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C&W - MONTREAL INDUSTRIAL MARKETBEAT - Q4 2012

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C&W - MONTREAL INDUSTRIAL MARKETBEAT - Q4 2012

  1. 1. MARKETBEATINDUSTRIAL SNAPSHOTCANADA Q4 2012A Cushman & Wakefield Research Publication CANADIAN OVERVIEW to prioritize the ability to control long-term costs, which is long GDP growth is expected to remain restrained underscoring the drive to own. at 2.0% in 2012 and increase moderately to Through the second half of 2012, we saw over 3.0 msf of positive 2.4% in 2013 (RBC Provincial Outlook). absorption across the Vancouver industrial market. Speculative Western Canadian markets are expected to development continues to be constrained by excessive land costs. A rained outperform the national average, while central recovery in the U.S. residential sector is creating a spike in demandand eastern provinces will see slower growth. The exception to this th. for BC lumber, and Vancouver is benefiting from this activity.is Newfoundland and Labrador, where oil production and miningoutput is expected to rebound in 2013, contributing to strong The overall vacancy fell from 4.6% to very tight 3.5% in 2012. Manyeconomic growth. people are concerned that the results of the May 2013 provincial election could have a negative impact on business activities.The Canadian job market ended 2012 roaring like a lion but began2013 bleating like a lamb, with the loss in January of 22,000 net new STATS ON THE GOpositions. However, the national unemployment rate still notched Q4 2011 4 20 Q4 2012 Y-O-Y 12-MONTHdownward by 0.1% to 7.0% in January, the lowest rate in four years. CHANGE FORECASTThe decline was attributed to fewer people looking for work. Overall Vacancy 6.2% 6.2 6.2% 0.0 ppSofter demand for industrial space over the first half of 2012 gave way nd Direct Net Asking Rents (psf/yr) $5.62 5.62 $5.78 2.8%to improved demand momentum in the latter half of the year, driven YTD New Supply (sf) 5,387,955 7,971,550 47.9%significantly by a pick-up in expansionary activity in Vancouver and upToronto. Both markets have experienced strong occupier dema demandand are benefiting from strengthening U.S. recovery. For example, a CONSTRUCTION COMPLETIONS IONSrevived U.S. housing sector is helping to invigorate the lumber 25industry in British Columbia, while growing strength in consumerconfidence and a related pick-up in U.S. vehicle purchas are having a up purchases 20 sf (millions)positive impact on the auto sector in southern Ontario. While the 15Canadian industrial sector experienced positive absorption of over 14 10million square feet (msf) in 2012, the vacancy rate held flat at a 21.9 11.2respectable 6.2%. 5 5.4 8.0 3.9 0WESTERN CANADA 2008 2009 2010 2011 2012An interesting reversal of fortunes took place across WesternCanadian industrial markets in 2012, with Calgary handing theexpansionary demand torch to Vancouver in the latter half of 2012. OVERALL RENTAL VS. VACANCY RATES RStrong commodity prices over the first half of 2012 led to impres impressive $7.00 8.0%expansionary growth in Calgary’s industrial markets and triggered a $6.00respectable amount of speculative development. Vancouver 6.0% $5.00experienced modest growth over the first half of 2012, with psf/yr $4.00momentum shifting into high gear by the second half of the year. I In 4.0% $3.00part, the Vancouver market has benefited from the recovery in the $2.00 2.0%U.S. residential housing sector, while Calgary has seen an easing of $1.00demand conditions due to weakening oil prices and a growing gap $0.00 0.0%between the global benchmark Brent crude and Western Ca Canadian 2008 2009 2010 2011 2012Select. The price gap at the time of writing stood at about $45 perbarrel. OVERALL NET RENTAL RATE OVERALL VACANCY RATEVANCOUVERVancouver’s industrial sector is active with strong positive absorption,driven primarily by the sale of strata industrial units. Tenants continue
  2. 2. CALGARY Tenants across the GTA West, who remain in a cautious mindset, areLower energy prices and a significant gap between the price of tending to lengthen the transaction process. Over the fourth quarter,Western Canadian Select oil and the global benchmark Brent Crude companies did their best to manage growth and minimize capitalled to softer demand for industrial space, particularly in the fourth commitments in response to continued economic uncertainty.quarter of 2012. Calgary also saw a reduction in large users looking Vacancy across the GTA rose marginally to 6.2% from 6.1% quarterfor space, which could open opportunities for other tenants looking over quarter. Improved U.S. economic fundamentals are expected tofor high-quality well-located space in tight market conditions. translate into stronger leasing and acquisition activity across the GTA West markets. Development activity was active over the fourthSpeculative development in Calgary was strong through 2012, while quarter, with 1.3 msf arriving across the GTA.vacancy remained relatively stable, rising marginally to 4.5% from4.3% at mid-year. Of the 4.0 msf of product under construction, The GTA East market saw softer market demand over the fourthabout 1.7 msf is speculative. Although the fourth quarter saw