2017 Mid-Year Office Market Report Metro Vancouver, BC metro Vancouver Suburban leasing tightens regional vacancy as vacancy & absorption trends next Downtown development cycle set to launch Vacancy Rate 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% obust suburban demand in the Metro occupancies due to a reduced deal flow noted in RVancouver office market, particularly in the the second half of 2016. This temporary situation 2017F 209,694 8.2% Vancouver-Broadway and Surrey submarkets, will likely conclude by year-end as elevated deal continues to drive a decline in overall vacan- flow in the first half of 2017 will fuel tenant occu- cy with mostly positive absorption recorded pancies downtown in the second half of 2017, Mid-2017 324,320 9.1% throughout the region in the first half of 2017. Of strengthening downtown absorption. Approx- the four Metro Vancouver submarkets that regis- imately 2.2 msf of office space was absorbed in tered negative absorption in the first six months Metro Vancouver in the 24-month period prior 2016 856,868 9.7% of 2017 – Burnaby, Richmond, New Westminster to 2017. and the North Shore – three of the four are Leasing activity in Yaletown, Vancouver-Broad- anticipated to swing to positive absorption and 10% 1,334,604 way and Surrey was responsible for virtually all 2015 contribute to a further decline in regional vacan- absorption recorded regionally in the first half cy by year-end 2017. of 2017. For the urban submarket of Yaletown, 2014 92,870 9.4% Vacancy in Metro Vancouver dropped to 9.1% at which recorded its most first-half absorption mid-year 2017 – the lowest since year-end 2013 since mid-year 2010, vacancy dropped steeply – from 10.4% at mid-year 2016. Positive first-half to 3.9% from 6.8% just six months earlier. The 2013 -158,905 7.8% 2017 absorption of 324,320 sf represented a same can be said for the suburban Vancou- 48% decline from first-half 2016 absorption, ver-Broadway market, which registered the -400, 0 40 80 1, 1, 0, 0, 20 60 000 000 0, 0, but marked the third year in a row that positive most first-half absorption on record and 00 000 000 0 absorption was recorded regionally in the first six where vacancy declined to 7.5% from 10.7% Absorption Rate (sf) months of the year. The year-over-year decline at year-end 2016. Both submarkets, along with Vacancy Absorption was largely the result of minimal absorption Downtown, are expected to see vacancy tight- recorded in Downtown Vancouver in the first six en further by year-end 2017, with absorption months of 2017 as a result of buildings being remaining healthy. 12-month projection based on 10-year average absorption and known net absorption in new inventory removed from inventory, relocations and fewer continued on back page

Metro Vancouver Office Vacancy Summary (mid-year 2017) INVENTORY HEAD LEASE SUBLEASE TOTAL VACANCY 6-MONTH DISTRICT (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) RATE (%) ABSORPTION (SF) Downtown 22,684,775 1,385,708 147,023 1,532,731 6.8% 31,352 Yaletown 2,029,244 74,442 4,777 79,219 3.9% 59,647 Vancouver-Broadway 6,477,349 459,738 23,233 482,971 7.5% 276,474 Burnaby 9,256,790 938,255 297,404 1,235,659 13.3% -81,720 Richmond 4,215,800 373,482 97,083 470,565 11.2% -20,227 Surrey 2,906,607 373,140 5,102 378,242 13% 92,936 New Westminster 1,688,572 292,956 2,358 295,314 17.5% -7,860 North Shore 1,372,098 121,451 13,162 134,613 9.8% -26,282 TOTAL 50,631,235 4,019,172 590,142 4,609,314 9.1% 324,320

Vacancy rate June 30, 2017 9.1% Absorption (demand) Vacancy (supply) Rental Rates Vacancy rate December 31, 2016 9.7%

Partnership. Performance. avisonyoung.com Downtown Downtown vacancy lowest since mid-year 2014

Vacancy trends Oxford Properties is Vacancy slipped to 6.8% at mid-year 2017 scheduled – the lowest vacancy rate recorded to deliver downtown since 2014 – from 7.8% 12 401 West months earlier. Class A vacancy declined Georgia in to 8.4% at mid-year 2017 from 10.5% 12 late 2019. months earlier. Class C vacancy declined by approximately 71,000 sf (or 25%) in that same 12-month period. Class AAA vacancy remained largely unchanged during the past 12 months with only a modest increase to 5% from 4.8%. The removal of 1166 West Pender (150,943 sf) than two-thirds of total sublease vacancy) absorption trends from class B inventory due to the building and marked a significant increase from 12 Absorption of 31,352 sf was the least owner considering a medium- to months earlier. Sublease vacancy amount of first-half positive absorption long-term renovation or redevelopment increased slightly in class AAA and A of the property impacted vacancy. A new properties, while it declined slightly in recorded downtown since Avison office building, FiveTen Seymour, was class C buildings. Overall vacancy has Young started tracking the market added to class A inventory. Downtown continued to decline steadily after in1996. However, absorption in the office sublease vacancy represented 9.6% peaking at 9.8% at mid-year 2015. The first half was impacted significantly by of overall vacancy at mid-year 2017, up market remains reasonably balanced the departure of Canada Revenue significantly from 3.6% at mid-year 2016, although current trends are forecast to Agency to the Vancouver-Broadway but still below historic norms and not a begin to favour landlords. There are very submarket and the subsequent removal significant force in the market. The rise in few large-block opportunities currently of its former office building at 1166 sublease vacancy was primarily located in available. Occupancies during the next 12 West Pender Street from inventory class B premises (which represented more months, including Sophos, QuadReal (which was registered as negative Property Group, WeWork and WSP absorption). Postmedia’s relocation recent lease deals - Mid-Year 2017 (>10,000 sf) Global, will result in vacancy tightening from 200 Granville Street (backfilled by further, particularly in class AAA and A the College of Registered Nurses of tenant BUILDING SF buildings. Strong deal velocity, including a BC) to Broadway Tech Centre also WeWork Bentall 3 77,000 number of new Downtown leases signed contributed to negative absorption. Lawson Lundell LLP (renewal) Cathedral Place 59,000 in the first half of 2017 by new and existing However, these departures did not WSP Global Inc. Robson Court 53,000 tenants to the downtown market, signal a completely offset occupancies in BC Artscape Society 268 Keefer Street 49,000 further decline in vacancy and a boost in the first half, which included Miller Scanline VFX 580 Granville Street 41,700 Downtown absorption is likely to occur in Thomson LLP at 725 Granville Street, the second half of 2017. Bench Accounting in the podium at College of Registered Nurses of BC 200 Granville Street 41,680 Anthem Properties Group Ltd. Bentall 4 33,400 Vacancy with Space Availability Factor (SAF) and Absorption Smythe LLP The Exchange 28,000 14.0% 1,101,041 1,200,000 Spaces Ormidale Block 23,600 12.0% 1,000,000 Hyperwallet Systems Inc. The Exchange 22,500 2.8% 3.8% 800,000 Watson Goepel LLP (renewal) 1075 West Georgia Street 19,800 F 10.0% e A 3.4% 3.4% 2.7% S

9.3% 600,000 a t / Kuehne + Nagel Inc. 900 Howe Street 16,930 3.4% R

e 8.0% n o a t Koffman Kalef LLP (renewal) HSBC Building 16,800 7.5% 400,000 i

R 387,909 t

6.8% p y 6.0% 7.2% 6.8% r Sony Pictures Imageworks TD Tower 16,400 c 5.7% 200,000 o s a n Altus Group Royal Centre 14,700 4.0% b 0 A

V a c 61,216 Archiact (sublease) Royal Centre 14,690 31,352 2.0% -270,560 -200,000 Charlwood Pacific Group (renewal) 1199 West Pender Street 14,400 - -304,835 0.0% -400,000 BrainStation 717 West Pender Street 12,000 2013 2014 2015 2016 Mid-2017 2017F Bazinga Technologies Inc. 1155 West Pender Street 11,600  Vacancy Absorption  SAF* Space Availability Factor Agreement Express Inc. 625 Howe Street 10,800 12-month projection based on 10-year average absorption and known net absorption in new inventory, HUB International Vancouver TD Tower 10,780 and 10-year average SAF.

