Economy Most noteworthy this quarter were the Greater Montréal Area’s (GMA) new industrial construction starts which almost doubled from the beginning of the year and represent the highest increase in almost two years. This is encouraging for industrial investors and a long awaited sign of market recovery. Regardless of an increased unemployment rate of 8.7 percent across the GMA, full-time employment has made considerable improvements with some 22,500 new full-time jobs. Notable gains were seen in the manufacturing sector (gain of 5,400 jobs) and the transportation-warehousing industry (gain of 15,200 jobs). On the flip side, employment losses occurred mostly on the administration and services side. A strengthening US economy along with a soft Canadian dollar continued to enhance provincial foreign trade. Provincial exports will remain a key driver of growth in 2015 with positive implications for Québec manufacturers. The manufacturing and transportation industries will continue to further benefit from decreased gasoline prices. Quarter in review (Leasing Market) The leasing fundamentals of GMA’s industrial market has continued to improve since January 2015. Close to 500,000 square feet of new industrial space were completed in the second quarter and 2.1 million square feet are currently under construction; an indication of continued market recovery and developers’ market optimism. Overall net absorption rose by over 1 million square feet to end the quarter at 405,323 square feet; meaning that more industrial space were leased in the second quarter. The availability rate has increased by 175 basis points since January to 7.5 percent across the GMA; a result of new space added to the market which provides more options to tenants looking for space.

Industrial Insight Report

Greater Montréal Area | Second Quarter 2015

12-month forecast

Key Market Indicators 12 Month Forecast

Supply Total inventory (s.f.) – Light industrial

316,046,643

Total availability (%) 7.53%

Under construction (s.f.) 2,150,437

Demand

Total net absorption (s.f.) 405,323

YTD net absorption (s.f.) -208,046

Pricing

Average net rental rate $5.80 p.s.f.

12-month percent change +3.20%

Source: Desjardins Economics, RBC Economics, Institut de la Statistique du Québec

Industrial Overview

JLL | Greater Montréal Area | Local Industrial Insight Report | Q2 2015

Industrial Overview Cont’d

2

Quarter in review (Leasing Market) Off-island markets outperformed this quarter. Laval, South-Shore and North-Shore all recorded strong leasing demand in the second quarter. A total of 166 buildings were fully or partially leased during the second quarter. Spaces leased include 11281 Albert-Hudon in the East End (170,087 square feet), 2100 52nd avenue in Lachine (53,245 square feet) and 2190 Francis-Hughes in Laval (51,698 square feet). A few of the largest industrial buildings that became available during the quarter include 2450 Marie-Curie (166,730 square feet), 867 Hodge (229,355 square feet) and 2500 Marie-Curie (158,958 square feet); all three properties are located in Saint-Laurent. Sublet spaces on the market decreased during the quarter. Most spaces available for sublease were located in Saint-Laurent and range from 5,000 to 15,000 square feet. There were 107,194 square feet (across eight buildings) of new sublease space added to the market in Q2 2015. There are currently 23,783,236 square feet available for lease in the GMA of which 54.0 percent are multi-tenant buildings, 43.0 percent are single-tenant and 3.0 percent are industrial condos. Rental rates rose slightly across the GMA to an average of $5.80 per square foot net and $9.10 per square foot gross. Due to their mostly newer inventory, North-Shore and Laval are currently the most expensive submarkets. Average asking rents for space above 50,000 square feet did not increase over the last quarters; there continues to be a large supply of larger spaces and landlords continue to be competitive to attract and retain these size tenants. Smaller spaces continue to be abundant on the market, typically with higher rental rates on a per square foot basis than larger spaces; thus increasing the average rental rate for the GMA. Redevelopment of industrial buildings continued to spread in Q2; more specifically, refurbishment from industrial to office use. The latest large buildings to be redeveloped were 1236 Mill street in Sud-Ouest (264,658 square feet) and 9292 Meilleur in Ahuntsic-Cartierville (109,740 square feet) both converted into offices. Montréal’s Midtown submarkets have been the primary target for this type of projects, which can be very lucrative for landlords. Approximately 18 percent of industrial buildings which were built prior to 1960, the majority of which are on the island of Montréal, may not be suitable for the current demand of higher ceilings and modern office layouts which is creating a mini-exodus towards markets such as Laval, South-Shore and North-Shore. Moreover, over 66 percent of Montréal’s industrial inventory has a clear height below 18 feet and only 11 percent have a clear height of 24 feet or higher. On the Island, higher ceiling buildings are primarily found in the West-Island and in Saint-Laurent, leading to the higher asking rates in those submarkets.

