U.S. Office Market Fundamentals Level Off but Remain Positive

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1 U.S. Research Report OFFICE OUTOOK Q U.S. Office Market Fundamentals evel Off but Remain Positive Michael Roessle, National Director of Office Research In Q3 2016, U.S. office market fundamentals continued the positive momentum of the first half of 2016, particularly in terms of net absorption amid renewed GDP growth. Robust office leasing in the third quarter should set the table for a solid year-end figure, as the fourth quarter has historically been strong for absorption. While the rate of occupancy gains is slowing as many businesses increasingly focus on efficiency, the U.S. office vacancy rate has a strong chance of matching or dipping below the prior cycle low by early Key Observations >> U.S. GDP growth rebounded to 2.9 percent in the third quarter, marking the strongest quarter in two years. The U.S. economy added an average of 206,000 jobs per month in Q3 2016, up 41 percent from Q Office-using jobs increased by 17 percent over the past quarter to an average of 75,000 per month. >> Class A asking rents ended the third quarter averaging $46.54 per square foot in central business districts (CBDs) and $28.91 in the suburbs. Both figures represent gains from Q with the CBDs registering a 7.6 percent increase, compared to 3.3 percent in the suburbs. However, both areas registered slight decreases from Q2 2016, suggesting the pace of these gains is slowing. >> The national vacancy rate dropped to 12.4 percent, down 10 basis points (bps) from Q and down 40 bps from Q Compared to Q3 2015, 78 percent of metros registered stable or declining vacancies while 71 percent of metros recorded a quarterly decrease in vacancy. However, market conditions moderated in the core areas of the top 10 investment markets tracked by Colliers International. Market Indicators Relative to prior period Q Q3 2017* VACANCY NET ABSORPTION CONSTRUCTION RENTA RATE** *Projected **Rental rates for current quarter are for CBD; rent forecast is for metrowide rents. Summary Statistics, Q U.S. Office Market Vacancy Rate Change From Q (Basis Points) Absorption (MSF) % of Markets with Positive Absorption New Supply (MSF) Under Construction (MSF) 12.4% % ASKING RENTS PER SQUARE FOOT PER YEAR >> >> Net absorption reached 20.6 million square feet in Q3 nearly equal to the 23.8 million square feet absorbed in the first and second quarters combined. This level of net absorption easily surpassed the five-year quarterly average of 16.6 million square feet. Third quarter sales volume in the U.S. was down 4 percent from Q to $33.9 billion, though the pace of decline is slowing from earlier in the year. While major and tertiary markets saw sales volume declines, secondary markets saw a 3 percent yearover-year increase. Downtown Class A Change From Q Change From Q Suburban Class A Change From Q Change From Q $ % +7.6% $ % +3.3%

2 Jobs GDP and Employment Signal Renewed Economic Growth U.S. GDP grew at 2.9 percent in Q3 2016, the fastest pace in two years and twice the rate of last quarter. Exports soared at an annualized rate of 10 percent, while public sector spending, private inventories and business spending all turned from negative to positive. On the other hand, consumption grew by a relatively tepid 2.1 percent in the quarter, almost half its 4.3 percent pace in the second quarter. The U.S. economy continues to demonstrate resilience with a string of strong monthly job growth figures. According to the Bureau of abor Statistics, September s upwardly revised 191,000 job additions, following August s 176,000 additions, marked a record six straight years of positive job growth, though the gains have been moderating as the economy nears its full employment level. The labor force participation rate also increased to 62.9 percent in September from 62.4 percent in Q3 2015, demonstrating rising worker confidence. U.S. Job Growth Trends - 2 Month Moving Average 350, , , , , ,000 50,000 0 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Office-Using Employment Nonfarm Employment Vacancy % In addition, 89 percent of suburban markets recorded positive absorption compared with 68 percent of CBDs. However, this does not indicate that the trend toward urbanization is slowing. In fact, several major firms recently announced relocations from the suburbs to CBDs. Two prime examples are GE s headquarters relocation from Stamford, CT to Boston and McDonald s headquarters relocation from the Illinois suburb of Oak Brook to Chicago s West oop. The tech sector, professional services sector and corporate relocations continue to fuel demand for office space. Suburban areas of Boston, Dallas, Seattle, Phoenix, South Florida and Nashville all posted absorption gains of at least 500,000 square feet. New Tech tenants, or those technology and e-commerce companies founded in the past 20 years, are responsible for an increasing share of absorption while more traditional sectors have been consolidating. For example, open source solutions provider Red Hat is opening a new facility in Boston s Seaport submarket in an effort to tap into the area s deep talent pool. U.S. Office Market Q Q % 14.0 % 13.5 % 13.0 % 12.5 % 12.0 % 11.5 % 11.0 % 10.5 % 10.0 % Q Q Q Q Q Q Q Q Q New Supply (MSF) Absorption (MSF) Vacancy Rate (%) Millions SF Source: Bureau of abor Statistics Source: Colliers International Despite core inflation still sitting below the Federal Reserve s target rate of 2 percent, the signs of strength in the job market and renewed economic growth appear to reaffirm the belief that the Fed will hike interest rates this December for the first time since December Office Absorption Reaches 2016 High National office absorption rebounded from a slow first half of 2016 to reach 20.6 million square feet in Q3 nearly equal to the 23.8 million square feet absorbed in the first and second quarters combined. This bodes well for a strong finish to the year as tenants and landlords often push to complete deals before the new year. Still, limited space options and restrained construction activity will make matching the million-square-feet annual totals for the past two years highly unlikely. Absorption gains were widespread in the third quarter, with 82 percent of the markets we track recording a net gain. Suburban areas fueled the majority of those gains as there are much larger inventories in these areas than in the CBDs. As a result, suburban absorption accounted for 16.7 million square feet of the 20.6 millionsquare-foot total. 2 U.S. Research Report Q Office Market Outlook Colliers International

