Metro Office Market Report Year-End 2015

Metro Vancouver market remains balanced Vacancy rate December 31, 2015 10% as new supply supports the most positive Vacancy rate June 30, 2015 10.3% annual absorption recorded in a decade ignificant additions to Downtown Vancouver’s inventory of office Stowers contributed to regional vacancy rising to 10% at year-end 2015 from 9.4% at year-end 2014, but the development boom also helped ac- commodate more than 1.3 million square feet (msf) of annual absorption – the most recorded in Metro Vancouver in a decade. More than 1.7 msf ABSORPTION VACANCY RENTAL of new office space was delivered in Downtown Vancouver in 2015, and (DEMAND) (SUPPLY) RATES Downtown absorption of more than 1.1 msf significantly impacted the region’s annual absorption. While regional vacancy reached 10.3% at mid- Metro Vancouver - Vacancy and Absorption Trends year 2015 (due in part to the delivery of new Downtown office buildings in the first half of 2015), vacancy tightened in the second half despite the 12.0% 1,600,000 addition of new buildings in the Downtown core as well as the suburbs. 1,334,604 1,400,000 10.0% 10.5% 10% 1,200,000 Most suburban submarkets in Metro Vancouver recorded positive annual 9.4% 1,000,000 absorption in 2015, led by the ongoing recovery of Richmond’s office sub- e 8.0% e (sf) a t 7.8% 800,000 a t market, while Vancouver-Broadway and Yaletown were the only submar- R

7.4% R

7% y n kets to register negative annual absorption. The Vancouver-Broadway and c 6.0% 640,019 600,000 o i t a n 532,275 Yaletown submarkets are both located within Vancouver city limits. Volatility 400,000 p r

397,843 o

V a c 4.0% in the Yaletown submarket in 2015 was tied directly to tenants relocating to 92,870 200,000 s b

A occupy larger Downtown premises. In the Vancouver-Broadway submar- 0 2.0% ket, a number of tenants chose to search for office space efficiencies in an -200,000 -158,905 attempt to reduce costs – which subsequently led some to downsize or 0.0% -400,000 2011 2012 2013 2014 2015 2016F relocate, resulting in slight negative annual absorption. Surrey registered the most positive annual absorption since 2010. Burnaby, New Westminster Vacancy Absorption and the North Shore registered minimal positive absorption in 2015. The 12-month projection based on 10-year average absorption and known net absorption in new inventory Burnaby and Surrey submarkets also recorded elevated vacancy rates. continued on back page Metro Vancouver Office Vacancy Summary (Year-End 2015) INVENTORY HEAD LEASE SUBLEASE TOTAL VACANCY 12-MONTH DISTRICT (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) RATE (%) ABSORPTION (SF) Downtown 22,825,576 1,878,942 249,851 2,128,793 9.3% 1,101,041 Yaletown 2,029,244 82,797 0 82,797 4.1% -20,091 Broadway 5,849,095 256,718 6,366 263,084 4.5% -38,637 Burnaby 9,100,255 1,055,445 120,044 1,175,489 12.9% 32,637 Richmond 4,215,800 443,061 61,359 504,420 12% 186,883 Surrey 2,851,607 471,912 28,178 500,090 17.5% 36,751 New Westminster 1,688,572 253,682 0 253,682 15% 29,444 North Shore 1,372,098 82,276 18,304 89,028 7.3% 6,576 TOTAL 49,932,247 4,524,833 484,102 5,008,935 10% 1,334,604

Partnership.Performance. I 1 Downtown Positive annual absorption highest since 2005

Available sublease space continues to decrease with sublease vacancy accounting for 11.7% of overall vacancy, down from 12.9% a year earlier and significantly off the 19.9% recorded at year-end 2013. Much of the po- tential sublease space vacated by tenants moving into the new towers was backfilled and a significant increase in sublease space did not materialize. The Downtown market remains fairly balanced overall and while there was an increased number of large-block vacancies or availabilities, they remain limited in absolute numbers. With the space availability factor (SAF) at its lowest since mid-year 2012, vacancy is less likely to increase in the short term. Absorption Trends Positive annual absorption of more than 1.1 msf in 2015 marked the most annual absorption recorded since year-end 2005, which had marked the end of a four-year run during which time Downtown absorption was at Bentall Kennedy continues to work on the development permit least 2 msf annually. Positive absorption in 2015 also marked a reversal application for 1090 West Pender, a new 415,920-sf office tower. in a four-year slide towards negative absorption, starting in 2011 when absorption reached 373,425 sf before dropping to just 7,753 sf of positive Vacancy with Space Availability Factor (SAF) and Absorption: absorption in 2012 and then registering negative annual absorption in 2013 and 2014. Almost three-quarters of positive absorption in 2015 oc- 14.0% 1,200,000 1,101,041 curred within class AAA properties. Positive class A absorption of 172,762 12.0% 1,000,000 sf in 2015 marked the first positive annual absorption recorded in class A 2.8% 2.4% F 800,000 Downtown properties since 2012. A 10.0%

S 3.4%

e (sf) Recent Lease Deals – Year-End 2015 /

3.4% 9.3% 9.2% 600,000 a t e

R TENANT BUILDING SF 8.0% a t

373,425 n R

400,000 o PwC (renewal) PwC Place 110,000 3.3% i y 6.8% t c 2.6% 6.0% p

r Absolute Software (renewal & expansion) Bentall 4 46,000 a n

5.7% 200,000 o s Rocky Mountaineer 980 Howe Street 36,400

7,753 b 4.0% 134,990 V a c 3.9% 0 A 3.9% Kabam Inc. (sublease & head lease) 745 Thurlow Street 32,000 2.0% -200,000 Provincial Health Services Authority (renewal) 1380 Burrard Street 31,000 -270,560 -309,835 Boughton Law Corp. (renewal) Bentall 3 30,000 0.0% -400,000 2011 2012 2013 2014 2015 2016F The Profile 375 Water Street 30,000  Vacancy Absorption  SAF* Space Availability Factor Impark (renewal) The Station 25,000 12-month projection based on 10-year average absorption and known net Impark (renewal) 515 West Hastings Street 23,000 absorption in new inventory, and 10-year average SAF Copeman Healthcare Centre 808 Nelson Street 20,400 Stemcell Technologies Inc. Pender Place II 18,900 Vacancy Trends Hostway (renewal) Bentall 5 17,500 Downtown vacancy peaked at 9.8% at mid-year 2015 before tightening (expansion) 1380 Burrard Street 17,300 to 9.3% at year-end 2015, which was up from 6.8% a year earlier. Despite Pacific North West LNG (expansion) Park Place 17,000 the delivery of more than 1.7 msf of new office space in 2015, vacancy GE Capital 1055 Dunsmuir Street 16,800 had already started to tighten by the end of the year as tenants occupied College of Massage Therapists of BC 1050 West Pender Street 15,700 the new inventory. Despite substantial absorption in class AAA assets, FullyManaged/ITG Software 128 West Pender Street 14,580 vacancy more than doubled to 10.5% from 5% a year earlier primarily due AXIM Royal Centre 14,200 to the delivery of new inventory that contained limited vacancy. Class Western Forest Products Royal Centre 14,200 A vacancy also climbed to 10.8% from 5.5% year-over-year as the flight IIROC (renewal) Royal Centre 13,800 to quality began to impact existing inventory. Class B and C vacancy CanWell Building Materials Group (sublease) Royal Centre 13,800 declined year-over-year, dropping to 7.5% and 7.9% at year-end 2015 Wavefront Wireless (renewal) Guinness Tower 12,400 from 8.3% and 9.6%, respectively. Vacancy is expected to remain stable – Simon Fraser University Harbour Centre 12,000 even decrease incrementally – through 2016 as minimal new inventory is JH Investments Inc. 745 Thurlow Street 12,000 scheduled to be delivered and significant occupancies still remain in the Agricultural Bank of China Garden 12,000 new towers. (renewal) Commerce Place 11,500 Even while tenants continue to search for space efficiencies to reduce oc- Pacific Future Energy 701 West Georgia Street 10,000 cupancy costs, there was solid deal activity with a good cross-section of new Accenture Telus Garden 10,000 leases, expansions, renewals and new tenants in the Downtown market. Esri Canada (renewal) 1130 West Pender Street 10,000