Greater Montréal Area Property Clock

Peaking market

Falling market

Rising market

Bottoming market

Lachine East End

Land

lord l

ever

age Tenant leverage

Midtown South

Saint-Laurent

Midtown North & South Shore

West Island

Laval & Vaudreuil

North Shore

Distribution of Availabilities for Lease by Submarket

12.22%

5.01%

17.91%

20.55% 8.98%

17.60%

6.91%

2.94% 6.99%

West Island 4,737,361 s.f.

Lachine 2,069,869 s.f.

East End 4,128,747 s.f.

Midtown South 1,154,755 s.f.

St-Laurent 4,057,715 s.f.

Laval 1,592,042 s.f.

North Shore 1,355,527 s.f.

South Shore 1,610,373 s.f.

Midtown North 2,817,139 s.f.

JLL | Greater Montréal Area | Local Industrial Insight Report | Q2 2015

Industrial Overview Cont’d

3

Average Lease Rental Rates by Submarket

$7.52 $6.58 $5.69 $6.05 $5.31 $6.20 $5.51 $5.11 $5.04

$3.24 $3.64

$3.79 $3.21 $3.69 $2.63 $3.21 $3.16 $2.69

$- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00

$10.00

Net Asking Rent Additional Rent$10.76 $10.22

$9.48 $9.26 $9.00 $8.83 $8.72 $8.27 $7.73

Market statistics

Submarket Total

inventory (s.f.)

Number of buildings

Under construction

(s.f.)

Total availability

Quarterly absorption

(s.f.)

Average net asking rent

($ p.s.f.)

QoQ % change in net

rent

YoY % change in net

rent

Midtown North 50,869,927 1,139 0 5.54% -514,032 $7.52 +0.27% +16.41% Midtown South 23,981,083 608 0 4.82% 215,862 $6.05 -5.32% +15.90% East End 69,522,610 2,175 0 5.94% 160,518 $5.04 -0.79% -1.18% West Island 44,709,317 656 512,000 10.60% -212,633 $5.69 +4.21% +7.77% Lachine 22,012,450 294 0 9.40% 7,916 $5.11 +0.99% -0.99% Saint-Laurent 63,139,927 1,019 287,637 6.43% -149,416 $5.31 -2.75% -1.67% Laval 17,661,943 363 0 9.01% 135,729 $6.58 +2.81% +3.30% Vaudreuil 810,890 13 294,000 30.03% - $6.75 +3.85% -1.75% South-Shore 16,522,778 304 893,800 9.75% 371,329 $5.51 -1.08% -9.38% North Shore 6,815,718 170 163,000 20.31% 401,749 $6.20 +0.55% +1.13% Greater Montréal Area 316,046,643 6,741 2,150,437 7.53% 405,323 $5.80 +0.35% +3.20%

Source: certain numbers come from Altus Insite

Historical Greater Montréal Area Total Net Absorption and Total Availability

0%1%2%3%4%5%6%7%8%9%10%

-2,500,000-2,000,000-1,500,000-1,000,000

-500,0000

500,0001,000,0001,500,0002,000,0002,500,000

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

s.f. GMA Net Absorption GMA Total Availability

New developments/Under construction There are currently seven industrial buildings under construction in the GMA for a total of 2,150,437 square feet. The average delivery time of those new projects are estimated to be by the end of the year. Montoni recently announced a new 60,000 square feet development for Abipa in Boisbriand, the project will be completed at the end of the summer 2015. Triovest is continuing it’s work on a 150,000 square feet building on FX Tessier in Vaudreuil; the project will be delivered in December 2015. Broccollini has 144,000 square feet under development on FX Tessier until the end of 2016. Divco will soon be starting a 65,000 square feet development project at 2985 Douglas B. Floreani. Quintcap also has 63,000 square feet under development of which half is already rented out; another project next door should begin this summer. Broccollini’s building on Aviation street in Dorval is now fully leased to Cardinal Health and construction will begin this spring. Almost 70 percent of all current developments are off the island of Montréal due to the scarcity of industrial land availability. Outlook Landlords will need to continue to reinvent themselves to stay competitive with the current available market supply. Moreover, the rise of data center requirements should be able to breath new life into lower ceiling buildings, as data centers do not require high ceilings. Finally, we will be slowly moving from a tenant favorable market to a more balanced market on the leasing side and should remain in a buyer’s market on the sale side.

