Metro Vancouver, BC Metro Vancouver Prolific Downtown and Suburban Office Leasing Vacancy & Absorption Trends

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2017 Year-End Office Market Report Metro Vancouver, BC metro Vancouver Prolific downtown and suburban office leasing vacancy & absorption trends

Vacancy Rate activity heightens regional supply constraints 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% emand for office space in Metro Vancouver later. Much of the delay was simply attributable Dcontinued to climb through 2017 with vacan- to fixturing periods as deal velocity through 2017 2018F 437,640 7.3% cy tumbling to 8% at year-end 2017 – the lowest remained robust and will likely lead to a similar regional vacancy recorded since year-end 2013 but slightly smaller decline in vacancy in 2018, and a decline from the 9.7% registered at year- particularly Downtown, as the number of options 2017 8% 1,223,656 end 2016. Vacancy in all but three submarkets grows fewer. With no new Downtown office was sub-10% at year-end 2017 with two of those space scheduled for completion until the end of three submarkets – Surrey and New Westmin- 2016 856,868 9.7% 2019, vacancy is expected to tighten considerably ster – forecasted to also drop below 10% in 2018. by the end of 2018. Vacancy in New Westminster Regional annual absorption of 1.22 million square is also expected to drop significantly in 2018 as 2015 10% 1,334,604 feet (msf) in 2017 was the second-most annual the long vacant Anvil Centre is finally occupied absorption recorded since 2005, surpassed only by a wide range of tenants, including Douglas by the 1.33 msf of annual absorption recorded in College, which signed the largest suburban lease 2014 92,870 9.4% Metro Vancouver in 2015. All submarkets except deal in Metro Vancouver in the back half of 2017. one – the North Shore – registered positive annu- Vacancy on the North Shore is also expected to al absorption in 2017 and were led by Vancou- decline as tenants such as COWI occupy the new 2013 -158,905 7.8% ver-Broadway, Burnaby, Downtown and Surrey. CentreView development in 2018, which was

-400, 0 40 80 1, 1, Much of the leasing activity that manifested in added to inventory as largely vacant at year- 0, 0, 20 60 000 000 0, 0, 00 000 000 0 the statistics at year-end 2017 in the Vancou- end 2017. With almost two-thirds of new office ver-Broadway, Burnaby, Downtown and Surrey development in Vancouver-Broadway set for Absorption Rate (sf) submarkets was actually completed in 2016 delivery out to 2020 already preleased, vacancy is Vacancy Absorption and early 2017 and is what led to the substantial expected to tighten further. In virtually all Metro drop in vacancy and increase in absorption as 12-month projection based on 10-year average absorption Vancouver submarkets, vacancy will remain stable and known net absorption in new inventory tenants occupied their spaces six to 12 months continued on back page

METRO VANCOUVER OFFICE VACANCY SUMMARY (YEAR-END 2017) INVENTORY HEAD LEASE SUBLEASE TOTAL VACANCY 12-MONTH DISTRICT (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) RATE (%) ABSORPTION (SF) Downtown 22,943,145 1,520,204 101,438 1,621,642 7.1% 200,811 Yaletown 2,047,372 83,092 3,039 86,131 4.2% 52,735 Vancouver-Broadway 6,583,900 370,169 20,700 390,869 5.9% 425,059 Burnaby 9,256,790 574,981 255,199 830,180 9% 323,759 Richmond 4,215,800 298,387 114,397 412,784 9.8% 37,554 Surrey 2,906,607 293,385 0 293,385 10.1% 177,793 New Westminster 1,688,572 278,418 2,358 280,776 16.6% 6,678 North Shore 1,450,898 187,864 0 187,864 12.9% -733 TOTAL 51,093,084 3,606,500 497,131 4,103,631 8% 1,223,656

Vacancy rate December 31, 2017 8% Absorption (demand) Vacancy (supply) Rental Rates Vacancy rate June 30, 2017 9.1%

Partnership. Performance. avisonyoung.com Downtown Downtown vacancy temporarily stable due to delivery of vacant space

Vacancy trends GWL Realty Advisors Downtown vacancy remained stable will deliver at 7.1% at year-end 2017, almost VAncouver unchanged from 7.2% a year earlier; CEntre II however, vacancy rose by 30 bps from 6.8% at mid-year 2017 due primarily to in 2021. the addition of 252,000 sf of vacant office space at The Exchange in the fourth quarter. While approximately 85,000 sf of the office space has been preleased in the Exchange, the tenants – National Bank, Hyperwallet Systems, Smythe LLP and Sovereign Insurance – will year-end 2017 from 4.7% a year earlier. market also generated activity but had not occupy until mid-to-late 2018 at the Class A vacancy continues to tighten, a negligible effect on net absorption, earliest. This addition to inventory – the dropping to 6.7% at year-end 2017 from positive or negative. With few vacant and last new office tower of the previous 9.8% 12 months ago. Class B vacancy available large blocks of contiguous space construction cycle, which had delivered also declined, slipping to 6% from 6.4%. Downtown, alternative options for larger several new office buildings in 2015/16 Class C vacancy actually increased to tenants are diminishing. – pushed class AAA vacancy to 8.2% at 8.3% from 6.1% in that 12-month period. Strong leasing velocity had placed the absorption trends recent lease deals - YEAR-END 2017 (>10,000 sf) Downtown market on a trend towards Annual absorption of 200,811 sf in 2017 lower vacancy in 2017, but a statistical tenant BUILDING SF marked the third straight year of positive pause due to the delivery of the mixed- annual absorption recorded in the down- Amazon 402 Dunsmuir Street 147,000 use Exchange building (the office portion town core. The vast majority of absorption Spaces 939 Granville Street 67,000 of which still remains approximately in 2017 was recorded in class A buildings, 63% available) has temporarily delayed WeWork Bentall 2 54,000 which offset negative absorption in class B that trend from manifesting in the data. and C properties. Absorption in class AAA Legal Services Society 510 Burrard Street 50,000 Sublease vacancy remained insignificant premises was limited by a lack of supply Facebook Waterfront Centre 45,000 in the Downtown market in 2017, in 2017. After peaking in 2015 at 1.1 msf dropping to just 6.3% (101,438 sf) of total Peoples Trust (renewal/expansion) 888 Dunsmuir Street 35,600 (the most annual absorption recorded vacancy from 7.8% (128,232 sf) a year Downtown since Avison Young started BCBC (renewal) Oceanic Plaza 28,400 earlier. There were almost no significant tracking the market in 1996), absorption Splunk (sublease) 555 Robson Street 27,360 sublease deals (greater than 10,000 sf) has remained positive but declined in Kasian (renewal) 1500 West Georgia Street 26,000 completed Downtown in 2017. New each subsequent year. This most recent and expanding occupants continue to Oracle Canada (renewal) Bentall 1 24,800 three-year run of positive absorption redefine the tenant mix in Downtown (2015-2017) totalled 1.69 msf, which was Canada Drives (renewal/expansion) Bentall 2 19,800 Vancouver with continued demand from less than both of the previous three-year Flight Centre 980 Howe Street 18,200 technology and co-working companies runs of positive annual absorption the driving much of the activity. A lot of Real Estate Council of BC Pender Place II 17,400 market has experienced since 1996: 2004- (renewal/expansion) movement from existing tenants in the 2006 (2.02 msf) and 2005-2007 (1.71 msf). Great-West Life Assurance Co. Bentall 4 16,800 Vacancy with Space Availability Factor (SAF) and Absorption Pretium Resources Bentall 4 16,800 14.0 1,101,041 1,200,000 Aurora Cannabis 510 Seymour Street 16,800 12.0 1,000,000 Wesbild Holdings Royal Centre 14,700 2.8% 800,000 Miller Titerle + Co. 638 Smithe Street 14,700 10.0 3.8% 3.4% iQ Office Suites Royal Centre 14,200 3.4% 9.3% 2.2% 600,000 F

2.8% e A 8.0 S

a t / R

xMatters 510 Burrard Street 14,600 400,000

e 387,909 7.1% n o i a t 6.0 6.8% 7.2% t R 222,873

Indochino (sublease) 720 Robson Street 14,000 p y 5.7% 200,000 r c 200,811 6% o s a n Kabam 1075 West Georgia Street 13,800 4.0 b 0 A Fluor Canada (renewal) 1075 West Georgia Street 13,800 V a c 2.0 -270,560 -200,000 Safeway 1050 West Pender Street 11,000 -304,835 BBA Engineering 1050 West Pender Street 11,000 0.0 -400,000 2014 2015 2016 2017 2018 Preszler Law Firm 1075 West Georgia Street 10,800  Vacancy Absorption  SAF* Space Availability Factor VanWest College (renewal) 1016 Nelson Street 10,800 12-month projection based on 5-year average absorption and known net absorption in new inventory, Innergex Renewable Energy 1185 West Georgia Street 10,500 and 10-year average SAF.