3 YOY Change in CBD Class A Rent - Q $ % $ % $ % $ % $ % $ % $ % $ % $23.32 $ % $ % $ % $ % $ % $ % $30.47 $ % 2.6% $ % $ % -3.7% $27.11 $ % 3.8% -0.8% $ % $ % $ % $ % YOY Change in Rent -15.7% 15.7% $ % $ % $21.00 $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % Class A Asking Rents Rise but Pace Eases Class A asking rents ended the third quarter averaging $46.54 per square foot in CBDs and $28.91 per square foot in the suburbs. Both figures represented gains from Q3 2015, with the CBDs registering a 7.6 percent increase, compared to 3.3 percent in the suburbs. While 40 CBDs and 43 suburban areas posted quarterly increases in rents and annual gains in asking rent continue, CBD and suburban areas as a whole saw small quarterly declines that suggest the pace of gains is moderating. Of note, both the East Bay CBD (-3.3 percent) and San Francisco CBD (-3.6 percent) posted quarterly rent decreases, slowing the record-breaking gains seen over the past months. Suburban areas of os Angeles, Portland, Seattle and the San Francisco Bay Area (particularly Silicon Valley and the Peninsula) led the west in annual rent growth, while the suburban areas of Nashville, Atlanta, Raleigh/Durham, Austin, Orlando and Dallas topped the southern markets. Dallas serves as a good example of the influence that the growth of professional services and corporate relocations are having in some markets. These factors have pushed the Uptown submarket in Dallas to record-breaking highs in asking rent, with some top-tier buildings commanding a once unthinkable $50-$60 per square foot. Though these are records for Dallas, these rents are still lower than in many major markets around the country, helping to draw out-of-market relocations. As asking rents rise, occupiers in many sectors have grown increasingly cost conscious. Many law firms are embracing more efficient workplace strategies. Other firms are relocating operations to lower-cost markets. For example, JPMorgan Chase & Co. and Toyota have consolidated in Dallas and Plano, respectively. Yet relocations aren t happening in all markets. In 2015, 39 percent of leases over 100,000 square feet in Manhattan were renewals. In 2016, that number has shot up to 59 percent, demonstrating a shift toward the lower cost option of renewing in-place rather than relocating. Top U.S. Office eases in Q TENANT ADDRESS SF TENANT INDUSTRY Coach, Inc. 10 Hudson Yards New York 694,000 Fashion Google Moffett Gateway Silicon Valley 595,840 Technology Random House, Inc.* 1745 Broadway New York 631,025 Publishing Verizon* 600 Hidden Rdg Dallas 576,138 Communications Allergan 5 Giralda Farms * Renewal Sources: CoStar, Colliers International Northern New Jersey 431,493 Pharmaceutical Top U.S. Office Sales in Q ADDRESS SF PRICE BUYER 1095 Sixth Ave* New York 1,116,129 $1,152,970,000 HKMA 11 Madison Ave* New York 2,285,043 $1,040,000,000 PGIM Real Estate 1221 Sixth Ave* New York 2,600,000 $1,035,000,000 Invesco Real Estate 10 Hudson Yards* New York 1,813,465 $946,000,000 Allianz Real Estate of America 10 Hudson Yards New York 694,000 $707,000,000 Related Companies *Partial Interest Sale Source: Real Capital Analytics 3 U.S. Research Report Q Office Market Outlook Colliers International

4 YOY Change in Metro Vacancy - Q % 0.3% 10.8% 14.9% -2.0% -1.6% 11.0% -1.6% 7.5% 0.0% 7.7% 1.0% 8.4% -0.9% 14.5% -0.8% 12.3% -0.3% 11.4% -0.7% YOY Change in Vacancy -4.1% 4.1% 18.0% -1.3% 16.3% -4.1 % 11.1% -2.0% 9.0% 0.7% 15.4% 0.3% 11.7% -0.4% 10.7% -0.8% 9.9% -1.2% 14.4% 0.5% 13.4% -1.8% 5.0% -0.4% 13.0% -0.9% 9.8% -2.9% 17.2% 3.0% 10.9% -0.8% 15.2% -0.8% 14.3% -0.9% 14.0% 0.2% 22.7% -0.5% 13.7% -0.6% 13.0% -2.6% 15.3% -3.1 % 16.6% 0.4% 8.2% -0.8% 13.9% 0.0% 9.0% -1.0% 12.7% -2.3% 11.2% -0.7% 8.2% -1.0% 7.8% -0.6% 12.1 % 9.9% -3.3% -0.2% 10.2% -2.3% 11.6% -0.2% 11.7% -0.7% 6.9% -1.6% 12.2% -1.7% 10.5% -0.9% 7.3% -2.1 % 11.4% 2.1% 13.5% -0.5% 16.1 % 0.4% 11.5% -0.3% Suburban Occupancy Drives Down Vacancy Rates At the close of the third quarter, just under 30 percent of the markets we track had a vacancy rate of less than 10 percent, while only the Dayton, OH market exceeded 20 percent. The national office vacancy rate now stands at 12.4 percent, dropping 10 bps from mid-year 2016 and 40 bps from Q on the strength of occupancy gains in suburban markets. Overall vacancy rates now stand just above the trough of 12.2 percent seen in the prior peak in Q3 2007, with a strong chance of matching that figure by year-end. Impressively, 78 percent of the markets Colliers tracks posted stable or declining vacancies on an annual basis. In particular, strong secondary markets in the west and southeast continue to outperform the rest of the country. Phoenix, Tacoma, Denver, Tampa Bay and Orlando all saw vacancy rates drop between 200 and 410 bps on an annual basis. It should come as no surprise that Houston was not one of those markets. As energy markets continue to struggle to gain traction and a flood of sublease space saturates the market, Houston saw vacancy rise 300 bps on an annual basis. The Midwest region was the top performer for CBD areas, registering an annual vacancy decrease of 80 bps to end the third quarter at 11.9 percent. The downtown areas of Detroit, St. ouis, Kansas City, Dayton, Indianapolis and Columbus all enjoyed quarterly vacancy declines of between 90 and 530 bps. Strong local employment is the driver, with the Midwest unemployment rate falling to just 4.6 percent the only region with a rate significantly lower than the overall U.S. unemployment rate of 5 percent. As space constraints continue to be an issue in the CBDs, particularly for large blocks, many firms are looking to secondary markets and suburban areas as viable options for their expansion needs. Suburban occupancy gains were greatest in the west region, with vacancy decreasing by 110 bps year-over-year. Growth of the technology sector in primary and secondary markets also continues to be a major factor in driving down vacancy rates. Suburban areas of Phoenix, Denver, as Vegas, Portland and the San Francisco Bay Area saw vacancy decreases varying from 40 bps to 450 bps, demonstrating widespread growth in the region. Suburban markets saw strong vacancy declines, decreasing quarterly and annually by 30 bps and 60 bps, respectively. Meanwhile, occupancy gains in the CBD areas have moderated, as vacancies declined a mere 10 bps annually to 11.2 percent. Conditions were relatively weaker in the core areas of the top 10 investment markets tracked by Colliers, as vacancies increased in six of the 10 markets. 4 U.S. Research Report Q Office Market Outlook Colliers International