quarter of 2012, providing an incentive for landlords to aggressivelysignificantly weaker demand and mildly negative absorption, tenant pursue those tenants on the street. Acquisition activity remains veryactivity picked up in early 2013, providing some evidence that demand strong, though tenants here are less traditional in nature, and tend tostrength will remain respectable through the year. be more focused on supporting local communities. While the east is active and tours are underway, tenants require greater due diligenceEDMONTON and transactions remain tough to close.Edmonton’s industrial market remained active over the fourth Land remains a hot commodity across the GTA, as buyers try toquarter, although demand conditions tend to lag Calgary by a couple position themselves within a recovering construction cycle andof quarters, so an easing of activity due to softer oil prices is generally ensure they have sizeable sites to meet long-term demandexpected. However, Edmonton’s proximity to Fort McMurray helps requirements in a market that is currently devoid of larger options.to moderate the pace of change due to the huge capital-intensive oilsands projects underway. Land sales have remained brisk -- a strong MONTREALindicator of more development activity to come. The outlook for The Montreal market softened over the fourth quarter, withindustrial demand in Alberta’s capital city is closely tied to the health absorption slipping into negative territory for the first time since Q4of the energy industry. 2010. Although momentum has eased, there is still significant activityCENTRAL CANADA being generated by companies that are seeking modern, efficientGenerally, Canadian industrial markets have had a difficult time facilities that are designed specifically for their manufacturing orrecovering from global recession and ensuing U.S. economic distribution needs. Although there are significant availabilities, theslowdown. While tenants remain cautious, Ontario’s industrial desire to maximize productivity and profitability is driving the demandmarkets are beginning to benefit from accelerating U.S. recovery, as for modern or upgraded design-build facilities. Bombardier, which isevidenced by positive absorption in the GTA in the latter half of headquartered in Montreal, recently completed a 15-year lease2012. transaction in a soon-to-be modernized 300,000-sf facility at 2345 Boulevard des Sources.One of the few bright lights has been the expansionary demanddriven by the growth in distribution facilities supporting the expanding OTTAWAretail sector in Canada. Large U.S. retail companies are establishing Ottawa’s modest industrial market is focused on the distributiondistribution facilities, mainly in Toronto, in order to support new or sector. Vacancy held flat at 5.7% over the latter half of 2012 as aexpanded operations. Entrants such as Target and Amazon, and result of very soft but positive demand strength alongside a modestexpansions by companies such as Wal-Mart, have significantly introduction of new supply. Rental rates have been stable across 2012contributed to the positive absorption over the past five years. and little pressure over the near term is anticipated. The government is a dominant business driver and a major contributor to the market’sIn markets where speculative development has been repressed due to economic growth. Although there are a few speculative projects ineconomic conditions, quality product, with 28-foot-or-higher clear pre-leasing mode, there are currently no new construction projectsheights, is in demand. A recent slowdown in demand for big box underway. A few larger blocks of space are scheduled to return toformats is seen as a pause due to a slowing Canadian economy and market over the first half of 2013 and this may put some upwardprotracted global uncertainty, but is expected to turn around as pressure on vacancy over the near term.conditions improve in the U.S.GREATER TORONTO AREA ATLANTIC CANADAAfter experiencing weak demand over the first three quarters of Real GDP growth was weaker than expected in New Brunswick over2012, the GTA office market saw an increase in demand momentum 2012 with estimates at 0.8% (RBC Economics). This led to a weakwith positive absorption reaching 4.6 msf over the fourth quarter of private labour market and the situation was worsened by a further2012. Some of this demand was driven by the pent-up need for drop in public-sector employment, eroding much of the jobs regainedcompanies to acquire and occupy space in order to meet their since the end of the recession. The impact of the $25-billion federallogistical and location needs over the next few years. There were a government shipbuilding contract won by Irving Shipbuilding shouldsignificant number of such acquisitions over the fourth quarter. begin to fuel job and economic growth in Halifax and Nova Scotia, but The market terms and definitions in this report are based on NAIOP standards.Cushman & Wakefield Ltd.33 Yonge Street, Suite 1000 No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental orToronto, ON M5E 1S9 other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.www.cushmanwakefield.com/knowledge © 2012 Cushman & Wakefield, Inc. All rights reserved.
