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1 WEBINAR Capital Markets Outlook: The Elusive Search for Yield JANUARY 2018 The webinar will begin momentarily.

2 WEBINAR Capital Markets Outlook: The Elusive Search for Yield JANUARY 2018 KEVIN THORPE Chief Economist, Global Head of Research

3 Today s Agenda Economic Outlook Global Capital Flows Local Market Dynamics Strategies for 2018/19

4 As the Economy Goes, So Goes CRE U.S. Real GDP vs. U.S. Net Absorption (Office + Industrial) 5% 4% 3% 2% 1% 0% Correlation = Key Takeaways U.S. GDP set to accelerate, not a boom, but stronger U.S. GDP growth and demand for real estate space generally move in tandem -1% -2% -3% -4% On track to be longest expansion in the Post WWII Era 92% probability U.S. expansion continues Recession GDP (LHS) Net Absorption (msf) Source: BEA, Cushman & Wakefield Research

5 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q U.S. Economic Outlook GDP Trends & Forecasts Latest Trends GDP Forecasts 3.5% 3.0% 2.5% 2.0% 3.1% 3.2% 2.6% 5% 4% 3% 2% 1% 2.9% 2.2% 1.5% 0% 1.0% -1% 0.5% 0.0% -2% -3% -4% Real GDP, % change annualized Moody's Oxford Capital Economics C&W Source: BEA, Cushman & Wakefield Research, Various

Growing Nearly Everywhere GDP Forecasts for 2018 Solid & accelerating. Likely to get a near-term boost from tax cuts. Powering through political uncertainty and on the upswing.

6 Growing Nearly Everywhere GDP Forecasts for 2018 Solid & accelerating. Likely to get a near-term boost from tax cuts. Powering through political uncertainty and on the upswing. Eurozone creating jobs at fastest pace in over a decade. APAC remains fastest growing global region, growth strengthening in nearly all pockets. Pulling out of commodities slump. Latin America on the mend. Recession <0% Weak 0 1% Modest 1 2% Stable/Strong >2% Source: Moody s Analytics, Cushman & Wakefield Research

Sprinkle in Some Tax Stimulus History as a Guide Real GDP, % 10 5 0-5 5 4 3 2 1 0 Tax cut 1980 1981 1982 1983 1984 Tax reform 1985 1986 1987 1988 1989 10-Year Treasury Yield,% 15 14 13 12 11 10 1980

7 Sprinkle in Some Tax Stimulus History as a Guide Real GDP, % Tax cut Tax reform Year Treasury Yield,% Tax Bill Positives Big win for businesses 2018 GDP expected to be bps stronger Stronger wage growth Stock prices will get lift wealth effect Negatives Tax cut Increases the deficit Higher interest rates more likely Housing sector will contribute less Source: BEA, Federal Reserve, Moody s Analytics, Oxford Economics, Cushman & Wakefield Research

8 % U.S. GDP Growth Is Possible Stronger GDP Means Stronger NOI Growth % 20% 15% 10% 5% 0% -5% -10% -15% 6.0% 4.0% 2.0% 0.0% -2.0% -3-4 Baseline Real GDP Bullish Scenario -20% -25% Office Returns Unlevered (LHS) GDP Growth (RHS) -4.0% Source: Cushman & Wakefield Research

Indicators to Keep An Eye On Recession Predictors Indicator Status Risk Level Stock P/E Ratios China s Debt Burdon Geopolitical Threats Oil/Commodities Inverted Yield Curve Leading Indicator Index

9 Indicators to Keep An Eye On Recession Predictors Indicator Status Risk Level Stock P/E Ratios China s Debt Burdon Geopolitical Threats Oil/Commodities Inverted Yield Curve Leading Indicator Index Elevated, due for a correction Debt-to-GDP nearing 300%, but foreign exchange reserves still very strong U.S.- North Korea/Iran/Russia/China; Brexit-EU A spike in oil? Highly unlikely 100+ bps spread, pretty normal but watch it Surging again Symbols: Green = no imminent threat; Orange equals caution; Red = elevated risk of recession Source: Cushman & Wakefield Research

10 02 Jun Jun Jul Aug Aug Sep Oct Oct Nov Dec Dec Jan 2018 Should Investors Fear the Rising 10-Yr? U.S. 10-Yr Treasury Yield Demand for Treasuries $54.0 $53.5 $53.0 $52.5 $ $51.5 $ Yr Treasury Yield $50.5 Jan 2017 Jan 2018 Auction Bids for 10-Yr US Gov't Bonds Source: Federal Reserve, Cushman & Wakefield Research