JLL | Greater Montréal Area | Local Industrial Insight Report | Q2 2015 4

Industrial Sales Overview Industrial sales declined in the second quarter of 2015 with 2.4 million square feet sold, a decrease of 13.0 percent from the previous quarter, across the GMA for a total of $189,692,151. The average transaction price for non-investment deals was of $61.45 per square foot. The most notable transaction of the quarter was the sale of 11281 Albert-Hudon, Sobeys Québec headquarter, a 551,759 square foot property located in the East End of Montréal. The transaction was a sale/leaseback and closed at $29.15 million or $52.83 per square foot. Throughout the quarter, there were approximately 13.23 million square feet of industrial space available for sale in the GMA , of which 9 million square feet were on the island of Montréal. Saint-Laurent and the East End accounted for almost 38 percent of the market’s availability with 4.98 million square feet available for sale. The amount of industrial space available for sale increased across the GMA and consequently, average asking sale prices dropped slightly to an average of $68.17 per square foot. Due to their newer inventory, Vaudreuil and Laval once again had the highest average asking sale prices. On the other hand, Lachine, Midtown South and Montérégie recorded the lowest average asking sale prices at $49.09, $50.35 and $43.81 per square foot, respectively. We continue to be in a buyer-favorable market across the GMA; however, smaller stand-alone properties in the 10,000-30,000 square feet range that are available for sale are becoming harder to find and thus, sell at a premium. We believe that such properties will continue to increase in value, representing great opportunities for vendors of those industrial buildings.

Average Asking Sale Prices by Clear Height (GMA)

<18 feet 19-22 feet 23-27 feet >28 feet

$61.69 p.s.f. $66.54 p.s.f. $71.68 p.s.f. $75.42 p.s.f.

Current Space Available for Sale in the Greater Montréal Area

Submarket Available space (s.f.) Proportion of the Market

Midtown North 1,141,355 8.63%

Midtown South 421,046 3.18%

East End 2,408,450 18.21%

West Island 1,879,315 14.21%

Lachine 622,903 4.71%

Saint-Laurent 2,572,077 19.45%

Laval 1,620,251 12.25%

North-Shore 1,511,704 11.43%

South Shore 905,604 6.85%

Vaudreuil-Dorion 143,560 1.09%

Greater Montréal Area 13,226,265 100%

Average Asking Sale Prices by Submarket

Submarket Average Asking Price ($/s.f.)

Vaudreuil-Dorion $87.00

Laval $85.95

Midtown North $79.43

Saint-Laurent $74.91

West-Island $71.68

South Shore $68.50

North Shore $67.91

East End $58.95

Midtown South $50.35

Lachine $49.09

Montérégie $43.81

Sales Transactions (Square feet traded and average $/s.f.)

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

0

1

2

3

4

Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

($/s.

f.)

Millio

ns o

f squ

are f

eet

Square feet sold Average transaction value

JLL | Greater Montréal Area | Local Industrial Insight Report | Q2 2015

(400) (300) (200) (100) 0 100 200 300 400Thousands of s.f.

5

Quarterly Market News

Greater Montréal Area • Real estate developer Gimmelin intends to build a new three

million square feet industrial park for medium and heavy industries in Eastern Laval at the junction of Highways 25 and 440. The project will have the capacity to accomodate a dozen large firms with buildings of up to 530,000 square feet. No firm dates have yet been released.

• Green Cross Biotherapeutics kicked off the construction of its biopharmaceutical facility located in Saint-Laurent’s Technoparc campus. The $315 million project is one of the largest biopharmaceutical projects in Canada and will be built on a land of 700,000 square feet with a building size of 225,000 square feet. This project was the result of the Canada-Korea Free Trade Agreement.

• Lisi Aerospace Canada unveiled plans to install a new production line to manufacture titaniu assembly parts at its facility located at 2000 Place Transcanadienne in Dorval. The project involves an investment of more than $12 million.

• Alta Group succesfully rezoned 8.5 million square feet of land to an industrial use in Coteau-du-Lac adding to the existing supply of industrial land in the region.

