Office fall2010 final

greater toronto areaCOLLIERS INTERNATIONAL | MARKET REPORT & FORECAST

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Canadian Market Overview

MARKET INDICATORS

Q3 2010

OFFICE INVENTORY ~NET ABSORPTION ~VACANCY RATE AVERAGE ASKING NET RENT ~AVERAGE ADDITIONAL RENT |}

As the third quarter of 2010 comes to a close, the economic climate remains cautiously optimistic with the recovery still fragile. Warren Buffett recently stated he does not see signs of the U.S. headed for a double dip, though that may bring little comfort for the unemployed as everyone watches to see if unemployment numbers improve.

GDP growth in the first half of this year surprised many with a strong showing at 5.8 percent. Depletion of inventories, unleashed pent-up demand, and fiscal and monetary stimulus have all contributed to this astounding growth. As we enter into the second half of 2010, GDP is expected to grow at a more subdued level of about 2.0 percent (annualized) due in part to a weak U.S. recovery, an increasingly fatigued consumer, and the easing of monetary and fiscal stimulus that were needed to stave off a global recession.

GTA Office Market OverviewThe Greater Toronto Area (GTA) office market gradually regained stability in 2010 as a healthy availability rate was established at approximately 10.5 percent for the past 12 months. The vacancy rate remained stable for the past four consecutive quarters at 6.5 percent, despite the completion of many new buildings during the last two years. All five

Q3 2010 | OFFICE

MidtownDowntown

GTA East

GTA West

GTA North

GTA markets reported minimal positive net absorption which has yet to affect the overall vacancy rate. Average asking net rent fluctuated marginally within a range of $16.25 to $16.35. Although some areas appeared to be more competitive than others, the overall GTA office market held on to a tenant-favoured sentiment, with opportunities for tenants to optimize their real estate strategies.

In comparison to the central area, suburban markets reported higher vacancy rates and subsequently, a larger sublease market. GTA East and GTA West contributed to 55 percent of the total vacant space in the GTA and correspondingly, 20.6 percent of available space in suburban GTA was for sublease,

versus 13.5 percent in GTA central.

Across the GTA, all markets showed a return of activity, which is anticipated to increase positive absorption. Occupancy rates should continue to increase as no major new supply is expected in the market in the near future. Average asking net rent is expected to dip slightly over the balance of 2010 and gradually pick up in the following six to nine months. The office market overall is forecasted to stabilize in the short term and shift to a landlord’s market by the end of next year as supply is depleted.

Using office employment growth as a proxy for office space demand, vacancy rates are expected to rise marginally by the end of

this year and decline to around 6.1 percent in 12 months. Average asking net rent is projected to increase steadily to $16.38 per square foot by the end of Q3 2011.

FORECAST

Source: Colliers International, August 2010

Net New Supply Asking Net Rent Vacancy Rate

2000

0.0%

12.0%

$0

$5

$10

$15

$20

$25

$30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 2 3 4 1 2 3 4 1 2 3 4

4.0%

6.0%

8.0%

10.0%

Net R

ent $

/PSF

/Net

New

Sup

ply

(100

,000

SF)

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

$16.26

6.5%

GTA | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F

GTA Office Market Overview (continued)

P. 2 | COLLIERS INTERNATIONAL

MARKET REPORT & FORECAST | Q3 2010 | OFFICE | GREATER TORONTO AREA

GTA DowntownTHE MARKET The gradual expansion of the Finance, Insurance and Real Estate (FIRE) sector has been one of the primary drivers of the downtown market over the past five quarters. Some mid-size companies have been active in the downtown market outside of the financial core, while smaller companies do not have a strong presence in this market. Renewals have been predominant in the marketplace and tenants have remained cautious, thus placing some downward pressure on rental rates in order to retain the competitiveness of available space.

