800 - 475 WEST GEORGIA STREET, VANCOUVER, B.C. V6B 4M9 PHONE: (604) 684-7117 • FAX: (604) 684-1017

VISIT OUR WEBSITE: WWW.JJB.COM/VANCOUVER

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Q1 00

Q1 01

Q1 02

Q1 03

Q1 04

Q1 05

Q1 06

Q1 07

All Classes Class A Class B Class C

GREATER VANCOUVER VACANCY RATES BY CLASS

YTD

2 0 0 7

GVRD OFFICE REPORTS E C O N D Q U A R T E R H I G H L I G H T S

MARKETINDICATORS:

SECOND QUARTER

2007

VACANCY

NEW SUPPLY

ABSORPTION

* quarterly comparison

GVRD’s offi ce vacancy rate is down to 5.05%

Non-Residential Building Permits

are up 1.5%

MARKET OVERVIEW

• While suburban offi ce rental rates have remained relatively fl at and consistent, the Downtown Core and other popular business regions, such as the Broadway Corridor, are experiencing a space crunch and signifi cant demand for new offi ce space. With the City of Vancouver’s “Living First” Policy (encouraging Downtown Core residential development) enacted over 15 years ago, the addition of new offi ce space to the market has been neglected. Demand has continued to surge upwards, lease and sale rates have followed suit, and supply continues to struggle to keep pace. As a result, vacancy rates have been dropping all over the Lower Mainland. In a new report issued early July 2007, the City of Vancouver declared a plan for the Downtown Core involving policies to discourage offi ce to residential conversions, expantion of commercial districts, as well as allowing higher FSR (fl oor space ratio) for offi ce buildings in several key areas.

• Q2 2007 saw overall vacancy fall nearly a full percent from 6.00% to 5.05%, while new supply increased minimally to 43,366,607 Square Feet (sq.ft.). In addition, absorption climbed to 359,364 sq.ft., up 231,480 sq.ft. from last quarter’s 127,884 sq.ft.

ECONOMIC OVERVIEW

• The consumer price index of BC increased 1.7% from May 2006 to May 2007. Canadian interest rates are likely to climb higher in an effort to curb infl ation (the prime business rate sits around 6.2%, while both 1 and 5 year mortgage rates continue to climb to 7.05% and 7.24% respectively). An increase in rates will impact affordability and may impact demand for commercial properties. Furthermore, buyers may become more security conscious and look for safer investments. If the Bank of Canada decides to raise interest rates, Greater Vancouver may see more commercial properties up for sale in the immediate future.

• The Canadian dollar is currently reaching 30 year highs, and though the strength of the dollar is great, Canada is not a standalone economy. While the USA’s housing market continues to fl ounder, British Columbia’s forestry and manufacturing industries are feeling the impact. BC’s economy, however, is based on several industries and typically while one is lagging, the others are booming, thus leading to consistent growth in the long run.

GVRD OFFICE REPORT S E C O N D Q U A R T E R H I G H L I G H T S

VANCOUVER • Toronto • Calgary • Edmonton • Winnipeg • Montreal • Mississauga • Nanaimo • Burlington • Halifax • Kingston • London • Markham • Niagara • Ottawa • Regina • Waterloo • Victoria

• BC’s economy grew by 1.3% over Q2, nearly double the rate of Q1, and is expected to keep growing and expand by 3.1% by year-end (less than last year’s 3.3%). Construction and steady job growth continue to remain strong in the region (job growth at 1.6% and unemployment dropping below 4.2%). Further evidence of BC’s booming economy can be seen through new business incorporations hitting 13 year highs, as well as the provincial bankruptcy rate, which currently sits at a record low of 118 per quarter, down nearly 40% from last year.

• Non-residential building permits were up 1.5% in Q2. In Q1 2007, BC builders were granted $2.96 billion worth of permits, an increase of nearly 16% over the same period of 2006. $1.03 billion (35%) of those permits were issued for commercial buildings.

• In terms of population, BC has seen a steady increase, growing at a rate of 1.3% over the past year. It is projected to grow from 4,338,100 (Q1 ’07) to 4,408,400 by year end. The Greater Vancouver Area has also seen an infl ow of nearly 40,000 immigrants over the past year, the majority of which settled in Vancouver’s suburbs and outlying areas. GVRD municipalities currently experiencing the largest population growth include Port Moody, Surrey, and Mission (measured over the past 5 years).

MARKET ACTIVITY

• Bentall Capital has applied for a building permit from the City of Vancouver in order to develop a brand new 22-storey offi ce tower at the corner of Thurlow Street and Alberni Street, potentially providing over 400,000 sq.ft. of new offi ce supply to the Downtown market.

• The $5 million Carrall Street Greenway is under construction and, when complete, will link the False Creek Seawall and Burrard Inlet completing a seawall loop around Downtown, and connecting the

neighbourhoods of Chinatown, Downtown Eastside and Gastown. Construction involves a complete street redesign including rows of trees, recreational path on both sides of the road, and integrated public art. Projected completion is Fall 2008.