• Womensweat retailer Boutique Jacob is relaunching its operations with five Quebec stores along with a focus on online operations to adapt to the current retail environment.

• Ikea Canada announced the opening of a pick-up store in Québec City. Stefan Sjostrand, managing director, said “The pick-up format is part of a global Ikea test pilot for secondary markets where it currently has no stores…”.

Quarterly Leasing Activity by Submarket (s.f.)

Submarket Conditions – Market History and Forecast

Submarket 2012 2013 2014 2015 2016

Midtown North

Midtown South

East End

Saint-Laurent

West island

Lachine

Vaudreuil

Laval

North-Shore

South-Shore

Balanced conditions

Tenant-favorable conditions

Landlord/Owner- favorable conditions

Positive Absorption Negative Absorption

North Shore Greater Montréal Area South Shore Midtown South East End Laval Lachine Saint-Laurent West-Island Midtown North

JLL | Greater Montréal Area | Local Industrial Insight Report | Q2 2015

Greater Montréal Area • Q2 2015 Highlights

1

4505 HIckmore, Saint-Laurent Tenant: Mega Brands Lease renewal: 817,000 s.f.

2 165 Hymus, Pointe-Claire Tenant: Leviton Lease renewal: 131,465 s.f.

3 4141 Highway Laval Tenant: Staples Canada Inc. Lease renewal: 130,219 s.f.

4 510-560 Orly, Dorval Rosedale Transport Ltd. Lease renewal: 83,014 s.f.

5 12225 Industriel, Rivière-des-Prairies Tenant: Transport Viens New lease: 48,000 s.f.

6 11281 Albert-Hudon, Montreal North 551,759 s.f. Buyer: Quintcap & Divco Seller: Sobeys Québec Inc. Sale price: $27,100,000 ($52.83 p.s.f.)

7 8000 Henri-Bourassa, Saint-Laurent 297,170 s.f. Buyer: Groupe Mach Seller: LaSalle CIG Sale price: $17,350,000 ($58.38 p.s.f.)

8 2177-2185 23nd avenue, Lachine 200,033 s.f. Buyer: Cominar Seller: Igri Industrial Fund Sale price: $7,215,100 ($36.07 p.s.f.)

9

2125 23rd avenue, Lachine 204,610 s.f. Buyer: Cominar Seller: Igri Industrial Fund Sale price: $7,969,500 ($38.95 p.s.f.)

10 3655 Losch, Saint-Hubert 99,646 s.f. Buyer: Darmieux Inc. Seller: Groupe Royal Sale price: $3,350,000 ($33.62 p.s.f.)

11 3075 Thimens, Saint-Laurent Direct: 1,642,615 s.f. Asking rent: No official asking price

12 1144 Magenta, Farnham (Also available for sale) Direct: 618,928 s.f. Asking rent: $4.50 p.s.f net

13 2200 Trans-Canada, Pointe-Claire Direct: 413,335 s.f. Asking rent: $5.00 p.s.f. net

14

2105 23rd avenue, Lachine Direct: 318,960 s.f. Asking rent: $4.25 p.s.f. net

15

6755 Grandes-Prairies, Montréal Direct: 283,438 s.f. Asking rent: $4.25 p.s.f. net

16 800 Industriel, St-Jean (Also available for lease) 352,000 s.f. Asking price: $11,500,000 ($31.25 p.s.f.)

17

150 Collins, Farnham 272,000 s.f. Asking price: $4,080,000 ($15,00 p.s.f.)

18 117 Hymus, Pointe-Claire (Also available for lease) 241,929 s.f. Asking price: $18,500,000 ($76.47 p.s.f.)

19

22000 Trans-Canada, Baie-d’Urfé (Also available for lease) 225,196 s.f. Asking price: To be determined

20 7800 Trans-Canada, Pointe-Claire 224,130 s.f. Asking price: $11,500,000 ($51.31 p.s.f.)

6

Lease Transactions Sale Transactions Large Blocks Available for Lease Large Blocks Available for Sale

4

2 7

8

138

13

14

17

18

16

10

6 9

13

15 40

40 40

40

13

20

25

15

25

20

117

20

20 15

10

440

25

20 20

10

19 125

134

122

138

520

335

20

15

40

25 138

40

40 19

3

6

12

5

1

7

10

15

20 11

JLL | Greater Montréal Area | Local Industrial Insight Report | Q2 2015

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