5 Millions Construction Activity Picks Up in Response to Demand Construction has been restrained during this period of economic expansion, as many developers and lenders shied away from speculative projects. However, the pace is picking up. The million square feet under construction at the end of the third quarter is the second-highest total since the peak of the prior cycle. Quarterly Under Construction Totals Source: Colliers International Average 73.8MSF Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Under Construction (SF) Prudently, much of the construction is centered in metros where demand for new product is high and there is limited leftover supply from the recession. The top 10 markets in terms of office square footage under construction account for 56 percent of the U.S. total, showing that development is tightly focused on the areas where demand is greatest: markets such as Dallas, Manhattan, Silicon Valley, Seattle and Denver. In many of these markets, projects are often between percent pre-leased, giving tenants little relief from low vacancies, particularly for occupiers with large space requirements. Construction will have to rise to the levels of the prior peak (above 120 million square feet) before we begin to see any significant impact on vacancy. Slowing Declines Suggest the Start of a Sales Volume Rebound Transaction volume in the office sector fell 4 percent year-over-year during the third quarter to reach $33.9 billion, according to data from Real Capital Analytics. However, the trends point to an improvement as the pace of the declines earlier in the year is starting to slow. Deal volume in secondary markets was up 3 percent annually to $13.8 billion, while major markets registered a decline of 4 percent to $18.3 billion. Volume in CBD areas posted a 10 percent decrease compared to Q as investors appear to be waiting on the sidelines due to sub-4 percent cap rates for prime office properties in some gateway CBDs. Tertiary markets registered the sharpest annual decline in activity, down 29 percent. Though with only $1.7 billion in deal volume for the quarter, smaller shifts have a greater impact on percentage changes. The U.S. property markets continue to attract overseas investors. Year-to-date cross-border investment in the office sector stands at $26 billion, a full 50 percent increase from the first three quarters of This year-over-year spread could rise further as the fourth quarter is generally the most active period for investment. Canadian capital has historically been the most active overseas investment force in the U.S. office market. However, Canadian investment volume now lags behind levels from Europe, Asia and the Middle East further proving that the U.S. is widely viewed as the safest option for investment capital as demand continues to rise. Cross-Border Investment in the U.S. Q COUNTRY # OF PROPERTIES TOTA VOUME* Germany 7 $1,917 Hong Kong 2 $1,527 Switzerland 85 $1,517 Norway 4 $969 Canada 20 $824 UK 7 $580 South Korea 2 $552 Japan 4 $546 Qatar 3 $403 Other 19 $968 * Volume in Millions Source: Real Capital Analytics Moderate Growth is the Name of the Game in Q So far this year, our relatively bullish 2016 outlook has largely taken form as expected. Economic growth has come in a bit below expectations but job additions remain steady. Both occupancy and asking rents have continued their growth, though at a more moderate pace than the recordsetting past year. We still see room for gains in many markets that have not yet matched or surpassed their prior troughs in vacancy. The fourth quarter should see the U.S. vacancy rate inch closer to, if not dip below, that prior trough. The technology sector, particularly New Tech, continues to unseat traditional industries like finance as a major driver of office activity across markets, whether seeking expansion opportunities for satellite offices or serving as the anchor tenant for new construction in core markets. As we enter the time of year when investment and deal activity often accelerates, it s important to consider that while gains may be slowing, the U.S. office market fundamentals remain positive. Though the financial market responded positively in the days immediately following the November election, it remains to be seen what the full impact will be. However, barring any unexpected exogenous shock to the economy, we see strong opportunities for occupiers and investors alike. 5 U.S. Research Report Q Office Market Outlook Colliers International

6 Supplemental Data andlord and Tenant Conditions (argest 20 Markets) 24.0% 22.0% Dallas Region Midwest Northeast South West easing Market Trend In favor of andlord = Equal Footing T In favor of Tenant 20.0% 18.0% = = Cleveland Phoenix os Angeles Q CBD Vacancy Rate 16.0% 14.0% 12.0% 10.0% 8.0% Median T Minneapolis-St. Paul Atlanta Sacramento Detroit = Denver NYC Northern Suburbs = T Miami Orlando Chicago T Portland Philadelphia Silicon Valley Washington, D.C. Boston 6.0% 4.0% Raleigh/Durham East Bay 2.0% 0.0% Median $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 Q Average CBD Rent, All Classes ($/SF/Year) Source: Colliers Q office survey. Tenant-andlord assessment reflects conditions as of Q U.S. Research Report Q Office Market Outlook Colliers International