2 Partnership. Performance More than 2.1 msf scheduled for completion by 2021 Downtown

The occupancies of WeWork in Bentall and represents a wave of fewer, but much to 18 months. Vacancy may drop by up to 3, Kuehne + Nagel at 900 Howe Street larger buildings. These three projects are 150 bps with Downtown vacancy likely and Sophos at 777 Dunsmuir Street all likely to be delivered in 2022/2023 and will to land below 6% by year-end. It appears contributed towards absorption recorded total approximately 1.56 msf of new office statistically that the market is at the front- in the second half of 2017. Substantial but space. More than 2.9 msf of new space is end of the next downtown development stabilized positive absorption is expected anticipated to be delivered by 2023. cycle and numerous developers have or in 2018 as tenants occupy contractually are positioning themselves. Strata office leased but physically vacant premises, market forecast Annual in the Downtown market is likely to play an increased role moving forward due including WeWork at Bentall 2, WSP Upward pressure on rates occurred absorption to the success of Bosa Waterfront Centre Global at Robson Court, National Bank through 2017 as landlords benefited from lowest achieving sales in excess of $2,000 psf. at the Exchange and the College of Reg- the downward trend in vacancy and avail- The Downtown tenant mix continues to istered Nurses at Granville Square. ability. With SAF at its lowest point since since 2014 be reshaped by new and expanding ten- 2013, non-existent sublease space and ancies with co-working spaces emerging space availability factor minimal near-term inventory scheduled as a new force in the market. Despite The space availability factor, or SAF, refers for delivery in the next 18 months, rental the temporary stabilization of vacancy at to head lease or sublease space that is rate increases and supply constraints are year-end 2017, the market will be supply being marketed but is not physically likely to intensify. Expect a return to imbal- constrained as it enters the next develop- vacant, and new supply that is nearing anced market fundamentals for the next 12 ment cycle in 2018. completion and available for lease. SAF decreased significantly to 2.2% at DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION Reliance Properties/ The Offices at Burrard Place, year-end 2017 from 3.8% 12 months 99,000 (office podium) Strata 67% sold Q3 2019 Jim Pattison Developments 1281 Hornby Street (mixed use) earlier. Combined with vacant space, Rendition Developments Bench, 353 Railway Street (I-4 zoning) 35,000 0 0% Q3 2019 the amount of space being marketed Bosa Properties/ The Cardero, 1575 West Georgia Street 44,948 (office) Lease/Strata Lease/Strata Q4 2019 for lease in the Downtown core is 9.3% Arpeg Holdings & 620 Cardero Street (mixed use) (or approximately 2.12 msf) – the lowest Oxford Properties 402 Dunsmuir Street 147,000 147,000 100% Q4 2019 overall availability since year-end 2013 Reliance Properties/ The Offices at Burrard Place, 146,375 (office tower) 0 0% Q1 2020 (9.1% or 1.9 msf). Jim Pattison Developments 1280 Burrard Street (mixed use) Westbank/Allied REIT 400 West Georgia Street and 725 & 731 Homer Street 353,000 0 0% Q2 2020 new construction Low Tide Properties 155 Water Street 75,000 (office) 0 0% Q3 2020 Downtown is on the cusp of its next devel- Omicron/ Rendition Maker Exchange, 488 Railway Street (I-4 zoning) 152,000 0 0% Q3 2020 opment cycle with developers declaring Developments their intentions to deliver new buildings PCI / Greystone 601 West Hastings Street 210,000 0 0% Q4 2020 into 2021. With no new deliveries until the Uptown Property Group 625 West Hastings Street 120,000 0 0% Q1 2021 back half of 2019 (much of which is already preleased or sold), the next Downtown GWL Realty Advisors Vancouver Centre II, 753 Seymour Street 368,115 0 0% Q2 2021 development cycle will start in 2020 with Bosa Developments Bosa Waterfront Centre, 320 Granville Street 355,000 (50% for lease) Lease/Strata* 0% Q2 2021 the delivery of 710,000 sf in three new Downtown office towers as well as smaller Bentall Kennedy 1090 West Pender Street 530,000 - - Planning projects in Railtown and Gastown. This cy- Oxford Properties 1133 Melville Street 530,000 (office) - - Planning cle will continue in 2021 with the delivery The Post on Georgia, QuadReal Property Group 500,000 (office) - - Planning of more than 650,000 sf of lease space in 349 West Georgia Street (mixed-use) three additional Downtown towers. One Asia Standard Americas 1468 Robson Street 29,115 (office) - - Planning of the projects, the Bosa Waterfront FDG Properties 117-131 Water Street 68,576 (office) - - Proposed Centre, also offers approximately 178,000 Eight 55 on Granville, Terrma GP I Inc. 29,785 (office) - - Proposed sf of strata office space, which was 100% 855 Granville Street (mixed use) Aquilini Development and Aquilini Centre East, sold in 2017. These six towers will likely TBD - - Proposed come to represent the next development Construction 777 Pat Quinn Way cycle (2020-2021) and will total approxi- Westbank 720 Beatty Street TBD - - Proposed mately 1.36 msf. However, a subsequent Cadillac Fairview Waterfront Tower, 555 West Cordova Street TBD - - Proposed development cycle is already taking shape *The building contains 50% lease space and 50% strata space. The strata space is 100% sold. No preleasing had been completed by year-end 2017. HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY SAF (SF) SAF (%) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RANGE (PSF) COST (PSF) AAA 4,980,576 373,163 35,289 408,452 8.2% 64,276 82,291 1.7% $30 - $50 $50 - $75 A 8,103,253 496,722 49,145 545,867 6.7% 316,124 205,719 2.5% $25 - $45 $43 - $69 B 6,714,398 394,017 10,886 404,903 6% -114,312 159,974 2.4% $22 - $35 $38 - $56 C 3,144,918 256,302 6,118 262,420 8.3% -65,277 52,159 1.7% $18 - $28 $31 - $46 Total 22,943,145 1,520,204 101,438 1,621,642 7.1% 200,811 500,143 2.2% - - avisonyoung.com 3 downtown development timeline AN ICONIC

OffICe The Offices aT Burrard Place The offices at Burrard Place The Cardero,1575are w. a func georgiaTiOnal scul PTure The Offices at Burrard Place and The cOrnersTOne Of 402 Dunsmuir Street 400 West Georgia Street TOWeR 1281 Hornby Street street & 620 carderoa full ci Tstreety BlOck Of new 1280 Burrard Street develOPmenT.

One of the last buildings designed by Vancouver’s world-renowned architect, Bing Thom, this structure will define the southern entrance to downtown Vancouver and will anchor the largest mixed-use development in the most rapidly growing commercial / residential community on the downtown peninsula.

Connected to the sixty-storey luxury residential tower, The Offices at Burrard Place will animate one of the most prominent corners of one of Vancouver’s most notable streets. Complementing the curving glass of the exterior, the office interiors will be among the finest in the city. And in addition, an incredible array of world class amenities will provide commercial occupants with a workplace lifestyle unmatched in Vancouver.

The Offices at Burrard Place represent a new standard for business that will attract and retain the best talent and employers in Vancouver.

Q3 2019 Q4 2019 Q4 2019 q1 2020 Q2 2020

Developer Reliance Properties/ Bosa Properties/ Reliance Properties/ Oxford Properties Westbank/Allied REIT Jim Pattison Developments Arpeg Holdings Jim Pattison Developments Storeys 7-storey podium (3 floors) 3 floors in mixed-use building5 9 13 24 office sf 99,000 (strata) 45,346 (lease/strata) 147,000 146,375 (office tower) 353,000 tenants Sold (phase 1 - 66,000 sf) 3,000 sf - Arpeg Holdings 147,000 sf - Amazon No tenants at this time No tenants at this time Not released (phase 2 - 33,000 sf) Occupancy 67% 7% 100% 0% 0%

proposed downtown/railtown developments Maker exchange, bench, 117-131 Water Street 1090 West Pender Street Aquilini Centre East, 488 Railway Street 353 railway Street Developed by Developed by 777 Pat Quinn way Developed by Developed by FDG Properties Bentall Kennedy Developed by Aquilini omicron & Rendition rendition developments Storeys / Office area Storeys / Office area Development & construction Developments Storeys / Office area 7 / 68,576 sf 31 / 530,000 sf Floors / Office area Storeys / Office area 6 / 35,000 TBD 7 / 152,000 sf

Developers of this 152,000- The developer had originally A seven-storey, mixed-use UDP supported the design This proposed mixed-use sf, seven-storey mixed-use applied for a development commercial/residential in February 2014. A public residential/office tower building featuring ‘creative permit in 2015 for this building has been proposed hearing related to its rezon- will be the third and final manufacturing’ uses and six-storey, 35,000-sf mixed- on this site that would retain ing application was set for building to form the Aq- office uses applied for a de- use building, which features three existing heritage February 24, 2015, and the uilini Centre development velopment permit in Septem- ‘creative manufacturing’ uses buildings. The development application was approved anchored by Rogers Arena. ber 2017. The City’s director and office uses under the permit application was by the City. As of December This building was originally of planning approved the site’s I-4 zoning. The project’s “conditional” so it may be 31, 2017, the developer was scheduled for completion project’s development permit development permit has permitted, but it requires continuing to work through by the end of 2018, but the application on December 17, been approved and con- the decision of the director development permit timing of construction has 2017, subject to a number of struction is anticipated to of planning. The building application requirements. It been delayed due to the conditions. The permit will be break ground in the first half features 68,576 sf of office is anticipated that construc- forthcoming removal of the issued once all the conditions of 2018 and complete in the space on floors 2, 3 and 4. As tion could potentially break Georgia and Dunsmuir via- have been satisfied. Project second half of 2019. of December 31, 2017, the ground at mid-2019 and ducts. The east tower, as pro- marketing materials indicate development permit appli- complete in the back half posed, was to feature 69,300 building construction is cation with the City was no of 2022. sf of office space on floors 5 scheduled to be complete by longer online. Further details through 13 with residential Q3 2020. were unavailable. units on the upper floors.

