The Economy and What It Means to Commercial Real Estate

The Economy and What It Means to Commercial Real Estate Hans Nordby Managing Director PPR NAIOP. Do not distribute or reproduce without permission.

THE RECOVERY TO DATE GDP GROWTH BY COUNTRY 15% 10% 5% 0% (5%) (10%) (15%) Change in Real GDP, Last Four Quarters v. 2009 10.3% 8.6% 8.4% 8.0% Consumption, government, real, LCU Investment, total fixed investment, real, LCU Stockbuilding, real, LCU 6.4% 3.7% 3.4% 2.5% (1.3%) (2.3%) Australia Canada Germany United States Japan France United Kingdom Eurozone Italy Spain Consumption, private, real, LCU Net Exports GDP, real, LCU Source: Oxford Economics As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 2

A THREE-SPEED WORLD GDP GROWTH BY REGION 4% Real GDP Growth 3% 2% 1% 0% (1%) U.S. United Kingdom Eurozone Japan World 1992-2011 Trend 2013 Forecast 2014 Forecast 2015 Forecast Source: Bloomberg As of September 9, 2013 NAIOP. Do not distribute or reproduce without permission. 3

Macro Trends NAIOP. Do not distribute or reproduce without permission. 4

INDICATORS POINT TO STRONGER GROWTH ISM INDICES AND GDP GROWTH 65 ISM Index, SA GDP Growth (Annualized) 60 55 50 45 40 35 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 ISM Composite Index GDP 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) Sources: Moody's Analytics; ISM; BEA; PPR As of September 2013 NAIOP. Do not distribute or reproduce without permission. 5

INDICATORS POINT TO STRONGER GROWTH ISM INDICES AND GDP GROWTH 70 ISM Index, SA GDP Growth (Annualized) 65 60 55 50 45 40 35 30 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 GDP ISM Composite Index 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) Sources: Moody's Analytics; ISM; BEA; PPR As of September 2013 NAIOP. Do not distribute or reproduce without permission. 6

INDICATORS POINT TO STRONGER GROWTH ISM INDICES AND GDP GROWTH 70 ISM Index, SA GDP Growth (Annualized) 65 60 55 50 45 40 35 30 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 GDP ISM Composite Index ISM Non-Manufacturing Index 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) Sources: Moody's Analytics; ISM; BEA; PPR As of September 2013 NAIOP. Do not distribute or reproduce without permission. 7

INDICATORS POINT TO STRONGER GROWTH ISM INDICES AND GDP GROWTH 70 ISM Index, SA GDP Growth (Annualized) 65 60 55 50 45 40 35 30 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 GDP ISM Composite Index ISM Non-Manufacturing Index ISM Manufacturing Index Sources: Moody's Analytics; ISM; BEA; PPR As of September 2013 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) NAIOP. Do not distribute or reproduce without permission. 8

MOST IMBALANCES HAVE BEEN PURGED HOME PRICE RATIO AND SAVINGS RATE 5.5 Median Home Price/Income Ratio Personal Savings Rate 16% 5.0 14% 4.5 12% 4.0 10% 3.5 8% 3.0 6% 2.5 4% 2.0 2% 1.5 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 0% 13 Median Home Price/Income Average Home Price/Income Savings Rate Average Savings Rate Sources: Moody's Analytics; BEA; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 9

BUSINESSES COULD BE SPENDING MORE CAPITAL SPENDING TO INTERNAL FUNDS RATIO, NONFINANCIAL CORPORATE 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 Capital Spending to Internal Funds Ratio 0.9 1.1 1.0 1.1 1.1 1.0 0.6 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 1.2 1.0 1.2 0.8 Capital Spending to Internal Funds Ratio Sources: Moody's Analytics; Federal Reserve Board of Governors; PPR Recessionary Period As of 13Q1 NAIOP. Do not distribute or reproduce without permission. 10

HN5 GOVERNMENT SPENDING DRAG MANAGEABLE GROWTH OF GOVERNMENT SPENDING AND GDP 5% Growth (Y/Y) 4% 3% 2% 1% 0% (1%) (2%) (3%) (4%) 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 Federal State Total Government GDP Sources: Moody's Analytics; BEA; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 11

