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34Total number of buildings with more than 50,000 sf available for lease in

Toronto North & East markets

The Toronto North market began to warm in the fourth quarter of 2016. This is not surprising as the marketplace has seen increased lease activity and a number of significant-sized deals. Occupancy levels increased 164,400 square feet (sf ) with class A buildings making up the bulk of the gain. Overall availability (10.4%, +50 basis points (bps)) entered double-digit territory and vacancy fell to 8.4% (-90 bps). Year-over-year, availability and vacancy are up by 300 and 240 bps, respectively. An active new-supply pipeline in Vaughan (almost 300,000 sf under construction) and robust sublet market in North Yonge (122,500 sf ) will continue to put upward pressure on availability and vacancy moving forward.

Availability and vacancy levels, which have been on an upward trend in recent quarters in the North Yonge corridor due to corporate rightsizing and relocations, will climb further to start 2017. Though not reflected in the fourth-quarter figures, KPMG will be returning 74,500 sf to the sublet market in first-quarter 2017 at Cadillac Fairview’s Yonge Corporate Centre, after renewing its premises earlier in 2016. The North Yonge vacancy rate was 8.5% in the fourth quarter, unchanged from the previous quarter, and the availability rate increased by a modest 120 bps to 11.3%.

In keeping with the theme of transit-oriented development, the City of Toronto’s Design Review Panel

Market Overview

Fourth Quarter 2016 / Office Market Report

Toronto North & East

Market Facts

11%Overall Toronto North & East vacancy

rate, vs. 12.4% availability rate

$373 MTotal dollar volume of office buildings

sold in Markham in 2016

388,000 sfTotal office area under construction

in Toronto North, of which 45% is preleased

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Photo by Paul Bica / CC 4.0

Toronto East Occupancy Costs - All Classes

Toronto North & East Fourth Quarter 2016 / Office Market Report

Toronto North Occupancy Costs - All Classes

6Total number of office

buildings under construction in the North & East

7Number of buildings with

50,000+ sf available in North Yonge

12%Toronto North sublease space

as a proportion of total available space

Net Asking Rent (Avg. $psf) Additional Costs (Avg. $psf)Net Asking Rent (Avg. $psf) Additional Costs (Avg. $psf)

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Fourth Quarter 2016 / Office Market ReportToronto North & East

undertook its first review of Menkes’ 49-storey mixed-use proposal for 4800 Yonge St. (at the southwest corner of Yonge St. and Sheppard Ave.). The proposal, currently awaiting site plan approval, consists of 539,000 sf of total gross floor area, including 497 dwelling units atop a five-storey podium with retail (37,000 sf ) and office (92,000 sf ) uses. The site was purchased for almost $13 million by Menkes in 2015.

The Vaughan Metropolitan Centre (terminus of the TTC subway extension) continues to attract its share of tenants. GFL Environmental (65,000 sf ), Miller Thomson (22,000 sf ) and Harley-Davidson (14,000 sf ) inked deals at the recently completed KPMG Tower at 100 New Park Place. Vaughan will continue to be the focus of growth in the North & East markets with almost 300,000 sf under construction across three developments, the largest of which – 7777 Weston Rd. (138,800 sf ) – is scheduled for completion in second-quarter 2017.

Toronto East ended 2016 with a healthy increase in occupancy of just over 290,000 sf year-over-year, despite seeing a decline in occupied area of almost 114,000 sf in the fourth quarter. An increase in the overall vacancy rate (12.3%, +40 bps) in the East can be attributed primarily to the return of class B product to the market, most noticeably in the Don Mills and Eglinton and Duncan Mill nodes. Of note, Imperial Oil vacated 1 Duncan Mill Rd., bringing 57,400 sf to market in Duncan Mill.

In all, Toronto East has 23 buildings with more than 50,000 sf available for lease, which has not changed from the previous quarter. This compares with 11 buildings offering greater than 50,000 sf in Toronto North. Of Toronto East’s seven nodes, availability increased in Don Mills and Eglinton, Duncan Mill, Highway 404 and Steeles and Scarborough during the fourth quarter.