2 I Partnership.Performance. Downtown Vacancy elevated but market remains balanced

Prelease Prelease Space Availability Factor (SAF) Developer Building SF SF % Completion SAF refers to head lease or sublease space that is being marketed but is 501 Robson Street Westbank/Telus (Telus Garden podium) 48,050 0 0% Q1 2016 not physically vacant, and new supply that is nearing completion and FiveTen Seymour, available for lease. The space availability factor, or SAF, slipped to 2.8% Serracan Properties 510 Seymour Street 68,000 (office) 66,600 98% Q3 2016 (650,435 sf) at year-end 2015, its lowest point since mid-year 2012 when Ormidale Block Century Group 151 West Hastings Street 23,600 (office) 0 0% Q4 2016 the indicator reached 2.6% (511,283 sf). Hence, the actual amount of Credit Suisse AG/ space currently being marketed (occupied and vacant) in the Downtown The Exchange, SwissReal Group 475 Howe Street 362,000 (office) 35,750 10% Q2 2017 core is 12.1% or approximately 2.8 msf. Canada Jim Pattison Burrard Place, 230,000 (office New Construction Developments/ 1290 Burrard Street including tower 0 0% Q4 2018 Reliance Properties (mixed use) & podium) (phase 1) The podium at Telus Garden, which features 48,050 sf of office space, Aquilini 777 Pat Quinn Way 69,300 (office) is planned to be completed in the first quarter of 2016 and remains Development and 0 0% Q4 2018 Construction (residential/office) (east tower) available for lease. Serracan Properties’ FiveTen Seymour develop- 1575-1577 West Georgia ment is 98% preleased by the Adler School of Professional Psychol- Bosa Properties Street & 620 Cardero 45,346 (office) - - Proposed ogy, OnlineShoes.com, Hardy Capital and Serracan Properties, and is Street Carrera anticipated to be finished by the third quarter of 2016. Century Group’s Management Corp. 320 Granville Street 350,000 - - Proposed Ormidale Block redevelopment is under construction and is scheduled Morguard 601 West Hastings Street 212,500 (office) - - Proposed for completion by the end of 2016. No tenants have been announced. GWL Realty Advisors Vancouver Centre II, 368,115 - - Proposed The largest office tower under construction in the Downtown core, the 753 Seymour Street 31-storey, 372,000-sf Exchange building being developed by Credit Su- Bentall Kennedy 1090 West Pender Street 415,920 (office) - - Proposed isse AG and SwissReal Group Canada, is 10% preleased and scheduled Oxford Properties 1133 Melville Street TBD - - Proposed for completion in the second quarter of 2017. National Bank Financial Waterfront Tower, Cadillac Fairview 555 West Cordova Street TBD - - Proposed preleased 45,000 sf of office and retail space. Construction of Aquilini 300,000 to Development’s east tower at 777 Pat Quinn Way is scheduled to break Westbank Projects 720 Beatty Street 350,000 (office) - - Proposed ground in the summer of 2016 and anticipated to be complete in the Low Tide Properties 155 Water Street 69,000 (office) - - Proposed fourth quarter of 2018. Construction on the long-planned Burrard Place Boffo Developments 225 Smithe Street 28,110 (office) - - Proposed development is scheduled to start in the second quarter of 2016. Canadian Metropolitan 750 Pacific Boulevard TBD - - Proposed Development proposals for Carrera Management’s site at 320 Granville Properties Corp. and Cadillac Fairview’s proposed Waterfront Tower at 555 West Cordo- Market Forecast va remain in process as the City of Vancouver decides how to proceed with Rental rates remained stable in 2015 due to landlords offering significant the associated development permit and rezoning applications in relation leasing inducements, but downward pressure on rates is likely to in- to its Central Waterfront Hub Framework, which city council had adopted crease in 2016. While a diminishing supply of high quality sublease space in 2009 to provide development guidelines in the area. Bentall Kennedy improved landlords’ negotiating leverage, a greater number of large-block continues to work through the development permit application for 1090 lease opportunities in the market will allow larger tenants to negotiate with West Pender. Oxford Properties is reviewing its overall development landlords from a position of strength. Smaller tenants may discover land- plan for 1133 Melville after the city’s urban design panel did not support lords to be less flexible on rental rates when it comes to the limited supply the proposed 32-storey, 500,000-sf office building. GWL Realty Advisors’ of high quality view premises, but more open to negotiation on mid- and proposal for Vancouver Centre II at 753 Seymour and Bosa Properties’ lower-tower options. The leasing market is expected to remain stable in proposal for a 26-storey, mixed-use building at 1575 West Georgia and 2016 with average deal velocity and incremental decreases in vacancy and 620 Cardero Street remain in the rezoning process. Low Tide Properties availability rates until the next wave of new inventory nears delivery. Any is working through its development permit application for a new seven- recovery in the mining, energy and commodities markets will increase storey office building at 155 Water Street, which requires the retention of demand, likely decreasing vacancy and availability rates. The tenant mix in the building facades of 151 and 157 Water Street among other conditions. the Downtown office market will continue to diversify in 2016 and remain Boffo Developments is proposing a 26-storey, mixed-use building at 225 balanced as landlords achieve reasonable rental rates and tenants have Smithe Street that will include office space on three floors. sufficient space alternatives to accommodate their needs.

CLASS INVENTORY HEAD LEASE SUBLEASE TOTAL VACANCY TOTAL 12-MONTH SAF (SF) SAF (%) NET RENTAL RATE GROSS OCCUPANCY VACANCY (SF) VACANCY (SF) (SF) VACANCY (%) ABSORPTION (SF) RANGE (PSF) COST (PSF) AAA 4,728,576 398,772 96,413 495,185 10.5% 818,295 128,823 2.7% $26 - $44 $46 - $69 A 7,983,952 818,475 47,280 865,755 10.8% 172,762 359,662 4.5% $20 - $37 $39 - $61 B 6,829,205 412,296 97,476 509,772 7.5% 54,244 120,959 1.8% $18 - $31 $35 - $52 C 3,283,843 249,399 8,682 258,081 7.9% 55,740 40,991 1.2% $14 - $25 $26 - $41 Total 22,825,576 1,878,942 249,851 2,128,793 9.3% 1,101,041 650,435 2.8% - -

Partnership.Performance. I 3 Downtown Development Timeline 0% 69,300 East Tower Q4 2018 & Construction& 777 Quinn Pat Way Aquilini DevelopmentAquilini East Tower, Floors 5-13 East Tower, No tenants at this time 0% 13 fl oors + fl 13 Q4 2018 Burrard Place 7-storey podium 7-storey 1290 Burrard1290 St. Reliance/Pattison 129,100 + 100,000 + 129,100 No tenants at this time 31 10% 362,000 Q2 2017 475 Howe St. Howe 475 Credit Suisse/ The Exchange SwissReal GroupSwissReal 35,750 sf 5 0% 23,600 Q4 2016 Century Group Ormidale Block 151 West Hastings St. 151 No tenants at this time 10 98% 68,000 68,000 Q3 2016 510 Seymour St. 510 FiveTen Seymour FiveTen UPDATED FEBRUARY 2016 FEBRUARY UPDATED Downtown Development Timeline Serracan Properties 4,250 sf 4,250 sf 25,500 sf 30,000 sf 30,000 4 0% 48,050 Q1 2016 501 Robson501 St. Westbank/Telus (Telus Garden podium) (Telus No tenants at this time Tenants (leased) Tenants Residential O c es f Tenants Developer Storeys Occupancy rates © 2016 Avison Young. All rights© 2016 reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought be to correct, is not guaranteed by Avison Commercial Young Real Estate (B.C.) Inc.; DBA, Avison Young.

4 I Partnership.Performance. Proposed Downtown Developments 1090 W. Pender St. W. 1090 Developed by Bentall Kennedy areace Storeys / O / 415,920 sf 31 UDP supported the February in design A public hear- 2014. its to ing related applicationrezoning was set for and the applica- 2015, February 24, tion was the As approved by City. of the developer 2015, December 31, was working development through permit application requirements and six months take it will that anticipates the process. complete to

GRANVILLE SQUARE RICHARDS ST RICHARDS available Picture not HARBOUR CENTRE STATION WATERFRONT CONTEXT ELEVATIONS

COOPER BUILDING PRICEWATERHOUSE

WEST CORDOVA ST CORDOVA WEST SEYMOUR ST SEYMOUR PLACE FUTURE Vancouver Centre II St. Water 155 753 Seymour St.753 Developed by Advisors Realty GWL areace Storeys / O / 368,115 sf 32 UDP supported the design A com- September 2013. in munity open house was As of June 30, held October in 2013. the developer was still working 2015, on the application rezoning and the city the re- to was awaiting revisions application.zoning The were revisions subsequently received and accepted theby City and the public hearing for the application be rezoning likely will scheduled for fall 2015. The development was supported the by UDP on and the 2015 12, August applicationrezoning was subsequently approved directly the by director of sign- with planning numerous conditions need that to cant be formet fi the project its receive development to andpermit. The facades historic of 151 must be Street maintained Water 157 and the seven-storey mixed-use building includes restaurant/retail on the ground – 7. fl oors 2 ce on space oorand offi fl Developed by TideLow Properties areace Storeys / O 7 / 69,000 sf (333 SEYMOUR) 320 GRANVILLE GRANT THORNTON GRANT FUTURE BANK ROYAL

