Office fall2010 final

Q3 2010 | OFFICE greater toronto area COLLIERS INTERNATIONAL | MARKET REPORT & FORECAST Canadian Market Overview As the third quarter of 2010 comes to a close, the economic climate remains cautiously optimistic with the recovery still fragile. Warren Buffett recently stated he does not see signs of the U.S. headed for a double dip, though that may bring little comfort for the unemployed as everyone watches to see if unemployment numbers improve. GDP growth in the first half of this year surprised many with a strong showing at 5.8 percent. Depletion of inventories, unleashed pent-up demand, and fiscal and monetary stimulus have all contributed to this astounding growth. As we enter into the second half of 2010, GDP is expected to grow at a more subdued level of about 2.0 percent (annualized) due in part to a weak U.S. recovery, an increasingly fatigued consumer, and the easing of monetary and fiscal stimulus that were needed to stave off a global recession. GTA Office Market Overview The Greater Toronto Area (GTA) office market gradually regained stability in 2010 as a healthy availability rate was established at approximately 10.5 percent for the past 12 months. The vacancy rate remained stable for the past four consecutive quarters at 6.5 percent, despite the completion of many new buildings during the last two years. All five GTA North MARKET INDICATORS GTA East Q3 2010 OFFICE INVENTORY ~ NET ABSORPTION ~ GTA West VACANCY RATE  Midtown Downtown AVERAGE ASKING NET RENT ~ AVERAGE ADDITIONAL RENT |} www.colliers.com/toronto

MARKET REPORT & FORECAST | Q3 2010 | OFFICE | GREATER TORONTO AREA GTA Office Market Overview (continued) GTA markets reported minimal positive versus 13.5 percent in GTA central. net absorption which has yet to affect the Across the GTA, all markets showed a overall vacancy rate. Average asking net return of activity, which is anticipated to rent fluctuated marginally within a range increase positive absorption. Occupancy of $16.25 to $16.35. Although some areas rates should continue to increase as no appeared to be more competitive than major new supply is expected in the market others, the overall GTA office market held in the near future. Average asking net rent is on to a tenant-favoured sentiment, with expected to dip slightly over the balance of opportunities for tenants to optimize their 2010 and gradually pick up in the following real estate strategies. six to nine months. The office market overall In comparison to the central area, suburban is forecasted to stabilize in the short term markets reported higher vacancy rates and and shift to a landlord’s market by the end this year and decline to around 6.1 percent subsequently, a larger sublease market. GTA of next year as supply is depleted. in 12 months. Average asking net rent is East and GTA West contributed to 55 percent Using office employment growth as a proxy projected to increase steadily to $16.38 per of the total vacant space in the GTA and for office space demand, vacancy rates are square foot by the end of Q3 2011. correspondingly, 20.6 percent of available expected to rise marginally by the end of space in suburban GTA was for sublease, GTA | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F Net New Supply Asking Net Rent Vacancy Rate $30 FORECAST 12.0% Net Rent $/PSF/Net New Supply (100,000 SF) $25 10.0% $20 $16.26 8.0% $15 6.5% 6.0% $10 4.0% $5 $0 0.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Colliers International, August 2010 P. 2 | COLLIERS INTERNATIONAL

MARKET REPORT & FORECAST | Q3 2010 | INDUSTRIAL | GREATER TORONTO AREA GTA Downtown THE MARKET Q4 2007, but its pace slowed in the past The gradual expansion of the Finance, year to settle at 5.6 percent by Q3 2010. Insurance and Real Estate (FIRE) sector After a significant decline of 9.7 percent in has been one of the primary drivers of the Q3 2009, average asking net rents hovered downtown market over the past five quarters. at approximately $21 for the past year. Some mid-size companies have been active in the downtown market outside of the financial FORECAST core, while smaller companies do not have Rental rates are predicted to remain a strong presence in this market. Renewals steady in the short term and eventually have been predominant in the marketplace increase in the second half of 2011 as and tenants have remained cautious, thus the market becomes more favorable to placing some downward pressure on rental landlords. It is foreseeable that vacancy rates in order to retain the competitiveness rates for Class A and AAA buildings will Similar to the GTA market as a whole, the of available space. go up by the end of this year as some downtown vacancy rate is projected to large tenants have decided to relocate experience a minimal increase followed by TRENDS outside of the financial core. Going into a decline in 2011. Average asking net rent is GTA Downtown has been stabilizing in both 2011, the return of strong activity is expected to increase steadily to $21.34 per vacancy and rent performance.The vacancy expected to turn into positive absorption. square foot by the end of Q3 2011. rate has been continuously increasing since GTA DOWNTOWN | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F Net New Supply Asking Net Rent Vacancy Rate $30 FORECAST 18.0% Net Rent $/PSF/Net New Supply (100,000 SF) $25 15.0% $15.97 $20 12.0% $15 9.0% 5.6% $10 6.0% $5 3.0% $0 0.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Colliers International, August 2010 COLLIERS INTERNATIONAL | P. 3

