Research & Forecast Report DOWNTOWN | OFFICE Fourth Quarter 2020

Pandemic Restrictions Cause 10-Year Peak in Office Vacancy

Sandy McDonald Senior Director of Research | Chicago As of January 6th, 2021, the Chicago Metro occupancy (according to Market Indicators Kastle Systems) was 16.9%, up 4.9% from 11.9% at the end of 2020. CHICAGO CBD OFFICE Q4 2020 Q3 2020 Q4 2019 Rents continue to tick down as availability ticks up with tenants across all classes contracting space and/or adapting new working environments VACANCY RATE 15.0% 13.8% 12.3% for their employees. Overall activity in the market was slow for a third AVAILABILITY RATE 20.8% 19.3% 16.0% consecutive quarter, as vacancies reach 2010 post-recession levels. QUARTERLY NET ABSORPTION (SF) (1,129,559) 236,973 408,517

Vacancy & Absorption YTD NET ABSORPTION (SF) (1,275,593) (146,034) 1,597,365

» In the fourth quarter of 2020, Chicago saw overall and sublease RENTAL RATES (PSF) $41.91 $42.13 $42.95 vacancy rates rise to the highest levels since the 2009 recession. The overall Chicago CBD vacancy rate increased 120 basis points to SUBLEASE VACANCY (SF) 2,770,321 1,935,838 1,429,706 15 percent with sublease vacancy accounting for 1.8 percent of this SUBLEASE AVAILABLE (SF) 5,866,761 4,770,502 2,936,278 total. UNDER CONSTRUCTION (SF) 4,631,081 6,473,843 5,475,409

» As expected, net absorption hit a low point in the final quarter, NEW SUPPLY (SF) 2,384,402 0 2,500,000 totaling 1.13 million square feet of negative net absorption bringing the 2020 total to 1.28 million square feet—both of which are the highest negative net absorption levels since 2009. Submarket Vacancy Vacancy Rates Rates » Class A CBD vacancy peaked at 13.0 percent in the final quarter of 2018 - 2020 2020, increasing 100 basis points from 12.0 percent last quarter— 20% the highest quarterly Class A vacancy in seven years. However, the delivery of several new class A developments with substantial

vacancy contributed to this vacancy peak. In addition, there was 15% significant vacancies recorded in class A existing space in both the Central and East Loop submarkets. » Class B vacancy increased by 180 basis points from 15.0 percent in 10% the third quarter to 16.8 percent. Central Loop and the West Loop areas had the most move-out activity from Class B assets (more than 645,000 square feet of net move-outs in just two submarkets). 5% Additionally, River North had high Class B negative net absorption 2020 2020 2020 2020 2020 2020 2019 2018 2019 2019 2018 2019 2019 2018 2018 2018 2019 (101,408 square feet negative net). 2018 » 0% Class C vacancy increased to 17.2 percent in the fourth quarter—the Central Loop East Loop North Michigan Ave. River North West Loop Fulton Market highest rate in the history of the Chicago office marketplace. Total negative net absorption was primarily in direct space this quarter New Construction Deliveries with negative 200,338 square feet bringing the total to 724,039 2004New - 2020 Construction Deliveries negative square feet year-to-date. This is also the highest class C

negative combined yearly absorption ever recorded. Further vacancy 4.5 4.2

4.0 increases may cause class C building owners to repurpose the use of 3.7 the buildings. However, demand for any alternative uses (residential, 3.5

dorm and hotel) is low. 3.0 2.7

Millions of Square Feet 2.5 » Current available sublease space increased 1.1 million square feet 2.1 1.9 2.0 1.9 quarter-over-quarter to a record high of 5.86 million square feet, 1.6 1.5 representing 3.8 percent of the market. This is the highest amount 1.1 0.9 1.0 of sublease space available ever recorded. Many of the sublease 0.5 0.7 0.5 spaces on the market are offering competitive terms, fully built-out 0.5 0.0 0.0 0.0 0.0 0.0 space, and short leases lengths that are appealing to businesses 0.0 2011 2017 2013 2019 2015 2018 2016 2014 2012 2010 2007 2009 2005 2008 2006 2004 uncertain of long-term steps in this pandemic business environment. 2020 Competing sublease space will be the biggest challenge in the coming quarters for landlords trying to fill vacancies in their buildings.

1 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Rents Large Sublease Space Available