7 Supplemental Data (continued) Absorption Forecast (argest 20 Markets) Expected Absorption Over Next 12 Months 1.0% 0.5% Washington, D.C. Chicago Silicon Valley Region Midwest Northeast South West Absorption Forecast Positive Close to Zero Negative YoY Change in Vacancy Rate 0.0% -0.5% Median -1.0% -1.5% -2.0% -2.5% Dallas Cleveland Philadelphia Miami East Bay Boston Atlanta os Angeles Minneapolis-St. Paul NYC Northern Suburbs Raleigh/Durham Sacramento Denver Portland Orlando Detroit -3.0% -3.5% -4.0% -1.0% -0.5% 0.0% Phoenix Median 0.5% 1.0% 1.5% 2.0% YTD Absorption as % of Inventory (as of Q3-16) 2.5% 3.0% Source: Colliers Q office survey. Absorption forecasts reflect a 12-month outlook. 7 U.S. Research Report Q Office Market Outlook Colliers International

8 United States - Downtown - All Classes INVENTORY (SF) NEW SUPPY Q (SF) UNDER CONSTRUCTION (SF) JUN 30, 2016 ABSORPTION Q (SF) YTD ABSORPTION (SF) 2016 USA 1,909,804,581 1,794,216 42,034, % 11.2 % 3,892,718 7,305,842 NORTHEAST 862,200, ,519 17,733, % 10.4 % 2,757,672 1,186,919 Baltimore, MD 45,627, , % 10.0 % 157, ,953 Boston, MA 65,467, ,000 1,375, % 11.0 % -110, ,475 Hartford, CT 10,723, % 13.7 % -64, ,058 New York City Metro 523,132, ,917, % 10.1 % 3,366,719 1,380,874 > Manhattan 506,126, ,917, % 10.0 % 3,293,810 1,581,061 Downtown 104,384, ,861, % 11.7 % 4,174,946 4,843,024 Midtown 236,122, ,668, % 10.6 % -320,566-1,657,738 Midtown South 165,618, ,387, % 7.9 % -560,570-1,604,225 > NYC Northern Suburbs 17,006, % 15.9 % 72, ,187 Fairfield County, CT 10,477, % 16.8 % 75,778-59,187 Westchester County, NY 6,529, % 14.5 % -2, ,000 Philadelphia, PA 42,533, ,546, % 9.6 % 216, ,147 Pittsburgh, PA 51,913,266 98, , % 8.2 % 123, ,011 Washington, DC 122,801, ,980, % 12.1 % -932, ,533 SOUTH 358,972, ,932 8,318, % 12.7 % 520,225 1,372,439 Atlanta, GA 50,473, , % 14.0 % 170, ,681 Austin, TX 10,395, , , % 7.0 % 155, ,859 Birmingham, A 5,056, % 14.2 % 42,235 72,938 Charleston, SC 2,422, , % 4.8 % 23,584 37,848 Charlotte, NC 21,499,936 12,912 1,213, % 6.3 % -65, ,758 Columbia, SC 4,854, % 10.9 % 29, ,195 Dallas-Ft. Worth, TX 42,813, , % 20.5 % 30, ,644 > Dallas 32,208, , % 23.4 % 72, ,188 > Forth Worth 10,604, , % 11.9 % -41, ,456 Greenville, SC 3,582, , % 10.2 % 131, ,187 Houston, TX 43,010, ,000 1,056, % 16.8 % -408, ,716 Huntsville, A 3,859, % 8.4 % 11,608 33,211 Jacksonville, F 16,093, % 11.3 % -27, ,189 Memphis, TN 5,246, % 13.5 % 1,301-29,431 Nashville, TN 12,505, ,030, % 8.3 % 78, ,983 Norfolk, VA 4,715, % 13.1 % 10,992 19,163 Orlando, F 12,763, % 10.2 % -39, ,987 Raleigh/Durham, NC 12,270, , % 4.8 % -7,238 42,930 Richmond, VA 16,136, , % 9.1 % 40,744-36,462 Savannah, GA 803, % 12.1 % 5,513 50,270 South Florida 80,557,191 35, , % 11.6 % 301, ,084 > Fort auderdale 27,257,120 17, , % 10.9 % 19, ,599 > Miami 31,535,714 18, , % 12.4 % 146, ,621 > Palm Beach 21,764, , % 11.4 % 134, ,864 Tampa Bay, F 9,914, % 12.1 % 33,959 38,409 8 U.S. Research Report Q Office Market Outlook Colliers International

9 United States - Downtown - All Classes (continued) INVENTORY (SF) NEW SUPPY Q (SF) UNDER CONSTRUCTION (SF) JUN 30, 2016 ABSORPTION Q (SF) YTD ABSORPTION (SF) 2016 MIDWEST 378,139, ,533 4,885, % 11.9 % 332,763 2,588,540 Chicago, I 160,013, ,900, % 10.6 % -72, ,384 Cincinnati, OH 18,214, , % 12.9 % 330, ,991 Cleveland, OH 19,985, % 17.9 % -69, ,678 Columbus, OH 19,807, , % 8.1 % -47,967 12,450 Dayton, OH 5,180, % 27.3 % 23,226 67,899 Detroit, MI 25,106, % 12.2 % 195, ,398 Indianapolis, IN 11,683, , % 18.1 % 31,953 75,880 Kansas City, MO 33,708, , % 9.8 % 193, ,714 Milwaukee, WI 19,500, , % 10.3 % 88, ,486 Minneapolis-St. Paul 47,023, , % 11.9 % -105,246 1,438,320 > Minneapolis CBD 36,027, , % 13.1 % -205,652 1,187,745 > St. Paul CBD 10,995, % 7.9 % 100, ,575 Omaha, NE 6,336, % 11.2 % -317, ,066 St. ouis, MO 11,579,643 60,000 99, % 20.9 % 82, ,530 WEST 310,492, ,232 11,096, % 10.9 % 282,058 2,157,944 Downtown Bakersfield, CA 3,433, % 7.1 % -72, ,533 Denver, CO 35,037, ,530, % 11.9 % -90, ,977 Fresno, CA 3,483, % 14.5 % 18,671-36,384 Downtown os Angeles, CA 32,235, ,990, % 18.2 % 45, ,100 Honolulu, HI 7,153, % 13.8 % 110,948 72,045 as Vegas, NV 4,993, , % 12.8 % -35, ,486 Phoenix, AZ 21,131, % 18.0 % 34, ,469 Portland, OR 25,307, , % 9.8 % 43, ,072 Reno/Sparks, NV 3,994, % 10.5 % 4,088 84,781 Sacramento, CA 12,242, % 13.3 % 74, ,345 San Diego, CA 10,301, % 16.2 % 89, ,829 San Francisco Bay Area, CA 116,737, ,232 3,876, % 6.9 % -45, ,524 > East Bay 17,255, % 5.8 % -155, ,420 > San Francisco 91,080, ,232 3,876, % 6.9 % 148,612 1,193,328 > Silicon Valley 8,401, % 9.5 % -38,853 75,616 Seattle, WA 26,190, ,913, % 9.8 % 91, ,499 Stockton, CA 8,250, , % 11.0 % 13,545 18,688 9 U.S. Research Report Q Office Market Outlook Colliers International

