Toronto Office MarketView Q3 2014

Toronto Office MarketView Q3 2014 CBRE Global Research and Consulting VACANCY RATE 9.2% NET ASKING RENTAL RATE $17.59 per sq. ft. NET ABSORPTION 712,563 sq. ft. The arrows are Q-o-Q trend indicators and do not represent a positive or negative value (e.g., net absorption could be negative, but still represent a positive trend). WHAT SUMMER SLOWDOWN? COMPLETIONS 138,880 sq. ft. 1 Hot Topics The Downtown office leasing market continued heating up through the summer, causing overall GTA vacancy to decrease by 40 basis points quarter-over-quarter to 9.2% in Q3 2014. Downtown, vacancy returned to 2013 levels, decreasing by 70 basis points quarter-overquarter to 5.0%. The rosy picture in the Downtown market was counterbalanced by flatter activity in the Suburban market, where vacancy remained unchanged at 13.7% in Q3 2014. A standout submarket was North/Richmond Hill, where a slower spring turned to a red-hot summer. Despite expectations of a summer slowdown, Q3 2014 came in as one of the best quarters in recent memory. Strong leasing activity in the Downtown and Midtown markets pushed vacancy in the Greater Toronto Area (GTA) down by 40 basis points (bps) quarterover-quarter to 9.2% in Q3 2014. GTA net quarterly absorption, at 712,563 sq. ft., was the highest since Q3 2009. Downtown, vacancy returned to 2013 levels, decreasing by 70 bps quarter-over-quarter to 5.0% in Q3 2014 on the back of 476,230 sq. ft. of net absorption. Activity was strong due to a number of factors: A busy spring translated into a busier-than-normal summer as tenants who began looking for space in previous quarters executed on transactions. Demand for expansion space was on the rise, with many tenants taking additional space to house growing workforces. Financial services firms have been leading the market in terms of demand for expansion space. The Big Five banks are currently or will soon be in the market for space totaling approximately 1.5 million sq. ft. The trend towards Suburban tenants moving Downtown continued being a source of positive net absorption. Interestingly, the decrease in Downtown vacancy was not caused by a handful of large deals but rather by a collection of smallerand mid-sized deals. This speaks to the overall health of the market, which was not skewed by any one large transaction. The rosy picture in the Downtown market was counterbalanced by flatter activity in the Suburban markets, where vacancy remained unchanged at 13.7% in Q3 2014. Much of this vacancy was attributed to the 138,880 sq. ft. of new construction completed this quarter, which was delivered over 80% vacant. This vacant new supply contributed a full 10 bps to Suburban vacancy, without which vacancy would have decreased to 13.6%. Tenant activity was patchy, with most Suburban submarkets experiencing flat demand. A standout submarket was North/Richmond Hill, where a slower spring turned to a red-hot summer. This submarket has experienced a flurry of leasing activity, much of which was due to tenant migration from other submarkets. With a number of large deals in the pipeline, both in the Suburbs and Downtown, we expect 2014 to end on a positive note.

2 Figure 1: Market Statistics Submarket Inventory Vacancy Rate (%) Sublease as % of Vacant Q3 2014 Net Absorption YTD Net Absorption Q3 2014 New Supply Q3 2014 Under Construction Net Rent ($ per sq. ft.) CENTRAL 81,196,588 5.3 20.0 650,560 678,943 0 5,050,588 24.51 Downtown 66,522,556 5.0 17.9 476,260 572,430 0 5,050,588 26.36 Financial Core 24,440,366 5.4 22.7 248,824 204,835 0 1,923,546 30.10 Greater Core 19,446,685 3.8 22.5 179,744 159,525 0 0 21.58 Downtown South 4,031,442 2.9 4.7 (20,518) 82,481 0 2,379,461 21.61 Downtown North 7,525,829 7.9 2.8 4,955 57,274 0 0 27.29 Downtown East 2,709,878 6.8 4.2 (25,262) (28,632) 0 462,000 20.01 Downtown West 6,439,245 3.4 40.9 76,784 74,979 0 285,581 20.04 Liberty Village 1,929,111 7.6 7.1 11,733 21,968 0 0 21.75 Midtown 14,674,032 6.7 27.0 174,300 106,513 0 0 18.15 Bloor / Yonge 7,443,507 4.8 28.0 81,149 68,588 0 0 21.26 St. Clair / Yonge 2,193,893 5.2 8.2 21,735 10,331 0 0 18.49 Eglinton / Yonge 5,036,632 10.2 30.4 71,416 27,594 0 0 15.81 SUBURBAN 70,241,309 13.7 17.3 62,003 (138,761) 138,880 2,002,923 14.94 East 24,869,264 12.4 9.2 76,903 80,164 0 443,909 13.67 