• The Canada Line, formerly known as the RAV Line, continues construction. Businesses along the construction corridor continue to struggle with business interruption stemming from traffi c disruption, noise, vibration, dust, excavation, and other construction activity. The Project is on schedule, and is still aiming to complete November 30th, 2009.

• The former Storyeum site, located at 142 Water Street in Gastown, has seen considerable interest from users, ranging anywhere from fi tness clubs to cabarets, since it closed its doors last October. The City of Vancouver has launched a Request For Proposals, but a decision on a new tenant is not expected until Autumn 2007.

MUNICIPALITY VACANCY CHANGES

0%

5%

10%

15%

20%

25%

Vanco

uver

Downt

own

Core

Broad

way C

orrid

or

Burna

by

North

Van

couv

er

Richm

ond

Surre

y

New W

estm

inste

r

Q1 2007 Q2 2007

Major Offi ce SalesAddress Municipality Price Size (sq.ft.) Price Per Square Foot

Royal Bank Building, 628 6th Street New Westminster $17,250,000 69,510 $248.17

Queen’s Court, 625 Agnes Street New Westminster $14,515,000 84,429 $171.91

Hycroft Center, 3195 Granville Street Vancouver $12,775,000 33,652 $379.62

Birks Building, 698-686 Hastings Street Vancouver $22,900,000 92,767 $246.86

First Capital Place, 690 Quayside Drive New Westminster $13,200,000 59,880 $220.44

Major Offi ce Lease TransactionsAddress Municipality Tenant Size (sq.ft.)595 Burrard Street Vancouver Lake Service 55,000

3600 Lysander Lane Richmond Catalyst Paper Corp. 31,970

1075 West Georgia Street Vancouver Guild, Yule & Company 19,945

Bentall IV, 1055 Dunsmuir Street Vancouver Absolute Software Corp. 16,721

Park Place, 666 Burrard Street Vancouver Goldcorp. Inc. 16,590

ROYAL BANK BUILDING

628 SIXTH STREET, NEW WESTMINSTER

$17,250,000 - SOLD

GVRD OFFICE REPORT S E C O N D Q U A R T E R H I G H L I G H T S

VANCOUVER • Toronto • Calgary • Edmonton • Winnipeg • Montreal • Mississauga • Nanaimo • Burlington • Halifax • Kingston • London • Markham • Niagara • Ottawa • Regina • Waterloo • Victoria

Q2 2007 Number of Buildings

Total Offi ce Area (sq.ft.)

Total Occupied Area (sq.ft.)

Total Vacant Area (sq.ft.)

Total Vacancy (%)

Greater Vancouver Market 434 40,694,585 38,638,689 2,055,896 5.05

Vancouver District

All Classes 217 24,982,332 24,347,698 643,643 2.54

Downtown 171 22,082,124 21,497,390 584,734 2.65

Class A 50 12,463,761 12,236,184 227,577 2.65

Class B 66 6,536,460 6,346,039 190,421 1.83

Class C 55 3,081,903 2,915,167 166,736 5.41

Broadway Corridor 46 2,900,208 2,850,308 49,900 1.72

Class A 27 2,097,287 2,074,734 22,553 1.07

Class B 14 628,030 600,683 27,347 4.35

Class C 5 174,891 174,891 0 0.00

Surrey 25 2,318,653 1,997,246 321,407 13.86

Class A 12 1,817,505 1,530,914 286,591 15.77

Class B 5 255,356 237,657 17,705 6.93

Class C 8 245,792 228,681 17,111 6.96

Richmond 74 4,484,514 3,986,165 498,349 11.11

Class A 47 3,093,367 2,696,745 396,622 12.82

Class B 24 1,195,100 1,098,004 97,096 8.12

Class C 3 196,047 191,416 4,631 2.36

North Vancouver 22 1,268,652 1,174,649 94,003 7.41

Class A 6 430,640 405,553 25,087 5.83

Class B 13 725,547 663,030 62,517 8.62

Class C 3 112,465 106,066 6,399 5.70

New Westminster 14 725,135 583,126 142,009 19.58

Class A 4 197,899 189,152 8,747 4.42

Class B 10 527,236 393,974 133,262 25.28

Class C 0 0 0 0 0.0

Burnaby 82 6,915,299 6,549,805 365,494 5.29

Class A 46 4,653,516 4,467,003 176,513 4.00

Class B 28 1,913,881 1,737,423 176,458 9.22

Class C 8 347,902 345,379 2,523 0.73

• The potential Whitecaps Waterfront Stadium development is currently under review regarding the remedy of several key issues including: provision of an adequate street network, reconfi guration of resolution of impacts on the livability of residential areas south of the rail lands, and resolution of impacts on future port lands. The process is expected to complete early July in order to qualify for rezoning and, if approved, the stadium is forecast to complete early 2010.

• Potential buyers have been submitting bids on several Federally owned buildings in Vancouver, including the Sinclair Center and 401 Burrard Street. Deutsche Bank has been hired to examine the costs and benefi ts of selling and leasing back the buildings. Speculators believe that a handful of Federal buildings located all across Canada will soon come to market, worth in excess of $1 billion.