TOTAL SUBLET » Total average CBD rental rates dropped $0.22 per square foot to ADDRESS CLASS MAX CONTIG SF SUBMARKET SF AVAILABLE $41.91 PSF Gross. Although significant, this is half the average 101 N Wacker Dr A 547,685 99,592 West Loop drop between 3Q20 and 2Q20, suggesting that the margin of rental 300 S Riverside Plz A 234,951 53,857 West Loop rate decreases may be diminishing incrementally. Rates are still 600 W Chicago Ave B 180,264 150,000 River North expected to continue to decrease over the next few quarters. 225 W Randolph St B 172,303 79,588 West Loop » Class A asking rental rates currently average $48.01 (only a two- 1 N Dearborn St B 162,684 52,457 Central Loop 167 N Green St A 144,454 50,744 Fulton Market/Near West Side cent drop quarter-over-quarter). However, these landlords are 540 W Madison St A 139,324 48,307 West Loop offering more robust concessions packages to lure tenants. 233 S Wacker Dr A 135,898 26,654 West Loop » Class B asking rental rates dropped $0.55 to $40.03 quarter-over- 200 N LaSalle St A 130,969 87,266 Central Loop quarter are expected to continue to decline as landlords try to 191 N Wacker Dr A 127,055 77,042 West Loop compete with an abundance of sublease space on the market. 1 E Wacker Dr B 125,746 14,878 East Loop 141 W Jackson Blvd B 120,506 37,776 Central Loop » Surprisingly, overall Class C asking rate averages increased $0.25 222 Plz A 117,195 48,939 River North quarter-over-quarter to $29.32, entirely due to West Loop asking 550 W Washington Blvd A 113,884 89,779 West Loop rates increasing by $0.49 while other submarkets reported minor 350 N Orleans St A 101,855 71,862 River North decreases. 433 W Van Buren St A 99,551 65,000 West Loop 1330 W Fulton St A 88,438 52,209 Fulton Market/Near West Side Large Blocks 303 E Wacker Dr A 87,175 31,276 East Loop » Chicago’s CBD ended the fourth quarter with 42 large blocks 203 N LaSalle St A 84,163 44,601 Central Loop 10 S Wacker Dr A 83,675 83,675 West Loop (100,00+ square feet) of contiguous space in 40 buildings, an 311 S Wacker Dr A 77,275 21,500 West Loop increase of six additional large blocks of space quarter-over- 333 W Ohio St B 75,715 75,715 River North quarter. There is now over 8.1 million square feet available comprised of large blocks of contiguous office space. Investment Sales Activity Investment2012 - 2020 Sales Activity » The largest block of contiguous space is at 135 S Lasalle for 35 672,618 square feet, space which Bank of America has now vacated for their move into their new namesake tower at 110 N Wacker Dr. 30 25 » For a full list of large blocks, please reference Appendix A. 20

Lease Transaction Highlights 15 Millions of Square Feet » New direct lease signing activity has significantly declined in the last 10 three quarters. Any activity in the fourth quarter has been primarily 5

dominated by sublease deals, renewals, and contractions of existing 0

space. 2017 2013 2019 2015 2018 2016 2014 2012 2020 YTD » Only one notable lease transaction was signed in the fourth quarter: CLASS A CLASS B CLASS C Industrious for 52,000 square feet at 233 S . NetNet Absorption Absorption & Vacancy & Vacancy » Pritzker Military Museum signed a renewal in the East Loop at 104 S Overall CBD Michigan Ave for 40,500 square feet. 2,000,000 16.0% 1,402,389 1,597,365 1,479,383 1,500,000 14.0% Sale Transactions 1,207,122 12.0% 1,000,000 » Sales transactions have significantly decreased since the first quarter 782,408 10.0% of this year. There were four sale transactions that finalized in the 500,000 377,066 fourth quarter. The two most notable were: 8.0% 0 6.0%

» JP Morgan Asset Management, jointly with Sterling Bay sold -500,000 110 N Carpenter St (1045 W Randolph St), the 575,018 square 4.0% feet McDonalds headquarters to Normandy Properties LLC for -1,000,000 2.0% (1,275,593) -1,500,000 0.0% $412,500,000 ($717/SF). 2014 2015 2016 2017 2018 2019 2020

» Sterling Bay sold 1515 W. Webster Ave on to Source: Costar; Colliers International Research Absorption Vacancy APEX Capital investment Corp. This is class A, 207,000 square AskingAsking Gross Gross Rental RentalRates Rates feet low rise for $110,250,000 ($533.00/SF). Overall CBD » There are two major office buildings in the West Loop with pending $50.00 50 sales: 225 W Randolph St and 200 W Jackson Blvd. $45.00 45 $40.00 40

Construction $35.00 35 » Eleven new office buildings over 25,000 square feet were delivered $30.00 30 in the CBD in 2020 for a total of 4.1 million square feet. $25.00 25 $20.00 20 » 110 N Wacker Dr-Bank of America Tower in the West Loop was the $15.00 15 most notable high-rise this quarter. The tower hit the market with 80 $10.00 10

percent preleased in the building so its impact on raising vacancy was $5.00 5

significant but less than anticipated. $0.00 0 2014 2015 2016 2017 2018 2019 2020 Source: Costar; Colliers International Research

2 » 24 E Washington St renovation above Macy’s in the East Loop was Outlook the next largest impact on the market in the beginning of 2020 and Positives: this project remained vacant at the end of 2020. » Although pandemic restrictions have lasted longer than most » The other nine buildings delivered this year were in the trendy Fulton businesses initially contemplated, it has created a great negotiating Market district with the majority being mid-to-low rise buildings. The environment for any tenants currently in the market or considering a exception was 167 N Green St which joins 333 N Green St as one of lease restructuring. the largest office buildings built in Fulton Market. Completed in the final quarter of 2020, the 17-floor structure offers 645,000 square » Economic losses may only be felt in the near term and local feet of office space. 167 N Green was delivered by Shapack Partners businesses may be poised and ready to resume safe and thoughtful and owned by Walton Street Capital while 333 N Green St was operation once pandemic panic has waned. The area is not delivered by Sterling Bay. compromised by any one business type that was permanently affected by the pandemic. Though some social businesses such » Two additional Fulton Market buildings constructed this year as coworking was greatly affected by lockdown restrictions, many delivered in 4Q20: 215 N Peoria St and 318 N Carpenter St. Adding Chicago businesses have been able to stay afloat with creative 110 N Wacker Dr to new completions makes a total of over 2.38 solutions and technology integration. million square feet completed in 4Q20. Challenges: » There are currently thirteen buildings under construction totaling 4.63 million square feet. Of these, nine are expected to complete by » One of the largest hurdles for office recovery will be the high amount the end of 2021 and will add a total of 1.86 million square feet to the of sublease space available. market. » The psychology of safety and cleanliness will be an additional » Excluding Lincoln Yards and the 78, there is over 8.64 million square hurdle that Chicago landlords will need to overcome. Tenants will feet of office space proposed for Chicago’s CBD in the next three have higher demands on air quality conditions in their buildings and years. Given the impending oversupply of office space, most of the shared space cleanliness. The cost of these changes may add to the proposed properties are unlikely to break ground without major operating costs and passed on to new tenants. preleasing. » New construction will be an additional competitor to existing landlords. New construction delivering with vacant space has softened the market considerably and will continue to do so. With 1.86 million square feet expected to complete in 2021, this is not favorable to landlords trying to recover vacancy losses. Takeaway » The year ended with the lowest lease activity the market has seen in a decade. However, this quarter may be the pinnacle of low activity. Based on previous downturns in Chicago office history, we expect to see increased activity in the new year. A more significant recovery is not expected until mid-2021. Strategic predictions remain that tenants will benefit from the most favorable pricing over the next 12-15 months as well-appointed subleases drive pricing. For the first time since 2009, CBD rates have seen a drop for three consecutive quarters. Rates are expected to continue softening and some economists do not see a total recovery from this downturn until 2022. If local policies for pandemic restrictions lift by mid-2021 and back to work conditions are managed reasonably, Chicago office interest may see an uptick before the end of 2021.

