Capital Markets

Insight
Q2 2017

Page 1
Table of Contents
Economic Overview 3

Toronto 6

Montreal 10

Vancouver 14

Calgary 18

Edmonton 22

Page 2
 Canadian Economy
Q2 2017

Capital Markets Insight

Upbeat economic outlook results in a rate hike

1H17 Market Performance (rebased to 100)
Economic Overview
106
The biggest news for the quarter took place two weeks after the quarter
ended when the Bank of Canada (BoC) announced its interest rate hike. 104
The BoC raised the overnight rate to 0.75 percent, a first rate increase in
almost 7 years, a move that was widely expected by markets. The BoC 102
+0.3%
expects GDP growth of 2.8 percent in 2017, up from its April forecast of 100
2.6 percent. The 2018 GDP growth forecast has also been increased
slightly to 2.0 percent from 1.9 percent in April. Employment rose by 98 S&P/TSX (1.4%)
45,200 in June 2017, beating the consensus expectation of a gain of S&P/TSX Capped REIT
96
10,000 and continuing an impressive run of upside surprises. Over the 3-Jan-17 10-Mar-17 15-May-17 20-Jul-17
past 12 months, employment has increased by 350,700, largely on
strength in the full-time category and in the private sector.

Retail sales rose 0.8 percent, on a monthly basis as of April 2017, and 1H17 Benchmark Bond Yield (%)
manufacturing sales continued their rise for a third consecutive month, Canada 10-Yr Yield
2.7
up 1.1 percent in May 2017. An important aspect of this growth is that the US 10-Yr Yield
upgrade to 2017 figures is largely due to consumption and inventories, 2.5
while investment is now seen to be slightly less of a drag on growth than 2.3
previously thought. Those upgrades more than offset downgrades to 2.1 71bp 36bp
contributions from government and trade. The contribution of housing 1.9
has been left unchanged for both this year and next as of June 2017. 1.7
1.5
Overall, the rise in the economy bodes well for Canadian commercial
1.3
real estate, especially in the office, industrial and retail sectors. 3-Jan-17 10-Mar-17 15-May-17 20-Jul-17

Outlook
Steady rise in retail and manufacturing sales
The market expects that the BoC will raise its policy rate by a further 25 (C$bn)
basis point increase to 1.0 percent on 25 October 2017. This would result Retail Sales
in the BoC having reversed the emergency 50 basis points of rate cuts $55.0 Manufacturing sales
from 2015 in response to the decline in oil prices. However, as core
inflation has been declining and inflation expectations are still in the $52.5

lower half of the BoCs target range, we foresee the BoC to be cautious
in its stance on raising rates for post the October decision, if any change $50.0

does take place at all. Exports continue to underperform projections of

foreign demand growth, and business investment, while taking a positive $47.5

turn, remains sluggish.

$45.0
May-16 Sep-16 Jan-17 May-17

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 3
 3 key trends

Positive momentum continues

Cap rates in most markets and sectors remained unchanged from
the last quarter. Some markets may see further compression in cap
rates through the year

Transaction activity to remain robust

The tap on Asian capital doesnt seem to be closing anytime soon
in spite of new measures

Value-add opportunities highly

sought after
Focus is on properties with strong future upside especially among
institutional and private investors

Page 4
 Canada
Capital Markets Insight Q2 2017

2Q17 INVESTMENT VOLUME: C$7.1bn 2Q17 INVESTMENT BY SECTOR

0.9%
1.6%
3.0% Toronto 2.4% Office
4.7% 8.8%
3.2% Vancouver Industrial
6.0% Montreal 12.7% Multifamily
39.2%
9.4% 48.0% Other Ontario Retail
Edmonton Land
17.4%
Calgary Hotel
23.2%
Other BC 19.5%
Other Quebec
RoC

2Q17 BUYER PROFILE 2Q17 BUYER TYPE

0.6% 0.3%
Private Investors Canada
4.6% 3.6%
9.5%
Investment Funds United States

Corporates/Govt. Singapore
17.1%
REIT/REOC Sweden
Pension Funds
16.5% 52.3%
95.5%

