COMMERCIAL REAL ESTATE MARKET AND INDUSTRY OUTLOOK THE BIG PICTURE 2019 AND BEYOND

COMMERCIAL REAL ESTATE MARKET AND INDUSTRY OUTLOOK THE BIG PICTURE 2019 AND BEYOND

10-Year Economic Lookback 2007 The Height of the Last Cycle 25.4 Million Increase in Population Since 2007 10.4 Million More Households Than 2007 11.1 Million More Jobs Than 2007 130 bps Decline of Unemployment Rate to 3.7% 2.8 Million More Job Openings Than 2007 (6.9 Million) $5.7 Trillion GDP Growth Since 2007 (Japan s Total) 120 bps Decline in Inflation Rate (PCE) to 2.2% 90 bps Decrease in 10-Yr. Treasury Yield to 3.2% 10,000 Baby Boomers Turn 65 Every Day 12,000 Millennials Turn 21 Every Day Sources: Marcus & Millichap Research Services, BLS, U.S. Census Bureau, BEA, Federal Reserve Board

Employment Growth Durable and Remarkably Stable Quarterly Job Growth (Millions) 0.8 0.3-0.2-0.7-1.2-1.7-2.2-2.7 2017 Total: 2,188,000 2018 Forecast: 2,300,000-8.7 Million +8.2 Million +19.8 Million** 96 Months of Continuous Gains* Monthly Average: 199,000 Jobs 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* * Through 3Q Sources: Marcus & Millichap Research Services, BLS

National Employment Rank by Metro Y-O-Y Absolute Change Through August 2018 Top 10 Metros Absolute Change Percent Change Dallas-Fort Worth 116,300 3.2% Houston 113,200 3.7% Phoenix 75,500 3.7% Seattle-Tacoma 73,500 3.7% Los Angeles 64,400 1.4% Washington, D.C. 64,100 2.0% Atlanta 53,700 2.0% New York 53,000 1.2% Orlando 52,100 4.2% Inland Empire 51,100 3.5% U.S. Total 2,417,000 1.6% Bottom 10 Metros Absolute Change Percent Change West Palm Beach 3,600 0.6% Milwaukee 6,800 0.8% Columbus 9,000 0.8% Cincinnati 9,100 0.8% Fort Lauderdale 11,200 1.3% Northern NJ 11,600 0.5% St. Louis 12,900 0.9% Orange County 13,100 0.8% San Antonio 13,200 1.3% Nashville 13,300 1.4% U.S. Total 2,417,000 1.6% Sources: Marcus & Millichap Research Services, BLS

Impact of Tax Reform Significant reduction of corporate and personal tax rate should spur investment and expansion = More Inflation Pressure Key tax provisions critical to commercial real estate retained 1031 Exchange, Mortgage Interest Deduction, Depreciation Pass-through entity 20% deduction increases after tax yield, could boost market liquidity Reduced corporate taxes and accelerated depreciation could boost commercial real estate space demand Unfavorable for residential housing and high-tax states

THERE ARE RISKS - DESPITE FAVORABLE ECONOMIC BACKDROP

U.S. Has More Job Openings Than People Seeking Work Challenge of Skills Mismatch Job Openings/Unemployed (Millions) 16 12 8 4 0 Job Openings Unemployed 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* * Unemployed through September; job openings through July Sources: Marcus & Millichap Research Services, BLS

Interest Rates: Key Driver of Future Economic Performance 16% 12% 6 7 8% 5 11 5 8 5 0 5 10 4% 0% * Through October 03 Sources: Marcus & Millichap Research Services, Federal Reserve Board

Long-Term Yield Spread An Indication of Recession? Spread: 10yr Note and 3mth Bill (Bps) 500 250 0-250 -500 54 58 62 66 70 74 78 82 86 90 94 98 02 06 10 14 18* * Through October 03 Sources: Marcus & Millichap Research Services, Federal Reserve

Exports: Major Force in the U.S. Economy As Measured by Contribution to GDP 16% 13.9% Contribution to GDP 12% 8% 4% Long-Term Average: 7.0% 0% 50 54 58 62 66 70 74 78 82 86 90 94 98 02 06 10 14 18* * Through 2Q 2018 Sources: Marcus & Millichap Research Services, BEA

OFFSETTING STRENGTHS ARE HARD TO IGNORE

Length of Current Cycle Over-Shadowed by Pace of Growth Expansion Cycle Duration Percent Job Growth Expansion Cycle Periods 1991 to 2001 1961 to 1970 2010 to 2018* 1983 to 1990 1975 to 1980 2003 to 2008 1970 to 1974 1950 to 1953 1954 to 1957 1958 to 1960 1980 to 1981 12 22 59 53 44 43 32 Average 90 103 109 117 1961 to 1970 1983 to 1990 1991 to 2001 1975 to 1980 1950 to 1953 2010 to 2018* 1970 to 1974 1954 to 1957 1958 to 1960 2003 to 2008 1980 to 1981 2% 24% 23% 19% 16% 15% 12% 9% 8% 6% Average 33% 0 35 70 105 140 Months 0% 10% 20% 30% 40% Percent Growth * Through September Sources: Marcus & Millichap Research Services, BLS