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MAP # TENANT ADDRESS CLASS SUBMARKET SIZE DEAL TYPE 1 Industrious 233 S Wacker Dr A West Loop 52,000 New 2 Platform Portal Innovations 400 N Aberdeen St B Fulton Market 34,125 New 3 Simplex Investments 230 S Lasalle St B Central Loop 26,000 Expansion 4 Primera Engineers Ltd 550 W Jackson Blvd A West Loop 25,569 New 5 Board of Trustees - University of Illinois 200 S Wacker Dr A West Loop 22,560 New 6 Ninja Trading 222 N Lasalle St B Central Loop 19,581 Sublease 7 Covenant Trust 141 W Jackson Blvd B Central Loop 19,226 New 8 BatesCarey 191 N Wacker Dr A West Loop 18,814 Renewal 9 Intercom 1330 W Fulton St A Fulton Market 17,665 Renewal 10 Blackstone Group 332 S Michigan Ave C East Loop 15,837 Renewal 11 Mckenna Storer 33 N Lasalle St B Central Loop 14,297 Contraction 12 Pangea Universal Holdings Inc 1 N State St B East Loop 12,325 New 13 Brownson, Rehmus & Foxworth 227 W Monroe St A West Loop 11,318 New 14 Pediatric Dental Health Associates 737 N Michigan Ave A North Michigan Ave 8,485 Renewal 15 Shore Capital Partners 1 E Wacker Dr B East Loop 8,435 New 16 Inman Fitzgibbons 33 N Dearborn St B Central Loop 8,379 Renewal 17 Chittenden Murday & Novotny 303 W Madison St B West Loop 8,043 Contraction 18 Vivaldi Capital Management 225 W Wacker Dr A West Loop 7,501 Renewal 19 Newcold 500 W Madison St A West Loop 5,615 New

Chicago CBD Office | Q4 2020 Investment Sale Activity

MAP # STATUS ADDRESS SUBMARKET CLASS SIZE (SF) ASKING SALE PRICE PRICE/SF SELLER BUYER 1 Sold 110 N Carpenter St (1045 FM A 575,018 $412,500,000 $717 JP Morgan Asset Normandy Properties LLC W Randolph St) Management, Sterling Bay Cos 2 Sold 1515 W. Webster Ave GI A 207,000 $110,250,000 $533 Sterling Bay APEX Capital investment Corp 3 Sold 40-50 E Huron St NMA B 60,000 Undisclosed Undisclosed R2 Companies Undisclosed 4 Sold 318 W Grand Ave RN C 22,187 $2,200,000 $99 Paul Goldstein BMI Management 5 Pending 225 W. Randolph St WL B 849,252 $188,000,000 $220 RBS Securities, Kushner Onni Group Companies, Gellert Global Group 6 Pending 200 W Jackson Blvd WL A 483,340 $150,000,000 $310 White Oak Realty Partners New York Life Real Estate Investors 7 Pending 2020-2032 N Clybourn Ave GI B 153,602 TBD TBD Anixter TBD 8 Pending 555 W Monroe St WL A 429,316 TBD TBD Principal Financial Group TBD 9 For Sale 65 E Wacker Pl EL B 226,420 TBD TBD Wilton US 65 East LLC TBD 10 For Sale 300 W. Adams (leasehold) WL C 254,418 $30,000,000 $108 Alliance HSP TBD 11 For Sale 216 W. Jackson WL C 176,622 $27,000,000 $135 Marc Realty TBD 12 For Sale 651-659 W Washington WL B 140,000 TBD TBD Horwitz & Company TBD Blvd 13 For Sale 105 W Madison St CL B 134,220 $26,750,000 $291 Windy City RE TBD 14 For Sale 1112 S Wabash Ave SL C 75,000 TBD TBD ABMA Ents-3 Inc TBD 15 For Sale 1400-1416 W Fulton St FM B 62,555 TBD TBD North American Real Estate TBD 16 For Sale 2017 N Mendell St FM B 60,718 TBD TBD The Missner Group TBD 17 For Sale 333 S Ashland Ave FM C 59,411 TBD TBD Amalgamated Lf & Hlth TBD Insur Co 18 For Sale 230 W Superior St RN B 43,324 $12,600,000 $290 Horwitz & Company TBD 19 For Sale 213 N Morgan St-part of a FM C 40,000 TBD TBD Walton Street Capital TBD 3 property portfolio 20 For Sale 212 N Sangamon St-part FM C 38,616 TBD TBD Walton Street Capital TBD of a 3 property portfolio 21 For Sale 28 E Ohio St NMA C 28,700 $6,500,000 $226 Sherman Corp TBD 22 For Sale 1400 W Hubbard St FM B 26,417 TBD TBD Hubbard St LLC TBD 23 For Sale 434 W Ontario St RN C 24,810 $5,700,000 $229 Fifth Third Bank TBD