Source: RCA Analytics, RealNet

Note: Market data as of latest available

Page 5
Toronto
Capital Markets Insight Q2 2017

Page 6
 Toronto
Capital Markets Insight Q2 2017

Toronto bounced back strongly from a 2Q17 INVESTMENT BY SECTOR : $3.4bn

slow start to the year as overall
investment volumes for 2Q17 stood at
$3.4 billion, up from $1.6 billion in Office
1.2%
1Q17. Investment in the office sector 9.8%
led the league tables this quarter, with Industrial
investors pumping in approximately 10.0% Retail
$1.5 billion as compared to $500 44.9% Multifamily
million in 1Q17. We expect this trend to
continue in the coming quarters due to 13.9% Land
an ever-increasing interest in core Hotel
properties from domestic and foreign
buyers 20.2%

Industrial investment volumes in 2Q17

stood at approximately $690 million, as
compared to $340 million in 1Q17. 2Q17 BUYER PROFILE
Investor demand remains quite strong
given their preference to acquire new
generation industrial product
9.7% Private Investors

Investment in the multifamily sector 10.6%

Corporates/Govt.
rose to $344 million in 2Q17, up from 41.3%
$155 million in 1Q17. We foresee
Investment Funds
strong multifamily valuations in the 14.8%
year ahead as stable income streams
will attract private investors in larger REIT/REOC
numbers 23.6%
Pension Funds
Investment in the retail sector rose to
$475 million in 2Q17, up from $172
million in 1Q17. Urban retail is a huge 2Q17 BUYER DOMICILE
focus area for many large Canadian
REITs and institutional owners. 1.8% 0.4%
Investors are keenly focused on the
redevelopment potential and the
upcoming residential density of the Canada
area around potential retail sites
United States

Sweden

97.8%

Source: RCA Analytics | Note: Market data as of latest available Page 7

 Toronto
Q2 2017
Capital Markets Insight

Office Downtown Office 4Q16 1Q17 2Q17

Q2 2017 investments in the office sector totaled Total Vacancy Rate (%) 6.9% 6.4% 7.3%
$1.5B, representing a +31 percent volume Class A Net Rent (p.s.f.) $27.14 $28.78 $29.28
increase on an annual basis Net Absorption (s.f.) 549,110 347,522 217,948
Private investors (including owners, operators New Supply (s.f.) 2,354,400 0 1,002,064
and developers) were the largest investor group Under Construction (s.f.) 2,506,639 3,384,500 4,007,239
this quarter accounting for 39 percent of total 4.25%- 4.25%- 4.25%-
investment volumes, similar to Q2 2016 Class A Cap Rate (%)
4.75% 4.75% 4.75%
The CBD accounted for 54 percent of total
investment volumes this quarter, representing a
2 percent decrease as compared to Q2 2016 Suburban Office 4Q16 1Q17 2Q17
Demand for high quality assets remains very Direct Vacancy Rate (%) 13.3% 13.0% 13.1%
strong across the GTA and tight market Class A Net Rent (p.s.f.) $14.80 $14.84 $15.69
conditions may embolden developers to build
Net Absorption (s.f.) 694,383 331,408 5,343
more product on spec in the peripheral CBD
market New Supply (s.f.) 1,343,041 105,364 289,637

Cap rates remain largely unchanged or Under Construction (s.f.) 1,053,881 1,030,588 1,082,668
compressed slightly in some sub-markets 5.25%- 5.25%- 5.25%-
Class A Cap Rate (%)
6.00% 6.00% 6.00%

Industrial
Q2 2017 investments in the industrial sector Industrial 4Q16 1Q17 2Q17
totaled $690M representing a +7 percent volume Vacancy Rate (%) 2.1% 2.7% 2.9%
increase on an annual basis Net Asking Rent (p.s.f.) $6.13 $6.15 $6.17
Corporate/Government users and pension funds Net Absorption (s.f.) 897,414 1,580,988 1,751,780
were the largest investor group this quarter New Supply (s.f.) 741,960 2,510,239 3,046,501
accounting for 41 percent and 26 percent of total
Under Construction (s.f.) 6,949,822 6,258,155 5,712,484
investment volumes respectively
4.25%- 4.25%- 4.25%-
Demand for industrial space continues to exceed Class A Cap Rate (%)
5.00% 5.00% 5.00%
supply as the logistics, warehousing and e-
commerce footprint increases
Investors are particularly on the lookout for new
generation big-box distribution product which
has the potential to be customized to meet the
demands of tenants involved in e-commerce
Cap rates remain largely unchanged or Source: JLL Research
compressed slightly in some sub-markets

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 8
 Toronto
Q2 2017
Capital Markets Insight