4 Partnership. Performance Vancouver Centre II, bosa waterfront centre, 155 Water Street 601 West Hastings Street 625 West Hastings Street 753 Seymour Street 320 granville street

Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q2 2021

Developer Low Tide Properties PCI /Greystone Uptown Property Group GWL Realty Advisors Bosa Developments Storeys 7 25 28 33 30 office sf 75,000 210,000 120,000 368,115 355,000 tenants Approx. 50% of the building has No tenants at this time No tenants at this time No tenants at this time No tenants at this time been sold as strata office space; no tenants at this time Occupancy 0% 0% 0% 0% 0%

1133 Melville Street The Post on Georgia, Waterfront Tower, 1468 robson Street Eight 55 on Granville, Developed by 349 West Georgia Street 555 West Cordova Street Developed by 855 Granville Street Oxford Properties Developed by Developed by Asia Standard americas Developed by Storeys / Office area QuadReal Property Group Cadillac Fairview floors / Office area Terrma gp I inc. 34 / 530,000 SF Storeys / Office area Storeys / Office area 3 / 29,115 sf Storeys / Office area 19 / 410,000 sf; Podium: 25 / TBD 3 / 29,780 sf 90,000 sf (3 floors)

Rezoning application was A public open house The Urban Design Panel A revised development A development permit filed on July 8, 2015. The was held in 2016 as part (UDP) did not support the permit application was filed application was filed to UDP did not support the of the rezoning applica- original building design in February 2017. The new provide interior & exterior initial building design as tion process, which was in 2015. The architect project design was sup- alterations and a change proposed, but subsequently originally submitted to the subsequently presented ported by the UDP in March of use to include 27,011 sf supported a new design at City in June 2016. A pro- nine alternative concepts 2017 and appeared before of retail in the basement/ a May 31, 2017 UDP review posed19-storey office tower in a UDP workshop in June the development board in ground floor and 29,780 sf meeting. New renderings includes 410,000 sf of office 2015, which received a June 2017. While the de- of office space on the 2nd were released in June 2017. space and 90,000 sf in the “warmer reception.” A public velopment permit has not and 3rd floors. The devel- Oxford Properties re-submit- podium. A revised rezoning engagement session was been issued as the applicant opment permit application ted a revised rezoning ap- application was filed in May held in December 2015. As continues to work through was approved by the city plication. Open house was 2017 that reduced overall of December 31, 2017, the the conditions of approval, with conditions on January held in November 2017. As density & building massing developer remains in pro- demolition of the former ho- 27, 2017. A building permit of December 31, 2017, the and slimmed tower design. cess with the City and while tel on site has commenced was applied for in July 2017. City had not yet approved As of December 31, 2017, the design has changed with project construction As of December 31, 2017, the application. Depending the developer is working somewhat, the scale of the proposed to potentially start exterior renovations had on approvals, construction through the development building remains similar at in early 2019. not yet begun nor had an could complete by 2022. permit application process. 25 storeys. update been provided. avisonyoung.com 5 Vancouver-Broadway Vacancy plunges as new developments occupied

Vacancy and Absorption (overall) at 1157 Parker Street. Two new large office developments were proposed 12.0% 450,000 410,466 425,059 in late 2017: Cressey Development’s 400,000 157,000-sf, 10-storey office building at 10.7% 10.0% 350,000 425 West 6th Avenue on the current 300,000 site of Craftsman Collision; and Rize 8.0% Alliance’s 13-storey, 290,000-sf office 250,000

e e Annual tower at 1296 Station Street at Terminal a t a t

200,000 R

R 6.6% n absorption y Avenue, next to the Pacific Central train

6.0% o c i t p a n 5.9% 150,000 r of 425,059 sf station. Both are scheduled to break o s V a c 5.1% b most 100,000 A recorded ground in late 2018. 4.0% 4.6% 4.5% 118,883 15,187 50,000 since 1996 market forecast 2.0% - 0 Upward pressure on rental rates strength- -16,768 -50,000 -38,637 ened through 2017 as vacancy continued 0.0% -100,000 to tighten and availabilities on a head 2013 2014 2015 2016 2017 2018F lease or a sublease basis remained few Vacancy Absorption and far between, particularly for large 12-month projection based on 10-year average absorption and known net absorption in new inventory blocks of contiguous space in the core Vancouver-Broadway market. That upward Vacancy trends tered in the market since Avison Young pressure on rental rates is anticipated to started tracking the market in 1996. remain in 2018 as vacancy remains tight Overall vacancy in Vancouver-Broadway New developments, particularly in the with some potential relief coming in the dropped to 5.9% at year-end 2017, down periphery, which had been delivered small-to-mid-sized pockets of vacant from 10.7% a year earlier as a number vacant in 2015/16, were subsequently space in the new developments (which of major tenancies took occupancy in leased up and occupied in 2017. New are primarily preleased/sold) set for primarily class A premises across the city. developments such as Renfrew Cen- delivery in 2018. Several new projects are Major tenancies included BC Safety tre, Marine Gateway and phase two of working through the permitting process Authority and Associated Engineer- Containers along with the Fifth have with the City of Vancouver and will contin- ing occupying the Renfrew Centre all been primarily occupied and resulted ue to roll out through 2018 and beyond, as well as Intel and Townline Homes but they are anticipated to prelease/sell moving into Marine Gateway – two in absorption overwhelmingly occurring out quickly as availabilities are anticipated new developments that were largely (94%) in class A premises. While 99,515 to remain limited and vacancy low. vacant for more than a year after they sf of annual absorption was noted in the were completed. In the first full year of Vancouver-Broadway core, more than statistics for the newly designated Van- 325,000 sf was registered in the periphery. recent lease deals - YEAR-END 2017 couver-Broadway core market, vacancy new construction rose slightly to 3.4% at year-end 2017 tenant BUILDING SF Construction of new office space in the from 1.7% 12 months earlier. Vacancy Provincial Health Services Authority 1333 West Broadway 83,540 Vancouver-Broadway market remains in the Vancouver-Broadway periphery Spaces 565 Great Northern Way 38,770 market plummeted to 9.2% at year-end very active with much of the new supply 2017 from 21.2% at year-end 2016 due to – both strata and lease – scheduled for Thunderbird Entertainment 123-141 West 7th Avenue 35,240 the occupancies listed above and others. delivery in 2018/19 already significantly Finning International 565 Great Northern Way 28,690 Vacancy is likely to tighten further in preleased/sold. The ongoing transfor- Blackbird Interactive 565 Great Northern Way 28,690 mation of the former industrial node 2018 with significant lease deals com- City of Vancouver 555 & 575 West 8th Avenue 28,000 pleted in 2017 at 1333 West Broadway of Mount Pleasant into a tech-focused Umedia 204 West 6th Avenue 21,230 by the Provincial Health Services office hub continues unimpeded but de- Authority and at 565 Great Northern velopers’ attention is increasingly turning Samsung 565 Great Northern Way 20,200 Way, which is scheduled for completion towards Great Northern Way, the False GFC Enterprises (renewal) 1367 West Broadway 11,700 Creek Flats and the northern end of the in 2018 and counts Finning, Blackbird Inception Pharma 887 Great Northern Way 11,400 Interactive, Samsung and Spaces Cambie Street corridor. However, outside Engine Digital 34 West 8th Avenue 10,130 among its new tenants. Sublease space of these central submarkets, little new is virtually non-existent in the overall development is being contemplated in Jumpstart Games 112 East 6th Avenue 9,130 Vancouver-Broadway market. East or South Vancouver with the excep- Eastside Games 555 West 12th Avenue 8,100 tion of QuadReal Property Group’s Method Studios 120 West 3rd Avenue 7,680 absorption trends proposed 1-msf expansion of Broadway Arius Tech 33 West 8th Avenue 7,000 Annual absorption of 425,059 sf in Tech Centre and Porte Commercial’s 2017 was the most absorption regis- much smaller The George development Brandlive 120 West 3rd Avenue 5,450