5 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Submarket Indicators Central Loop CENTRAL LOOP Q4 2020 Q3 2020 Q4 2019 VACANCY RATE 15.7% 15.5% 14.2% The Central Loop resides in the heart of the CBD Loop. The submarket is bordered by the on the north, Van AVAILABILITY RATE 24.6% 23.4% 19.9% Buren Street on the south and Wells Street and on QUARTERLY NET ABSORPTION (SF) (421,508) (197,056) (125,349) the West and East, respectively. The second largest submarket in YTD NET ABSORPTION (SF) (863,063) (441,555) (60,552) the Chicago CBD, the Central Loop is best known for its LaSalle RENTAL RATES (PSF) $40.99 $41.40 $42.24 Street corridor and its historic distinction as Chicago’s core SUBLEASE VACANCY (SF) 489,563 345,890 335,345 financial district. Although this distinction has dissipated some during the last decade, the submarket remains home to several SUBLEASE AVAILABLE (SF) 1,096,287 909,035 535,135 of the city’s largest financial institutions, banks, and professional UNDER CONSTRUCTION (SF) 0 0 0 services firms. INVENTORY (SF) 37,153,964 37,133,497 37,416,310 Vacancy & Net Absorption NetNet Absorption Absorption & Vacancy & Vacancy » The Central Loop submarket reported a negative net Central Loop Submarket 1,000,000 18.0% 791,288 absorption of 421,508 square feet. This is the highest 800,000 16.0%

600,000 negative quarterly net absorption for this submarket since 14.0% 400,000 2009 and the hightest of all CBD submarkets this quarter. 12.0% 200,000 Year-to-date totals of negative 863,063 square feet is the 10.0% 0 (52,235) (26,804) (88,694) (60,552) 8.0% highest negative net absorption for this area in 20 years -200,000 6.0% -400,000 (The highest year-to-date total was recorded in 2000 at over (408,064) 4.0% one million negative square feet). -600,000 -800,000 2.0% (863,063) -1,000,000 0.0% » Vacancy increased significantly in this submarket to 15.7 2014 2015 2016 2017 2018 2019 2020 percent as 2020 closed. This is highest total quarterly Source: Costar; Colliers International Research Absorption Vacancy vacancy since 2006. Asking Gross Rental Rates » In the final quarter of 2020, every asset class had negative AskingCentral Loop Gross Submarket Rental Rates $50.00 50 net absorption. Class B space took the largest hit in Class A negative activity in both direct and sublease space with total $45.00 45 Class B negative net absorption of 342,304 square feet. Sixteen $40.00 40 $35.00 35 out of the thirty-two Class B buildings in the Central Loop Class C $30.00 30 reported some level of negative net absorption. Most $25.00 25

buildings reporting a range of 5,000-10,000 square feet in $20.00 20

consolidations or move outs. $15.00 15 » The Central Loop area will continue to be challenged with $10.00 10 major vacancies over the next few years with a potential of $5.00 5 $0.00 0 more than two million square feet vacated. 2014 2015 2016 2017 2018 2019 2020 Source: Costar; Colliers International Research » Bank of America made its move from 135 S LaSalle St in the Large Blocks of Available Space Central Loop to its namesake new tower in the West Loop. CentralLarge Loop Submarket Blocks of Available Space The vacated 780,000 square feet is listed as available but 135 S LaSalle St 672,618 has not been officially listed as vacant. This vacancy will hit 30 N LaSalle St 225,500 77 W Wacker Dr 170,267 the market in the coming months as Bank of America fully 111 W Monroe St 164,387 145 S Wells St 160,195 completes their move. 175 W Jackson Blvd 157,830 33 W Monroe St 144,727 161 N Clark St 144,710 2 N LaSalle St 139,669 10 S LaSalle St 108,090 111 W Washington St 107,983 203 N LaSalle St 106,849 1 S Dearborn St 106,624 70 W Madison St 105,230 131 S Dearborn St 102,840 425 S Financial Pl 102,756

6 CLASS A CLASS B » Additionally, BMO will be leaving several Central Loop properties Forecast totaling 800,000 square feet and Chapman & Cutler is also vacating 160,000 square feet in the area. Both tenants will move » In 2020, Central Loop rental rates have declined significantly by into the BMO tower at 320 S Canal St in the West Loop in 2022. $1.25 per square foot on average in year-over-year comparisons. It remains to be seen if these spaces will be sufficiently prefilled It is expected that all asset classes in the Central Loop will in this next year. continue to see rates decline and landlords will not be able to hold rates as more quality space continues to go vacant. Rents Experiencing the highest vacancy rate in 14 years and very » Central Loop overall average asking rental rates decreased $0.48 little new activity, the Central Loop is expected to see the rate quarter-over-quarter to $40.99 per square foot gross in the increase in 2021. fourth quarter. This is the fourth consecutive quarterly decrease overall in this market. Year-over-year, overall asking rates decreased a staggering $1.25 per square foot gross. » Class A gross asking rental rates averaged $46.35 per-square- foot in the last quarter, an increase of a negligible 9 cents, which is due to new 2020 tax increases rather than overall average increases. » Class B gross asking rental rates decreased significantly by 64 cents to $38.56 per square foot in the fourth quarter, reflecting high vacancy in this asset class. » Class C gross asking rental rates also decreased significantly by 65 cents to $28.07 per square foot in the fourth quarter. This is a $2.38 drop in asking rates.