Multifamily
The multifamily sector continues to see a record Multifamily 4Q16 1Q17 2Q17
pace of investment activity as overall investment
Overall Vacancy Rate (%) 1.3% 1.3% 1.3%
volumes for 2Q17 stood at approximately $350
3.50%- 3.25%- 3.25%-
million, up from approximately $160 million in High Rise A Cap Rate (%)
4.00% 4.00% 4.00%
1Q17. We note the strong demand for product in 3.50%- 3.25%- 3.25%-
the market and foresee a voracious appetite for Low Rise A Cap Rate (%)
4.00% 4.00% 4.00%
multifamily assets throughout Toronto and the
GTA
Most deals in the GTA market are in the class B
to C product range, with not many A class
buildings trading and none of which are to scale
Given the escalation in value and increased
sophistication required to remain competitive,
mom and pop ownership is becoming rarer in
buildings larger than 50 units

Retail
Investment activity continues to be driven by low
interest rates and increased demand from both Retail 4Q16 1Q17 2Q17
institutional and private capital. We note that 4.50%- 4.00%- 4.00%-
Regional Cap Rate (%)
5.00% 4.50% 4.50%
retail cap rates continue to compress, with
5.00%- 4.50%- 4.50%-
remarkable increases in value in major urban Power Center Cap Rate (%)
6.00% 5.50% 5.50%
centers 5.25%- 5.00%- 5.00%-
Anchored Strip Cap Rate (%)
Urban retail is a huge focus area for many large 6.25% 5.75% 5.75%
Canadian REITs and institutional owners. 4.00%- 3.50%- 3.50%-
Urban Streetfront Cap Rate (%)
Investors are keenly focused on the 4.50% 4.50% 4.50%
redevelopment potential and the upcoming
residential density of the area around potential
retail sites
The trending departure of retailers from some
traditional malls has opened opportunities for
both landlords and tenants to restructure lease
terms, uses and mall layouts to match consumer
Source: JLL Research, CMHC
demand

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 9
Montreal
Capital Markets Insight Q2 2017

Page 10
 Montreal
Capital Markets Insight Q2 2017

Investment activity in Montreal picked 2Q17 INVESTMENT BY SECTOR : $0.7bn

up as overall investment volumes for
2Q17 stood at approximately $675 1.2% 1.0%
million, up from $550 million in 1Q17. Office
We believe that the market is poised 5.1%
Multifamily
for growth and is extremely attractive to 9.1%
Retail
investors across the spectrum
Industrial
Land
Investment in the office sector led the
25.6% 57.9% Hotel
league tables this quarter, with
investors pumping in approximately
$390 million into the sector. We expect
this trend to continue due to a
considerable lack of high quality
investment product

Demand for quality investment 2Q17 BUYER PROFILE

property continues to outstrip supply in
the industrial market with investors 1.7%
looking to older generation assets on
shorter leases to satisfy demand. 8.6%
Investment Funds
Downtown office is highly sought after
but as with industrial there is limited Private Investors
supply
30.3%
59.4% REIT/REOC
Recent transaction evidence points
towards a further widening of the Corporate/Govt.
spread between Montreal and Toronto
cap rates. We expect to see Montreal
cap rates compress further in the
coming months as investors capitalize
on the yield spread 2Q17 BUYER DOMICILE

1.2%
Core retail properties remain highly Canada
sought after especially those with 6.2%
development or upside potential Singapore

Sweden

92.6%

Source: RCA Analytics | Note: Market data as of latest available Page 11

 Montreal
Q2 2017
Capital Markets Insight

Office Downtown Office 4Q16 1Q17 2Q17

Total Vacancy Rate (%) 9.8% 10.1% 9.5%
There continues to be strong demand from all Class A Net Rent (p.s.f.) $17.76 $16.21 $16.45
buyer types as CBD assets are highly sought Net Absorption (s.f.) 12,869 (96,212) 687,196
after amid limited supply
New Supply (s.f.) 0 76,000 76,000
Investment and growth in the technology sector
Under Construction (s.f.) 1,102,200 1,026,200 901,200
has been increasing and we expect the trend to
5.25% - 4.75% - 4.75% -
continue Class A Cap Rate (%)
5.75% 5.25% 5.25%
The anticipated commencement of construction
for the new light rail transit system is generating
additional interest in suburban office around the
Suburban Office 4Q16 1Q17 2Q17
location of the proposed stations and with the
discontinuation of the PR@M program, the Total Vacancy Rate (%) 17.7% 17.0% 16.7%
market is stabilizing Class A Net Rent (p.s.f.) $14.12 $13.51 $13.30
This quarter saw the Montreal market post the Net Absorption (s.f.) 207,424 250,066 140,210
highest positive net absorption rate since 2000. New Supply (s.f.) 507,716 169,348 169,348
This combined with a drop in vacancy is a Under Construction (s.f.) 431,848 262,500 262,500
promising sign of a stabilizing market on the way 6.00%- 5.75%- 5.75%-
to growth Class A Cap Rate (%)
7.00% 6.75% 6.75%

