Vancouver Retail Market Report Q4

www.collierscanada.com

!"#$% &'()%*&"$COLLIERS INTERNATIONAL | MARKET REPORT

BRITISH COLUMBIA

Canadian Market OverviewCanada was considered to have one of the best investment climates in 2011, particularly in the commercial property market. Investment activity was strong, with uncertainty in other markets undoubtedly making Canadian commercial property look attractive in comparison. The commercial property market as a whole remained solid across all asset types in 2011, supported by employment growth and a healthy domestic economy. 2012 is projected to be another relatively stable year for Canada, with muted growth in GDP across all provinces and a similar pullback in employment growth. All forecasts, however, are currently subject to the strength of the emerging nations’ economies, as well as the European debt crisis which could push the global economy into recession once again.

Q4 2011 | OFFICE REPORT

BC MARKET: Colliers has !ve o"ces in British Columbia: Vancouver, Kelowna, Surrey, Nanaimo and Victoria.

BRITISHCOLUMBIA

Nanaimo

Vancouver

Kelowna

SurreyVictoria

Metro Vancouver Market OverviewThe Metro Vancouver o+ce market remained very stable throughout 2011. Each quarter posted positive net absorption, totaling an impressive 476,986 square feet for the entire year. This is particularly noteworthy as it is the largest amount of net absorption since 2007, indicating that the Metro Vancouver o+ce market is steadily on its way to regaining pre-recession numbers. The vacancy rate changed minimally throughout 2011, ,uctuating between 7.2 percent and 7.5 percent. Based on vacancy ,uctuation alone, 2011 has been the most stable year for the Metro Vancouver o+ce market in over a decade.

Net absorption for the fourth quarter of 2011 totaled 74,446 square feet; however, even with positive net absorption, the vacancy rate increased slightly to 7.4 percent. This was due to 184,085 square feet of new supply being added to the inventory, with tenants absorbing only 120,000 square feet of it.

MARKET INDICATORS

2011 Q3

2011 Q4

VACANCY

NET ABSORPTION

SALES PRICE ($/SF)

RENTAL RATE

0

5

10

15

20

25

-500

-400

-300

-200

-100

0

100

200

300

400

500

600Va

canc

y (%

) /

Net A

skin

g Re

nt (

$)

Thou

sand

s (S

F)

Metro Vancouver Historical Performance

Net Absorption (SF) Current Qtr Weighted Avg Asking Net Rent Vacancy Rate

In Q1 2011, Colliers removed over 1.7 million square feet of non-competitive space from its inventory in order to adhere to new North American standards.In Q3 2010, Colliers began calculating its rental rates using a weighted average. As a result, Q3 rental rates appeared to jump, but in reality remained stable.

DowntownTHE MARKET Over 89,000 square feet of Class A new supply was added to the Downtown inventory this quarter: The O+ces at Hotel Georgia, located at 669 Howe Street, and 2 ,oors of o+ce space in The Beasley, located at 860 Homer Street. Of this new supply, over 60,000 square feet was absorbed, primarily by The College of Physicians and Surgeons. Net absorption for Downtown totaled 89,117 square feet this quarter and vacancy remained at 3.5 percent.

TRENDSTwo of the upcoming Downtown o+ce buildings made notable progress this quarter: 1021 West Hastings o+cially broke ground and 745 Thurlow secured SNC-Lavalin as a tenant, set to occupy approximately 100,000 square feet. There are still a number of proposed Downtown o+ce buildings awaiting approval on their rezoning applications. These buildings include: Burrard Gateway, located at 1290 Burrard Street; The Exchange, located at 475 Howe Street; and Manulife’s building, located at 980 Howe Street.

INVESTMENTREITs and pension funds continue to show strong interest in purchasing capital in the Downtown Vancouver o+ce market, but with anticipated further compression of capitalization rates and minimal tradeable stock Downtown, very few transactions actually occur. Even though there were no signi-cant sales transactions in Downtown Vancouver this quarter, 2011 experienced more sales activity than 2010, with a handful of signi-cant deals in total.

FORECASTThe Downtown Vancouver o+ce market is anticipated to remain stable throughout the -rst half of 2012. With vacancy at 3.5 percent, the market is considered to be full and the majority of spaces still available and vacant are less desirable spaces that receive little interest. This being said, vacancy will likely decrease minimally, if at all, throughout the next six months. In the second half of 2012, HSBC’s consolidation and relocation to Broadway Tech Centre may cause an initial leap in the Downtown vacancy rate.

“Two of the upcoming Downtown o!ce buildings

made notable progress this quarter...”

The O"ces at Hotel Georgia 669 Howe Street, Vancouver

0

5

10

15

20

25

30

-400

-300

-200

-100

0

100

200

300Va

canc

y (%

) /

Net A

skin

g Re

nt (

$)

Thou

sand

s (S

F)

Downtown Historical Performance



P. 2 | COLLIERS INTERNATIONAL

MARKET REPORT | Q4 2011 | OFFICE | METRO VANCOUVER

THE MARKET Activity in the Suburban o+ce market was fairly ,at this quarter, with most markets experiencing minimal ,uctuations in vacancy. The Suburban market as a whole saw its vacancy rate increase from 10.6 percent last quarter to 11.0 percent this quarter. One contributing factor was the 95,000 square feet of new supply added to the Surrey inventory, of which approximately 60,000 square feet was absorbed. Net absorption for the Suburban market was negative 14,671 square feet.