BUILDING

320 GRANVILLE

WEST HASTINGS ST HASTINGS WEST GRANVILLE ST GRANVILLE BANK OF BUILDING NOVA SCOTIA NOVA CENTRE SINCLAIR SQUARE GRANVILLE 601 West Hastings, 601 West B.C. Vancouver, 601 Hastings Tower

601 W. Hastings W. St.601 225 Smithe St. Developed Morguard by areace Storeys / O 25 / 212,500 sf UDP supported the November in design part as of the 2013 rezoning application, approved was which a public at hearing conditions) (with The project 2014. on September 16, was supported the by UDP on July part as of its development 2015, 15, permit application. Construction had been scheduled start to year-end by but did with completion 2018, in 2015 not commence. Developed by o Developments Boff areace Storeys / O / 28,110 sf 26 Rezoning application 2015 5, led May was fi and the development received the support of The rezon- 2015. the UDP on July 29, ing application council by was heard and the ap- 2015 on December 15, plication been has a public moved to The building’s hearing early 2016. in retailoor podim ground-fl have will total- ce space oors of offi and three fl 28,110 sf. ling

WEST PENDER ST PENDER WEST HOWE ST HOWE B+H ARCHITECTS BC, Canada V6J 0E4 Vancouver, Ave 1st 400 - 1706 West 604-685-9913 F: 604-685-0694 T: [email protected] www.bharchitects.com SECTION ALONG HASTINGS LOOKING NORTH SECTION ALONG SEYMOUR LOOKING WEST SECTION UPDATED FEBRUARY 2016 FEBRUARY UPDATED Downtown Proposed Developments Proposed Downtown Waterfront Tower 1575-1577 West Georgia Cardero & 620 St. 555 W. Cordova W. 555 St. Developed by Cadillac Fairview areace Storeys / O TBD UDP support did not the building design on January A development 2015. 28, permit board meeting set for March was then cancelled. The 2015 9, architect subsequently presented a UDP in concepts nine alternative which workshop June in 2015, Thereceived a “warmer reception.” project subject is the City’s to Central Framework, Hub Waterfront which under discussion. remains Developed by Bosa Properties areace Storeys / O / 45,346 sf 26 Rezoning application 2014. 16, led July was fi UDP supported building ondesign October 22, report rezoningon the The staff 2014. application was council received by and was referred on February 2016 2, public hearing.to The development commercialoor ground fl features ce space oors of offi and threespace fl in podium. 320 Granville St. Granville 320 Developed Carrera by Management Corp. areace Storeys / O 25 / 350,000 sf UDP had supported the ondesign second review Rezoning ap- 2013. May in plication for the proposed building was approved and the 2014. public hearing was held July 15, A development permit application had still been not the received by The 2015. City of as December 31, project subject is the city’s to Central Framework, Hub Waterfront which under discussion. remains Melville St. 1133 Developed by Oxford Properties areace Storeys / O TBD Rezoning application was com- A led2015. on July 8, fi munity open house was 2015. held September 14, The before application the went UDP 2015. during the week of October 19, The UDP support did not the building itas was proposed. Oxford currently is reviewing its development overall While the rezoningplan for the site. ongoing, is process no deadline has been the application. resubmit set to © 2016 Avison Young. All rights© 2016 reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought be to correct, is not guaranteed by Avison Commercial Young Real Estate (B.C.) Inc.; DBA, Avison Young.

Partnership.Performance. I 5 Vancouver - Broadway Negative annual absorption recorded only twice since ‘03

Vacancy and Absorption Graph:

7.0% 450,000 410,466 6.5% 400,000 6.0% 350,000 e 5.0% 300,000 a t 5.1% e (sf) R

229,994 250,000 a t y

4.6% 4.6% R

c 4.5%

4.0% n 200,000 o a n i t

150,000 p r V a c 3.0% 3.3% 96,889 o 100,000 s b A 2.0% 50,000 34,752 0 1.0% -16,768 -50,000 -38,637 0.0% -100,000 2011 2012 2013 2014 2015 2016F Vacancy Absorption 12-month projection based on 10-year average absorption and known net absorption in new inventory Mount Pleasant’s light industrial/office district continues to evolve with Vacancy Trends PC Urban’s new Lightworks Building, a 54,000-sf, six-storey character development utilizing the former building facade. Vacancy remained virtually unchanged year-over-year, down slightly to 4.5% at year-end 2015 from 4.6% at year-end 2014. Deal velocity was Recent Lease Deals – Year-End 2015 reasonably strong throughout 2015 and has been stable since 2014. TENANT BUILDING SF Sublease vacancy, primarily in class A and B space, dropped considerably Symcor (renewal) 111 East 5th Avenue 50,000 year-over-year to the lowest point since mid-year 2000. Class C vacancy PrimeFocus World 149 West 4th Avenue 47,000 dropped to 1.7% from 3% year-over-year, but that was primarily due to Rainmaker Entertainment Inc. (renewal) 2025 West Broadway 45,000 the demolition of two older office buildings for residential developments. Nicola Wealth Management (renewal/expansion) 1508 West Broadway 29,000 While vacancy remained stable, several 10,000-sf-plus opportunities PHSA/Information Systems Management 1885 West Broadway 25,000 became available for occupancy in early 2016. Immigrant Services Society of BC (renewal) 333 Terminal Avenue 17,300 Kit & Ace Designs 159 West 7th Avenue 16,760 Absorption Trends Copperleaf Technologies 2920 Virtual Way 11,800 Negative annual absorption of 38,637 sf marked only the second time Vancouver Free Press Publishing Corp. 1635-1637 West Broadway 11,580 since 2003 that the Broadway submarket registered negative annual PHSA/Finance 1867 West Broadway 10,900 absorption. The other occurrence was in 2013 and was even less at nega- BC Public School Employers’ Association (renewal) 1333 West Broadway 10,800 tive 16,769 sf. While companies such as Active Network, Lululemon, Rovio Entertainment Co. Ltd. (sublease) 555 West 12th Avenue 7,400 Rogers Financial Group and PrimeFocus expanded and/or estab- Trinimbus Technologies Inc. 1401 West 8th Avenue 6,040 lished operations in the submarket, others such as Hothead Games, Bell Canada, Coastal.com and Rainmaker Entertainment downsized or of a seven-storey, 165,000-sf office tower at 565 Great Northern Way in relocated, particularly during the second half of 2015. spring 2016 with completion scheduled for fall 2017 to coincide with the New Construction opening of the new Emily Carr Institute of Art + Design campus. No prelease commitments have been announced. Renfrew Centre, a seven-storey, 161,610-sf office building developed Construction on BlueSky Properties’ new 10-storey, 104,000-sf office/ by Blackwood Partners and AIMCo Realty, is scheduled for comple- retail building at 988 West Broadway commenced near the end of 2015. tion in the first quarter of 2016. The building is wholly available for lease. The building is primarily leased by Industrial Alliance, which is leasing Construction continues on the Fifth, a four-storey, 76,000-sf office/light approximately 75,000 sf and occupying all but two floors. industrial building developed by Cressey that will be occupied by DHX Media after construction is completed in the fourth quarter of 2016. The development permit application for phase one of Bentall Ken- Phase two of Rize Alliance’s Containers development, which features nedy’s new office campus at 3030 East Broadway is nearing comple- an eight-storey, 143,000-sf office tower that will serve as the new home tion and will likely be filed in early 2016. Five office buildings totalling for the Canada Revenue Agency, is under construction and set for 962,300 sf are proposed for the site. There are no prelease commitments completion in the fourth quarter of 2016. at this time. A proposal from GNW Trust to build a new four-storey, 60,360-sf building at 1933 Fraser Street at Great Northern Way Campus Construction on the Lightworks Building, a six-storey, 54,000-sf office/ needs a prelease agreement to kick off construction. light industrial development in Mount Pleasant, is expected to break ground in the first quarter of 2016 with occupancy set for the fourth Development of office/light industrial projects in the Mount Pleas- quarter of 2017. Construction is proceeding on a speculative basis as ant node remains active. Rendition Developments has two projects no tenants have been announced. PCI Group will kick off construction underway in the neighbourhood, including The Mirror, a three-storey,

6 I Partnership.Performance. Vancouver - Broadway Vacancy remains among tightest in Metro Vancouver

18,000-sf office/light industrial building at 7 West 6th Avenue, as well as a from years previous. Leasing activity is forecast to remain strong due to four-storey, 27,000-sf office/light industrial building at 204 West 6th Avenue. new opportunities in the Mount Pleasant employment area and fresh Construction has started on the Mirror and the building is scheduled for vacancies along the Broadway corridor and at Broadway Tech Centre. completion in the third quarter of 2016. A development permit application Vacancy is anticipated to rise in 2016 primarily due to the delivery of the for 204 West 6th Avenue has been filed and construction is anticipated to wholly vacant Renfrew Centre. start in the third quarter of 2016 with completion tentatively planned for the third quarter of 2017. Kevington Building Corp. had proposed the Q4 Block at 125 East 4th Avenue. However, the development has not gone forward as the owner evaluates the potential implications of the recent sale of the properties across the street to and Westbank and any associated zoning changes in the immediate vicinity that may come about as a result. Market Forecast Slight upward pressure on rental rates manifested in the submarket in the back half of 2015 due primarily to Industrial Alliance committing to take approximately 75,000 sf at 988 West Broadway and effectively removing the only large-block opportunity on the Broadway corridor proper. While some tenants in the Broadway submarket sought to control rising over- head costs by relocating to less expensive space, downsizing or spending capital to improve office space efficiencies, others had trouble securing suitable premises for expansion. This dichotomy is expected to remain in PCI Group is looking to deliver a seven-storey, 165,000-sf office building 2016. Lease rates are likely to remain stable in 2016 albeit slightly elevated adjacent to the new Emily Carr Institute of Art + Design in fall 2017.