6 Partnership. Performance New construction primarily focused in Mount Pleasant Vancouver-broadway

Mount Pleasant DEVELOPER BUILDING SF PRELEASE % COMPLETION Employment Area PC Urban Properties The Lightworks Building, 22 East 5th Avenue 46,740 (office/light industrial) 100% Q1 2018 (I-1 Zoning) Rize Alliance The Independent at Main, 275 East 10th Avenue 17,000 (office) 0% Q1 2018 BlueSky Properties Broadway Commercial, 988 West Broadway 94,120 100% Q2 2018 While office vacancy in Mount Pleas- Rendition Developments / 204 West 6th Avenue 28,430 (office/light industrial) 76% Q2 2018 ant rose slightly at year-end 2017 from MDC Property Services six months earlier, the rise was due to PCI Group /Low Tide Properties 565 Great Northern Way 161,000 73% Q2 2018 an increase in rentable area; other- Strata: Chard Development 34 | W7, 34 West 7th Avenue 54,347 (office/light industrial) Q3 2018 wise, vacancy would have tightened. 87.5% sold Much of the current leasing activity in Porte Commercial The George, 1157 Parker Street 34,308 (office/light industrial) 0% Q4 2018 the area is within new developments, PC Urban Properties Nickel, 285 West 5th Avenue 71,000 (office/light industrial) 65% Q1 2019 which typically have little impact on Rendition Developments The Beltline Off Broadway, 224 West 8th Avenue 32,898 (office/light industrial Strata Q3 2019 overall vacancy in the area. The area Champion Development Group 151 West 5th Avenue 54,770 (office/light industrial) 0% Q1 2020 remained in demand from office tenants in 2017 – particularly tech firms Cressey Development 425 West 6th Avenue 156,983 (office) 0% Planning – but availabilities remained scarce. QuadReal Property Group Broadway Tech Centre, 3030 East Broadway (five buildings) 962,300 0% Planning The area continues to transition to an Onni Group Voxel, 399 East 1st Avenue 86,531 0% Planning office precinct, away from the neigh- Reliance Properties/ 339 East 1st Avenue 133,594 0% Planning bourhood’s light industrial heritage. Porte Communities Many vacant buildings (or soon to Rize Alliance 1296 Station Street 290,000 0% Planning be vacant) have been earmarked for CRS Group of Companies 2395 Cambie Street 39,270 (office) 0% Planning

redevelopment as either strata office Pacific Crown Management Ltd. 510 West Broadway 43,425 (office) 0% Planning or flex office lease projects. There Wesgroup Properties 110 West 5th Avenue 45,290 (office/light industrial) 0% Planning are very limited sublease options in the submarket with the exception of PCI Group / Low Tide Properties 901 Great Northern Way 400,000 0% Proposed 149 West 7th Avenue. The remaining Vanlux Development 521-527 West 8th Avenue 61,650 (office) 0% Proposed industrial space in Mount Pleasant Medali Developments (West 6th) 35 & 43 West 6th Avenue 52,713 (office/light industrial) 0% Proposed

continues to grow more challeng- Vivagrand Development Corp. 5812-5888 Cambie Street TBD 0% Proposed ing to lease as property taxes have increased significantly in the last three New SF by 2020 years, which has spiked operating new Currently 64% costs in lease agreements and made it projects 511,248 sf preleased difficult for industrial tenants to justify by 2020 10 remaining in Mount Pleasant and for landlords and property owners HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY to forego the returns possible from VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RANGE (PSF) COST (PSF) renovations and/or redevelopment. A 1,996,863 27,103 1,035 28,138 1.4% 105,540 $25 - $32 $42 - $50 Office rental rates are expected to

CORE B 1,244,433 35,862 0 35,862 2.9% 12,416 $18 - $25 $31 - $41 continue to rise in existing buildings C 470,010 56,852 6,342 63,194 13.4% -18,441 $15 - $19 $28 - $33 and new developments as vacancy is predicted to remain very tight. Total 3,711,306 119,817 7,377 127,194 3.4% 99,515 - - Demand is forecast to remain strong HEAD LEASE SUBLEASE TOTAL TOTAL 12- MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY with several more developments in VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RANGE (PSF) COST (PSF) the pipeline. Vacancy will remain tight A 2,181,299 212,364 13,323 225,687 10.3% 295,057 $22 - $32 $40 - $50 in 2018 and beyond as it is expected B 625,797 36,725 0 36,725 5.9% 19,085 $18 - $23 $31- $38 that most new builds will be delivered fully leased/sold. PERIPHERY C 65,498 1,263 0 1,263 1.9% 11,402 $15 - $19 $28 - $33 Total 2,872,594 250,352 13,323 263,675 9.2% 325,544 - -

HEAD LEASE VACANCY SUBLEASE VACANCY TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY TOTAL VACANCY (%) (SF) (SF) VACANCY (SF) ABSORPTION (SF) RANGE (PSF) COST (PSF) A 4,178,162 239,467 14,358 253,825 6.1% 400,597 $22 - $32 $39 - $50 B 1,870,230 72,587 0 72,587 3.9% 31,501 $18 - $23 $31 - $38 OVERALL C 535,508 58,115 6,342 64,457 12.0% -7,039 $15 - $19 $2 8 - $33 Total 6,583,900 370,169 20,700 390,869 5.9% 425,059 - - avisonyoung.com 7 Yaletown Vacancy tight as annual absorption strongest since 2010

Vacancy and Absorption

14.0% 60,000 52,735 50,000 12.0% 4.9% 40,000 23,928 10.0% 30,000 19,732 20,000 ) f

s F (

8.0% 6.9% A e

S 10,000

/ 3.8% a t

e 2.8%

3% n

a t 0 o i R

6.0%

6.8% t y p c r

-10,000 o a n -9,107 s -20,091 0.3% b A V a c 4.0% -20,000 4% 4.1% 3.1% 4.2% 4.7% -30,000 2.0% -40,000 Visier -41,953 market forecast 0.0% -50,000 Workforce 2013 2014 2015 2016 2017 2018F Analytics Rental rates rose significantly in 2017  Vacancy Absorption  SAF* Space Availability Factor leased 22,000 sf due to an uptick in demand for quality Yaletown office space and a very limited 12-month projection based on 10-year average absorption and 10-year average SAF at 1110 Hamilton Street. supply of such office space in the popular Vacancy trends occupancies of Stellar Creative Labs, submarket. This upward pressure on Tuangru and Grosvenor all contributed rates is expected to continue in 2018 as Vacancy dropped to 4.2% at year-end to the surge. The relocation of McEl- landlords increasingly dictate terms as 2017 from 6.8% a year earlier. Vacancy hanney to class A space at 858 Beatty demand continues to outpace supply tightened through 2017 due to a signif- Street from class C office space at 780 and vacancy tightens further, particularly icant increase in demand from tenants Beatty Street had an outsized impact on in class A and B premises. Slight relief in seeking small-to-mid-sized heritage absorption and vacancy and resulted in terms of vacancy may come later in 2018 brick-and-beam creative space close to the one large block of vacant space to when Relic Entertainment, which cur- the core. This demand resulted in the come available in this small submarket at rently occupies approximately 30,000 sf at occupation of most of the large blocks of year-end 2017. space (by Yaletown standards) that came 1040 Hamilton Street, is scheduled to re- available in 2015/16 when some volatility space availability factor locate to its new office in Mount Pleasant. roiled the typically stable submarket. The space availability factor (SAF) refers Limited quality options will be available in Some tenants had relocated to up-and- to head lease and/or sublease space that 2018, and when they do come to market, coming office nodes such as Mount is being marketed, but is not physically will lease quickly at likely higher rates than Pleasant with its ‘gritty’ light industrial vacant. The SAF plummeted to a record deals completed in 2017. vibe or, in some cases, consolidated in low of 0.3% (5,500 sf) at year-end 2017 the new office developments that were from 4.9% (98,839 sf) a year earlier. Hence, recent lease deals - YEAR-END 2017 being delivered Downtown starting in the amount of available space currently 2015. However, Yaletown’s allure was being marketed (occupied and vacant) in quickly re-established by the end of 2016 Yaletown is 4.5%, or approximately 58,000 tenant BUILDING SF and deal velocity picked up throughout sf – the lowest since mid-year 2008. Westside Preparatory School 873 Beatty Street 30,000 the past year and desirable spaces have Visier Workforce Analytics 1110 Hamilton Street 22,000 leased up quickly. new construction Nomadic Films 780 Beatty Street 19,880 absorption trends Boffo Developments’ mixed-use project, The Smithe, includes 31,000 sf Segment 1050 Homer Street 5,270 Annual absorption surged to 52,735 sf of office space in a three-floor podium. in 2017, a significant reversal of fortune Completion is set for the end of 2020. Tuangru 1122 Mainland Street 4,780 from the negative annual absorption of -41,953 sf registered in 2016 and the DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION most annual absorption recorded in Boffo Developments The Smithe, 885 Cambie Street 31,000 0 0% Q3 2020 Yaletown since 2010. The second-half

