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Market Overview 2018 TREB s COMMERCIAL DEVELOPMENT FORUM PEEL REGION November 7 th, 2018 DATA SOLUTIONS
Commercial Overview Agenda Office Market and the Chase for Talent E-Commerce Impact Retail and Industrial Capital Market Overview Summary 2
What Keeps Us Up at Night 2020-2 Recession? Consumer Debt and rising interest rates Trade and Tariffs Housing Affordability Lack of Wage Inflation Speed of Change Cyber-Security 3
Everyone s Challenge! 4
Job Changes A.I. Influence Source: The Economist 5
Everyone Wants not just the millennials 6
All About Community LIVE: Self-contained mini-cities are on trend 7
WORK: Co-Working Space is Everywhere and Anywhere! Altus Group Limited altusgroup.com 8
WeLive Not for Everyone 9
PLAY: North America is beginning to see a resurgence in retail and entertainment complexes 1. Know your market and deliver or change the market! 2. Broaden the demographic appeal! 3. Re-route circulation to benefit park visitors and adjacent retail tenants 4. Become the new visual and physical hub for the mall Galeries de la Capital s Mega Parc, Quebec City, QC Oxford s Galeries de la Capital s Mega Parc gets a facelift with 18+ attractions and expand F&B offerings Triple Five s American Dream Mall will be North America s largest shopping-dining-entertainment complex. Expected to bring 30 to 40M visitors a year The American Dream Mall in East Rutherford, NJ Source: Plumpton, J. (2018). Energizing your retail environment with compelling entertainment experiences. Toronto, ON. ICSC Canadian Convention. 10
PropTech Market 11
Getting Crowded 12
Is CRE Prepared for What s Next? 13
Driverless Automobiles 14
Rooms Locked Until Ransomware Paid 15
Office Market
Office Vacancy Rate Contrast Urban Vs. Suburban VACANCY RATE 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 9.3% 8.6% 6.3% 4.4% 14.9% 14.8% 14.9% GTA Downtown West Airport Corporate Centre 2017 16.7% Q3 2018 Q3 13.3% 13.0% 13.9% 13.4% 12.3% 10.7% Heartland Meadowvale Mississauga City Centre Source: Altus Group 17
Occupancy Costs Remains Competitive $50 $45 $45.64 $40 $35 $30 $32.38 $29.76 $30.58 $23.34 $30.66 $33.27 $25 $20 $15 $10 $5 $0 GTA Downtown West Airport Heartland Meadowvale Mississauga City Corporate Centre T&O Centre Net Rent Source: Altus Group 18
New Office Construction, Again Contrast SQ. FT. (MILLIONS) 18 16 14 12 10 8 6 4 2 0 40.7% 45.8% 46.3% 85.1% GTA Downtown West Airport Corporate Centre 15.1% Heartland 0.0% 0.0% Meadowvale Mississauga City Centre 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% % AVAILABLE Under Construction % Available Source: Altus Group 19
GTA Office Construction Delivery Forecast Will Bring Little Available Supply in 2018 7,000 6,000 Available Pre-Leased Sq. Ft. (Thousands) 5,000 4,000 3,000 2,000 1,000 0 2018 2019 2020 2021 2022 2023 2024 Source: Altus Group 20
Under Construction in Downtown Toronto Stacked Availability Comparison Source: Altus Group 21
Ecommerce Revolution
Percentage of E-Commerce Sales Increasing Total Retail Sales $700 $600 $500 $400 $300 $200 $100 E-Commerce Retail Sales $70 $60 $50 $40 $30 $20 $10 $0 2013 2014 2015 2016 2017 Retail e-commerce Retail Sales $0 Source: Statistics Canada, in $billions 23
Sales Per Capita and Retail Sales Change 2015 to 2017 NATIONAL 10.0% Sales Per Capita Change British Columbia 14.7% Sales Per Capita Change 17.7% Retail Sales Change Saskatchewan 2.7% Sales Per Capita Change 5.7% Retail Sales Change Quebec 10.6% Sales Per Capita Change 13.4% Retail Sales Change 3.2% Sales Per Capita Change 11.1% Retail Sales Change Alberta 8.2% Sales Per Capita Change 11.8% Retail Sales Change Manitoba 10.8% Sales Per Capita Change 12.5% Retail Sales Change Nova Scotia 11.5% Sales Per Capita Change 12.9% Retail Sales Change 15.1% Retail Sales Change Ontario 24
Retail Vacancy By Major City (Mid-Year 2018) 12% 10% 10.50% 8% 6% 5.90% 6.20% 7.10% 4% 4.30% 3.70% 2% 2.20% 2.10% 0% Vancouver Calgary Edmonton Winnipeg Toronto Ottawa Montreal Halifax Source: Altus InSite, CBRE, Colliers International, Cushman & Wakefield 25
National Industrial Demand Driven by Growth in E-Commerce 10 8 5% 4% SQ.FT. (MILLIONS) 6 4 2 3% 2% 1% VACANCY RATE 0 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 New Construction Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Vacancy Rate Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 0% Source: Altus Group 26