TRENDSGTA Downtown has been stabilizing in both vacancy and rent performance.The vacancy rate has been continuously increasing since

Q4 2007, but its pace slowed in the past year to settle at 5.6 percent by Q3 2010. After a significant decline of 9.7 percent in Q3 2009, average asking net rents hovered at approximately $21 for the past year.

FORECASTRental rates are predicted to remain steady in the short term and eventually increase in the second half of 2011 as the market becomes more favorable to landlords. It is foreseeable that vacancy rates for Class A and AAA buildings will go up by the end of this year as some large tenants have decided to relocate outside of the financial core. Going into 2011, the return of strong activity is expected to turn into positive absorption.

Similar to the GTA market as a whole, the downtown vacancy rate is projected to experience a minimal increase followed by a decline in 2011. Average asking net rent is expected to increase steadily to $21.34 per square foot by the end of Q3 2011.

FORECAST



2000

0.0%

9.0%

12.0%

18.0%

$0

$5

$10

$15

$20

$25

$30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 2 3 4 1 2 3 4 1 2 3 4

3.0%

6.0%

15.0%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

Net R

ent $

/PSF

/Net

New

Sup

ply

(100

,000

SF)

$15.97

5.6%

GTA DOWNTOWN | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F

COLLIERS INTERNATIONAL | P. 3

MARKET REPORT & FORECAST | Q3 2010 | INDUSTRIAL | GREATER TORONTO AREA

GTA Midtown

THE MARKET With limited new supply, the GTA Midtown market has not experienced much change. Both Yonge-Bloor and Yonge-St.Clair submarkets had low vacancy rates of four percent and five percent respectively, and low transaction volumes. With only a few large contiguous spaces available in those two areas, smaller deals have been driving these submarkets. Yonge-Eglinton had a much higher vacancy rate of seven percent in comparison to the other two submarkets, which was due to an elevated vacancy rate in Class A buildings.

TRENDSThe GTA Midtown market has followed the trend of the GTA overall in terms of

stabilization. After a moderate increase of 0.3 percent in the second quarter, the vacancy rate of the midtown market returned to 4.7 percent, the same level observed in the second half of 2009 and early 2010. Average asking net rent has declined since Q4 2008 and but has steadied at around $16 per square foot in the last three quarters.

FORECASTThe midtown market is forecasted to remain flat for the rest of 2010 and most of 2011. With some available sublease space coming onto the market, the vacancy rate is expected to slightly increase in the short term , but overall the market is tight. As the economy improves, rents should go up by the middle of next year, which will make it more difficult to get deals done.

Colliers projects the GTA Midtown vacancy rate will remain at 4.7 percent for most of 2011 and that average asking net rents will marginally trend upwards.

FORECAST



2000

4.0%

10.0%

$0

$2

$6

$10

$14

$16

$20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 2 3 4 1 2 3 4 1 2 3 4

$18

$12

$8

$4

2.0%

6.0%

8.0%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

Net R

ent $

/PSF

/Net

New

Sup

ply

(100

,000

SF)

$15.97

4.7%

GTA MIDTOWN | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F



THE MARKET The GTA North office market has maintained a vacancy rate of below five percent since the Q2 2007 and based on this indicator, is considered to be the healthiest market across all other GTA submarkets. This is partially due to the tight supply of the smaller submarkets, such as Dufferin-Finch and Richmond Hill. Similar to other markets in the GTA, activity levels have been rising in GTA North over the past quarter due to increased tenant demand.

TRENDSSince the beginning of Q1 2010, vacancy levels have moderately dropped 5.1 percent to 4.7 percent as transactions from 2009 closed. Average asking net rents responded with consistent increases to a ten-year

record high of $18.22 per square foot. Net absorption recovered from a first quarter loss of 112,383 square feet and began to show improvement in the last two quarters with a total gain of 305,913 square feet.

FORECASTMinor changes are anticipated in the GTA North market and sublease absorption should continue to keep the momentum going. Similar to other markets, activity levels will continue to improve.

Colliers expects that mild positive net absorption will drive the vacancy rate to 3.9 percent over the next 12 months and average asking net rents should respond with an increase to $18.34 per square foot.