11 Global Inflation is Still Very Low 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 2% Inflation Target Latest Reading 2017Q4* CPI U.S. 2.1% Canada 1.6% Brazil 2.8% Japan 0.2% Eurozone 1.4% Advanced Economies 1.7% 0.4% Advanced Economies Source: Oxford Economics, Cushman & Wakefield Research

12 Slightly Higher, but Still Historically Low 10-year Government Bond Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 4.0% 3.0% 2.0% 1.0% 0.0% 0.2% 0.1% 0.6% 1.0% 1.7% 1.8% 2.2% 2.5% 2.4% 2.7% 2.7% 2.7% -1.0% Current 2018F Historical Average Source: Oxford Economics, Bloomberg, Cushman & Wakefield *Average ; Current = as of 1/9/2018, forecasts updated

13 Global Capital Flows

14 Fundraising for CRE Robust & Trending Up Real Estate Debt Funds Dry Powder, billions $250 $200 Rest of World Asia Europe $ $100 North America 20 $50 0 Sept 2015 Sept 2016 Sept 2017 $ No. of Funds Raising Aggregate Capital Targeted (Bn) Source: Preqin, Cushman & Wakefield Research

15 Capital Shifts: This Will Rightsize Too much capital going to stocks, higher percentage set to target CRE 10 Capital Pouring Into Stocks $9,170,510,000, U.S. Stock Market Pulling out of CRE -$97,102,127,072 U.S. CRE -2 Growth in U.S. Wealth Last 2 Years Source: Cushman & Wakefield Research

16 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 U.S., Billions Cross-border Capital Flows $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 U.S. All Property Types Cross-Border Volume ($) Europe All Property Types Cross-Border Volume ($) UK All Property Types Cross-Border Volume ($) AsiaPac All Property Types Cross-Border Volume ($) Global All Property Types Cross-Border Volume ($) Source: Real Capital Analytics, Cushman & Wakefield

17 America s Still Relatively Attractive Prime Office Cap Rates (%) 12% Max* Min* Current Average (*max/min/avg refer to ) 10% 8% 6% 4% 2% 0% Europe APAC/China Americas Source: Real Capital Analytics, Altus Insite Investment Trends Survey, Cushman & Wakefield Current = 2017Q4

18 Spreads Are Still Attractive Prime Office Cap Rates Spread to 10-Year Gov t Bond (bps) 700 Max* Min* Current 2016 (*max/min refer to ) Europe APAC/China Americas Source: Real Capital Analytics, Altus Insite Investment Trends Survey, Cushman & Wakefield Current = 2017Q4

19 WEBINAR U.S. Real Estate Outlook: The Elusive Search for Yield JANUARY 2018 REVATHI GREENWOOD Americas Head of Research

20 Three Key Drivers Investor Interest CRE Fundamentals Long term structural drivers

21 Performance Across Real Estate Sectors NCREIF Property Index Total Returns (%) 14.0% 13.2% 13.1% 12.0% 11.1% 10.0% 10.2% 9.2% 9.2% 8.0% 6.0% 7.0% 6.1% 6.1% 6.2% 7.2% 4.9% 6.0% 7.5% 5.7% 4.0% 2.0% 0.0% All Property Types Apartment Industrial Office Retail 10Y CAGR 5Y CAGR 2017 Source: NCREIF, Cushman & Wakefield Research

22 Too Expensive? RCA Commercial Property Price Index: Jan 2000 December 2017 December 2006 = Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Multifamily Retail Industrial Office - CBD Office - Suburban Source: RCA, Cushman & Wakefield Research Deals over $5 million

23 CRE Fundamentals Solid With Substantial Differentiation CBD Office Suburban Office New supply primarily in Gateways 6.0% 5.0% 4.0% 14.0% 13.5% 13.0% 6.0% 5.0% 4.0% 14.8% 14.6% 14.4% Rent growth decelerating as supply responds Secondary markets see less softening 3.0% 2.0% 1.0% 0.0% Industrial 12.5% 12.0% 11.5% 11.0% 3.0% 2.0% 1.0% 0.0% Multifamily 14.2% 14.0% 13.8% 13.6% Employment growth slows but remains elevated historically and relative to CBD Absorption is 7.0% strong; supply 6.0% response 5.0% bringing 4.0% markets into balance 3.0% 2.0% Slower rent 1.0% growth in nearterm 0.0% % 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% % 5.2% 5.1% 5.0% 4.9% 4.8% 4.7% Strong renter demand expected to absorb peak deliveries as permitting slows Gradual rebound in rent growth, declining vacancy Source: Axiometrics, Cushman & Wakefield Research Note: effective rent growth for multifamily Asking rent growth Vacancy