Head Lease Sublease Total Vacancy Total Vacancy 12-month Net Rental Rate Gross Occupancy Class Inventory SAF (sf) SAF (%) Vacancy (sf) Vacancy (sf) (sf) (%) Absorption (sf) (psf) Cost (psf) A 576,938 0 3,039 3,039 0.5% 16,330 0 0.0% $32 - $40 $49- $57 B 998,357 35,980 0 35,980 3.6% 49,793 5,500 0.6% $26 - $31 $43 - $48 C 472,077 47,112 0 47,112 10% -13,388 0 0.0% $21 - $25 $35 - $42 Total 2,047,372 83,092 3,039 86,131 4.2% 52,735 5,500 0.3% - -

8 Partnership. Performance Most positive annual absorption recorded since 2000 Burnaby

Vacancy and Absorption New Construction 350,000 Anthem Properties’ mixed-use Station 323,759 14.0% 300,000 Square will feature 52,800 sf of office 246,115 space on two floors in the project’s 12.9% 250,000 12.0% 12.6% podium. Two floors have been sold in 12.5% 200,000 Cressey Developments’ eight-storey, 10.0% Vacancy 74,016-sf strata office project, Kings 9.6% 150,000 9% 99,358 e Crossing. Onni Group’s mixed-use e 8.0% a t

100,000 R

a t slips to project at 3355 North Road, which in- n R

o i y t

c 8.4% 34,390 50,000 p cludes a 14-storey office tower featuring r a n 6.0% o lowest s b

V a c 161,200 sf of office space as well as 32,637 0 A 4.0% point retail on the ground floor, is set to break -50,000 since 2013 ground by mid-2019. 2.0% -100,000 Market Forecast -114,783 0.0% -150,000 Rental rates remained stable in 2017 as 2013 2014 2015 2016 2017 2018F landlords maintained high face rates 12-month projection based on 10-yearVaca averagency absorption andAbs knownorption net absorption in new inventory while offering larger inducements that have now been reduced in the face of Vacancy trends absorption trends tightening vacancy. Sublease vacancy Vacancy declined to 9% at year-end 2017 Annual absorption of 323,759 sf in 2017 will likely serve as the primary source from 12.5% a year earlier – and is at its marked the most annual absorption of lease availabilities in next 12-month period. Upward pressure on rental rates lowest point since mid-year 2013. Sub- recorded in Burnaby since 2000 and in 2018 is likely as vacancy decreases lease vacancy at year-end 2017 remained followed positive annual absorption of further and a constrained supply of new elevated at 255,199 sf – the second 246,115 sf in 2016. A number of significant occupancies, including Raymond James construction being delivered offers little most square footage since Avison Young and Kinder Morgan at 3777 Kingsway, relief in the short- to-mid term. started tracking the market in 1997 – Capcom at Solo District, Flextronics at after peaking at mid-year 2017. FortisBC 4333 Still Creek and Metro Vancouver recent lease deals - YEAR-END 2017 removed the space it was offering for at Metrotower III, contributed to the ab- sublease at 4370 Still Creek Drive. Telus’ sorption. The expansions of Clio at 4611 tenant BUILDING SF sublease space at 3777 Kingsway and Canada Way and Binnie Consulting at Arista Networks Canada 9100 Glenlyon Parkway 61,800 HSBC’s sublease space at 3383 Gilm- 4946 Canada Way also contributed to the Themis Solutions (renewal/expansion) 4611 Canada Way 45,530 ore Way were the dominant sources of absorption. Few tenants are vacating the LMI Technologies (expansion) 9200 Glenlyon Parkway 34,300 sublease availability in Burnaby in 2017. Burnaby market, while many are renewing However, DA Townley’s decision to and/or expanding. A lack of availabilities Teradici (renewal) 4601 Canada Way 24,350 and rising rental rates in the Downtown vacate and sublease its former space Flextronics Global Services Canada Inc. 4333 Still Creek Drive 9,840 and Vancouver-Broadway markets has at 4400 Dominion Street added to that benefited Burnaby’s office market. CH Robinson Worldwide (renewal) 4445 Lougheed Highway 6,746 total along with Cymax offering to sublease 10,000 sf at 4170 Still Creek Drive and Worley Parsons deciding DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION to sublease 12,000 sf at 4321 Still Creek Anthem Properties Station Square, 6060 Silver Avenue 52,800 (office) 0 0% Q3 2018 Drive. While the return of swing space Cressey Development Group Kings Crossing, 7350 Edmonds Street 74,016 (office) Strata 30% sold Q2 2019 used by Pacific Blue Cross at 4601 Can- ada Way and Teradici’s downsizing at Onni Group 3355 North Road 161,200 (office) 0 0% Q2 2022 Awaiting 4621 Canada Way added some availabil- Kingswood Capital Discovery Place Business Park, 3555 Gilmore Way 50,000 0 0% ities, there remain very limited options prelease Under Belford Properties The Centre at Sun Towers, 4458 Beresford Street 70,000 (office) Strata NA for mid-to-large-sized tenancies. There construction were very few significant lease deals in Shape Properties The Amazing Brentwood (redevelopment) 500,000 (office) 0 0% Proposed the back half of 2017, but a number of 400,000 (office - Onni Group Gilmore Place, Gilmore Avenue & Lougheed Highway 0 0% Proposed smaller infill availabilities were leased. second phase)

HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RANGE (PSF) COST (PSF) A 6,306,081 366,833 228,286 595,119 9.4% 319,138 $18 - $28 $34 - $44 B 2,081,671 143,131 26,913 170,044 8.2% -12,652 $16 - $18 $28 - $30 C 869,038 65,017 0 65,017 7.5% 17,273 $15 - $18 $26 - $29 Total 9,256,790 574,981 255,199 830,180 9% 323,759 - - avisonyoung.com 9 Richmond Vacancy sinks below 10% for first time since 2002

Vacancy and Absorption Continental Properties Inc. and Beck- with Development are expected to add 18.0% 200,000 186,883 another 240,000 sf of office space in the 167,121 16.0% coming years. 15.4% 15.2% 14.0% 150,000 market forecast

12.0% Lease rates remained relatively stable

12% ) f e 100,000 s t with small increases noted in buildings (

Positive

10.0% n

R a 10.7%

i o y located near No. 3 Road and in the large t

c 9.8% n r p a annual 8.0% o c 8.8% office business parks as deal volume was s a

V 50,000 54,082 A b absorption minimal in 2017. As vacancy tightens, 6.0% 41,860 37,554 recorded lease rates will continue to rise albeit 4.0% 0 slowly. Rental rates should remain largely 7,545 7 years unchanged in 2018, making Richmond 2.0% in a row one of the most cost-effective markets 0.0% -50,000 in Metro Vancouver. Large blocks remain 2013 2014 2015 2016 2017 2018F available, which allows large tenants in Vacancy Absorption the market to expand as well as accom- 12-month projection based on 10-year average absorption and known net absorption in new inventory modate new large tenants to the market. The forecasted decline in vacancy in was more responsible for the decrease Vacancy trends 2018 may be tempered somewhat due in vacancy and positive absorption than to a limited number of known future Vacancy slipped to 9.8% at year-end new tenants to the market. notable deals. 2017 from 10.7% a year earlier – and is at new construction its lowest point since mid-year 2002. The recent lease deals - YEAR-END 2017 main reason for the decrease in vacancy The first new office space for lease was due to a number of small deals that delivered in Richmond since 2008 is tenant BUILDING SF were completed in the back half of 2017 scheduled for completion by the end of Telecon (expansion) 6651 Fraserwood Place 41,870 along with some larger deals that closed 2020. Yuanheng Holdings’ three phase in the first half of 2017, which resulted mixed-use ViewStar development will in- Bootlegger 6651 Fraserwood Place 14,120 in space being occupied towards the clude a 12-storey, 205,141-sf office tower Patterson Dental Canada (expansion) 6651 Fraserwood Place 14,000 end of 2017. Despite the decline in in its second phase. iFortune Homes’ Transoft Solutions 13700 International Place 12,980 vacancy, large blocks of space remain is awaiting the issuance of its develop- Exchequer Management Ltd. available at Airport Executive Park ment permit for its mixed-use project, 5811 Cooney Road 12,930 and Crestwood Corporate Centre. The the iFortune Centre, which includes an (renewal) departure of Tetra Tech and Procurify 11-storey, 105,420-sf office tower at 6860 Loblaws 6651 Fraserwood Place 11,790 from Airport Executive Park has created No. 3 Road scheduled for completion Mainstream Broadcasting Crestwood Corporate 5 7,610 opportunities for other tenants. by the end of 2020. New projects from Freelife Solutions Ltd. 13091 Vanier Place 7,750 absorption trends Bene (No. 3) Road Development, New

