CANADA

Global economic Space markets are Investors showing a expansion continues, resilient and rents bias to quality as the but risks are growing are rising cycle matures

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | A We would like to Altus Group, Archival Economic Data RBC Capital Markets, RBC Economics acknowledge the St. Louis Fed (ALFRED), Avison Young, Research, RBC Financial Group, RealNet BMO Capital Markets, Bank of Canada, Canada, REALPAC, Recode, Residential assistance we received Bloomberg, BuildForce Canada, CB Construction Council of Ontario, Ryerson from the following Insights, CBRE, CBRE Econometric Centre for the Study of Commercial Advisors, Calgary Economic Development, Activity (CSCA), Statista, Statistics Canada, parties in completing Canada Mortgage and Housing Scotiabank Economics, SunTrust Robinson this report: Corporation (CMHC), Canadian Real Humphrey, TD Economics, US Department Estate Association (CREA), Canada Visa, of Transportation, Urbanation, WeWork. CMLS Financial, Colliers International, Conference Board of Canada, CoStar, We would also like to thank the many Cushman & Wakefield, eMarketer, individuals who are employed by these Emergent Research, Environics Analytics, parties as well as the real estate owners Global Coworking Unconference and managers who helped us with Conference (GCUC), Globe & Mail, Haver insights and guidance along the way. Analytics, Gluskin Sheff, Hofstra University, International Council of Shopping Centres The information and statistics contained (ICSC), International Monetary Fund in this report were obtained from sources (IMF), J.C. Williams Group, Jones Lang deemed reliable. However, Bentall La Salle, KPMG, MSCI REALPAC Canada, Kennedy Group does not guarantee Macrobond, Montreal Institute for Learning the accuracy or completeness of the Algorithm (MILA), L2 Inc., National information presented, nor does it Autonomous Vehicle Technology and assume any responsibility or liability Innovator Directory, National Association for any errors or omissions. All opinions of Real Estate Investment Trusts (NAREIT), expressed and data provided herein are National Council of Real Estate Investment subject to change without notice. Fiduciaries (NCREIF), National Post, Prequin, Organisation for Economic Co- This report cannot be reproduced in operation and Development (OECD), part or in full in any format without the prior written consent of Bentall Kennedy Group.

Bentall 5, Vancouver, BC

BBENTALL | BENTALL KENNEDY, KENNEDY, 2019 2019 CANADA CANADA PERSPECTIVE PERSPECTIVE Contents

2 Executive overview Key takeaways for real estate investors heading into 2019

4 Global economy What do asymmetrical risks mean for the global expansion?

8 Canadian economy Steady growth, but downside risks building

14 Special topic: demographics A deep dive into surging population growth

16 Office Tech clusters, co-working and how technology is changing the decision making process

22 Retail Will online grocery disrupt needs-based retail formats?

28 Industrial Urban infill becoming a critical component of modern logistics

34 Multi-residential Confluence of factors threaten new supply

40 Capital markets Above trend returns, but are they sustainable?

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE 01. EXECUTIVE OVERVIEW

Executive overview Up-in-quality as cycle matures

Tour KPMG, Montreal, QC

Investor sentiment As we look ahead to 2019, the Global growth has peaked but remains strong outlook for global economic remains solid growth remains solid. But there Despite increased headwinds and supported by are increasing signs that growth is emerging signs of slower economic solid real estate slowing and is more fragile as trade activity, mid-3.0% global GDP growth fundamentals and tensions linger between the U.S. and is anticipated for 2019. China. Financial markets are more healthy job growth, volatile as they grapple with some U.S. growth resilient but downside major global central banks steadily Strong stateside demand combined economic risks are tightening monetary policy. Barring with the expected approval of the an unforeseen financial shock, United States-Mexico-Canada building. mid-2019 will mark the longest U.S. Agreement (USMCA) will support economic expansion in history. And, slower but steady Canadian growth. although real estate fundamentals in Canada are solid, there are many “Help wanted” pressing questions for investors. Record low unemployment and a How much further can this economic mismatch of skills will become the expansion run? Have real estate biggest challenge for Canadian values peaked or is there a new businesses. pricing paradigm for institutional quality real estate? How to invest Immigration is a boon for growth prudently at this stage of the cycle? Canadian cities are capitalizing on the opportunity to attract economic What do we see in the year ahead? migrants. Signs of a growing populist Here are the key takeaways from this wave threaten this key labour source. year’s Canada Perspective.

2 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE KEY TAKEAWAYS: THE YEAR AHEAD

Global growth steady Real estate fundamentals as Not enough purpose-built rental but more fragile strong as ever apartments 1 Business optimism and consumer A myriad of tailwinds for demand confidence remain high, near historic have accelerated rent growth. Supply U.S. growth levels, which bode well for real is up, but rising land and construction remains solid estate demand. Developers remain costs and an inefficient approval 2 disciplined. process make new construction very challenging. Record low Technology’s impact on knowledge unemployment work accelerates Investors exhibiting an “up-in- 3 Not only is tech affecting the demand quality” bias for space, but it’s changing the future But that hasn’t slowed the pace of Immigration positive of work, office space design and investment activity, which is expected for growth building operations. to reach a new all-time high in 2018. 4 Strong momentum should continue Cyclical headwinds add to negative into 2019. Property fundamentals sentiment in retail 5 as strong as ever Borrowers are adjusting well to higher Ample availability of low-cost debt interest rates but at the expense of Favourable lending conditions should consumer spending. Grocers are continue to provide liquidity. Technology impacts ramping up digital offerings. 6 knowledge work Industrial and multi-residential Not enough industrial real estate outperform Supply constraints and steady These sectors should continue to Slowing consumption logistics demand will continue to generate the highest returns across 7 a headwind for retail exert upward pressure on rents, property types as they offer the especially for urban infill locations. greatest prospects for rent growth Institutional investors are clamouring and remain under-allocated in many Short supply of for increased exposure to the sector. portfolios. 8 industrial real estate Operational excellence will be paramount to performance Short supply of Healthy operating fundamentals 9 purpose-built and strong investor demand for real rental apartments estate should help support valuations in the face of higher interest rates. Investor sentiment Future returns will become harder to 10 remains strong come by as valuations have inched higher. But supply-side constraints and steady tenant demand will limit Ample availability of the downside risk of space market 11 low-cost debt dislocation. Investors will need to exercise patience and prudence Best opportunities when navigating this maturing cycle. are in industrial and 12 multi-residential

Operational 13 excellence is critical

301 College Street, Toronto, ON

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 3 02. GLOBAL ECONOMY

Global economy Expansion continues, but growth has peaked

GDP Growth: Y/Y % Change G7 2.0% (2019F) EMERGING 4.7% (2019F) There are undoubtedly signs of decelerating growth in the global 2.5 2019F 2018F economy. Faltering leading US 2.0 indicators from the Organization Canada for Economic Co-operation 2.0 and Development (OECD) and Germany 1.9 modest downward revisions to France global growth projections for 1.6 2018–19 by the International Italy 1.0 Monetary Fund (IMF) both signal UK a more challenging economic 1.5 environment ahead. Japan 0.9 Eurozone 6.2 Projected global China GDP growth India 7.4 1.8 3.7% 2019F Russia Brazil 2.4

0.0 2.0 4.0 6.0 8.0

Source: IMF, Deutsche Bank Research 4 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Leading indicators signal softening outlook U.S. labour shortage accelerating OECD Confidence Indices Persons (Millions)

LEADING CONSUMER BUSINESS JOB VACANCY UNEMPLOYED PERSONS

102.5 16

102.0 14

101.5 12

101.0 10

100.5 8

100.0 6

99.5 4

99.0 2

98.5 0 10 11 12 13 14 15 16 17 18 02 04 06 08 10 12 14 16 18

Source: OECD Source: St. Louis Federal Reserve

Trade tension between U.S. and China could dampen growth

The outlook for global growth is and China would undoubtedly far from dour. In its October, 2018, have spillover effects on the global forecast, the IMF projected average economy. But at the time of this annual global GDP growth to run near writing, the two sides agreed to a 3.7% through 2020. Growth over the temporary and partial truce in hopes preceding five years was 3.5%. In that a long-term deal can be reached. China, economic reports are mixed, but growth is projected to hold above In the U.S., household wealth has 6.0% annually. Meanwhile, in North been bolstered by the home price America, leading indicators of near- and stock market gains of the term growth are solid in both Canada past several years. Tight labour and the U.S. market conditions are supporting wage growth well above the pace There are lingering headwinds and of inflation. These conditions are risks that could lead global growth encouraging consumption. More lower in 2019 and beyond. China’s recently, rising interest rates, volatility focus on deleveraging financial and losses in the stock market, rising risks and managing other economic, government deficits, and a cooling political, and environmental reforms housing market are generating some could result in missteps that concerns about growth. undermine growth. Further escalation in the trade war between the U.S.

