Canada Industrial MarketView Q2 2013

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1 Q13 2Q13 $ (millions) Canada Industrial MarketView Q CBRE Global Research and Consulting AVAILABILITY RATE 5.8% ANOTHER STRONG QUARTER FOR THE INDUSTRIAL MARKET Executive Summary: Canada s industrial markets posted another strong quarter and are expected to remain robust throughout the second half of Quarterly net absorption, at 3.9 million SF, is above the 10-year quarterly average of 3.5 million SF. Eastern markets were again the largest contributor to national absorption - the second consecutive quarter where this was the case. Construction is putting some upward pressure on industrial availability rates in Western Canada. Net asking rental rates, at $5.92 psf, are at a record high, eclipsing the previous high of $5.87 psf recorded in late Construction activity is more diversified compared to last year when the focus was in large retail/consumer distribution centres. NET RENT $5.92 psf The second quarter of 2013 proved to be another strong quarter for the industrial market. The momentum from the first quarter of 2013 carried over to the second quarter with 3.9 million SF of net absorption. However, this is only marginally above the 10-year quarterly average of 3.5 million SF, and was not enough to move the availability rate, which was unchanged quarter-overquarter (QoQ) at 5.8%. Although the Canadian industrial market continues to exhibit strong fundamentals overall, construction is putting some upward pressure on industrial availability rates in Western Canada, with availability up 80 basis points (bps) QoQ and 50 bps year-over-year (YoY) to 6.0%. The Western industrial markets continue to adjust to decreased capital spending in resource-dependent markets. In Eastern Canada the story is reversed. The pickup in the U.S. economy and signs of continued growth in China are supporting demand for industrial space in Eastern Canada, with availability down 20 bps QoQ and 80 bps YoY to 5.8%. Construction activity remains relatively strong at 14.8 million SF, up by 2.0 million SF QoQ, and well above the 10- Chart 1: Manufacturing $75,000 Manufacturing Sales Inventory UNDER CONSTRUCTION 14.8 million SF New Orders Unfilled Orders NET ABSORPTION 3.9 million SF Arrow indicates change from previous quarter. year historical average of 11.1 million SF. This activity is centered on Toronto, Edmonton, Vancouver and Calgary, with 5.3 million SF, 3.8 million SF, 2.4 million SF and 2.0 million SF under construction, respectively. Industrial construction activity as a percentage of existing inventory in the west is over three times that in the east. Construction activity in Toronto, Edmonton, and to an extent Vancouver, is reflective of strong leasing activity. With the current levels of demand being experienced, it is not surprising that asking rent across the nation continue to climb for the fourth consecutive quarter, reaching a record high at $5.92 psf this quarter. This is up $0.25 psf QoQ and $0.39 psf YoY. The main driver for growth in rental rates comes from the West and Toronto. Edmonton recorded a record high average net rent of $10.78 psf this quarter, while Toronto closed the quarter at $4.93 psf. Toronto is fast approaching the $5.00 psf mark, which was last experienced in the second quarter of Overall, the industrial market is expected to perform well throughout the second half of the year. $60,000 1 $45,000 $30,000 $15,000 $0 Source: Statistics Canada