Mount Pleasant Employment Area (I-1 Zoning) Developer Building SF Completion Renfrew Centre, ince 2013, the emergence of the Mount Pleasant employment Blackwood Partners/AIMCo 2889 East 12th Avenue 161,610 (office) Q1 2016 area has stimulated a number of value-add and redevelopment S The Mirror, 7 West 6th Avenue projects in the neighbourhood, resulting in the conversion of older Rendition Developments (Mount Pleasant) 18,000 Q3 2016 industrial space to primarily office use or the redevelopment of The Fifth, industrial buildings to accommodate additional office uses. Many of Cressey 380 West 5th Avenue 75,690 (office) Q4 2016 (Mount Pleasant) the repositioned buildings are less than 20,000 sf and typically range Containers (phase II), from 5,000 sf to 18,000 sf. More developments are under way that Rize Alliance 468 Terminal Avenue 143,000 Q4 2016 have been preleased or presold. As a result, vacancy remains tight The Lightworks Building, despite these additions as development boosts the total size of the PC Urban Properties Corp. 22 East 5th Avenue 45,200 (office) Q4 2017 market. Sublease space remains extremely limited in this area. (Mount Pleasant) PCI Group 565 Great Northern Way 165,000 Q4 2017 Deal velocity picked up in 2015 as the market became increasingly Broadway Commercial, popular as a vibrant new office district and additional technology BlueSky Properties 988 West Broadway 94,120 (office) Q1 2018 tenants made it home. Developers and value-add investors have Centre for Digital Media, Awaiting been entering or expanding their holdings in this desirable node. GNW Trust 1933 Fraser Street 60,360 prelease Lease rates rose in 2015 and this trend is expected to continue. New commitment developments offer large inducement packages while repositioned 204 West 6th Avenue Rendition Developments (Mount Pleasant) 27,000 Planning assets offer less inducements as the space does not require a full 3030 East Broadway buildout. Rents were in the mid $20s psf (with inducements) and Bentall Kennedy (five buildings) 973,350 Proposed that is expected to rise to the high $20s psf in the first half of 2016. Kevington Building Corp. Q4 Block, 125 East 4th Avenue 27,205 Proposed The market outlook is strong for 2016 as new supply comes online (Mount Pleasant) and the City of Vancouver continues to encourage the shift in uses. Westbank/Ivanhoé Cambridge Oakridge Centre redevelopment TBD Proposed

CLASS TOTAL HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH AVERAGE NET GROSS OCCUPANCY RENTABLE (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RENTAL RATE (PSF) COST (PSF) A 3,640,976 148,792 1,309 150,101 4.1% 21,445 $22 -$30 $39 - $48 B 1,715,203 103,663 1,003 104,666 6.1% 11,951 $18 - $23 $31 - $38 C 492,916 4,263 4,054 8,317 1.7% -72,033 $15 - $19 $28 - $33 Total 5,849,095 256,718 6,366 263,084 4.5% -38,637 - -

Partnership.Performance. I 7 Yaletown Volatile year reflects extensive tenant churn

Vacancy with Space Availability Factor (SAF) and Absorption: 12.0% 50,000 39,047 40,000 10.0% 6.9% )

f

F 30,000 s

23,928 (

A e S 8.0% 19,732

4%

/ 3.8% 20,000

a t e R 6,785 3% 2.6% a t 6.0% 10,000 n R o

i t y 0.5% c p

5% 0 r o a n 4.0% 4.4% 4.3% 4.1% s

4% b A

V a c -10,000 3.1% -6,193 2.0% -20,000 -20,091 0.0% -30,000 2011 2012 2013 2014 2015 2016F  Vacancy Absorption  SAF* Space Availability Factor 12-month projection based on 10-year average absorption and nine-year average SAF

Recent Lease Deals – Year-End 2015 Engineering consultant McElhanney has leased 39,810 sf in 858 TENANT BUILDING SF Beatty Street as it sets to expand into the former space. McElhanney Consulting Services Ltd. 858 Beatty Street 39,810 The Westside School 910 Mainland Street 20,000 Absorption Trends Double Negative (expansion) 1008 Homer Street 12,800 Negative annual absorption of 20,091 sf at year-end 2015 represented Eventbase Technology Inc. 1286 Homer Street 12,000 a significant shift in the Yaletown market, which had not recorded Splunk Inc. 860 Homer Street 10,150 negative annual absorption since 2009. A substantial uptake of office iamota corporation 860 Homer Street 3,300 space in the second half helped to offset the significant negative ab- sorption that characterized the first half of 2015. More than 10,000 sf Vacancy Trends of positive absorption occurred in each of the following properties: Vacancy in the Yaletown office market finished 2015 at 4.1%, up from 855 Homer Street, 1008 Homer Street, 1286 Homer Street, 910 Main- 3.1% at year-end 2014, but down significantly from 7.5% at mid-year land and 788 Beatty during the last six months of 2015. The positive 2015. A number of tenants vacated the market in the first half of 2015, absorption in the second half was predominately driven by smaller which led to a spike in vacancy to levels unseen since year-end 2009. technology-related firms. That spike was short-lived as demand from small technology-related companies and the ongoing lack of new supply drove deal velocity in New Construction the second half. Large lease deals completed in the second half of 2015 No new construction is currently planned for Yaletown. at 858 Beatty, 1286 Homer and 910 Mainland should have an impact on Market Forecast vacancy in 2016. Market volatility is expected to continue with notewor- While rental rates softened slightly in 2015 as the addition of new supply thy Yaletown tenants, Avigilon and Blast Radius, set to vacate larger downtown combined with tenants relocating out of the submarket blocks of space in 2016. Vacant sublease space was non-existent at year- contributed to upward pressure on vacancy, lease rates should remain end 2015 – a marked decline from just six months earlier when more steady in 2016. Vacancy will likely remain volatile with Blast Radius set to than 43,000 sf had been available. close its doors at 1146 Homer and vacate 24,000 sf in 2016. Avigilon will Space Availability Factor (SAF) vacate another 40,000 sf at 858 Beatty Street when it moves to its new The space availability factor (SAF) refers to head lease and/or sublease downtown head office at 555 Robson Street in 2016. These vacancies space that is being marketed, but is not physically vacant. The SAF will create rare opportunities for larger tenants to enter the typically tight slipped to 3.8% (76,365 sf) at year-end 2015 from 6.9% (139,110 sf) at submarket or provide expansion space within the submarket. Yale- year-end 2014, its lowest point since year-end 2013 when the indica- town remains a unique market that continues to attract tenants in the tor reached 3% (61,439 sf). Hence, the actual amount of available space technology and creative sectors, both of which are thriving in Vancouver; currently being marketed (occupied and vacant) in Yaletown is 7.9% or however, these large pockets of space coming available could heighten approximately 159,000 sf. concerns regarding rising vacancy. CLASS INVENTORY HEAD LEASE SUBLEASE TOTAL VACANCY TOTAL 12-MONTH SAF (SF) SAF (%) NET RENTAL RATE GROSS OCCUPANCY VACANCY (SF) VACANCY (SF) (SF) VACANCY (%) ABSORPTION (SF) RANGE (PSF) COST (PSF) A 576,938 7,446 0 7,446 1.3% 8,734 39,111 6.8% $26 - $33 $41 - $49 B 998,357 53,989 0 53,989 5.4% -32,228 10,903 1.1% $19 - $25 $33 - $40 C 453,949 21,362 0 21,362 4.7% 3,403 26,351 5.8% $14 - $20 $26 - $33 Total 2,029,244 82,797 0 82,797 4.1% -20,091 76,365 3.8% - -

