Q3 OFFICE COLLIERS INTERNATIONAL MARKET REPORT WATERLOO REGION ONTARIO Waterloo Region Well-Positioned for 11 O QUEBEC Ottawa Waterloo Region Toronto Montré Burlingto CANADIAN RECOVERY REMAINS FRAGILE As the third quarter of comes to a close, the economic climate remains cautiously optimistic with the recovery still fragile. Warren Buffett recently stated he does not see signs of the U.S. headed for a double dip, though that may bring little comfort for the unemployed as everyone watches to see if unemployment numbers improve. GDP growth in the first half of this year surprised many with a strong showing at.8%. Depletion of inventories, unleashed pent-up demand, and fiscal and monetary stimulus have all contributed to this astounding growth. As we enter into the second half of, GDP is expected to grow at a more subdued level of approximately 2 percent (annualized) due in part to a weak U.S. recovery, an increasingly fatigued consumer, and the easing of monetary and fiscal stimulus that were needed to stave off a global recession. INCREASED ACTIVITY & NEW SUPPLY WATERLOO REGION MARKET: The Colliers Waterloo Region office is located in Kitchener and provides real estate services to Cambridge, Waterloo, Kitchener, Guelph and outlying markets. Waterloo Region continues to see a healthy office market with a continued increase in product and absorption. Although the graph below shows an increase in vacancy, this is a function of new product on the market currently vacant although pre-leased. As tenants take occupancy of their suites, vacancy rates will decline. The downward trend in vacancy from previous quarters will continue moving into Q4 and Q1 of 11. Cambridge, Kitchener and Waterloo are well positioned to benefit from a healthier economy and with the exception of Cambridge, demand may outstrip supply in 11. MARKET INDICATORS Q2 Q3 VACANCY NET ABSORPTION SALE PRICE (PSF) 8 6. -. Waterloo Region Historical Performance - - - - RENTAL RATE - - www.colliers.com/canada
MARKET REPORT Q3 OFFICE WATERLOO REGION Kitchener THE MARKET The Kitchener office market continues to absorb office space and draw the attention of investors. Although the graph below shows a dramatic increase in vacancy, this is due largely to new space being added to the market. Much of this space is preleased and the vacancy rate will begin to trend down as tenants take occupancy. TRENDS Downtown office space is seeing an increase in interest as tenants focus on product that reflects their corporate culture and provides easily accessible amenities to its employees as only a downtown location can do. INVESTMENT New options are receiving a great deal of attention due to some pent-up demand for good investment opportunities. Tenants contemplating ownership may turn their eyes to less competitive markets such as Cambridge, in order to own their real estate. FORECAST A continued flight to quality in the downtown market will leave the Class C market with fewer tenants and required reinvestment into aging stock. Landlords of Class A and B buildings may find themselves unable to accommodate tenants with needs for significant expansion. Rates are expected to stay relatively the same through Q4 but dwindling supply may push rates up moving into 11. Tenants focus on product that reflects their corporate culture... 7 6... -. -. -. Kitchener Historical Performance Graph or table - - - - - COLLIERS INTERNATIONAL P. 2
MARKET REPORT Q3 OFFICE WATERLOO REGION Waterloo THE MARKET The Waterloo market was very quiet after the deluge of activity that took place in the preceding four quarters. Mid-sized tenants have been noticeably absent form the market with a number of good options remaining on the market for long periods of time. Vacancy in Waterloo continues to be very low and the predicted increase in asking rates is beginning to take place. TRENDS Conservatism is the trend in the Waterloo office market. Speculative building is very quiet, tenants are carefully considering future real estate requirements and transactions are down. Waterloo enjoys a healthy office market with the only real foreseeable risk being an inability to accommodate a quick onslaught of demand should the office users begin to expand rapidly. INVESTMENT Investment opportunities in the Waterloo office market remain attractive to investors with the only detractor being lack of product or opportunity. Although future investment opportunities are a certainty, investors did not demonstrate any significant activity in Q3. FORECAST Vacancy will continue to drop putting further pressure on supply and likely an increase in asking rates especially in the Class A market. There are signs that in Q4 the midsized tenant will return to the market after a long absence contributing to an increase in the number of transactions completed in the upcoming quarters. Conservatism is the trend in the Waterloo office market. 7 6... -. -. -. Waterloo Historical Performance Graph or table - - - - - COLLIERS INTERNATIONAL P. 3