TRENDSIvanhoe Cambridge announced that Metrotower III in Burnaby will re-commence construction early in the new year, with completion set for April of 2014. The Class AAA o+ce tower is to be developed without any preleasing commitments; however, its close proximity to the SkyTrain and amenities is sure to attract signi-cant tenant interest. Other suburban buildings that will be under construction in 2012 include: Central City Professional Building in Surrey, Merchant Square in New Westminster, and Marine Gateway in Vancouver.

INVESTMENTThe Suburban investment market was once again dominated by strata o+ce sales this quarter, with the majority of transactions taking place in Burnaby, Surrey and North Vancouver. Strata o+ce units were also very popular in the Brewery District at 233 Nelson’s Crescent in New Westminster. The most signi-cant Suburban non-strata transaction took place in Burnaby with Canada Lands Company’s sale of 4300 North Fraser Way to Canadian private investors for $8.5 million.

FORECASTSuburban vacancy is predicted to decline slowly over the next six months due to stable activity and the lingering interest of Downtown tenants. Although very few tenants have actually committed to moving from Downtown to the Suburbs, increased movement is still a possibility if Downtown vacancy continues to tighten in 2012 and 2013. The Burnaby vacancy rate is likely to decline in 2012 despite Telus vacating a portion of its space at 3777 Kingsway as part of the reorganization of its o+ce facilities.

Suburbs

“The Suburban investment market was once again dominated by strata o!ce sales...”

Metrotower III 4730 Kingsway, Burnaby

0

5

10

15

20

25

-300

-200

-100

0

100

200

300

400Va

canc

y (%

) /

Net A

skin

g Re

nt (

$)

Thou

sand

s (S

F)

Suburban Historical Performance



COLLIERS INTERNATIONAL | P. 3


512 o"ces in 61 countries on six continentsUnited States: 125 Canada: 38 Latin America: 18 Asia Paci!c: 214 EMEA: 117

$1.53 billion in annual revenue 978.6 million square feet under management 12,509 professionals

Accelerating success.

www.collierscanada.com

This report has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, express or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/ or its licensor(s). © 2011. All rights reserved. *Personal Real Estate Corporation. PO11213

CONTACT INFORMATION

O"ce Team:

Ron BaganManaging Director | Vancouver BrokerageDIRECT: +1 604 662 [email protected]

Courtney Markle Director of Research | Vancouver Brokerage DIRECT: +1 604 692 1476 [email protected]

Vancouver Downtown O"ce200 Granville Street, 19th FloorVancouver, BC V6C 2R6MAIN +1 604 681 4111 FAX +1 604 661 0849

Kayvon Besharat*Matthew CarlsonRobert Chasmar*Marco DiPaoloMaury DubuqueJohn FreyvogelDan Jordan

Je. Kincaid-Smith*Brian MacKenzieDerek MayStephen MoscovichColin Scarlett*Jason TeahenDavid Thistle*


Local Spotlight StoryDOWNTOWN RENTAL RATESIncreasing Downtown Vancouver rental rates was a prominent topic of conversation throughout 2011. The table below outlines the average Net E.ective Rents (NERs) for 2006, 2010, and 2011, in order to demonstrate precisely how much rental rates have increased over the past -ve years.

It is evident that Downtown Vancouver rental rates have not only increased noticeably in the past year, but that sizable increases have taken place over the last -ve years. Downtown tenants are -nding it very di+cult to come to the realization that they may have to renew their spaces at nearly 50.0 percent higher than they paid -ve years ago. In addition, the reality that there is no option to relocate to a better space, or to relocate to an equivalent space at a lower cost, has sparked the recent surge of interest in suburban o+ce options (particularly in Burnaby). While rates have increased by an average of 30.0 percent over the past -ve years in Burnaby, the increase is still less severe than in Downtown. Furthermore, rental rates for Downtown quality spaces are typically 50.0 percent higher than rates for equivalent spaces in Burnaby.

DOWNTOWN VANCOUVER RENTAL RATESAverage NER1

2006 2Average NER1

2010 2Average NER1

2011 2% Increase

Over 5 years% Increase

Over last year

Class AAA $23.70 $31.96 $33.92 43.1% 6.1%

Class A $21.61 $27.88 $29.88 38.3% 7.2%

Class B $15.82 $19.96 $22.38 41.5% 12.1%

Class C $11.79 $16.54 $17.53 48.7% 6.0%

1 Net E.ective Rent (NER) is the contract rental rate adjusted for free rent and allowances 2 Averages were calculated using Colliers data pulled from the last six months of each year

Documents

Vancouver Retail Market Report Q4