Slide 11 HN5 Hans Nordby, 10/2/2013

ENERGY AND TECH MARKETS LEAD RECOVERY CUMULATIVE GAINS IN GROSS METRO PRODUCT AND JOBS 30% Cumulative Change in GMP from Trough Through 13Q2 25% AUST 20% 15% 10% 5% STLO PHIL NORT CLEV KANS PORT DETR SEAT PITT ORAN BALT BOST PHOE ATLA MINN CHIC SAND NEWY LOSA MIAM DENV WASH ORLA INLA LONG TAMP EDIS SACR EAST SANJ DALL SANF CHAR HOUS 0% 0% 2% 4% 6% 8% 10% 12% 14% Cumulative Change in Total Employment from Trough NE SE SW MW W Sources: Moody's Analytics; PPR. Bubble size denotes 13Q2 Gross Metro Product. As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 12

THE AMERICAN TIGER EXPORTS AS % OF GDP AT POSTWAR HIGHS 14% Exports & Trade Deficit as % of GDP Trade Weighted U.S. Exchange Rate 140 12% 130 10% 8% 6% 4% 120 110 100 2% 90 0% 95 97 99 01 03 05 07 09 11 13 Exports as % of GDP Trade Deficit as % of GDP Weighted Average Exchange Value of U.S. Dollar (Index 1997=100, NSA) Sources: Moody's Analytics; BEA; PPR As of 13Q2 80 NAIOP. Do not distribute or reproduce without permission. 13

Everything Isn t Picture-Perfect NAIOP. Do not distribute or reproduce without permission. 14

LOAN PERFORMANCE: INVERSE TO CLIMATE TOTAL DOUBTFUL AND NON-PERFORMING LOANS BY COUNTRY 20 18 16 14 12 10 8 6 4 2 0 Doubtful and Nonperforming Loan % USA* Germany France Spain Portugal Italy Cyprus Greece Hungary 2007 2008 2009 2010 2011 2012 Sources: PPR; ECB; FDIC As of 2012 *Doubtful Not Included NAIOP. Do not distribute or reproduce without permission. 15

THE TREND IS NOT YOUR FRIEND TOTAL UNEMPLOYMENT RATE BY COUNTRY AND EUROZONE AVERAGE 30 Unemployment Rate 25 20 15 10 5 0 09Q2 10Q2 11Q2 12Q2 13Q2 Ireland Greece Spain Italy Portugal Eurozone Sources: Oxford Economics; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 16

IMF: U.S. WON'T MANAGE THE DEFICIT ADMINISTRATION: WE'RE GOOD! 120% Receipts and Outlays (% of GDP) Budget Deficit (% of GDP) 4% 110% 2% 100% 0% 90% (2%) 80% (4%) 70% (6%) 60% (8%) 50% (10%) 40% 98 02 06 10 14 18 Deficit (% of GDP) - U.S. Treasury Deficit (% of GDP) - CBO Deficit (% of GDP) - IMF Debt (% of GDP) Sources: Moody's Analytics; U.S. Treasury; CBO; IMF; PPR As of 13Q2 (12%) NAIOP. Do not distribute or reproduce without permission. 17

TREASURIES FOR SALE! CHINA'S ACQUISITION OF FOREIGN RESERVES HAS ABRUPTLY SLOWED 2.0 12-Month Trailing Average Monthly Change, US$ Billions 10-Year Treasury Rate 6% 1.5 5% 1.0 0.5 4% 3% 2% 0.0 1% (0.5) 03 06 09 12 15 Fed Ownership of U.S. Government Securities China Foreign Reserves 10-Year Treasury Yield (and implied forward forecast) Interest Rate Shock Scenario Sources: Bloomberg; PPR As of 13Q2 0% NAIOP. Do not distribute or reproduce without permission. 18

Office Overview NAIOP. Do not distribute or reproduce without permission. 19

ADDITIONAL OCCUPANCY GAINS AHEAD IN OFFICE RECOVERY PPR54 OFFICE QUARTERLY SUPPLY, DEMAND, AND VACANCY 14% 13% Vacancy Million SF Forecast 60 12% 40 11% 10% 20 9% 0 8% 7% (20) 6% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 (40) Net Completions Net Absorption Vacancy Interest Rate Shock Severe Recession Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 20