2 Partnership. Performance Next wave of development preparing to kick off in 2017 Downtown

Telus Garden and Adler University at with Oxford Properties’ 401 West vacancy in The Exchange may temporarily 510 Seymour Street, among others. Only Georgia leading the pack. Others will offset absorption and boost availability at class A buildings registered positive follow in 2020/21. year-end 2017, but overall, the tightening absorption in the first half of 2017. market forecast trend is forecasted to continue into 2018/19. Developers are expected to space availability factor Rates remained stable in the first half of respond to current and projected market 2017, but expect upward pressure on First-half The space availability factor, or SAF, fundamentals with three or more towers rents by year-end 2017, particularly at positive refers to head lease or sublease space constructed on a speculative basis and that is being marketed but is not the higher end of the market. Vacancy Absorption breaking ground by the end of the year. physically vacant, and new supply that in the Downtown office submarket is lowest Virtually all new inventory delivered over is nearing completion and available for forecasted to tighten further as tenants since1996 the last 30 months has been absorbed. lease. SAF increased slightly to 3.4% at continue to expand and new tenants Tenant demand is now refocused on mid-year 2017 from 3.2% 12 months enter the market. Although the delivery earlier. Combined with vacant space, of The Exchange by year-end 2017 will availability in the existing inventory, which the amount of space being marketed provide some relief, supply constraints already remains limited with almost no for lease in the Downtown core is 10.2% will become a factor during the next six new supply slated to be completed until (or approximately 2.3 msf), the lowest to 24 months. This substantial block of 2019 at the earliest. overall availability since year-end 2013 (9.1% or 1.9 msf) and the same as DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION Credit Suisse AG/ The Exchange, 475 Howe Street 252,000 (office) 86,250 34% Q4 2017 recorded at year-end 2014. SwissReal Group Canada Bosa Properties/ The Cardero, 1575 West Georgia Street 44,948 (office) Lease/Strata Lease/Strata Q1 2019 new construction Arpeg Holdings & 620 Cardero Street (mixed use) Reliance Properties/ The Offices at Burrard Place, 146,375 (office tower) 0 0% Q3 2019 The impact of the completion of The Jim Pattison Developments 1280 Burrard Street (mixed use) Reliance Properties/ The Offices at Burrard Place, 90,000 (office podium) Strata 67% sold Q3 2019 Exchange on downtown vacancy Jim Pattison Developments 1281 Hornby Street (mixed use) will be more subdued than initially Oxford Properties 401 West Georgia Street (redevelopment) 147,000 0 0% Q4 2019 forecast after it was announced in the Morguard sixOne, 601 West Hastings Street 227,000 0 0% Q1 2020 first half of 2017 that 110,000 sf would be converted from office to hotel use. Westbank/Allied REIT 400 West Georgia Street and 725 & 731 Homer Street 350,788 0 0% Q1 2020 About two-thirds of the remaining Uptown Property Group 625 West Hastings Street 120,000 0 0% Q1 2021 office space in The Exchange was GWL Realty Advisors Vancouver Centre II, 753 Seymour Street 368,115 0 0% Q2 2021 available for lease as of June 30, 2017. Bentall Kennedy 1090 West Pender Street 530,000 - - Proposed The building’s completion will mark the last delivery from the previous Oxford Properties 1133 Melville Street 495,000 - - Proposed The Post on Georgia, development cycle. Only two other QuadReal Property Group 471,428 (office) - - Proposed 349 West Georgia Street (mixed-use) significant downtown office projects Bosa Developments 320 Granville Street TBD - - Proposed remain under construction: The Aquilini Development and Aquilini Centre East, 69,300 (office) - - Proposed Cardero and The Offices at Burrard Construction 777 Pat Quinn Way Place. While these two developments Low Tide Properties 155 Water Street 69,000 (office) - - Proposed offer a mix of lease and strata office FDG Properties 117-131 Water Street 68,576 (office) - - Proposed space totalling 281,000 sf, 60,000 sf Eight 55 on Granville, Terrma GP I Inc. 29,785 (office) - - Proposed of the strata space being built in The 855 Granville Street (mixed use) 1488 Robson Street 1488 Robson Street 28,730 (office) - - Proposed Offices at Burrard Place has already Holdings Ltd. been presold. The next development Boffo Developments The Smithe, 885 Cambie Street 28,280 (office) - - Proposed cycle, which will likely see at least three Westbank 720 Beatty Street TBD - - Proposed office towers break ground by year-end Cadillac Fairview Waterfront Tower, 555 West Cordova Street TBD - - Proposed 2017, will start to deliver in late 2019

Head Lease Sublease Total Total Vacancy Six Months Net Rental Rate Gross Occupancy CLASS Inventory SAF (sf) SAF (%) Vacancy (sf) Vacancy (sf) Vacancy (sf) (%) absorption (sf) Range (psf) Cost (psf) AAA 4,728,576 209,504 24,726 234,230 5% -13,502 110,361 2.3% $28 - $46 $48 - $71 A 8,103,253 658,925 19,053 677,978 8.4% 184,013 342,404 4.2% $22 - $40 $40 - $64 B 6,714,262 308,416 99,966 408,382 6.1% -117,927 166,613 2.5% $18 - $34 $35 - $56 C 3,138,684 208,863 3,278 212,141 6.8% -21,232 144,180 4.6% $14 - $25 $26 - $41 Total 22,684,775 1,385,708 147,023 1,532,731 6.8% 31,352 763,558 3.4% - - avisonyoung.com 3 downtown development timeline AN ICONIC

OffICe The Offices aT Burrard Place The exchange The Cardero,1575 w. georgia The Offices at Burrard Place The offices at Burrard Place are a funcTiOnal sculPTure 401 West Georgiaand The Street cOrnersTOne Of 475 howe street street & 620 cardero street 1280TOW Burrard StreeteR 1281 Hornby Street a full ciTy BlOck Of new 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.

Q4 2017 Q1 2019 q3 2019 Q3 2019 Q4 2019

Developer Bosa Properties/ Reliance Properties/ Reliance Properties/ Credit Suisse / SwissReal Group Oxford Properties Arpeg Holdings Jim Pattison Developments Jim Pattison Developments Storeys 31 3 floors in mixed-use building5 13 7-storey podium (3 floors) 9 office sf 252,000 44,948 (lease/strata) 146,375 (office tower) 90,000 (strata) 147,000 tenants 35,750 sf - National Bank of Canada 3,000 sf - Arpeg Holdings No tenants at this time Sold (phase 1 - 60,000 sf) No confirmed tenants at this time 28,000 sf - Smythe LLP Not released (phase 2 - 30,000 sf) 22,500 sf - Hyperwallet Systems 4,250 sf - Serracan Properties Occupancy 34% 7% 0% 67% 0% proposed downtown developments 320 Granville Street Waterfront Tower, 117-131 Water Street 1090 West Pender Street Aquilini Centre East, Developed by 555 West Cordova Street Developed by Developed by 777 Pat Quinn way Bosa Developments Developed by FDG Properties Bentall Kennedy Developed by Aquilini Storeys / Office area Cadillac Fairview Storeys / Office area Storeys / Office area Development & construction TBD Storeys / Office area 7 / 68,576 sf 31 / 415,920 sf Floors / Office area TBD 9 / 69,300 sf

This development site was The Urban Design Panel A seven-storey, mixed-use UDP supported the design This proposed mixed-use formerly owned by Carrera (UDP) did not support the commercial/residential in February 2014. A public residential/office tower Management. Bosa Develop- original building design building has been proposed hearing related to its rezon- will be the third and final ments, which acquired the in 2015. The architect on this site that would retain ing application was set for building to form the Aq- site in early 2016, introduced subsequently presented three existing heritage build- February 24, 2015, and the uilini Centre development its own design for the site in nine alternative concepts ings. The development per- application was approved anchored by Rogers Arena. December 2016. Construction in a UDP workshop in June mit application is “condition- by the City. As of June 30, This building was originally timing is not known but the 2015, which received a al” so it may be permitted, 2017, the developer was scheduled for completion project’s development permit “warmer reception.” A public but it requires the decision of continuing to work through by the end of 2018, but the application was approved on engagement session was the director of planning. The development permit appli- timing of construction has April 3, 2017. The DP appli- held in December 2015. A building will feature 68,576 cation requirements. been delayed due to the cation no longer appears on revised design has not yet sf of office space on floors 2, forthcoming removal of the the City of Vancouver website been submitted and work 3 and 4 and residential units Georgia and Dunsmuir via- and Bosa Developments continues on the building on 5, 6 and 7. The ground ducts. The east tower as pro- remains tight lipped about but a design consensus has floor would feature retail and posed was to feature 69,300 its plans. yet to been reached with restaurant uses. sf of office space on floors 5 the City. An update is antici- thru 13 with residential units pated in Q3 2017. on the upper floors.