2 Annualized Change (%) Table 1: Market Statistics Region West Inventory Availability Rate (%) Vacancy Rate (%) 2Q13 Net Absorption YTD Net Absorption 2Q13 New Supply YTD New Supply 2Q13 Under Construction Avg. Net Asking Rent ($ psf) Avg. Asking Sale Price ($ psf) Vancouver 176,946, % 4.9% 396, , ,683 1,458,380 2,398,599 $7.83 $ Calgary 122,148, % 3.7% -1,052, ,322 1,072,164 1,505,677 2,037,475 $7.95 $ Edmonton 102,738, % 2.4% 110,789 1,096,300 1,299,916 1,657,446 3,801,513 $10.78 $ Winnipeg 76,784, % 3.7% -65,895-77,569 50, , ,000 $6.75 $82.02 Total 478,617, % 3.9% -611,117 1,178,186 3,335,763 4,786,503 8,514,587 $8.30 $ East London 37,534, % 8.9% 320, , , ,244 $3.91 $53.00 Waterloo Region 112,125, % 4.1% 477,999 1,295, ,576 $4.28 $61.72 Toronto 744,173, % 2.8% 3,024,724 7,724, ,689 2,241,100 5,347,795 $4.93 $90.65 Ottawa 29,245, % 6.2% 28,858 2, ,363 $8.64 $ Montreal 295,196, % 8.0% 441,028 1,235, , , ,000 $5.07 $59.11 Halifax 11,426, % 5.3% 192, , , ,080 60,000 $7.47 $80.00 Total 1,229,701, % 4.6% 4,485,830 10,922,199 1,292,583 3,363,122 6,292,978 $4.96 $80.33 National Total 1,708,318, % 4.3% 3,874,713 12,100,385 4,628,346 8,149,625 14,807,565 $5.92 $ Employment % Change GDP % Change 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13* 2Q13* 3Q13* 4Q13* Source: Statistics Canada and Conference Board of Canada Consensus of major bank GDP forecasts Chart 2: Economic Trends The Canadian economy continues to post below trend growth, however, the first quarter did see a reacceleration to more normal expansion levels. Early projections suggest second quarter GDP growth will come in at 2.4% (annualized) and for the second half of the year the consensus forecast is for the Canadian economy to expand near trend, but the risk is to the downside if there is not a significant pick-up in the U.S. economy. This should provide a modest tailwind for commercial real estate, but more so in 2014 than Despite a somewhat lackluster economy, most sectors continue to make gains, albeit modest. The potential tapering of the Fed Federal Reserve s bond buying program has added an element of uncertainty and may cause hesitation amongst occupiers, however, considerable momentum exists which should keep leasing activity at or near current levels.

3 SF (000s) Table 2: Top Sales Transactions Size Price ($ Million) Purchaser Purchaser Industry Address 2,580,911 $256,200,000 PURE Industrial REIT REIT GE Canada Industrial Portfolio, Vaughan / Markham / Burlington / Mississauga / Brampton, ON 1,102,383 $103,705,000 Dundee Industrial REIT REIT CanFirst Capital Management Portfolio, Various Locations Toronto, ON 754,957 $69,500,000 Private Company ( Ontario Inc.) Private Investor 2935 Pillette Rd, Windsor, ON 1,000,082 $66,500,000 KingSett Capital Inc. Private Equity/Pension Fund Advisor 100 Alfred Kuehne Blvd., Toronto, ON 319,509 $28,400,000 Sorbora Group Private Investor 180, 240, 270 & 290 Courtneypark Drive East, Miss. ON Acre $25,060,000 Skyline Commercial Real Estate REIT 740 Industrial Ave., Ottawa, ON 180,000 $12,832,316 GWL Realty Inc. Pension Fund 220 Wayne Gretzky Parkway, Brantford, ON 151,167 $11,275,000 Cristall Group Investment Private Investor 1200 Aerowood Drive, Mississauga, ON 132,665 $11,000,000 BTB REIT REIT 3695 des Laurentides, Montreal, QC 31,730 $10,650,000 Autobahn Freight lines Ltd. Freight & Transportation 27 Automatic Road, Toronto, ON Table 3: Top Lease Transactions 3 Size Tenant Tenant Industry Address 627,791 Best Buy Canada Ltd. Electronic Retailer 86 Pillsworth Road, Caledon, ON 287,350 The Squires Corporation Apparel 1100 Squires Beach Road, Pickering, ON 280,000 Rice Commercial Group Ltd. Engineering Overlea Boulevard, East York, ON 241,698 3E Logistics Inc. Warehousing and Storage 7090 Kennedy Road, Mississauga, ON 180,900 Medical Mart North Corp. Medical Supplies 6200 Cantay Road, Mississauga, ON 176,804 Spectrum Supply Chain Solutions Warehousing and Storage 6099 McLaughlin Road, Mississauga, ON 167, Spinnaker Tools Ltd. Hardware 333 North Rivermede Road, Vaughan, ON 145,623 UPS SCS Inc. Transportation and Freight 7315 David Hunting Drive, Mississauga, ON 97,574 Kenroc Building Materials Co Ltd. Transportation and Freight Avenue, Edmonton, AB 80,915 Miller Zell Canada Inc. Interior Design 1400 Commerce Way, Woodstock, ON * Renewal Chart 3: Net Absorption 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 National Net Absorption 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 10-Yr Avg. Second quarter absorption totaled 3.9 million SF, less than half that recorded in the first quarter (8.1 million SF), but above the 10-year average of 3.5 million SF. Second quarter absorption numbers were also up by approximately 1.0 million SF YoY. Increases in occupied space was led again by Toronto which recorded quarterly absorption of 3.0 million SF followed by the Waterloo Region at 478,000 SF. Calgary was the main detractor with occupied space contracting by almost 1.1 million SF. This was the third consecutive quarter of positive absorption for Toronto after a string of poor performances in mid By contrast, Calgary experienced the first quarter of negative absorption since the third quarter of

