Western Canadian Commercial Real Estate in PerspectiveCPTA 2020 Symposium

AGENDA

Commercial market update

Closing remarks

1

2

4

New Decade

Capital markets update

3

A new decade, a new beginning……sort of.

4altusgroup.com

Trends in the past decade…to continue

Co-working space, improved office amenities Amenities and lifestyle driving housing decisions

Immersive food & retail experiences

Source: WeWork, MetroNaps ,Shop Square One, Eataly Toronto

PropTech

5altusgroup.com

Suburban mixed-use redevelopment

Taza - Calgary

Century Park - Edmonton

Oakridge Centre - Vancouver

6altusgroup.com

Key factors shaping the outlook for the next year

GLOBAL ECONOMIC & GEOPOLITICAL

OUTLOOKPOPULATION

POLICY

EMPLOYMENTINTEREST RATES % ?CORONAVIRUS

CAPITAL MARKETS

8altusgroup.com

What investors want…

Source: Altus Group (Investment Trends Survey)

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0M

OM

ENTU

M R

ATIO

(BUY

% /

SELL

%)

Property type barometer – all available products (Q4 2019)

9altusgroup.com

National investment activity down 9% in 2019

$17.0B

$3.8B $3.7B

$21.0B

$5.1B$2.0B

$6.5B

$59.1B

$9.2B

$3.3B $2.7B

$22.6B

$4.9B$2.4B

$8.8B

$53.9B

0

$10B

$20B

$30B

$40B

$50B

$60B

$70B

Vancouver Edmonton Calgary GTA GGH Ottawa Montreal National*

Q1-Q4 2018 Q1-Q4 2019

*National summaries include: commercial arm’s length market transactions and share sales > $1 million

Source: Altus Group

BILL

ION

S

10altusgroup.com

Calgary cap rate trends

Source: Altus Group (Investment Trends Survey)

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5Q

1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CAP

RATE

(%)

Downtown Class "AA" OfficeTier I Regional MallSingle Tenant IndustrialSuburban Multiple Unit Residential4 Asset Class Average

11altusgroup.com

Calgary Transactions by Asset

$0

$2

$4

$6

$8

$10

$12

Office Retail Industrial Apartment Hotel ICI Land Residential Land

2018 2019

$ (1

00M

)

Source: Altus Group

12altusgroup.com

Edmonton cap rate trends

Source: Altus Group (Investment Trends Survey)

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5Q

1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CAP

RATE

(%)

Downtown Class "AA" OfficeTier I Regional MallSingle Tenant IndustrialSuburban Multiple Unit Residential4 Asset Class Average

13altusgroup.com

Edmonton Transactions by Asset

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

Office Retail Industrial Apartment Hotel ICI Land Residential Land

2018 2019

$ (1

00M

)

Source: Altus Group

14altusgroup.com

Vancouver cap rate trends

Source: Altus Group (Investment Trends Survey)

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0Q

1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CAP

RATE

(%)

Downtown Class "AA" OfficeTier I Regional MallSingle Tenant IndustrialSuburban Multiple Unit Residential4 Asset Class Average

15altusgroup.com

Vancouver Transactions by Asset

$0

$10

$20

$30

$40

$50

$60

$70

Office Retail Industrial Apartment Hotel ICI Land Residential Land

2018 2019

$ (1

00M

)

Source: Altus Group

16altusgroup.com

Apartment Demand Remains Very Strong…

CONTINUUM REIT – STARLIGHT PORTFOLIOGTA, OTTAWA, LONDON

Date: December 2019Price: $1.73B

Price / unit: $276,116Cap rate: 3.56%

Source: Altus Group

17altusgroup.com

Capital watch

Redevelopment / densification opportunities –continued cap rate pressures

Retail in secondary markets will need to continue to evolve

Apartment and industrial will continue to be hot, especially

properties with potential upside

Capital is still chasing desirable assets – at the

right price

OFFICE

19altusgroup.com

Top office tenant preferences

Source: Informa, 2019 Office Tenant Preference Survey

1. Abundant natural light 2. Coffee shops 3. Free WiFi 4. Room sensors -temperature control

6. Sound proofing

5. Efficient elevators 7. Ability to receive packages

20altusgroup.com

Health, wellness, employee-centric amenities

Nap it Up – daytime napping studio for office tower workers at Yonge & Eglinton

Source: WELL Building Institute, Workplace Wellness Study, Forbes, Toronto Life, Office Snapshots / Claude-Simon Langlois

BDO Offices, Toronto

Lifestyle choices & physical / social environments determine 90% of health.

- WELL Building Institute

70% of employees say that a workplace that enhances their health and well-being

would encourage them tostay at current job or accept a job offer.

- 2019 Workplace Wellness Study,Future Workplace

21altusgroup.com

Challenges with open workspaces

‘Wear Space’ by Panasonic:Wireless, noise-canceling headphones and U-shaped

fabric – limits vision and creates personal space

Source: CBC / Onetwosix Design / The Japan Times

22altusgroup.com

5.3%

14.9%

21.8%

7.1%

9.3%

12.3%

8.1%

14.9%

4.5%

14.3%

20.7%

6.8%7.7%

10.0%

6.5%

14.7%

0%

5%

10%

15%

20%

25%

Vancouver Edmonton Calgary Toronto Ottawa Montreal Quebec City Halifax

VACA

NCY

RAT

E

Q4 2018 Q4 2019

Office vacancy rate in balance – for the most part

Source: Altus Group

23altusgroup.com

Strong office pre-leasing activity

35%

0%

69%

0%

26%

6%

42%

15%

32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

2

4

6

8

10

12

14

16

18

20

22

Vancouver Edmonton Calgary Winnipeg Toronto Ottawa Montreal Halifax National

Under Construction % AvailableSource: Altus Group

SQ. F

T. (M

ILLI

ON

S)

% A

VAIL

ABLE

24altusgroup.com

Vancouver Office Forecast

-5.0%

0.0%

5.0%

10.0%

15.0%

-1.0

0.0

1.0

2.0

3.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

AVA

ILA

BILI

TY R

ATE

(%)

TOTA

L N

EW S

UPP

LY /

ABS

ORP

TIO

N (S

Q.F

T.