Large Blocks of Availability

» The Central Loop has the most large blocks (100,00+ square feet) of contiguous and direct space available (a total of sixteen blocks in sixteen buildings). There are eleven large contiguous blocks in Class A buildings and five in Class B buildings. The largest contiguous block is 672,618 square feet available at 135 S LaSalle St where Bank of America has already begun to vacate for the now completed tower in the West Loop.

» The second largest block of space available is in 30 N LaSalle St at 225,500 square feet on consecutive floors 2 to 12. This makes up close to 35 percent of the building available for lease.

Leases

» One notable lease signing occurred as Simplex Investments signed a 26,000 SF expansion at 230 S Lasalle St.

Sales

» No new office sales were signed in the Central Loop in the fourth quarter of 2020.

» The most significant building listed for sale this year was the Citadel Center (131 S. Dearborn St), a 1,504,364 square feet building that was offered for $620 million (or $413 per square foot) by a Korean Syndicate in the third quarter. It has since refinanced and building is now off the market.

Construction

» No new office construction is anticipated in the foreseeable future.

7 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Submarket Indicators East Loop EAST LOOP Q4 2020 Q3 2020 Q4 2019 VACANCY RATE 16.7% 16.1% 15.9% The East Loop possesses a dynamic inventory base that includes office towers interspersed amongst residential condominium AVAILABILITY RATE 20.4% 19.7% 15.6% buildings. With Millennium Park, the city’s largest public space, QUARTERLY NET ABSORPTION (SF) (281,236) 302,610 69,693 serving as the submarket’s focal point, the East Loop offers a YTD NET ABSORPTION (SF) 136,936 418,172 136,063 unique office environment that is conducive to the work-life RENTAL RATES (PSF) $37.51 $37.57 $38.24 balance often desired by the tenants that have an office there. SUBLEASE VACANCY (SF) 335,491 289,416 305,720 Although the East Loop’s distinct culture continues to remain attractive to more eclectic office tenants such as advertising SUBLEASE AVAILABLE (SF) 664,171 564,166 430,596 firms, not-for-profit organizations, and educational institutions, UNDER CONSTRUCTION (SF) 0 0 652,452 recently, landlords of the submarket have been successful in INVENTORY (SF) 27,506,508 27,506,508 27,250,779 retaining and attracting traditional office space users by offering more affordable space options relative to those available in the Central and West Loop. The submarket is bordered by the NetNet Absorption Absorption & Vacancy & Vacancy East Loop Submarket Chicago River on the north, Van Buren Street on the South, Lake 600,000 18.0% 414,976 Michigan on the East, and State Street on the West. 400,000 16.0%

207,816 14.0% 200,000 136,936 82,187 Vacancy & Net Absorption 12.0% 0 (46,154) (30,598) 10.0% (200,000) » The East Loop submarket reported a total negative net 8.0% (400,000) absorption of 281,236 square feet in the final quarter of 6.0% (600,000) 2020. Year-to-date net absorption ended positively with 4.0% (800,000) a total of 136,936 square feet for the collective year. The (745,207) 2.0% (1,000,000) 0.0% largest positive needle mover for the year in this submarket 2014 2015 2016 2017 2018 2019 2020 was Northern Trust moving into 404,719 square feet at 333 Source: Costar; Colliers International Research Absorption Vacancy S Wabash St last quarter. In the fourth quarter, high negative AskingAsking Gross Gross Rental Rental Rates Rates net absorption was a combination of small to mid-size East Loop Submarket $50.00 50 tenants, primarily in class B assets consolidating, contracting, Class A $45.00 45 or moving out entirely. Class B $40.00 40 » Total vacancy increased up 60 basis points to 16.7 percent $35.00 Class C 35 $30.00 30 quarter-over-quarter. Year-over-year total vacancy is up 80 $25.00 25 points from 15.9 percent in 4Q19. Class A and B vacancy $20.00 20

made the most impact. $15.00 15

$10.00 10 » Class A vacancy increased 60 basis points to 12.3 percent $5.00 5 quarter-over-quarter. Year-over-year, it jumped 500 basis $0.00 0 points (or 5 percent) from 7.3 percent in 4Q19. This is the 2014 2015 2016 2017 2018 2019 2020 first increase of Class A vacancy in the East Loop after three Source: Costar; Colliers International Research consecutive quarters of vacancy decreases. Large Blocks of Available Space East Loop SubmarketLarge Blocks of Available Space » Class B vacancy increased significantly to 19.6 percent from 24 E Washington St 616,218 17.9 percent quarter-over-quarter. Class B quarterly net 200 E Randolph St 170,462 absorption was negative 220,871 square feet—the highest 200 E Randolph St 158,450 233 N Michigan Ave 143,067 negative net absorption for Class B assets in a single quarter 55 E Washington St 105,000 for this submarket in two years. CLASS A CLASS B