  3. 3. it is still at the initial planning stages, and any real impact on regional significant amount of available land, and this suppresses the upwardeconomies is not likely to be felt until the latter half of 2013 and pressure on rental rates. Moncton’s vacancy rate increased to 9.8% inbeyond. Newfoundland & Labrador continues to be the region’s the fourth quarter of 2012, up from about 7.1% at mid-year. This wasgrowth leader, although some reduction in oil output from offshore primarily due to the introduction of new supply, particularly in theoilrigs is expected and this may temper near-term, pent-up demand Caledonia Business Park, and the related displacement of space asfor office and industrial space. tenants relocated into this new supply.In Nova Scotia, the unexpected downtime at the Sable Island naturalgas project and further delay to natural gas production at Deep ST. JOHN’SPanuke have held back the anticipated boost in GDP growth.However, production at the Port Hawkesbury paper mill began, with A temporary decline in GDP growth is unlikely to dampen the St.average production late in 2012 of 935 tons per day. More than 280 John’s industrial market. Real estate activity remained strong acrossemployees are back to work at the mill and an additional 400 2012, with 85,000 sf of space absorbed, almost 100,000 sf of newemployees are working in the company’s woodlands. This will supply introduced and a vacancy rate that held at 6.3%. At 4.4%,strengthen 2013 exports. Newfoundland and Labrador has the highest projected 2013 GDP growth rate in the country, driven by a return to full oil production.Maintenance shutdowns in Newfoundland and Labrador’s offshore oil Strong investment in the region means continued solid growth andfacilities resulted in a significant decline in crude oil production over tightening employment conditions.the first quarters of 2012. Real GDP growth is now expected tocontract by 0.7% across 2012 (RBC Economics). It is expected that areturn to full production will mean a strong rebound in 2013, withGDP growth forecast surging by 4.4%.HALIFAXDemand remained relatively weak across Halifax’s distribution-basedindustrial market in the latter half of 2012, though the initialization of VACANCY RATESprojects in support of the federal government shipbuilding contractshould mean positive job growth and stronger demand for industrialspace as we progress through 2013. The submarkets of Ragged Lake Vancouver 3.5%and Burnside have the highest vacancy rates at 14.9% and 8.2% Calgary 4.5%respectively. The overall market saw vacancy fall to 7.8% from 8.5%at mid-year. While 2012 was a story of slow growth, Nova Scotia is Toronto 6.2%expected to see improved momentum in 2013, with real GDP growth Ottawa 5.7%of 1.9% (RBC Economics). Montreal 8.6%MONCTONMoncton is located at the geographic centre of the Maritime Fredericton 10.9%Provinces and is the transportation hub of the region. Driven by Saint John 22.4%distribution companies, Moncton’s entrepreneurial market tends to Moncton 9.8%be the most active in eastern Canada. Demand over the latter half of2012 was relatively strong, with overall positive absorption of in Halifax 7.8%excess of 185,000 square feet (sf). Moncton has the luxury of a St. Johns 6.3% The market terms and definitions in this report are based on NAIOP standards.Cushman & Wakefield Ltd.33 Yonge Street, Suite 1000 No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental orToronto, ON M5E 1S9 other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.www.cushmanwakefield.com/knowledge © 2012 Cushman & Wakefield, Inc. All rights reserved.
  4. 4. CANADASUBMARKET INVENTORY OVERALL UNDER YTD CURRENT YTD WEIGHTED WEIGHTED VACANCY CONSTRUCTION CONSTRUCTION QUARTER ABSORPTION AVERAGE NET AVERAGE GROSS RATE COMPLETIONS ABSORPTION RENTAL RATE RENTAL RATEVancouver 191,434,876 3.5% 2,123,748 2,384,351 1,154,496 4,445,481 $7.84 $11.19Calgary 110,596,036 4.5% 2,099,724 1,418,319 (117,369) 1,533,759 $8.69 $11.81Toronto 789,003,730 6.2% 2,691,968 3,307,034 4,654,265 4,865,669 $5.05 $8.09Ottawa 21,642,376 5.7% 64,000 47,500 15,998 184,332 $8.29 $12.79Montreal 283,616,486 8.6% 781,000 419,500 (607,972) 2,797,351 $5.00 $8.10Fredericton 463,925 10.9% 0 11,000 (15,718) 5,851 $7.47 $11.78Saint John 433,031 22.4% 0 25,000 (16,600) (36,227) $6.86 $10.33Moncton 3,618,004 9.8% 0 259,500 (33,011) 239,624 $6.00 $8.97Halifax 7,398,544 7.8% 0 0 11,853 (58,411) $7.15 $11.44St. John’s 3,075,255 6.3% 192,990 99,346 19,939 84,707 $9.29 $11.75TOTALS 1,411,282,263 6.2% 7,953,430 7,971,550 5,065,881 14,062,136 $5.78 $8.91* RENTAL RATES REFLECT ASKING $PSF/YEAR The market terms and definitions in this report are based on NAIOP standards.Cushman & Wakefield Ltd.33 Yonge Street, Suite 1000 No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental orToronto, ON M5E 1S9 other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.www.cushmanwakefield.com/knowledge © 2012 Cushman & Wakefield, Inc. All rights reserved.
