Industrial Insight Report

Industrial Insight Report Greater Montréal Area Third Quarter 14 Industrial Overview Economy Once again Québec s economy has disappointed many with shy improvements during the third quarter. Economists reassessed their forecasted provincial GDP growth slightly downward from 1.9 percent to 1.7 percent to reflect the loss of domestic momentum. In fact, weak domestic demand resulted in weakened imports. Households were increasingly selective in their spending and businesses were still hesitant to invest in La Belle Province. Full-time job creation has also struggled since the beginning of the year, a trend that continued in the third quarter. In the Greater Montréal Area (GMA), the unemployment rate rose again from 8.3 percent to 8.4 percent with cutbacks in the transportation/warehousing industry (loss of,800 jobs), the professional and scientific industry (loss of 11,100 jobs) and in the education sector (loss of 3,700 jobs). On a more positive note, provincial exports continued to rise in tandem with a weaker loonie, an increase of 6.6 percent when compared to the same time last year. Products associated with commodities such as aluminum and lumber showed strong growth. As our exports continue to strengthen and overall economic performance improves, Québec businesses confidence will gradually solidify which should boost the real estate industry. Key Market Indicators Supply Demand Pricing Total inventory (s.f.) Light industrial 3,5,345 Total availability (%) 7.6% Under construction (s.f.),177,47 Total net absorption (s.f.) 99,484 YTD net absorption (s.f.) -174,387 Average net rental rate $5.6 p.s.f. 1-month forecast 1-month percent change +3.88% 1 Month Forecast Quarter in review The GMA leasing market fundamentals improved slightly in the third quarter of the year, however a drastic recovery from pre-election momentum is still awaited. With economic trends underperforming expectations, users and investors level of confidence remained weak. We continue to believe that market fundamentals will improve further heading into the new year as the provincial economy picks up. As expected, absorption became positive for the first time in the year showing modest signs of market improvements. In Q3 14, absorption for the GMA was recorded at positive 99,484 square feet. The amount of new space occupied was not notable enough to have a significant impact on the availability rate. The rate rose marginally to 7.6 percent from 7.5 percent in Q 14 due to new industrial inventory being added to the market. When comparing different submarkets performances, the Lachine, Saint-Laurent and Laval submarkets recorded the strongest leasing demands during the quarter. Source: RBC Economics, Desjardins Economics, Institut de la Statistique du Québec

Industrial Overview Cont d Quarter in review (Cont d) A total of,51,573 square feet (across 141 buildings) were leased during the quarter of which 999,65 square feet (across 9 buildings) had an area above 50,000 square feet; only one of those nine spaces was a sublease. Spaces leased during the quarter include 4600 Poirier in Saint-Laurent (104,560 square feet), 1600 50 th Avenue in Lachine (44,990 square feet) and 8000 Blaise-Pascal Avenue in the East End (6,345 square feet). There are currently,893,148 square feet available for lease in the GMA of which 55.0 percent are multi-tenant buildings, 44.0 percent are single-tenant and 1.0 percent are industrial condos. A few of the largest industrial buildings that became fully or partially available during the quarter are 4455 Cousens (6,353 square feet), 985 Douglas B. Floreani (6,637 square feet) and 5005 Levy (70,000 square feet). These three properties are all located in Saint-Laurent. Sublease space seems to be rising in popularity across the region with 14 new small sublease spaces added to the market in Q3 14. Rightsizing and maximization of space are key factors driving this trend. According to JLL s supply chain experts, labor represents the largest cost for businesses in the manufacturing industry. With current economic conditions, companies continue to try to reduce their total costs; this is unfortunately often done by laying off employees and thus requiring less operating space. Greater Montréal Area Property Clock Landlord leverage Laval & Vaudreuil Saint-Laurent West Island Lachine Peaking market Rising market Falling market Bottoming market East End Midtown South North Shore Midtown North & South Shore Distribution of Availabilities for Lease by Submarket Tenant leverage Rental rates remained relatively stable at an average of $5.6 per square foot net and $8.80 per square foot gross, representing a mere 0.3 percent rise from Q 14. In submarkets such as Laval and the South Shore, where properties are typically newer, rental rates are higher because infrastructure costs are passed onto the tenants. In regards to new development, industrial building permits were valued at $.6 million in August 14, a significant decrease from the month of July. On the other hand, the value of commercial building permits rose substantially. There are currently 10 industrial buildings under construction in the GMA for a total of,177,47 square feet. The average delivery time of those new projects is estimated to be in mid. Submarkets off the island have seen increased activity in terms of new industrial construction, caused by a scarcity of industrial land left on the island. There are currently four industrial buildings under construction on the island of Montréal including Novotaste s new buidling (30,000 square feet) in Dollarddes-Ormeaux, Tenaquip s new headquarters (96,000 square feet) in Senneville, Polykar s expansion at 5637 Kieran in Saint-Laurent and 985 Douglas-B.-Floreani in Saint-Laurent (6,637 square feet). The remaining development projects are off-island and total 1,686,194 square feet. The major projects include Jean-Coutu s new 893,000 square feet head office in Varennes, Elopak s new 306,644 square feet facility at 37 Grandes Tourelles in Boisbriand and Lumen s new 36,700 square feet distribution center in Laval. Laval 1,395,860 s.f. North Shore 879,53 s.f. St-Laurent 4,74,053 s.f. 6.10% 18.67% South Shore 1,747,318 s.f. 7.63% 3.84% 9.38% Lachine,147,365 s.f. Midtown North,560,5 s.f. 11.18% 18.11% 5.% 19.3% West Island 4,145,08 s.f. Midtown South 1,179,049 s.f. East End 4,4,531 s.f. JLL Greater Montréal Area Industrial Insight Report Q3 14