8 » Class C assets still had negative net absorption of 17,252 Sales square feet. However, since this is the lowest negative quarterly absorption of the year in this class, vacancy improved from 17.4 » There were no notable office buildings sold in the East Loop in percent to 16.2 percent quarter-over-quarter. There is little the fourth quarter. expectation that much activity will happen in the Class C class in Construction the coming quarters. » There was no new construction completed in the East Loop Rents in the final quarter of 2020. The last notable construction » Total average gross asking rental rates in the East Loop completion was Brookfield Asset Management’s renovation of the decreased only 6 cents to $37.51-per-square-foot gross quarter- top floors (8- 13) of 111 N State St (24 E. Washington) known as over-quarter. This is now the fourth consecutive quarterly the former Marshall Field’s building in the first quarter of 2020, decrease for the overall market average. Year-over-year, East which added 672,590 square feet of new office inventory to this Loop rental rate averages are down 73 cents per square foot. It submarket this year. No other new construction is expected for is expected that overall averages in this submarket will continue the East Loop in 2021. There is a 200,000 square feet building to drop in small quarterly increments over the coming year, proposed at 424-434 S Wabash Ave: this is expected to primarily mostly fueled by class C rate and possibly class B drops. function as a medical office building and is slated to deliver in 2022 but it is unlikely to break ground without a significant » Class A office assets continue to hold its face rates, dropping only portion preleased. 2 cents this quarter to $45.15-per-square-foot gross. Year-over- year, class A rates decreased just 19 cents per square foot. East Forecast Loop class A rates are already the lowest of all submarkets and » The East Loop has held fast to overall average face rental rates is therefore not expected to decrease significantly over the next in 2020 as this market already has the lowest average rents in year. Class A assets of all submarkets. Class B and C assets will start » Class B office assets also held fast at $39.03-per-square-foot to show more incremental decreases of rental rates moving gross (a one cent difference quarterly). forward. Vacancy is expected to inch up in 2021.

» Class C office rates significantly fell quarter-over-quarter to » An indicator of less interest is the fact that there has been $30.92-per-square-foot gross (a seventy-five-cent difference little activity in the area’s newest asset, the renovated 24 E quarterly). Year-over-year, class C rates decreased $1.07-per- Washington St. This building remains 91 percent vacant since it square-foot gross. This may be a sign that Class C asset holders hit the market in 1Q20. are seeing competition in the market and becoming even more aggressive to fill their space.

Large Blocks of Availability

» The East Loop has five blocks of contiguous and direct space of 100,000 square feet or more available in four buildings. These building offerings did not change quarter-over-quarter for the entirety of 2020. The largest block of space is 616,218 square feet at 24 E Washington St, the new development above the retail floors of Macy’s.

» Additional buildings’ large offerings are in 233 N Michigan Ave on floors 22-25 for 143,067 square feet and 55 E Washington with 105,000 square feet.

» 200 E Randolph St has two separate large blocks on floors 16-19 for 158,460 square feet and floors 62-66 for 170,462 square feet. 200 E Randolph’s large block of space will become available when the Federal Home Loan Bank of Chicago finishes its move to the Old Main Post Office in 2021.

Leases

» There were no sizable direct leases signed in the East Loop in the fourth quarter.

9 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Submarket Indicators North Michigan Avenue NORTH MICHIGAN AVENUE Q4 2020 Q3 2020 Q4 2019 VACANCY RATE 10.0% 10.4% 7.5% The North Michigan Avenue submarket possesses a unique building composition comprised of hotels, retail space, office AVAILABILITY RATE 12.5% 12.7% 11.1% buildings, medical facilities, and residential properties. Its QUARTERLY NET ABSORPTION (SF) (8,081) (46,967) 16,173 unique inventory composition and peripheral location make YTD NET ABSORPTION (SF) (385,554) (377,473) (34,181) it an appealing home for less traditional office tenants. The RENTAL RATES (PSF) $40.04 $40.13 $40.12 submarket’s small office tenant base is comprised of primarily SUBLEASE VACANCY (SF) 170,123 172,750 61,818 advertising firms, media agencies and a growing number of medical office users that desire proximity to the large hospitals in SUBLEASE AVAILABLE (SF) 262,948 279,968 155,712 the area. The submarket is bordered by on the north, UNDER CONSTRUCTION (SF) 0 0 0 the Chicago River on the south, State Street on the west and Lake INVENTORY (SF) 11,166,045 11,166,045 10,940,562 Michigan on the east.

Vacancy & Net Absorption Net Absorption Absorption & Vacancy & Vacancy North Michigan Avenue Submarket 500,000 18.0% 401,899 » With four consecutive negative net absorption quarters, 400,000 16.0%

300,000 14.0% the North Michigan Avenue submarket is not faring well 216,083 203,257 200,000 12.0% but did improve slightly this quarter. Year-to-date, total net 89,871 100,000 2,228 10.0% absorption was negative 385,554 square feet. The final 0 8.0% quarter did have the least negative net absorption with only (100,000) (34,181) 6.0% (200,000) 8,081 square feet reported. In a year-over-year comparison, 4.0% (300,000)

(400,000) 2.0% 2020 had over 351,000 square feet more total move outs/ (385,554) (500,000) 0.0% contractions than 2019. 2014 2015 2016 2017 2018 2019 2020

Source: Costar; Colliers International Research Absorption Vacancy » Class A assets in North Michigan Avenue showed a positive total net absorption this quarter of 39,194 square feet, a marked improvement from four consecutive quarters of AskingAsking Gross Gross Rental Rental Rates Rates North Michigan Avenue Submarket negative activity. $50.00 50 Class A $45.00 45 Class B » The negative absorption can be attributed to Class B direct $40.00 40

and sublease space this quarter with Class B reporting $35.00 35

a negative net of 48,235 square feet—a sign that in this $30.00 Class C 30 downturned market, class B tenants are contracting or $25.00 25 looking for deals in Class A upgrades. $20.00 20 $15.00 15 » Class C assets showed little activity, reporting only 960 $10.00 10 square feet of positive net absorption. $5.00 5 $0.00 0 2014 2015 2016 2017 2018 2019 2020 » Overall, North Michigan Avenue vacancy dropped 40 basis Source: Costar; Colliers International Research points to 10.0 percent quarter-over-quarter. Overall vacancy has been inching up steadily for four consecutive quarters and is expected to stay steady in the 10 percent range over the next few quarters as very little new activity has been recorded in the sector.

