The Office ReportCALGARY MARKET - Q4 2013

Calgary Overall - Vacancy 7.8%

Overall vacancy within Calgary’s office leasing market rose sharply to 7.8% from its third quarter high of 6.6%

and ended the year on a low note. Q4 2013 marks the fourth consecutive quarter of negative absorption in the office leasing market and brings the year to a close with overall negative absorption of approximately 2 Million square feet (msf ). Overall headlease vacancy rose throughout 2013 from 3.9% in Q1 to 4.8% in the fourth quarter and sublease vacancy also increased substantially to 3.0% after beginning the year at 1.8%. The upward movement is predominantly due to the Downtown, however, both the Beltline and Suburban South markets contributed as well with each submarket witnessing their highest vacancy rates of the year at 6.1%, 10.4% and 12.4% respectively. The most volatile area of the city has been the Beltline, with vacancy rates as high as 11% in the first quarter to as low as 9.5% in the third.

We can best describe the overall picture as unsettled, although several economic indicators suggest strong growth for 2014. RBC is projecting 3.9% Alberta GDP growth for 2014 and the price of Western Canada Select averaged well-over $75 per barrel in 2013. We anticipate the market remaining soft for the first six to eight months of 2014, picking up steam thereafter.

‐1,200,000

‐1,000,000

‐800,000

‐600,000

‐400,000

‐200,000

0

200,000

400,000

Calgary Overall Downtown Beltline Suburban North Suburban South

Calgary 2013 Absorption

Q1 2013 Q2 2013 Q3 2013 Q4 2013

0%

2%

4%

6%

8%

10%

12%

14%

16%

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

SuburbanNorthSuburbanSouthBeltline

CalgaryOverallDowntown

Q4, 2009 - Q4, 2013

Avison Young The Office Report - Calgary Market | Q4 2013 | page 1Partnership. Performance.

INVENTORY (SF)

VACANCY RATE (%)

UNDER CONSTRUCTION (%)

ABSORPTION 2013 (SF)

AVG NET RENT (SF)

AVG TAXES & OP COSTS (SF)

Downtown - Vacancy 6.1%

Vacancy in the Downtown increased in the fourth quarter, from 4% in Q1 to 6.1% at year end with all three

downtown submarkets contributing to negative absorption. The Central, East and West Cores collectively contributed over 800,000 square feet of vacant space. More than 680,000 square feet of this total was Class A space coming available. Class A vacancy represented half of all vacant space in the Downtown.

Class AA space remains essentially fully-occupied at 0.9% vacancy, but vacancy rates in Class A space skyrocketed during 2013; rising more than five per cent over the year to 7.2% while Class B rose steadily, quarter-over-quarter to 9% from 6.3% vacancy in Q1. Of note, class C space was the exception, falling to 12.9% from 15.2% at the beginning of the year.

The largest subleases available in the market are Athabasca Oil with up to 250,000 square feet in EAP (potentially leased as of early January, 2014), Talisman Energy, who are currently subleasing approximately 118,000 square feet of space at First Canadian Centre and Penn West Energy, who have placed 148,000 square feet of space for sublease at Penn West Centre.

Cadillac Fairview announced in mid-2012 that City Centre I would go ahead and that Inter Pipeline had agreed to lease 104,000 square feet of office space; approximately 20% of leasable space in the building. Speculation has it that two other tenants have subsequently pre-leased space as well, leaving approximately 400,000 square feet remaining available on a headlease basis in the low-rise of the building. Completion is expected in Q1, 2016.

Beltline - Vacancy 10.4%

The fourth quarter witnessed positive absorption of 20,000 square feet, continuing a trend that began in Q2. Since

the second quarter, the Beltline has seen positive absorption of 176,000 square feet. Unfortunately, the first quarter had 320,000 square feet of negative absorption so the year overall had negative absorption of 156,000 square feet. Even though Q4 had positive absorption, vacancy increased from 9.5% to 10.4% with new office space coming on stream from two new developments; the 20/20 Building and Centre 10. These buildings add approximately 450,000 square feet of new space to the Beltline market. Significant portions of these buildings have been leased but vacancy still remains, thus pushing overall vacancy upward.

Headlease vacancy increased in the fourth quarter to its highest rate of the year at 8.2% although sublease vacancy remained stable at 2.2%.The Beltline market is set to expand in 2014 with 717,000 square feet of new inventory to come online and this will put additional upward pressure on vacancy rates.