8 I Partnership.Performance. Burnaby Vacancy stable as leasing drives positive annual absorption

Vacancy and Absorption Graph: 16.0% 300,000 248,017 14.0% 14.5% 250,000 200,000 12.0% 212,072 12.9% e 12.6% e e (sf)

a t 150,000 a t a t R

10.0%

R 10.6% R

n y

100,000 n o c

i 9.1% 52,757 8.0% o i t 34,390 32,637 t a n p 7.8% 50,000 p r r

o 6.0% o s 0 V a c s b b

A 4.0%

-50,000 A

2.0% -100,000 -114,783 Cressey will include a six-storey, 70,000-sf office building with retail space 0.0% -150,000 2011 2012 2013 2014 2015 2016F on the ground floor as part of the Kings Crossing development. Vacancy Absorption 12-month projection based on 10-year average absorption and known net Vacancy Trends absorption in new inventory Vacancy remained stable in Burnaby during 2015 and finished the year at Recent Lease Deals – Year-End 2015 12.9%, almost unchanged from the 12.6% recorded at year-end 2014. Most TENANT BUILDING SF of the major lease deals were renewals with a limited shuffling of smaller ten- Microsemi Corp. (renewal) 8555 Baxter Place 125,000 ants already in the submarket making up the majority of lease activity. Telus Canadian Food Inspection Agency (renewal) 4321 Still Creek Drive 40,000 continued to vacate the Burnaby market as it consolidates operations in its Crius Financial Services Corp. (renewal) 4720 Kingsway 20,000 new head office in Downtown Vancouver. Current tenants in the market are Shoeme.ca (sublease) 3777 Kingsway 18,000 taking on expansion space to capitalize on the favourable terms being given Fortinet Technologies 4190 Still Creek Drive 17,380 by landlords. Smaller tenants have been filling pockets of vacancy, particu- Konica Minolta Business Solutions (Canada) Ltd. 4401 Still Creek Drive 17,000 larly in class B space. Sublease availability remains primarily limited to Telus’ (expansion) former space at 3777 Kingsway and in Willingdon Park. There were few Rising Star Learning 4664 Lougheed Highway 13,070 new entrants to the submarket in 2015. Tenants have a wide range of options Regus Group (renewal) 4170 Still Creek Drive 12,500 to consider and landlords have had to provide inducements to attract new Mindfield RPO Group Inc. 3480 Gilmore Way 11,500 tenants and maintain face rates. Business Centre Solutions 3292 Production Way 11,500 Absorption Trends Infoblox Canada Ltd. 4710 Kingsway 11,000 Schweitzer Engineering Laboratories Inc. 4299 Canada Way 10,500 Positive annual absorption of 32,637 sf in 2015 marked the second con- Aerotek 4321 Still Creek Drive 8,200 secutive year of positive absorption recorded in the market. While Telus vacated more than 40,000 sf at 3500 Gilmore Way, Thales Rail Signal- Developer Building SF Completion ling Solutions occupied 20,000 sf at 3555 Gilmore Way. Most absorption Appia Group SOLO District (phase II) 230,000 (office) Q2 2016 in 2015 was attributed to the occupancy of small pockets of vacancy. Cressey Kings Crossing, 7350 Edmonds Street 63,000 (office) Q4 2018 Awaiting prelease New Construction Kingswood Capital Discovery Place Business Park 50,000 commitment The office component of phase two of Appia Development’s SOLO Sears Canada 4750 Kingsway (Metrotown) Two office towers Proposed District is scheduled for completion in the second quarter of 2016. The Shape Properties Brentwood Town Centre One/two office towers Proposed 230,000-sf office component, which consists of 12 floors in a 54-storey Onni Group Gilmore Station 996,900 (office) Proposed mixed-use tower, is approximately 18% preleased. Tenants include CMW rise in vacancy will likely be offset by the removal of Metrotower III from Insurance (21,000 sf), Bosa Development (11,000 sf) and Embassy the leasing market as it will be primarily occupied by its new owner, Metro Properties (10,000 sf). Cressey’s Kings Crossing development near the Vancouver, in the next 18 months. The regional authority’s former head Edmonds SkyTrain station will include a 70,000-sf office/retail tower as office will likely be redeveloped and subsequently removed from Burnaby’s part of the project and is set to break ground in fall 2016. office inventory. It is anticipated that deal velocity will be slow as the majority Market Forecast of tenants in the market with lease expiries in 2016 have already been ad- While rental rates remained stable in 2015 with landlords offering induce- dressed. Engineering firms with connections to the oil and gas industry may ments to maintain face rates, more of the same is anticipated for 2016. return additional space to the market, but it is expected that tech tenants will Vacancy is expected to rise slightly due primarily to the delivery of the office expand. Most deal velocity or growth will be organic through renewals or component in SOLO District, which remains largely vacant. A more significant renewal/expansions. CLASS TOTAL HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH AVERAGE NET GROSS OCCUPANCY RENTABLE (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RENTAL RATE (PSF) COST (PSF) A 6,081,516 797,795 118,394 916,189 15.1% -24,972 $16 - $28 $30 - $42 B 2,081,671 174,366 0 174,366 8.4% -225 $14 - $18 $27 - $31 C 937,068 83,284 1,650 84,934 9.1% 57,834 $13 - $19 $24 - $30 Total 9,100,255 1,055,445 120,044 1,175,489 12.9% 32,637 - -

Partnership.Performance. I 9 Richmond Most positive annual absorption recorded since 1997

Vacancy and Absorption Graph 25.0% 200,000 186,883 23.3% 167,121 180,000 20.0% 160,000 ) f

19.3% s e (

t 140,000 n R a

15.0% 110,703 120,000 i o t y 15.4% 15.2% c r p n 100,000 o a s c 12% a 10.0% 11% 80,000 V A b 60,000

5.0% 40,000 41,264 10,124 20,000 7,545 0.0% 0 2011 2012 2013 2014 2015 2016F Vacancy Absorption 12-month projection based on 10-year average absorption Vacancy Trends Leasing activity in Crestwood Corporate Centre contributed to the recovery of Richmond’s office market in 2015. Vacancy declined to its lowest level since year-end 2007 as tenants re- newed and/or expanded, capping off a five-year period of recovery dur- Recent Lease Deals – Year-End 2015 ing which vacancy fell to 12% at year-end 2015 from 24.6% at year-end TENANT BUILDING SF 2010. Tenants are increasingly drawn to the No. 3 Road corridor due to its Boeing Co. (renewal) Crestwood Corporate #5/#6 42,210 proximity to transit; however, available office space in the area is in short Wenco International Mining Systems Ltd. Crestwood Corporate #8 29,065 supply and high demand. Richmond’s more traditional office parks have Sierra Wireless Inc. Crestwood Corporate #2 23,060 also recorded lower vacancy as businesses were increasingly attracted Clevest Solutions Inc. 13911 Wireless Way 20,000 to the value proposition offered in the form of moderate rents and the Star Solutions International Inc. (renewal) 4600 Jacombs Road 21,050 ability to expand within the park. A lack of new supply has contributed Syscon Justice Systems 3600 Lysander Lane 17,920 to tenants absorbing existing space, particularly in class B assets. Vacancy Kahn Zack Ehrlich Lithwick LLP Airport Executive Park #7 13,080 is anticipated to continue to tighten through 2016 as potential new sup- ply is in process with the city, rental rates remain modest and landlords Developer Building SF Completion continue to offer generous tenant inducement packages. Ampri International Gateway Centre Ampar Ventures Ltd. (office/hotel) 105,000 (office) Proposed New Continental 8320, 8340 & 8440 Bridgeport Way; and 8311 101,540 Absorption Trends Properties Inc. & 8351 Sea Island Way (office/campus) Proposed Annual absorption in 2015 was the most recorded since 2005 and was Westmark 4100, 4120, 4126, 4140, 4180 & 4220 Garden 71,990 (office/ Development Group City Road and 9131, 9151 & 9191 Odlin Road commercial) Proposed the second highest achieved in Metro Vancouver. A combination of ex- Bene Development Nine-storey building pansions and relocations contributed to positive absorption in all classes, Ltd. 4700 No. 3 Road (retail/office) Proposed including more than 122,000 sf of class A space. Modest rental rates Formation Project Mgmt. 8740, 8760, 8780, 8880 & 8900 Charles Street 45,210 (office) Proposed remain a key factor in driving absorption, particularly in class B space, iFortune Center (6840 & 6860 No. 3 Road and which has resulted in very few tenants relocating out of the market and iFortune Homes Inc. 8051 Anderson Road) 102,740 (office) Proposed subsequently generating positive organic absorption. This trend is antici- Market Forecast pated to continue with no new supply likely to disrupt absorption in the next 12 months and rental rates that will help secure existing tenants and Richmond’s recovery is expected to slow in 2016 as balance returns to potentially attract new ones. the market and vacancy continues to tighten and absorption remains positive. Rental rates are forecast to remain largely unchanged, but some New Construction upward pressure on rents for office space located along the No. 3 Road A lack of new construction has been one factor contributing to the recov- corridor, particularly in Downtown Richmond, may begin to manifest. ery of Richmond’s office market, but that may soon change. An increasing New office construction may also break ground in 2016, which could lead number of rezoning and development permit applications have been filed to the delivery of new office product in 2017/18, which would mark the with the City of Richmond since 2014. All remain in process. first time new office supply had been delivered since 2008.

