Q4 2014 cap rate report

Valuation & Advisory Services Canada

Cap Rate Report Q4 2014

Accelerating success.

CANADIAN COMMERCIAL REAL ESTATE MARKET 2015 With domestic pension funds looking to increase real estate allocations, the competition for prime commercial assets across Canada will remain fierce.

- Adam Kosoy, Senior Managing Director, Capital Markets & Investment Services, Colliers Canada

The Canadian real estate market appears to be poised for another steady year.

With continued improvements across the Canadian economic landscape, the property investment market continues to benefit from sustained confidence and the availability of capital on a national basis. Solid national demographics, upward trending gross domestic product (GDP) forecasts and rising employment levels continue to draw both domestic and international capital towards Canada’s real estate markets. Offsetting this somewhat, the decline in oil and gas prices, which has been in occurring since mid 2014, is having a notable impact on the economy, not just in Alberta but across Canada; investors will be watching the energy sector with increased concern in 2015.

Bolstered by strong underlying fundamentals and favorable financing terms, as banks regain confidence in the sector, the stability of property, particularly office, retail, multi-family and industrial assets positioned within close proximity to Canada’s major cities, has led to an abundance of debt and equity targeting the market.

As the US recovery solidifies, the country continues to benefit from strong exports, which are estimated at CAN$307 billion year-to-date. An annualized GDP growth forecast of 3.1% (September 2014) and a real GDP growth estimate of 2.3% for 2014 continue to support positive investor sentiment for the stability, income and return characteristics that the property markets offer. With unemployment levels at 7% projected to continue a gradual decrease to 5.7% by 2018, investors remain bullish on both market performance and property investment volumes overall.

www.collierscanada.com

COLLIERS INTERNATIONAL | P. 1

Accelerating success.

Major investors from institutions to private equity firms project good investment opportunities to come to the market in the next 12 months despite the fact there is a distinct lack of quality stock available.

For 2015, the changing work environment and urbanization will continue to shape Canada’s real estate market. Traditionally, employees were restricted to a physical office, but today, the office can be accessed through the palm of your hands. This paradigm shift is ongoing and change is inevitable for companies to stay competitive. In the next decade, savvy business leaders will be focused on three connected factors drive change in the workplace:

> Talent Attraction and Retention > Productivity: Innovation Through Collaboration

CONTACT INFORMATION

Chris Marlyn Senior Vice President Valuation & Advisory Services, Canada tel: +1 403 298 0439 email: chris.marlyn@colliers.com

> Technology: Doing More with Less

Gen Y, Millennials, Echo Boomers – no matter what you call them, will make up nearly half of Canada’s workforce and are already driving a major shift in ideas as to how and where we work.

Millennials are migrating into the city core to live close to both work and their lifestyle choices. Companies and retailers including TELUS, Microsoft, Nordstom, Coca-Cola, and Google are all opening additional offices or relocating their suburban offices to the city core. The growth of mixed use developments which combine office, residential, and retail spaces are expected to continue. Office tenants are demanding new building amenities need to attract and retain today’s talent, foster and breed collaboration and creativity. Advances in technology have allowed us not only access to files and documents from outside the four walls of the office, but to have face-to-face meetings on a national or international basis with virtual meeting software or even apps on your smart phone. In cases where employees work both remotely and on-site, hoteling stations can be arranged to make better use of a company’s floor plan, resulting in a smaller footprint per person in the office and allowing additional costs to be allocated to common area space. Colliers projects that by 2018, square feet per employee benchmarks will fall as low as 145 square feet, compared to today’s average of 172 square feet per person. Despite a decrease in individual space requirements, the need for additional meeting rooms and common areas has kept the total amount of space required from plummeting.

www.collierscanada.com

Adam Kosoy Senior Managing Director Capital Markets & Investment Services, Canada tel: +1 416 607 4348 email: adam.kosoy@colliers.com

Craig Hennigar Market Intelligence Director Colliers International | Canada tel: +1 604 505 1710 email: craig.hennigar@colliers.com COLLIERS INTERNATIONAL | P. 2