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 5 02. GLOBAL ECONOMY

At its December, 2018 meeting, the Synchronized retreat in global equity markets Federal Reserve saw fit to move Index: January 2015 = 100 ahead with the year’s fourth rate S&P TSX MSCI WORLD hike as expected. The central bank 160 notes that underlying economic fundamentals are strong in the U.S. 150 even if there are signs of softer 140 growth compared to earlier in 2018. 130 Comments from Federal Reserve 120 Chairman Jerome Powell indicated a slightly more dovish stance on rate 110 hikes in 2019. 100 90 80 70 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Source: Bloomberg

Monetary policies diverge

Risks in Europe have accelerated. economy. Financial conditions are still Trade protectionism, weaker global broadly accommodative. The recent demand for European exports and plunge in world oil prices is negative looming uncertainty around Brexit for oil-exporting countries but will have translated into slower-than- have a stimulative effect on the global anticipated growth this year. The economy as consumers have more outlook for 2019 is even more muted. money to spend. Consumer spending in the U.S. may continue to rise, Monetary policy is diverging as despite some more negative factors. the Fed and Bank of Canada are raising interest rates. Meanwhile, The path of global growth will be the European Central Bank is largely predicated on the trajectory looking out to the latter half of 2019 of the U.S. economy where conditions to move and the Bank of England are far better than recent stock is currently on pause until Brexit is market losses would suggest. All resolved. The net result is a rising told, the global economy is on dollar and increased borrowing solid footing. Downside risks have costs, which are causing stress on increased for 2019 and beyond but, emerging markets, making it harder barring any unforeseen shock, the to repay dollar-denominated debt. current expansion is expected to continue. Despite numerous headwinds and risks, underlying fundamentals point to further expansion in the global

6 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 7 03. CANADIAN ECONOMY

Canadian economy Backdrop remains supportive for real estate demand

Bentall 5, Vancouver, BC

Despite real GDP growth easing to a more sustainable pace, economic UPSIDE RISKS DOWNSIDE RISKS fundamentals in Canada remain buoyant. Growth is expected to be Strong U.S. economy Rising interest rates broadly based across the country. Stateside demand continues to Consumer spending grinds to a Barring any unanticipated shocks, the drive goods-producing sectors halt as high debt levels weigh on net impact from the current upside borrowers and downside risks should remain North American trade positive for the Canadian economy as USMCA removes uncertainty Trade wars we head into 2019. on trade — further boosting U.S.-China-led global trade war confidence accelerates

Business investment Housing market Projected Business confidence and Vancouver market continues to Canadian GDP capacity constraints spur slide and/or Toronto recovery growth investment fades

2.0% 2019F Tech sector Oil price Canadian value-play gains Prices remain low, Canadian oil further momentum spread exacerbated by pipeline Source: IMF Forecast capacity issues

8 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Onus on capital investment as the economy nears full capacity

Inflation has risen to 2.4% as of Domestic demand and capacity constraints key drivers of investment October, 2018, up significantly from % Firms Citing Drivers of Future Investment 1.4% a year earlier. Core inflation is nearing the Bank of Canada’s policy target range of 2% to 3%. This implies 41% Domestic Demand that the Canadian economy is at 39% Long Term Strategy or near its output potential. Above- average economic growth going 35% Export Demand forward will be largely dependent 26% Capacity Constraints on the propensity to raise output capacity through capital investment. 19% Competition Fortunately, Canadian fixed capital 16% Balance Sheet Position investment is poised to gain further momentum, pending congressional 16% Other approval of the USMCA. In the October Bank of Canada Business 9% Availability of Financing Outlook Survey, the expectation of 7.5% Price stronger domestic demand, along with reaching the limits of existing 4% Previous Year Investment capacity, are cited as two of the main 3% Regulations drivers of capital investment. 1% Uncertainty

Source: Bank of Canada Business Outlook Survey, October 2018

10 Dundas East, Toronto, ON

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 9 03. CANADIAN ECONOMY

Signs of a labour shortage prevalent

While the rate of job creation has enough qualified applicants for all slowed compared with the impressive open jobs. This shortfall appears to levels observed a year ago, the be getting worse as evidenced by The Canadian labour market is still churning out how the labour shortage intensity unemployment jobs at a healthy pace — in line level is seeing considerable upward rate is at a with historical averages. Over the pressure. Job vacancies are on 12-month period ending November, the rise, suggesting tighter labour 2018, the Canadian economy conditions and possibly indicating added 219,000 jobs, dropping the that, even if labour is available, the unemployment rate to a 44-year low candidate skill set for the job is 44 of 5.6%. Even more encouraging, inadequate. 227,000 full-time jobs were created mostly in the private sectors (8,000 While this has yet to result in material YEAR part-time lost). This generally signals wage growth, scarcity in qualified a positive business outlook because labour along with an economy it suggests employers are more poised to surpass its potential LOW willing to commit to longer-term, production means employers are higher-paying full-time positions. likely to respond with higher wages in 2019. Higher earnings should ease 5.6% Signs of full employment are the trend of softening consumer prevalent as labour shortages are spending and help mitigate the risks Source: Statistics Canada intensifying. The latest Bank of stemming from elevated household Canada Business Outlook Survey debt. indicated that 50% of firms can’t find

Businesses citing labour shortage Job growth slowing to long-term average Rolling 12-Month Employment Change (Thousands)

LABOUR SHORTAGE (%) INTENSITY OF LABOUR SHORTAGE (%)

60 500

450 50 400

350 40 300

30 250 Long-term average

200 20 150

100 10 50

0 0 08 09 10 11 12 13 14 15 16 17 18 12 13 14 15 16 17 18

Source: Bank of Canada Business Outlook Survey Source: Statistics Canada, Haver Analytics *Labour Shortage: % of Firms Experiencing Labour Shortage **Intensity: % Firms Facing Labour Shortage Today Minus Relative To 12 Months Ago

10 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE National housing market stabilizing, but Vancouver’s slide continues

Stricter mortgage qualifications rates will continue to challenge NATIONAL MLS HOME PRICE rules and higher interest rates led to homeownership there. The Toronto COMPOSITE INDEX ROSE BY a softening in the national housing housing market is also grappling with market in 2018. As Toronto stabilizes, affordability issues, despite the recent year- so does the national market with the downturn. Signs are emerging that 2.5% to-date Canadian Real Estate Association suggest the Toronto market may be Source: CREA, October, 2018 (CREA) reporting in October, 2018 that stabilizing. its national Housing Price Composite Index rose by 2.5% year-to-date. This Housing market stabilizes outside of Vancouver is far removed from the double-digit MLS Home Price Index gains registered prior to mid-2017, but these more balanced conditions TORONTO VANCOUVER NATIONAL suggest more sustainable growth in home prices is on the horizon. 300 280 Resale activity in Vancouver has 260 cooled considerably and inventories 240 of unsold new housing units are 220 building. From a home ownership 200 cost-to-income standpoint, 180 Vancouver remains the most 160 unaffordable housing market 140 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 in the country. Rising interest 2014 2015 2016 2017 2018

Source: CREA

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 11 03. CANADIAN ECONOMY

Trade landscape improves but uncertainty remains

Canada’s trade balance registered Global crude prices have plummeted significant discount compared with a surplus in August for the first time over recent months after showing the West Texas Intermediate (WTI) since December, 2016. Energy and signs of life earlier in the year. But benchmark. This will continue to non-energy exports were significantly even if oil prices rebound, Canadian be a downside risk to the Canadian up on a year-to-year basis. Barring a crude prices are trading at a economy heading into 2019. dismissal from legislators, the newly signed USMCA should positively Crude oil prices retreat benefit exports and investment. Tariffs $US/BBL SPREAD WTI WCS remain in place for aluminum and steel, and this uncertainty remains 160 a risk for non-energy exports. The 140 important energy sector got a boost from the $40-billion liquefied natural 120 gas project (LNG Canada), a network 100 of pipelines aimed at transporting 80 liquefied natural gas from British Columbia to China and Japan. 60 However, the longer-term outlook 40 for the energy sector remains tepid as pipeline constraints continue to 20 impact the competitiveness of crude 0 oil originating from Western Canada. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Bloomberg

12 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Bank of Canada more cautious in 2019

The Bank of Canada has been more prices is also a significant recently as trade tensions with aggressive in tightening monetary downside risk for inflation. Bank China remain unresolved. For these policy over the past two years. of Canada Governor Poloz will be reasons, it’s likely that the Bank of However, the Bank of Canada left keeping a close eye on the Fed, Canada will take a more cautious the overnight rate unchanged at which has become more dovish approach in 2019. 1.75% in December, signaling that its commitment towards a neutral policy Bank of Canada signals a neutral rate policy stance rate of 2.5% to 3.5% could be on hold. Overnight Rate (%) Three more rate hikes resulting in an overnight rate of 2.5% by the end of 2019 would mean that the policy 4.5 PROJECTION rate increased by 2.0% in a span of 4.0 2.5 years (mid-2017 to 2019). This 3.5 would represent one of the most NEUTRAL TARGET RANGE aggressive interest-rate hike cycles 3.0 on record, which could be debilitating 2.5 PROJECTED TO RISE 2PPT for interest rate-sensitive parts of the 2.0 economy. Given that private debt 1.5 OVERNIGHT RATE levels remain elevated, any sharp rise in interest rates could weigh 1.0 on consumer spending and create 0.0 further dislocation in the housing 2011 2012 2013 2014 2015 2016 2017 2018 2019 market. The recent plunge in oil Source: Bank of Canada, Bentall Kennedy

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 13 04. SPECIAL TOPIC: DEMOGRAPHICS

Surging population growth 5 Immigration is critical to lifting Canada’s potential economic growth

fuelled by immigration Declining natural increase An aging population By 2023, natural increase (Canadian Will lower revenues and drive up costs atio of retirees to workers births minus deaths) will contribute to a for federal and provincial governments declining annual population growth. (health care and Old Age Security costs).