10 United States - Downtown - Class A INVENTORY (SF) AVG ANNUA QUOTED RENT (USD/SF) JUN 30, 2016 ABSORPTION (SF) Q QUARTERY CHANGE IN RENT ANNUA CHANGE IN RENT USA 1,074,703,601 $ % 11.6 % 4,557, % 7.60 % NORTHEAST 549,781,128 $ % 11.1 % 3,817, % 6.38 % Baltimore, MD 16,002,390 $ % 10.8 % 62, % % Boston, MA 46,250,515 $ % 11.7 % -42, % % Hartford, CT 7,415,680 $ % 15.9 % -45, % 2.68 % New York, NY 336,265,994 $ % 11.2 % 3,694, % 5.70 % > Manhattan 323,242,521 $ % 11.0 % 3,636, % 5.84 % Downtown 79,469,698 $ % 13.2 % 4,062, % 1.44 % Midtown 203,429,082 $ % 10.9 % -263, % 3.86 % Midtown South 40,343,741 $ % 6.8 % -161, % 9.06 % > NYC Northern Suburbs 13,023,473 $ % 16.8 % 57, % % Fairfield County, CT 9,069,460 $ % 16.6 % 68, % % Westchester County, NY 3,954,013 $ % 17.1 % -10, % 1.99 % Philadelphia, PA 30,314,537 $ % 9.1 % 161, % 6.49 % Pittsburgh, PA 22,864,221 $ % 8.2 % 76, % 3.76 % Washington, DC - District of Columbia 90,667,791 $ % 11.7 % -89, % 1.71 % SOUTH 192,824,189 $ % 13.7 % 59, % 6.26 % Atlanta, GA 30,907,773 $ % 14.8 % 173, % 6.27 % Austin, TX 6,983,856 $ % 7.2 % 166, % % Birmingham, A 3,939,806 $ % 9.7 % 12, % % Charleston, SC 950,039 $ % 5.9 % -2, % 3.31 % Charlotte, NC 15,419,771 $ % 6.5 % -113, % 2.56 % Columbia, SC 2,324,922 $ % 12.0 % 38, % 8.53 % Dallas-Ft. Worth, TX 28,878,361 $ % 23.7 % -1, % 8.35 % > Dallas 22,964,115 $ % 26.1 % 9, % 9.27 % > Forth Worth 5,914,246 $ % 14.7 % -11, % 1.68 % Greenville, SC 2,310,167 $ % 10.0 % 122, % % Houston, TX 31,571,839 $ % 13.4 % -412, % % Huntsville, A 890,757 $ % 6.9 % % % Jacksonville, F 7,524,530 $ % 11.4 % -31, % 3.44 % Memphis, TN 1,971,211 $ % 20.0 % 1, % 3.65 % Nashville, TN 4,648,442 $ % 8.7 % 28, % 5.79 % Norfolk, VA 2,328,115 $ % 11.0 % -3, % 1.25 % Orlando, F 5,798,966 $ % 11.7 % -53, % 0.00 % Raleigh/Durham, NC 6,812,575 $ % 6.5 % 6, % 3.82 % Richmond, VA 6,972,914 $ % 12.4 % -4, % % Savannah, GA 645,713 $ % 9.1 % 3, % 0.00 % South Florida 25,327,991 $ % 14.3 % 102, % 3.46 % > Fort auderdale 6,282,293 $ % 13.8 % -14, % 4.69 % > Miami 12,885,623 $ % 15.0 % 99, % 4.48 % > Palm Beach 6,160,075 $ % 13.3 % 17, % 0.79 % Tampa Bay, F 6,616,441 $ % 11.1 % 28, % 6.84 % 10 U.S. Research Report Q Office Market Outlook Colliers International