CLASS TOTAL HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH AVERAGE NET GROSS OCCUPANCY RENTABLE (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RENTAL RATE (PSF) COST (PSF) A 2,895,256 356,574 53,542 410,116 14.2% 122,765 $16.50 - $18 $27 - $29.50 B 972,346 31,834 7,817 39,651 4.1% 42,115 $13.50 - $15 $25 - $26.50 C 348,198 54,653 0 54,653 15.7% 22,003 $10.50 - $11.50 $18.50 - $20 Total 4,215,800 443,061 61,359 504,420 12% 186,883 - -

10 I Partnership.Performance. Surrey Positive annual absorption reducing elevated vacancy

Vacancy and Absorption Graph

25.0% 60,000 36,751 40,000 22.1% 16,018 20.0% 20,000 -6,879 14,475

18.6% 0 ) f e 17.5% s ( t 17.3% -20,000

15.0% -47,226 n R a

i o

y -40,000 t c n -60,000 r p a

11.5% o c 10.0% s

a -80,000 V

8.8% A b -100,000 5.0% -120,000 -137,809 -140,000 0.0% -160,000 2011 2012 2013 2014 2015 2016F Vacancy Absorption 12-month projection based on 10-year average absorption Coast Capital vacated its former headquarters at 15117 101st Street, which contributed to Surrey’s elevated vacancy rate. New Construction Vacancy Trends Industrial Alliance’s Gateway Place is under construction and is scheduled to be delivered in the third quarter of 2016. Construction on Vacancy declined to 17.5% at the end of 2015 from 22.1% a year earlier, Lark Group’s City Centre 2 broke ground in January 2016 and has no but did rise from mid-year and remained elevated in all classes. Coast prelease commitments in place. PCI Group/Triovest is preparing for Capital vacated more than 100,000 sf when it relocated to The HUB phase two of its mixed-use development near the King George SkyTrain at King George Station in fall 2015. While approximately half of Coast station, which will include approximately 170,000 sf of office space. Capital’s former space will be backfilled by Westminster Savings, Coast Avondale Development’s The Professional Centre @ South Point Capital’s old head office at 15117 101st Street remains mostly vacant. Ad- is proposed to start construction in 2016. Circadian Projects’ proposed ditional vacancy was also delivered in the HUB with two floors remaining 18-storey office tower remains in process with the City of Surrey. to be leased. Surrey’s office market has not recovered from the departure of a handful of large tenants in 2013/14. The ongoing delivery of specula- Market Forecast tive office supply continues to exacerbate vacancy further. Despite moderate leasing activity in the Surrey market in 2015, absorp- Absorption Trends tion is anticipated to remain minimal (but positive) and vacancy is expect- ed to rise slightly in 2016 due in part to the delivery of vacant new supply. Annual positive absorption of 36,751 sf represented the greatest amount of annual absorption recorded in Surrey since year-end 2010, but was primar- Rental rates will remain flat in 2016 as a plentiful supply of options, both ily due to activity that occurred in the first half of 2015. The combination large and small, continues to provide tenants with a range of choices. of Coast Capital’s relocation and the delivery of The HUB at King George Leasing activity will continue to be spread among Surrey’s submarkets Station (which was partially vacant) in the second half impacted annual ab- such as Guildford, Central City, Newton, etc. With Gateway Place currently sorption negatively. Westminster Savings will occupy Coast Capital’s former scheduled as the only new supply to be delivered until late 2018, organic space at Central City in 2016 when it relocates from New Westminster, a absorption during the next two years may assist in lowering the elevated move that will contribute positive absorption to the Surrey market. vacancy that has characterized the market since 2013. Developer Building SF Completion Recent Lease Deals – Year-End 2015 TENANT BUILDING SF Industrial Alliance Gateway Place, 13479 108th Avenue 56,000 Q3 2016 (office/retail) (office) Westminster Savings Credit Union 10153 King George Boulevard 52,900 172,000 Lark Group City Centre 2, 9639 137A Street (office) Q3 2018 Village Church 14928 56th Avenue 22,000 Landview GTC Professional Building, Awaiting prelease Frozen Mountain Software (sublease) 5455 152nd Street 11,500 Construction 10189 153rd Street 103,700 commitment Dale Matheson Carr-Hilton Labonte LLP 1688 152nd Street 11,000 The Hub at King George Station (phase two), 170,000 PCI Group/Triovest 9900 King George Boulevard (office/retail) (office) Planned Regus Group 15300 Croydon Drive 11,000 Avondale Fraser Health 7327 137th Street 6,500 Development Corp. / The Professional Centre@ South Point, 87,500 Proposed Monark Group 3231 152nd Street (office) Westland Insurance Morgan Creek Corporate 5,600 Circadian Projects 9677/9681 King George Boulevard 178,000 Proposed Direct Credit 7495 132nd Street 4,500

CLASS TOTAL HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH AVERAGE NET GROSS OCCUPANCY RENTABLE (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RENTAL RATE (PSF) COST (PSF) A 2,019,968 319,534 28,178 347,712 17.2% -22,748 $18 - $30 $32 - $43 B 626,010 118,525 0 118,525 18.9% 58,628 $13 - $18 $26 - $30 C 205,629 33,853 0 33,853 16.5% 871 $9 - $13 $23 - $25 Total 2,851,607 471,912 28,178 500,090 17.5% 36,751 - -

Partnership.Performance. I 11 New Westminster Positive annual absorption slowly chipping away at vacancy

Vacancy and Absorption Graph

25.0% 200,000 178,035

20.0% 20.8% 150,000 ) f s (

e 16.8% e a t 15.0% 100,000 a t R R

15% y n c o 12.7% i t

a n 11.8% p

10.0% 52,537 50,000 r

29,444 o V a c 9.3% s

39,368 b A 5.0% 0 -1,478 -33,147 0.0% -50,000 2011 2012 2013 2014 2015 2016F Vacancy Absorption 12-month projection based on 10-year average absorption

Recent Lease Deals – Year-End 2015 TENANT BUILDING SF Fraser Health 287 Nelson’s Court 8,000 (TransLink building) The 137,000-sf Anvil Centre office tower remains vacant and will Amix Group 625 Agnes Street 7,600 continue to significantly impact vacancy and leasing activity in New Westminster. Sea To Sky Law Corp. 625 Agnes Street 6,170 Hanson International Academy 960 Quayside Drive 3,220 Developer Building SF Completion J.Y. Kim & Associates 800 McBride Boulevard 2,000 97 Braid Street (near Braid Street SkyTrain Bentall Kennedy station) part of proposed Sapperton Green Up to 400,000 Proposed New Construction mixed-use development site (office) There is currently no new office construction underway in New Westminster. Vacancy Trends Strata office space and build-to-suit opportunities are available in the Vacancy tightened to 15% at year-end 2015, down from 16.8% 12 months Brewery District. Redevelopment plans involving Bentall Kennedy’s earlier, and is the lowest recorded vacancy since the delivery of the still- proposed mixed-use community, Sapperton Green, were postponed as vacant Anvil Centre office tower in the first half of 2014. Deal velocity a result of Amazon.com choosing to extend and expand its lease com- has been minimal in all classes with many tenants choosing to renew mitment to a warehouse located on a portion of the proposed redevelop- long-term lease deals as opposed to relocating. Class A vacancy of 24.5% ment site. However, a valid and active development permit for two office represents a disproportionate share of overall vacancy in New Westmin- buildings up to 400,000 sf still remains in place for the property, but a ster when compared with vacancy in class B and C assets. Approximately prelease commitment would be necessary to start construction. 72% of New Westminster’s class A vacancy is located in the Anvil Centre’s Market Forecast office tower. The decline in vacancy recorded in 2015 was the result of lower-cost sublease space being taken up accompanied by modest leas- Deal activity is forecast to remain nominal in 2016 (as it was in 2015) with ing activity in all asset classes. limited positive absorption contributing to a slight decrease in vacancy. Rental rates are anticipated to remain flat. New construction will likely Absorption Trends remain at a standstill unless accompanied by a significant prelease com- Annual positive absorption of 29,444 sf represented the greatest amount mitment. The departure of Westminster Savings from the submarket of positive absorption recorded in New Westminster since TransLink in 2016, the result of combining of its operations at 422 Sixth Street and and its related companies occupied their new head office in Wesgroup’s 960 Quayside Drive into the Central City office tower in Surrey, could Brewery District development in 2013. The potential for achieving exacerbate vacancy further and negatively impact absorption. The poten- substantial annual positive absorption moving forward remains largely tial leasing (or stratification) of the office tower at the Anvil Centre, which limited until the fate of the 137,000-sf office tower at the Anvil Centre is was sold to private investors in February 2014, remains the largest factor settled or a significant lease deal is announced. influencing the New Westminster office submarket moving forward.