1 Canada leads all G7 nations in population growth anked 181st POPULATION GROWTH: 20002018 % CHANGE 1.6 globally 25% 21.0% 20.5% Canadian fertility rate (number of the population will be older of births per woman) than 65 by 2035 TODAY: 2018 PROJECTION: 2023 17.0% 16.0% 13.0% Source: Conference Board of Canada 10.5% 10.5% 7.0% 7.0% 6 Population growth concentrated in urban centres, especially in the GTA TOTAL POP. TOTAL 4.8%

WORKING AGE POP. AGE WORKING 2.0% -4.0% -0.5% -12.0%

CANADA U.S. UK FRANCE ITALY GERMANY REST OF ONT ARIO OTTAWA Canada extends immigration targets 48.3 / 22% 19.2 / 9% Note: working age: 20 to 64 years old. Source: IMF. 350,000 annually by 2021 JAPAN The vast majority of these newcomers are coming GREATER TORONTO AREA Canadian population growth surges to the fastest Immigration is key to Canada’s under economic programs designed to address 128.4 / 58% pace in nearly three decades population growth skills shortages and gaps in the labour market WATERLOO AREA 8.0 / 4% 202,300 HAMILTON Net immigation Canadian Immigration levels, by program 1.4% 1990/1991 10.2 / 5% LONDON 7.7 / 3% Economic

CANADA POPULATION: % CHANGE Y/Y Family class 1986 1994 2002 2010 Q3-2018 Births minus deaths Share of Ontario population growth 2016/2017 Refugee Thousand persons, Y/Y population change as of July 2018 Canada’s key immigration drivers 2018 2019 2020 2021 Source: Canada Visa Source: Statistics Canada, Haver Analytics

Canada has a long history of immigration innovation Key election issue in 2019 But the reality is, immigrants:

Over the past 50 years, Canada Boost trade ties between Add diverse and skilled has been a world leader on Canadian programs and strategies Closing doors in the U.S Immigration is poised to become a key Canada and the world labour to the workforce immigration policy. It was the federal election issue in 2019 because it is first country—and is still one of Global Skills Strategy Immigration uncertainty the most vulnerable to populist attack. only a handful of countries—to Enhanced in 2017, this program expedites the Since the 2016 U.S. presidential election, there Conservatives have already started to test Strengthen culture May boost productivity of implement a points-criteria work-permit process to two weeks for "low-risk, has been speculation about the future of U.S. populist rhetoric on such issues as and diversity domestic workers high-skilled" foreign workers. work visa programs, including the H1B visa, upon system. This merit-based immigration and trade. Almost 35,000 which many tech companies rely on to recruit people have entered Canada from the U.S. system helps ensure that talent from abroad. immigrants have the best to claim asylum since January, 2017. There Are motivated, innovative Boost demand for goods chance at finding gainful are undoubtedly issues to be addressed and entrepreneurial and services Express Entry International students that are more acute to refugee claimants, employment to integrate more Launched in 2015, this electronic system helps to Enrolment in Canadian universities is up 40% over such as how to successfully integrate them quickly and more fully. expedite the permanent residency approvals the past two years. Enrolment in American institutions Do not significantly aect Can result in higher process to as little as 6 months from what had fell 6.6% in 2017-18 and by 3.3% the previous year. into the community. been up to 10 years. the wages of existing workers business investment Source: Conference Board of Canada 14 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE 5 Immigration is critical to lifting Canada’s potential economic growth

Declining natural increase An aging population By 2023, natural increase (Canadian Will lower revenues and drive up costs atio of retirees to workers births minus deaths) will contribute to a for federal and provincial governments declining annual population growth. (health care and Old Age Security costs).

1 Canada leads all G7 nations in population growth anked 181st POPULATION GROWTH: 20002018 % CHANGE 1.6 globally 25% 21.0% 20.5% Canadian fertility rate (number of the population will be older of births per woman) than 65 by 2035 TODAY: 2018 PROJECTION: 2023 17.0% 16.0% 13.0% Source: Conference Board of Canada 10.5% 10.5% 7.0% 7.0% 6 Population growth concentrated in urban centres, especially in the GTA TOTAL POP. TOTAL 4.8%

WORKING AGE POP. AGE WORKING 2.0% -4.0% -0.5% -12.0%

CANADA U.S. UK FRANCE ITALY GERMANY REST OF ONT ARIO OTTAWA Canada extends immigration targets 48.3 / 22% 19.2 / 9% Note: working age: 20 to 64 years old. Source: IMF. 350,000 annually by 2021 JAPAN The vast majority of these newcomers are coming GREATER TORONTO AREA Canadian population growth surges to the fastest Immigration is key to Canada’s under economic programs designed to address 128.4 / 58% pace in nearly three decades population growth skills shortages and gaps in the labour market WATERLOO AREA 8.0 / 4% 202,300 HAMILTON Net immigation Canadian Immigration levels, by program 1.4% 1990/1991 10.2 / 5% LONDON 7.7 / 3% Economic

CANADA POPULATION: % CHANGE Y/Y Family class 1986 1994 2002 2010 Q3-2018 Births minus deaths Share of Ontario population growth 2016/2017 Refugee Thousand persons, Y/Y population change as of July 2018 Canada’s key immigration drivers 2018 2019 2020 2021 Source: Canada Visa Source: Statistics Canada, Haver Analytics

Canada has a long history of immigration innovation Key election issue in 2019 But the reality is, immigrants:

Over the past 50 years, Canada Boost trade ties between Add diverse and skilled has been a world leader on Canadian programs and strategies Closing doors in the U.S Immigration is poised to become a key Canada and the world labour to the workforce immigration policy. It was the federal election issue in 2019 because it is first country—and is still one of Global Skills Strategy Immigration uncertainty the most vulnerable to populist attack. only a handful of countries—to Enhanced in 2017, this program expedites the Since the 2016 U.S. presidential election, there Conservatives have already started to test Strengthen culture May boost productivity of implement a points-criteria work-permit process to two weeks for "low-risk, has been speculation about the future of U.S. populist rhetoric on such issues as and diversity domestic workers high-skilled" foreign workers. work visa programs, including the H1B visa, upon system. This merit-based immigration and trade. Almost 35,000 which many tech companies rely on to recruit people have entered Canada from the U.S. system helps ensure that talent from abroad. immigrants have the best to claim asylum since January, 2017. There Are motivated, innovative Boost demand for goods chance at finding gainful are undoubtedly issues to be addressed and entrepreneurial and services Express Entry International students that are more acute to refugee claimants, employment to integrate more Launched in 2015, this electronic system helps to Enrolment in Canadian universities is up 40% over such as how to successfully integrate them quickly and more fully. expedite the permanent residency approvals the past two years. Enrolment in American institutions Do not significantly aect Can result in higher process to as little as 6 months from what had fell 6.6% in 2017-18 and by 3.3% the previous year. into the community. been up to 10 years. the wages of existing workers business investment Source: Conference Board of Canada BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 15 05. OFFICE

Office Broad-based strength across non-energy-dependent markets

150 King Street West, Toronto, ON

The Canadian office market is making West and Montreal’s Midtown might should be absorbed with relative positive strides but national numbers garner more attention going forward. ease. As such, prospects of strong overlook regional dynamics. Outside rental rate growth remain rather of Alberta, conditions are generally Under these favourable conditions, bullish in these markets as we head healthy with some metro sub-markets development activity is picking up. into 2019. While conditions are not performing at record vacancy levels. As expected, the majority of this as robust in Calgary and Edmonton, activity is taking place in Vancouver, upward pressure on vacancy rates A thriving tech sector and the rise Toronto and Montreal. Given very has subsided, signalling a bottoming in co-working have been drivers of strong demand in these markets, new phase. demand for office space, especially supply, along with any backfill space, in Vancouver, Toronto, Ottawa and Montreal. This is most evident in downtown markets where securing Downtown Class A office vacancy improves large blocks of quality space is a challenge for prospective tenants. Long-term avg. 16Q3 17Q3 18Q3 25% As such, downtown Class A vacancy rates are seeing considerable 20% downward pressure. As tight conditions persist within the cores, 15% suburban and midtown sub-markets 10% are poised to see spillover demand. This trend is most evident in 5% Vancouver where the suburban Class A vacancy rate fell by 5.6% year-over- 0 year as of 2018 Q3. Looking ahead, Vancouver Calgary Edmonton Toronto Ottawa Montreal Canada suburban nodes such as the GTA Source: CBRE Econometric Advisors

16 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Vacancy Rent Upward pressure on vacancy rate subsides Alberta weighing down an otherwise positive rent outlook

Vacancy Y/Y Growth 12.4% As of 18Q3 -4.2% As of 18Q3

10-Year Avg. Vacancy 10.4% 10-Year Avg. Ann. Rent Growth -0.1%

QUARTERLY QUARTERLY VACANCY TREND Y/Y RENT TREND

• Downtown class A office space outperforms with • Market rent growth remains elusive in Calgary and Toronto and Vancouver at or near record low Edmonton as these markets work through a long vacancy. bottoming phase. • Downtown Class A conditions in Ottawa and • Downtown Class A rent growth in Vancouver Montreal tightening. and Toronto accelerated to 13.5% and 10.3%, respectively year-over-year.