EFFICIENCY IN SPACE USE TAKES ITS TOLL HISTORICAL AND FORECAST GROWTH FOR OFFICE-USING SECTORS Y/Y Change in Jobs (000) 1,500 1,000 500 0 (500) (1,000) Y/Y Growth 8% 6% 4% 2% 0% (2%) (4%) (6%) (1,500) 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 Professional and Business Services Information Financial Activities Office-Using Employment Office Demand Growth Sources: Moody's Analytics; CoStar Group, Inc.; PPR As of 13Q2 (8%) NAIOP. Do not distribute or reproduce without permission. 21

TOP-QUALITY ASSETS CAPTURING MOST DEMAND NET OFFICE ABSORPTION BY BUILDING STAR RATING Annualized Demand Growth (Two-Quarter Moving Average) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% (0.5%) (1.0%) (1.5%) (2.0%) 00 01 02 03 04 05 06 07 08 09 10 11 12 13 4 & 5 Star 3 Star 1 & 2 Star Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 22

CONSTRUCTION QUIET ON AVERAGE OFFICE UNDERWAY AS PERCENT OF INVENTORY FOR MAJOR MARKETS Houston Boston San Jose New York Washington D.C. Orange County San Diego Dallas - FW San Francisco Atlanta Denver Minneapolis Chicago Northern NJ Los Angeles Miami Philadelphia Seattle East Bay Phoenix Detroit 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Sources: CoStar Group, Inc.; PPR SF Underway as % of Inventory West South East Midwest Historical Average As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 23

NEW BUILDINGS HAVE LEASED UP OFFICE VACANCY RATE BY YEAR BUILT 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Vacancy 08 09 10 11 12 13 2008 or Newer 2000-07 1990s 1980s Older Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 24

HN6 HUGE DIFFERENCES IN DOWNTIME BY MARKET LEASE DOWNTIME TO ACHIEVE 80% OCCUPANCY (00Q1-13Q2) NY Midtown Wash DC Seattle CBD LA Mid-Wilshire Sources: CoStar Group, Inc.; PPR 5 7 8 9 9 9 10 10 10 10 10 10 10 11 11 12 12 3 6 9 1215182124 LA CBD Chicago CBD Chicago W & NW Dallas Far North Months Downtime To Reach 80% Occupancy South East Midwest 12 13 14 14 14 15 18 18 18 21 21 21 22 23 24 24 3 6 9 12 15 18 21 24 West As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 25

Slide 25 HN6 Hans Nordby, 10/2/2013

Warehouse Overview NAIOP. Do not distribute or reproduce without permission. 26

RECOVERY BECOMING MORE WIDESPREAD PERCENT OF IMPROVED SUBMARKETS 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% Percentage of Submarkets 01 with Positive Occupancy & Rent Change (Q/Q) 02 03 04 05 06 07 08 09 10 11 12 13 Rent 0-100K SF 100-250K SF 250-500K SF 500K+ SF Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 27

OK DEMAND + LITTLE SUPPLY = GOOD STORY PPR54 WAREHOUSE FUNDAMENTALS AS % CHANGE 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% (0.2%) (0.4%) (0.6%) Demand & Supply Change (Q/Q) Vacancy Forecast 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Change in Demand (Q/Q) Change in Supply (Q/Q) Vacancy - Alternate Case Vacancy - Base Case Historical Average Vacancy (1990-2012) Sources: CoStar Group, Inc.; PPR As of 13Q2 12% 10% 8% 6% 4% 2% 0% NAIOP. Do not distribute or reproduce without permission. 28

NOW THIS IS INDUSTRIAL!!! 07Q3 UNDER CONSTRUCTION SF 1 Millions of SF Under Construction 2 5 10 20 Buildings Under Construction 500K+ <500K Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 29

WHAT IS THIS??? 10Q1 UNDER CONSTRUCTION SF 1 Millions of SF Under Construction 2 5 10 20 Buildings Under Construction 500K+ <500K Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 30

THE MODEL CANNOT BELIEVE IT AUGUST 2013 UNDER CONSTRUCTION SF 3 4 2 2 1 1 1 1 1 1 7 3 1 8 1 2 2 2 1 10 6 2 3 1 1 2 9 1 3 4 1 1 2 2 1 1 2 2 1 3 1 2 2 3 2 2 1 1 2 3 1 1 2 Millions of SF Under Construction 8 1 44 2 Buildings Under Construction 1 1 8 4 1 2 5 10 20 500K+ <500K Sources: CoStar Group, Inc.; PPR As of August 2013 NAIOP. Do not distribute or reproduce without permission. 31