Record Profits and Rising Corporate Investment Support Economic Cycle Extension $600 Corporate Profits** Fixed Investment in Equipment 30% Corporate Profits ($ Bil.) $450 $300 $150 $0 15% +8.1% 0% -15% -30% 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* Y-O-Y Change in Investment * Through 2Q ** Trailing 12-month average Sources: Marcus & Millichap Research Services, BEA

U.S. Core Retail Sales Building Steady Momentum - Growth Supporting Economy Retail Sales (Bil. Aug. 2018 Dollars) $370 $340 $310 $280 $250 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* * Through August Trailing 12-month average; adjusted for inflation using core PCE Core retail sales excludes auto and gasoline sales Sources: Marcus & Millichap Research Services, U.S. Census Bureau, BEA +16%

Long-Term 10-Year Treasury Trends 16% 10-Year Treasury Rate 12% 8% 4% 0% 1874 1886 1898 1910 1922 1934 1946 1958 1970 1982 1994 2006 2018* * Through October 9 Sources: Marcus & Millichap Research Services, Federal Reserve

Completions/Household Growth (Mil.) 2.0 1.5 1.0 0.5 0.0 Housing Market Provides Solid Economic Support Due to Drop in New Construction Single-Family Completions Multifamily Completions Household Growth 2000-2007 Oversupply: 2.6M 2008-2019* Undersupply: 2.0M 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* 19* * Forecast Trailing 24-month average for household growth Sources: Marcus & Millichap Research Services, U.S. Census Bureau, RealPage, Inc.

U.S. Commercial Real Estate: Healthy Supply/Demand Balance Despite 8th Year of Recovery 20% 100% 87.3% Vacancy Rate 15% 10% 5% 5.2% 4.8% 13.6% 4.8% 10.0% Occupancy Rate 75% 50% 25% 66.6% 0% 0% Apartment Retail Office Industrial Self-Storage Seniors Housing Hotel * Forecast Sources: Marcus & Millichap Research Services, RealPage, Inc., CoStar Group, Inc., STR, Inc., Union Realtime LLC, NICMap

U.S. Average Price Trends $160 $300 Avg. Price per Unit (000s) $120 $80 $40 +44% +10% Avg. Price per Sq. Ft. $225 $150 $75 +56% +28% +20% +19% +10% +7% $0 $0 Apartment Hotel Self-Storage Seniors Housing * Through 2Q Includes sales $1 million and greater; $2.5 million and greater for hotels; ST=Single Tenant; MT=Multi-Tenant Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics ST-Retail Industrial MT-Retail Office

U.S. Commercial Real Estate: Competitive Yields 8% Average Yield (Cap Rate) 6% 4% 2% 0% U.S. CRE Yield U.S. Treasury Canadian Treasury S&P 500 Dividend UK Treasury French Treasury As of October 3, 2018 Treasury rates for 10-year treasuries Commercial real estate yield (cap rate) includes apartment, retail, office, and industrial sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Standard & Poor s, Federal Reserve German Treasury Japanese Treasury

Commercial Real Estate Avg. Yield vs. 10-Yr. Treasury Spread Tightening 12% Average Cap Rate 10-Year Treasury Average Rate 9% 6% 3% 430 bps 480 bps 480 bps 200 bps 580 bps 310 bps 0% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* * Through October 03 Includes apartment, retail, office, and industrial sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Federal Reserve

Real Estate Has Become Mainstream Investment Vehicle for Institutions, But Still Under-Allocated Institutional Target Allocations to Real Estate 10.3% 10.1% 9.9% 9.6% U.S. Pension Funds Asset Allocations** Real Estate 3.3% Cash 3.2% Other 7.9% Debt 44.4% 9.3% 8.9% $22.5 Trillion Equity 41.2% 13 14 15 16 17 18* Debt Equity Other Real Estate Cash * Forecast ** As of 2016; allocations for Fortune 1000 pension plans; other category includes hedge funds, derivatives, and interest rate swaps; cash category includes cash equivalents and money market instruments; debt category includes insurance instruments Sources: Marcus & Millichap Research Services, Cornell/Hodes Weill Allocations Monitor, Willis Towers Watson