4 Partnership. Performance Sixone, Vancouver Centre II, 400 West Georgia Street 625 West Hastings Street 601 West Hastings Street 753 Seymour Street

Q1 2020 Q1 2020 Q1 2021 Q2 2021

Developer Morguard Westbank/Allied REIT Uptown Property Group GWL Realty Advisors Storeys 25 24 28 33 office sf 227,000 350,788 120,000 368,115 tenants No tenants at this time No tenants at this time No tenants at this time No tenants at this time Not released (phase 2 - 30,000 sf)

Occupancy 0% 0% 0% 0%

1133 Melville Street The Post on Georgia, The Smithe, 155 Water Street Eight 55 on Granville, Developed by 349 West Georgia Street 885 Cambie Street Developed by 855 Granville Street Oxford Properties Developed by Developed by Low Tide Properties Developed by Storeys / Office area QuadReal Property Group Boffo Developments Storeys / Office area Terrma gp I inc. 34 / 495,000 SF Storeys / Office area Storeys / Office area 7 / 69,000 sf Storeys / Office area 19 / 471,428 sf 3 / 28,200 sf 3 / 29,780 sf

Rezoning application was A public open house was The rezoning application The development was A development permit filed on July 8, 2015. The held in November 2016 for current design was filed supported by the UDP on application was filed to application went before as part of the rezoning May 5, 2015. A community August 12, 2015 and the provide interior and exterior the UDP during the week application process, which open house was held June rezoning application was alterations and a change of of October 19, 2015. The was originally submitted to 15, 2015 and the rezoning subsequently approved use of the existing movie UDP did not support the the City in June 2016. The application was approved by directly by the director of theatre to include 27,011 sf initial building design as office component of the council at public hearing on planning with numerous of retail in the basement/ proposed, but subsequently mixed-use development January 19, 2016. The project significant conditions. Those ground floor and 29,780 sf supported a new design at will be in podium and tower went before the UDP on conditions were addressed of office space on the 2nd a May 31, 2017 UDP review forms. The proposed19-sto- August 10, 2016 as part of its and the project received and 3rd floors. The devel- meeting. Oxford Properties rey office tower includes development permit appli- its development permit in opment permit application is currently updating its 381,428 sf of office space cation and was supported. spring 2017 and was await- was approved by the city 2015 rezoning application, with another 90,000 sf in the The application has received ing its building permit. There with conditions on January but as of June 21, 2017, podium. A revised rezoning approval-in-principle and is currently no time frame 27, 2017. A building permit had not resubmitted that application was filed in May Boffo is working through the for construction to start and was applied for in July 2017 updated application to the 2017 that reduced overall outstanding conditions be- would only proceed with with construction slated to city. New renderings were density & building massing fore a permit can be issued. a “meaningful amount of start in the third quarter of released in June 2017. and slimmed tower design. preleasing” in place. 2017. avisonyoung.com 5 Vancouver-Broadway Vacancy rapidly declining as absorption rises

Vacancy and Absorption (overall) absorption trends

12.0% 450,000 Overall first-half absorption of 276,474 sf 410,466 400,000 marked the most absorption recorded in 10.7% the first half of the year in the Vancou- 10.0% 350,000 ver-Broadway submarket since Avison 276,474 300,000 Young started tracking the market in e

e 8.0% First-Half 250,000

a t 1996. Absorption of 82,636 sf in the Van- a t R

R

7.5% n absorption couver-Broadway Core was primarily re- y 200,000 o i c 6.0% t p corded in Mount Pleasant, while positive

a n of 276,474 sf 150,000 r o

5.6% s most recorded absorption of 193,838 sf in the Periphery V a c 5.1% b

100,000 A 4.0% 4.6% 4.5% since 1996 was largely registered at Marine Gateway 15,187 50,000 and Broadway Tech Centre. Columbia 58,060 College’s occupancy at Vantech Centre 2.0% - 0 at 333 Terminal Avenue largely offset the -16,768 -50,000 -38,637 relocation of Rocky Mountaineer. 0.0% -100,000 2013 2014 2015 2016 Mid-2017 2017F new construction Vacancy Absorption BlueSky Properties’ Broadway Com- 12-month projection based on 10-year average absorption and known net absorption in new inventory mercial development is scheduled for The Vancouver-Broadway submarket has Columbia College and smaller tenants completion by the end of 2017. The project is mostly leased to a single tenant. PC historically encompassed the office space at 333 Terminal Avenue also contributed Urban Properties’ Lightworks Building, located along the Broadway corridor to the decline in Periphery vacancy as slated for completion in early 2018, is as well as smaller ancillary office nodes did Westport’s expansion at 1750 West primarily leased to a single tenant. What scattered throughout Vancouver. As office 75th Avenue. Occupancy at Marine was planned to be office space in Rize development has spread throughout Gateway by Intel and Townline Group Alliance’s The Independent at Main Vancouver and the Broadway corridor reduced vacancy even further. The will now mostly be used to accommodate assumed greater importance, the submar- sublease space that had been formerly a 30,000-sf grocery store and is estimated ket’s statistics were increasingly skewed by offered by Westport in Marine Gateway to be completed in the first quarter of development in East and South Vancouver. has reverted to head lease availability. 2018. Construction continues on PCI In an effort to address these diverging sub- All of these occupancies helped offset Group’s project at 565 Great Northern markets, Avison Young began separating Rocky Mountaineer’s relocation to Way and Rendition Developments’ Vancouver-Broadway into two submarkets downtown and the removal of Arbutus development at 204 West 6th Avenue, – the Core and Periphery – in 2017. While Village from inventory due to the prop- which has been acquired in a forward sale the core will focus on office space located erty’s redevelopment. The occupancy of by MDC Property Services. Both are along the traditional Broadway corridor, Renfrew Centre by the BC Safety Au- scheduled for completion in the second the periphery will include office space thority and Associated Engineering quarter of 2018. Chard Development’s strata office project, 34|W7, is 75% sold, located throughout the rest of Vancouver. in the second half of 2017 along with the City of Vancouver occupying a floor in while PC Urban Properties’ development Vacancy trends Marine Gateway will further reduce over- at 275 West 5th Avenue has been largely preleased and is scheduled for completion Overall vacancy fell to 7.5% at mid-year all vacancy, in the Periphery specifically, by year-end 2018. Porte Commercial 2017 from 10.5% a year earlier as tenants by year-end 2017. While vacancy in the recently launched a new four-storey, started to occupy the wave of new Core increased slightly at mid-year 2017 construction delivered in 2016 as well from year-end 2016, vacancy is likely to recent lease deals - Mid-Year 2017 as more traditional office space in both remain tight with limited availability in Core and Periphery submarkets. Vacancy the new developments being delivered tenant BUILDING SF in the Core rose slightly to 2.4% (up from in the next 12 months. In the first half BC Emergency Health Services 2920 Virtual Way 49,500 1.7% at year-end 2016) whereas vacancy of 2017, DHX Media occupied the in the Periphery plunged to13.8% at entirety of the Fifth at 380 West 5th SEGA Games Co. Ltd. 275 West 5th Avenue 48,000 mid-year 2017 from 21.2% six months Avenue, while Creative BC and Native Saje Natural Wellness 22 East 5th Avenue 46,800 ago. Vacancy in the Periphery tightened Canada Footwear occupied the Mirror Atomic Cartoons 123 West 7th Avenue 35,000 as a result of Postmedia relocating at 7 West 6th Avenue, both in Mount Rainmaker Entertainment (renewal) 2025 West Broadway 22,910 from downtown to Broadway Tech Pleasant. Vacancy remains low and new City of Vancouver Marine Gateway 21,590 Centre (BTC) and HSBC expanding inventory has been absorbed quickly AbCellera Biologics Inc. 2215 Yukon Street 21,000 its footprint at BTC after shuttering its since mid-year 2016, particularly along Burnaby operations. The occupancies of the tight core Broadway corridor. NetApp VTC Inc. (renewal) 2608 Granville Street 7,700

6 Partnership. Performance REZONING SUBMISSION | 339 E 1st Ave,Almost Vancouver, BC 1.4 msf of new construction proposed Vancouver-broadway