MARKET REPORT & FORECAST | Q3 2010 | OFFICE | GREATER TORONTO AREA GTA Midtown THE MARKET stabilization. After a moderate increase With limited new supply, the GTA Midtown of 0.3 percent in the second quarter, the market has not experienced much change. vacancy rate of the midtown market returned Both Yonge-Bloor and Yonge-St.Clair to 4.7 percent, the same level observed in the submarkets had low vacancy rates of four second half of 2009 and early 2010. Average percent and five percent respectively, and asking net rent has declined since Q4 2008 low transaction volumes. With only a few and but has steadied at around $16 per large contiguous spaces available in those square foot in the last three quarters. two areas, smaller deals have been driving FORECAST these submarkets. Yonge-Eglinton had a The midtown market is forecasted to remain much higher vacancy rate of seven percent flat for the rest of 2010 and most of 2011. in comparison to the other two submarkets, With some available sublease space coming which was due to an elevated vacancy rate onto the market, the vacancy rate is expected Colliers projects the GTA Midtown vacancy in Class A buildings. to slightly increase in the short term , but rate will remain at 4.7 percent for most of overall the market is tight. As the economy 2011 and that average asking net rents will TRENDS improves, rents should go up by the middle marginally trend upwards. The GTA Midtown market has followed of next year, which will make it more difficult the trend of the GTA overall in terms of to get deals done. GTA MIDTOWN | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F Net New Supply Asking Net Rent Vacancy Rate $20 FORECAST 10.0% $18 Net Rent $/PSF/Net New Supply (100,000 SF) $15.97 $16 8.0% $14 $12 6.0% $10 4.7% $8 4.0% $6 $4 $2 2.0% $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Colliers International, August 2010 P. 4 | COLLIERS INTERNATIONAL

MARKET REPORT & FORECAST | Q3 2010 | INDUSTRIAL | GREATER TORONTO AREA GTA North THE MARKET record high of $18.22 per square foot. Net The GTA North office market has maintained absorption recovered from a first quarter a vacancy rate of below five percent since loss of 112,383 square feet and began to the Q2 2007 and based on this indicator, is show improvement in the last two quarters considered to be the healthiest market across with a total gain of 305,913 square feet. all other GTA submarkets. This is partially due FORECAST to the tight supply of the smaller submarkets, Minor changes are anticipated in the GTA such as Dufferin-Finch and Richmond Hill. North market and sublease absorption Similar to other markets in the GTA, activity should continue to keep the momentum levels have been rising in GTA North over the going. Similar to other markets, activity levels past quarter due to increased tenant demand. will continue to improve. TRENDS Colliers expects that mild positive net Since the beginning of Q1 2010, vacancy absorption will drive the vacancy rate to 3.9 levels have moderately dropped 5.1 percent percent over the next 12 months and average to 4.7 percent as transactions from 2009 asking net rents should respond with an closed. Average asking net rents responded increase to $18.34 per square foot. with consistent increases to a ten-year GTA NORTH | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F Net New Supply Asking Net Rent Vacancy Rate $25 FORECAST 12.0% Net Rent $/PSF/Net New Supply (100,000 SF) 10.0% $20 $18.22 8.0% $15 6.0% 4.1% $10 4.0% $5 2.0% $0 1.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Colliers International, August 2010 COLLIERS INTERNATIONAL | P. 5