Industrial
Demand for new generation investment property Industrial 4Q16 1Q17 2Q17
continues to outstrip supply in the industrial Vacancy Rate (%) 5.8% 5.5% 6.0%
market with investors looking to older generation Net Asking Rent (p.s.f.) $5.77 $5.87 $5.91
assets on shorter leases to satisfy demand Net Absorption (s.f.) 874,913 2,169,329 (740,862)
There remains limited speculative development New Supply (s.f.) 1,231,519 0 364,812
despite vacancy rates continuing to fall to new Under Construction (s.f.) 315,000 1,571,280 1,219,125
lows with tenants often choosing to occupy more 5.75%- 5.75%- 5.50%-
space with lower clear heights rather than invest Class A Cap Rate (%)
6.25% 6.25% 6.25%
in higher clear height facilities
The market continues to be dominated by users
buying vacant properties for occupancy

Source: JLL Research

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 12
 Montreal
Q2 2017
Capital Markets Insight

Multifamily
We note the surplus of demand in the market Multifamily 4Q16 1Q17 2Q17
amid a lack of good quality product. Even though
Overall Vacancy Rate (%) 3.9% 3.9% 3.9%
cap rates remain compressed and are expected
4.25%- 4.25%- 4.25%-
to compress further, any high quality product is High Rise A Cap Rate (%)
4.75% 4.75% 4.75%
being heavily bid on 4.50%- 4.50%- 4.50%-
Low Rise A Cap Rate (%)
Montreals multifamily market has been, for the 5.00% 5.00% 5.00%
most part, dominated by private investor activity.
We have begun to see significant purpose built
development and there is considerable
difference between rental rates of old stock
multi-family and new condo style apartment
buildings
We foresee the secondary rental market to be
the biggest threat to traditional multifamily
building owners downtown as they are
competing against new-built towers with
amenities at competitive pricing

Retail
Core properties remain highly sought after,
especially those with development or upside Retail 4Q16 1Q17 2Q17
potential. We note the decrease in investor 5.00%- 5.25%- 5.25%-
interest in high street retail as vacancy on even Regional Cap Rate (%)
6.00% 5.75% 5.75%
the most important high streets has started to 6.00%- 5.75%- 5.75%-
creep up and investors seem to be less bullish Power Center Cap Rate (%)
6.75% 6.75% 6.75%
on fashion retailers 5.25%- 5.25%- 5.25%-
Anchored Strip Cap Rate (%)
Local buyers continue to express high interest 6.00% 6.00% 6.00%
4.50%- 4.50%- 4.50%-
for retail properties on the back of low interest Urban Streetfront Cap Rate (%)
5.00% 5.00% 5.00%
rates and we expect cap rates to continue to
compress ahead
Many retailers are embracing omni-channel
sales strategies to better compete with online
retailers as well as centralizing, downsizing, and
consolidating retail space into single marquis
locations
Source: JLL Research, CMHC

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 13
Vancouver
Capital Markets Insight Q2 2017

Page 14
 Vancouver
Capital Markets Insight Q2 2017

Investment in Vancouver remains 2Q17 INVESTMENT BY SECTOR : $1.6bn

strong through Q2 2017 with total
transaction volumes exceeding $1.6
billion. The largest transactions of the Office
1.6%
quarter included MetroTower I and II 7.7%
office towers in Burnaby, and 1371 Multifamily
10.3%
McKeen Avenue, North Vancouver a 36.0% Industrial
27.5 acre parcel of waterfront industrial
Land
land
20.3% Retail

The market continues to witness a Hotel

chronic lack of quality product in the
24.1%
retail, industrial, and downtown office
sector. Should any high-quality,
investment grade assets come to
market, we expect cap rates to
compress further 2Q17 BUYER PROFILE

Private investors have been the most 2.7% 0.7%

active buyer type this quarter, Private Investors
accounting for 80 percent of total
16.7% Corporate/Govt.
transaction volume. REITs remained
on the sidelines in Q2 2017,
Investment Funds
accounting for just 1 percent of total
transaction volume REIT/REOC

