3Q17 UNITED STATES CAPITAL MARKETS REPORT

3Q17 UNITED STATES CAPITAL MARKETS REPORT

3Q17 UNITED STATES CAPITAL MARKETS REPORT 3 Key Takeaways 4 Yield Spread 5 Global Capital 6 Sales Volume - Primary Markets 7 Sales Volume - Secondary Markets 8 East Coast vs. West Coast Sales volume 9 Top Buyers, Sellers and Transactions 10 Multihousing Sales Distribution 11 Growth in Specialty Assets 12 Trophy Deal Volume 13 International Capital Distribution 14 International Capital Investment 15 Debt Market Update 16 Mortgage Maturities 17 Office Dashboard 18 Multihousing Dashboard 19 Retail Dashboard 20 Industrial Dashboard 21 Hospitality Dashboard 2

KEY TAKEAWAYS SALES VOLUME Strong market fundamentals are occurring on the west coast as activity is outpacing the east coast for the first time in the current cycle. CAP RATES While yields remain flat in most large metros, secondary and tertiary cities are increasingly attracting capital and have experienced cap rate compression in those markets. RENT GROWTH Western metros such as Phoenix, Sacramento, San Diego and Seattle continue to lead the nation in multihousing rent growth as they benefit from strong demographics and resilient local economies. SUPPLY & DEMAND Despite record high inventory for industrial properties, demand from ecommerce, particularly in the last mile of major metros, continues to drive vacancy rates downward, and pricing higher. INTERNATIONAL CAPITAL International investment has moderated in as investors have faced political headwinds and constrained capital requirements coupled with a lack of available trophy assets and higher cap rates. DEBT MARKETS CMBS issuance through the first three quarters of the year totaled $66.6 billion, representing a 34.3% increase versus the first three quarters of. REITs continue to grow their lending business as the most recent data shows a 5.2% quarter-overquarter increase. 3

CAP RATE SPREAD (BPS) YIELD SPREAD Cap rates remained flat quarter-over-quarter at 5.9% for institutional-grade assets, with commercial real estate yields offering a 357 basis point premium to the 10-year treasury note. 10% 500 8% 400 6% 300 4% 200 2% 100 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 Yield Spread Cap Rates, All Property Types 10-Year Treasury Rate Source: Newmark Knight Frank Research, Real Capital Analytics, Federal Reserve Bank of St. Louis 4

GLOBAL CAPITAL 12-Month Totals; All Property Types BERLIN $6.2B GERMANY $18.7B CANADA $35.9B U.S. $58.8B U.S. $63.6B AMSTERDAM $7.5B SPAIN $16.9B UK $42.4B GERMANY $40.1B CHINA $64.8B CHINA $50.1B HONG HONG KONG KONG $66.3B $66.3B SINGAPORE $33.1B TOP CAPITAL SOURCES TOP CAPITAL DESTINATIONS HONG KONG UNITED STATES CHINA CANADA SINGAPORE $66.3B $58.8B $50.1B $35.9B $33.1B CHINA UNITED STATES UNITED KINGDOM GERMANY SPAIN $64.8B $63.6B $42.4B $40.1B $16.9B 5

Billions SALES VOLUME Primary Markets; Yearly Totals; All Property Types Sales volume in New York City and most other primary markets has declined notably as a lack of trophy assets have come to market in addition to the disconnect between what buyers are willing to pay versus the perceived value of potential sellers properties. $100 92.1 $80 DC sales volume was an outlier the increase was led by Japan, Singapore and South Korea who were attracted by higher yields, relative to its primary market peers. 70.3 $60 48.0 45.5 $40 31.4 31.6 39.0 35.3 $20 21.3 24.5 23.1 20.4 20.1 21.3 21.1 16.0 13.4 18.4 17.8 10.5 10.9 15.4 18.2 15.9 15.3 11.8 8.8 12.3 9.8 9.1 9.2 6.7 5.1 $0 NYC Metro LA Metro SF Metro DC Metro Dallas Chicago Atlanta Seattle Boston Metro Denver Miami Sales Volume: 1Q-3Q 4Q 6