RENTS TO REACH NEW PEAKS ASKING NET RENTS $10 $9 $8 $7 $6 $5 $4 $3 $2 Rent Orange County Los Angeles Prerecession Max/Recessionary Min Range Sources: CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 32

RENTS TO REACH NEW PEAKS ASKING NET RENTS $10 $9 $8 $7 $6 $5 $4 $3 $2 Rent Orange County Los Angeles Tampa Minneapolis Prerecession Max/Recessionary Min Range Sources: CoStar Group, Inc.; PPR Current As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 33

RENTS TO REACH NEW PEAKS ASKING NET RENTS $10 $9 $8 $7 $6 $5 $4 $3 $2 Rent Orange County Los Angeles Tampa Minneapolis Prerecession Max/Recessionary Min Range Sources: CoStar Group, Inc.; PPR Current Columbus Memphis End of Forecast As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 34

HOW MUCH DOWNTIME DO YOU MODEL? DOWNTIME LA: Industry/Hacienda Blv Houston: Southeast Outer Loop LA: Commerce Downtime (Quarters) Top 15 Atlanta: Fulton District Chicago: South Chicago Dallas: Redbird Airport Bottom 15 Baltimore: Aberdeen Memphis: Northwest Atlanta: S Clayton/Henry Cnty 0 2 4 6 8 10 12 # of 100K+ SF Buildings in Submarket 15 100 190 Sources: CoStar Group, Inc.; PPR As of 13Q2 *Of 95 sublets that have at least 15 100K+ SF buildings where 50% or more of the RBA is comprised of buildings over 100K SF. page 35 NAIOP. Do not distribute or reproduce without permission. 35

Industry Analysis: Housing NAIOP. Do not distribute or reproduce without permission. 36

THE HOUSING RECOVERY IS WELL UNDERWAY DOUBLE-DIGIT GROWTH AMONG HOME PRICES AND STARTS $250 $200 $150 $100 $50 $0 Median Home Price (Thousands) Total Construction Employment & Starts (Thousands) 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Total Construction Employment Existing Single-Family Home Price Total Housing Starts 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Sources: Moody's Analytics; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 37

THE HOUSING RECOVERY IS WELL UNDERWAY DOUBLE-DIGIT GROWTH AMONG HOME PRICES AND STARTS $250 $200 $150 $100 $50 Median Home Price (Thousands) Total Construction Employment & Starts (Thousands) $0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Total Construction Employment Existing Single-Family Home Price Total Housing Starts Real Existing Single-Family Home Price (Base=2005) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Sources: Moody's Analytics; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 38

MORTGAGE RATES UP BUT HOUSING AFFORDABILITY STILL NEAR ALL-TIME HIGH 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Interest Rates Housing Affordability Index 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Composite Housing Affordability Index, (Index US = 100, SA) FHLMC: 30-Year Commitment Rate - Fixed Rate - National, (%, NSA) FHLMC: 15-Year Fixed Commitment Rate, (%, NSA) Sources: Moody's Analytics; NRA; PPR As of July 2013 200 180 160 140 120 100 80 60 40 20 0 NAIOP. Do not distribute or reproduce without permission. 39

HOME PRICES REBOUNDING ACROSS THE COUNTRY BUT HOUSING MARKET HEALTH VARIES BY METRO 30% 20% 10% 0% (10%) (20%) (30%) (40%) (50%) (60%) Home Price Total Loss & Recovery Since 2006 07 Level Austin Houston Dallas Pittsburgh Denver San Francisco Raleigh Philadelphia San Jose Boston Seattle New York Orange County Washington, D.C. East Bay San Diego Atlanta Chicago Los Angeles Phoenix Miami Las Vegas Detroit Home Price - Current Relative to 2006 07 Level *Industry Location Quotient >1.1 Sources: Moody's Analytics; BLS; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 40