11 United States - Downtown - Class A (continued) INVENTORY (SF) AVG ANNUA QUOTED RENT (USD/SF) JUN 30, 2016 ABSORPTION (SF) Q QUARTERY CHANGE IN RENT ANNUA CHANGE IN RENT MIDWEST 151,150,646 $ % 12.1 % 601, % % Chicago, I 63,101,526 $ % 10.9 % 253, % 1.22 % Cincinnati, OH 8,137,243 $ % 12.8 % 356, % 5.70 % Cleveland, OH 9,831,957 $ % 16.2 % -7, % 2.72 % Columbus, OH 9,056,062 $ % 10.9 % -60, % 2.51 % Dayton, OH 2,369,290 $ % 25.6 % 18, % % Detroit, MI 7,276,729 $ % 4.4 % 6, % 6.67 % Indianapolis, IN 6,080,832 $ % 19.2 % 35, % 2.96 % Kansas City, MO 10,834,802 $ % 13.2 % 16, % 2.52 % Milwaukee, WI 5,818,531 $ % 17.0 % 54, % 8.05 % Minneapolis-St. Paul 19,937,202 $ % 11.3 % -66, % 1.16 % > Minneapolis 17,163,242 $ % 11.6 % -36, % 3.41 % > St. Paul CBD 2,773,960 $ % 9.3 % -29, % % Omaha, NE 3,515,362 $ % 7.1 % -62, % 5.58 % St. ouis, MO 5,191,110 $ % 15.8 % 56, % 0.43 % WEST 180,947,638 $ % 10.3 % 78, % % Downtown Bakersfield, CA 788,282 $ % 5.8 % 10, % % Denver, CO 22,270,250 $ % 13.2 % 71, % % Fresno, CA 1,089,103 $ % 7.7 % 10, % 0.00 % Downtown os Angeles, CA 18,098,000 $ % 15.4 % 22, % 1.16 % Honolulu, HI 4,966,720 $ % 13.7 % 85, % % as Vegas, NV 1,232,341 $ % 19.5 % -44, % 8.29 % Phoenix, AZ 9,467,087 $ % 19.0 % 91, % 4.42 % Portland, OR 12,006,312 $ % 10.2 % 33, % 4.90 % Reno/Sparks, NV 779,707 $ % 12.8 % -5, % % Sacramento, CA 5,369,452 $ % 12.8 % -11, % 5.15 % San Diego, CA 7,577,266 $ % 11.6 % 87, % 6.55 % San Francisco Bay Area, CA 73,490,501 $ % 6.4 % -347, % % > East Bay 10,562,055 $ % 2.8 % 11, % % > San Francisco 59,122,564 $ % 6.7 % -302, % 8.45 % > Silicon Valley 3,805,882 $ % 11.2 % -56, % 3.93 % Seattle, WA 20,981,652 $ % 9.4 % 67, % 5.78 % Stockton, CA 2,830,965 $ % 15.1 % 7, % % 11 U.S. Research Report Q Office Market Outlook Colliers International

12 United States - Suburban - All Classes INVENTORY (SF) NEW SUPPY Q (SF) UNDER CONSTRUCTION (SF) JUN 30, 2016 ABSORPTION Q (SF) YTD ABSORPTION (SF) 2016 USA 4,080,783,054 10,438,070 63,543, % 12.9 % 16,740,172 36,825,512 NORTHEAST 1,065,908,772 3,256,743 9,958, % 14.1 % 5,071,956 6,565,439 Baltimore, MD 76,202, ,480 1,309, % 10.9 % 29, ,550 Boston, MA 126,507,406 1,955,963 2,259, % 14.8 % 1,849,640 1,950,804 Hartford, CT 32,016, % 10.6 % -56,320 47,364 New Hampshire Markets 17,685, , % 12.2 % 54, ,527 New York City Metro 350,562, ,500 1,107, % 13.8 % 2,542,781 3,141,517 > Central New Jersey 86,334, , , % 13.1 % 1,294,900 1,735,855 > ong Island 75,443, , % 8.1 % 232, ,815 > Northern New Jersey 121,039, , , % 17.2 % 550, ,004 > NYC Northern Suburbs 67,745, , % 15.3 % 465, ,851 Philadelphia, PA 103,226, , % 12.3 % 115, ,516 Pittsburgh, PA 72,501, , % 7.5 % 304, ,138 Washington, DC 287,205, ,800 4,397, % 17.8 % 231,874-1,049,977 SOUTH 1,276,203,498 3,831,884 23,845, % 12.6 % 4,696,653 11,670,645 Atlanta, GA 169,488, ,811 3,207, % 13.6 % 124, ,607 Austin, TX 39,303,335 79, , % 12.9 % 170, ,383 Birmingham, A 13,932, % 13.9 % -61,645-39,579 Charleston, SC 9,890, , % 7.9 % 179, ,727 Charlotte, NC 64,606, ,619 1,968, % 8.9 % 206,074 1,097,098 Columbia, SC 4,936, % 22.2 % 13,228 19,607 Dallas-Ft. Worth, TX 276,130,785 1,521,399 10,730, % 14.6 % 1,573,295 3,298,699 > Dallas 252,648,421 1,297,260 10,533, % 14.7 % 1,417,130 3,003,714 > Forth Worth 23,482, , , % 14.3 % 156, ,985 Greenville, SC 6,428, % 18.1 % 12, ,034 Houston, TX 187,575,743 1,439,315 1,100, % 17.3 % 3, ,344 Huntsville, A 18,750, % 10.1 % 103, ,661 Jacksonville, F 46,599, ,425 98, % 9.4 % 415,162 1,004,895 Memphis, TN 28,133,370 51, , % 12.9 % -46, ,644 Nashville, TN 35,604, ,165, % 3.8 % 506, ,406 Norfolk, VA 34,720, % 11.5 % 147, ,873 Orlando, F 55,255, , , % 10.2 % 331,840 1,178,873 Raleigh/Durham, NC 72,556,545 26,000 1,409, % 7.2 % 411, ,450 Richmond, VA 37,001, , % 8.9 % -25,564-32,278 Savannah, GA 1,394, % 12.1 % 18,764 17,858 South Florida 118,359,755 43,795 1,773, % 10.9 % 555,069 1,549,346 > Fort auderdale 31,978,636 11, , % 11.6 % 170, ,727 > Miami 59,497, ,091, % 9.5 % 94, ,090 > Palm Beach 26,883,807 32,182 35, % 13.2 % 289, ,529 Tampa Bay, F 55,533, % 12.8 % 56, , U.S. Research Report Q Office Market Outlook Colliers International