Industrial Overview Cont d Redevelopment of industrial buildings continues to spread especially in the Midtown submarkets to make room for new office, residential and retail spaces. The latest property to be announced for an office conversion was 1863-1865 Trans- Canada in Dorval (4,310 square feet). 1100 Norman in Lachine is currently on the market for a short term lease and will be demolished and redeveloped in the near future. This wave of new redevelopment projects can be a very lucrative option for landlords who can triple or even quadruple their rents for well positioned properties. Textile buildings around the Chabanel area in particular have been a popular choice for conversion into office use. Average Lease Rental Rates by Submarket $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $.00 $1.00 $- $9.7 $3.06 Net Asking Rent $6.66 $8.45 $7.95 Additional Rent $8.37 $8.46 $.99 $.83 $3.48 $3.4 $8.87 $3.55 $5.46 $5.1 $4.89 $5.04 $5.3 $10.04 $8.81 $3.51 $8.56 $.86 $.50 $6.53 $5.95 $6.06 The majority of current market conditions are favoring tenants therefore landlords continue to offer inducement packages such as free rent to retain and attract tenants. Current market conditions push certain landlords to revamp and improve their properties with the hope of getting more traction. Even though numerous municipalities decreased their municipal taxes, many industrial property owners saw their municipal evaluation rise, adding to their fixed costs. Outlook We will continue to be in a tenant favorable market for at least another 6-1 months. JLL continues to see elevated demand for data centre requirements and distribution centres. With the influx of new developments, we should expect a rise in the overall availability rate as properties won t be occupied by tenants right away. Historical Greater Montréal Area Total Net Absorption and Total Availability 3,000,000,000,000 1,000,000-1,000,000 -,000,000-3,000,000 s.f. GMA Net Absorption GMA Total Availability 0 Q1 1 Q 1 Q3 1 Q4 1 Q1 13 Q 13 Q3 13 Q4 13 Q1 14 Q 14 Q3 14 10% 9% 8% 7% 6% 5% 4% 3% % 1% 0% Market statistics Submarket Total inventory (s.f.) Number of buildings Under construction (s.f.) Total availability Quarterly absorption (s.f.) Average net asking rent ($ p.s.f.) QoQ % change in net rent YoY % change in net rent Midtown North 51,733,053 1, 0 4.95% -33,784 $6.66 +3.10% +3.74% Midtown South 4,01,37 607 0 4.91% -19,074 $5.46 +4.60% -0.73% East End 69,850,773,180 0 6.33% 84,94 $5.1 +0.39% +6.89% West Island 44,54,106 654 36,000 9.31% -399,501 $4.89-7.39% -1.41% Lachine,016,095 93 0 9.75%,375 $5.04-0.% +1.% Saint-Laurent 63,504,655 1,043 165,33 6.73% 19,98 $5.3-1.48% +0.95% Laval 17,007,38 337 36,700 8.1% 388,306 $6.53 +.51% +1.78% Vaudreuil 667.330 11 43,000 1.34% - $7.00 +5.69% +.18% South-Shore 16,044,4 95 956,000 10.89% 53,970 $5.95 -.14% +.3% North Shore 5,856,479 0 34,494 13.9% 4,466 $6.06-1.4% -1.46% Greater Montréal Area 3,5,345 6,7,177,47 7.6% 99,484 $5.6 +0.36% +.64% Source: certain numbers come from Altus Insite JLL Greater Montréal Area Industrial Insight Report Q3 14 3