Though buyer domicile was 79.9%

predominantly local, foreign investors
remain aggressive purchasers in
Vancouver. Despite the recent 0.25%
hike in the Bank of Canadas overnight
lending rate, we do not anticipate cap 2Q17 BUYER DOMICILE
rates to increase in the near term

6.7% Canada

United States

93.3%

Source: RCA Analytics | Note: Market data as of latest available Page 15

 Vancouver
Q2 2017
Capital Markets Insight

Office
Downtown Office 4Q16 1Q17 2Q17
We note a significant uptick in investment
Total Vacancy Rate (%) 8.3% 7.1% 6.8%
activity from Q1 due to Ivanhoe Cambridges
sale of MetroTower I and II, representing the Class A Net Rent (p.s.f.) $29.45 $29.36 $28.75
largest deal of the quarter. Generally, both Net Absorption (s.f.) 83,219 168,894 81,765
private and institutional foreign investors were New Supply (s.f.) 119,328 0 0
aggressive purchasers for office product in Under Construction (s.f.) 534,196 541,824 666,484
Vancouver 3.75%- 3.75%- 3.75%-
Class A Cap Rate (%)
Cap rates have sustained their historic lows. We 4.25% 4.25% 4.25%
expect this to remain relatively unchanged over
the short term due to lack of quality grade
investment opportunities Suburban Office 4Q16 1Q17 2Q17
The only significant office space delivery Total Vacancy Rate (%) 12.3% 12.6% 12.2%
anticipated for 2017 is The Exchange in Class A Net Rent (p.s.f.) $19.04 $19.00 $19.98
Downtown Vancouver. We anticipate the next
Net Absorption (s.f.) 191,006 (10,649) 67,735
wave of construction to be in 2020/2021. The
New Supply (s.f.) 137,602 224,565 280,565
tech industry, followed by engineering, continues
to lead office space demand Under Construction (s.f.) 709,512 507,918 303,000
5.00%- 5.00%- 5.00%-
Class A Cap Rate (%)
5.50% 5.50% 5.50%

Industrial
High net worth/private investors were the most
Industrial 4Q16 1Q17 2Q17
active buyers this quarter. Institutional investors
have also been active, but more so in their Vacancy Rate (%) 2.0% 2.2% 2.3%
willingness to bid and not necessarily in Net Asking Rent (p.s.f.) $9.80 $9.85 $9.87
succeeding with the acquisition Net Absorption (s.f.) 116,498 897,414 151,353
The overall vacancy rate is expected to remain New Supply (s.f.) 1,231,519 741,199 360,363
low in Metro Vancouver as a strong provincial Under Construction (s.f.) 4,621,568 7,115,078 4,172,017
economy continues to generate robust demand 4.50%- 4.25%- 4.25%-
Class A Cap Rate (%)
for warehouse space 5.00% 4.75% 4.75%
Cap rates have sustained their historic lows. We
expect supply to remain scarce in the short term
despite the 4.1M s.f. currently under
construction, due to strong demand and
municipal permit delays. This is especially true
for large-scale warehouse space, which has
faced a consistent lack of supply over the past Source: JLL Research
few quarters

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 16
 Vancouver
Q2 2017
Capital Markets Insight

Multifamily
Record low vacancy rates in chosen suburban Multifamily 4Q16 1Q17 2Q17
markets can be attributed to younger or lower
Overall Vacancy Rate (%) 0.7% 0.7% 0.7%
income individuals who are moving from core
2.00%- 2.00%- 2.00%-
centers to avoid paying high rental rates High Rise A Cap Rate (%)
3.00% 3.00% 3.00%
We notice that cap rates have begun to stabilize 2.50%- 2.50%- 2.50%-
Low Rise A Cap Rate (%)
in major urban centers and we continue to see 3.25% 3.25% 3.25%
them compress in suburban areas where rental
rates have seen substantial growth, such as
New Westminster
The multifamily sector is yet to see foreign
investment from Asia come in. While there have
been a number of inquiries, there hasnt been a
transaction involving foreign capital to date in
2017