13 United States - Suburban - All Classes (continued) INVENTORY (SF) NEW SUPPY Q (SF) UNDER CONSTRUCTION (SF) JUN 30, 2016 ABSORPTION Q (SF) YTD ABSORPTION (SF) 2016 MIDWEST 704,157,661 1,467,498 4,846, % 13.2 % 2,621,524 6,394,559 Chicago, I 157,968,062 73, % 18.3 % -1,152,319-2,305,061 Cincinnati, OH 45,498,588 75, , % 14.8 % 461,868 1,083,986 Cleveland, OH 54,461, , , % 12.4 % 541, ,531 Columbus, OH 45,026, , , % 8.2 % 89, ,028 Dayton, OH 9,252, , % 20.1 % 43,861 52,010 Detroit, MI 140,049, , , % 13.1 % 2,043,304 4,615,369 Indianapolis, IN 25,751, , , % 13.8 % 3, ,876 Kansas City, MO 60,060,934 90,000 1,114, % 10.0 % 212, ,197 Milwaukee, WI 25,891, % 11.3 % 62, ,267 Minneapolis-St. Paul 81,920, , % 10.1 % 16, ,395 Omaha, NE 21,474, , % 8.3 % 277, ,496 St. ouis, MO 36,800, , % 11.0 % 21, ,255 WEST 1,034,513,123 1,881,945 24,892, % 11.9 % 4,350,039 12,194,869 Bakersfield, CA 6,334, , % 8.0 % 5,140-5,306 Denver, CO 106,755,864 98,980 1,980, % 10.8 % -63,802 1,026,712 Fresno, CA 18,534, % 10.8 % 54, ,881 Greater os Angeles, CA 271,097, ,267 3,314, % 14.0 % 1,182,200 2,444,000 > Inland Empire 20,457, , % 15.2 % 166, ,100 > os Angeles 167,875, ,267 2,116, % 14.9 % 526,200 1,502,000 > Orange County 82,764, ,173, % 11.8 % 489, ,900 Honolulu, HI 7,496, % 11.0 % 24,527 41,544 as Vegas, NV 38,924, , % 18.7 % 199, ,844 Phoenix, AZ 119,668, ,314 1,861, % 16.0 % 899,162 2,256,722 Portland, CA 56,066, ,500 1,087, % 7.7 % 255,382 1,108,593 Reno/Sparks, NV 7,208, % 11.0 % 40,965 20,615 Sacramento, CA 56,652,598 35, % 15.2 % 266,578 74,456 San Diego, CA 74,195, , % 11.7 % 194, ,390 San Francisco Bay Area, CA 163,425, ,694 10,442, % 7.8 % 313,732 1,895,168 > East Bay 43,301, , % 9.7 % 397,094 1,046,641 > Fairfield, CA 5,055, % 17.6 % -16,619 49,120 > San Francisco Peninsula 41,066, ,008, % 6.7 % -715, ,775 > Silicon Valley 74,002, ,694 9,023, % 6.7 % 649, ,182 Seattle/Puget Sound, WA 108,152, ,190 5,697, % 7.9 % 978,036 1,714,250 > Bellevue 38,071, ,570, % 6.9 % 262, ,780 > Everett 10,921, % 8.5 % 64, ,959 > Seattle 36,843, ,190 3,081, % 6.9 % 569, ,575 > Tacoma 22,316, ,045, % 10.9 % 81, , U.S. Research Report Q Office Market Outlook Colliers International

14 United States - Suburban - Class A INVENTORY (SF) AVG ANNUA QUOTED RENT (USD/SF) JUN 30, 2016 ABSORPTION (SF) Q QUARTERY CHANGE IN RENT ANNUA CHANGE IN RENT USA 1,625,635,519 $ % 13.1 % 10,519, % 3.34 % NORTHEAST 522,202,604 $ % 14.1 % 4,896, % 1.32 % Baltimore, MD 30,157,410 $ % 9.2 % 129, % 5.08 % Boston, MA 61,672,752 $ % 12.9 % 1,677, % 2.32 % Hartford, CT 5,725,827 $ % 24.4 % -18, % 0.13 % New Hampshire Markets 9,362,948 $ % 13.4 % -21, % 6.48 % New York City Metro 207,733,349 $ % 13.4 % 2,128, % 1.39 % > Central New Jersey 59,967,464 $ % 12.0 % 1,075, % 6.18 % > ong Island 24,939,028 $ % 7.8 % 180, % % > Northern New Jersey 87,932,933 $ % 15.8 % 490, % 2.52 % > NYC Northern Suburbs 34,893,924 $ % 14.0 % 381, % % Philadelphia, PA 52,584,270 $ % 8.9 % 114, % 1.65 % Pittsburgh, PA 13,250,774 $ % 13.3 % 141, % 1.36 % Washington, DC 141,715,274 $ % 18.4 % 743, % 0.64 % SOUTH 512,670,134 $ % 13.1 % 3,620, % 4.47 % Atlanta, GA 82,420,680 $ % 12.0 % 173, % 6.44 % Austin, TX 19,791,399 $ % 13.6 % 40, % 5.47 % Birmingham, A 8,462,097 $ % 12.1 % -55, % % Charleston, SC 3,407,799 $ % 6.9 % 250, % 1.41 % Charlotte, NC 22,938,875 $ % 10.5 % -13, % 5.01 % Columbia, SC 1,001,972 $ % 12.6 % -24, % 3.11 % Dallas-Ft. Worth, TX 113,394,164 $ % 14.9 % 1,695, % 5.15 % > Dallas 108,945,923 $ % 14.9 % 1,602, % 5.31 % > Forth Worth 4,448,241 $ % 14.8 % 93, % 1.44 % Greenville, SC 3,106,961 $ % 8.0 % 71, % 7.59 % Houston, TX 95,782,090 $ % 19.1 % 565, % % Huntsville, A 4,005,114 $ % 3.2 % % 1.59 % Jacksonville, F 9,584,978 $ % 10.0 % 13, % 4.91 % Memphis, TN 8,559,051 $ % 6.2 % 24, % % Nashville, TN 15,697,101 $ % 2.6 % 377, % 7.93 % Norfolk, VA 11,131,516 $ % 12.2 % -14, % % Orlando, F 19,261,994 $ % 9.8 % 188, % 5.29 % Raleigh/Durham, NC 28,304,157 $ % 7.9 % 261, % 5.71 % Richmond, VA 14,110,961 $ % 9.8 % -138, % 1.38 % Savannah, GA 462,344 $ % 10.0 % 7, % 1.99 % South Florida 33,436,627 $ % 13.6 % 279, % 3.85 % > Fort auderdale 10,288,036 $ % 13.9 % 61, % 1.26 % > Miami 14,648,943 $ % 11.8 % 37, % 6.03 % > Palm Beach 8,499,648 $ % 16.2 % 180, % 0.93 % Tampa Bay, F 17,810,254 $ % 11.0 % -84, % 3.20 % 14 U.S. Research Report Q Office Market Outlook Colliers International