24 Demand Slows Just as New Supply Comes Online U.S. Office Sector Fundamentals Vacancy Bottoming Forecast % % % 14.5% % % % % 13.0% 12.5% 12.0% % 12.4% Net Absorption (msf) Completions (msf) Vacancy % Net Absorption (msf) Completions (msf) Vacancy Source: Cushman & Wakefield Research

25 Who Is Driving Demand: New Office Leasing Trends by Industry High Tech Business Services Financial Services Healthcare & Life Sciences Government Legal Creative Industries Insurance Energy 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Source: Cushman & Wakefield Research Note: Rankings based on the 40 largest new office leasing deals by year in all reported major markets.

26 2YR Millennial Population Growth Forecast Which Cities Are Magnets for Talent? Cities for Amazon HQ2 Shortlist Next Two Year Purchasing Power vs. Millennial Population Growth Percent (%) 4.0% 3.5% raleigh charlotte 3.0% 2.5% 2.0% 1.5% 1.0% atlanta las vegas austin nashville phoenix ft worth dallas houston indianapolis seattle denver san antonio washington boston columbus portland palm beach orlando ft lauderdale tampa miami 0.5% National 0.0% -0.5% san francisco oakland cincinnati new york minneapolis san diego san jose chicago philadelphia sacramento orange county newark NJ cleveland los angeles baltimore milwaukee -1.0% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 2YR GDP per Capita Growth Forecast Source: Moody s Analytics Forecasts, Cushman & Wakefield Research

27 Deconstructing Construction 44% of the Country s New Supply Occurring in These Markets % of inventory 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Construction U.S. Average: 2.0% Vacancy 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% U/C Preleased % Inventory U/C Available % Inventory Market Vacancy Rate U.S. Vacancy Source: Cushman & Wakefield Research

28 Retail and Industrial

29 Retail Apocalypse?

Online Not Killing Neighborhoods Neighborhood/Community Centers ecommerce

Organic, Ethnic, Discount, Niche Restaurants Off-Price Apparel Service Related

30 Online Not Killing Neighborhoods Neighborhood/Community Centers ecommerce Resistant Core Tenancy of Neighborhood/Community Centers Grocery: Traditional, Organic, Ethnic, Discount, Niche Restaurants Off-Price Apparel Service Related Retail Medical Retail Personal Services NUMBER OF U.S. MALLS 2007: 1, : 1, : 850 Overall Vacancy 8.0% Class A Vacancy 4-5.0% Class B Vacancy 7-9.0% Class C Vacancy % Source: Costar Group, Cushman & Wakefield Research

31 Seriously, What Is Really Happening? Radical Shifts in Retail Retrenchment & Reinvention Over Retailed Marketplace Greater Bifurcation on Basis of Class Acceleration of NewCommerce Race to the Bottom Discounting Shifting Consumer Spending Patterns (Millennials) Radical Shifts in Retail Retrenchment & Reinvention Greater Bifurcation on Basis of Class Source: Cushman & Wakefield Research

32 Retail s Pain Is Industrial s Gain Growth Rates are Accelerating Online Sales Are Understated Retail Sales ($, Billions) & ecommerce Penetration (%) $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 ecommerce Sales ecommerce Penetration 14% 12% 10% 8% 6% 4% 2% 0% Top 1,000 Online Retailers Sales Growth by Category 2016 YoY Sales Growth 30% 25% 20% 15% 10% 5% 0% -5% Source: U.S. Census Bureau, Company filings, Federal Reserve, Cushman & Wakefield Research

And Specifically Amazon Labor Market and Supply Chain in Flux 53% Amazon accounted for over half of all online sales growth in the U.S. in 2016 = Amazon warehousing facility = Recently closed Kmart, J.

33 And Specifically Amazon Labor Market and Supply Chain in Flux 53% Amazon accounted for over half of all online sales growth in the U.S. in 2016 = Amazon warehousing facility = Recently closed Kmart, J.C. Penney, Macy s or Sears Source: Bloomberg, Amazon, J.C. Penny s, Macy s, Search, Cushman & Wakefield Research

34 Industrial Sector Dynamics Absorption and Rents Have Reached All-Time Highs 4Q Trailing Average Vacancy will Slowly Rebalance Vacancy Rate, % Net Absorption, MSF Weighted Asking Rent, $ PSF Overall Vacancy Rate 80 $ % 70 $ % $5.00 $ % 10-Year Historical Average $3.00 $ % 4.0% 10 $ % 0 $ % Source: Cushman & Wakefield Research