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Toronto

Q4 2014 CAP RATES

Contact Us

DOWNTOWN OFFICE A

B

TREND

DEMETRI ANDROS

LOW

HIGH

LOW

HIGH

A

B

4.75%

5.75%

5.75%

6.50%





Managing Director, Toronto +1 416 643 3779 Demetri.Andros@colliers.com

What's Trending

SUBURBAN OFFICE A

B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.00%

7.25%

7.00%

7.75%





The City of Toronto continues to attract strong demand from both domestic and international capital with core commercial assets benefiting from sustained confidence in the stability and growth of the city. With limited offerings coming to market across all asset classes, pent up demand, backed by a continued weight of available investment capital has given rise to strong competition and pricing within the marketplace.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

5.25%

5.75%

6.25%

7.25%





Notable transactions across 2014 include Manulife Real Estate’s $114MM acquisition of 180 Wellington Street West, a 210,000 SF Class A core office building fully occupied by the Vendor, Royal Bank of Canada. Representing a going-in yield of 4.66%, the sale presented one of a few opportunities for potential purchasers to acquire core Toronto office product, achieving multiple rounds of offerings and aggressive pricing.

RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

4.75%

5.75%

6.00%

6.75%

5.50%

6.25%







Global capital continues to seek the stability of the Canadian market, most recently noted by Spain’s Ponte Gadea’s acquisition of 150 Bloor Street West in June 2014 for $255MM. A mixed office and retail asset of approximately 275,000 SF, the transaction achieved a going-in yield of 4.57% and presents further example of the attraction of Toronto to foreign capital.

MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

3.75%

5.00%

4.00%

5.25%

q



HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

6.75%

8.00%

7.00%

8.50%

9.25%

11.50%







www.collierscanada.com

Looking ahead into 2015, Colliers expects to see limited offerings of core Class A office and retail product, with some opportunities released by larger institutional funds seeking to capitalize on pent-up demand within the marketplace. Private capital will continue to dominate the acquisition of mid-market project across all asset classes, with suburban office in particular continuing to offer greater value-add potential as yields see further rises.

COLLIERS INTERNATIONAL | P. 3

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Montreal

Q4 2014 CAP RATES

Contact Us

DOWNTOWN OFFICE A

B

TREND

MICHEL COLGAN

LOW

HIGH

LOW

HIGH

A

B

6.75%

6.50%

6.00%

6.50%





Managing Director, Montreal +1 514 764 8192 Michel.Colgan@colliers.com

SUBURBAN OFFICE A

B

What's Trending

TREND

LOW

HIGH

LOW

HIGH

A

B

6.75%

7.75%

7.25%

8.25%





The Montreal market, much like the rest of Canada, is characterized by stability. Capitalization rates for Office, Retail, Industrial and Multi-Family assets remained for the most part constant throughout 2014. Vacancy in the office and industrial market also remained consistent with only nominal change between Q3 and Q4 of 2014.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.75%

7.50%

7.00%

7.75%





From a development perspective there continues to be many cranes in the Montreal skyline; but most of this development is for high rise condominium rather than for new office buildings. The most notable current downtown office development is the Deloitte Tower which offers 495,000 square feet of space over 26 floors.

RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

5.75%

6.75%

6.90%

7.75%

7.00%

7.75%







There were a number of notable sales in Montreal in 2014. One key sale which occurred in October of 2014 was the sale of the Bell Canada Campus on Nun’s Island. This asset houses Canada’s largest telecommunications company headquarters and features 840,000 square feet of space over five buildings. The asset was sold to a South Korean Investment Consortium as part of a $1.2 billion dollar international portfolio transaction.

MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

5.00%

6.00%

6.00%

6.75%





Montreal continues to be an attractive choice for regional, national and international investors.

HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

7.25%

9.00%

8.50%

9.75%

9.75%

11.50%







www.collierscanada.com

COLLIERS INTERNATIONAL | P. 4

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Calgary

Q4 2014 CAP RATES

Contact Us

DOWNTOWN OFFICE A

B

LAUREL EDWARDS

TREND

LOW

HIGH

LOW

HIGH

A

B

5.50%

6.25%

6.50%

7.00%



p

Managing Director, Calgary +1 403 298 0446 Laurel.Edwards@colliers.com

What's Trending

SUBURBAN OFFICE A

B

Energy pricing will be the focus in Alberta in 2015. While the decline in pricing that has occurred since mid 2014 has already impacted Calgary's downtown of the market, the prospects in the mid-term remain a topic conversation.