Scarborough 3,609,408 11.9 1.8 (15,014) 46,240 0 0 12.19 Mark. N. / R. Hill 7,449,132 13.5 11.6 83,254 (186,350) 0 443,909 16.37 Steeles / Woodbine 2,860,816 12.6 8.2 (34,111) 50,393 0 0 12.66 E. York / D. Mills S. 2,695,747 11.1 26.5 (5,703) (24,615) 0 0 12.31 Don Mills North 2,782,278 8.8 2.6 45,106 47,871 0 0 10.56 Consumers Road 3,862,867 13.1 4.8 12,412 103,893 0 0 12.49 G. Baker / Vic. Park 1,609,016 14.7 7.9 (9,041) 42,732 0 0 14.86 North 11,993,041 7.6 32.3 7,920 2,339 45,104 65,000 17.24 North Yonge 7,707,955 7.6 46.1 (20,579) (11,062) 0 0 18.27 North York West 2,170,968 5.2 4.7 5,713 (1,562) 0 0 10.91 Vaughan 2,114,118 9.9 8.5 22,786 14,963 45,104 65,000 16.22 West 33,379,004 16.9 19.2 (22,820) (221,264) 93,776 1,494,014 15.43 Bloor / Islington 1,497,663 16.8 3.0 (33,464) (90,167) 0 0 15.80 427 Corridor 2,298,002 9.6 19.0 (16,328) (24,917) 0 0 14.34 Airport Strip 3,162,826 25.2 8.1 85,606 (62,741) 0 0 12.96 Airport Corp. Centre 5,506,703 14.6 35.6 10,534 54,771 0 330,788 13.57 Mississauga South 1,893,118 16.2 22.5 (2,023) (46,196) 0 0 16.61 City Centre 3,804,147 19.0 14.7 (41,726) (49,126) 0 0 16.82 Hwy 10 / Hwy 401 3,849,275 13.0 54.3 73,307 (41,478) 0 611,935 12.31 Meadowvale 4,041,272 14.0 13.8 (66,128) 40,604 0 278,761 15.11 Brampton 1,157,318 28.2 15.3 16,152 27,512 0 0 17.69 Oakville 2,925,953 16.2 2.2 10,517 87,827 93,776 239,182 18.17 Burlington 3,242,727 21.3 14.9 (59,267) (117,353) 0 33,348 16.96 GTA 151,437,897 9.2 18.1 712,563 540,182 138,880 7,053,511 17.59 Source: CBRE Research, Q3 2014.

DOWNTOWN MARKET The Downtown market exhibited the largest vacancy decline since Q1 2011, dropping by 70 bps quarter-over-quarter to 5.0% in Q3 2014. Net quarterly absorption registered at a three-year high of 476,260 sq. ft. A busy spring translated into a busier-than-normal summer as many tenants who began looking for space in previous quarters executed on transactions. Leasing activity was dispersed among multiple small- and medium-sized transactions, with no single large deal skewing the numbers significantly. Sublease vacancy was at historical lows in Q3 2014, with sublets contributing a mere 17.9% to all vacant space and many submarkets posting single-digit sublease vacancies. Sublets have enjoyed strong leasing activity because they offer built-out space which is available with shorter terms and lower rents than direct space. Major consumers of sublease space have been companies that have experienced growth and require built-out, shorter term growth space as they make longer term decisions about their real estate needs. New build leasing activity was a clear indication of demand for new space. Bremner Tower and RBC WaterPark Place, the two buildings expected to be completed in Q4 2014, were 70.0% preleased as of Q3 2014, with additional leasing activity expected to be announced shortly. Select Downtown market transactions in Q3 2014 included: Royal Bank of Canada completing a sale-leaseback of 209,000 sq. ft. at 180 Wellington Street West Intelex leasing 72,500 sq. ft. at 70 University Avenue AIG leasing 57,000 sq. ft. at 120 Bremner Boulevard MIDTOWN MARKET Leasing activity was strong in the Midtown market, where vacancy decreased by 120 bps to 6.7% and net absorption rang in at 174,300 sq. ft. Vacancy decreased in all three Midtown submarkets. Sublease vacancy has also started showing signs of abatement, down from 30.7% of all vacant in space in Q2 2014 to 27.0% in Q3 2014. This decline was even more pronounced in absolute terms, with the amount of sublease space decreasing by nearly 100,000 sq. ft. quarter-over-quarter from 356,877 sq. ft. in Q2 2014 to 266,294 sq. ft. in Q3 2014. The pickup in leasing activity in the Midtown market was due more to its lease expiry profile than to pent-up tenant demand. Deal velocity has been steady in smaller suites and many of the larger deals executed this summer were initiated in the spring. RioCan is continuing with the renovation of the retail portion of Yonge Eglinton Centre. Projects include the addition of a rooftop patio, a redesign of the interior, and an expansion of the retail premises. Construction is scheduled to be completed in 2015. While the original plans called for a recladding of the office towers, RioCan is no longer planning these renovations to the office portion of the