Billions SALES VOLUME Secondary Markets; Yearly Totals; All Property Types Year-to-date sales volume in secondary market volumes finished lower--the exceptions being Charlotte, Houston, and Orlando which averaged 20% higher volumes than the first three quarters of. In all three of those markets Canadian firms led the buying, investing heavily in Houston office, Orlando and Charlotte multihousing properties. $15 Canadians have contributed over 1 billion dollars to the sales volume in the past 12 months, purchasing large office and trophy properties. $12 12.8 11.8 11.9 12.5 10.5 $9 $6 $3 7.3 9.2 5.7 9.0 6.6 8.0 8.8 5.0 9.6 7.6 7.4 5.9 6.0 6.0 6.2 5.7 3.8 3.4 4.6 4.7 5.5 5.0 5.3 4.2 3.0 $0 Phoenix San Diego Northern NJ Austin Houston Tampa Portland Orlando Charlotte Raleigh Sales Volume: 1Q-3Q 4Q 7

Billions EAST COAST VS. WEST COAST SALES VOLUME United States; 12-Month Totals; All Property Types Investment sales on the west coast has surpassed activity on the east coast for the first time in the current cycle, with the difference in volume currently at $22 billion dollars. $205 $185 $165 $145 $125 $105 $85 2013 2014 NCREIF East NCREIF West 8

TOP BUYERS, SELLERS AND TRANSACTIONS ACQUISITIONS DISPOSITIONS TRADES Top Buyers Top Sellers Top Transactions Company $ Volume Company $ Volume Property $ Volume Blackstone $3.0 B Blackstone $2.0 B 3333 Scott Boulevard Santa Clara Office $610 M CBRE Global Investors $1.5 B JP Morgan $1.5 B Fontainebleau Resort Las Vegas Hotel $600 M Stonemont Financial $1.0 B Oak Street Capital $1.0 B 375 Hudson Street New York Office $580 M Gramercy $1.0 B Principal Financial $1.0 B 222 Second Street San Francisco Office $500 M Brookfield AM $900 M Worthe Group $1.0 B Five Point Gateway Irvine, California Office $440 M 9

MULTIHOUSING SALES DISTRIBUTION By Market Tier, Region and Property Type; 12-Month Totals Sales volume in major markets declined from 36.7% to 28.9% over the past 12 months, as investors continued to seek out higher yields from assets in secondary and tertiary markets, predominantly in the Southeast and West. Major Markets 28.9% Mid-Atlantic 8.1% Midwest 8.9% Northeast 11.9% Tertiary Markets 15.0% Sales Volume by Market Tier West 23.2% Sales Volume by Region Southeast 24.6% Secondary Markets 56.1% Southwest 23.3% 10

GROWTH IN SPECIALTY ASSETS International and institutional investors are looking past traditional property types, in search of more portfolio diversity, greater macro growth prospects and varied risk profiles. Self Storage Medical Office Student Housing Data Centers TOP MARKETS 1. Sacramento 2. Philadelphia 3. Tampa/St. Petersburg 1. Dallas 2. Los Angeles 3. Atlanta 1. Tallahassee 2. Austin 3. Chicago 1. Washington DC 2. San Jose 3. Chicago LARGEST BUYERS 1. National Storage Affiliates 2. Prime Group Holdings 3. Extra Space Storage, Inc. 1. HTA (REIT) 2. Physicians Realty Trust 3. Starwood Property Trust 1. GIC 2. Scion Group 3. CPP Investment Board 1. Equinix (REIT) 2. Digital Realty 3. Carter Validus Mission 12-MONTH DEAL VOLUME 3.5 B 14.0 B 7.5 B 4.5 B CHANGE IN VOLUME SINCE 2010 264% 220% 324% 165% ASSET TYPE FUNDAMENTALS Low breakeven rates, limited operating expenses, and high rates of urbanization. An aging population, and demand for more community oriented and specialized healthcare, outside of major hospital facilities. Predictable rent schedules and returns, and stability associated with established higher education institutions. The increased need from all industries for big data and cloud computing, and price consistency irrespective of geographic location. 11

Billions TROPHY DEAL VOLUME Primary Markets; Transactions greater than 500 million $40 Retail 13 Multihousing 9 Hotels 6 Industrial 1 $30 127 Deals $18.43 Office 98 $20 $17.78 $10.99 $10 $16.09 $6.77 $5.18 $9.83 $6.95 $0 2014 YTD International Capital Domestic Capital 12