Avison Young The Office Report - Calgary Market | Q4 2013 | page 2Partnership. Performance.

9.5%

6.1%

11.1%11.7%

15.5% 15.4%

21.1%

4.57%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

22.00%

24.00%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015 2016 2017 2018

Downtown Calgary OfficeHistorical & Projected Market Supply

Historical & Projected Vacancy Rate

Assuming 0 sq. ft. absorption per annum

Assuming 500,000 sq. ft. absorption perannum

Assuming 1,000,000 sq. ft. absorption perannum

City

Cen

tre

I, 3

Eau

Clai

re

2nd Esso Expiry:759,000 sq. ft.

1st Esso Expiry:156,000 sq. ft.

Historical Forecast

BPC

East

T

elus

Sky

Man

ulife

Tow

er

8th

Ave

nue

Plac

e W

est

Barr

onBu

ildin

g

634

- 6th

Ave

SW

continued on page 3

Several developments in the Beltline were under construction

as the year drew to a close. Eleventh Avenue Place has an expected completion target of Q3 2014 and will add more than 198,000 square feet of Class A space to the market. As for proposed future developments, Centron’s Place 10 stands to introduce more than 600,000 square feet of additional Class A space over two towers and Stampede Station stands to offer 317,000 square feet of space should the projects go ahead.

Suburban South - Vacancy 12.4%

Overall vacancy in the Suburban South rose significantly to 12.4% in Q4 from 8.4% in Q1 and experienced

332,000 square feet of negative absorption. The SE quadrant vacancy rate rose to 10% from 7.5% in the previous quarter and vacancy in the SW quadrant also increased from 14% to 18.3% over the fourth quarter. Several large blocks of space were available for lease at year-end, the largest of which was Southland Park II, with over 100,000 square feet of direct vacant space.

Eight developments comprising 1.5 msf of new inventory were under construction or in the final stages of completion in the Suburban South, including three buildings at Blackfoot Point which are due to come on-line in early 2014. Quarry Park remains extremely active as Imperial Oil’s campus and Quarry Crossing are both under construction and Brookfield is moving forward with Seton, its South Urban District development, which is anchored by the South Health Campus at 196th Avenue SE. Seton is slated to offer more than 1.5 msf of office and commercial space.

Avison Young The Office Report - Calgary Market | Q4 2013 | page 3Partnership. Performance.

Suburban North - 7.3%

The Suburban North market displayed signs of positive momentum and increasing demand, having posted

four quarters of falling vacancy rates and net absorption of 140,000 square feet for the year. Overall vacancy decreased from 8.8% to 7.3% as a result of 176,000 square feet of positive absorption over the quarter. The NE quadrant vacancy rate fell from 9.3% to 8.5% at year end as a result of 81,000 square feet of absorption and the NW quadrant witnessed a significant drop from 7.5% vacancy to 3.9% at year end with 94,000 square feet being absorbed over the quarter. Several large blocks of space were available in the Northeast quadrant and include the Deerfoot Atrium buildings I and II with 81,000 square feet available for lease.

Current construction activity in the Suburban North remains minuscule compared to the booming markets in the Downtown, Beltline, and Suburban South with Remington Development Corp. being the only active developer at this time. Under development are the Meredith Block which encompasses 159,000 square feet of Class A space and the Westwinds Business Campus Phase III. Other large projects have been proposed, such as the four-building, 293,000 square foot Harvest Hills Office Park (Qualico Commercial). n

Avison Young Calgary Office Leasing Team

Nathan Donahue | 403.232.4320

Erik Dobrovolsky | 403.232.4315

Brock Evans | 403.232.4383

Tracy Fu | 403.232.4304

Steve Goertz | 403.232.4322

Larry Gurtler | 403.232.4326

Eric Horne | 403.232.4339

Chris Howard | 403.265.9552 ext. 223

Will Mullane | 403.232.4325

Alexi Olcheski | 403.232.4332

Doug Pilip | 403..232.4317

Nairn Rodger | 403.232.4309

John Savard | 403.232.4309

Glenn Simpson | 403.232.4329

Mark St. Pierre | 403.232.4319

Peter Thorpe | 403.232.4342

Todd Throndson | 403.232.4343

Alex Wong | 403.232.4327

Gordon Woodman | 403.232.4323

Allan Zivot | 403.232.4307

Business Condominium Team

Research

Pali Bedi | 403.232.4311

Fred Clemens | 403.232.4312

Anthony B. Scott | 403.232.4344

© 2014, Avison Young Real Estate Alberta Inc. All rights reserved. The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.