ENERGY MARKETS ON TOP HOME PRICE TRENDS BY MARKET 30% 20% 10% 0% (10%) (20%) (30%) (40%) (50%) (60%) Home Price Total Loss & Recovery Since 2006 07 Level Austin Houston Dallas Pittsburgh Denver San Francisco Raleigh Philadelphia San Jose Boston Seattle New York Orange County Washington, D.C. East Bay San Diego Atlanta Chicago Los Angeles Phoenix Miami Las Vegas Detroit Home Price - Current Relative to 2006 07 Level Metro Classification: Energy* *Industry Location Quotient >1.1 Sources: Moody's Analytics; BLS; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 41

TECH METROS ALSO FARING RELATIVELY WELL HOME PRICE TRENDS BY MARKET 30% 20% 10% 0% (10%) (20%) (30%) (40%) (50%) (60%) Home Price Total Loss & Recovery Since 2006 07 Level Austin Houston Dallas Pittsburgh Denver San Francisco Raleigh Philadelphia San Jose Boston Seattle New York Orange County Washington, D.C. East Bay San Diego Atlanta Chicago Los Angeles Phoenix Miami Las Vegas Detroit Home Price - Current Relative to 2006 07 Level *Industry Location Quotient >1.1 Sources: Moody's Analytics; BLS; PPR Metro Classification: Tech* NAIOP. Do not distribute or reproduce without permission. 42

HOUSING-BUST* METROS OFFER THE GREATEST UPSIDE HOME PRICE TRENDS BY MARKET 30% 20% 10% 0% (10%) (20%) (30%) (40%) (50%) (60%) Home Price Total Loss & Recovery Since 2006 07 Level Austin Houston Dallas Pittsburgh Denver San Francisco Raleigh Philadelphia Home Price - Current Relative to 2006 07 Level *Industry Location Quotient >1.1 Sources: Moody's Analytics; BLS; PPR San Jose Boston Seattle New York Orange County Washington, D.C. East Bay San Diego Atlanta Chicago Los Angeles Phoenix Miami Las Vegas Detroit Metro Classification: Home Price Total Recessionary Loss >40%* NAIOP. Do not distribute or reproduce without permission. 43

BRICKLAYERS, BROKERS, & BANKERS HOUSING-RELATED EMPLOYMENT ACCELERATING 7% 6% 5% 4% 3% 2% 1% 0% (1%) (2%) Housing-Related Job Growth & Contribution by Industry (Y/Y) Miami Tampa Detroit Houston Las Vegas Denver Minneapolis Sacramento Seattle Dallas Orange County New York Austin Phoenix Philadelphia Washington, D.C. Los Angeles San Francisco Charlotte N. New Jersey East Bay Atlanta Nashville Boston San Diego Construction* Financial Activities* Manufacturing* Retail/Wholesale Trade* Prof. & Bus. Svcs* Total Housing-Related Job Growth *Includes only housing related subsectors: residential construction; manufacturing of household and kitchen goods; architecture, engineering, and interior design svcs; credit intermediation and real estate services; retail/wholesale trade of home furnishings garden products, and construction equipment. Sources: Moody's Analytics; BLS; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 44

HOMES AND SMALL INDUSTRIAL DEMAND LIKE HAND IN (WORK) GLOVE 80 Demand Change (Q/Q, Millions SF) Change in Starts (Y/Y, One Qtr. Lag) 80% 60 60% 40 40% 20 20% 0 0% (20) (20%) (40) (40%) (60) 00 01 02 03 04 05 06 07 08 09 10 11 12 13 (60%) Warehouse Demand Housing Starts Sources: Moody's Analytics; CoStar Group, Inc.; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 45

HOME BUILDERS FLOCKING SOUTH FORECAST ANNUAL SINGLE-FAMILY HOME STARTS 200 180 160 140 120 100 80 60 40 20 0 Annual Average Single-Family Home Starts (Thousands, 13Q2 17Q4) Houston Phoenix Dallas Saint Louis Memphis Oklahoma East South Midwest West Sources: Moody's Analytics; U.S. Census; PPR Hartford San Francisco Stamford As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 46

Industry Analysis: Healthcare NAIOP. Do not distribute or reproduce without permission. 47