The more optimistic projections suggest stabilized pricing at national levels by year end 2015; the more conservative forecasts predict that this downfall may be more protracted and that recovery may not commence for 18 to 24 months.

TREND

LOW

HIGH

LOW

HIGH

A

B

5.75%

6.50%

6.75%

7.50%

p

p

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

5.75%

6.25%

6.00%

6.75%





Supply in the downtown office will also increase as several new buildings get added to inventory in 2017 and early 2018. These projects will add another 3 million square feet to the inventory, and 930,000 square feet of available space. The impact of this is general upward pressure on going in capitalization rates notwithstanding that yields rates (IRRs) and terminal capitalizations remain largely undamaged.

RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

5.25%

6.00%

5.75%

6.50%

6.00%

6.75%







Demand for owner user properties in the industrial market is also forecast to taper off with the decrease in energy prices. In addition there will be over three million square feet of new industrial supply forecasted for completion in 2015.

These factors are likely to cause lease rates to moderate over the next year. Potentially, increasing capitalization rates for investment grade industrial real estate.

MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

4.25%

4.75%

4.50%

5.25%





Calgary’s low vacancy rate of 1.81% for retail shopping centres is driven by the significant demand of the high earning Alberta population. As a result of this demand, Calgary is experiencing city wide growth of mixed use developments in all quadrants. The low vacancy rate in the retail sector is expected to continue given the shortage in supply of retail space in the city.

HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

7.00%

8.50%

8.00%

9.25%

8.50%

10.00%







www.collierscanada.com

It is forecast that transaction volumes for all asset classes will decrease as investors take a cautious stance in the market over the short term. However, given the resilience of the Alberta economy in the past, many are still optimistic about long-term prospects in the province.

COLLIERS INTERNATIONAL | P. 5

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Vancouver

Q4 2014 CAP RATES

Contact Us DOWNTOWN OFFICE A

B

JAMES GLEN

TREND

LOW

HIGH

LOW

HIGH

A

B

4.25%

5.25%

5.00%

6.00%





Vice President, Vancouver +1 604 661 0897 James.Glen@colliers.com

What's Trending

SUBURBAN OFFICE A

B

Vancouver moves into 2015 much as it left 2014; with constrained supply and strong demand for core assets, particularly on the Downtown Peninsula, where land values continue to soar. The continued increase of underlying land values, along with what can reasonably be described as a flood of Asian investment capital, led to many office buildings trading under the 5.00% capitalization rate mark in 2014. This trend looks set to continue in 2015, with two C Class office buildings in the $25 to $50 million range likely trading well under 5.00%.

TREND

LOW

HIGH

LOW

HIGH

A

B

5.50%

6.25%

6.00%

6.75%





INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

5.00%

5.50%

5.50%

6.00%





The headwind against this surge is the large supply of new downtown office space coming on stream starting this year and continuing through 2017. 2015 alone will see more than 1.7 million square feet of space, leading to a continued increase of the tenant and broker inducements which landlords began offering in 2014. This has tempered the downward pressure on capitalization rates, IRR’s and terminal capitalization rates, however the fact remains that available investment product is very rare.

RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

4.75%

5.50%

5.00%

6.00%

5.00%

6.00%







MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

3.00%

3.50%

3.50%

4.50%

q

q

HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

6.00%

7.00%

7.25%

8.50%

7.25%

8.50%







www.collierscanada.com

The scarcity of properly priced (or un-priced, and reasonable vendor expectations) property will continue to remain across most of Metro Vancouver’s asset classes.

Retail properties of all segments remain below the 6.00% going-in capitalization rate range, in many cases well below this range, with grocery anchored centres at the low end of the 5.00% range, and prime street-front properties falling below 5.00%. Industrial investment opportunities are very few, as owner-user properties make up a large percentage of sales, Multi-family properties will continue to see strong demand, particularly as owning a house, or condominium, in Metro Vancouver becomes more expensive. The two factors that could upset the downward pressure on yields are a sizeable increase in interest rates, or a halt to the inflow of Asian investment capital; neither of these factors appear on the horizon.