East Perspective

Mount Pleasant Employment Area (I-1 Zoning) Tightening vacancy (3.7% at mid-year 2017) Lease rates in existing buildings are achieving high and rising lease rates remain the story in Mount $20s to low $30s psf, while new buildings are com- Pleasant – the most in-demand emerging office manding low $30s to high $30s psf. With potential- node for tech firms in Metro Vancouver. Despite ly more than 1 msf of new office space proposed significant new supply being delivered in the next or contemplated during the next 36 months, the 18 months, most is already preleased or presold. As submarket will remain dynamic as the parade of Reliance Properties/Porte communities is proposing a 144,216- the building inventory in Mount Pleasant expands, new product further densifies the area, which will 36 sf 6-storey office/retail building on East 1st Avenue. vacancy will stabilize or tighten further as many soon rival Yaletown and surpass the New Westmin- 34,308-sf office/showroom/flex indus- new projects are preleased prior to completion. ster and North Shore submarkets in terms of size. trial project, The George, in Strathcona that is estimated to be complete by the DEVELOPER BUILDING SF PRELEASE % COMPLETION end of 2018. New office development in Vancouver-Broadway continues to flourish BlueSky Properties Broadway Commercial, 988 West Broadway 94,120 80% Q4 2017 with projects proposed in both the core PC Urban Properties The Lightworks Building, 22 East 5th Avenue 53,200 (office/light industrial) 95% Q1 2018 and periphery from well-known developers Rize Alliance The Independent at Main, 288 East Broadway 17,000 (office) 0% Q1 2018 Rendition Developments / such as QuadReal Property Group, Onni 204 West 6th Avenue 27,800 (office/light industrial) 0% Q2 2018 Group, Westbank, PCI Group, Reliance MDC Property Services Properties and Conwest along with PCI Group 565 Great Northern Way 170,000 56% Q2 2018 Strata: Chard Development 34 | W7, 34 West 7th Avenue 54,347 (office/light industrial) Q3 2018 smaller developers such as the CRS Group, 75% sold Vivagrand Development, Champion PC Urban Properties 275 West 5th Avenue 70,915 (office/light industrial) 68% Q4 2018 Development, Vanlux Development Porte Commercial The George, 1157 Parker Street 34,308 (office/light industrial) 0% Q4 2018 and Pacific Crown Management. QuadReal Property Group Broadway Tech Centre, 3030 East Broadway (five buildings) 962,300 0% Proposed

market forecast Onni Group Voxel, 399 East 1st Avenue 80,000 0% Proposed

Rental rates are likely to remain stable in Vanlux Development 521-525 West 8th Avenue 61,650 (office) 0% Proposed

all classes in 2017, but ongoing limited Champion Development Group 151 West 5th Avenue 54,290 (office/light industrial) 0% Proposed availability will begin to exert upward pres- Conwest Group of Companies 35-43 West 6th Avenue 52,000 (office/light industrial) 0% Proposed sure on rates in 2018 as tenants relocate or renew. Deal velocity has slowed consid- Pacific Crown Management Ltd. 510 West Broadway 43,425 (office) 0% Proposed Reliance Properties/ 339 East 1st Avenue 144,216 0% Proposed erably due to a lack of available space, Porte Communities particularly in the Core. This has served to Vivagrand Development Corp. 5812-5888 Cambie Street 21,657 (office) 0% Proposed keep rate increases limited as fewer deals are being completed. However, overall Head Lease Sublease Total Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory vacancy will continue to tighten, partic- Vacancy (sf) Vacancy (sf) Vacancy (sf) Vacancy (%) absorption (sf) Range (psf) Cost (psf) ularly in the Periphery, as Renfrew Centre A 1,996,863 28,971 7,182 36,153 1.8% 97,525 $25 - $32 $42 - $50

is occupied. Overall vacancy is forecast to o re

C B 1,190,893 49,332 2,105 51,437 4.3% -14,889 $18 - $25 $31 - $41 tighten considerably by year-end 2017. C 417,140 0 0 0 0.0% 0 $15 - $19 $28 - $33 The majority of new space being deliv- Total 3,604,896 78,303 9,287 87,590 2.4% 82,636 - - ered in Vancouver-Broadway during the next 12 to 18 months (much of it located Head Lease Sublease Total Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory within Mount Pleasant) is already preleased, Vacancy (sf) Vacancy (sf) Vacancy (sf) Vacancy (%) absorption (sf) Range (psf) Cost (psf) which will further hamper leasing activity A 2,181,158 344,527 13,946 358,473 16.4% 162,271 $24 - $32 $39 - $50 as tenants have limited options. It is highly B 625,797 34,980 0 34,980 5.6% 20,830 $18 - $23 $31 - $38 likely that new developments along the Peri p hery C 65,498 1,928 0 1,928 2.9% 10,737 $15 - $19 $28 - $33 Broadway corridor and in the Periphery will be announced before year’s end. Total 2,872,453 381,435 13,946 395,381 13.8% 193,838 - -

Head Lease Vacancy Sublease Vacancy Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory Total Vacancy (%) (sf) (sf) Vacancy (sf) absorption (sf) Range (psf) Cost (psf) A 4,178,021 373,498 21,128 394,626 9.4% 259,796 $24 - $32 $39 - $50 B 1,816,690 84,312 2,105 86,417 4.8% 5,941 $18 - $23 $31- $41 Overall C 482,638 1,928 0 1,928 0.4% 10,737 $15 - $19 $28 - $33 Total 6,477,349 459,738 23,333 482,971 7.5% 276,474 - -

avisonyoung.com 7 Yaletown Strong leasing activity sends vacancy tumbling

Vacancy and Absorption

14.0% 60,000

47,833 50,000 12.0% 4.9% 40,000

23,928 30,000 ) f 10.0% 19,732 F s (

A e

S 20,000 6.9% /

a t

e 8.0% R 10,000

3.8% 1,333 n a t o i R 3% t y 6.8% 0 p c 6.0% 2.4% r o a n -10,000 2.3% s -20,091 b A V a c 4.0% -20,000 4% 3.9% 3.1% 4.1% 3% -30,000 2.0% -40,000 -41,953 0.0% -50,000 2013 2014 2015 2016 Mid-2017 2017F Visier new construction  Vacancy Absorption  SAF* Space Availability Factor Workforce Analytics has No new construction is currently planned. 12-month projection based on 10-year average absorption and 10-year average SAF leased the market forecast record lows. There is virtually no sub- balance of 858 Vacancy trends Rental rates are trending upwards in all lease space available in the submarket. Beatty Street. Vacancy dropped to 3.9% at mid-year building classes in Yaletown as vacancy 2017, down from 6% a year earlier and absorption trends tightens with no new supply under the lowest vacancy recorded since construction (or proposed) in the pop- Positive absorption was recorded in the year-end 2014. The main reasons for the ular submarket. This trend will continue first half of the year for the first time since decline in vacancy was SAP occupy- through 2017 as landlords continue to mid-2013 as Yaletown businesses occupied ing 53,000 sf at 910 Mainland and 990 benefit from a resurgence in leasing 59,647 sf in the first six months of 2017, the Homer, as well as several other smaller activity after vacancy spiked at mid-year most since mid-year 2010. Strong leasing tenants such as Klei Entertainment 2014 and had remained elevated as ten- activity in the submarket since mid-2016 and Conconi Holdings moving into ants relocated to other submarkets such has exerted downward pressure on avail- their new premises. Demand from the as Downtown, Mount Pleasant and Gas- abilities in all property classes and limited tech sector, in particular, has pushed town/Railtown. With no obvious large lease options. Absorption will very likely re- vacancy lower in the submarket. Visier blocks of space coming available besides main positive in 2017 with several tenants Workforce Analytics, currently located 30,000 sf at 780 Beatty Street, vacancy set to occupy in the second half of 2017. in the Vancouver-Broadway submarket, is expected to remain low with tenants leased more than 39,000 sf at 858 Be- space availability factor looking to locate in Yaletown having to atty Street. With Stellar Creative Lab contend with very limited options in all The space availability factor (SAF) refers leasing 17,400 sf at 1128 Homer Street, sizes and building classes. to head lease and/or sublease space that one of the last remaining large blocks is being marketed, but is not physically recent lease deals - Mid-Year 2017 of space that had been available, for vacant. The SAF plunged to 2.4% (47,833 occupancy in the second half of 2017, tenant BUILDING SF sf) at mid-year 2017 from 6.1% (124,508 and Kokko Luxury Boutique opening Visier Workforce Analytics 858 Beatty Street 39,110 in third-quarter 2017 after leasing sf) at mid-year 2016 (which had been Stellar Creative Lab 1128 Homer Street 17,400 21,000 sf in 948 Homer Street, vacancy the most SAF since year-end 2014 when will continue to tighten in this landlord’s the indicator reached a record high of EF Language School 750 Cambie Street 13,280 6.9% (139,110 sf)). Hence the amount of market. There are very limited options Tuangru (sublease) 1110 Hamilton Street 5,500 available or coming available in the near available space currently being marketed Grosvenor Americas 1050 Homer Street 3,980 future for mid- to large-sized blocks of (occupied and vacant) in Yaletown is 6.3% space as vacancy approaches or approximately 127,000 sf. Globalme Localization Inc. 1008 Homer Street 3,900