Retail
Cap rates compressed further from Q1 levels, Retail 4Q16 1Q17 2Q17
sustaining the asset class historically low levels; 3.50%- 3.50%- 3.50%-
we note, however, that the rate spread between Regional Cap Rate (%)
4.50% 4.50% 4.50%
specific retail types is relatively large as 4.50%- 4.50%- 4.50%-
investment opportunities for high quality retail Power Center Cap Rate (%)
5.50% 5.50% 5.50%
remains scarce 4.00%- 4.00%- 4.00%-
Anchored Strip Cap Rate (%)
New standalone construction is restrained as 5.00% 5.00% 5.00%
much of the anticipated supply coming to market 3.50%- 3.50%- 3.50%-
Urban Streetfront Cap Rate (%)
4.50% 4.50% 4.50%
are part of redevelopment efforts for the retail
components of mixed-use projects, which
continues to be a popular trend in Vancouver
Though strong demand across all buyer profiles
held through the second quarter, the most active
buyers were private investors. The largest retail
transaction of the quarter was the sale of
Sevenoaks Shopping Centre in Central Source: JLL Research, CMHC
Abbotsford

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 17
Calgary
Capital Markets Insight Q2 2017

Page 18
 Calgary
Capital Markets Insight Q2 2017

Investment activity in 2Q17 has slowed 2Q17 INVESTMENT BY SECTOR : $0.2bn

with the quarter posting approximately
$200 million in investment volumes,
down from approximately $500 million
Industrial
in 1Q17. The demand from investors 15.1%
continues to be strong, however, Office
owners continue to be discouraged by 33.3%
perceived discounted valuations Multifamily
23.4%
Retail
Investment demand for industrial
product in Calgary has increased as a
nationwide lack of supply continues
28.2%

Private investors are on the lookout for

value-add opportunities across the
office, industrial, retail and multifamily
sector. On the other side of the 2Q17 BUYER PROFILE
spectrum, institutional buyers are
seeking core properties with renewed
vigour Corporate/Govt.
11.1%
Private Investors
11.3%
42.5% Investment Funds

REIT/REOC

35.2%

2Q17 BUYER DOMICILE

Canada

100.0%

Source: RCA Analytics | Note: Market data as of latest available Page 19

 Calgary
Q2 2017
Capital Markets Insight

Office
Downtown Office 4Q16 1Q17 2Q17
Institutional investment activity in the second
Total Vacancy Rate (%) 21.1% 21.2% 21.7%
quarter of 2017 has slowed. The demand from
investors continues to be strong, however, Class A Net Rent (p.s.f.) $16.70 $15.36 $15.42
owners continue to be discouraged by perceived Net Absorption (s.f.) (891,328) (76,919) (199,010)
discounted valuations New Supply (s.f.) 602,115 0 522,525
Two transactions closed in the quarter both Under Construction (s.f.) 2,361,752 2,403,250 1,838,900
sold by public companies to private buyers. This 5.50%- 5.50%- 5.50%-
Class A Cap Rate (%)
is a trend that is expected to last for the 6.00% 6.00% 6.00%
remaining of the year
The market continues to discuss re-purposing
office assets the most popular options being Suburban Office 4Q16 1Q17 2Q17
multi-family, hotel and senior housing Total Vacancy Rate (%) 20.5% 18.7% 18.6%
Class A Net Rent (p.s.f.) $16.51 $15.06 $16.42
Net Absorption (s.f.) (370,996) (152,027) 185,939
New Supply (s.f.) 36,269 0 0
Under Construction (s.f.) 480,130 692,135 1,667,402
6.25%- 6.25%- 6.25%-
Class A Cap Rate (%)
6.75% 6.75% 6.75%
Industrial

Investors continue to have an insatiable demand

Industrial 4Q16 1Q17 2Q17
for quality industrial investment assets in
Calgary. One mid-size multi-tenant asset Vacancy Rate (%) 7.8% 7.8% 7.1%
attracted more than 20 bids from a wide array of Net Asking Rent (p.s.f.) $9.57 $9.55 $9.55
investor profiles Net Absorption (s.f.) (82,480) 79,131 535,200
Supply is slowly starting to increase with three New Supply (s.f.) 344,360 172,629 314,698
transaction totaling over one million square feet
Under Construction (s.f.) 605,128 527,000 384,509
listed in the second quarter. All of the listing are
under contract at or above vendor expectations 5.00%- 5.00%- 5.00%-
Class A Cap Rate (%)
5.50% 5.50% 5.50%
Cap rates continue to show signs of
compression. Owners are now considering
taking advantage of favourable valuations and
we expect more assets to come to the market in
the third quarter

Source: JLL Research

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 20
 Calgary
Q2 2017
Capital Markets Insight