Annual absorption of 37,554 sf in 2017 DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION marked the seventh consecutive year of ViewStar, 3031-3351 No. 3 Road, 8151 Capstan 205,141 (office - Yuanheng Holdings 0 0% Q4 2020 positive annual absorption in Richmond’s Way & 8051/8100 River Road second phase) office market. The majority of the absorp- iFortune Homes Inc. iFortune Centre, 6860 No. 3 Road 105,420 (office) 0 0% Q4 2020 tion recorded in 2017 was from tenants 9451/9491/9511/9531/9551 Bridgeport Road and Beckwith Development 128,600 (office) 0 0% Proposed who relocated within the market in the 9440/9460/9480 Beckwith Road 8320, 8340 & 8440 Bridgeport Way and 8311 & 8351 second half of the year. While many New Continental Properties 50,527 0 0% Proposed Sea Island Way smaller class A and B deals contributed to absorption in 2017, the expansion Bene (No. 3) Development Ltd. 4700 No. 3 Road 63,479 (office) 0 0% Proposed International Trade Centre at Versante, Under of Vancouver Coastal Health in 7671 MYIE Development 100,000 (office) Strata NA 8477 Bridgeport Road construction Alderbridge Way was also largely responsible. Expansion by tenants in the market Vanprop Investments Lansdowne Centre (redevelopment) TBD 0 0% Proposed

Head Lease Sublease Total Vacancy Total Vacancy 12-Month Average Net Rental Gross Occupancy Class Inventory Vacancy (sf) Vacancy (sf) (sf) (%) Absorption (sf) Rate (psf) Cost (psf) A 2,895,256 242,063 94,000 336,063 11.6% 16,822 $17 - $18 $28.25 - $30 B 972,346 49,681 20,397 70,078 7.2% -3,370 $14.75 - $16 $26.50 - $28.50 C 348,198 6,643 0 6,643 1.9% 24,102 $11.85 - $14 $20.35 - $22.50 Total 4,215,800 298,387 114,397 412,784 9.8% 37,554 - -

10 Partnership. Performance Vacancy slips to lowest level since 2012 surrey

Vacancy and Absorption new construction 25.0% 300,000 Lark Group will put the finishing touch- 237,051 250,000 es on CityCentre 2 in the first quarter 22.1% of 2018 and prepare for the launch of 20.0% 200,000 177,793 CityCentre 3, a 10-storey, 115,000-sf 150,000 17.3% 17.5% strata office/retail building scheduled ) f e 15.0% 100,000 Second most for completion in the back half of 2020. s t (

15% n R a PCI Group will launch the second phase

45,842 y 14,475 50,000 i o t c annual of King George HUB at the Stations n r p a o c 10.0% 36,751 0 absorption s in 2018, which will include 160,000 sf a 10.1% V 8.5% -50,000 A b recorded of office space and is contemplated for 5.0% -100,000 completion in early 2021. Landview since 2005 Construction’s long-awaited GTC -150,000 -137,809 Professional Building is anticipated to 0.0% -200,000 break ground in the first half of 2018 and 2013 2014 2015 2016 2017 2018F complete by year-end 2019. Vacancy Absorption market forecast 12-month projection based on 10-year average absorption and known net absorption in new inventory Upwards pressure on rental rates is anticipated in 2018 as vacancy contin- Vacancy trends absorption trends ues to tighten. Absorption is expected to remain positive and subsequently drive Vacancy in Surrey’s office market Annual absorption of 177,793 sf in vacancy moderately lower during the declined rapidly to 10.1% at year-end 2017 marked the second-most annual next 12 months. Deal activity is forecast 2017 from 15% a year earlier – and absorption recorded in Surrey since 2005 to remain stable and tightening vacancy finished the year at its lowest level since and follows on the heels of record annual in the market will likely lead landlords mid-2012. The significant decline came absorption of 237,051 sf in 2016. Several to start to push rental rates upwards. in part from the delivery and 100% significant occupancies in 2017, including With no new lease supply until the end occupancy of Gateway Place, which ICBC, McQuarrie Hunter, Métis Family of 2019, vacancy will likely decline and was added to inventory in the second Services and BC’s Ministry of Children rents will rise slightly in 2018. quarter of 2017 and wholly occupied and Family Development, were largely re- by year-end. BC’s Ministry of Children sponsible for the absorption. TransLink’s recent lease deals - YEAR-END 2017 and Family Development occupied decision to reoccupy space in early 2017 that it had previously offered for sublease tenant BUILDING SF 18,500 sf in the Northmark Building also boosted annual absorption. While a TransLink (renewal) 13401 108 Avenue 55,825 at 9180 King George Boulevard, while number of small-to-mid-sized vacancies BC Ministry of Children Métis Family Services moved into 9180 King George Boulevard 18,500 did occur in all property classes in 2017, & Family Development 15,000 sf in Surrey Central Business particularly in class C buildings, they were Douglas College 13769 104 Avenue 14,200 Park. Both occupancies served to push offset by the larger class A occupancies. vacancy lower. Sublease vacancy is Urban Systems King George HUB at the Stations 6,000 Office space closer to SkyTrain stations non-existent in all classes, which has led tended to attract more leasing activity. Legal Services Society Newton Landmark II 5,000 tenants to secure head lease space at full cost. While deal velocity slowed in the DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION back half of the year compared with the first six months, leasing activity remained Lark Group City Centre 2, 9639 137A Street 172,000 (office) Strata 85% sold Q1 2018 steady. The ongoing tightening of Landview Construction GTC Professional Building, 10189 153rd Street 100,550 0 0% Q4 2019 vacancy, which has been occurring since Lark Group CityCentre 3, 13775 96th Avenue 108,500 (office) Strata 0% sold Q3 2020 hitting a record-high 22.1% in 2014, has King George HUB at the Stations (phase 2), PCI Group 160,000 (office) 0 0% Q1 2021 led some landlords to become more 9900 King George Boulevard (office/retail) Avondale Development / Monark The Professional Centre @ South Point, bullish on rates. Development activity is 71,780 32,300 45% TBD Group 3231 152nd Street expected to resume in 2018 with at least Central City Tower 2, Blackwood Partners 500,000 0 0% Proposed three new projects breaking ground. 100 Avenue & King George Boulevard

HEAD LEASE VACANCY SUBLEASE VACANCY TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY TOTAL VACANCY (%) (SF) (SF) VACANCY (SF) ABSORPTION (SF) RANGE (PSF) COST (PSF) A 2,074,968 175,016 0 175,016 8.4% 138,579 $22 - $32 $36 - $45 B 626,010 81,358 0 81,358 13% 36,307 $15 - $20 $28 - $31 C 205,629 37,011 0 37,011 18% 2,907 $11 - $13 $25 - $27 Total 2,906,607 293,385 0 293,385 10.1% 177,793 - - avisonyoung.com 11 new Westminster Vacancy finally set to decline significantly in 2018

Vacancy and Absorption market forecast 20.0% 200,000 178,035 With vacancy expected to tighten 18.0% significantly in 2018, rental rates are 16.0% 16.8% 17% 150,000 anticipated to increase slightly by year’s 16.6% end. Absorption in 2018 will be primar- 14.0% 15% ily driven by multiple tenants moving ) f s

12.0% 100,000 (

e into the Anvil Centre, but this positive e a t a t R

10.0% absorption will be offset somewhat by y

10.3% n c o i a n t the departure of the BC Safety Authority 8.0% 9.3% 50,000 p r o V a c 29,444 27,631 s from the market in the first half of the b

6.0% A 6,678 More than 90% year. There is a renewed interest in New 4.0% - 0 of the Anvil Westminster’s office market, which has -1,478 2.0% Centre has recorded limited leasing activity in the -33,772 past 24 months, as tightening vacancy in 0.0% -50,000 been leased 2013 2014 2015 2016 2017 2018F and will be Burnaby and Surrey pushes prospective tenants to explore leasing opportunities Vacancy Absorption occupied in in other markets. 12-month projection based on 10-year average absorption and known net absorption in new inventory 2018.

Vacancy trends of 6,678 sf in 2017, the total marked an improvement on the negative annual Vacancy declined to 16.6% at year-end absorption recorded in 2016 (-33,772 sf) 2017 from 17% 12 months earlier. Vacan- and 2014 (-1,478 sf). Evolution Gaming cy has been greater than 15% since mid- (16,000 sf) and Aerotek (4,950 sf) year 2014 thanks to the delivery of the occupied Anvil Centre in 2017. Century vacant 137,000-sf Anvil Centre. How- Group, LTSA BC and Douglas College ever, leasing activity at the end of 2017 will occupy an additional 100,450 sf in in the formerly empty building should 2018 and substantially reduce class A va- lead to a sharp decline in overall vacancy cancy. A series of small tenancies in the in New Westminster’s office market in market was responsible for the negative 2018. While deal velocity was muted in annual absorption of -17,714 sf recorded the back half of 2017, leasing and tour in class B premises in 2017. activity were on the rise when compared new construction with the past 12 to 24 months. While significant occupancy of the Anvil Centre QuadReal Property Group’s proposed in 2018 will help reduce vacancy, the Sapperton Green development adja- recent lease deals - YEAR-END 2017 departure of the BC Safety Authority cent to the Braid Street SkyTrain station continued to proceed as the developer from Westminster Centre to Renfrew works through the development permit tenant BUILDING SF Centre in Vancouver will contribute to a application approval process after having Douglas College Anvil Centre 68,450 significant increase in sublease vacancy secured the necessary OCP amendments in the first quarter. Despite the likely TransLink 287 Nelson’s Court 21,000 in mid-2017. A valid and active develop- overall decline in vacancy anticipated in ment permit for two office buildings up LTSA BC Anvil Centre 16,000 New Westminster from the lease up of to 400,000 sf still remains in place for the Century Group Anvil Centre 16,000 the Anvil Centre, there remains multiple property, but a prelease commitment Aerotek Anvil Centre 4,950 options for businesses seeking small-to- would be necessary to start construction. large-sized tenancies.