Absorption New supply 9 consecutive quarters of positive absorption Supply easing as the market awaits the next wave of development

Square feet Square feet Four quarters Four quarters 4.6M ending 18Q3 4.3M ending 18Q3

10-Year Avg. Ann. Demand Growth 3 Million SF 10-Year Avg. Ann. Supply Growth 6 Million SF

QUARTERLY QUARTERLY DEMAND TREND SUPPLY TREND

• Demand underpinned by strong job creation, • Current development cycle has 14 million sf especially within the tech sector. under construction. • Co-working space operators are an accelerator • 54% (7.6 million sf) of this new supply is poised to of demand. enter the market in 2019 and 2020.

Source: CBRE Econometric Advisors

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 17 05. OFFICE

Canadian tech sector continues to thrive

Healthy economic fundamentals, political stability and an open immigration policy have been the driving forces behind the tech sector in Canada. This fertile environment for innovation is encouraging many tech companies, both home- grown and foreign, to set up shop in the major corporate hubs across the country.

Vancouver Montreal As a key hub within the Has one of the highest Cascadia Innovation Corridor, academic concentrations large tech enterprises are of Artificial Intelligence expanding their footprint researchers in the world. in Vancouver. 300+ SF* Researchers and doctoral 802,000 students in the AI field Amazon’s footprint* of DT office market ~ 2.9% by 2023 Source: MILA Source: CBRE * sf including leased and pre-leased *projection includes future inventory

Ottawa Calgary At the forefront of Local economy autonomous vehicle continues to diversify research, especially for by bolstering its clean software support and energy sector. hardware design.

Home to approximately $600M Toronto Direct contribution to local GDP Considered as one of the 93% Source: Calgary Economic world’s largest innovation of firms that service the AV industry in Canada Development and startup hubs. Source: National Autonomous Vehicle Technology and Innovator Home to Directory 4,000 active startups Source: KPMG

18 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Co-working providing agility

Co-working has grown exponentially Global number of co-working spaces expected to double by 2022 in recent years and has become an accelerator for office absorption. As of 2017, there are approximately 2015 7,805 14,000 co-working office spaces globally and that figure is projected to double by 2022. The impetus for 2016 11,100 this success has been a structural PROJECTION shift within the labour market, 2017 14,411 particularly the growing reliance on flexible or contingent labour. This coincides with the rise of the “gig 2018 17,725 economy,” where highly skilled labour is increasingly being provided in 2019 21,306 the form of freelancing. Tech-savvy millennials are most active in this new marketplace. Given its size, this 2020 24,306 generation is projected to account for 75% of the global labour force by 2021 2025, a trend that should continue to 27,919 shift labour market dynamics further toward “on-demand” arrangements. 2022 30,432

Source: Emergent Research, GCUC, December 2017

Millennials are also active Robust gains in self-employment growth entrepreneurs starting small Index (January 2012 = 100) businesses whereby low overhead costs and maintaining flexibility 150 is crucial. A closer look into 140 employment data by class of workers Self-employment services (self-employed vs. employee) 130 reflects a rise in entrepreneurship 120 across Canada. In particular, self- 110 employment within the services 100 sector (a proxy for entrepreneurs) has Total employment 90 grown at a pace that is much quicker than the overall labour market. 80 2011 2012 2013 2014 2015 2016 2017 2018

Note: self-employment = incorporated with no paid help Source: Statistics Canada

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 19 05. OFFICE

While individual entrepreneurs should Enterprise co-working use on the rise continue to play a key role, the co- Composition of Co-working User Base working industry’s next phase of 2010 2017 growth is likely to focus more on larger enterprises to diversify its revenue. 68% According to findings from Emergent Research, there has been a shift in the 49% composition of the co-working user 39% base. Enterprise users are occupying more flexible space relative to the 29% 12% traditional freelance source of demand. Increasingly, enterprise users are 5% experimenting with “agile workforce” environments to a) improve employee productivity; b) gain efficiency in space Freelancer / Employee at a Employee at a utilization; and c) maintain flexibility. independent small firm (< 100 large firm ( > 100 workers employees) employees)

Source: CB Insights, Emergent Research, Recode

20 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Making better decisions using innovative technology

Data-driven decision making in real Artificial neural network example estate management is becoming easier due to advancements Input layer Hidden layer 1 Hidden layer Z Output layer in sensory hardware and other Layout Occupant measurement tools. For example, dimension analysis movement analysis it has made it feasible to apply machine learning for guidance in Input 1 space utilization decisions. One Floor layout such application is Artificial Neural Output 1 Hours of Networks (ANN), a process that, meeting among other things, recognizes Input Z rooms usage Number patterns within vast amounts of data of offices that otherwise might be too complex to detect. Input feed Machine learning algorithm Metric of interest

Source: WeWork, Bentall Kennedy Prediction of conference room usage

Prediction by 2000 Prediction by 2000 designers computers Predicted hours Predicted hours

2000 2000 Actual hours Actual hours Source: WeWork

Data for the entire building, ranging The use of artificial intelligence its decentralized nature. With data from floor layouts to occupier can extend beyond architectural maintained through a distributed movements to temperature, feed decisions. It can also be used to ledger, it eliminates a central into an ANN. In theory, any metric determine what attributes are point of failure that typically has of interest for an asset could be significant in causing variations in been vulnerable to tampering. In projected using this process. For asset performance (occupancy, a world where transaction history, example, by using its ANN, WeWork rental growth, etc). This can land registry, leasing information was able to predict the usage of potentially provide an additional and building servicing reports are meeting rooms for a new location layer of empirical data for investment managed through a private or public with far greater accuracy than their management decisions. blockchain, the need for resources designers. This ultimately resulted to assess counterparty risk and due in a more optimal allocation of Distributed ledger technology diligence would greatly diminish. This collaborative spaces within their (blockchain), albeit still in its infancy removes friction, ultimately resulting floor layouts. and far removed from mass adoption, in greater efficiency in investment could improve the efficiency of some decision-making and transacting. industry practices. The potential of blockchain technology stems from

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 21 06. RETAIL

Retail Consumer spending slows sharply

Cyclical headwinds for the retail $20). This amount is far from the The divide between the winners and sectors are mounting heading opening negotiating position of losers in retail is becoming more into 2019. Much of the consumer the U.S. administration, which was pronounced. Investors will need to spending during this expansion has $800. Nonetheless, it adds another be more active than ever and ensure been fuelled by debt derived from headwind as it gives U.S. retailers that operators are creative and can home equity, as real estate values a leg up. These headwinds add to maintain flexibility in this increasingly have increased while wages have an otherwise challenging brick-and- dynamic environment. only recently gained momentum. mortar retail environment. However, household credit growth has slowed to anemic levels, which resulted in a sharp slowdown in Core retail sales moderating consumer spending in the third Y/Y % Change quarter. Core retail sales 12-mos. mov. avg. 8% Following that trend, core retail sales 7% growth retreated to 2.6% year-to-date 6% as of August — down from 5.0% in the 5% same period in 2017. 4% 3% 2% Canadian retailers are breathing a 1% sigh of relief as the new USMCA trade 0% agreement limited the increase on the -1% de minimis threshold on purchases 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 from the U.S. to $150 (previously Source: Statistics Canada

22 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Vacancy Rent Vacancy trends higher post Sears closure Rent growth restrained in challenging retail environment

Vacancy Y/Y Growth 6.8% As of 18Q2 1.3% As of 18Q2

10-Year Avg. Vacancy 5.1% 10-Year Avg. Ann. Rent Growth 2.1%

ANNUAL ANNUAL VACANCY TREND Y/Y RENT TREND

• ~15 million square feet left by Sears will take longer • Moderating retail sales will constrain the ability to re-lease than Target and challenge the creativity to charge higher rents. of landlords. • Knowing your customer (shoppers) and working • Regional malls and power centres registered the with retailers to improve convenience and largest increases in vacancy, while other retail experience is the only way to drive rents. formats remain relatively stable.

