Investor interest in Miami s CBD takes the spotlight

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1 MARKETVIEW Miami Office, Q Investor interest in Miami s CBD takes the spotlight 10.5% Lease Rate Class A $44.28 PSF Figure 1: vs (Class A & B) Millions of SF ,000 SF Completions 190,000 SF *Arrows indicate change from previous year. Rate Q1 Q2 Q3 Q4 Rate ( R ) INVESTMENT SALES ACTIVITY 0 vacancy was 10.5% in Q2 2018, declining 30 bps quarter-over-quarter and 50 bps yearover-year. Net absorption (move-ins/move-outs) during Q was 144,524 sq. ft., with 91,257 sq. ft.in the downtown submarkets and 53,267 sq. ft. in the suburban submarkets. New-to-market tenants are currently seeking to occupy over 270,000 sq. ft. in the coming months. Tenants seeking space in the market have requirements for 1.4 million sq. ft. Business services, which includes co-working providers, legal and financial services were the top industries in the market. Miami ranked #8 out of the top 50 metros in the U.S. for Best Places for Job Seekers in 2018 from data collected by job site Indeed on CNBC.com Investor interest in the urban core took the spotlight in Q Two prominent office buildings traded, one in Downtown and one in Brickell, totaling $375.5 million. Year-to-date sales have already surpassed sales for the entire year in 2017 in Miami s CBD Brickell last sold for $184 million in 2013, generating a 35% return on Prudential Global Investment Management s investment over a five-year period. Crocker Partners purchased SunTrust International in 2011 for $82.5 million, selling at a price 54% higher than the previous sale. LEASING ACTIVITY Strong leasing activity continued in Q2 2018, leading to a tightening office market. Leasing activity totaled approximately 622,300 sq. ft., across 110 transactions. The majority of the lease transactions were larger than usual, at 5,000 sq. ft. Q CBRE Research 2018 CBRE, Inc. 1

2 Figure 2: Market Statistics Class A & B Airport/Doral 4,818, ,829 71, ,022, (1,196) (9,414) Aventura A 1,250, (15,368) B 166, (1,122) Biscayne Blvd Corridor A 704, (9,441) (9,441) 147, B 392, ,950 7,242 30, Coconut Grove A 507, (11,075) 139, B 601, ,485 (3,328) Coral Gables A 4,172, ,735 6, , B 2,992, ,137 26, Kendall A 1,445, (584) 46, B 2,109, ,365 7, Miami Beach A 820, ,676 40, , B 926, (7,675) Miami Lakes A 517, (12,919) (8,985) 38, B 996, ,069 30, North Miami A 560, ,467 5, , B 314, (751) (3,080) 0 - South Dade A B 467, ,694 17, Suburban 29,787, , ,916 1,075, ,943, , ,486 1,075, Figure 3: Market Statistics All Classes Inventory Inventory Direct Direct Q Absorption Q Absorption 2018 YTD 2018 YTD Under Construction Under Construction Avg. Dir. Asking Lease Rate ($/SF/FSG/G/MG) Submarket Class CBD Brickell A 4,220, (4,018) 44, B 2,085, (10,395) (697) Downtown A 3,537, ,991 35, B 2,311, (3,983) (2,294) CBD 12,155, ,595 77, Avg. Dir. Asking Lease Rate ($/SF/FSG/G/MG) Submarket Brickell 7,284, ,520 71, Downtown 7,674, ,737 45, CBD 14,958, , , Airport/Doral 11,956, ,887 39, Aventura 1,549, ,222 (15,979) Biscayne Blvd Corridor 1,685, (15,728) (12,763) 177, Coconut Grove 1,173, ,485 (14,403) 139, Coral Gables 7,287, ,955 34, , Kendall 3,730, ,781 54, Miami Beach 1,995, ,076 33, , Miami Lakes 1,953, ,971 56,469 38, North Miami 1,423, (76) (3,963) 111, South Dade 467, ,694 17, Suburban 33,222, , ,139 1,075, ,180, , ,309 1,075, Q CBRE Research 2018 CBRE, Inc. 2

3 Figure 4: Significant Q Occupancies* Submarket Property Tenant Transaction Airport/Doral Doral Court Blue Cross Blue Shield (Florida Blue) 81,000 Downtown One Riverview Square GSA - United States of America 21,237 Coconut Grove SBS Biscayne Bank Tower Ritz-Carlton Yacht Collection 14,400 Coral Gables Alhambra Plaza Berk Merchant Sims 11,700 Miami Lakes Lincoln Square North Community Connections For Life, Inc. 11,612 Figure 5: Significant Q Leases Executed *Does not include renewals. Submarket Property Tenant Lease Type Transaction Coconut Grove Mary St. Kaufman Rossin New Lease 75,000 North Miami Parkway Medical Center Vitas Healthcare Corporation of Florida New Lease 30,280 Downtown LVMH Group LVMH Group (Louis Vuitton Moet Hennesy) Expansion/Renewal 30,000 Coral Gables Bacardi Building MSP Recovery Law Firm New Lease 29,374 Downtown Three MiamiCentral Viacom (MTV) New Lease 24,009 Figure 6: Top Q Investment Sales ($ Millions) Submarket Property Buyer Seller Building Sale Price ($) Price per SF ($) Brickell 1111 Brickell Parkway Properties/KKR Prudential 522, ,500, Downtown SunTrust Int. PCP LLC Crocker Partners 707, ,000, Figure 7: Under Construction Submarket Property Owner Developer Building Delivery Date Coral Gables The Plaza Coral Gables - North Agave Holdings Agave Holdings 289, Miami Beach Collins Ave. Creative Realty Group Creative Realty Group 102, Coconut Grove Mary St. Terra Group Terra Group 95, Biscayne Blvd Corridor CUBE Wynwd RedSky Capital Investments RedSky Capital Investments 87, Coral Gables Ofizzina The Solution Group (TSG) The Solution Group (TSG) 83, North Miami Canal Park Office Eduardo Namnum Eduardo Namnum 74, Coral Gables Giralda Place - West Tower Transamerica Holding Corp. Transamerica Holding Corp. 71, Coral Gables Sunset Office Center Catherine Lorie Catherine Lorie 60, Biscayne Blvd Corridor Wynwood 25 Annex East End Capital Partners, LLC East End Capital Partners, LLC 60, Coconut Grove Main Highway Optimum Development USA Optimum Development USA 44, Miami Lakes NW 67th Ave. The Graham Companies The Graham Companies 38, North Miami 2420 NE Miami Gardens David Mendall, Forest Travel David Mendall, Forest Travel 36, Biscayne Blvd Corridor The Wynwood Garage Goldman Development, LLC Goldman Development, LLC 30, Q CBRE Research 2018 CBRE, Inc. 3