MARKET REPORT & FORECAST | Q3 2010 | OFFICE | GREATER TORONTO AREA GTA East THE MARKET all GTA markets. The vacancy rate fluctuated GTA East has the highest vacancy rate in the between 7.8 percent in Q1 and 8.1 percent in GTA as a whole at 8.1 percent. Submarkets Q3. Leasing activity has improved in most of in this region quoted rental rates of $13.19— the submarkets resulting in a positive change far below the GTA average of $16.26 in net absorption from -342,572 square feet per square foot. Nodes in the southern in Q2 to 423,541 square feet in Q3. part of the GTA East market have stayed FORECAST competitive, such as Consumers Road and Colliers expects the GTA East market to Woodbine-Steeles. However, Scarborough remain constant overall, with moderate has experienced challenges in attracting positive absorption driven by better tenants and continues to have a high level of performing areas such as Markham and available space at approximately 4,130,000 Woodbine-Steeles. square feet. Vacancy rates are expected to trend TRENDS downwards to 7.9 percent by Q3 2011, with Average asking net rents for GTA East reached average asking net rent increasing to $13.25 the bottom of the recessionary trough in per square foot. Q3 2009 and have increased marginally to $13.19 in the last quarter, the lowest among GTA EAST | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F Net New Supply Asking Net Rent Vacancy Rate $16 FORECAST 15.0% Net Rent $/PSF/Net New Supply (100,000 SF) $14 $13.19 13.0% $12 11.0% $10 8.1% 9.0% $8 7.0% $6 5.0% $4 $2 3.0% $0 1.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Colliers International, August 2010 P. 6 | COLLIERS INTERNATIONAL

MARKET REPORT & FORECAST | Q3 2010 | INDUSTRIAL | GREATER TORONTO AREA GTA West THE MARKET West office markets are steady. Asking net While consistent activity was observed rents showed mild fluctuation in the past during the past quarter in the GTA West 12 months and declined from $15.30 in Q1 market, the performance of office leasing to $14.95 per square foot in Q3. varied among submarkets and building FORECAST types. Areas such as the Airport Corporate Centre continued to experience challenges The GTA West market is projected to have and had a vacancy rate of 16.7 percent, the stronger activity as available sublease highest among all GTA submarkets. With space is absorbed and the overall vacancy limited supply of larger spaces, landlords rate declines. had more negotiating strength within that Colliers anticipates the vacancy rate to drop product category, while smaller office to 6.8 percent a year from now and foresees spaces faced additional competition from a higher average asking net rent of around the sublease market. $15.35 per square foot by Q3 2011. TRENDS With the vacancy rate remaining fairly constant at approximately 8.2 percent for the last three consecutive quarters, GTA GTA WEST | HISTORICAL PERFORMANCE & FORECAST | Q1 2000 - Q3 2012F Net New Supply Asking Net Rent Vacancy Rate $18 FORECAST 14.0% $16 $14.95 Net Rent $/PSF/Net New Supply (100,000 SF) 12.0% $14 10.0% $12 8.2% $10 8.0% $8 6.0% $6 4.0% $4 2.0% $2 $0 0.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Colliers International, August 2010 COLLIERS INTERNATIONAL | P. 7

MARKET REPORT & FORECAST | Q3 2010 | OFFICE | GREATER TORONTO AREA 480 offices in 61 countries on six continents United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95 • $1.6 billion in annual revenue • 672.9 million square feet under management • More than 10,000 professionals COLLIERS INTERNATIONAL CONTACTS Scott Addison John Arnoldi Executive Vice President | Eastern Canada Managing Director | Toronto Region +1 416 620 2800 +1 416 643 3733 scott.addison@colliers.com john.arnoldi@colliers.com Ken Norris Wayne Duong Managing Director | Toronto Region Director of Research | Canada +1 416 791 7239 +1 416 643 3477 ken.norris@colliers.com wayne.duong@colliers.com COLLIERS INTERNATIONAL OFFICES SERVING THE GTA Downtown Office West Office One Queen St. East 185 The West Mall Suite 2200 Suite 1600 This document has been prepared by Colliers International for Toronto, ON Toronto, ON advertising and general information only. Colliers International makes no guarantees, representations or warranties of any Canada, M5C 2Z2 Canada, M9C 5L5 kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. +1 416 777 2200 +1 416 777 2200 Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and North Office Burlington Office warranties arising out of this document and excludes all liability for loss and damages arising there from. Colliers International 245 Yorkland Blvd. 1122 International Blvd. is a worldwide affiliation of independently owned and operated companies. This publication is the copyrighted property of Suite 200 Suite 100B Colliers International and /or its licensor(s). © 2010. All rights reserved. Colliers Macaulay Nicolls (Ontario) Inc., Brokerage. Toronto, ON Burlington, ON Canada, M2J 4W9 Canada, L7L 6Z8 +1 416 777 2200 +1 905 333 8849 Accelerating success. www.colliers.com/toronto

Office fall2010 final

by Chris Fyvie on Oct 22, 2010

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Office fall2010 final — Document Transcript