INTERNATIONAL CAPITAL DISTRIBUTION United States; 12-Month Totals; All Property Types Despite lower Chinese investment over the past 12 months, other Asia Pacific countries have filled the void -- South Korea outspent China by 2% and Japan matched China s spending in the third quarter alone. New entries to the US market, such as Mori Trust, have also bolstered international investment. INVESTED CAPITAL $500+ MILLION Other 12.8% $1.0B+ $500M $999M Israel 3.6% Switzerland 2.1% Canada 29.5% CANADA Brookfield CPP Investment Board Ivanhoe Cambridge AHIP REIT OMERS CANADA QATAR ISRAEL Global Holdings SOUTH KOREA Netherlands 4.8% Japan 4.9% Germany 5.7% South Korea 5.8% Singapore 12.3% China 18.6% CHINA HNA Group China Investment Corp China Life Insurance GIC Mirae Asset SINGAPORE SOUTH KOREA Qatar Investment Authority JAPAN Mori Trust Unizo Holdings Co Ltd NORWAY Norges Bank (NBIM) SINGAPORE Global Logistic Properties Mapletree Korea Investment Corp Korea Post APG Group NETHERLANDS GERMANY Commerz Real BVK Allianz Union Investment ; Analysis: Newmark Knight Frank Research 13

INTERNATIONAL CAPITAL INVESTMENT United States; 12-Month Totals; All Property Types While foreign investment slowed over the past 12 months, primary markets continue to see the bulk of capital. Office transactions in Washington, DC shifted the balance of trade to more international capital than domestic in that market. 3.6% BOS ORIGIN OF CAPITAL 3.0% SEA 3.3% CHI 19.8% NYC WASHINGTON, DC 54.0% 46.0% 6.2% SF/SJ 1.0% DEN 7.0% D.C. NEW YORK CITY 43.0% 57.0% MIAMI 19.0% 81.0% 5.6% LA/OC 1.2% PHX 3.1% DAL 2.2% HOU 2.7% ATL 2.8% MIA SAN FRANCISCO 18.0% 82.0% BOSTON 17.0% 83.0% CHICAGO 12.0% 88.0% SEATTLE 10.0% 90.0% 36.2% OTHER International Domestic ; Analysis: Newmark Knight Frank Research 14

Billions DEBT MARKET UPDATE CMBS Issuance and Debt Outstanding CMBS issuance through the first three quarters of the year totaled $66.6 billion, representing a 34.3% increase versus the first three quarters of. REITs continue to grow their lendingbusiness as the most recent data shows a 5.2% quarter-over-quarter increase. $250 $229 CMBS ISSUANCE DEBT OUTSTANDING $200 $150 Gov't 3.6% Other 9.1% $100 $86 $94 $101 $76 $67 GSEs 18.1% Banks & Thrifts 40.6% $50 $0 $12 $3 $12 $33 $48 2007 2008 2009 2010 2011 2012 2013 2014 YTD CMBS 14.0% Insurance 14.6% Source: Newmark Knight Frank Research, Commercial Mortgage Alert, Trepp 15

MORTGAGE MATURITIES By Lender Group, $ in Billions will see $136.1 billion dollars in CMBS maturities, the largest amount in history, contributing to the record amount of overall mortgages maturing. $500 COMMERCIAL 71.3% MULTIFAMILY 28.7% $400 $300 $200 63.6 69.2 21.2 21.6 54.3 38.5 75.1 77.6 82.0 23.3 24.6 24.0 54.8 57.7 78.3 83.4 23.7 96.2 88.6 25.8 104.1 99.5 27.5 136.1 107.4 27.7 48.5 106.4 27.5 37.8 103.6 29.1 35.3 $100 187.7 204.5 213.1 211.1 186.7 158.8 133.3 136.2 156.4 178.1 202.9 $0 2010 2011 2012 2013 2014 2018 2019 2020 Banks CMBS Life Insurance Other Source: Newmark Knight Frank Research, Trepp 16

Billions OFFICE DASHBOARD While sales volume remains less active (down over 7.5% year over year), pricing has risen sharply over the past five years, almost entirely led by gains in major metros such has San Francisco, Los Angeles, Seattle, Washington, DC and New York City where pricing reached all time highs. 8% 7.6% Cap Rate Sales Volume Annual Totals 7% $160 6% [10-Year Average = 5.8%] 5.9% $120 5% 5.0% 4% 2007 2008 2009 2010 2011 2012 2013 2014 United States 10-Year Average $80 $33.0 $35.0 $35.1 $27.7 $400 Price Per Square Foot $378 $26.1 $350 $40 $300 $250 $0 2013 2014 1Q 2Q 3Q 4Q $200 $198 $150 2007 2008 2009 2010 2011 2012 2013 2014 United States 17