Industrial Sales Overview Industrial sales escalated substantially in the third quarter of the year making it the best quarter of the year so far. The industrial sale market is finally getting back on track to historical averages. After a very slow first half of the year, industrial sales more than doubled from Q 14 to Q3 14. Roughly 3. million square feet of industrial space (across 34 transactions) were traded in Q3 totaling $189,736,56. Stable low interest rates and limited quality supply impacting this market readjustment. The most notable transaction of the quarter was the sale of a 5,000 square foot property located at 4705 Dobrin in Saint-Laurent. The property was sold by Vista Properties to Manulife Real Estate in September of this year. During the quarter there were approximately 10.0 million square feet of industrial space available for sale in the GMA out of which 5.7 million square feet were on the island of Montréal. The East End and the West-Island accounted together for almost 34.5 percent of the market s availability with 3.46 million square feet available for sale. With a diminished amount of industrial space available for sale, average asking prices rose slightly across the GMA. Vaudreuil, Laval and the West-Island had the highest average asking sale prices. This is explained by the fact that buildings are typically newer with higher ceilings in those areas. With a much older inventory and lower ceiling heights, the lowest average asking sale prices were once again recorded in Midtown South at $36.95 per square foot. The GMA continues to be in a buyer favorable market but should shift to balanced conditions in the next few quarters if deal velocity continues at this pace. Current Space Available for Sale in the Greater Montréal Area Submarket Available space (s.f.) Proportion of the Market Midtown North 99,090.98% Midtown South 300,4.99% East End 1,518,134.11% West Island 1,941,773 19.33% Lachine 484,434 4.8% Saint-Laurent 1,138,509 11.33% Laval,91,01.81% North-Shore 1,038,898 10.34% South Shore 1,014,046 10.10% Vaudreuil-Dorion 18,713 0.19% Greater Montréal Area 10,486,707 100% Average Asking Sale Prices by Clear Height <18 feet 19- feet 3-7 feet >8 feet $6.85 p.s.f. $68.48 p.s.f. $80.33 p.s.f. $7.43 p.s.f. Average Asking Sale Prices by Submarket Submarket Average Asking Price ($/s.f.) Vaudreuil-Dorion $101.73 Laval $85.54 West-Island $75.18 South-Shore $74.75 Saint-Laurent $73.5 Midtown North $67.74 East End $63.44 North Shore $6.31 Laurentides $56.58 Montérégie $55.01 Lachine $53.83 Lanaudière $. Midtown South $36.95 Sales Transactions (Square feet traded and average $/s.f.) Millions of square feet Square feet sold Average transaction value 5 $90.00 4 $80.00 4 $70.00 3 $60.00 3 $50.00 $.00 $30.00 1 $.00 1 $10.00 0 $0.00 Q1 13 Q 13 Q3 13 Q4 13 Q1 14 Q 14 Q3 14 ($/s.f.) JLL Greater Montréal Area Industrial Insight Report Q3 14 4

Quarterly Market News Greater Montréal Area Energizer, which manufactures feminine-hygiene products, closed its Montréal plant (601,951 square feet) at 7101 Notre- Dame East in Mercier-Hochelaga. The transfer of operations will happen in phases at the beginning of and will be transfered to an Energizer-owned plant in Delaware. Rogers Sugar at the Lantic sugar factory in Montréal layed off 59 employees (.0 percent of the company s labor force) in September. Ed Makin, the president and CEO of the company, said that Canada s largest sugar suppliers have to fight foreign competitors who receive governmental support. The completion of CSX Corp. s.5 kilometers (1.4 mile) rail line leading to the Saint-Lawrence Seaway marks another key milestone in the $100 million intermodal terminal in Salaberry-de- Valleyfield. In July, Wal-Mart Canada purchased two privately held Canadian logistics firms: trucking company Translogic Express Dedicated Inc. (TEDI) and distribution centre operator SCM. TEDI is currently located at 550 Morgan in Baie-d Urfé. Both companies will be operated as wholly owned Wal-Mart subsidiaries. Saputo closed its Québec milk processing plant in Trois-Rivières due to outdated equipment. Production will be transferred to Saputo s other locations across the province. As of November 14 th of this year, Kruger will close one of its three paper machines in its Brompton plant in Sherbrooke. This decision will lead to a loss of 100 jobs at the plant. Cascades announced in July that it will cease its Kraft paper manufacturing activities in its East Angus plant. This decision precedes unfavorable market conditions and the failure of the plant s transfer and turnaround. Quarterly Leasing Activity by Submarket (s.f.) Negative Absorption Positive Absorption Laval Greater Montréal Area Lachine Saint-Laurent East End South Shore North Shore Vaudreuil Midtown South Midtown North West-Island (0) (300) (0) (100) 0 100 0 300 0 Thousands Submarket Conditions Market History and Forecast Submarket 1 13 14 16 Midtown North Midtown South East End Saint-Laurent West island Lachine Vaudreuil Laval Resolute, a pulp and paper manufacturer headquartered in Montréal, announced the closing of its paper plant in Shawinigan. The plant was in operation for 16 years and factors such as increased transportation, fiber and gas costs negatively impacted the performance of the plant. As of October th, 75 employees will be laid off. North-Shore South-Shore Landlord/Ownerfavorable conditions Balanced conditions Tenant-favorable conditions JLL Greater Montréal Area Industrial Insight Report Q3 14 5

