Research & Forecast Report SOUTHWESTERN ONTARIO APARTMENT INVESTMENT MARKET

2014-2018 SOUTHWESTERN ONTARIO APARTMENT INVESTMENT MARKET SALES

Sales Volume by Geographic Region

Market % St. Thomas-Elgin Chatham-Kent London-Middlesex 31% Huron, Perth, Grey Bruce Windsor-Essex 30% Sarnia-Lambton 10% London-Middlesex Woodstock-Oxford Woodstock-Oxford 9% Huron, Perth, Grey Bruce 9%

Chatham-Kent 8% Sarnia-Lambton St.Thomas-Elgin 3%

*Source: RealTrack and MLS Chatham-Kent Huron, Perth, Grey Bruce Woodstock-Oxford Sarnia-Lambton Windsor-Essex London-Middlesex St. Thomas-Elgin Windsor-Essex

HURON, PERTH, GREY BRUCE

WOODSTOCK-OXFORD

SARNIA-LAMBTON LONDON-MIDDLESEX

ST.THOMAS-ELGIN

CHATHAM-KENT

WINDSOR-ESSEX

Top Sales by volume

2 Research & Forecast Report | 20162018 | Southwestern Ontario Apartments | Colliers International PRICE PER SUITE VS. CAP RATE The average price per suite rose by about 17% in Southwestern Ontario from 2016 to 2017. However, the average capitalization rates have continued to decline year over year since 2014. From 2014 to 2016, rates compressed by about 100 basis points per year and by about 50 basis points in 2017 (v. 2016). The difference between asking cap rates and selling cap rates has also narrowed over the past four years.

SouthwesternSouthweste rOntarion Ontario AApartmentpartment Sa leSaless 2014-20172014 - 2017 $93,000 8.50%

$90,351

8.01% 8.00% $88,000

7.50% 7.53% $83,000 7.08% 7.00% e t a R p a

$78,000 6.50% C 6.66% e g

$73,196 a r e v Average Cap Rate Average

6.01% A

Average Price per Suite 6.00% $73,000

5.74%5.74% 5.45% 5.50% $68,224 $68,000 $67,487 5.18% 5.00%

$63,000 4.50% 2014 2015 2016 2017 Average Price Per Suite $68,224 $67,487 $73,196 $90,351 Average Asking Cap Rate 7.53% 6.66% 5.74% 5.18% Average Selling Cap Rate 8.01% 7.08% 6.01% 5.45%

BUILDING SIZE & CAP RATE Interestingly in 2017, buildings in the 13-20 suite range were the least expensive per suite and had the highest cap rate. BuildingBuilding Size Size vs. vs. Cap RateCap Rate $100,000 8.0% $93,933 $92,585 $90,000 6.88% 7.0%

$80,000 $77,486 6.0% $70,000 5.15% 5.12% 5.0% $60,000

$50,000 4.0%

$40,000 11% 3.0% $30,000 2.0% $20,000 11% 1.0% $10,000

$0 0.0% 5-12 Suites 13-20 Suites > 20 Suites $/Suite Cap Rate

3 Research & Forecast Report | 20162018 | Southwestern Ontario Apartments | Colliers International 2017 AVERAGE PRICE PER SUITE The average price per suite rose year over year in each region excepting Huron Perth Grey Bruce. Notably, Woodstock shows the highest price per suite as well as the highest rental rate per suite for the region.

AverageAverage Price Price per per Suite Suite $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 London Windsor Sarnia Chatham St. Thomas Woodstock Huron, Perth, Grey Bruce

2016 2017

2017 VACANCY AND AVERAGE RENTS According to CMHC, within the City of London the overall vacancy rate decreased in 2017 to 1.8% and the average rent was $952 (up 3%). In Windsor, the overall vacancy rate remained unchanged at 2.4% in 2017 and the average rent was $772 (up 3.2%). While London saw employment growth for young people, and Windsor saw growth of its seniors population; Windsor and London each saw a net migration increase. These factors helped to keep vacancy rates low while increasing average rents.

Average Rents and Vacancy Rates Average Rents and Vacancy Rates $1,200 3.0%

$1,000 2.5%

$800 2.0%

$600 1.5%

$400 1.0%

$200 0.5%

$0 0.0% LondonLondon WindsorWindsor SarniaSarnia Chatham-KentChatham-Kent WoodstockWoodstock Stratford AverageAverage Rent $952$952 $772$772 $923 $735$735 $1,142$1,142 $847 AverageAverage Vacancy Vacancy 1.8%1.8% 2.4%2.4% 2.3% 2.7%2.7% 2.2% 1.8%1.8%

4 Research & Forecast Report | 20162018 | Southwestern Ontario Apartments | Colliers International SOUTHWESTERN ONTARIO NOTABLE TRANSACTIONS 2017

ADDRESS SALE PRICE $/SUITE 1126-1154 Adelaide Street North, London $70,500,000 $126,344

515 FInkle Street, Woodstock $33,265,000 $279,538 340 Colborne Street, London $30,000,000 $227,273

500 Finkle Street, Woodstock $29,747,899 $252,101 325 Lakeview Drive, Woodstock $23,008,845 $223,387

8 Ridout Street $10,350,000 $287,500

*Source: RealTrack and GeoWarehouse

2017 SUMMARY The total sales volume in 2017 for Southwestern Ontario was up from 2016, and while demand continues to remains strong, listings for purpose built apartments remain low. While listings are down, supply appears to remain consistent. Significant demand is still evident as the price per suite continues to rise for this asset class. As the price per suite has been increasing, inversely, capitalization rates have continued to compress. This trend is expected to continue, making rental upside opportunities harder to find. Value added for the buyer is no longer to buy and renovate units, but rather by management and reduction of utility consumption. Importance is also placed on the development potential of an asset and the as of right zoning that exist on a site, especially in urban centres. The trend to redevelop sites or building additional density on excess land is becoming more commonplace and is expected to continue. Both vacancy and capitalization rates remain low and a rise in interest rates may see smaller investors decide to sell. Existing assets are still preferred over new builds due to high construction costs. However, with the lack of product and historical low vacancy rates, there are more and more new purpose built apartment buildings planned and under construction.

IF YOU WOULD LIKE TO DISCUSS THE ACQUISITION OR DISPOSITION OF YOUR MULTI-FAMILY ASSET OR APARTMENT BUILDING, PLEASE CONTACT:

Lisa Lansink Broker [email protected] 1 519 438 4300 ex 205 LISA LANSINK Chris Kirwin Broker of Record [email protected] 1 519 438 4300 ex 201

CHRIS KIRWIN

5 Research & Forecast Report | 20162018 | Southwestern Ontario Apartments | Colliers International SOUTHWESTERN ONTARIO 413 offices in APARTMENT INVESTMENT 69 countries on MARKET CONTACT:

6 continents LISA LANSINK, APARTMENT SPECIALIST United States: 145 Broker Canada: + 1 519 438 4300 x 205 28 [email protected] Latin America: 23 Asia Pacific:39 CHRISTOPHER L. KIRWIN, AACI, SIOR EMEA: 131 President I Broker of Record ANZ: 47 +1 519 438 4300 x 201 [email protected]

Colliers International London, Ontario Brokerage 650 Colborne Street $2.7 London, ON N6A 5A1 billion US* in annual revenue

2.0 billion square feet under management

15,400 professionals and staff

*Based on 2017 results

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