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MARKET OUTLOOK

New Supply

Development/Sales

Under Construction

Sale Price (avg.)

Asking Net Rent

This Quarter* Year-over-Year

Availability

This Quarter Year-over-Year

Net Absorption

This Quarter

5-Year Annual Average

Waterloo RegionIndustrialMarket Report

12-Month Absorption

*weighted average

$140 PSF

130k SF

$6.63 PSF 31%

2.6% 35 bps

Q1 2020

95k SF 456k SF

535k SF

384k SF

The recent COVID-19 outbreak across Canada has created great uncertainty and has all but halted economic production for a yet to be determined length of time. We are already seeing supply chain disruptions, rent relief and deferral requests from tenants, and governments are mobilizing relief programs aimed to support individuals and businesses.

Market activity over the recent quarters showed strong demand, limited supply, and new construction putting upward pressure on lease rates and average sale price. A slight bump in vacancy and availability rates suggested that perhaps some supply relief was on the horizon that would provide more options for tenants and buyers in the market.

Average asking lease rates were up by 31% over the previous year, net absorption remained strongly positive and land prices hit new records – each

pointing to robust activity in Q2 2020, typically one of the most active times in any given year.

It is too early to predict the impacts of the COVID-19 pandemic on Waterloo Region’s industrial market. If we look at the 2008 global financial crisis, the Region’s industrial market hadsignificant vacancy of newly built speculative developments, an availability rate of 5.5% compared to the current 2.6%. Supply at the time outpaced demand and landlords were offering significant tenant incentives to encourage lease up. While the impact of that recession was sharp, the Region’s industrial market bounced back quickly. Although the two events are very different there is reason to be optimistic that the market could bounce back just as quickly.

collierscanada.com/research P.2

01 02

0403

05

Rental Rates by ClassWeighted Average Asking Net Rates ($PSF)

Rental Rate Growth Class A, BBy Market | Q1 2019 – Q1 2020

Under Construction by MarketBy Square Feet (SF)

Availability Rate by MarketQ1 2019 – Q1 2020

Historical Overview Availability vs. Net Absorption and New Supply

Availability Rate Net Absorption New Supply

Waterloo RegionOverview

- 50,000

100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

Cambridge Kitchener Waterloo RegionSF 249,915 133,963 383,878

A A A

BB

BB

CC

C C

$0

$2

$4

$6

$8

$10

Kitchener Waterloo Cambridge Waterloo Region

4.2% Q1’195.7%Waterloo

0.9% Q1’192.2%Kitchener

2.3% Q1’192.6%Waterloo Region

2.6% Q1’192.0%Cambridge

Availability Rate Net Absorption New Supply

Colliers Canada | Waterloo Region Industrial Report | Q1 2020

31%

6%

-26%

4%

Cambridge

Waterloo

Kitchener

Waterloo Region

-10%-8%-6%-4%-2%0%2%4%6%8%10%

-600

-400

-200

0

200

400

600

800

Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20

AvailabilityNe

t Abs

orpti

on / N

ew S

upply

(SF)

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Featured Sale & Lease Transactions

Statistic Cambridge Kitchener Waterloo Total

Total Inventory 32,080,076 SF 18,561,571 SF 8,778,382 SF 59,420,029 SF

Headlease Vacant Space 586,066 SF 347,269 SF 175,004 SF 1,108,339 SF

Sublease Vacant Space 5,509 SF 10,000 SF 23,741 SF 39,250 SF

Vacant Space for Sale 248,820 SF 11,102 SF 30,000 SF 289,922 SF

Total Vacant Space 840,395 SF 368,371 SF 228,745 SF 1,437,511 SF

Vacancy Rate 2.6% 2.0% 2.6% 2.4%

Availability Rate 2.0% 2.2% 5.7% 2.6%

Net Absorption 96,103 SF 3,462 SF -4,738 SF 94,827 SF

New Supply 40,000 SF 90,083 SF 0 SF 130.083 SF

Currently Under Construction 249,915 SF 133,963 SF 0 SF 383,878 SF

Wgt Avg. Asking Net Rent $7.20 PSF $5.66 PSF $6.96 PSF $6.63 PSF

Wgt Avg. Asking Additional Rent $3.41 PSF $2.61 PSF $3.27 PSF $3.21 PSF

Colliers Canada | Waterloo Region Industrial Report | Q1 2020

Notable Lease Transactions

Transaction Type Address Submarket Tenant Size

Lease 140 Turnbull Court Cambridge Sutherland-Schultz Ltd. 51,401 SF

Lease 25 Tyler Street Cambridge Undisclosed 51,332 SF

Lease 505 Thompson Drive Cambridge Tournament Sports 41,387 SF

Lease 555 Parkside Drive Waterloo Ultra Manufacturing Ltd. 34,585 SF

Lease 1574 Eagle Street North Cambridge Pride Bodies Ltd. 21,783 SF

Lease 20 Steckle Place Kitchener Distinctive Wood Products Inc. 13,800 SF

Notable Sale Transactions

Transaction Type Address Submarket Purchaser Size

Sale Berkshire Portfolio Kitchener DREAM 588,617 SF

Sale 25 Reuter Drive Cambridge Conestoga College 248,820 SF

Sale 199 Trillium Drive Kitchener Cedar Creek Property Management 97,426 SF

Sale 1680 Victoria Street North Kitchener 2716456 Ontario Inc. 64,899 SF

Sale 60 Northland Road Waterloo Inter-Building Investments Ltd. 64,871 SF

Sale 75 Ardelt Place Kitchener GFL Envorinmental 48,286 SF

Waterloo RegionMarket Statistics

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Copyright ©2019 Colliers International

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we

cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the

material contained in this report.

Colliers Research

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For more information on the Waterloo Region Industrial Market, please contact:

Karl InnanenManaging Director, Waterloo Region+1 519 904 7005karl.innanen@colliers.com

Report Contributors:

Serguei KaminskiResearch and Valuation Coordinator+1 519 904 7007serguei.kaminski@colliers.com

Colliers International | Kitchener305 King Street West, Suite 606Kitchener, ON N2G 1B9 +1 519 570 1330

Ron JansenVice President+1 519 904 7006ron.jansen@colliers.com

Leo LeeRegional Director, Research Eastern Canada+1 416 620 2839leo.lee@colliers.com