Absorption New supply Absorption to remain soft for the foreseeable future New supply focused on major urban metros

Square feet Square feet Four Quarters Four Quarters -4.0M Ending 18Q2 3.2M Ending 18Q2

10-Year Avg. Ann. Demand Growth 5 Million SF 10-Year Avg. Ann. Supply Growth 6 Million SF

ANNUAL ANNUAL DEMAND TREND SUPPLY TREND

• Pace of negative absorption decelerated in H1 2018 • Deliveries running well below historical average (-200K SF) relative to the -3.8 MSF in H2 2017. as development opportunities are generally • Right-sizing of physical store networks and limited to urban mixed-use. footprints continues, limiting absorption. • 11.9 MSF of retail under construction but highly concentrated (77%) in Toronto (4.6 MSF), Montreal (2.5 MSF) and Vancouver (2.1 MSF).

Source: CBRE Econometric Advisors, MSCI REALPAC Canada Property Index

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 23 06. RETAIL

Grocery wars escalate

KEY FACTORS Canadian grocers are also dealing become a force, with an estimated with their share of headwinds. A 35% of Canadians having Prime INCREASING COST OF GOODS low Canadian dollar is increasing subscriptions. Consumers have Low Canadian dollar their cost of goods sold at the same become more price-conscious and time as higher minimum wages are mobile apps are making it easier increasing labour costs. Meanwhile, to find the best deals, increasing Higher minimum wages a fierce battle for market share is competition among grocers. limiting many grocers’ ability to pass on these higher input costs to the These factors are putting a strain on COMPETITION consumer. Grocery store operators profit margins. In addition, the macro Competition among wholesale and discount are battling among themselves, as backdrop is becoming less favourable merchants well as with larger wholesale and as household credit growth dipped discount merchants such as Costco to its lowest level in any non- Mobile apps enable and Walmart (now the largest grocer recessionary environment. This price comparison in the U.S.). Market share is being decline, along with higher interest lost to convenience and specialty rates, will act to slow consumer MACRO ECONOMIC food stores that are catering to the spending, dampening the outlook for Household credit and higher unique tastes and preferences of grocery sales in 2019. interest rates slow consumer consumers. And now Amazon has spending

24 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Online grocery still in its infancy

Ecommerce could ultimately have the second-ranked destination for Percentage of budget spent online the most transformative impact on online grocery. It also concluded that by product category the grocery industry and the real current usage of grocery ecommerce SHELF STABLE estate that it occupies. Current appears to be primarily for pantry- 27% estimates are that ecommerce restock, and that consumers appear Snack and sweets grocery penetration is around 1% to to prefer home delivery as opposed Beverages 24% 2% in Canada, when measured by the to click-and-collect. Another study 23% total dollars spent online relative to by the J.C. Williams Group supports Packaged / canned food total grocery sales. Other developed the findings that when it comes to Ethnic food 18% economies are at varying stages categories, shelf-stable items such as Dietary and lifestyle 15% of adoption with penetration rates snacks and sweets, beverages, and as low as 0.5% in Italy and as high packaged or canned foods are the Bakery 15% as 20% in South Korea, which has most-often purchased. Specialty 14% the world’s fastest average internet connection speed. A recent study by Amazon’s foray into the space with Frozen food 14% BMO Capital Markets suggests that the acquisition of Whole Foods Fruits / vegetables 12% the number of Canadians who have in late 2017 may be looked back purchased groceries online recently upon as the tipping point for the Dairy 11% is around 30%. These shoppers are industry. It appeared to galvanize Prepared meals 11% typically buying only occasionally Canadian grocers’ digital strategies Meat 10% and are spending approximately as they realized they were behind in $50 per transaction. Amazon was delivering what today’s digitally savvy Other 3% overwhelmingly the ecommerce consumers want. website of choice and saw twice Source: J.C. Williams Group - Canadian as many shoppers as Loblaw.ca, E-tail Report Summer 2018

Ecommerce revenue as a share of total FMCG revenue in selected countries Y/E March 2017

U.K. JAPAN

NETHERLANDS CANADA 7.5% CHINA 7.5% 1.5% 2.6% GERMANY 6.2% FRANCE 1.7% U.S. 5.6% 1.5% ITALY SPAIN 0.5% 1.8%

SOUTH KOREA 19.7%

Source: Statista. *Estimated Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG)

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 25 06. RETAIL

Multimodal distribution is key

Consumers want convenience, but the milk is in the far back corner. sales make up almost one-third of great prices and experience. And Adapting to these preferences will core retail sales in Canada. Given convenience means options for require a paradigm shift in the model much lower margins in grocery, different modes of distribution. for grocers. losing 5% of your customers to a Grocers need to be able to deliver competitor’s online offering makes to home, to provide buy-online Being multimodal is as much about a big difference in both your bottom and pick-up-in-store options (click- customer acquisition as it is about line and that of your competitor’s. and-collect) as well as create great brand loyalty and retention. Walmart Moreover, online grocery sales in-store experiences that focus on U.S. has indicated that 30% of typically attract the most-profitable convenience. Bricks-and-mortar its online grocery shoppers are customers: dual-income households grocery stores are traditionally new to Walmart. And while online that prioritize convenience over price designed to maximize dwell time, penetration rates are low (for now), or promotions — and they typically not reduce it. The produce is front small percentage point shifts have have big basket sizes. and centre upon entering the store huge dollar implications as grocery

IN-STORE PICK-UP HOME DELIVERY Grocer / strategy emphasis Availability Cost Availability Cost 500 stores $3-6/order + Select locations Instacart pricing: Weston Group → click and collect nationally, free promos nationally $3.99 and up + Delivery partner: Instacart expanding to service fee of 7.5% 700 (end of 2018) of order Quebec only $4/order Quebec, Toronto $9.50/order Empire → home delivery and Ottawa; GTA Quebec; $15/order Delivery partner: The Ocado Group warehouse in Ottawa, Toronto (min 2 yrs order $50) Quebec only, $4/order Same-day in Varies Metro Inc. → hybrid plans for Ontario Quebec, plans for Delivery partner: owns trucks, uses 3rd-party operator in 2019 Ontario in 2019 Walmart → click and collect Select location Free 1-hr in GTA and $9.97 (min $50 Delivery partner: Instacart, Food-X Urban Delivery Inc. nationally (min $50 order) Winnipeg order) in Vancouver Not available Southern Ontario Free (min order $75) Costco → home delivery — within 2 days, non- Delivery partner: Instacart perishable only

Source: Bentall Kennedy, Company websites and reports Notes: Digital strategy typically in reference to its prominent banner

Which digital offering will win out?

Each of the Canadian grocers has a network of physical stores is a looking across all three channels to taken a slightly different approach to valuable brand tool in addition to some degree to deliver convenience their digital offerings. Walmart and a means to distribute from closer to their customers. They realize that Loblaw are placing more emphasis proximity to customers. Metro and transforming their business to have a on click-and-collect. Joining Amazon, Costco are taking a more cautious greater digital presence is critical to Empire has moved predominantly in approach, waiting for this nascent their bottom line. the direction of home delivery. That trend to play out further before said, Amazon’s acquisition of Whole committing to significant investments. Foods is an acknowledgement that What’s clear is that all grocers are

26 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Online grocery will become pervasive across generations

Online grocery is most appealing to digitally native generations are very households with children who (also) comfortable online. What does that lead busy lives. They also consume mean for penetration rates once they Click-and-collect the largest grocery basket. The back become decision-makers? And as end of the millennial generation the population ages, technology is is growing among is largely comfortable with mobile enabling many older Canadians to digital native generations technology and is beginning to maintain their independence and and older Canadians form households, earn higher remain in their own homes. Click-and- incomes and move into their higher collect and home delivery are two consumption years. Younger and solutions that will help them do that.

What does it mean for for grocery real estate?

The outlook for the physical grocery shopping. Current levels of online chains have the deep pockets to store is evolving. It’s likely that the delivery are relatively “capital-light” compete but smaller operators trend toward smaller stores carrying but reconfiguration of stores and without a unique product offering less inventory will continue. Existing expansion of logistics networks will be challenged to deliver on all store footprints are likely to be could prove to be capital-intensive levels that customers desire. The best reconfigured to facilitate multimodal depending on the growth online. locations will be fine, but investors distribution, meaning an increase These reasons, along with current need to be mindful of how well in “back-room” inventory space, as macro headwinds, could limit the grocers are adapting to the changing well as more floor space designated upside on rents as grocers grapple needs of their customers. for prepared foods and experiential with tighter profit margins. Larger

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 27 07. INDUSTRIAL

Industrial Firing on all cylinders

10 Ronrose Drive, Concord, ON

Ecommerce-driven logistics and Industrial availability tightening across markets strong macro fundamentals are driving industrial demand. Without Min-Max 2013-2018 18Q3 18Q2 17Q3 much new supply delivered to 12% the market, robust absorption has lowered availability to record levels. 10% There is some relief in sight as the volume of space under construction 8% has risen to 19.5 million square feet with approximately 11 million more scheduled to become available 6% in 2019. Nonetheless, persistent demand for new-generation space 4% should easily absorb this influx. Under these landlord-favourable conditions, 2% industrial rents should continue to register robust gains, generating 0% attractive net operating income (NOI) growth for investors. Vancouver Calgary Edmonton Toronto Ottawa Montreal Canada

Source: CBRE Econometric Advisors

28 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Availability Rent Availability rate reaching the lowest level on record Rent growth continues to accelerate

Availability Y/Y Growth 3.1% As of 18Q3 7.9% As of 18Q3

10-Year Avg. Vacancy 5.9% 10-Year Avg. Ann. Rent Growth 2.2%

QUARTERLY QUARTERLY AVAILABILITY TREND Y/Y RENT TREND

• Availability rates tightening across the six major • Robust growth pushing average market rents to markets in Canada. $7.50 psf, the highest level on record. • Historically tight conditions in Toronto (1.6%) and • Vancouver remains the priciest market as net rent Vancouver (2.3%). increased by 16% year-over-year to $11.75 psf.