Multifamily
There continues to be a lack of multifamily Multifamily 4Q16 1Q17 2Q17
product available for purchase in Calgary as
Overall Vacancy Rate (%) 7.0% 7.0% 7.0%
vendors are keeping a watchful eye on interest
4.50%- 4.50% 4.50%
rates, oil prices, and the overall Alberta economy High Rise A Cap Rate (%)
5.50% 5.50% 5.25%
While the number of multifamily transactions in 5.00%- 5.00% 5.00%
Low Rise A Cap Rate (%)
1H2017 in the Calgary market has increased in 5.75% 5.75% 5.75%
comparison to 1H2016, the total investment
volume in dollar terms is lower in the same
period, with the difference largely being in the
value of high-rise apartment sales
Private investors are actively on the lookout for
value-add opportunities while institutional buyers
are seeking core properties with renewed vigor.
The current buyer profile have been all domestic
investors although new investors are beginning
to enter the Calgary market

Retail
There is a rise in consumer optimism in the
Retail 4Q16 1Q17 2Q17
region and we expect heavy interest in urban
street front retail properties in the days ahead. 4.75%- 4.75%- 4.75%-
Regional Cap Rate (%)
6.00% 5.75% 5.75%
Most of the construction activity in the future will
5.50%- 5.50%- 5.50%-
comprise of neighborhood centers and urban Power Center Cap Rate (%)
6.00% 6.00% 6.00%
mixed-use development 5.00%- 5.00%- 5.00%-
Anchored Strip Cap Rate (%)
There is still a strong interest from institutional 6.00% 6.00% 6.00%
and private investors amid a lack of supply of 5.75%- 5.50%- 5.50%-
Urban Streetfront Cap Rate (%)
trophy assets and grocery anchored/key location 6.25% 6.00% 6.00%
product
We note the upcoming availability of large
spaces in Calgarys North Hill Centre,
Southcentre Mall and the Brentwood Village
Shopping Centre, post Sears exit. Opportunities
exist for Landlords to re-establish market rental
rates with new smaller format tenancies Source: JLL Research, CMHC

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 21
Edmonton
Capital Markets Insight Q2 2017

Page 22
 Edmonton
Capital Markets Insight Q2 2017

Investment activity in 2Q17 has slowed 2Q17 INVESTMENT BY SECTOR : $0.2bn

with the quarter posting approximately
$200 million in investment volumes,
down from approximately $500 million
Retail
in 1Q17. The demand from investors 5.7%
continues to be strong, however, 10.8% Industrial
owners continue to be discouraged by 37.0%
perceived discounted valuations Multifamily
15.2%
Office
We note that buyers are circling the
market with greater intensity especially Land
in the multifamily sector. Private
31.3%
investors who are looking for well
located, existing assets seem to be
struggling to find opportunities

While transaction activity in the office 2Q17 BUYER PROFILE

and industrial sector has been tepid
this quarter, we foresee greater activity
in coming months as economic
1.5%
conditions brighten 18.1%
Private Investors
Investment Funds
REIT/REOC

80.4%

2Q17 BUYER DOMICILE

Canada

100.0%

Source: RCA Analytics | Note: Market data as of latest available Page 23

 Edmonton
Q2 2017
Capital Markets Insight

Office
Downtown Office 4Q16 1Q17 2Q17
Dream Office REITs sales of their Edmonton Total Vacancy Rate (%) 17.2% 16.9% 18.2%
Office assets has been the most noteworthy Class A Net Rent (p.s.f.) $20.39 $20.65 $20.29
transaction year to date. The transaction has Net Absorption (s.f.) 106,670 47,230 (93,346)
shown a clear delineation of pricing between New Supply (s.f.) 1,122,618 0 0
their class A assets their class B and C assets.
Under Construction (s.f.) 578,000 578,000 578,000
We expect the transaction to act as a benchmark
6.25%- 6.25%- 6.25%-
for deals in the near future Class A Cap Rate (%)
7.00% 7.00% 7.00%
The suburban office market continues to perform
reasonably well and has shown resilience. Most
of the transaction activity is being driven by
Suburban Office 4Q16 1Q17 2Q17
private investors
Total Vacancy Rate (%) 11.4% 12.6% 14.4%
Class A Net Rent (p.s.f.) $17.76 $17.60 $17.60
Net Absorption (s.f.) (69,305) (72,405) (61,168)
New Supply (s.f.) 67,680 0 0
Under Construction (s.f.) 224,306 106,000 185,058
6.50%- 6.50%- 6.50%-
Class A Cap Rate (%)
7.50% 7.50% 7.50%