CLASS TOTAL HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH AVERAGE NET GROSS OCCUPANCY RENTABLE (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RENTAL RATE (PSF) COST (PSF) A 780,114 190,901 0 190,901 24.5% 14,337 $19 - $27 $32 - $41 B 700,684 48,280 0 48,280 6.9% 8,876 $13 - $17 $25 - $28 C 207,774 14,501 0 14,501 7% 6,231 $8 - $12 $20 - $24 Total 1,688,572 253,682 0 253,682 15% 29,444 - -

12 I Partnership.Performance. North Shore Vacancy tightening due to absorption and limited supply

Vacancy and Absorption Graph 12.0% 40,000

16,128 20,000 )

10.0% f

6,576 s ( 9.6% 790 e e 0 t t 8.0% 8.5%

8.2% R a

R a -8,891 7.8% 7.9% n y 7.3% -20,000 c i o t n 6.0% a r p c a -40,000 o s V 4.0% -56,772 -60,000 A b

2.0% -80,000 -86,621 0.0% -100,000 2011 2012 2013 2014 2015 2016F Vacancy Absorption 12-month projection based on 10-year average absorption Recent Lease Deals – Year-End 2015 Harbourview Projects’ new East Esplanade strata light TENANT BUILDING SF industrial/office development highlights the trend towards the Petitt and Company 2609 Westview Drive 4,870 mixed-use redevelopment of older single-use buildings. Everything Wine 758 Harbourside Drive 4,860 Absorption trends North Shore Heart Group 1133 Lonsdale Avenue 4,070 Positive annual absorption of 6,576 sf was recorded at year-end 2015. The W.L. Macdonald Law Corporation 221 West Esplanade 3,010 majority of absorption was registered in class B properties with minimal Hanson & Co. Personal Injury Law 1401-1409 Lonsdale Avenue 2,050 absorption in class A and C properties. Demand was strong in the first Developer Building SF Completion half of 2015 with few lease options, but weakened in the second half. East Esplanade, 22,443 (strata Harbourview Projects 350 & 370 East Esplanade office/showroom) Q1 2017 New Construction Polygon West Quay, 260 West 38,000 (strata Q3 2017 Harbourview Projects’ four-storey East Esplanade light industrial/office Esplanade (mixed use) office/retail) development will offer strata office space on its second and third (includ- CentreView, 1308 Lonsdale Onni Group Avenue (mixed use) 78,800 (office) Q3 2017 ing mezzanine) floors. CentreView will offer 78,800 sf of office space on four 801, 889 & 925 Harbourside floors as well as ground-floor retail when it is completed in 2017. No office Concert Properties Drive and 18 Fell Avenue 204,000 (office) Proposed tenants have been confirmed for the project. Polygon’s West Quay de- (mixed use) velopment will offer 38,000 sf of strata office/retail space when completed Hollyburn Legacy Prop Ltd. 1301 Lonsdale Avenue 14,100 (office) Proposed in the third quarter of 2017. Concert Properties submitted its develop- Vacancy Trends ment permit application in January 2016 for the first phase of its proposed mixed-use Harbourside development. The first phase, which includes Vacancy in the North Shore office market tightened to 7.3% at year-end 40,000 sf of retail space, could break ground by fall 2016. The four-phase 2015, a drop from the 7.8% registered just 12 months earlier. Increased development will include 204,000 sf of office space when completed. leasing activity in class A and B properties – primarily small pockets of space being absorbed in multiple buildings – along with a lack of new Market Forecast supply helped to push vacancy lower. With no new supply delivered until Rental rates remained stable in 2015 with some landlords providing induce- 2017, vacancy is expected to continue to tighten. Preleasing activity has ments to tenants to ensure buildings remain fully occupied. Upward pres- been limited in the market – one of the smallest in Metro Vancouver – and sure on rates may start to manifest in 2016 as vacancy tightens and the lack which is generally characterized by office tenants with small space require- of new supply becomes more pronounced. The large blocks of space com- ments. The addition of Onni Group’s CentreView development will have ing to market in CentreView have not been seen on the North Shore in years a significant impact on vacancy if delivered vacant in 2017. Strata office and will create new opportunities for tenants. For larger tenants, options projects under development may impact vacancy if tenants choose to are currently limited in the market, which has resulted in very few choices if become owners due to the lack of lease options and the low cost of capital. expansion or relocation is necessary. Strata buildings will continue to have Sublease vacancy rose due to Newalta Corp. vacating 111 Forester Street. an impact on vacancy as some tenants embrace ownership opportunities.

CLASS TOTAL HEAD LEASE SUBLEASE TOTAL TOTAL 12-MONTH AVERAGE NET GROSS OCCUPANCY RENTABLE (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) VACANCY (%) ABSORPTION (SF) RENTAL RATE (PSF) COST (PSF) A 793,013 29,265 14,752 44,017 5.6% 1,694 $20 - $27 $31 - $43 B 481,395 41,306 3,552 44,858 9.3% 3,630 $15 - $19 $23 - $31 C 97,690 11,705 0 11,705 12% 1,252 $13 - $16 $19- $26 Total 1,372,098 82,276 18,304 100,580 7.3% 6,576 - -

Partnership.Performance. I 13 Suburban Development Timeline 5 0% 78,800 sf Q3 2017 Onni Group Onni CentreView North Shore 1308 Lonsdale1308 Ave. No tenants at this time oung.

A, Avison y b 8 10 0% 100% Cressey Burnaby 63,000 sf 143,000 sf 143,000 Q4 2016 Q4 2018 Rize Alliance Kings CrossingKings 7350 Edmonds St. Edmonds 7350 468 Terminal Ave. .C.) Inc.; D Containers (phase II) b Vancouver-Broadway No tenants at this time 143,000 sf 143,000 eal Estate (

Ave. th 4 12 oung Commercial r oung Commercial 0% 0% Surrey Surrey 56,000 sf 56,000 172,000 sf 172,000 Lark Group Q3 2016 Q3 2018 City Centre 2 9639 137A St. 9639 137A Gateway Place 13479 108 Industrial Alliance No tenants at this time No tenants at this time Ave. th 4 10 80% Fifth 100% Cressey 94,120 sf 75,690 sf Q1 2018 Q3 2016 380 West 5 BlueSky Properties 988 West Broadway Vancouver-Broadway Vancouver-Broadway Broadway Commercial Broadway 75,690 75,000 ry 2016

UA br E 7 0% 18% Burnaby 12 (office) (office) 12 PCI Group PCI 230,000 sf 165,000 sf 165,000 Q2 2016 Q4 2017 Appia DevelopmentsAppia 2025 Willingdon Ave. Vancouver-Broadway SOLO District (Phase II) No tenants at this time 565 Great Northern Way 20,000 sf 20,000 11,000 sf 11,000 10,000 sf 10,000 UPDATED F Suburban Development Timeline Ave. th Ave. th 7 6 0% 0% 45,200 sf 161,610 sf Q1 2016 Q4 2017 22 East 5 Renfrew Centre 2889 East 12 Vancouver-Broadway Vancouver–Broadway No tenants at this time No tenants at this time The LightworksThe Building PC Urban Properties Corp. Blackwood Partners/AIMCo Realty oung. All rights reserved. Tenants (leased) Tenants Residential Tenants Office sf Developer Storeys Occupancy rates Occupancy rates City Office sf Developer Storeys Tenants City © 2016 Avison y © 2016 E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought be to correct, is not guaranteed by Avison y