Absorption New supply 2018 on pace to set an annual record for net Supply relief ahead in 2019 absorption

Square feet Square feet Four quarters Four quarters 30.1M ending 18Q3 12.4M ending 18Q3

10-Year Avg. Ann. Demand Growth 15 Million SF 10-Year Avg. Ann. Supply Growth 14 Million SF

QUARTERLY QUARTERLY DEMAND TREND SUPPLY TREND

• Absorption levels outstripping new supply by • 19.5 million sf is under construction — highest almost 3-to-1. volume since 2015 Q3. • Warehousing, distribution and logistics remain • 73% of construction volume taking place in key drivers for industrial demand. Toronto, Vancouver and Calgary.

Source: CBRE Econometric Advisors

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 29 07. INDUSTRIAL

Logistics activity a key driver of industrial demand

Due to the rapid rise of ecommerce, logistics activity has been a catalyst Canadian ecommerce activity for industrial demand. Ecommerce Sales ($Billions) % of Total Retail Sales sales continue to grow at double- digit rates in Canada, significantly $100 20% outpacing core retail sales growth. $90 According to Prologis, ecommerce 18% fulfillment requires approximately $80 16% $70 three times the logistics space 13.7% 14% compared with traditional bricks- $60 12% and-mortar retail, due to: 1) shipping $50 parcels vs. pallets; 2) high inventory 10% $40 turnover levels; 3) broader product 8% $30 variety; and 4) reverse logistics 6% (product returns). For these reasons, $20 even as retail sales moderate, $10 4% demand for logistics space should $0 2% remain healthy. 2016 2017 2018F 2019F 2020F 2021F Source: eMarketer

Urban infill space garnering more attention

Users of logistics space are now ~4% of the end-to-end costs, with Identifying who the end consumers focused on the end-to-end total transportation costs accounting for are and where they reside is crucial. network costs rather than individual the lion’s share (~50%). As such, From this standpoint, demographics procurement operations for proximity to inbound suppliers and play a key role in dictating transportation, real estate and labour outbound customers is paramount ecommerce logistics and industrial — something that the major retailers in reducing overall costs. This demand. These ideal locations tend have been doing for years. Optimizing suggests that industrial rents have to be in close proximity to: a) dense a supply chain often means securing room to grow as logistics users are populations; b) households with high infill logistics real estate for better increasingly willing to pay more for disposable income; c) millennials; and service and access to the urban location, specifically for industrial d) households with young children. consumer base. Estimates are that space that reduces distance to end real estate costs are merely consumers. 2% ADMINISTRATION

Real estate only a fraction of supply-chain costs 3% SUPPLIES 1% 10% LABOUR 4% RENT OTHER

22% INVENTORY 50% TRANSPORTATION CARRYING

8% CUSTOMER SERVICE

Source: Colliers, Hofstra University 30 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Infill vs. peripheral industrial dynamics in the Greater Toronto Area

Online shopping is likely to be most Highest propensity to shop online prevalent in large metropolitan areas such as the GTA. Aggregating the Econsumer index score demographic variables above into an Population Millennials Families with High-income “econsumer index score” and then density (20-34) young children household >100K mapping it across space, sheds more light on infill and peripheral industrial dynamics. 89

404 The results show there is an overwhelmingly greater 7 400 concentration of nodes having a 48 9 higher score closer to urban centres. This ultimately serves as a pull factor

404 7 for demand, particularly for older 41 2 industrial space located around Peripheral the edge of the urban core. There Rent: $7.00 PSF | 2-YR CAGR: 8% 7 are pockets in suburban areas in 27

401 the west, north and east ends that 7 fit this demographic profile as well, 401ime 407 ive t 41 0 dr albeit to a lesser extent. However, in m 401 0 these markets are typically served . 3 x o by larger fulfillment centres that tend 401 r 7 p p to be located near major highway A infrastructure outside the City of 401 403 QEW Toronto. Infill Rent: $8.00 PSF | 2-YR CAGR: 13% Comparing the performance between 403 infill and outer sub-markets using 401 a 30-minute drive time boundary lends support to the growing 38 demand of urban infill assets. This is reflected in rental rate trends, which 6 show that infill industrial space has outperformed its counterpart over Econsumer index score recent years. The average net rental very low very high rate for infill industrial space is $8.00 6 per square foot, reflecting a 14% premium relative to peripheral assets. This premium has emerged in as few as two years. Previous to that, there was very little discernible difference Note: Each variable within its dissemination area is indexed relative in rents. to the GTA. An equally weighted “econsumer index score” is calculated thereafter.

Source: Environics

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 31 07. INDUSTRIAL

Rent premium for highway North American highway density access in the GTA Area Highway density*

Accessibility to arterial highway thereby reducing transportation Dallas-Fort-Worth-Arlington 157 networks is another factor that costs. According to Colliers research, Houston 144 logistics users consider when the GTA is among one of the most Atlanta 136 choosing a location. Our analysis of under-served metro areas when it Boston 104 assets located along major highway comes to highway access per capita. Calgary 94 corridors within the six major markets As such, its industrial market is Montreal 91 shows that only Toronto and Montreal concentrated along arterial highway Washington DC 87 exhibit a material rent growth corridors. Approximately 67% of Detroit 83 premium in recent years compared to industrial assets in the GTA are within Philadelphia 81 their overall benchmarks. 1 kilometre of its major highways. San Francisco - Oakland 80 This subset of assets with superior Miami 77 The premium in the GTA is most access is seeing rents at over a 6.5% Los Angeles - Long Beach -Santa Ana 72 pronounced, where a sprawling premium compared to the broader New York - Newark 68 population base and traffic GTA market. Chicago 59 congestion encourages tenants to Toronto 59 favour locations that improve mobility, Vancouver 34

*Highway KM Per 100K People Source: Colliers, Statistics Canada, US Department of Transportation

32 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Industrial generates robust returns

For the four-quarter period ending Increasing momentum across all major markets 2018 Q3, industrial total returns 2018 Total Return registered an impressive 12.1%. Capital appreciation has been driven by both cap rate compression and 20% Toronto NOI growth. Institutional capital Vancouver continues to flow into this asset class as investors look to capitalize on the current bullish environment. As 15% pricing adjusts upwards, investors are Ottawa looking to NOI growth to drive returns going forward. Fortunately, rental rate growth is strengthening leading 10% Montreal to four-quarter trailing NOI growth of 2.3%, the highest in more than a decade. Calgary 5% Toronto and Vancouver continue to Edmonton outperform, but near 20% returns are likely unsustainable. Montreal and Ottawa are gaining considerable 0% interest from investors as relative yields have become more favourable in comparison with pricing in Vancouver and Toronto. Meanwhile, -5% conditions in Calgary and Edmonton are clearly improving. Perhaps what -5% 0% 5% 10% 15% 20% is more reflective of the strength 3-year annualized total return (%) of Canada’s industrial market is how broad-based performance improvements have been across the Source: MSCI/REALPAC Canadian Quarterly Property Index six major markets. Note: Period ending Q3 of every year

10 Driver Road, Brampton, ON

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 33 08. MULTI-RESIDENTIAL

Multi-residential Vacancy continues to fall

Two St. Thomas, Toronto, ON

Vacancy in purpose-built rental Vacancy declines in most markets continues to fall as a myriad of strong demand drivers outpaced constrained Long-term avg. 2016 2017 2018 supply. The national vacancy rate fell to 2.4% from 3.0% a year ago (as 8% of October, 2018) — the lowest level since 2008. Robust population growth fuelled by immigration and a strong 6% labour market underpinned solid demand. Stricter mortgage stress test rules and higher interest rates have also made it harder for first-time home 4% buyers to enter the market, meaning there are fewer leaving the rental market and more opting to rent as 2% they form households. These demand factors are more acute in the highly desirable urban areas of Toronto, 0% Vancouver and Montreal where the Canada Vancouver Edmonton Calgary Toronto Ottawa Montreal vast majority of job creation has occurred in recent years. Source: CMHC, As of October of every year

34 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Vacancy Rent Vacancy tightens below historical average Further rent growth in the cards for the year ahead

Vacancy Y/Y Growth 2.5% As of 18Q3 4.4% As of 18Q3

10-Year Avg. Vacancy 2.6% 10-Year Avg. Ann. Rent Growth 3.1%

QUARTERLY ANNUAL VACANCY TREND Y/Y RENT TREND

• 4 of 6 major markets experienced reduced • Landlord-favourable markets outside of Alberta vacancy. will enable landlords to drive rents. • Vacancy rates near record lows in Montreal and • Rent levels in some markets may be reaching Ottawa. levels that may not support further growth without a corresponding rise in wages.