10 Rents Sales

» The North Michigan Avenue submarket reported a decrease in » There was one office building sales transaction finalized in the the overall average asking rental rates to $40.04 from $40.13 North Michigan Ave submarket during the fourth quarter of per-square-foot gross. All assets classes decreased. 2020. 40-50 E Huron St was on the market for $149.83 per square foot by R2 Companies. It sold to a private buyer for an » Class A office assets fell below $46 mark to $45.91, a 33-cent undisclosed final amount. decrease from the previous quarter. » There is one office building for sale in this area: 28 E Ohio St, a » Class B office rents decreased from $39.94-per-square-foot 28,700 square foot building is being offered by Sherman Corp for gross to $39.30. approximately $226 per square foot.

» Class C Class B office rents stayed steady at $25.95 per-square- Forecast foot gross. » North Michigan Avenue activity is not expected to improve Large Blocks of Availability drastically in 2021. The submarket remains limited by its lack of new building options. High-end retail space is also suffering high » There are currently no large, contiguous blocks of space available vacancy in this area. Competitive pricing remains very appealing within the North Michigan Avenue submarket. There has been in this submarket. However, as pricing inches down in other no contiguous space in excess of 100,000 square feet over the submarkets, this wil no longer be an edge. past 61 months as this submarket’s buildings with smaller floors plates, are not conducive to large contiguous blocks.

Leases

» No large notable lease transactions occurred in the North Michigan Avenue submarket during the fourth quarter.

11 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Submarket Indicators River North RIVER NORTH Q4 2020 Q3 2020 Q4 2019 VACANCY RATE 13.4% 12.1% 7.8% River North is dynamic submarket that contains a mix of office options ranging from Class B and C brick and timber loft-style AVAILABILITY RATE 20.1% 17.9% 13.7% properties to some of its newest Class A trophy office towers. QUARTERLY NET ABSORPTION (SF) (192,985) (138,839) (12,351) The range in office space options captures the interest of both YTD NET ABSORPTION (SF) (696,524) (503,539) 14,600 traditional and unconventional office users. This diverse mix RENTAL RATES (PSF) $41.79 $42.57 $43.35 of office types coupled with an abundance of trendy amenities SUBLEASE VACANCY (SF) 369,433 319,125 131,613 within walking distance that appeals to the younger workforce has contributed to the submarket’s stability. The submarket’s SUBLEASE AVAILABLE (SF) 694,825 675,440 399,038 boundaries include Oak Street on the north, the Chicago River on UNDER CONSTRUCTION (SF) 1,615,023 1,615,023 93,535 the south and west and State Street on the east. INVENTORY (SF) 17,077,034 17,082,784 17,026,115

Vacancy & Net Absorption NetNet Absorption Absorption & Vacancy & Vacancy » The River North submarket reported a total negative net River North Submarket 600,000 16.0%

absorption of 192,985 square feet in the fourth quarter of 415,786 356,578 14.0% 2020. This represents five consecutive quarters of negative 400,000 12.0% 200,000 90,726 absorption. Year-to-date net absorption is negative 696,524 10.0% 0 (21,558) square feet which is the second highest year to date total of (48,903) 8.0% (200,000) (128,241) all CBD submarkets (Central Loop had the highest year to 6.0%

(400,000) date total). 4.0%

(600,000) 2.0%

(696,524) » Quarter-over-quarter, the total overall vacancy rate (800,000) 0.0% increased from 12.1 percent to 13.4 percent. River North’s 2014 2015 2016 2017 2018 2019 2020 Source: Costar; Colliers International Research Absorption Vacancy current office vacancy is the highest this submarket has seen since 2012. The year-over-year difference shows a dramatic AskingAsking Gross Gross Rental Rental Rates Rates increase of 560 basis points from 7.8 percent at the end of River North Submarket $50.00 Class A 50 2019. $45.00 45 Class B $40.00 40 » Class A assets reported a net negative absorption of 35,885 $35.00 35

square feet, increasing the Class A vacancy rate to 10.4 $30.00 Class C 30

percent from 9.8 percent quarter-over-quarter. This is now $25.00 25

the highest class A vacancy River North has seen since $20.00 20 2014. $15.00 15 $10.00 10 » Like most of the Chicago area, Class B assets in River North $5.00 5 $0.00 0 reported the most total net negative absorption with 101,408 2014 2015 2016 2017 2018 2019 2020

square feet. Class B vacancy rate increased to 16.1 percent Source: Costar; Colliers International Research from 13.8 percent. Current River North Class B vacancy is at the highest point in ten years. Class B negative activity came Large Blocks of Available Space primarily in increases in direct space but sublease vacantRiver North Submarket Large Blocks of Available Space spaces have increased as well. 222 Merchandise Mart Plz 304,815