complex. Select Midtown market transactions in Q3 2014 included: Infrastructure Ontario renewing 67,000 sq. ft. at 2 Bloor Street West Bain & Company extending 26,000 sq. ft. at 2 Bloor Street East Global Knowledge subleasing 16,500 sq. ft. at 2 Bloor Street East Q3 2014 Toronto Office MarketView FINANCIAL CORE The Financial Core submarket experienced the largest quarterly vacancy decrease in nearly four years, declining by 100 bps quarter-over-quarter to 5.4% in Q3 2014. Net quarterly absorption was at a two-year high, netting 248,824 sq. ft. Sublease vacancy continued its downward trajectory, down by 1.6% quarterover-quarter to 22.7% of all vacant space. A notable sublet that has come off the market was the Toronto Stock Exchange sublet at 130 King Street West. The continued vacancy decrease in the Financial Core submarket spoke to the amount of tenant demand. Tenants, particularly in the financial services and professional services industries, have been picking up expansion space in recent quarters. As evidenced by the relative shortage of large deals, leasing activity in the Financial Core submarket was strongest in smaller-sized suites. This speaks to the overall health of the market, which was not skewed by one large transaction. Select Financial Core transactions in Q3 2014 included: Aimia leasing 51,000 sq. ft. at 130 King Street West Bentall Kennedy leasing 49,500 sq. ft. at 155 King Street West EMC leasing 31,500 sq. ft. at 100 King Street West DOWNTOWN WEST Vacancy in the Downtown West submarket continued on its downward trajectory, decreasing by 120 bps to 3.4% in Q3 2014. Renovated and Converted (RC) Class vacancy remained below the three per cent mark for the fourth consecutive quarter, sitting at 2.6% in Q3 2014. The largest vacancy decrease was felt in Class B space, where vacancy decreased by 3.7% quarter-over-quarter to 6.6%. This was due primarily to 47,290 sq. ft. of former Symcor space coming off the market at 325 Front Street West. Strong leasing activity of direct space has translated to a proportionally higher sublease vacancy. While the amount of sublease space only increased by 11,581 sq. ft., the substantial decrease in direct space caused sublease vacancy to jump from 26.4% of all vacant space in Q2 2014 to 40.9% in Q3 2014. Tenant demand in the Downtown West submarket continued being strong, with few large blocks of space available for lease. At 2.6% in Q3 2014, vacancy Downtown West RC Class was 260 bps lower than that of Financial Core Class A space. Select Downtown West transactions in Q3 2014 included: eone expanding by 23,500 sq. ft. at 134 Peter Street Sonic Boom ULC leasing 11,500 sq. ft. at 215 Spadina Avenue Uber leasing 8,500 sq. ft. at 312 Adelaide Street West 3

4 SUBURBAN MARKET The Suburban market puttered along this summer, with vacancy coming in flat at 13.7% in Q3 2014. Stronger leasing activity in the Toronto North market was countered by a slowdown in the Toronto West and Toronto East markets. Leasing activity continued being weighted more toward renewals than relocations, motivated by tenants considerations for premises consolidation, space reductions, and cost cutting. Despite the overall static market, certain Suburban submarkets have shown increased activity in recent quarters. In particular, the North/Richmond Hill submarket in the Toronto East market has enjoyed strong leasing activity and demand from new tenants migrating into this submarket. Leasing activity was similarly strong in Toronto West s Highway 10/Highway 401 submarket, which has displayed strong fundamentals. Construction activity has been steady, with three buildings totaling 138,880 sq. ft. completed in Q3 2014. An additional 2.0 million sq. ft. are currently under construction, 1.5 million sq. ft. of which are in the Toronto West market. Select Suburban market transactions in Q3 2014 included: Allstate Insurance extending 137,500 sq. ft. at 27 Allstate Parkway, Genivar renewing 62,500 sq. ft. at 600 Cochrane Drive, MNP Group leasing 50,000 sq. ft. at 50 Burnhamthorpe Road West, Mississauga EAST MARKET Leasing velocity in the Toronto East market was stable in Q3 2014, causing vacancy to decrease by 30 bps quarter-over-quarter to 12.4% on the back of 76,903 sq. ft. of net quarterly absorption. As has been the case for the past few