Absorption New supply Renter formation continues to outstrip new supply Lack of new supply is the prominent driver of eroding rent affordability

Units Units Four Quarters Four Quarters 28K Ending 18Q3 26K Ending 18Q3

10-Year Avg. Ann. Demand Growth 14K units 10-Year Avg. Ann. Supply Growth 13K units

ANNUAL ANNUAL DEMAND TREND SUPPLY TREND

• Deliveries remain well-above long-run trend but • Rising development costs are increasingly not enough to satiate robust demand. challenging the financial feasibility of projects. • Demand for professionally managed apartments • Elimination of rent control on new developments is increasing in secondary markets where home in Ontario could shift investment capital east ownership is challenged. from Vancouver.

Source: CMHC, As of October of every year

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 35 08. MULTI-RESIDENTIAL

Rents grow at fastest pace since 2007

On the supply side, despite a record Synchronized rent growth number of purpose-built rentals % Change in 2-Bedroom Rents 2016 2017 2018 being delivered to market in 2018, it was not enough to satiate demand. 8% Tighter market conditions resulted in an increase in rent growth across 4% major Canadian cites. While evidence of higher rents is no surprise in 0% Toronto and Vancouver, the pace 4% of rent growth in Ottawa stood out. Two-bedroom market rents in Ottawa 8% grew at the fastest pace since 2001 Canada Vancouver Edmonton Calgary Toronto Ottawa Montreal at 5.8% year-over-year — well above the Ontario rent guideline increase of 1.8% for 2018. This strength can be largely attributed to growth in Rents grew at the fastest pace since 2001 at 5.8% year-over-year — well above the Ontario rent guideline increase of 1.8% for 2018. population driven by non-permanent residents, of which many are international students. Zeroing Purpose-Built Rental Apartment Source: CMHC in on newer purpose-built rentals completed after 2005, highlights Survey, average index rents in the the strength of the Toronto market. GTA, increased a staggering 17% According to Urbanization’s 18Q3 year-over-year.

Diverging rent control policies in Ontario and B.C.

There are diverging trends on as part of its Ontario Fair Housing rent control in Ontario compared Plan in April, 2017, which blanketed with B.C., which could have the rent controls across all rental units. effect of shifting investment capital Previous to that, rent control had only eastward. In September, the B.C. been applicable to units constructed government introduced a 2.5% prior to 1991. Rent control remains cap on rent increases (previously in place in Ontario for any unit built set at inflation + 2.0%). Meanwhile prior to November 15, 2018. As many in Ontario, the newly elected empirical studies have shown, rent Progressive Conservatives removed controls reduce the new supply of rent control on new developments purpose-built rentals. effective November 15, 2018. This was somewhat of a reversal of the prior government’s policy change,

36 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Vancouver implications

The removal of rent control for new becomes available. It would result construction in Ontario is a step in in reduced incentive for landlords the right direction, which will help to invest in their assets without The bottom line is the economics of development. the ability to recover those costs Meanwhile, vacancy control is through higher rents over time. It is that rent control and currently being considered by a shifting development toward for-sale vacancy control will only government rental task force in condominiums as developers would exacerbate the housing British Columbia. This would mean be adverse to being exposed to the crisis in Vancouver. that landlords could not raise the rising costs of operating a building. rent to market rates when a unit

Cost pressures add to challenge 3 BIGGEST CHALLENGES FACING of development DEVELOPERS OVER THE NEXT 5 YEARS

A recent study by Altus Group that looked at current global trends in development indicated the biggest challenges facing developers over the next five years are project cost escalations, labour/trade shortages, and slow approval processes. Development cost inputs such as labour, materials, government Labour/trades Escalating Slow approval charges and land prices are all facing shortage project costs processes upward cost pressure making it challenging to make development projects economically feasible. Source: Altus Group

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 37 08. MULTI-RESIDENTIAL

Portfolio, Calgary, AB

Labour challenges

Labour costs are rising due to a the construction industry’s most PERCENTAGE OF CONSTRUCTION WORKERS RETIRING IN THE NEXT shortage of skilled workers and significant challenges. BuildForce 10 YEARS an unemployment rate that now Canada estimates that 255,000 sits at a 44-year low. Adding to the skilled construction workers, or 21% cyclical challenges are the structural of the current workforce, will need to 21% headwinds of an aging workforce be replaced over the next 10 years. in the skilled trades. Replenishing Source: BuildForce Canada a retiring workforce is one of

“Tariffy-ing” materials cost escalation

Construction material costs have on imported steel because of the Canada Top 11 CMAs: highrise increased substantially in the past challenges and costs of bringing apartment building construction 18 months, especially for concrete, steel across the country from price index windows and doors, electrical and Ontario producers. The Residential % Change Y/Y; 2017=100 mechanical, elevators, and finished Construction Council of Ontario carpentry. Steel and aluminum tariffs suggests the increased cost of re- 15% are exacerbating price increases. bar alone could increase the price 10% 5.8% In an effort to protect Canadian of a new Vancouver condo unit by steel makers from the effects of the $10,000. Fortunately for developers, 5% Trump administration’s 25% tariffs there is evidence that cost pressures 0% on imported steel, the Canadian are easing, in part due to fewer government introduced a surtax new housing starts anticipated over -5% on select steel products to prevent the next five years. Rent increases -10% international steel producers from have also worked to help preserve dumping products in Canada that development yields, although they -15% 94 98 02 06 10 14 18 are no longer destined for the are narrowing as land costs U.S. Projects in B.C. rely heavily continue to rise. Source: Statistics Canada

38 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Portfolio, Calgary, AB

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 39 09. CAPITAL MARKETS

Capital markets Real estate investor sentiment strong but cautious

150 King Street West, Toronto, ON

Real estate continues to benefit There is also growing concern that from increasing institutional portfolio an unfavourable credit market is allocations to the asset class because emerging as corporate debt levels are of the stable income it delivers. But elevated and the quality of investment investors are increasingly mindful of grade credit is the weakest it has ever rising interest rates, escalating trade been (as measured by the number tensions, a maturing business cycle of investment grade credits that are and what it means for their portfolios. BBB-rated). While corporate credit $39B These crosscurrents combined with spreads remain at historically tight investment volume on recent volatility in the equity markets levels, they have widened this year pace to surpass 2017’s are creating a sense of unease and widening typically precedes record of $43B among investors. It remains to be the turning of a credit cycle. The seen whether recent equity market downside could be more severe, volatility is a healthy correction or if given weaker credit quality, which it signals the beginning of the end of could have a negative ripple effect Source: CBRE, 18Q3 YTD the longest bull market in history. through financial markets.

40 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Interest rates move higher

Monetary policies are tightening and multi-residential sectors continue near-term rollover risk, functional as the Bank of Canada and the Fed to experience downward pressure obsolescence and/or inferior judiciously raise interest rates. How due to favourable net operating locations will be the most negatively quickly and how high will interest income prospects and strong investor impacted by rising interest rates. rates ultimately go? And what is the demand. Assets with vacancy, impact on asset prices? Canadian returns now outperforming the U.S. Four-Quarter Trailing Total Returns, 2018 Q3 In the current environment, real estate cap rate decompression is U.S. Canada becoming evident across select sectors in the U.S. such as infill 25% apartment and non-transit-oriented 20% suburban office markets, and is more 15% widespread across much of the retail 7.5% sector, as well as smaller secondary/ 10% 7.2% tertiary locations. While there is 5% a sense that asset values have 0% peaked (with perhaps the exception -5% of the industrial sector), there has not been evidence of widespread -10% cap rate decompression in the U.S. -15% Canadian cap rates across most -20% markets have generally flattened -25%- with the exception of core properties 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 offering credit and term. Industrial Source: NCREIF Property Index, MSCI/REALPAC Canada Quarterly Property Index

150 King Street West, Toronto, ON

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 41 09. CAPITAL MARKETS

150 King Street West, Toronto, ON

Canadian property returns gain momentum

The MSCI/REALPAC Canada Property in excess of development costs. Index posted a 7.5% total return for Development is becoming a key MSCI/REALPAC Canada Property the four-quarter period ending Q3 driver of benchmark performance Index 2018. This performance marks a although newer projects are now significant 120-basis-point increase forecasting lower development TOTAL RETURN from the prior four-quarter period. yield spreads as a result of rising Improved performance was driven in construction costs. Income yields Four quarters ending 18Q3 large part by strength in the multi- remain attractive relative to other 7.5% residential and industrial sectors, investment alternatives but their particularly in Toronto and Vancouver, spread over risk-free rates has Basis-Point Increase: 120 where rent growth was strongest. narrowed below historic averages, These are now bearing fruit as assets reaffirming fulsome pricing. From the prior 4-quarter period are being delivered at values well