Head Lease Sublease Total Total Vacancy Six Months Net Rental Rate Gross Occupancy CLASS Inventory SAF (sf) SAF (%) Vacancy (sf) Vacancy (sf) Vacancy (sf) (%) absorption (sf) Range (psf) Cost (psf) A 576,938 19,061 0 19,061 3.3% 308 0 0.0% $28 - $33 $46 - $52 B 998,357 38,201 4,777 42,978 4.3% 42,795 17,506 1.8% $25 - $28 $42 - $44 C 453,949 17,180 0 17,180 3.8% 16,544 30,327 6.7% $20 - $25 $35 - $40 Total 2,029,244 74,442 4,777 79,219 3.9% 59,647 47,833 2.4% - -

8 Partnership. Performance Vacancy forecast to tighten despite elevated sublease availability Burnaby

Vacancy and Absorption Market Forecast

14.0% 300,000 Rental rates will remain stable in 2017 246,115 13.3% 250,000 as landlords continue to induce tenants 12.0% 12.6% 12.9% 12.5% to complete a new deal or renew. Large 200,000 10.0% blocks of space are leasing up at a faster 10.4% e 150,000 e a t pace than smaller pockets, where numer- R

a t 9.1% n R

8.0% sublease 100,000 o i y ous options remain. Vacancy will decline by t c p r a n 34,390 space 6.0% 29,888 50,000 o year-end 2017 with absorption recorded in s b V a c

A to remain 32,637 0 3777 Kingsway and Willingdon Park. Metro 4.0% a factor Vancouver’s relocation to Metrotower III -50,000 beyond and the likely redevelopment of its former 2.0% -81,720 -100,000 head office will reduce vacancy and boost -114,783 0.0% -150,000 2017 absorption by year-end. Sublease space will 2013 2014 2015 2016 Mid-2017 2017F remain a factor impacting rates, absorption Vacancy Absorption and vacancy as additional floors in 3777 12-month projection based on 10-year average absorption and known net absorption in new inventory Kingsway are released slowly over time. Vacancy trends has been occupied. While Capcom relo- cated to Solo District from Willingdon Park, recent lease deals - Mid-Year 2017 Vacancy dropped to 13.3% at mid-year Huawei Technologies and the Sher- 2017 from 14.6% a year earlier due primar- win-William Company all leased space tenant BUILDING SF ily to tenants occupying Solo District; in the park and will occupy in the second Grantham Holdings Ltd. 2700 Production Way 36,025 however, the departure of HSBC, which half. H.Y. Louie will occupy in 2018. vacated more than 146,000 sf at 3383 Kinder Morgan (sublease) 3777 Kingsway 35,880 Gilmore Way, offset further tightening. New Construction Binnie Consulting Ltd. 4940 Canada Way 27,800 Deal velocity in the first half was limited Anthem Properties’ mixed-use Station H.Y. Louie Co. Ltd. 4401 Still Creek Drive 25,000 by the sluggish lease-up of small pockets Square will feature 52,800 sf of office space SCM Insurance Services 8333 Eastlake Drive 20,740 of vacancy despite larger blocks of space on two floors in the project’s podium. One being backfilled. While more than 61,000 floor has been sold in Cressey Develop- RDH Building Science Inc. 4333 Still Creek Drive 20,500 sf of vacant sublease space was leased at ments’ eight-storey, 70,430-sf strata office Ventana Construction (renewal) 3875 Henning Drive 20,250 3777 Kingsway and will be occupied in the project, Kings Crossing. Onni Group Raymond James Ltd. (sublease) 3777 Kingsway 17,865 second half of 2017 by Kinder Morgan, continues to work on its phased mixed-use MaxLinear 4370 Still Creek Drive 14,000 Raymond James and Optimum West project, Gilmore Place, which will feature Insurance, more than 132,000 sf of 340,000 sf of office space when complete. Wondershare 4445 Lougheed Highway 13,000 sublease space is being marketed at 3777 Onni Group is also proposing an 11-storey Traction on Demand (expansion) 8555 Baxter Place 10,000 Kingsway as available (with 74,753 sf of mixed-use building at 3355 North Road. Huawei Technologies Co. Ltd. 4321 Still Creek Drive 10,000 that available but occupied). FortisBC is Plans call for a three-storey retail/office also offering a significant block of space podium and eight floors of office space to Optimum West Insurance (sublease) 3777 Kingsway 8,200 for sublease in Willingdon Park. Despite break ground by year-end 2018. The Sherwin-Williams Company 4370 Still Creek Drive 7,275 a decline in vacancy and limited options on rapid transit, Burnaby remains a tenant’s DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION market with a range of options available. Anthem Properties Station Square, 6060 Silver Avenue 52,804 (office) 0 0% Q3 2018

absorption trends Cressey Development Group Kings Crossing, 7350 Edmonds Street 70,430 (office) Lease/Strata 15% sold Q2 2019 Awaiting Negative absorption of -81,720 sf in the Kingswood Capital Discovery Place Business Park, 3555 Gilmore Way 50,000 0 0% first half of 2017 was largely the result of prelease HSBC vacating the submarket, tenants Belford Properties The Centre at Sun Towers, 4458 Beresford Street 70,000 (office) Strata Strata Proposed relocating from Willingdon Park, and three Shape Properties The Amazing Brentwood (redevelopment) 500,000 (office) 0 0% Proposed more vacant floors being released for 340,000 (office - Onni Group Gilmore Place, Gilmore Avenue & Lougheed Highway 0 0% Proposed sublease at 3777 Kingsway. Much of the second phase) backfill space created in Willingdon Park Onni Group 3355 North Road 161,239 (office) 0 0% Proposed

Head Lease Vacancy Sublease Vacancy Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory Total Vacancy (%) (sf) (sf) Vacancy (sf) absorption (sf) Range (psf) Cost (psf) A 6,306,081 674,354 295,204 969,558 15.4% -55,301 $17 - $27 $33 - $43 B 2,081,671 195,746 2,200 197,946 9.5% -40,554 $14 - $18 $26 - $30 C 869,038 68,155 0 68,155 7.8% 14,135 $12 - $18 $22 - $28 Total 9,256,790 938,255 297,404 1,235,659 13.3% -81,720 - - avisonyoung.com 9 Richmond New development looms as recovery officially ends

Vacancy and Absorption office tower will include 63,475 sf of office space and ground-floor retail. The 18.0% 186,883 200,000 rezoning application for New Continen- 167,121 16.0% tal Properties’ mixed-use project was 15.4% 15.2% expected to be referred to public hear- 14.0% 150,000 ing in July 2017 and calls for a 50,483-sf ) f e 12.0% s t office tower. Completion dates for the ( 12% Vacancy n R a

100,000

11.2% i o y 10.0% three projects are not known.