quarters, transaction activity in the Toronto East market continued being characterized primarily by renewal activity at the expense of new leases. Further, tenants are closely looking at their space requirements and some are right-sizing their premises. Consequently, some submarkets in the Toronto East market have posted modest vacancy increases and slightly negative net absorption figures. It is too early to tell if this was merely the cause of a summer slowdown or if it signals a larger trend towards slowed tenant demand. A standout submarket within Toronto East has been the North/Richmond Hill submarket, where vacancy decreased and net absorption was positive. After rising sharply in Q2 2014, vacancy decreased by 110 bps quarter-over-quarter to 13.5% in Q3 2014. Strength in this submarket is attributed to an influx of tenants from other submarkets, rather than to expansions by existing tenants. Select East market transactions in Q3 2014 included: Allstate Insurance extending 137,500 sq. ft. at 27 Allstate Parkway, Genivar renewing 62,500 sq. ft. at 600 Cochrane Drive, Brookfield Johnson Controls leasing 25,000 sq. ft. at 4175 14th Avenue, NORTH MARKET Demand in the Toronto North market slowed slightly in Q3 2014. Following Q2 s 40 bps vacancy retreat, vacancy rebounded by 30 bps, up to 7.6% in Q3 2014. Despite the uptick in vacancy, net quarterly absorption remained in positive territory, posting 7,920 sq. ft. This anomaly was attributed to the 45,104 sq. ft. 9131 Keele Street delivered 29.1% leased, contributing 13,104 sq. ft. to positive net absorption. The North York West submarket was the only Toronto North submarket to experience a decrease in vacancy, dropping by 30 bps quarter-over-quarter to 5.2% in Q3 2014. Net quarterly absorption was 5,713 sq. ft., reversing a three-quarter negative net absorption trend. Conversely, vacancy in the North Yonge Corridor and Vaughan submarkets increased in Q3 2014, up by 30 bps to 7.6% and 90 bps to 9.9%, respectively. Notable infrastructure development projects in the Toronto North market include the Toronto-York Spadina Subway Extension and the York Viva Bus Rapid Transit Expansion. Select North market transactions in Q3 2014 included: QA Consultants leasing 25,500 sq. ft. at 5700 Yonge Street, Toronto Manpower Services Canada renewing 15,500 sq. ft. at 4950 Yonge Street, Toronto Trimble Canada Limited leasing 14,500 sq. ft. at 9131 Keele Street, Vaughan WEST MARKET Vacancy in the Toronto West market continued its upward trajectory, increasing by 30 bps quarter-over-quarter to 16.9% in Q3 2014. Despite this vacancy increase, net quarterly absorption as only slightly negative, registering at negative 22,820 sq. ft. The mismatch between rising vacancy and relatively stable net absorption was attributed to two primary factors. First, while most submarkets exhibited vacancy increases coupled with negative net absorption, strong leasing activity in a handful of submarkets pulled overall net absorption figures up. An example of a submarkets that exhibited strong leasing activity was Highway 10/Highway 401, which posted 73,307 sq. ft. of net positive quarterly absorption in Q3 2014. Strength in this submarket is expected to continue into the coming quarters as many tenants are currently on the market for space. Second, the 93,776 sq. ft. of new supply completed in Q3 2014 in Oakville were delivered 12.9% leased, contributing positively to net absorption. The two buildings completed were 209 Oak Park Boulevard and 1300 Cornwall Road. Construction activity remained stable, with 1.5 million sq. ft. of space currently under construction. Development charges have been driving construction in the municipalities of Peel and Halton. Select West market transactions in Q3 2014 included: BPA leasing 30,000 sq. ft. at 50 Burnhamthorpe Road West, Mississauga Wescom Solutions Inc. subleasing 24,000 sq. ft. at 7100 West Credit Avenue, Mississauga IPEX leasing 23,000 sq. ft. at 1425 North Service Road, Oakville

CONTACTS For more information about this Toronto MarketView, please contact: Toronto Research Masha Dudelzak, MBA Research Manager, GTA CBRE Limited 145 King Street West Suite 600 Toronto, Ontario M5H 1J8 t: +1 416 815 2316 e: masha.dudelzak@cbre.com FOLLOW US 5 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 CBRE. 5