Industrial
We note a steadily increasing spread currently
Industrial 4Q16 1Q17 2Q17
between class A and B industrial product with
abundant institutional interest in the former and Vacancy Rate (%) 4.6% 4.9% 5.3%
a lack of product offering Net Asking Rent (p.s.f.) $9.89 $10.03 $9.74
Investment volumes for class B assets are being Net Absorption (s.f.) 441,070 5,360 786,073
largely driven by private equity and private New Supply (s.f.) 140,720 431,251 0
investors
Under Construction (s.f.) 431,251 66,223 66,223
With renewed pipeline activity on the horizon,
5.25%- 5.25%- 5.25%-
heavier industrial areas have begun to generate Class A Cap Rate (%)
6.00% 6.00% 6.00%
investor interest along with associated industries
in the supply chain, thereby driving demand for
small to mid-bay product. There is an increase in
bidding activity for such product among private
investors looking for value-add opportunities

Source: JLL Research

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 24
 Edmonton
Q2 2017
Capital Markets Insight

Multifamily

We note that vendor and purchaser pricing Multifamily 4Q16 1Q17 2Q17
expectations have largely yet to align with higher Overall Vacancy Rate (%) 7.1% 7.1% 7.1%
vacancies and lower rents, which the market is 4.25%- 4.25%- 4.25%-
High Rise A Cap Rate (%)
currently experiencing. A possible bump in 5.25% 5.25% 5.25%
interest rates around the end of the year will 5.50%- 5.50%- 5.50%-
Low Rise A Cap Rate (%)
6.50% 6.50% 6.50%
further widen the gap
There is a considerable lack of supply of high-
rise concrete product in the City of Edmonton
and the opportunity to acquire such product is
rarely available. We expect to see a renewed
interest in core type product, however, at lower
prices than seen in the past
We foresee that the largest demand for
multifamily product will continue to be in the
high-rise concrete sector of the market with
buyers looking to acquire this product under a
reposition or value-add strategy

Retail
Retail 4Q16 1Q17 2Q17
There is a rising interest in neighborhood and 4.75%- 4.75%- 4.75%-
Regional Cap Rate (%)
anchored strip retail assets among investors as 6.00% 5.75% 5.75%
retail spending increases and the oil-industry 5.50%- 5.50%- 5.50%-
Power Center Cap Rate (%)
begins to stabilize 6.00% 6.00% 6.00%
5.00%- 5.25%- 5.25%-
Quality assets are still in demand across all Anchored Strip Cap Rate (%)
6.00% 6.00% 6.00%
product types. Institutional investors will need to 5.75%- 5.50%- 5.50%-
continue to focus on a customized development Urban Streetfront Cap Rate (%)
6.25% 6.00% 6.00%
solution to secure retail assets
We note the upcoming availability of large
spaces in the West Edmonton Mall, Kingsway
Mall and Southgate Centre, post Sears exit.
Opportunities exist for landlords to re-establish
market rental rates with new smaller format
tenancies
Source: JLL Research, CMHC

2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to
the accuracy thereof.
Page 25
About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to
clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee
revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries
and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate
outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118
billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment
Management, has $55.3 billion of real estate assets under management. JLL is the brand name, and a registered
trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

About JLL Research

JLLs research team delivers intelligence, analysis, and insight through market-leading reports and services that illuminate
todays commercial real estate dynamics and identify tomorrows challenges and opportunities. Our 415 professional
researchers track and analyze economic and property trends and forecast future conditions in over 75 countries, producing
unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking
around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate
decisions. For further information, visit www.jll.ca/research.

Office locations:
TORONTO TORONTO NORTH MISSISSAUGA MONTRAL
22 Adelaide Street West, Suite 251 Consumers Road, Suite 110 Matheson Blvd W, Suite 1, Place Ville Marie, Suite
2600 900 107 3838
Toronto, ON M5H 4E3 Toronto, ON M2J 4R3 Mississauga, ON L5R 4G7 Montral, QC H3B 4M6
Tel: +1 416 304 6000 Tel: +1 674 728 0457 Tel +1 905 502 6116 Tel +1 514 849 8849
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For more information, please contact:

Gaurav Mathur Thomas Forr

Research Manager, Capital Markets Research Manager, Office
+1 416 238 4455 +1 416 304 6047
Gaurav.Mathur@am.jll.com Thomas.Forr@am.jll.com
2017 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or
otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior written
permission of Jones Lang LaSalle. The information contained in this document has been compiled from sources believed to be reliable. Jones Lang LaSalle or any of their
affiliates accept no liability or responsibility for the accuracy or completeness of the information contained herein and no reliance should be placed on the information contained
in this document.

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