Following the completion of Remington Group’s 7980 Birchmount Rd. (353,500 sf ) in the second quarter, development has remained quiet in Toronto East. The City of Markham continues to promote its new downtown city centre, and nearly 2 million square feet remains in the pipeline across ten proposals.

The quarter’s most notable office building sales included True North Commercial REIT purchasing 3650 & 3660 Victoria Park Ave. ($34 million) in North York from Investors Group Trust, and 9050 Yonge St. ($22.5 million) in Richmond Hill trading from a private individual to a 50/50 joint venture between Montez Corporation and Adgar Canada. The Toronto North and East markets are increasingly featuring on investors’ radars, and saw sales of office properties in excess of $618 million in 2016.

Toronto East ended 2016 with a healthy increase

in occupancy of just over 290,000 sf year-over-year.

Toronto North & East Overall Availability & Vacancy Trends

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Toronto North & East Overall Absorption Trends

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Toronto North & East Overall New Supply Trends

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© 2017 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage

For more information, please contact:

E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young. Acknowledgment: Data for graphs, charts and tables used in this report are sourced from Avison Young and Altus InSite. Some of the data in this report has been gathered from third party sources and has not been independently verified by Avison Young. Avison Young makes no warranties or representations as to the completeness or accuracy thereof.

Bill ArgeropoulosPrincipal & Practice Leader, Research (Canada)416.673.4029bill.argeropoulos@avisonyoung.com

Charles TorzsokResearch Analyst905.968.8023charles.torzsok@avisonyoung.com

55 Commerce Valley Drive WestSuite 501, Mailbox #7Markham, ON L3T 7V9 905.474.1155

Toronto North & East Fourth Quarter 2016 / Office Market Report

Available Space Availability Rate

Office Space in Selected Nodes

Number of Buildings

Bldgs. with more than 50,000 sf

Bldgs. with largest contiguous available area

greater than 50,000 sf

Number of spaces between

4,000 sf and 8,000 sfDirect % Sublet % Total %

North Yonge 39 7 3 28 9.9 1.4 11.3

Richmond Hill 3 0 0 1 4.1 0.0 4.1

Vaughan 41 3 3 15 8.6 1.4 10.0

Comparison of Leasing Options for Tenants – Toronto North

Available Space Availability Rate

Office Space in Selected Nodes

Number of Buildings

Bldgs. with more than 50,000 sf

Bldgs. with largest contiguous available area

greater than 50,000 sf

Number of spaces between

4,000 sf and 8,000 sfDirect % Sublet % Total %

Hwy. 404 & Hwy. 407 110 8 3 44 11.3 1.8 13.1

Hwy. 404 & Steeles 60 3 1 28 9.6 0.8 10.4

Don Mills & Eglinton 29 4 1 17 11.7 2.1 13.8

Consumers Road 33 3 2 24 15.3 1.6 16.9

Duncan Mill 22 2 1 17 11.0 1.2 12.2

Pickering 13 0 0 4 9.3 0.9 10.2

Scarborough 39 3 1 18 15.2 1.1 16.3

Comparison of Leasing Options for Tenants – Toronto East

Toronto North and East Market Summary

Availability Trend Vacancy TrendChange in

Occupied Area(000's of sf)

New Supply(000's of sf)

12 Months Ago

3 MonthsAgo

Current Quarter

12 Months Ago

3 MonthsAgo

CurrentQuarter

CurrentQuarter

YTDYTD

CompletionsUnder

ConstructionPreleased

Toronto North 7.4% 9.9% 10.4% 6% 9.3% 8.4% 164 -27 347 388 45%

Toronto East 13.3% 12.9% 13.4% 12.2% 11.9% 12.3% -114 290 353 66 18%

Address District Tenant Size

101 McNabb Street East / Hwy. 404 & Hwy. 407 GM Canada 109,000 sf

150 Commerce Valley Drive West East / Hwy. 404 & Hwy. 407 CGI Group 101,900 sf

New Park Place North / Vaughan GFL Environmental 65,000 sf

5000 Yonge Street North / North Yonge Warner Brothers Entertainment 31,000 sf

5140 Yonge Street North / North Yonge RBC Dominion Securities 36,200 sf

Toronto North and East Market Significant Transactions