10.7% t c

n 9.9%

r p Rises a o c market forecast

8.0% s a for first V 50,000 54,082 A b 6.0% time in Ongoing availabilities within Crestwood Corporate Centre and Airport Executive 4.0% 25,870 7,545 0 6 years Park are expected to help keep rental 2.0% rates stable over the next six months. -20,227 0.0% -50,000 Loyaleaf Financial and CBE LLP are 2013 2014 2015 2016 Mid-2017 2017F scheduled to occupy their new premises Vacancy Absorption in the second half of 2017 and vacancy 12-month projection based on 10-year average absorption and known net absorption in new inventory will likely tighten slightly as a result. The Vacancy trends new construction Richmond submarket continues to offer tenants expansion space and multiple Vacancy in Richmond’s office market With no new construction of buildings options for businesses considering rose to 11.2% at mid-year 2017 from 11% for lease since 2008, developers are relocating. Lease rates remain among the 12 months earlier – the first increase positioning themselves to be the first lowest in Metro Vancouver. in vacancy in more than six years. The to break ground. Yuanheng Hold- anticipated relocations of Tetra Tech and ings’ three-phase mixed-use ViewStar recent lease deals - Mid-Year 2017 Procurify from Airport Executive Park development will include a 12-storey, tenant BUILDING SF offset expansions and new leases that 205,141-sf office tower in its second Vancouver Coastal Health (expansion) 7671 Alderbridge Way 26,120 would otherwise have contributed to phase. The earliest occupancy date is late vacancy tightening had the two firms not 2020. iFortune Homes’ rezoning appli- PressReader (expansion & renewal) 13111 Vanier Place 25,000 departed. Deal velocity increased slightly cation for its 105,422-sf, 11-storey office Loyaleaf Financial Services Crestwood Corporate #5 17,815 from the fourth quarter of 2016 and is tower has received its third reading and Developmental Disabilities Association expected to remain steady throughout 3851 Shell Road 13,555 its development permit application has (renewal) 2017. A large sublease availability at been submitted. Bene (No. 3) Road De- USANA Health Sciences (expansion 3600 Lysander offered to the market 13353 Commerce Parkway 10,400 velopment Ltd.’s rezoning application is & renewal) by Syscon Justice Systems also being reviewed. Its development permit contributed to the increase in vacancy. A Cohen Buchan Edwards LLP Crestwood Corporate #8 7,760 application will start being processed few large blocks of space remain available Sedgwick CMS Canada Inc. Airport Executive Park #10 3,000 after a public hearing. The nine-storey within both Crestwood Corporate Centre and Airport Executive Park. DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION absorption trends ViewStar, 3031-3351 No. 3 Road, 8151 Capstan 205,141 (office - Yuanheng Holdings 0 0% Q4 2020 Way & 8051/8100 River Road second phase) Negative absorption of -20,227 sf in the 8320, 8340 & 8440 Bridgeport Way and 8311 & 8351 New Continental Properties 50,483 0 0% Proposed first half of 2017 was the first time since Sea Island Way mid-year 2014 that negative absorption Bene (No. 3) Development Ltd. 4700 No. 3 Road 63,475 (office) 0 0% Proposed was recorded in the first six months of iFortune Center, 6840 & 6860 No. 3 Road and 8051 iFortune Homes Inc. 105,422 0 0% Proposed the year. The departure of Tetra Tech and Anderson Road International Trade Centre at Versante, Under Procurify, which both relocated to Down- MYIE Development 100,000 (office) Strata NA 8451 Bridgeport Road construction town Vancouver, vacated approximately Vanprop Investments Lansdowne Centre (redevelopment) TBD 0 0% Proposed 56,900 sf in Airport Executive Park. Head Lease Vacancy Sublease Vacancy Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory Total Vacancy (%) (sf) (sf) Vacancy (sf) absorption (sf) Range (psf) Cost (psf) A 2,895,256 282,693 75,549 358,242 12.4% -5,357 $16 - $18 $27 - $29 B 972,346 62,581 20,397 82,978 8.5% -16,270 $14.50 - $15.50 $26.50 - $27.50 C 348,198 28,208 1,137 29,345 8.4% 1,400 $9.50 - $11.50 $21.50 - $23.50 Total 4,215,800 373,482 97,083 470,565 11.2% -20,227 - -

10 Partnership. Performance Market conditions improving as vacancy tightens surrey

Vacancy and Absorption Gateway Place was delivered 25.0% 300,000 237,051 to the market 250,000 fully leased. 22.1% 20.0% 200,000 ) f e 150,000 s t 17.5% 92,936

17.3% (

n

R a 15.0% 100,000

15% i o y t c 14,475 24,269 50,000 n 13% r p a o c 36,751 10.0% 0 s a 10.5% V -50,000 A b 30% of which is preleased prior to its 5.0% -100,000 scheduled completion in the last quarter -150,000 of 2018. The long-proposed GTC Profes- -137,809 0.0% -200,000 sional Building, a five-storey, 100,550-sf 2013 2014 2015 2016 Mid-2017 2017F office building, will now apparently proceed on spec when it breaks ground Vacancy Absorption in the second quarter of 2018. 12-month projection based on 10-year average absorption and known net absorption in new inventory market forecast Central Business Park by a range of Vacancy trends Rental rates have remained flat, but with tenants. Leasing activity also occurred Vacancy slipped to 13% at mid-year vacancy in decline since 2015, land- at the former Coast Capital Savings 2017, its lowest point since year-end lords are looking to push rates. Upward Building where S.U.C.C.E.S.S. occu- 2012 and down from 17.5% just 12 pressure on rates is expected in the next pied 9,817 sf, and at the former RCMP months earlier. Deal velocity has been six to 12 months as landlords grow more headquarters, where Pattison Sign rising as improved market activity bullish. Absorption is anticipated to Group (3,400 sf) and DMC LLP (2,500 and an increase in tours resulted in remain positive in 2017 and vacancy will sf) took occupancy. leases being completed. TransLink likely decline further by year-end as deal reoccupied space that it had listed new construction activity remains healthy and the market for sublease in Station Tower, while continues to improve. Lark Group’s City Centre 2 is under McQuarrie Hunter occupied its new construction and set for completion in recent lease deals - Mid-Year 2017 premises in Central City. Several early 2018. The 12-storey strata office/ small- to mid-sized occupancies tenant BUILDING SF retail building is 75% occupied with combined to exert further downward Undisclosed tenant Gateway Place 50,000 100% of the office space sold. Some pressure on vacancy. With the market retail space remains available. The Metis Family Services Surrey Central Business Park 15,020 tightening, there are limited large-block Professional Centre @ South Point is opportunities, although several options Stenberg College International 10060 King George Highway 11,005 to break ground in the third quarter of remain for small- to mid-sized tenants. ParaMed Surrey Central Business Park 9,570 2017. The four-storey mixed-use building absorption trends contains almost 72,000 sf of office space, McQuarrie Hunter LLP Central City 7,640 First-half absorption of 92,936 sf repre- sented the third consecutive occurrence DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION of positive absorption during the first six Century Group 3 Civic Plaza 50,000 (office) Strata 100% Sold Q4 2017 months of the year in Surrey. TransLink Lark Group City Centre 2, 9639 137A Street 172,000 (office) Strata 100% Sold Q1 2018 re-occupied much of the space it had Avondale Development / Monark The Professional Centre @ South Point, 71,780 21,534 30% Q4 2018 previously listed for sublease in Station Group 3231 152nd Street Awaiting Tower, while McQuarrie Hunter absorbed Landview Construction GTC Professional Building, 10189 153rd Street 100,550 0 0% prelease more than 7,640 sf at Central City. More The Hub at King George (phase 2), 9900 King PCI Group 170,000 0 0% Planned than 22,000 sf was absorbed in Surrey George Boulevard (office/retail)

Head Lease Vacancy Sublease Vacancy Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory Total Vacancy (%) (sf) (sf) Vacancy (sf) absorption (sf) Range (psf) Cost (psf) A 2,074,968 253,458 5,102 258,560 12.5% 55,035 $20 - $30 $34 - $43 B 626,010 89,340 0 89,340 14.3% 28,325 $15 - $19 $28 - $31 C 205,629 30,342 0 30,342 14.8% 9,576 $11 - $13 $25 - $27 Total 2,906,607 373,140 5,102 378,242 13% 92,936 - - avisonyoung.com 11 new Westminster Vacancy elevated but relief possible by year end

Vacancy and Absorption active development permit for two office buildings up to 400,000 sf still remains 20.0% 200,000 178,035 in place for the property, but a prelease 18.0% commitment would be necessary to 17.5% 16.0% 16.8% 17% 150,000 kick-start construction. ) f