COLLIERS INTERNATIONAL | P. 6

Edmonton

Q42014 2014CAP CAPRATES RATES Q4

Contact Us

DOWNTOWN OFFICE A

B

TREND

LOW

HIGH

LOW

HIGH

A

B

5.75%

6.75%

6.25%

7.50%

p

p

ANDREW MACLEOD Managing Director, Edmonton +1 780 969 2977 Andrew.Macleod@colliers.com

What's Trending

SUBURBAN OFFICE A

B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.50%

7.25%

7.00%

7.75%

p

p

Within the last 18 months, Edmonton’s office market has dramatically changed; 3 large scale office tower developments are currently transforming Edmonton’s skyline and introducing approximately 1.7 million square feet of office space into the downtown core. The most noteworthy announcement came this quarter as Enbridge committed to the downtown core when they announced the consolidation of their office space into the currently under-construction Kelly Ramsey Tower and Manulife Place. This coupled with the recent announcement of the new Stantec Tower and the recent Delta Hotel reveal of its four-star property in the bottom half of proposed hotelcondominium tower. Construction has also begun on the $340-million Royal Alberta Museum. In addition, numerous towers are nearing completion as Edmonton continues to see a rise in multi-residential development and not just in the downtown core. The 123 unit Symphony Tower is located in Edmonton’s river valley just east of the Alberta Legislature grounds. South of Edmonton’s commonwealth stadium is the Edgewater development which is 194 suites and finally in Edmonton’s downtown, the 32 floor Ultima Tower, and the two Fox Towers illustrate the resurgence of multi-residential in Edmonton.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

5.50%

6.50%

6.00%

7.00%





RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

5.50%

6.00%

5.75%

6.50%

5.75%

6.25%







MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

5.00%

5.50%

5.25%

6.25%





HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

7.75%

9.50%

8.75%

9.50%

8.75%

9.50%







www.collierscanada.com

This strong economic and investment growth has built up considerable momentum in the Edmonton economy despite the largest economic development of the fourth quarter – the declining price of oil. This will undoubtedly impact Edmonton, Alberta and the larger economy through at least the first two quarters of 2015. Collapsing oil prices have yet to make their mark on job creation in Alberta and Edmonton, more specifically, which created 2,500 new jobs in December 2014. However, if low oil prices persist, it will negatively impact Edmonton moving forward with significant moderation to the growth projections estimated and an increase to the unemployment rate which could hit closer to 6.0% up from closer to 5.0% in 2014. Pending industrial construction has just over 3-million square feet slated for delivery in Edmonton’s northwest district alone through the end of 2015, and how the price of oil reacts through the first half of 2015 will ultimately affect the demand for this space moving forward as end-users respond to the changing economic conditions.

COLLIERS INTERNATIONAL | P. 7

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Ottawa

Q4 2014 CAP RATES

Contact Us

DOWNTOWN OFFICE A

B

TREND

OLIVER TIGHE

LOW

HIGH

LOW

HIGH

A

B

6.00%

6.25%

6.75%

7.25%



p

Managing Director, Ottawa +1 613 683 2225 Oliver.Tighe@colliers.com

SUBURBAN OFFICE A

B

What's Trending

TREND

LOW

HIGH

LOW

HIGH

A

B

6.50%

7.00%

7.50%

8.00%

p

p

The Ottawa market continues to be a stable choice for local, regional and national real estate investors. Cap rates for Industrial, Retail and Multi-Family assets remained consistent throughout 2014 and are expected to continue this trend for the foreseeable future. Nonetheless, capitalization rates for office product are beginning to trend upward. This is a direct result of vacancy concerns throughout the Ottawa office market. Ongoing space requirement reductions by the federal government have increased both downtown and suburban office vacancy.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.00%

6.50%

6.00%

6.50%





There are few large scale tenants actively seeking space in Ottawa thus buyers are concerned about potential for increased vacancy should an existing tenant vacate.