Absorption trends DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION 97 Braid Street (near Braid Street SkyTrain station) Up to 400,000 Despite very modest annual absorption QuadReal Property Group 0 0% Proposed part of Sapperton Green mixed-use redevelopment site (office)

HEAD LEASE VACANCY SUBLEASE VACANCY TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY TOTAL VACANCY (%) (SF) (SF) VACANCY (SF) ABSORPTION (SF) RANGE (PSF) COST (PSF) A 780,114 183,415 2,358 185,773 23.8% 24,392 $22 - $27 $34 - $41 B 700,684 80,502 0 80,502 11.5% -17,714 $14 - $19 $26 - $33 C 207,774 14,501 0 14,501 7.0% 0 $12 - $14 $24 - $28 Total 1,688,572 278,418 2,358 280,776 16.6% 6,678 - -

12 Partnership. Performance Vacancy spikes with delivery of new vacant space north shore

Vacancy and Absorption

14.0% 40,000 12.9% 12.0% 16,128 20,000 6,576 12.1% 10.0% 0 -733 -7,751 -8,783 8.0% 8.5% -20,000 ) 7.8% 7.9% f s (

e 7.3% n t 6.0% -40,000 i o R a t

y r p c o n s a

c 4.0% -60,000 A b a V 2.0% -80,000 -86,621 0.0% -100,000 Centreview cupied. Plus, much of the space coming 2013 2014 2015 2016 2017 2018F delivered available as a result of COWI’s relocation Vacancy Absorption 78,800 sf of has been backfilled and will be occupied in 2018. The uptick in leasing activity 12-month projection based on 10-year average absorption and known net absorption in new inventory new office space in 2017. in the back half of 2017 is anticipated to continue in 2018 with more options Vacancy trends front Business Centre occupying more than 10,000 sf at 224 West Esplanade for tenants, and vacancy will likely start Vacancy jumped to 12.9% at year-end contributed significant positive absorp- to decline by mid-year 2018. However, 2017 from 7.9% a year earlier due to the tion in the back half of 2017. a decline in vacancy by mid-year may vacant delivery of Onni’s CentreView be slightly delayed as Seaspan vacates development, which added 78,800 sf of new construction approximately 12,000 sf of office space in new office space to inventory in 2017. various buildings in order to consolidate While the office space is approximately Construction on Hollyburn Properties’ operations in its new four-storey, 84,000-sf 60% leased and will start to be occu- new mixed-use development in Central pied in 2018, the project’s largest office Lonsdale broke ground in November head office at the foot of Pemberton tenant, COWI North America, is simply 2017 and includes 13,890 sf of contig- Avenue in early 2018. relocating from its current North Shore uous office space that can be demised recent lease deals - YEAR-END 2017 location at 788 Harbourside Drive. If the into smaller units for lease. The project is delivery of CentreView is removed from scheduled for completion by the second tenant BUILDING SF the statistical analysis, vacancy remained quarter of 2020 and besides delivery of Keith Plumbing & Heating 788 Harbourside Drive 17,885 sf stable with some tenants relocating Seaspan’s new build-to-suit office build- Harbourfront Business Centre 224 West Esplanade 10,305 sf within the market while others down- ing in 2018, is likely the only new office sized. Deal velocity remained stable supply for lease to come to market for at Red Lion Management 267 West Esplanade 6,155 sf in the back half of 2017 with sublease least the next three years. FDM Software Ltd. 930 West 1st Street 5,110 sf vacancy reduced to nil by year-end. With no new office product for lease set market forecast Enbala Power Networks (renewal) 930 West 1st Street 4,360 sf for delivery until early 2020, vacancy is Coast Performance Rehabilitation 138 East 13th Street 4,190 sf Rental rates remained stable in 2017 and anticipated to decline in 2018 and likely Western Canadian Properties Group 930 West 1st Street 4,000 sf continue to tighten into 2019. will continue to remain flat in 2018 until vacancy starts to decline in a meaningful ePACT Network Ltd. 267 West Esplanade 3,790 sf Absorption trends fashion after CentreView has been oc- Revitalize Wellness Centre 138 East 13th Street 3,670 sf Negative annual absorption of -733 sf in 2017 represented a significant improve- DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION ment from mid-year as strong leasing 1301-1333 Lonsdale Avenue Hollyburn Properties 13,890 0 0% Q2 2020 activity in the back half of the year and 120-141 West 14th Street 801, 889 & 925 Harbourside Drive helped offset the relocation of Work- Concert Properties TBD 0 0% Proposed and 18 Fell Avenue SafeBC and the downsizing by ICBC North Shore Innovation District, Darwin Construction TBD 0 0% Proposed that occurred in the first half. Harbour- 2420 Dollarton Highway

HEAD LEASE VACANCY SUBLEASE VACANCY TOTAL 12-MONTH NET RENTAL RATE GROSS OCCUPANCY CLASS INVENTORY TOTAL VACANCY (%) (SF) (SF) VACANCY (SF) ABSORPTION (SF) RANGE (PSF) COST (PSF) A 871,813 134,971 0 134,971 15.5% -15,329 $22 - $30 $34 - $48 B 481,395 45,723 0 45,723 9.5% 12,663 $18 - $22 $25 - $33 C 97,690 7,170 0 7,170 7.3% 1,933 $15 - $18 $24 - $31 Total 1,450,898 187,864 0 187,864 12.9% -733 - - avisonyoung.com 13 suburban development timeline (to 2020)

City centre 2 The independent at main Broadway Commercial The Lightworks Building 204 West 6th Avenue 22 East 5th Avenue 9639 137A Street 275 East 10th avenue 988 West Broadway

Q1 2018 Q1 2018 Q1 2018 Q2 2018 Q2 2018

city Vancouver-Broadway Surrey Vancouver-Broadway Vancouver-Broadway Vancouver-Broadway Rendition Developments / Developer PC Urban Properties Corp. Lark Group Rize Alliance BlueSky Properties MDC Property Services Storeys 6 12 1 floor 10 4 office sf 46,740 172,000 17,000 94,120 28,430

tenants 46,740 sf - Saje Natural Wellness Strata No tenant at this time 94,120 sf - iA Financial Group 21,230 sf - Umedia

Occupancy 100% 85% sold 0% 100% 75%

565 Great Northern Way 34|w7 Station Square The George Nickel 34 west 7th Avenue 6060 Silver Avenue 1157 Parker Street 285 WEst 5th Avenue

q2 2018 q3 2018 q3 2018 Q4 2018 q1 2019

City Vancouver-Broadway Vancouver-Broadway Burnaby Vancouver-Broadway Vancouver-Broadway Developer PCI Group Chard Development Anthem Properties Porte Commercial PC Urban Properties Corp. Storeys 7 4 Two floors 4 4 office sf 161,000 54,350 52,804 (office) 34,310 70,915 38,770 sf - Spaces 28,690 sf - Finning International 47,000 sf - SEGA tenants Strata No tenant at this time No tenant at this time 28,690 sf - Blackbird Interactive (Relic Entertainment) 20,200 sf -Samsung

Occupancy 73% 87.5% sold 0% 0% 67%

Kings Crossing the Beltline off Broadway GTC Professional Building CityCentre 3 iFortune Centre, 7350 Edmonds Street 224 West 8th avenue 10189 153rd Street 13775 96th Avenue 6860 No. 3 Road

BUILDING OVERVIEW Q2 2019 Q3 2019 ANCHOR TENANT OPPORTUNITYQ4 2019 OCCUPANCY DATE Q3 2020 Q4 2020 Offering prominent building signage for a large format tenant. Occupancy estimated for mid 2019