MIL

LIO

NS)

Office Availability Rate vs. Total New Supply Forecast vs. Absorption (Downtown Vancouver, 2010-2024)

New Supply (SF) Absorption (SF) Availability Rate (%)

25altusgroup.com

Calgary Office Forecast

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-4.0

-2.0

0.0

2.0

4.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

AVA

ILA

BILI

TY R

ATE

(%)

TOTA

L N

EW S

UPP

LY /

ABS

ORP

TIO

N (S

Q.F

T.

MIL

LIO

NS)

Office Availability Rate vs. Total New Supply Forecast vs. Absorption (Downtown Calgary, 2010-2024)

New Supply (SF) Absorption (SF) Availability Rate (%)

26altusgroup.com

Edmonton Office Forecast

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

AVA

ILA

BILI

TY R

ATE

(%)

TOTA

L N

EW S

UPP

LY /

ABS

ORP

TIO

N (S

Q.F

T.

MIL

LIO

NS)

Office Availability Rate vs. Total New Supply Forecast vs. Absorption (Downtown Edmonton, 2010-2024)

New Supply (SF) Absorption (SF) Availability Rate (%)

27altusgroup.com

Office watch

New supply in Vancouver will match supply – while Edmonton and Calgary will continue to slowly

absorb space

Suburban office will struggle to compete with the desirability of

core office spaces

Tech demand driving demand for new spaces – everywhere?

Flexibility and talent is key;co-working will continue to grow

INDUSTRIAL

29altusgroup.com

2.9%

8.3%

9.5%

2.1%

4.1%

3.0%

5.0%

3.8%3.3%

8.2%

9.2%

1.9%

4.0% 4.0% 4.1%3.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Vancouver Edmonton Calgary Toronto SouthwesternOntario

Ottawa Montreal National

AVAI

LABI

LITY

RAT

E

Q4 2018 Q4 2019

Industrial sector remains undersupplied, while demand strengthens

Source: Altus Group

30altusgroup.com

Pre-leasing activity in new buildings under construction has been strong

34.7%

13.7%

100.0%

36.9%

70.0%

5.6%

32.6%

0%

20%

40%

60%

80%

100%

0

5M

10M

15M

20M

25M

Vancouver Edmonton Calgary Toronto Ottawa Montreal National

% A

VAIL

ABLE

SQ. F

T. (M

ILLI

ON

S)

Under Construction % AvailableSource: Altus Group

31altusgroup.com

Vancouver Industrial Forecast

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

-5.0 M

-4.0 M

-3.0 M

-2.0 M

-1.0 M

0.0 M

1.0 M

2.0 M

3.0 M

4.0 M

5.0 M

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Avai

labi

lity

Rate

(%)

Tota

l New

Sup

ply/

Abs

orpt

ion

(SF)

Industrial Availability Rate vs. Total New Supply Forecast vs. Absorption (Greater Vancouver Area, 2010-2024)

New Supply Absorption Availability Rate

32altusgroup.com

Calgary Industrial Forecast

-3.0%

0.0%

3.0%

6.0%

9.0%

12.0%

-1 M

M

1 M

2 M

3 M

4 M

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Avai

labi

lity

Rate

(%)

Tota

l New

Sup

ply/

Abs

orpt

ion

(SF)

Industrial Availability Rate vs. Total New Supply Forecast vs. Absorption (Greater Calgary Area, 2010-2024)

New Supply Absorption Availability Rate

33altusgroup.com

Edmonton Industrial Forecast

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-2 M

-1 M

M

1 M

2 M

3 M

4 M

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Avai

labi

lity

Rate

(%)

Tota

l New

Sup

ply/

Abs

orpt

ion

(SF)

Industrial Availability Rate vs. Total New Supply Forecast vs. Absorption (Greater Edmonton Area, 2010-2024)

New Supply Absorption Availability Rate

34altusgroup.com

Industrial watch

Tenants will focus on automation and efficiencies

Sale prices will continue to climb, driven by users and

investors

Demand for new spaces are (“have been”) pushing rental

rates higher

Key takeaways

36altusgroup.com

Commercial market summary and outlook

Office demand remains strong in Vancouver – Steady-ish in

Alberta

Apartment demand remains robust – both from

consumers and investors –but is there room left to

grow?Demand for industrial spaces remains strong, although new

supply in Alberta is keeping paceVancouver will see less intense

competition from Res developers

37altusgroup.com

Considerations in 2020 and beyond

• PropTech disruption has reached the tipping point and we are seeing wide spread adoption - in both commercial and residential assets

• High prices/aggressive valuations will support broader adoption in order to capture more value out of assets – and improve the attractiveness of new

• Climate change is on the minds of consumers, investors, and owners• Expect more attention to building standards, efficiency, reporting, and

location in years ahead

• The next decade will bring the rise of Gen Z• Their impact on residential and retail sectors will be profound, but their desires

will impact all sectors of real estate

Thank you!