Many owners are electing to substantially renovate in an attempt to reposition.

RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

5.00%

5.50%

6.00%

6.50%

6.25%

6.75%







In contrast to Ottawa’s office market the Industrial, MultiFamily and Retail markets continue to perform very well.

Transactions were down in 2014, though there was a notable increased presence of larger scale national owners. These national owners are attracted to the relatively lower price of assets in Ottawa combined with the stability of the market and low vacancy. The demand for good quality assets in Ottawa is substantial with a number of assets selling for capitalization rates much lower than the market expected.

MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

4.50%

5.00%

5.00%

5.50%





HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

6.50%

8.00%

8.50%

9.50%

9.25%

11.25%







www.collierscanada.com

As we move into 2015 there are a number of factors which will have a significant impact on the Ottawa Commercial Real Estate Market. High office vacancy, limited supply of industrial land & owner user industrial assets, the federal election and the national economy will all have a meaningful impact on the performance of the Ottawa market.

COLLIERS INTERNATIONAL | P. 8

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Winnipeg

Q4 2014 CAP RATES

Contact Us

DOWNTOWN OFFICE A

B

TREND

DARRYL PRATT

LOW

HIGH

LOW

HIGH

A

B

5.75%

6.50%

6.25%

7.25%





Director, Winnipeg +1 204 943 1600 Darryl.Pratt@colliers.com

SUBURBAN OFFICE A

B

What's Trending

TREND

LOW

HIGH

LOW

HIGH

A

B

N/A

N/A

6.50%

7.75%





The Manitoba economy has remained steady in an uncertain global economic climate. Its high level of industrial diversity coupled with a balance between domestic demand and export sales has provided Manitoba with modest and stable economic growth.

Winnipeg is view as a solid place to invest and grow.

Industrial vacancy trended downward over 2014 with new industrial buildings being absorbed at a much high rather than existing industrial inventory. Office vacancy has also trended downward slightly with rental rates remaining for the most part consistent over 2014. The multi-family market has also maintained its steady pace with vacancy holding strong at 2.5%. Nonetheless, in the last two years over $400 million of apartment permits have been issued, thus with as the new supply comes on stream the vacancy rate may increase.

Overall, Winnipeg will continue to maintain its steady pace throughout 2015 with no significant changes in vacancy or rental rates across all asset classes.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.00%

7.00%

6.25%

7.25%





RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

5.50%

6.25%

6.25%

6.75%

6.25%

7.00%







MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

4.75%

5.75%

5.00%

6.00%





HOTEL URBAN FULL SERVICE

SELECT SERVICE

LOW

HIGH

LOW

7.75%

8.75%

8.75%

www.collierscanada.com

HIGH

LIMITED SERVICE LOW

10.50% 10.00%

TREND

HIGH

U

S

L

11.75%







COLLIERS INTERNATIONAL | P. 9

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Halifax

Q4 2014 CAP RATES

Contact Us

DOWNTOWN OFFICE A

B

MITCH WILE

TREND

LOW

HIGH

LOW

HIGH

A

B

6.25%

7.00%

7.00%

7.75%





Managing Director, Halifax +1 902 442 8701 Mitch.Wile@colliers.com

What's Trending

SUBURBAN OFFICE A

B

TREND

Office

LOW

HIGH

LOW

HIGH

A

B

6.50%

7.00%

7.00%

7.75%





The Halifax office market continued to be impacted by the “flight to the suburbs” trend throughout 2014.

There has been a considerable amount of new supply recently delivered and still substantial new supply under construction for the downtown market. Vacancy rates in Halifax have risen sharply over the past year, with the downtown rate rising primarily due to a loss of tenants to the suburbs. While the downtown, it may be in a corrective phase at present, it can be thought of as taking one step back so that it can move two steps forward. It is a place of character and energy and we believe that there will be a vibrant downtown office sector in the mid to long-term.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.50%

7.00%

7.25%

7.75%





RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

5.25%

6.25%

6.50%

7.50%

6.25%

7.50%







Multi Family Residential There has been considerable new multi-family res supply recently completed and still much more to come throughout all areas of the City. There are concerns over the rate of new development in the city-edge.