OPPORTUNITY PARKING RATIO GTC Professional Building will be comprised of more than 100,000 square Approximately 3 stalls per 1,000 SF feet of Class A office and retail space designed to LEED® standards. City Burnaby Vancouver-Broadway Distributed over five floors and offering Surrey a variety of floor plates ranging Surrey Richmond LEASE RATE from 17,808 – 21,973 square feet, the building is designed specifically to Retail | from $25 per SF provide maximum flexibility and allow for many types of employers seeking Office | from $23 per SF high-quality premises Developer Cressey Development Group Rendition Developments Landview ConstructionAdditional Rent | est. $11 per SF Lark Group iFortune Homes Storeys 8 4 5 10 11 office sf 70,430 32,898 100,550 108,500 (office) 105,420 (office) tenants Strata Strata No tenant at this time Strata No tenant at this time

Occupancy 30% sold 0% sold 0% 0% sold 0%

14 Partnership. Performance BC Growth to slow in 2018 but still lead canada

special feature “Modest interest-rate increases and driver of growth over the next few years,” a tightening of mortgage lending Housing he added. “BC’s important forestry sector British Columbia’s economy will slow standards will act as headwinds for continues to face potential headwinds in 2018 compared with 2017 but will residential real estate activity,” according Starts to growth due to softwood lumber trade still lead all provinces in terms of GDP to the report. “Real estate has been a for British disputes, this summer’s record wildfire growth despite facing local and interna- substantial growth driver for the prov- season, and long-term timber availability.” tional headwinds, according to Central ince in recent years so the anticipated Columbia The report goes on to add: 1 Credit Union, the Business Council downshift will spill over to retail sales of British Columbia (BCBC) and the and others linked to real estate sales • Provincial growth will continue to fare Conference Board of Canada. and construction.” well compared with other provinces and will meet or exceed the national The provincial economy expanded by The report continues: “BC’s job market 2017 growth rate over the period. 3.2% in 2017, according to the Confer- remains healthy, although there is some ence Board of Canada’s Provincial Outlook early indication that the pace of job 39,200 • Housing market has outperformed Economic Forecast: BC – Autumn 2017 growth is moderating. Some slowing early-year expectations with housing published January 2, and will grow by is inevitable as the unusually strong starts forecast to decline only 6% in another 2.7% in 2018. While growth will gains earlier in 2017 were not sustain- 2017 following the 33% surge in 2016. be weaker than the gains of 3% or more able. With both the export sector and • Growth in employment has supported recorded from 2015 to 2017, B.C. will domestic activity still expanding, BC growing population and high con- lead the country in growth in 2018. economy is in good shape. While there sumer demand, but should stabilize. are risks to the outlook, there is nothing A slump in the BC housing sector will 2018 Despite this, unemployment will trend on the horizon to derail BC’s expansion.” be the main factor behind the slower lower due to changing demographics. growth, according to the Conference BCBC predicts real GDP growth of 2.3% 38,800 • A low Canadian dollar, combined with in 2018 and 2.4% in 2019 with both the Board of Canada. Housing starts are economic growth and investment, will unemployment rate and housing starts expected to drop by close to 2% in 2017 continue to drive goods and services dipping in 2018/19. Retail sales are also and only negligible growth is antici- exports higher. pated in 2018. Other factors slowing forecasted to decline from current levels economic growth in BC include U.S. in that period. • Softwood lumber trade negotiations are a risk for the forestry sector and duties on imports of Canadian softwood Central 1 Credit Union’s Economic Analy- will combine with production impacts lumber, which are a key factor behind sis of British Columbia (Volume 37, Issue 3) 2019 from wildfires to drag on growth. the anticipated drop of nearly 2% in real published in September 2017, reported forestry output in 2018. that BC’s economy expanded by 3.5% 39,000 Central 1 predicts real GDP growth of The BC Economic Review and Outlook in 2017, higher than both the BCBC 2.5% in 2018 and 3% in 2019, but also published by the BCBC on January 18 and the Conference Board estimates. It highlights declines in both the unem- forecasted a similar economic future predicts the BC economy will expand ployment rate and housing starts out to for the province in 2018 with higher by 2.5% in 2018. 2019. commodity prices providing a boost to “Robust consumer demand continues “Growth in goods exports, tourism, BC’s export sector even as the economy to support the economy thanks to surg- film industry, technology and business is poised to downshift in 2018 after real ing employment, combined with strong 2020 investment will be steady due to a fa- GDP growth of 3.1% in 2017. BCBC an- exports and government support,” said vourable currency,” Yu said. “Government ticipated real GDP growth to be 2.3% in Bryan Yu, deputy chief economist at 37,000 investments also remains high with large 2018, lower than the Conference Board’s Central 1. “Housing activity will remain Source: Central 1 Credit utility, transportation and public works estimate. elevated but will not be a significant Union projects.” avisonyoung.com 15 continued from page 1 or decline further in 2018. Suburban vacancy of 9.2% at year-end 2017 was the For more information, please contact: lowest since 2009. Michael Keenan, While annual absorption has remained positive regionally since 2014, the amount Principal & Managing Director of positive absorption Downtown has been in decline since peaking in 2015. Direct Line: 604.647.5081 While Vancouver-Broadway registered a record level of absorption in 2017, [email protected] Burnaby achieved a 17-year-high and Surrey posted the second-most annual Andrew Petrozzi, absorption since 2005, annual absorption Downtown in 2017 was down 48% Principal & Vice-President, Research (BC) from 2016 and 82% from 2015. This decline is not attributed to weak demand but Direct Line: 604.646.8392 [email protected] a lack of supply. The strong annual absorption recorded Downtown in 2015 was the result of the culmination of a development cycle that delivered several new Sherry Quan, office towers without vacancy exceeding 10% or a tsunami of sublease space Principal & Global Director of Communications & Media Relations undercutting rates. As vacancy continues to decline Downtown and elsewhere Direct Line: 604.647.5098 [email protected] in Metro Vancouver in 2018, annual absorption will also likely continue to drop, particularly in markets such as Vancouver-Broadway, Burnaby and Surrey. New supply constraints are starting to manifest throughout the region and are charac- Avison Young Office Leasing Team terized by tight vacancy, reduced absorption and substantial preleasing/presales Nicolas Bilodeau Jason Mah* activity. The temporary result is the emergence of an imbalanced market that [email protected] [email protected] favours landlords until new supply can be delivered. Robin Buntain* David MacFayden [email protected] [email protected] At year-end 2017, there was just 395,693 sf available for sublease outside Down- Fergus Cameron Justin Omichinski town Vancouver, while Downtown sublease space totalled 101,438 sf, for a total [email protected] [email protected] of 497,131 sf or 12.1% of the overall vacancy region-wide – up from 10% a year Kirstin Campbell Brian Pearson earlier. This increase is almost entirely attributable to the sharp rise in sublease [email protected] [email protected] space in Burnaby in 2017, climbing to 255,199 sf at year-end 2017 from just Matthew Craig* Ronan Pigott* 57,386 sf 12 months ago. [email protected] [email protected]

With no new supply scheduled to be delivered Downtown until the end of 2019, Bill Elliott Max Ripper no new development contemplated in Yaletown in the next 12 months and [email protected] [email protected] almost two-thirds of new supply being delivered out to 2020 in Vancouver-Broad- Glenn Gardner* Dan Smith way already preleased, there will continue to be fewer options for tenants as [email protected] [email protected] vacancy tightens and absorption slows in the core markets. This pause in new Jordan Gill Josh Sookero* [email protected] [email protected] development is also pronounced in suburban markets. Burnaby has just one mixed-use project with office space for lease coming at the end of 2018 and then Sean Keenan Bahareh Tabar [email protected] [email protected] nothing until 2022. New supply will not be delivered in Richmond until the end of 2020 (the first since 2008). Surrey has a single office development with office Mitchell Knoepfel Terry Thies* [email protected] [email protected] space for lease set for delivery at the end of 2019. There is no new supply con- Nabila Lalani Tammy Stephen templated currently in New Westminster and the North Shore will not see more [email protected] [email protected] office space delivered until mid-2020. Derek Lee Matt Walker Market activity in the next 24 months will highlight the supply constraints in Met- [email protected] [email protected] ro Vancouver’s office market. While sublease space in Burnaby and a very limited James Lewis Ian Whitchelo* supply of strata product in mostly suburban markets, particularly Surrey, may [email protected] [email protected] temporarily relieve some pressure for tenants, vacancy is forecasted to continue *Personal Real Estate Corporation to tighten amid rising rental rates and limited availability in most submarkets. This will spur additional development activity and place even more pressure on Avison Young municipalities to streamline their approval and permitting processes to meet the #2900-1055 W. Georgia Street demand that markets will be challenged to match in the near term.  Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada Vacant sublease space

800,000 700,000 600,000 484,102 497,131 500,000 480,936 456,175 425,921 400,000 322,884 avisonyoung.com

Square footage 300,000 240,814 249,851 200,000 190,092 © 2018 Avison Young. All rights reserved. 148,684 128,232 101,438 100,000 E. & O.E.: The information contained herein was obtained from sources that 0 we deem reliable and, while thought to be correct, is not guaranteed by 2012 2013 2014 2015 2016 2017 Avison Young Commercial Real Estate (B.C.) Inc.; DBA, Avison Young. Metro Vancouver Downtown