Greater Montréal Area Q3 14 Highlights 5 4 13 5 10 138 14 3 18 8 7 13 6 11 1 117 335 19 17 5 5 138 6 5 4 9 1 19 13 134 1 138 10 10 Lease Transactions Sale Transactions Large Blocks Available for Lease Large Blocks Available for Sale 1 4600 Poirier, Saint-Laurent Tenant: Fersten Worldwide Inc. New lease: 104,560 s.f. 5800 Saint-Denis, Montréal Tenant: Empire Clothing Renewal: 5,306 s.f. 3 88 Brunswick, Dollard-des-Ormeaux Tenant: Golden Elite Flooring New lease: 51,775 s.f. 4 100 5nd Avenue, Lachine Tenant: 8843848 Canada Inc. New lease: 51,43 s.f. 5 4105 Matte, Brossard Tenant: Biron Groupe Santé Inc. Renewal: 50,845 s.f. 6 5005 Lévy, Saint-Laurent 116,495 s.f. Buyer: TCAN Real Estate Investments Seller: Liberty Sites Ltd. Sale price: $10,446,438 ($89.67 p.s.f.) 7 945-965 André, Dorval 133,557 s.f. Buyer: Skyline Commercial Real Estate Seller: Hoop Realty Inc. Sale price: $8,0,000 ($60.01 p.s.f.) 8 70 Hymus, Pointe-Claire 90,969 s.f. Buyer: Skyline Commercial Real Estate Seller: Hoop Realty Inc. Sale price: $5,600,000 ($61.56 p.s.f.) 9 165 3nd Avenue, Lachine 81,394 s.f. Buyer: Skyline Commercial Real Estate Seller: Hoop Realty Inc. Sale price: $5,310,000 ($65.4 p.s.f.) 11 0 Trans-Canada, Pointe- Claire Direct: 411,64 s.f. Asking rent: $5.00 p.s.f. net 1 105 3rd Avenue, Lachine Direct: 318,960 s.f. Asking rent: $3.95 p.s.f. net 13 6767 Léger, East End Direct: 8,000 s.f. Asking rent: $5.50 p.s.f. gross 14 00-0 Trans-Canada, Baie-d Urfé Direct: 35,66 s.f. Asking rent: $4.95 p.s.f. net 111 3nd Avenue, Lachine (Also available for sale) Direct: 3,536 s.f. Asking rent: $6.75 p.s.f. net 16 100 de l Aéroport, Bromont (Also available for lease) 1,,000 s.f. Asking price: $3,000,000 ($18.85 p.s.f.) 17 6755-6801 Grandes-Prairies, East End (Also available for lease) 83,438 s.f. Asking price: $9,750,000 ($34.30 p.s.f.) 18 7800 Trans-Canada, Pointe-Claire (Also available for lease) 4,130 s.f. Asking price: $11,500,000 ($51.31 p.s.f.) 19 10-10 50th Avenue, Lachine 13,31 s.f. Asking price: $6,950,000 ($3.58 p.s.f.) 10 11490-150 Armand Bombardier, Montréal 63,48 s.f. Buyer: Groupe Immobilier Borex Inc. Seller: Sam Kader Realty Inc. Sale price: $,350,000 ($37.05 p.s.f.) 9091-9191 Henri-Bourassa, Saint- Laurent (Also available for lease) 0,000 s.f. Asking price: $,000,000 ($100.00 p.s.f.) JLL Greater Montréal Area Industrial Insight Report Q3 14 6

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