14.0% 15% 14.9% s market forecast (

e e a t 12.0% 100,000 a t

R Rental rates are likely to remain flat R

y n c o

10.0% i with the potential for some upward t a n p

r pressure as landlords seek to push rates 8.0% 9.3% 50,000 o V a c 29,444 28,427 s after years of low to no growth. There is b 6.0% A potential for the uptick in leasing activity 4.0% - 0 occurring in neighbouring submarkets -1,478 2.0% -7,860 to spill over into New Westminster. -33,772 A number of educational groups are 0.0% -50,000 said to be considering the submarket 2013 2014 2015 2016 Mid-2017 2017F Queens Court Vacancy Absorption and subsequent activity could lead to in New positive absorption by year-end 2017. 12-month projection based on 10-year average absorption and known net absorption in new inventory Westminster is However, any gains may be offset if BC one of several Safety Authority’s premises are returned Vacancy trends 2017. Class A absorption gains due to options for to the market as vacant sublease space Manheim Auto Canada and Aca- tenants. at the end of 2017. Vacancy remained elevated at 17.5% at demics PreKindergarten occupying mid-year 2017 – the highest recorded va- 628 6th Street were reduced by Dye cancy since mid-year 2006 – and up from & Durham downsizing at 620 Royal 16% 12 months earlier. Leasing activity Avenue. Class B negative absorption of was minimal with only small moves within -11,552 sf, which offset modest absorp- the submarket during the first half of tion gains in class A space, was driven 2017. The vast majority of vacancy exists largely by Avocette Technologies in class A space – 26.5% – with two-thirds vacating 8,600 sf in Royal City Centre of that space located in the 137,000-sf to relocate to its own building at 422 Anvil Centre, which has been 100% va- Sixth Street. Three small tenants who cant since it was built in 2014. Evolution vacated the New Westminster Medi- Gaming announced in April 2017 that it cal Building also contributed negative would lease 16,000 sf in the Anvil Centre, class B absorption of -2,465 sf. which may finally represent a turning new construction point for the building and the submarket QuadReal Property Group’s proposed as a whole with further deals anticipated Sapperton Green development adja- in the second half of 2017. While vacant cent to the Braid Street SkyTrain station sublease space remained limited at mid- continued to proceed as the developer recent lease deals - Mid-Year 2017 year 2017, almost 41,000 sf is currently be- worked through the rezoning permit ap- ing offered at 505 6th Street with the BC plication. City council recently endorsed tenant BUILDING SF Safety Authority occupying the space the project’s preliminary master plan Evolution Gaming Anvil Centre 16,000 concept. It is estimated the development until December 2017 before relocating to Spirit of the Children Society (renewal) 768 Columbia Street 11,500 the Renfrew Centre in Vancouver. will include up to 1.5 msf of commercial space when completed. A valid and Academics PreKindergarten Royal City 628 6th Avenue 6,300 Absorption trends Negative absorption of -7,860 sf was DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION the result of a flat market that record- 97 Braid Street (near Braid Street SkyTrain station) Up to 400,000 QuadReal Property Group 0 0% Proposed ed limited leasing activity in first-half part of Sapperton Green mixed-use redevelopment site (office)

Head Lease Vacancy Sublease Vacancy Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory Total Vacancy (%) (sf) (sf) Vacancy (sf) absorption (sf) Range (psf) Cost (psf) A 780,114 204,115 2,358 206,473 26.5% 3,692 $18 - $25 $31 - $38 B 700,684 74,340 0 74,340 10.6% -11,552 $12 - $18 $25 - $30 C 207,774 14,501 0 14,501 7% 0 $10 - $12 $22 - $25 Total 1,688,572 292,956 2,358 295,314 17.5% -7,860 - -

12 Partnership. Performance Vacancy rising as new space set to deliver north shore

Vacancy and Absorption

14.0% 40,000

12.0% 16,128 20,000 6,576 11.9% 10.0% 0 9.8% -4,391 ) -7,751 f 8.0% -20,000 s ( e

8.5% t 7.8% 7.9% n i o

R a 7.3%

-26,282 t

y 6.0% -40,000 c r p n o a s

c 4.0% -60,000 a A b V 2.0% -80,000 -86,621 Hollyburn’s 0.0% -100,000 market forecast 2013 2014 2015 2016 Mid-2017 2017F New mixed-use development Rental rates have remained stable, but Vacancy Absorption in central downward pressure will likely manifest later in 2017 as vacancy rises when new 12-month projection based on 10-year average absorption and known net absorption in new inventory Lonsdale will include retail space comes to the market and activity levels increase by way of tenants shifting Vacancy trends second half of 2017. Approximately 58% and office of the office space in Onni’s new building space for in the submarket. Tenant inducements are Office vacancy on the North Shore is preleased; however, CentreView’s largest lease. likely to grow due to the rise in vacancy climbed to 9.8% at mid-year 2017 – an tenant, COWI North America, is relocat- and the transition of the North Shore to increase from 7.2% at mid-year 2016 – pri- ing from its existing premises on the North more of a tenant’s market. Strata office marily as a result of WorkSafeBC relocat- Shore and will largely negate any positive sales will remain strong as values continue ing to Port Moody and ICBC downsizing. absorption generated by the move. to appreciate due in part to a limited Class A vacancy reached 9% at mid-year inventory and a lack of new supply. New Construction 2017, up from 6% 12 months earlier. Deal recent lease deals - Mid-Year 2017 velocity increased slightly during the Construction will break ground in first half of 2017, while sublease vacancy third-quarter 2017 on Hollyburn Prop- tenant BUILDING SF tightened to less than 1% at mid-year 2017 erties’ new mixed-use development in Central Lonsdale and includes 13,890 sf Pro Arté Performing Arts in Motion Ltd. 1225 East Keith Road 15,300 from 1.4% 12 months earlier. With a signif- (renewal) of office space that will be demised into icant amount of new vacant space being Acciona Infrastructure Canada Inc. & 980 West 1st Street 6,400 smaller units for lease. While Concert delivered at CentreView in the second Acciona Canada Inc. (sublease) Properties received rezoning approval Park Place Daycare & Montessori 124 East 15th Street 6,340 half of 2017, vacancy is expected to rise in 2014 along with a subsequent rezon- further by year’s end and tenants will have ing amendment in 2015, a development BA Blacktop (sublease) 111 Forester Street 6,150 more options than typically available. permit application has not been sub- Multivista Construction Documentation 111 Forester Street 4,420 absorption trends mitted and the proposed Harbourside Inc. development is not anticipated to break i-worx 1520 Barrow Street 3,300 First-half 2017 negative absorption of ground in 2017. -26,282 sf was the largest negative absorp- DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION tion in the first six months of any given year since Avison Young started tracking this Polygon West Quay, 260 West Esplanade (mixed use) 18,340 Strata 100% Sold Q3 2017 submarket in 2002. The departure of Work- Onni Group CentreView, 1308 Lonsdale Avenue (mixed use) 78,800 46,000 58% Q3 2017 SafeBC from 224 West Esplanade and ICBC 22,443 (office/ Harbourview Projects East Esplanade, 350 & 370 East Esplanade Strata 90% sold Q4 2017 downsizing by 12,000 sf at 221 West Espla- showroom) 1301-1333 Lonsdale Avenue Hollyburn Properties 13,890 0 0% Q1 2020 nade are the primary reasons for the surge and 120-141 West 14th Street in negative absorption. CentreView will 801, 889 & 925 Harbourside Drive Concert Properties TBD 0 0% Proposed add another 78,800 sf of office space in the and 18 Fell Avenue

Head Lease Vacancy Sublease Vacancy Total Six Months Net Rental Rate Gross Occupancy CLASS Inventory Total Vacancy (%) (sf) (sf) Vacancy (sf) absorption (sf) Range (psf) Cost (psf) A 793,013 61,522 9,610 71,132 9% -30,290 $22 - $30 $35 - $45 B 481,392 51,682 3,552 55,234 11.5% 3,152 $18 - $20 $31 - $33 C 97,690 8,247 0 8,247 8.4% 856 $16 - $17 $29 - $31 Total 1,372,098 121,451 13,162 134,613 9.8% -26,282 - - avisonyoung.com 13 suburban development timeline

Centreview West Quay East Esplanade Broadway Commercial The independent at main 1308 lonsdale avenue 260 West Esplanade 350 & 370 East Esplanade 988 West Broadway 288 East Broadway

Q3 2017 Q3 2017 Q4 2017 q4 2017 Q1 2018

city North Shore North Shore North Shore Vancouver-Broadway Vancouver-Broadway Developer Onni Group Polygon Harbourview Projects BlueSky Properties Rize Alliance Storeys 5 2 floors 4 10 1 floor office sf 78,800 18,340 sf 22,443 sf 94,120 17,000 tenants 37,000 sf - COWI North America Strata Strata 75,000 sf - iA Financial Group No tenant at this time 9,000 sf - medical tenants

Occupancy 58% 100% 90% 80% 0%

The Lightworks Building City centre 2 204 West 6th Avenue 565 Great Northern Way 34|w7 22 East 5th Avenue 9639 137A Street 34 west 7th Avenue

Q1 2018 Q1 2018 Q2 2018 q2 2018 q3 2018 City Vancouver-Broadway Surrey Vancouver-Broadway Vancouver-Broadway Vancouver-Broadway Developer PC Urban Properties Corp. Lark Group Rendition Developments / PCI Group Chard Development MDC Property Services Storeys 6 12 4 7 4 office sf 53,200 172,000 27,800 170,000 sf 54,347 tenants 46,000 sf - Saje Natural Wellness Strata No tenant at this time 95,000 sf - Kit and Ace Strata 3,884 sf - Tacofino