Billions MULTIHOUSING DASHBOARD Sales volume will likely fall short of s total, due to lower volume in the first quarter, which was largely a reaction to the election and interest rates. Most notably, prices per unit for properties in secondary markets can be purchased for a nearly 55% discount to properties in the primary markets, a record high disparity. 8% Cap Rates Sales Volume Annual Totals 7% $160 6% 5% 5.5% 4.9% $120 $37.8 4% 3% 2007 2009 2011 2013 Primary Markets Secondary Markets $80 $34.4 $38.3 $375,000 Price Per Unit $21.7 $31.9 $300,000 $318K $40 $225,000 $150,000 $146K $0 2013 2014 1Q 2Q 3Q 4Q $75,000 $0 2007 2009 2011 2013 Primary Markets Secondary Markets 18

Billions RETAIL DASHBOARD Investors remain cautious, and foresee industry disruption from online sales/ecommerce as well as volatility among brick and mortar retailers. Cap Rates $100 Sales Volume Annual Totals 10% 8% 6.4% 6% 6.1% $80 4% 2007 2008 2009 2010 2011 2012 2013 2014 $60 $20.4 Primary Markets Secondary Markets $20.0 $19.3 Price Per Square Foot $40 $12.4 $350 $19.4 $300 $20 $250 $200 $272 $235 $150 $0 2013 2014 1Q 2Q 3Q 4Q $100 2007 2008 2009 2010 2011 2012 2013 2014 Primary Markets Secondary Markets 19

Billions INDUSTRIAL DASHBOARD Industrial volume is poised to surpass, and match, as the third quarter of witnessed the highest third quarter volume on record. Even more noteworthy is the growing prices per square foot, which is being led by constrained supply in the warehouse sector in the last mile of major metros. 9% Cap Rates Sales Volume Annual Totals 8% 7% $80 6% 5% 4% 6.2% 4.9% $60 3% 2007 2008 2009 2010 2011 2012 2013 2014 Primary Markets Secondary Markets $40 $13.7 $18.8 $20 $13.9 $11.7 $14.8 $250.00 $200.00 Price Per Square Foot $217 $150.00 $100.00 $120 $0 2013 2014 1Q 2Q 3Q 4Q $50.00 $0.00 2007 2008 2009 2010 2011 2012 2013 2014 Primary Markets Secondary Markets 20

Billions HOSPITALITY DASHBOARD Hospitality volume is down 20% from the first three quarters of however, the distribution of investment is wider, with secondary markets such as Austin, Phoenix and Portland receiving considerable deal volume. 9.0% Cap Rates Sales Volume Annual Totals 8.5% 8.0% 8.2% $60 7.5% 7.0% 7.1% $50 $40 6.5% 6.0% 2007 2008 2009 2010 2011 2012 2013 2014 Primary Markets Secondary Markets $30 $20 $10 $- $7.5 $9.5 $13.3 $7.2 $6.6 2013 2014 1Q 2Q 3Q 4Q Price Per Key $400,000 $350,000 342K $300,000 $250,000 244K $200,000 $150,000 $100,000 $50,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 Primary Markets Secondary Markets 21

RESEARCH New York City HEADQUARTERS 125 Park Avenue New York, NY 10017 212.372.2000 Jonathan Mazur Senior Managing Director, National Research 212.372.2154 jmazur@ngkf.com Michael Wolfson Associate Director - Multihousing Daniel Littman Research Analyst - Office & Industrial North America Canada United States Europe Austria Belgium Czech Republic France Germany Ireland Italy Netherlands Poland Portugal Romania Russia Spain Switzerland United Kingdom Latin America Argentina Brazil Chile Colombia Costa Rica Dominican Republic Mexico Peru Puerto Rico Asia-Pacific Australia Cambodia China Hong Kong India Indonesia Japan Malaysia New Zealand Singapore South Korea Taiwan Thailand Africa Botswana Kenya Malawi Nigeria South Africa Tanzania Uganda Zambia Zimbabwe Middle East Saudi Arabia United Arab Emirates Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains. www.ngkf.com