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Market Trends & Analysis for 2015

ISCS Professional Development Webinar August 27, 2015

Andrew Garrett Director, Development

Agenda

Canadian Outlook for 2015 Economic Outlook Retail Outlook

Retail Trends Category Growth Luxury Expansion

Growth Markets Growth by Region Growth by Class

Q&A

Canadian Outlook

Economic Outlook | 2014 in Review

Continued growth in housing market Slower employment recovery than

anticipated Low interest rates maintained

manageable debt levels Record low interest to household-disposable-

income ratio of 6.8%

Real GDP growth, trade surplus, and increased consumer prices due to accelerated inflation

Economic Outlook | 2015 Forecast

Sinking commodity and oil prices Record high household debt-income

ratio of 162.6% Bank of Canada overnight interest rate

cut to 0.5% Exports and investment outlays to increase as a

result

Cheaper Canadian dollar may curb cross-border shopping

Economic Outlook | Real GDP Growth

Reduced pace of economic recovery in Canada compared to other G8 nations

2.0%

0.3% 0.2%

-1.7%

1.6% 1.7%

2.2%

0.1%

3.4%

2.5%

0.4%

1.6%

-0.4%

-0.1%

2.6% 2.4%

1.4%

3.4%

2.2%

1.2%

1.6%

0.5%

1.0%

2.7%

3.1%

1.8%

3.5%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

Canada France Germany Italy Japan UnitedKingdom

United States EU Global

2013

2014

2015

Economic Outlook | Canadian Interest Rates

Overnight lending rate cut twice by Bank of Canada down to 0.5% in 2015

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Bank of Canada Overnight Rate

Economic Outlook | Canadian Spending

Overall slower growth in consumer spending in 2015

Clothing and Footwear

Leisure and Recreation

Hotels and Catering

Total Other Consumer

Expenditure

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Forecast YoY % Change in Canadian Expenditure Adjusted for Inflation

Shopping Centre Outlook | Supply

Total shopping centre GLA plateauing at 542M SF

525.6

532.6

541.8 541.9

515

520

525

530

535

540

545

2010 2011 2012 2013

Tota

l Sho

ppin

g C

entre

GLA

in C

anad

a (m

illion

s of

SF)

Five Largest Canadian Shopping Centre Owners

47,878,000 SF

28,100,000 SF

27,816,000 SF

24,564,000 SF

24,555,000 SF

Shopping Centre Outlook | Demand

Total Retail sales outpacing shopping centre sales

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$0

$100

$200

$300

$400

$500

$600

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Tota

l Ann

ual C

anad

ian

Sale

s ($

billi

ons)

Shopping Centre Sales as a Percentage of Total Retail Sales

Annual Canadian Total Retail Sales ($ billions)

Annual Canadian Shopping Centre Sales ($ billions)

Retail Trends

Polarized Consumer and Retail Environment Mid-range retailers losing market share to luxury and discount brands

Influx of Foreign Retailers Incoming retailers looking to target the growing luxury market

Retail Trends | Growth Categories

Retail Trends | Luxury

Canadian luxury segment CAGR of 30% expected between 2015-2018

Market can absorb an additional 2M SF of luxury retail Saks, Nordstrom, Holt Renfrew, Harry Rosen and

others have announced 1.5M SF of new luxury space Luxury brands moving from high streets to malls

Luxury Sales 2014 $6.0B $72.4B

Percent of Total Retail Sales 2014 1.2% 1.5%

Growth Markets

Growth Markets | Growth by Region

Solid west coast retail growth and performance

BC $861PSF +15.3%

Prairies $631PSF +0.7%

ON $725PSF +8.5%

QC $514PSF +7.4%

Atlantic $559PSF +9.3%

Vancouver Edmonton Calgary Toronto Ottawa Montreal

+16.7% +5.7% +3.7% +8.8% +0.4% +8.1%

AB $770PSF +2.8%

Canada

$692PSF +16.7%

Thank you. Questions?