15 United States - Suburban - Class A (continued) INVENTORY (SF) AVG ANNUA QUOTED RENT (USD/SF) JUN 30, 2016 ABSORPTION (SF) Q QUARTERY CHANGE IN RENT ANNUA CHANGE IN RENT MIDWEST 257,392,009 $ % 13.8 % -93, % 3.62 % Chicago, I 81,881,268 $ % 20.0 % -1,195, % 2.11 % Cincinnati, OH 17,706,821 $ % 14.6 % 197, % 2.95 % Cleveland, OH 10,355,444 $ % 10.6 % 541, % 1.68 % Columbus, OH 19,274,502 $ % 7.2 % -7, % 4.52 % Dayton, OH 2,220,911 $ % 24.5 % 4, % % Detroit, MI 37,289,378 $ % 11.9 % 310, % 3.18 % Indianapolis, IN 11,983,240 $ % 13.4 % 26, % 3.78 % Kansas City, MO 18,045,176 $ % 9.7 % -8, % 0.67 % Milwaukee, WI 8,748,080 $ % 11.4 % -25, % 3.44 % Minneapolis-St. Paul 27,570,144 $ % 11.0 % 19, % 5.96 % Omaha, NE 5,538,665 $ % 3.4 % 51, % 2.97 % St. ouis, MO 16,778,380 $ % 9.1 % -6, % 0.04 % WEST 333,370,772 $ % 11.1 % 2,096, % 5.76 % Bakersfield, CA 2,924,775 $ % 11.8 % -17, % 0 % Denver, CO 39,354,392 $ % 9.6 % -173, % 1.39 % Fresno, CA 1,578,895 $ % 12.9 % % % Greater os Angeles< CA 61,619,182 $ % 13.4 % 358, % % > os Angeles 27,445,600 $ % 14.7 % 37, % 7.71 % > Orange County 34,173,582 $ % 12.4 % 321, % % as Vegas, NV 5,246,313 $ % 24.1 % -38, % % Phoenix, AZ 36,830,109 $ % 14.9 % 682, % 5.05 % Portland, OR 14,204,588 $ % 9.0 % 106, % 8.72 % Reno/Sparks, NV 847,224 $ % 10.1 % 5, % 1.33 % Sacramento, CA 15,324,256 $ % 13.4 % 57, % 1.87 % San Diego, CA 25,057,781 $ % 12.9 % 106, % % San Francisco Bay Area, CA 86,469,364 $ % 8.4 % 443, % 4.72 % > East Bay 19,188,664 $ % 9.6 % 341, % 4.83 % > Fairfield, CA 1,963,219 $ % 15.9 % -11, % 3.36 % > San Francisco Peninsula 23,950,588 $ % 7.7 % -559, % 7.50 % > Silicon Valley 41,366,893 $ % 8.0 % 673, % 4.89 % Seattle/Puget Sound, WA 43,913,893 $ % 8.6 % 567, % 5.61 % > Bellevue 19,150,332 $ % 7.7 % 92, % 6.20 % > Everett 1,461,153 $ % 15.7 % 29, % 1.38 % > Seattle 16,998,665 $ % 6.6 % 489, % 0.98 % > Tacoma 6,303,743 $ % 14.8 % -42, % % 15 U.S. Research Report Q Office Market Outlook Colliers International

16 United States Office Investment OFFICE SERVICES contact CBD SAES PRICE (USD PSF) CBD CAP RATE SUBURBAN SAES PRICE (USD PSF) SUBURBAN CAP RATE USA $ % $ % NORTHEAST $ % $ % Baltimore Metropolitan Area $103 $188 Boston $ % $ % Hartford $ % $ % New York City Metro $ % $ % Philadelphia $ % $ % Washington, DC $ % $ % SOUTH $ % $ % Atlanta $ % $ % Austin $ % $ % Birmingham Charlotte $235 Dallas-Ft. Worth $202 Houston $135 Huntsville 4.5% $ % $ % $ % $ % $148 $ % $205 $ % $ % $ % $ % Raleigh/Durham $ % $ % Richmond $ % $ % Savannah $ % $ % South Florida $ % $ % $ % $ % Tampa Bay $184 MIDWEST $ % Chicago $ % Cincinnati $43 Cleveland $71 $8 Columbus $ % $ % $ % $87 8.5% Dayton $ % Detroit $ % $ % $ % Kansas City Jeff Simonson Senior Research Analyst USA % Norfolk $113 Milwaukee $110 Minneapolis-St. Paul $165 St. ouis, MO Pete Culliney Director of Research Global CONTRIBUTOR Orlando 8.2% $95 $425 WEST Michael Roessle National Director of Office Research USA $105 Memphis Indianapolis FOR MORE INFORMATION 8.0% Jacksonville Nashville Cynthia Foster President, National Office Services USA % $ % $ % $ % $ % Denver $ % $ % Fresno $ % $ % Greater os Angeles $ % Phoenix $ % $ % Portland $ % $ % Sacramento $ % $ % San Diego $242 $ % San Francisco Bay Area $ % $ % Seattle/Puget Sound $ % $ % Sources: Colliers International, Real Capital Analytics Copyright 2016 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. 16 Colliers International 666 Fifth Avenue New York, NY colliers.com North American Research & Forecast Report Q Office Market Outlook Colliers International