HEALTHCARE PRACTICALLY IMMUNE TO JOB LOSSES HEALTH CARE SERVICES AND TOTAL EMPLOYMENT 16% 15% 14% 13% 12% 11% 10% Population: Ages 65+ (%) Employment Index (1982) 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Population: Ages 65+ (%) Healthcare Employment Index (1982) Total Employment Index (1982) 3.30 3.10 2.90 2.70 2.50 2.30 2.10 1.90 1.70 1.50 1.30 1.10 0.90 Sources: Moody's Analytics; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 48

POTENTIAL SURGE IN HEALTHCARE DEMAND FROM OBAMACARE UNINSURED AMERICANS UNDER THE AGE OF 65 19% Uninsured Rate Number Uninsured (Thousands) 55,000 18% 50,000 17% 45,000 16% 40,000 15% 35,000 14% 30,000 13% 25,000 12% 99 00 01 02 03 04 05 06 07 08 09 10 11 Number Uninsured - Age: Under 65 Uninsured Rate - Age: Under 65 Sources: U.S. Census Bureau (most recent data as of 2011); PPR As of 2011 20,000 NAIOP. Do not distribute or reproduce without permission. 49

PENT-UP DEMAND FOR HEALTHCARE IN THE SUNBELT UNINSURED RATES BY METRO 40% 35% 30% 25% 20% 15% 10% 5% 0% Uninsured Rate: Residents Less than 65 Years Old Miami Fort Lauderdale Houston Palm Beach LA Las Vegas Dallas - FW Inland Empire Orlando Tampa San Antonio Atlanta New Orleans Austin Orange County Oklahoma City San Diego Phoenix Salt Lake City Charlotte East South Midwest West Sources: U.S. Census Bureau (most recent data as of 2011); PPR As of 2011 NAIOP. Do not distribute or reproduce without permission. 50

Industry Analysis: Energy NAIOP. Do not distribute or reproduce without permission. 51

CHASING AFTER THAT LIQUID GOLD ENERGY EMPLOYMENT & FIXED INVESTMENT IN OIL AND GAS EXTRACTION 300 Energy Employment & Investment (Index: 2005 = Base) 250 200 150 100 50 0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Energy Employment Index (2005=Base) Quantity Index: Private Nonresidential Fixed Assets: Investment in Mining and Oilfield Machinery for Oil and Gas Extraction Industry, (Index 2005 = 100) Sources: Moody's Analytics; OCC; OTS; PPR As of 13Q2 NAIOP. Do not distribute or reproduce without permission. 52

SMALLER MARKETS HAVE BEEN GROWING FAST ANNUAL CHANGE IN NATURAL RESOURCES AND MINING OUTPUT Sources: Moody s Analytics; PPR As of 2011 NAIOP. Do not distribute or reproduce without permission. 53

SMALLER MARKETS HAVE BEEN GROWING FAST ANNUAL CHANGE IN NATURAL RESOURCES AND MINING OUTPUT Sources: Moody s Analytics; PPR As of 2011 NAIOP. Do not distribute or reproduce without permission. 54

Submarket Analysis NAIOP. Do not distribute or reproduce without permission. 55

HEALTHCARE HAPPENS HERE DENVER SUBMARKET INDUSTRY CONCENTRATIONS HEALTHCARE Sources: Moody s Analytics; CoStar Group, Inc.; PPR As of 2013 NAIOP. Do not distribute or reproduce without permission. 56

IT HERE DENVER SUBMARKET INDUSTRY CONCENTRATIONS INFORMATION TECHNOLOGY Sources: Moody s Analytics; CoStar Group, Inc.; PPR As of 2013 NAIOP. Do not distribute or reproduce without permission. 57

AND ENERGY COMPANIES THERE DENVER SUBMARKET INDUSTRY CONCENTRATIONS ENERGY Sources: Moody s Analytics; CoStar Group, Inc.; PPR As of 2013 NAIOP. Do not distribute or reproduce without permission. 58

Q&A This is your opportunity to make this session exactly what you need it to be Ask the question. Please note that this session is being recorded, so before speaking, please either proceed to a standing microphone or raise your hand and wait until a mic runner reaches you. Thank you! NAIOP. Do not distribute or reproduce without permission. 59

Thank You! Hans Nordby Managing Director PPR 617-443-3100 hnordby@pprglobal.com NAIOP. Do not distribute or reproduce without permission. 60