Economic Outlook | Canadian Debt and Income

Household debt continuing to outpace total income

Total Debt

Total Income

Total Disposable

Income

$0.00 T

$0.50 T

$1.00 T

$1.50 T

$2.00 T

$2.50 T

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Forecast

ANDREW’S NOTES

Retail Trends | Category Growth

Strong projected growth for Health & Beauty retailers

1.1%

0.6%

3.6%

1.2% 1.6% 1.6%

0.6%

-3.5%

2.2%

0.4% 0.6%

-1.1%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Apparel andFootwear

Electronics andAppliances

Health andBeauty

Home andGarden

Leisure andPersonal Goods

Other Non-Grocery

2009-14 CAGR

2014-19 Forecasted CAGR

ANDREW’S NOTES

Retail Trends | e-Commerce

80% of Canadians live in the country’s 15 largest cities, making urban centres the hubs of retail activity

Canadian e-Commerce segment CAGR of 11.3% between 2015-2020

Amazon.com Inc. commands a 10.5% market share of all Canadian e-Commerce

Forecasted e-Commerce Sales 2015 $27.0B $347.3B

Percent of Total Retail Sales 2015 5.7% 7.0%

ANDREW’S NOTES

Retail Trends | Multi/Omnichannel

61% of Canadian online shoppers purchase from foreign omnichannel retailers Omnichannel retail defined as ways to “drive the

customer from click to brick and back again”

Engage with Email, CRM, & Loyalty 93% of Canadian internet users have opted into email

marketing. 44% have made a resultant purchase

Digital Marketing Only 32% of consumers engage with brands via social media

Integrated Mobile Experience IKEA allows consumers to project 3D images of IKEA

furniture into their homes using the company’s mobile app

ANDREW’S NOTES

Growth Markets | Growth by Class Neighbourhood Regional Power Centre

NET RENT 6 MO. TREND

VACANCY RATE

6 MO. TREND NET RENT 6 MO.

TREND VACANCY

RATE 6 MO.

TREND NET RENT 6 MO. TREND

VACANCY RATE

6 MO. TREND

Victoria High $24 ↓ 4.5% ↑ $38 ↓ 6.3% ↑ $27 ↓ 1.6% ↑ Low $16 0.0% $30 0.0% $20 0.0%

Vancouver High $30 ↓ 10.0% ↑ $200 ↔ 7.0% ↔ $20 ↑ 3.0% ↔ Low $14 5.0% $28 3.0% $10 2.0%

Kelowna High $28 ↔ 15.0% ↑ $110 ↔ 10.0% ↑ $30 ↓ 5.0% ↑ Low $22 5.0% $50 5.0% $20 0.0%

Calgary High $32 ↔ 1.5% ↔ $200 ↔ 2.0% ↔ $80 ↑ 2.0% ↔ Low $24 1.5% $60 1.8% $35 1.0%

Edmonton High $35 ↔ 3.0% ↔ $35 ↔ 3.0% ↔ $40 ↔ 3.0% ↔ Low $22 1.0% $25 1.0% $25 1.0%

Saskatoon High $36 ↑ 5.0% ↔ $60 ↑ 25.0% ↑ $34 ↔ 3.0% ↔ Low $26 0.0% $38 5.0% $22 0.0%

Regina High $32 ↔ 3.5% ↔ $50 ↔ 4.0% ↔ $48 ↔ 2.0% ↔ Low $24 1.0% $30 0.0% $26 0.0%

Winnipeg High $32 ↔ 6.0% ↔ $100 ↑ 5.0% ↔ $35 ↔ 4.0% ↑ Low $20 2.0% $40 1.0% $22 0.0%

Toronto High $25 ↓ 8.0% ↔ $130 ↓ 3.0% ↔ $33 ↔ 4.0% ↑ Low $12 5.0% $25 1.0% $18 2.0%

Ottawa High $25 ↔ 10.0% ↔ $100 ↔ 10.0% ↔ $35 ↔ 10.0% ↔ Low $15 5.0% $50 0.0% $15 5.0%

Montreal High $15 ↔ 7.0% ↔ $18 ↔ 5.0% ↔ $20 ↔ 5.0% ↔ Low $10 5.0% $15 3.0% $17 3.0%

Halifax High $25 ↑ 8.0% ↔ $75 ↔ 1.3% ↓ $25 ↑ 3.7% ↑ Low $20 7.0% $70 1.0% $18 3.4%

ANDREW’S NOTES