  5. 5. MARKET HIGHLIGHTSSignificant 2012 Lease Transactions MARKET SUBMARKET TENANT/BUYER SQUARE FEETJames Snow Parkway Greater Toronto Area Milton Lowe’s 630,00011900 18th Street NE Calgary North East Walmart 436,21480 de l’Aeroport Montreal Bromont Pioneer Wind Energy Systems 361,6432345 Sources Boulevard Montreal GMA West Mobilia Inc. 293,37525 Cottrelle Boulevard Greater Toronto Area Brampton NFI Logistics 230,0007659 Bramalea Road Greater Toronto Area Brampton Sherway Warehousing Inc. 197,337450 Derwent Place Vancouver Delta Amazon Canada Fulfillment Services 193,494Significant 2012 Sale Transactions MARKET SUBMARKET BUYER PURCHASE PRICE SQUARE FEET16131 & 16133 Blundell Road Vancouver Richmond Pure Industrial Real Estate Trust $102,460,000 927,351 th th7008 5 Street SE, 6810 6 Street SE, 6812 Calgary East Fairview Industrial Twofer (GP) Inc. $75,406,000 617,7186th Street SE7510 5th Street SE, 7610 5th Street SE. 7710 Calgary Airways Industrial Twofer (GP) Inc. $45,127,000 327,6605th Street SEKingswood Industrial Vancouver Richmond Pure Industrial Real Estate Trust $44,000,000 416,000101 & 201 Innes Park Way Ottawa Sheffield Industrial The Standard Life Assurance Company $29,900,000 248,009 ParkLake City Court 1 & II Vancouver Burnaby N/A $26,500,000 260,9341120-1128 Old Innes Road & 1230 Old Innes Ottawa Sheffield Industrial The Standard Life Assurance Company $24,000,000 205,201Road Park7504 30th Street SE; 3916 61st Ave SE Calgary Foothills Industrial Twofer (GP) Inc. $18,225,000 238,707Significant 2012 Construction Completions MARKET SUBMARKET MAJOR TENANT COMPLETION DATE SQUARE FEET8450 Boston Church Road Greater Toronto Area Milton Cooper Construction Limited Q4 2012 1,320,00016111 Blundell Road Vancouver Richmond Acklands Grainger Q4 2012 275,00016100 Portside Road Vancouver Richmond Tolco Corp. Q4 2012 250,0001400 Church Street South (expansion) Greater Toronto Area Pickering Aspect Retail Logistics Q3 2012 200,0001865 Clements Road Greater Toronto Area Pickering First Gulf Corporation Q3 2012 190,00019358 24th Avenue (CHBP) Vancouver Surrey SPEC Q4 2012 145,540Shoreline Business Centre – Phase II Vancouver Vancouver SPEC Q3 2012 133,20310720 25th Street NE Calgary North East Hopewell Development Corporation Q4 2012 96,200Glenwood Business Park – Bldg 6 Vancouver Burnaby SPEC Q3 2012 90,615Significant Projects Under Construction MARKET SUBMARKET MAJOR TENANT ANND/OR DEVELOPER COMPLETION DATE SQUARE FEETCrosspointe Industrial Park (Bldgs A to C) Calgary Balzac Hopewell Development Corporation Q4 2014 1,658,715Great Plains (Bldgs 1-3) Calgary South East WAM Development Group Q1 2013 1,087,950100 Ironside Road Toronto Brampton Blackwood Partners Inc. Q1 2013 728,141Stoney Industrial Building (Bldgs 5&6) Calgary North WAM Development Group Q4 2012/Q1 716,224 2013Airport Trail Business Park (Bldgs 1-4) Calgary North Enright Capital Ltd. 2012-2013 568,750Starfield Logistics Centre Calgary South East HOOPP / Triovest 2012-2013 555,8007995 Winston Churchill Toronto Brampton Orlando Corporation Q2 2013 520,736 The market terms and definitions in this report are based on NAIOP standards.Cushman & Wakefield Ltd.33 Yonge Street, Suite 1000 No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental orToronto, ON M5E 1S9 other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.www.cushmanwakefield.com/knowledge © 2012 Cushman & Wakefield, Inc. All rights reserved.

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