GTA North

FORECAST



2000

1.0%

6.0%

12.0%

$0

$10

$15

$25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 2 3 4 1 2 3 4 1 2 3 4

$20

$52.0%

4.0%

10.0%

8.0%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

Net R

ent $

/PSF

/Net

New

Sup

ply

(100

,000

SF)

$18.22

4.1%

GTA NORTH | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F



GTA EastTHE MARKET GTA East has the highest vacancy rate in the GTA as a whole at 8.1 percent. Submarkets in this region quoted rental rates of $13.19—far below the GTA average of $16.26 per square foot. Nodes in the southern part of the GTA East market have stayed competitive, such as Consumers Road and Woodbine-Steeles. However, Scarborough has experienced challenges in attracting tenants and continues to have a high level of available space at approximately 4,130,000 square feet.

TRENDSAverage asking net rents for GTA East reached the bottom of the recessionary trough in Q3 2009 and have increased marginally to $13.19 in the last quarter, the lowest among

all GTA markets. The vacancy rate fluctuated between 7.8 percent in Q1 and 8.1 percent in Q3. Leasing activity has improved in most of the submarkets resulting in a positive change in net absorption from -342,572 square feet in Q2 to 423,541 square feet in Q3.

FORECASTColliers expects the GTA East market to remain constant overall, with moderate positive absorption driven by better performing areas such as Markham and Woodbine-Steeles.

Vacancy rates are expected to trend downwards to 7.9 percent by Q3 2011, with average asking net rent increasing to $13.25 per square foot.

FORECAST



2000

1.0%

7.0%

9.0%

15.0%

$0

$2

$6

$10

$12

$16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 2 3 4 1 2 3 4 1 2 3 4

$14

$8

$4

3.0%

5.0%

13.0%

11.0%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

Net R

ent $

/PSF

/Net

New

Sup

ply

(100

,000

SF)

$13.19

8.1%

GTA EAST | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F



THE MARKET While consistent activity was observed during the past quarter in the GTA West market, the performance of office leasing varied among submarkets and building types. Areas such as the Airport Corporate Centre continued to experience challenges and had a vacancy rate of 16.7 percent, the highest among all GTA submarkets. With limited supply of larger spaces, landlords had more negotiating strength within that product category, while smaller office spaces faced additional competition from the sublease market.

TRENDSWith the vacancy rate remaining fairly constant at approximately 8.2 percent for the last three consecutive quarters, GTA

West office markets are steady. Asking net rents showed mild fluctuation in the past 12 months and declined from $15.30 in Q1 to $14.95 per square foot in Q3.

FORECASTThe GTA West market is projected to have stronger activity as available sublease space is absorbed and the overall vacancy rate declines.

Colliers anticipates the vacancy rate to drop to 6.8 percent a year from now and foresees a higher average asking net rent of around $15.35 per square foot by Q3 2011.

GTA West

FORECAST



2000

0.0%

6.0%

8.0%

14.0%

$0

$2

$6

$10

$12

$14

$18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 2 3 4 1 2 3 4 1 2 3 4

$16

$8

$4

2.0%

4.0%

12.0%

10.0%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

Net R

ent $

/PSF

/Net

New

Sup

ply

(100

,000

SF) $14.95

8.2%

GTA WEST | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F



480 offices in 61 countries on six continentsUnited States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95• $1.6 billion in annual revenue

• 672.9 million square feet under management

• More than 10,000 professionals

This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed 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. Colliers International is a worldwide affiliation of independently owned and operated companies. This publication is the copyrighted property of Colliers International and /or its licensor(s). © 2010. All rights reserved. Colliers Macaulay Nicolls (Ontario) Inc., Brokerage.

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Scott AddisonExecutive Vice President | Eastern Canada +1 416 620 2800 [email protected]

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Ken Norris Managing Director | Toronto Region +1 416 791 7239 [email protected]

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