MARKET REPORT Q3 OFFICE WATERLOO REGION MARKET REPORT Q3 OFFICE WATERLOO REGION COLLIERS INTERNATIONAL COLLIERS INTERNATIONAL P.P.44
MARKET REPORT Q3 OFFICE WATERLOO REGION Cambridge THE MARKET The Cambridge office market is poised for a recovery. With a complete stop on new supply, the possibility of some older product coming off the market and the slow but steady leasing of existing product, Cambridge will begin to see a recovery. There are two large blocks of space coming to market in early 11 that will delay a recovery, but signs are positive that space will continue to be absorbed. TRENDS Lease transactions are taking place and are beginning to outstrip new space coming to the market. Asking rental rates remain steady; however, they are not reflective of the actual terms that landlords and tenants are negotiating in lease agreements. INVESTMENT Investor activity is virtually non-existent in Cambridge. However, Cambridge has seen a number of owner-occupiers purchase office buildings. FORECAST The Cambridge office market will see an increase in vacancy in the short term. In the long-range forecast, the slow, steady lease up of space will begin to lower vacancy into late 11. Cambridge will begin to see a recovery.... -. -. -. - - -6 Cambridge Historical Performance Graph or table - - - - - COLLIERS INTERNATIONAL P.
MARKET REPORT Q3 OFFICE WATERLOO REGION MARKET REPORT Q3 OFFICE WATERLOO REGION 48 offices in 61 countries on six continents United States: 13 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 9 $1.6 billion in annual revenue 672.9 million square feet under management More than, professionals Toronto Developers Take an Interest in Kitchener Former Collins & Aikman building sold to Toronto developers with plans for Class A office conversion. LARGEST RE-DEVELOPMENT PROJECT OF Q3 Perimeter Development Corporation, a Toronto-area development company has purchased the 4 acre site contained by King Street and Breithaupt Street in Kitchener. Construction is already underway to convert the former rubber manufacturing plant into an adaptive re-use urban office building. David Gibson of Perimeter Development and former CEO of First Gulf, the company responsible for extensive redevelopment in Uptown Waterloo, is optimistic about the success of the project. In an interview with the KW Record in July, Gibson stated that One of the exciting things about buildings like Breithaupt is that there s a huge demand for buildings like this. It would appear Gibson is right. The Tannery office development garnered much attention when plans were made public to turn the former tanning factory into an office/retail mix. After just over a year, the Class A office space is now almost fully leased with retail www.colliers.com/canada tenants eager to set up shop in Kitchener s newest development site. Gibson went on to say, there s so many good things happening on that corner - it s going to be the new centre of the universe for Waterloo Region. URBAN OFFICE MARKET REVIVED Transformations such as the Breithaupt Block are beginning to show up everywhere in Waterloo Region as developers respond to growing a trend in the office market for accessible, community-connected office space. Waterloo Region s tech industry continues to flourish. As more and more young creative minds enter the workplace, developers and landlords alike are beginning to bend to their demands for accessible, open concept spaces that defy the increasingly dated concept of the isolated suburban office. It s an employee s market and as long as competition for talent exists, tenants will be competing for people first offices such as the Breithaupt Block, to help attract and retain employees. CONTACT INFORMATION Karl Innanen, CCIM** Managing Director Waterloo Region DIRECT: +1 19 94 7 karl.innanen@colliers.com Serguei Kaminski Research Associate Waterloo Region DIRECT: +1 19 94 77 serguei.kaminski@colliers.com John R. A. Lind* Sales Representative Waterloo Region DIRECT: +1 19 94 79 john.lind@colliers.com This document/email has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and /or its licensor(s).. All rights reserved. This communication is not intended to cause or induce breach of an existing listing agreement. Colliers Macaulay Nicolls Brokerage Inc. (Ontario). **Broker Accelerating success. COLLIERS INTERNATIONAL P. 6