14 I Partnership.Performance. Special Feature

BC to lead Canada in economic growth through 2019 despite volatility he British Columbian economy will weather global economic turmoil approach 2.3% by 2017. Conversely, the unemployment rate is forecast Tand grow faster than any other province until at least 2017, according to to remain largely unchanged - around 6% - in Vancouver and BC in 2016 economic forecasts from Central 1 Credit Union and the Conference when compared with 2015, but then decline by 50 basis points to ap- Board of Canada. proximately 5.5% in 2017. Vancouver is expected to continue to lead Canada in terms of economic Central 1 Credit Union forecasts similar figures related to BC’s unemploy- performance in 2016 and remain an engine of employment generation. ment rate with provincial unemployment dropping from 6.3% in 2016 to Both forecasts indicate that the province will lead the country in terms of 5.4% in 2017 followed by a further decline to 4.4% in 2018 and 4% in 2019. real GDP until 2017 with Central 1 forecasting that BC will outperform the “Provincial unemployment is forecast to climb this year to 6.3% but that rest of Canada through 2019. Low interest rates and a lower currency will will reflect increased confidence rather than deterioration in the labour benefit BC despite the difficulties posed by a weak commodity sector. market,” according to the Credit 1. “ The unem- According to Credit 1, housing investment “Hiring momentum will gear off economic ployment rate will return to a declining trend and household demand will support moder- growth and drive employment growth of in 2017 onwards, reflecting a combination of ate economic growth of 3% in 2016. A decline hiring and demographics.” 1.7% this year, and above two per cent over in the Canadian dollar and an improving U.S. While rosy economic forecasts for BC and Van- economy will strengthen export activity in the remainder of the forecast period.” couver bode well, there is still some work to be sectors such as tourism, services, and non- - Central 1 Credit Union done when it comes to head office employ- resource goods. Economic growth greater ment, according to a new Business Council of British Columbia Policy than 3% is forecast in 2017 and 2018 and then 2.8% in 2019 due to stable Perspectives paper, Canadian Head Office Surrey: How Do Metro Vancouver consumer activity and greater business investment. and British Columbia Stack Up? “Hiring momentum will gear off economic growth and drive employment The main highlights from the paper include: growth of 1.7% this year, and above two per cent over the remainder of the forecast period,” according to Central 1 Credit Union’s Economic Analysis • Statistics Canada’s Annual Head Office Survey shows that Metro Van- of British Columbia published in January 2016. “Relatively stronger labour couver has room for improvement if the region wants to “punch at its market and economic trends in BC will attract a rising number of residents weight” compared with other major cities across Canada. from other provinces, offsetting modest international migration trends.” • Attracting new corporate offices, and growing more local firms into The Conference Board of Canada’s economic outlook for BC highlights that larger-scale businesses, would strengthen Metro Vancouver’s and British construction on the first multi-billion-dollar LNG terminal could start in late Columbia’s economic diversity and also create more high-paying jobs. 2016, which would provide a strong boost to the construction industry • Different levels of government and the business community have part- and business services. The conference board outlook also highlights the BC nered to launch two recent initiatives aimed at increasing the corporate housing market and indicates that it shows “no signs of fatigue and remains office presence in Metro Vancouver – and these have scored a couple a dominant factor in the solid performance of the economy.” of early “wins,” suggesting that Metro Vancouver can compete on the While Vancouver’s GDP has led the province in terms of real GDP growth world stage despite the disadvantages stemming from high housing since 2010, according to the Conference Board, provincial GDP is forecast costs and a lacklustre reputation as a global business centre. to surpass Vancouver’s GDP in 2016 with real GDP in both the province • To build a stronger corporate sector, political, civic and business leaders and the city forecast to be about 3% in 2017. The Conference Board need to collaborate to: establish a clear vision for the region, speak with forecasts that mixed-use and non-residential construction will make the one voice, address Metro Vancouver’s reputation as a “high-cost jurisdic- construction sector Vancouver’s top economic performer. Employment tion” for companies, and overcome the perception in some quarters growth is forecast to exceed 2% in both BC and Vancouver in 2016 and that Vancouver is “not a city for global business.” Forecast Summary: British Columbia 2014 2015 2016 2017 2018 2019 Real GDP, % Change 3.2 3.4 3 3.2 3.4 2.8 Nominal GDP, % Change 4.7 3.4 3.8 5.2 6.1 6.2 Employment, % Change 0.6 1.2 1.7 2 2.5 1.6 Unemployment Rate, (%) 6.1 6.1 6.3 5.4 4.4 4 Population, % Change 1.2 1 1 1.1 1.3 1.2 Housing Starts (000s) 28.4 31.1 33.8 34.7 34.1 33.9 Retail Sales, % Change 5.6 6.4 4.3 5.3 5.6 5.5 Personal Income, % Change 3.6 4.5 4.6 4.8 5.5 5.4 Net Operating Surplus Corporations, % Change 8.7 -15.7 -9.6 3.6 0.2 6.4 Consumer Price Index, % Change 1 1.1 1.8 1.7 1.9 2.3 Source: Statistics Canada, Central 1 Credit Union

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Sublease vacancy at year-end 2015 in the 50-msf Metro Vancouver office For more information please contact: market rose to 9.7% (of total vacancy) from 9% at year-end 2014. Regional sublease vacancy has remained stable since mid-year 2014, hovering be- Michael Keenan, Principal & Managing Director tween 9% and 10% despite a significant expansion of the office market since Direct Line: 604.647.5081 that time. Downtown sublease vacancy dropped to 11.7% (of total vacancy) [email protected] at year-end 2015 from 12.9% a year earlier. Excluding mid-year 2015 sublease Andrew Petrozzi, vacancy of 10.1%, Downtown sublease vacancy at year-end 2015 was the Vice-President, Research (BC) lowest since year-end 2003. Concerns that sublease vacancy could spike Direct Line: 604.646.8392 substantially after the delivery of significant new supply in 2015 have not [email protected] materialized. Outside the Downtown core, the amount of vacant sublease Sherry Quan, space has slipped to its lowest point since at least 2004. Two submarkets, Principal & Global Director of Communications & Media Relations Yaletown and New Westminster, have no sublease vacancy, while Vancou- Direct Line: 604.647.5098 [email protected] ver-Broadway has less than 7,000 sf. Only Burnaby, Richmond and the North Shore have sublease vacancy that exceeds 10% (of total vacancy). Following the delivery of new office product in suburban markets through Avison Young Office Leasing Team 2013 and 2014, more than 1.7 msf was added to the Downtown core in 2015. Nicolas Bilodeau David MacFayden Another 800,000 sf is scheduled for delivery Downtown by the end of 2018, [email protected] [email protected] and more than 700,000 sf of new supply is scheduled for completion by the Robin Buntain Justin Omichinski first half of 2018 in the Vancouver-Broadway submarket. More than 290,000 sf [email protected] [email protected] is planned for Burnaby by 2018 and almost 230,000 sf of new inventory is Fergus Cameron Brian Pearson [email protected] [email protected] anticipated to be completed in Surrey by the second half of 2018. The North Shore will add almost 79,000 sf by the second half of 2017 (along with more Matthew Craig* Leeanna Petrik [email protected] [email protected] than 60,000 sf of strata office space). In total, more than 2 msf of new office Shaan Desai Max Ripper space is scheduled for delivery in Metro Vancouver by 2018. [email protected] [email protected]

The Downtown market is expected to remain stable for the next 12 to 18 Bill Elliott Dan Smith months as the market continues to digest the new space delivered in 2015 [email protected] [email protected] and new supply remains limited and primarily preleased through 2016. Glenn Gardner* Josh Sookero* [email protected] [email protected] Delivery of the Exchange building (which is under construction and remains largely vacant) in the second quarter of 2017 may negatively impact the Sean Keenan Terry Thies* [email protected] [email protected] Downtown office submarket depending on the economic conditions pres- Derek Lee Tammy Stephen ent at the time and if the source of ongoing tenant demand remains unclear. [email protected] [email protected] Overall suburban vacancy decreased to 11.1% at year-end 2015 from 11.9% James Lewis Matt Walker at year-end 2014. The tightening of suburban vacancy came in large part [email protected] [email protected] from organic growth and expansion in the Richmond submarket as well as Jason Mah* Ian Whitchelo* an overall improvement in leasing activity generally. [email protected] [email protected] Metro Vancouver’s office market is well prepared for 2016 having come *Personal Real Estate Corporation through the largest expansion of office space in decades with regional va- cancy remaining at 10%, face rates largely intact and sublease vacancy at new lows. While risk factors such as the overestimation of future tenant demand, the end of the commodities cycle and rapidly escalating building costs remain present, the region’s fundamentals remain largely unscathed after the signifi- Avison Young cant expansion of the region’s office market. The stage is already set for the #2900-1055 W. Georgia Street  next wave of development should those risks be managed accordingly. Box 11109 Royal Centre Vacant Sublease Space Vancouver, BC V6E 3P3, Canada 600,000

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q 234,251 avisonyoung.com S 200,000 182,108 190,092 148,684 125,721 © 2016 Avison Young. All rights reserved. 100,000 E. & O.E.: The information contained herein was obtained from sources 0 which we deem reliable and, while thought to be correct, is not guaranteed 2010 2011 2012 2013 2014 2015 by Avison Young Commercial Real Estate (B.C.) Inc.; DBA, Avison Young. Metro Vancouver Downtown