Consulting This report was prepared by the CBRE Canada Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. Disclaimer 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 CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist. 5