4 and greater, and took place in the Downtown, Coconut Grove and Coral Gables submarkets. Miami s rental rates were among the highest in the region, with continued growth and diminished supply. The average asking lease rate for all classes in the CBD climbed to $42.66 per sq. ft. in Q2 2018, an increase of $1.01 year-over-year or 2.4%. In the suburban submarkets, the average asking rate for all classes was $34.33, an increase of $1.82 year-over-year or 5.6%. remained on a downward trend, decreasing by 30 basis points (bps) to 10.5% quarter-over-quarter and by 50 bps year-over-year. DEVELOPMENT Office properties under construction totaled 1,075,352 sq. ft. as of Q and are set to deliver over the next three years. Two MiamiCentral delivered 190,000 sq. ft., leaving the Miami CBD with zero projects under construction. The office tower was 43% pre-leased upon completion with major tenants including The Cisneros Group, Ernst & Young and Spaces (Regus Business Centers). Three office properties broke ground in Q including Collins Avenue in the Miami Beach submarket, NW 67th Avenue in the Miami Lakes submarket and 2420 NE Miami Gardens in the North Miami submarket. Coral Gables remains the submarket with the largest square footage under construction with a total of 506,105 sq. ft. in Miami-Dade County, followed by Biscayne Boulevard (which includes Wynwood), Coconut Grove and North Miami. ECONOMIC INFLUENCE Office-using employment growth driven by Job growth continued in the 12 months prior to May 2018 bringing an additional 12,100 jobs in the Miami metropolitan division, representing a yearover-year gain of 1.0% according to the Bureau of Labor Statistics (BLS). Miami s annual job growth was driven by gains in manufacturing (+7,200), construction (+46,400) and trade, transportation & utilities (+2,700). Figure dye highest 8: Average Direct Asking Lease Rate (FSG/G/MG) Asking Lease Rate ($) 50 THE VACANCY RATE CONTINUED TO DECLINE 45 IN Q TO 12.2%, DOWN 30 BASIS POINTS (BPS) QUARTER-OVER-QUARTER AND BPS YEAR-OVER-YEAR. AIRPORT/DORAL, 35 AVENTURA, COCONUT GROVE, CORAL 30 GABLES AND MIAMI BEACH ARE ALL REPORTING SINGLE-DIGIT VACANCIES. 25 ECO VACANCY RATE CONTINUED TO 20 DECLINE IN Q TO 12.2%, DOWN 30 Q Q Q Q Q Q Q BASIS POINTS (BPS) QUARTER-OVER-QUARTER AND 140 BPS YEAR-OVER-YEAR. Class A Class B Source: AIRPORT/DORAL, CBRE Research, Q AVENTURA, COCONUT GROVE, CORAL GABLES AND MIAMI BEACH Figure ARE 9: ALL Completions REPORTING SINGLE-DIGIT VACANCIES. 000's of SF) 2,000 Forecast 1,500 1, OUTLOOK Solid market fundamentals are driving Miami s strong performance in both leasing and investment activity, which is forecasted to continue through The opening of MiamiCentral and delivery of the second office tower at the train station, Two MiamiCentral, are instrumental in making Miami s CBD and Miami-Dade County in general increasingly relevant and sought-after. Together with a tightening labor force and newto-market tenants entering the market, demand will continue to outpace supply even as new projects slowly increase office inventory. Q CBRE Research 2018 CBRE, Inc. 4

Market Coverage: Includes all competitive office buildings 30,000 sq. ft. and greater in size in Miami-Dade county. Excludes: single occupancy, government and medical buildings.

5 Market Coverage: Includes all competitive office buildings 30,000 sq. ft. and greater in size in Miami-Dade county. Excludes: single occupancy, government and medical buildings. CONTACTS Arden Karson Senior Managing Director Endria Maiorano Research Operations Manager To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Contact CBRE Miami 777 Brickell Avenue, Suite 1100 Miami, FL Ana M. Gonzalez Research Analyst Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Landlords look for ways to stay competitive as vacancy tightens

MARKETVIEW Miami Office, Q4 2017 Landlords look for ways to stay competitive as vacancy tightens 10.9% Lease Rate Class A $44.04 PSF Net 147,000 SF Completions 90,000 SF Figure 1: vs Net (Class A & B)