Calgary Place I & II330 - 5 Ave & 355 - 4 Ave SWLeasing Opportunity

Merlin Block100 & 300, 1025 - 10 Street SEOffice/Residential Lease

340 - 12 Avenue SWLeasing Opportunity

1108 - 4th Street SWLeasing Opportunity

First Street Plaza138 - 4 Avenue SESublease Opportunity

Vintage Towers322 & 326 - 11th Avenue SWLease / Sublease Opportunity

639 - 5th Avenue SWLeasing Opportunity

Centron Corner6223 & 6227 - 2nd Street SELeasing Opportunity

Not intended to solicit any party under a relevant contract. The information above is derived from sources believed reliable; however, no warranties or representations are being made regarding such information, including the potential income, costs, or profits associated with a property. Interested parties should consult a qualified professional for investment, financial or tax advice. All offices are independently owned and operated, except those offices marked as “Royal LePage Real Estate Services Ltd.” Royal LePage is a registered trade-mark used under license. © 2012 Brookfield Real Estate Services Manager Limited

For Lease - Office SpaceCentre 898989 Macleod Trail S, Calgary, AB

Royal LePage FoothillsCommercial Division

#200, 1016 - 68th Avenue SWCalgary, AB T2V 4J2www.rlfoothills.com

Property Highlights• FabulousexposureonMa-

cleodTrail• High traffic count-75,000

cars/day• High profile signageavail-

able• On-siteLandlord• In-suitekitchen/sink• 1,440-4,882sq.ft.available

Tim AndersonAssociate

Direct: (403) 685-2437timjn_anderson@yahoo.ca

Sandy PattersonAssociate

403-818-1124sandyph@rlfoothills.com

Concept drawing only. Final design may differ.

Partnership. Performance.

CENTRE 89 | 8989 MACLEOD TRAIL S, CALGARY, Ab

OFFICE SPACE FOR LEASE

ParticularsAvailable: Immediately

Op. Costs: $12.11 psf (2013)

Rental Rates: $14.00 psf

Parking: Ratio of 1:250 sf u/g & surface available

Comments:

Most competetitively priced office building along South Macleod Trail

Excellent exposure directly on Macleod Trail S

High profile signage available

Walking distance to Heritage LRT

Exterior renovations scheduled for Q1 2014

© 2013, Avison Young Real Estate Alberta Inc. All rights reserved.The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.

Not intended to solicit any party under a relevant contract. The information above is derived from sources believed reliable; however, no warranties or representations are being made regarding such information, including the potential income, costs, or profits associated with a property. Interested parties should consult a qualified professional for investment, financial or tax advice. All offices are independently owned and operated, except those offices marked as “Royal LePage Real Estate Services Ltd.” Royal LePage is a registered trade-mark used under license. © 2012 Brookfield Real Estate Services Manager Limited

Property DetailsLeaseable Area: Suite118 4,882sq.ft.

Suite201 1,660sq.ft.

Suite306 3,132sq.ft.

Suite308 1,752sq.ft.

Suite409 1,440sq.ft.

Suite402 4,800sq.ft. +/-

Available: Immediately

Operating Costs: $12.11/sq.ft.(2013)

Net Rate: $12.00 - $14.00/sq.ft.or

market

Parking: $100.00/stall/month

Visitor Parking: Free

For Lease - Office SpaceCentre 898989 Macleod Trail S, Calgary, AB

Concept drawing only. Final design may differ.

SPACE FOR LEASE SQUARE FOOTAGE

Suite 118 4,882 SF

Suite 201 1,660 SF

Suite 306 3,132 SF

Suite 308 1,752 SF

Suite 404 4,800 SF

Suite 407 4,279 SF

Suite 409 1,440 SF

Centre 898989 Macleod Trail SLeasing Opportunity

Riverbend Atrium One200 Rivercrest Drive SELeasing Opportunity

1207 - 11th Avenue SWSublease Opportunity

404 - 6th Avenue SWLeasing Opportunity

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Avison Young The Office Report - Calgary Market | Q4 2013 | page 4Partnership. Performance.

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