WaterlooRegion Americas Marketbeat Office Q42019 v4 CV Edits · Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real

M A R K E T B E AT

ECONOMYTowards the end of 2019, Canada’s economic growth slowed as some of the nation’s primary sectors begun to weaken. As Canadian household debt continues to grow, overall consumption has fallen below its historical average. In addition, as the international price of oil weakens, Canada is experiencing a decrease in exports. Although global trade tension and geopoliticalinstability remain out of the country’s control, the Canadian economy continues to appear highly susceptible to foreign considerations.

A key economic indicator to consider is Canada’s labour market, which in November 2019 posted its largest monthly job loss sincethe financial crisis. According to Statistics Canada, approximately 71,000 jobs were lost, with 34,000 of those jobs being inmanufacturing and primary sectors. Although this hints towards a potential recession, other indicators suggest the Canadian economy remains stable.

SUPPLY AND DEMANDConstruction levels across Waterloo Region and Guelph remained steady through 2019, as approximately 306,000 square feet (sf)of new office inventory was introduced. Further, an additional 606,558 sf of Class A office space is under construction, with upwards of 1.7 million square feet proposed. Due to record low vacancy rates, the majority of the Region’s office developments remainconcentrated in Kitchener and Waterloo’s urban cores.

While Waterloo Region experienced declining vacancy through the first nine months of 2019, the fourth quarter revealed a net increase in available office space amounting to 96,663 sf, bringing the overall vacancy rate for the Waterloo Region up to 11.9%.

PRICINGAchieved rental rates for office space in Waterloo Region and Guelph continue to experience stable growth. For available office space across the Region, the average gross asking rent is resting at $23.88 per square foot (psf). This number fails to consider the more desirable Class A space that rarely hits the market and is broadly made up by less desirable Class C space. When looking atthe highly sought-after downtown Class A space in Kitchener and Waterloo, rental rates are sitting at $29.93 psf and $37.47 psf.

11.9%Vacancy Rate

-98,663KNet Absorption, SF

$23.88 Gross Asking Rent, PSF

(Overall, All PropertyClasses)

5.2%Waterloo RegionUnemployment Rate

305.5KWaterloo RegionEmployment

5.9%CanadaUnemployment Rate

Source: Statistics Canada

Office Q4 2019Waterloo Region

ECONOMIC INDICATORS Q4 2019

12-Mo.Forecast

12-Mo.Forecast

YoY Chg

YoY Chg

SPACE DEMAND / DELIVERIES OVERALL VACANCY & GROSS ASKING RENT

-400

200

800

2015 2016 2017 2018 2019

Thou

sand

s

Net Absorption, SF Construction Completions, SF

88.1KGuelph Employment

5.3%Guelph Unemployment Rate

0.0%

5.0%

10.0%

15.0%

20.0%

$20

$21

$22

$23

$24

$25

$26

2015 2016 2017 2018 2019

Asking Gross Rent, $ PSF Vacancy Rate

M A R K E T B E AT

Office Q4 2019Waterloo Region

OFFICE DEVELOPMENTS UNDER CONSTRUCTION

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATIONCushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.

©2020 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

MARKET STATISTICS

PROPERTY SUBMARKET TENANT SF TYPE140 Columbia Street West Waterloo Suburb N/A 15,260 Direct

565 Kumpf Drive Waterloo Suburb N/A 11,300 Direct

180 Northfield Drive West Waterloo Suburb N/A 6,448 Direct

485 Pinebush Road Cambridge Suburb N/A 6,332 Direct cushmanwakefield.com

Chad VrenjakMarket Analyst+1 519 804 4359 /[email protected]

KEY LEASE TRANSACTIONS Q4 2019

*Renewals not included in leasing statistics

PROPERTY SUBMARKET MAJOR TENANT SF OWNER / DEVELOPER345 King West Kitchener Core N/A 120,000 Perimeter

120 Victoria Street South Kitchener Core N/A 110,000 Momentum

1 Young Street Kitchener Core N/A 27,000 Bernie Nimer

Fairview Park Mall Kitchener Suburb N/A 200,000 Cadillac Fairview

2415 University Ave East Waterloo Suburb N/A 29,000 Red Rock

INVENTORY SUBLETSUBMARKET (SF) VACANT

(SF)

DIRECT VACANT

(SF)

OVERALL VACANCY

RATE

CURRENT QTR OVERALL NET

ABSORPTION (SF)

YTD OVERALL NETABSORPTION

(SF)

YTDLEASING ACTIVITY

(SF)

UNDER CNSTR

(SF)

OVERALL AVG ASKING RENT

(ALL CLASSES)*

OVERALL AVG ASKING RENT

(CLASS A)*

Waterloo Core 1,686,273 0 73,278 4.3% -11,337 43,255 19,299 0 $31.91 $37.47

Waterloo Suburb 5,694,795 132,286 589,909 10.4% -71,555 277,501 643,027 129,558 $23.09 $24.20

Waterloo Total 7,381,068 132,286 663,187 9.0% -82,892 320,756 662,326 129,558 $23.78 $25.07

Kitchener Core 2,625,465 2,399 391,705 14.9% -48,237 150,121 189,515 300,000 $26.96 $29.93

Kitchener Suburb 2,198,047 30,540 258,032 11.7% 28,598 -42,731 77,021 200,000 $22.40 $22.59

Kitchener Total 4,823,512 32,939 649,737 13.5% -19,639 107,390 266,536 500,000 $25.12 $23.76

Cambridge Core 342,150 0 75,080 21.9% -1,010 -37,205 0 0 $18.60 N/A

Cambridge Suburb 1,031,197 98,528 78,407 7.6% 4,930 -11,336 48,136 0 $21.41 $23.73

Cambridge Total 1,373,347 98,528 153,487 11.2% 3,920 -48,541 48,136 0 $20.52 $23.73

Guelph Core 551,094 0 15,662 2.8% 1,334 2,271 4,520 0 $25.75 $26.97

Guelph Suburb 1,180,805 2,500 79,811 6.8% -1,386 -2,709 41,356 0 $24.94 $27.96

Guelph Total 1,731,899 2,500 95,473 5.5% -52 -438 45,876 0 $25.07 $27.79WATERLOO REGION TOTALS 15,309,826 266,253 1,561,884 11.9% -98,663 379,167 1,022,874 629,558 $23.88 $24.63

* Rental Rates Reflect Gross Asking