There are major upscale developments that have been recently completed, under construction and planned for the downtown region as well, which is under supplied with modern units as compared to the city edge. As a result, rental rates in the downtown will need to reach unprecedented heights to support development costs.

MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

4.90%

5.25%

5.25%

6.50%





Industrial

HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

7.50%

8.50%

9.00%

10.00%

9.50%

11.00%







www.collierscanada.com

The overall Halifax industrial vacancy rate remains healthy, with property ownership in the largest industrial park having been largely consolidated by 3 ownership groups. Landlords are beginning to move asking net rental rates up in anticipation of increased demand related to the Canadian Navy ship building contract and expectations for growth coming from offshore oil exploration.

COLLIERS INTERNATIONAL | P. 10

CANADA CAP RATE REPORT | Q3 2014 | INVESTMENT

Victoria

Q4 2014 CAP RATES

Contact Us DOWNTOWN OFFICE A

B

CHRISTINA DHESI

TREND

LOW

HIGH

LOW

HIGH

A

B

6.00%

6.25%

6.25%

6.75%





Associate, Victoria +1 250 414 8371 Christina.Dhesi@colliers.com

What's Trending

SUBURBAN OFFICE A

B

TREND

LOW

HIGH

LOW

HIGH

A

B

6.25%

6.50%

6.25%

6.75%





While notable sales volumes have occurred, increases in owner-occupier transactions and conversion properties have resulted in fewer traditional investment sales, generally speaking.

INDUSTRIAL SINGLE-TENANT A

MULTI-TENANT B

A lack of supply relative to demand continues to limit the availability of quality investment product within Greater Victoria.

TREND

LOW

HIGH

LOW

HIGH

A

B

6.25%

6.75%

6.25%

6.75%





Higher vacancy rates experienced in Class C and lower Class B office buildings will result in these assets being “repositioned.” Movement to other uses will eliminate these buildings from office inventory and offset some of the vacancy associated with new buildings planned to come on stream in 2017.

RETAIL REGIONAL / POWER

COMMUNITY

STRIP MALL

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

R

C

S

6.00%

6.50%

6.25%

6.75%

6.50%

7.00%







Multi-residential investment continues to hold lower capitalization rates when compared with other investment-grade assets, driven by low interest rates, relatively low risk profile, and purchaser demand relative to supply.

MULTI-FAMILY HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

4.25%

4.50%

4.50%

5.25%





Greater Victoria overall is forecast to remain stable over the short term, yet some upward pressure may be exerted on capitalization rates for those asset classes impacted by the anticipation of new supply.