Occupancy 95% 100% 0% 56% 75%

Station Square 275 WEst 5th Avenue The George TPC @ South Point Kings Crossing 6060 Silver Avenue 1157 Parker Street 3231 152nd Street 7350 Edmonds Street

q3 2018 q4 2018 Q4 2018 Q4 2018 Q2 2019 City Burnaby Vancouver-Broadway Vancouver-Broadway Surrey Burnaby Developer Anthem Properties PC Urban Properties Corp. Porte Commercial Avondale Development / Cressey Development Group Monark Group Storeys Two floors 4 4 4 8 office sf 52,804 sf (office) 70,915 34,308 sf 71,780 sf 70,430 sf (lease/strata) tenants No tenant at this time 48,000 sf - SEGA No tenant at this time Undisclosed tenants Strata

Occupancy 0% 68% 0% 30% 15%

14 Partnership. Performance rapid transit en route to Broadway corridor

Source: TransLink

special feature Shore submarkets – has the tightest Millennium Line office/light industrial projects in Mount office vacancy rate in Metro Vancouver. Extension Pleasant. All of this new employment Demand for office space along the Yaletown is the next closest at 3.9%. by the numbers: space further reinforces the need for the Broadway corridor is boosting the The six-kilometre Millennium Line expansion of transit capabilities serving business case for delivery of a rapid extension would be primarily tunneled the Broadway corridor. transit line that appears to be finally below Broadway and would start at the From an investment perspective, dozens moving forward after years of discussions existing VCC-Clark SkyTrain station and of commercial real estate deals along the and negotiations. Both the federal and run on an elevated track for about 800 Broadway corridor have been concluded provincial governments have agreed to Length: metres to the first of six new stations, in the past 24 months. Many of these provide 80% (or $4.4B) of the proposed Great Northern Way. The extension deals were concluded in anticipation budget for the SkyTrain Millennium Line 6 km would then tunnel under Broadway with of a rapid transit line being constructed extension and Surrey’s LRT plan. The underground stations at Main Street, and the likelihood of increased density remaining 20% will be covered by local Cambie Street, Oak Street, Granville Street that would accompany such a transit municipalities. and Arbutus Street. The Cambie Street infrastructure project. However, this The Broadway corridor, which is home station would feature full underground significant investment in developing to the second largest job centre in BC integration with the existing Broadway- additional residential and commercial and connects the largest university City Hall station of the Canada Line. While stations: space will also further strengthen the and largest hospital in Western Canada, this first phase would initially end at need and demand for rapid transit service is widely considered the busiest bus Arbutus, subsequent phase(s) could see six along the corridor. route in Canada and the U.S. Existing rapid transit eventually extended to the Benefits of the Millennium Line extension transit service on the corridor is deemed University of British Columbia. include improving transit connectivity, insufficient to meet current demand The majority of new office development reduced commute times, more road and wholly incapable of matching in the Vancouver-Broadway submarket space for goods movement, a reduction future demand. Rapid transit along the has clustered along the Broadway corridor in operating costs and an increase in Broadway corridor will be required if the cost: (or the core), including Broadway transit capacity, according to the City growing demand for office space and Commercial at Oak Street, the $2B+ of Vancouver and TransLink’s most other commercial amenities in the area Independent at Main at Main Street recent Millennium Line Broadway Extension is to be met. and Broadway and 565 Great Northern Project Update released June 19. It should Demand for office space along the Way near the proposed Great Northern be added that just the potential of this Broadway corridor (aka the core) Way station. More than half a dozen transit infrastructure investment has pushed vacancy up to 2.4% at mid-year office/light industrial buildings are under served as a catalyst for development of 2017 – an increase from 1.7% at year- construction in Mount Pleasant, which is completion office space along the Broadway corridor. end 2016 – as rents for class A space located between the proposed Cambie date: This investment activity, which is already approach levels comparable to the Street and Main Street stations. There are taking place with office projects under Downtown core. The 3.6-msf submarket also three new office buildings proposed 2024 construction, will also spur additional – which is larger than the Yaletown, within a block or two of Broadway and commercial and residential development Source: TransLink Surrey, New Westminster and North Cambie Street as well as additional that benefit citizens and business alike. avisonyoung.com 15 continued from page 1

At mid-year 2017, there was 443,119 sf available for sublease outside Down- For more information, please contact: town, while Downtown sublease space totalled 147,023 sf, for a total of 590,142 sf or 12.8% of the overall vacancy region-wide – up significantly from Michael Keenan, Principal & Managing Director 5.9% 12 months earlier. This space has provided some flexibility in submarkets Direct Line: 604.647.5081 where vacancy is tight. [email protected]

While most suburban submarkets recorded negative absorption and a slight in- Andrew Petrozzi, crease in vacancy in first-half 2017 (Surrey notwithstanding), those conditions are Principal & Vice-President, Research (BC) forecasted to improve by year-end 2017 (with the exception of the North Shore). Direct Line: 604.646.8392 [email protected] Leasing activity in Surrey resulted in vacancy dropping to 13% at mid-year 2017 from 15% six months ago and 17.5% a year earlier, as tenants continued to rapidly Sherry Quan, occupy space as part of a trend that started in 2016 when two financial institu- Principal & Global Director of Communications & Media Relations Direct Line: 604.647.5098 tions relocated within the submarket. The delivery of Gateway Place fully leased [email protected] also reduced vacancy and boosted absorption. Despite reasonable deal velocity, vacancy in the Burnaby office market increased to 13.3% due to relocations, closures and additional sublease space coming to market. However, vacancy is Avison Young Office Leasing Team expected to decline with significant occupancies scheduled for the latter half of Nicolas Bilodeau David MacFayden the year. Vacancy in Richmond rose slightly to 11.2% since year-end 2016 and was [email protected] [email protected] largely the result of two firms relocating downtown, but is expected to tighten Robin Buntain* Justin Omichinski by year-end 2017. Vacancy in New Westminster remained elevated at 17.5%, but [email protected] [email protected] there are indications that leasing/sales activity in the Anvil Centre could mark Fergus Cameron Brian Pearson [email protected] [email protected] a turning point and vacancy may decline by year-end. The delivery of CentreV- iew on the North Shore combined with the relocation and downsizing of two Matthew Craig* Leeanna Petrik [email protected] [email protected] substantial tenants will result in vacancy rising by year-end 2017. Bill Elliott Ronan Pigott* Downtown construction activity has eased off as the submarket digested the [email protected] [email protected] more than 2.2 msf delivered in the past 30 months. Three downtown projects Glenn Gardner* Max Ripper totalling approximately 530,000 sf remain under construction. The largest, The [email protected] [email protected] Exchange, will be delivered by year-end 2017. The other two, The Cardero Jordan Gill Dan Smith and The Offices at Burrard Place, will not be completed until mid-2019. In the [email protected] [email protected] suburban markets, more than 510,000 sf is under construction in the Vancou- Sean Keenan Josh Sookero* ver-Broadway submarket with the majority of development located in or near the [email protected] [email protected] rapidly expanding Mount Pleasant office node and are scheduled to complete Mitchell Knoepfel Terry Thies* in 2017/18. More than 120,000 sf is under construction in Burnaby, but those [email protected] [email protected] projects do not complete until late 2018/19. Another 72,000 sf is under con- Nabila Lalani Tammy Stephen [email protected] [email protected] struction in Surrey. Strata options in Surrey and the North Shore are also under construction, but have been significantly presold. Almost 1.58 msf of lease and Derek Lee Matt Walker [email protected] [email protected] strata office space is under construction in Metro Vancouver. However, a new James Lewis Ian Whitchelo* development cycle is on the cusp of kicking off downtown. [email protected] [email protected]

With almost 1.2 msf of new office space likely breaking ground during the next Jason Mah* six to 12 months in the Downtown core and an additional 1.6 msf currently in the [email protected] permitting process, the next wave of office development is set to start delivering *Personal Real Estate Corporation in late 2019 through 2023 and will exceed the scope of the development cycle that just completed in 2017, the largest the city had experienced in almost three Avison Young decades. Metro Vancouver’s office market, led by its thriving core, is poised to re- #2900-1055 W. Georgia Street sume the rapid pace of expansion that has characterized the region since 2012.  Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada Vacant sublease space 800,000 700,000 600,000 590,142 484,102 500,000 480,936 456,175 425,921 400,000 322,884 avisonyoung.com

Square footage 300,000 240,814 249,851 190,092 200,000 148,684 128,232 147,023 © 2017 Avison Young. All rights reserved. 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 Mid-2017 Avison Young Commercial Real Estate (B.C.) Inc.; DBA, Avison Young. Metro Vancouver Downtown