Industrial Vacancy Rates Remain Tight in Toronto 8% 2017 Q3 2018 Q3 7% 6% 5% 5.4% 6.0% 6.8% 6.4% 5.5% 4% 3% 2% 1% 2.4% 2.2% 3.4% 2.9% 1.9% 1.3% 3.6% 3.2% 3.7% 3.2% 2.7% 0% Vancouver Edmonton Calgary Winnipeg Toronto Ottawa Montreal National Source: Altus Group/Johnson Report 27
Industrial Rental Rates Continue to Creep Up $ PSF $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 $18.06 $14.21 $14.95 $11.58 $12.49 $16.09 $9.65 $13.77 Vancouver Edmonton Calgary Winnipeg Toronto Ottawa Montreal National Net Rent TMI Source: Altus Group/Johnson Report 28
Much Needed New Industrial Supply on the Horizon 16 80.0% 14 70.0% 12 68.2% 60.0% SQ. FT. (MILLIONS) 10 8 6 4 2 0 42.5% 40.4% 44.1% 1.0% 8.0% 0.2% 3.8% Vancouver Edmonton Calgary Winnipeg Toronto Ottawa Montreal National 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% % AVAILABLE Under Construction % Available Source: Altus Group/Johnson Report 29
Industrial Vacancy Rates 4% 2017 Q3 2018 Q3 3% 3.2% 3% 2.7% 2% 2% 1% 1.9% 1.3% 1.8% 1.6% 1.1% 1.4% 1.1% 2.1% 1% 0.8% 0.8% 0% GTA West Mississauga Brampton Oakville Burlington Source: Altus Group/Johnson Report 30
Industrial Rental Rates Continue to Creep Up $14 $12 $12.50 $12.22 $12.42 $11.79 $12.62 $11.99. $10 $ PSF $8 $6 $4 $2 $0 GTA West Mississauga Brampton Oakville Burlington Net Rent TMI Source: Altus Group/Johnson Report 31
Much Needed New Industrial Supply on the Horizon 10 120.0% 8 85.9% 100.0% 100.0% SQ. FT. (MILLIONS) 6 4 40.3% 36.1% 76.1% 80.0% 60.0% 40.0% % AVAILABLE 2 20.0% 0 0.0% GTA West Mississauga Brampton Oakville Burlington Under Construction % Available 0.0% Source: Altus Group/Johnson Report 32
Growing Op Fast: Cannabis Facilities Across Canada SQ. FT. (MILLIONS) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 8.7 Existing Planned/Underway 6.4 3.0 3.4 2.7 1.9 1.3 0.8 0.8 0.2 0.1 0.1 0.5 0.3 British Columbia Alberta Saskatchewan Ontario Quebec New Brunswick National Includes: green houses, grow rooms, related vegetation, nutrient delivery and post production infrastructure. Source: Select large Public Company's, Management's discussion and analysis reports,altus Group 33
Capital Markets
Canadian Investment Activity Source: Altus Group 35
Supply Issue, not a Demand Issue $30 $25 $26.7 $28.0 $20 $15 $10 $5 $0 $10.6 $11.3 $7.3$6.7 $2.7 $2.3 $1.4 $1.9 $1.6 $1.7 $2.5 $3.2 $0.8 $0.7 GVA GEA GCA GTA GGH GOA GMA National In $ billions 1st Half 2017 1st Half 2018 Source: Altus Group 36
Availability of New Real Estate Equity Very Poor Poor Good Very Good Excellent Source: Investment Trends Survey, Altus Group 37
Cap Rates Stable 5.5% 5.3% 4.6% 3.7% 1.4% H1 2018 Source: Altus Group 38
GTA Investment Activity by Sector Source: Altus Group 39
Notable ICI Land Transactions Downsview Airport, North York ICI Land June 2018 $825,000,000 $2,261,813 / acre Mixed Use 2304 2370 Dixie Road, Mississauga ICI Land August 2018 $52,000,000 $2,097,620 / acre Industrial 10534 Hurontario Street, Brampton ICI Land January 2018 $32,000,000 $1,070,234 / acre Commercial Source: Altus Group 40
Transit Hubs Driving CRE Investment Activity Pearson Transit Centre Vaughan Metropolitan Centre Hurontario LRT East Harbour Project 41
Pearson Transit Hub 42
Notable Office Transactions 1243 Islington Ave, Etobicoke Lansing Square, North York Parkway Place, North York Office Office Office September 2018 July 2018 May 2018 $40,431,085 $162,300,000 $256,250,000 $363 / sf $369 / sf $296 / sf Mid-High 5% Cap Not Applicable 6.0% Cap Source: Altus Group 43
Notable Retail Transactions Woodside Square, Scarborough Retail March 2018 $97,280,000 $331 / sf 5.1% Cap 282 Monarch Ave, Ajax Retail July 2018 $22,000,000 $224 / sf 5.4% Cap 700 King St W, Toronto Retail May 2018 $15,120,000 $1,952 / sf 3.6% Cap Source: Altus Group 44
Notable Industrial Transactions American Business Park, Mississauga Industrial March 2018 $90,600,000 $164 / sf 4.9% Cap 4455 North Service Road, Oakville Industrial June 2018 $28,110,000 $114 / sf 5.8% Cap 350 Parkhurst Square, Brampton Industrial September 2018 $27,550,000 $159 / sf 3.8% Cap Source: Altus Group 45
What allows some of us to sleep? USMCA and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Trade and Tariff Discussion Rise of the Entrepreneur - Innovation Adaptation and Innovation Anything that removes uncertainty in the market 46
Thank you.
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