U.S. property returns moderate

For the past two quarters, Canadian same period a year prior. Similar to property returns have been slightly Canada, technological changes in NCREIF outpacing those in the U.S. This is supply chain logistics have been Property Index a reversal from the stronger U.S. driving industrial returns while returns going back to the third quarter challenges in retail have detracted TOTAL RETURN of 2013. The National Council of from performance with negative Four quarters Real Estate Investment Fiduciaries capital appreciation. Geographically, 7.2% ending 18Q3 (NCREIF) Property Index returned the innovation economies in the 7.2% over the past four quarters, Pacific and Mountain regions continue which was 30 bps higher than the to outperform. Basis-Point Increase: 30 From the prior 4-quarter period

42 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE Toronto industrial just had its best 4-quarter performance ever

Canada, All Asset Total Returns: Q3 2018, 4-Quarter Trailing, % - 8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

SEP-18 JUN-18 MAR-18 DEC-18 SEP-17 JUN-17 MAR-17 DEC-16 SEP-16 JUN-16 MAR-16 DEC-15 SEP-15 Toronto - Industrial 18.9 18.2 17.1 16.3 12.7 10.9 9.7 8.7 8.2 8.4 8.0 8.9 7.3 Toronto - Residential 18.8 17.9 15.6 15.9 11.6 12.3 12.1 11.3 11.4 10.6 11.0 10.6 9.8 Vancouver - Industrial 17.3 15.3 13.5 14.2 11.3 10.6 10.8 10.8 10.7 10.2 10.0 9.4 9.2 Ottawa / Hull - Industrial 12.6 11.5 12.4 9.9 7.5 7.0 6.7 7.0 5.8 6.2 5.6 6.1 6.1 Toronto - Office 11.3 12.1 11.2 10.7 10.4 9.7 9.0 9.3 11.5 14.9 14.5 15.3 11.9 Vancouver - Retail 10.2 10.4 10.4 9.2 13.6 13.0 12.5 12.7 13.4 13.5 12.8 12.9 11.5 Vancouver - Office 10.0 10.6 10.7 10.0 12.8 12.9 14.8 14.8 17.2 16.3 13.7 14.0 8.6 Vancouver - Residential 9.8 10.5 8.8 9.9 12.4 15.2 17.0 14.7 13.9 11.7 10.1 11.1 7.3 Toronto - Retail 9.4 9.2 8.3 8.4 8.7 8.5 8.6 8.2 11.5 11.5 11.8 11.7 7.2 Montreal - Industrial 9.2 8.6 7.2 6.8 5.5 5.3 6.2 6.7 8.7 8.6 8.5 7.7 6.6 Ottawa / Hull - Residential 9.1 8.8 9.3 8.8 6.3 6.2 5.0 5.0 5.3 5.5 6.4 6.5 5.1 Ottawa / Hull - Office 8.9 9.2 9.5 8.9 7.2 5.7 5.4 5.3 6.7 6.4 6.1 6.4 4.5 Montreal - Residential 7.4 5.6 5.5 5.6 6.1 6.8 7.2 7.3 7.3 7.0 7.6 7.7 4.6 Montreal - Retail 6.7 6.8 6.0 6.1 2.3 2.4 2.7 2.6 5.1 5.0 5.1 5.2 4.6 Montreal - Office 6.2 6.4 7.5 7.9 2.2 2.3 2.6 2.8 6.7 6.6 6.3 6.2 2.7 Calgary - Industrial 5.3 4.9 4.4 4.3 2.3 2.2 2.1 1.4 2.9 2.3 2.4 2.7 7.5 Edmonton - Residential 3.6 3.5 3.0 2.9 (1.7) (2.6) (2.8) (3.3) 2.7 4.4 5.5 6.2 6.3 Ottawa / Hull - Retail 3.5 3.1 3.4 3.9 2.7 2.7 2.4 2.3 7.7 8.0 7.3 7.3 4.1 Calgary - Residential 3.4 3.6 2.4 0.9 (4.5) (4.6) (3.7) (2.6) 2.8 3.1 2.9 3.9 7.4 Edmonton - Industrial 3.1 3.7 3.4 3.4 0.5 (0.4) (0.9) (0.8) 1.7 1.5 2.1 2.6 7.8 Edmonton - Retail 2.7 2.3 2.5 3.4 4.4 4.6 4.5 3.4 5.5 5.7 5.9 6.3 7.6 Edmonton - Office 2.3 2.1 0.4 (1.0) (4.8) (3.9) (2.9) (2.2) (0.4) (0.3) (0.7) (0.6) (1.8) Calgary - Retail 1.8 2.0 0.7 0.7 1.6 1.6 2.2 2.1 7.2 7.1 7.2 7.3 9.4 Calgary - Office (2.1) (2.3) (1.8) (2.0) (1.6) (2.9) (5.5) (6.1) (7.0) (6.7) (4.1) (3.1) 4.2

Source: MSCI/REALPAC Canada Quarterly Property Index, Q3 2018, 4-Quarter Trailing Investment volume at record pace

Strong demand for real estate from to sit on the sidelines waiting for both domestic and foreign capital a correction. This phenomenon is CHALLENGE IN sources continue to drive record most acute in the retail sector where CANADA: levels of investment volume. One negative sentiment is reducing challenge in Canada to achieving liquidity. Although retail transaction higher volumes is the shortfall in volume is in line with historic trends, Lack of available institutional quality real it doesn’t reflect the absent bids for estate to satiate demand. There are select retail assets that were softly supply emerging signs that buyer pools are marketed this year. Regardless, of institutional quality real thinning in terms of both breadth and investment volume should remain estate to satiate demand depth on certain offerings. These buoyant in 2019, supported by occurrences are likely a result of an healthy fundamentals and strong “up-in-quality” bias in the maturing investor demand. cycle rather than an outright decision

BENTALL KENNEDY, 2019 CANADA PERSPECTIVE | 43 09. CAPITAL MARKETS

Debt markets remain favourable for borrowers

Canadian conventional The availability of debt remains lending spreads throughout the mortgage spreads over exceptionally strong and real estate year, especially for high-quality risk-free rates: lenders continue to be active, making assets. However, there are signs that for a competitive market. As pricing spreads have hit a resistance level 5-YEAR TERM for assets has increased to record forcing lenders to compete on deal levels, mature cycle de-risking by structure such as loan-to-value (LTV), 145-160 bps equity investors has resulted in a amortization and recourse. The effect Compared with 150-180 bps a year ago greater number of investment dollars for borrowers is that even though shifting up the capital stack to more interest rates have been inching conservative, secure debt positions. higher, the all-in borrowing costs 10-YEAR TERM As a result, there is ample capital have not increased significantly 155-170 bps and liquidity, which has compressed throughout the year. Compared with 170-200 bps a year ago

Source: CMLS, CBRE, Bentall Kennedy

Investment outlook

Solid operating fundamentals, development projects. There are In this environment of renewed strong investor appetite and ample very few signs of over-building and volatility, real asset returns including low-cost debt all suggest a strong thus no imminent threat of supply- commercial property look especially outlook for real estate performance induced dislocation. The year 2019 attractive on a relative basis. But at in 2019. Although economic growth is will be characterized by an “up-in- this juncture, investors would be wise slowing, it remains supportive for real quality” bias as the business cycle to maintain an up-in quality bias, look estate demand, which will continue matures. Prudent deployment of to markets and sectors that are rich in to support property fundamentals capital will increase “flight to quality”. knowledge-based capital, and focus and drive NOI growth. Investors and The result is that transaction volume on operational excellence to boost capital sources remain disciplined is likely to pull back from the record NOI growth to drive performance. in transaction underwriting and, highs we’ve witnessed over the importantly, prudent in evaluating past two years but remain elevated.

44 | BENTALL KENNEDY, 2019 CANADA PERSPECTIVE About the Bentall Bentall Kennedy, a Sun Life Property Investing leader ranked Kennedy Group Investment Management company, among the top firms around the globe is a leading global real estate in the Global Real Estate Sustainability investment advisor and one of North Benchmark (GRESB) for the eighth America’s foremost providers of real consecutive year since GRESB was estate services. Bentall Kennedy launched. serves the interests of more than 545 institutional clients with expertise Bentall Kennedy includes Bentall in office, retail, industrial and multi- Kennedy (Canada) Limited residential assets throughout Canada Partnership, Bentall Kennedy (U.S.) and the U.S. Bentall Kennedy’s Limited Partnership and the real Investment Management group has estate and commercial mortgage approximately $48 billion (CAD)/$36 investment groups of certain of their billion (USD) of assets under affiliates, all of which comprise a management (as of September 30, team of real estate professionals 2018). Bentall Kennedy is one of the spanning multiple legal entities. The largest real estate services providers assets under management shown in Canada, managing more than 60 above include real estate equity million square feet on behalf of third- and mortgage investments of the party and investment management companies within Bentall Kennedy. clients (as of September 30, 2018). For more information, Bentall Kennedy is a member of UN visit www.bentallkennedy.com. PRI and a recognized Responsible

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Phil Stone, Vice President, Head of Canadian Research (416) 681-7955 | [email protected]

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