4 $ psf SF (000s) Chart 4: Availability and Vacancy Rates 8% 6% 4% 2% 0% Availability Rate 5.8% Vacancy Rate 4.3% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 The overall Canadian industrial availability remained steady QoQ at 5.8%, but is down 50 bps YoY. Despite its largely static position this year, the general trend when contrasting Eastern and Western Canada has changed drastically. Eastern industrial availability has been decreasing from 6.6% a year ago to 5.8% this quarter. Meanwhile the West has faced more volatility rising 80 bps just this quarter. The spread between the West and the East has narrowed considerably, where a year ago the spread was 110 bps, compared to 20 bps this quarter. Edmonton and Toronto continue to show strength with availability rates consistently going lower while bringing on considerable amounts of new supply. The current national availability rate is slightly below the 10-year average of 6.0% and is much less than the 5- year average of 6.8%. Chart 5: Construction 18,000 15,000 12,000 9,000 6,000 3,000 0 Under Construction 14,807,565 SF Completions 4,628,346 SF 10-Yr Quarterly Avg. Construction Completions 4,242,268 SF 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 The second quarter saw 4.6 million SF of industrial space come on-line, with Alberta s Calgary and Edmonton markets leading the way with 1.1 million and 1.3 million SF of new supply completed, respectively, followed by Vancouver with 914,000 SF and Toronto with 617,000 SF. Alberta remains the most vibrant region in terms of new supply, accounting for 2.4 million SF or over half of the nation s new supply this quarter. Construction for the quarter was slightly above the 10- year average of 4.2 million SF. Construction activity remains strong with 14.8 million SF of construction underway at quarter-end, 2.0 million SF more than last quarter. Edmonton in particular has been exceptionally strong this year as construction activity is second only to Toronto while only being one seventh the size of Toronto. 4 Chart 6: Net Asking Rental Rate $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 $3.00 Net Rental Rate $5.92 psf Q13 2Q13 Industrial rents moved higher during the quarter increasing $0.25 psf QoQ and $0.39 psf YoY. The highest rents in Canada remain in the West with Edmonton in particular taking the number one spot in the country at $10.78 psf, a $1.22 psf increase QoQ and a $1.11 psf YoY. In the Eastern half of the country, Toronto remains relatively strong with average rental rates at $4.93 psf and approaching the $5.00 psf mark, which was last seen in the second quarter of Industrial rents are expected to generally track higher in the coming quarters as supply is expected to remain largely restrictive and large retailers and logistics companies in particular continue to show a growing appetite for modern efficient warehouse premises. 4

5 Chart 7: Industrial Inventory Breakdown Toronto: 43.6% Montreal: 17.3% Vancouver: 10.4% Calgary: 7.2% Waterloo Region: 6.6% Edmonton: 6.0% Other: 9.1% 44% 17% 9% 10% 7% 7% 6% CONTACTS For more information about this Canada, Industrial MarketView, please contact: Canada Research Ross J. Moore Director of Research, Canada CBRE Limited 1111 West Georgia Street Suite 600 Vancouver, BC V6E 4M3 t: e: Roelof van Dijk Research Manager, Canada CBRE Limited 145 King Street West Suite 600 Toronto, ON M5H1J8 t: e: FOLLOW US TWITTER Global Research and Consulting This report was prepared by the CBRE Canada Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. 5 Disclaimer Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.