Real Estate Under-Allocated by Private Investors Percent of Households Holding Assets High-Probability Target Market 64.3% Rental Property Other Real Estate 23.9% 25.5% 20.0% 10.7% 11.4% 8.0% 7.5% Primary Residence Stocks Other Real Estate Rental Property Net Worth $500K+ (21.5M Households) Net Worth $250K-$500K (15.5M Households) * Homeownership rate as of 2Q 2018; other data as of 2013 Sources: Marcus & Millichap Research Services, U.S. Census Bureau

Commercial Real Estate Sales by Price Tranche Move-Up Equity from Private Investors a Key Driver Sales Dollar Volume $10M-$20M 8% $20M+ 9% $1M-$10M 83% $1M-$10M 30% 54,700 Deals $20M+ 56% $438 Billion $1M-$10M $10M-$20M $20M+ $10M-$20M 14% $1M-$10M $10M-$20M $20M+ Trailing 12-months through 2Q 2018 Includes apartment, retail, office, and industrial sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

Demographic Trends Provide Triple-Wave of Opportunity 120 10-Year Forecast 16.2 Million Population (Millions) 100 80 60 10-Year Forecast -133 Thousand 10-Year Forecast 6.0 Million 40 08 12 16 20* 24* 28* 08 12 16 20* 24* 28* 08 12 16 20* 24* 28* 20 to 34 Year Olds 35 to 55 Year Olds 55+ Year Olds * Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau, Moody s Analytics

Unprecedented Wealth Transfer, Quest For Yield = CRE Capital Flows U.S. 2017 Population by Age 5.0 $30+ Trillion Wealth Transfer Over the Next 3 Decades $$$ Population (Millions) 4.5 4.0 3.5 3.0 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 Age Sources: Marcus & Millichap Research Services, U.S. Census Bureau

There Should be Less and Less of This.

NAVIGATING BETWEEN THE ZONES: PAIN VS. OPPORTUNITY A TIME OF PROFOUND CHANGE

Rise of ecommerce Replaces Department Store Dominance 16% Share of Core Retail Sales ecommerce Department Stores Percent of Sales 12% 8% 4% 0% 92 94 96 98 00 02 04 06 08 10 12 14 16 18* * Through August; ecommerce sales through July Excludes auto and gasoline sales Sources: Marcus & Millichap Research Services, U.S. Census Bureau

Consumers Spend More on Dining Out Than on Groceries $64 Grocery Stores Bars and Restaurants Total Sales (Billions) $48 $32 $16 Millennials Gen X Boomers Eat Out at Least Once Per Week: 49% 43% 35% $0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* * Through August Sources: Marcus & Millichap Research Services, U.S. Census Bureau, Outlook on the Millennial Consumer 2014 report, The Heartman Group, Pew Research, Morgan Stanley

Successful Retailers in the Internet Age Off-Price Department Store Discount Stores Fitness Warehouse Club Quick-Serve Restaurant Healthcare/ Vision Health and Beauty Grocery Fast Fashion Home Improvement

Digital Companies Growing Physical Footprint (Acquired Whole Foods in June 2017) 100+ stores 270+ stores 570+ stores As of August 2018 Sources: Marcus & Millichap Research Services, Company disclosures

Aging Baby Boomers Seeking Yield Boost CRE Investment - Single-Tenant Investments a Good Proxy 55+ Year Olds Single-Tenant Transactions 100 12 Population (Millions) 90 80 70 10-Year Forecast +16.2 Million Transaction Activity (000s) 9 6 3 +56% 60 03 04 05 06 07 08 09 10 11 12 13 14 15 16 1718* 0 03040506070809101112131415161718* * As of 2Q; trailing 12 months through 2Q for transactions Includes sales $1 million and greater Sources: Marcus & Millichap Research Services, U.S. Census Bureau, CoStar Group, Inc., Real Capital Analytics

Commercial Real Estate Cap Rate Trends by Market Type 10% Primary Secondary Tertiary Average Cap Rate 9% 8% 7% 6% 60 bps 220 bps 130 bps 5% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18* * Through 2Q Includes apartment, retail, office, and industrial sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

Top 5 Trends Impacting Real Estate Services Industry 1. Technology, Automation, Analytics Internal workflow - Client interaction Business intelligence Societal waves (driverless cars, social media, ) Tech/data overload: Being clients guide for strategy/execution 2. Specialization taken to an extreme - Client sophistication, expectations soar 3. Integration of specialized units into a seamless client delivery system Skill sets, expertise forced to keep up more than ever 4. Increased capital inflows into CRE Moving beyond acceptance into a preferred asset class (investor education takes center stage) 5. Competing for talent: Diversity, Inclusion, Training, Connectivity, Retention Sources: Marcus & Millichap Research Services, BLS, U.S. Census Bureau, BEA, Federal Reserve Board

COMMERCIAL REAL ESTATE MARKET AND INDUSTRY OUTLOOK THE BIG PICTURE 2019 AND BEYOND