35 Industrial Sector Dynamics 2017 Deliveries by Type Deliveries (MSF), Vacancy (YoY Chg., bps) basis points Speculative Build-to-Suit Source: Cushman & Wakefield

36 Millions of New Renter Households Emerging Homeownership Trends Will Determine Extent of Current Undersupply Constant Homeownership Falling Homeownership Rising Homeownership Source: JCHS, Cushman & Wakefield Research

37 Rising Inventory Current Vacancy & One Year Forward Increase in Inventory, Top 25 Markets by Inventory 7% 6% 5% 4% 3% 2% 1% 0% Vacancy Rate 2017 Q4 Projected Increase in Inventory 2018 Q4 Source: Axiometrics, Cushman & Wakefield Capital Markets

38 Apartment Market Momentum 2 Bedroom Effective Rent to Median Family Income Ratio, % 42% 45% 46% 20% 20% 20% 21% 21% 21% 21% 24% 24% 24% 24% 27% 28% 31% Source: Axiometrics, Cushman & Wakefield Capital Markets

Key Takeaways Luxury apartment Gateway office commodity A LOW INVESTOR APPETITE HIGH INVESTOR APPETITE

NNN drug stores Class A warehouse Technology driven office Multifamily: Millennials/ Seniors Medical

GROWTH B/C Malls / Power centers Traditional bulk warehouse Discount retail Food halls/ experiential

39 Key Takeaways Luxury apartment Gateway office commodity A LOW INVESTOR APPETITE HIGH INVESTOR APPETITE Secondary markets/sunbelt: Office, Class A shopping? NNN drug stores Class A warehouse Technology driven office Multifamily: Millennials/ Seniors Medical office Last mile logistics Data centers WEAK LONG TERM STRUCTURAL GROWTH STRONG LONG TERM STRUCTURAL GROWTH B/C Malls / Power centers Traditional bulk warehouse Discount retail Food halls/ experiential retail Class A Malls in secondary markets Secondary market infill industrial Cold storage Source: Cushman Wakefield Research, Boston Consulting Group, RCLCO

40 Investment Strategies 2018/19 JANUARY 2018 NOBLE CARPENTER President Capital Markets, Americas

41 Investment Ideas for 2018/19 Idea Status Comment Buy Momentum Niche sectors ecommerce & Last Mile Smaller/Tier 2 Cities Demographic shifts Blended Returns Experiential Retail Markets with accelerating job growth & disciplined new supply (e.g. Charlotte, Minneapolis, Phoenix, Northern Virginia) Self-storage, medical office, student housing, data centers less cyclical. Driven more by demographics. Offer safer yields during a downturn. ecommerce continues to grow furiously. Over 2.3 billion sqft of warehouse space needed by Population centers are almost a can t miss. Gateway cities bumping up against labor shortages. Secondary/Tier 2 cities have more room to run & will emerge as new growth leaders. People drive demand. Sunbelt markets lead in net migration (e.g. Miami, Dallas, Atlanta, Tampa) offer some of the strongest risk-adjusted returns. Tier 1 cities are safest, but offer little yield. Diversify into more markets/product types (e.g. Manhattan Office + Indianapolis Industrial + Data center) to achieve a higher blended return. Food-centric retail, restaurants and bars, health & fitness in Class A locations are thriving. Stay away from anything that is achievable from behind a computer. Symbols: Green = attractive investment opportunities; Orange equals caution; Red = reduce your position Source: Cushman & Wakefield Research

42 Investment Ideas for 2018/19 Idea Status Comment Coworking Building late in the cycle Sell to aggressive foreign capital Luxury apartments Mid-quality Office Historically, not recession resilient. It s a strong engine now and it s not a fad, but be careful not to become overly exposed. Be extra cautious with office markets that are potentially overbuilding this late in the cycle. Insatiable foreign demand for core assets - sometimes ignoring the fundamentals, simply parking cash. Sell to them and find better yield elsewhere. Building too many. Not everyone is rich, most are not. The new construction cycle is going to create pain for mid-quality office. If it can t be upgraded to meet today s tastes & preferences, let someone else deal with it. Traditional Retail 11,000 more stores expected to close in Retail secular stress continues. Symbols: Green = attractive investment opportunities; Orange equals caution; Red = reduce your position Source: Cushman & Wakefield

43 WEBINAR U.S. Real Estate Outlook: The Elusive Search for Yield JANUARY 2018 Q&A

Office-Using Jobs and Net Migration Point to Continued Strength

October 20, 2017 Office-Using Jobs and Net Migration Point to Continued Strength Key Takeaways Secondary Sunbelt office markets are priced to offer attractive, risk-adjusted returns relative to the Gateway²