HOTEL URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

S

L

7.50%

8.50%

8.50%

10.50%

9.00%

11.50%



q



www.collierscanada.com

COLLIERS INTERNATIONAL | P. 11

Canadian Cap Rates Q4 2014 CAP RATES

DOWNTOWN OFFICE MARKET

A

CITY

B

TREND

LOW

HIGH

LOW

HIGH

A

B

Vancouver

4.25%

5.25%

5.00%

6.00%





Calgary

5.50%

6.00%

6.25%

6.75%



p

Edmonton

5.75%

6.75%

6.25%

7.50%

p

p

Toronto

4.75%

6.00%

5.75%

6.50%





Ottawa

6.00%

6.25%

6.75%

7.25%





Montreal

6.75%

6.50%

6.00%

6.50%





Winnipeg

5.75%

6.50%

6.25%

7.25%





Halifax

6.25%

7.00%

7.00%

7.75%





Victoria

6.00%

6.25%

6.25%

6.75%





SUBURBAN OFFICE MARKET CITY

A

B

TREND

LOW

HIGH

LOW

HIGH

A

B

Vancouver

5.50%

6.25%

6.00%

6.75%





Calgary

5.75%

6.25%

6.75%

7.25%

p

p

Edmonton

6.50%

7.25%

7.00%

7.75%

p

p

Toronto

6.00%

7.25%

7.00%

7.75%





Ottawa

6.50%

7.00%

7.50%

8.00%

p

p

Montreal

6.75%

7.75%

7.25%

8.25%





Winnipeg

N/A

N/A

7.00%

7.75%





Halifax

6.50%

7.00%

7.00%

7.75%





Victoria

6.25%

6.50%

6.25%

6.75%





www.collierscanada.com

COLLIERS INTERNATIONAL | P. 12

Canadian Cap Rates Q4 2014 CAP RATES

INDUSTRIAL MARKET CITY

SINGLE-TENANT A

MULTI-TENANT B

TREND

LOW

HIGH

LOW

HIGH

A

B

Vancouver

5.00%

5.50%

5.50%

6.00%





Calgary

5.75%

6.25%

6.00%

6.75%





Edmonton

5.50%

6.50%

6.00%

7.00%





Toronto

5.25%

5.75%

6.25%

7.25%





Ottawa

6.00%

6.50%

6.50%

7.00%





Montreal

6.75%

7.50%

7.00%

7.75%





Winnipeg

6.00%

7.00%

6.25%

7.25%





Halifax

6.50%

7.00%

7.25%

7.75%





Victoria

6.25%

6.75%

6.25%

6.75%





MULTI-FAMILY MARKET CITY

HIGH-RISE

LOW-RISE

TREND

LOW

HIGH

LOW

HIGH

H

L

Vancouver

3.00%

3.50%

3.75%

4.50%

q

q

Calgary

4.25%

4.75%

4.50%

5.25%





Edmonton

5.00%

5.50%

5.25%

6.25%





Toronto

3.75%

5.00%

4.00%

5.25%

q



Ottawa

4.50%

5.00%

5.00%

5.50%





Montreal

5.00%

6.00%

6.00%

6.75%





Winnipeg

5.00%

5.75%

5.00%

6.00%





Halifax

4.90%

5.25%

5.25%

6.50%





Victoria

4.25%

4.50%

4.50%

5.25%





www.collierscanada.com

COLLIERS INTERNATIONAL | P. 13

Canadian Cap Rates Q4 2014 CAP RATES

HOTEL MARKET CITY

URBAN FULL SERVICE

SELECT SERVICE

LIMITED SERVICE

TREND

LOW

HIGH

LOW

HIGH

LOW

HIGH

U

Vancouver

6.00%

7.00%

7.25%

8.50%

7.25%

8.50%

  

Calgary

7.00%

8.50%

8.00%

9.25%

8.50%

10.00%

  

Edmonton

7.75%

9.50%

8.75%

9.50%

8.75%

9.50%

  

Toronto

6.75%

8.00%

7.00%

8.50%

9.25%

11.50%

  

Ottawa

6.50%

8.00%

8.50%

9.50%

9.25%

11.25%

  

Montreal

7.25%

9.00%

8.50%

9.75%

9.75%

11.50%

  

Winnipeg

7.75%

8.75%

8.75%

10.50%

10.00%

11.75%

  

Halifax

7.50%

8.50%

9.00%

10.00%

9.50%

11.00%

  

Victoria

7.50%

8.50%

8.50%

10.50%

9.00%

11.50%

q

S

q

L



RETAIL MARKET

REGIONAL / POWER

CITY

LOW

HIGH

LOW

HIGH

LOW

HIGH

Vancouver

4.75%

5.50%

5.00%

6.00%

5.00%

6.00%

  

Calgary

5.25%

6.00%

5.75%

6.50%

6.00%

6.75%

  

Edmonton

5.50%

6.00%

5.75%

6.50%

5.75%

6.25%

  

Toronto

4.75%

5.75%

6.00%

6.75%

5.50%

6.25%

  

Ottawa

5.00%

5.50%

6.00%

6.50%

6.25%

6.75%

  

Montreal

5.75%

6.75%

6.90%

7.75%

7.00%

7.75%

  

Winnipeg

5.50%

6.25%

6.00%

6.75%

6.00%

7.00%

  

Halifax

5.25%

6.25%

6.50%

7.50%

6.25%

7.50%

  

Victoria

6.00%

6.50%

6.25%

6.75%

6.50%

7.00%

  

www.collierscanada.com

COMMUNITY

STRIP MALL

TREND R

C

S

COLLIERS INTERNATIONAL | P. 14