GREATER VANCOUVER HISTORICAL ABSORPTION655,904 sq.ft.

195,191 sq.ft.

407,984 sq.ft.

286,328 sq.ft.

503,255 sq.ft.

51,046 sq.ft.

127,884 sq.ft.

359,364 sq.ft.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Squ

are

Fee

t

Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

VANCOUVER • Toronto • Calgary • Edmonton • Winnipeg • Montreal • Mississauga • Nanaimo • Burlington • Halifax • Kingston • London • Markham • Niagara • Ottawa • Regina • Waterloo • Victoria

All information has been obtained from sources considered to be accurate but is not guaranteed and is subject to conditions at the time of any transaction taking place. Properties are submitted subject to prior sale or lease, withdrawal

or changes without notice.

800 - 475 WEST GEORGIA STREET, VANCOUVER, B.C. V6B 4M9 PHONE: (604) 684-7117 • FAX: (604) 684-1017

VISIT OUR WEBSITE: WWW.JJB.COM/VANCOUVER

GVRD OFFICE REPORTS E C O N D Q U A R T E R H I G H L I G H T S

FOR MORE INFORMATION, PLEASE CONTACT:KASIA HAJDUK

DIRECTOR OF RESEARCH

(604) 630-3405 KASIA.HAJDUK@JJB.COM

MIKE MEAKINRESEARCH ANALYST

(604) 630-3391MIKE.MEAKIN@JJB.COM

New Supply - Current Major Projects Under Construction Development Municipality Civic Address Developer Completion Total Sq.Ft. Sq.Ft. Available

BCIT Aerospace Center Richmond 3700 Cessna Street BCIT Q3 2007 90,647 90,647

Bentall V - Phase II Vancouver 550 Burrard Street Bentall Q3 2007 243,121 0

Central Park Burnaby 4555 Kingsway Avenue Bosa Ventures Q4 2007 62,772 62,772

Commerce Court Phase V Richmond 13900 Wireless Way PK Projects Q4 2007 116,000 28,250

Westminster Center South New Westminster 505 60th Street Canacemal Q1 2008 42,000 42,000

Broadway Tech Park - Phase III Vancouver 2925 Virtual Way Bentall Q2 2008 115,000 76,402

PCI Building Vancouver 525 West Broadway PCI/Tonko Q2 2004 85,000 0

New Supply - GVRD Current Pre-Leasing OpportunitiesBuilding Name Municipality Address Completion Typical Floor Size Floors Sq.Ft. Available

Jameson House Vancouver 848 West Hastings Street 2009 ND 7 75,000

100 East Esplanade North Vancouver 100 East Esplanade ND 13,000 5 51,800

Discovery Place - Building 12 Burnaby 4200 Canada Way ND 27,000 5 155,248

Production Way & Lougheed Burnaby 3294 Production Way ND 20,000 5 100,000

Willingdon Business Park Phase VIII Burnaby Willingdon Business Park Phase VIII ND 22,500 4 90,000

Willingdon Business Park Phase IX Burnaby Willingdon Business Park Phase IX ND 22,500 4 90,000

8980 Nelson Way Burnaby 8980 Nelson Way ND 19,200 3 57,861

Rosser Ave. & Lougheed Highway Burnaby Rosser Ave. & Lougheed Hwy 2008 10,000 10 108,000

4488 Halifax Street Burnaby 4488 Halifax Street 2008 6,733 9 60,600

801 Harbourside - Phase I North Vancouver 801 Harbourside Drive 2008 10,000 5 57,000

801 Harbourside - Phase II North Vancouver 801 Harbourside Drive 2008 10,000 7 75,000

• Microsoft is planning to open their fi rst Canadian Software Development Center in the fall. The facility is likely to draw software developers from around the globe, as it is easier to bring in foreign workers here than in the USA. The company is exploring sites in Vancouver, Burnaby, and Richmond to house their employee base of around 800 workers.

LOOKING AHEAD

• Looking to the future, both sale and lease rates will continue to increase. In the Downtown Core, lease rates for commodity space (low to mid-rise space in a building, constituting the majority of the market), will climb into the $50 per square foot range over the next two years. Currently, there is little evidence of many fi rms exiting the Downtown Area since moves are costly and inconvenient to the employee base. It is expected that businesses that need to be Downtown will remain and

adjust for the rate increase, while those who do not, will migrate to the various suburban markets.

• The continual space crunch in the City of Vancouver will force the rethinking of offi ce space utilization, moving away from fi xed fl oor plans, and into the embracing of open space and space saving adoptions such as wireless networks. Further demand and emphasis on environmentally conscious development and alternatives is expected to continue well into the future. The biggest overall issue facing the majority of GVRD offi ce users in the immediate future will continue to be fi nding space, whether for expansion or relocation purposes.

BENTALL V - PHASE IINEARLY COMPLETE

2 0 0 7