333 W Wolf Point Plz 291,300 » Class C assets also contributed the total negative net 350 N Orleans St 164,136

absorption with 55,596 square feet of negative net, primarily 600 W Chicago Ave 150,000

in direct space. 311 W Huron St 139,500

CLASS A CLASS B

12 » Similar to previous quarter’s activity, the final quarter of 2020 in Leases River North continues to show the impact of a collection of small tenants move outs. There were no large tenant move outs that » There were no notable leases in the River North area over impacted the market negatively but rather several small tenant 20,000 square feet. consolidations across all classes that added up to total negative Sales absorption for five consecutive quarters. » 318 W Grand Ave sold this quarter in River North. This is a class Rents C, 22,187 square foot building. It sold for $99.00 per square foot » River North average asking rental rates dropped by 78 cents (or $2.2 million) by Paul Goldstein to BMI Management. There quarter-over-quarter to $41.79-per-square-foot gross, a three are currently two office buildings under 50,000 square feet for year low for this area. Year-over-year, rents have decreased by sale in the area: 230 W Superior St and 434 W Ontario St. $1.56 per square foot. Construction » Class A average asking rental rates decreased by 8 cents from » There are four class A buildings under construction in the River last quarter to $47.57-per-square-foot gross. In a year-over-year North area for a total of 1,1615,023 square feet comparison, Class A rents dropped dramatically $1.54 per square foot. » The largest building, SalesForce Tower—333 W Wolf Point Plaza, 1,200,202 square feet building along the Chicago River—is » Class B average asking rental rates made the most overall impact expected to be completed by Hines by 2023. Forty four percent in decreases this quarter reporting a $1.12 drop to $38.95-per- of the building is already preleased. square-foot. This is also a three year low in this asset class for River North. » Latsko Interests’ property, 448 N Lasalle St is expected to add 174,599 square feet to the area by March 2021. It is currently » Class C dropped marginally to $28.06 from $28.15 quarter-over- listed as 28 percent preleased with WeWork offering their space quarter. as sublease space. Large Blocks of Availability » Under construction are two Urban Innovations office buildings— » There are currently five large, contiguous blocks of space 311 W Huron St (151,889-square-feet) and 306 W Erie St available (over 100,000 square feet) in five office buildings within (93,535-square-feet). They are expected to deliver by April and the River North submarket. There are three spaces in existing September of 2021, respectively. 311 W Huron is offering 100% buildings and two are in buildings currently under construction. of the building still vacant and 306 W Erie St is offering 75% of These are the same five spaces available in the third quarter as this building as vacant. there has been no interest in these large blocks of space in the Forecast past few quarters. » The River North submarket historically possessed the lowest » The largest block of contiguous direct available space in an vacancies of all surrounding submarkets. But after five existing building is 304,815 square feet at the Merchandise Mart consecutive quarters of negative absorption, it is now just the on floors 15 and 16. second lowest behind North Michigan Ave submarket. Vacancy » The second largest block of existing contiguous office space is expected to continue to increase as three new constructions is in 350 N Orleans where 164,136 square feet became vacant will hit the market this coming year with significant space empty. when WPP left for 333 N Green St in Fulton Market in the second There have been no new large notable signings that point to quarter of 2020. future positive absorption in the near term. Tenants looking to stay in the River North area but are up to renew will find that » The third largest existing block of contiguous office space is in terms will be favorable and options in this once very tight market 600 W. Chicago on the 3rd floor for 150,000 square feet, offered will be plentiful especially with more new building option this as a sublet from Groupon. area has seen since 2009.

» Additionally, 333 W Wolf Point (Salesforce Tower) is offering 370,800 square feet of contiguous space when this new office building is completed in 2023. 311 W Huron St is currently marketing 139,500 square feet of contiguous available space when it completes in second quarter of 2021.

13 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Submarket Indicators West Loop WEST LOOP Q4 2020 Q3 2020 Q4 2019 VACANCY RATE 13.7% 12.0% 12.7% The West Loop’s reputation as the CBD’s leading submarket is the result of it possessing the largest office inventory of any AVAILABILITY RATE 19.9% 17.8% 15.1% submarket, its proximity to public transit and tenant desire for the QUARTERLY NET ABSORPTION (SF) (264,954) 321,594 490,139 image associated with being located on or near Wacker Drive, YTD NET ABSORPTION (SF) 311,654 576,608 1,423,161 an address that has a long-standing positive reputation for office RENTAL RATES (PSF) $46.06 $46.21 $46.23 tenants. Further contributing to the submarket’s growth was SUBLEASE VACANCY (SF) 1,231,017 642,912 643,878 the development boom experienced over the past decade which added several highly efficient, state of the art trophy towers to SUBLEASE AVAILABLE (SF) 2,776,458 2,084,300 1,385,232 building inventory. The West Loop is bordered on the north by UNDER CONSTRUCTION (SF) 1,497,211 3,009,909 2,713,000 Kinzie Street, on the south by Van Buren Street, by INVENTORY (SF) 55,988,103 54,562,015 54,075,182 on the west and Wells street on the east.

Net Absorption & Vacancy Vacancy & Net Absorption WestNet Loop Absorption Submarket & Vacancy 1,600,000 16.0% 1,423,161 1,400,000 14.0% » The West Loop submarket reported 264,954 square feet of 1,215,283 1,200,000 1,099,733 12.0% negative net absorption in the fourth quarter of 2020. Total 1,000,000 10.0% year-to-date absorption ended positively with 311,654 in 800,000 600,000 8.0% combined positive activity for this submarket. Despite high 462,783 400,000 311,654 6.0% negative absorption this quarter, the West Loop had the most 200,000 4.0% lease signings which will result in future move-ins. 0 (33,690) 2.0% (200,000) (129,465)

(400,000) 0.0% » Overall vacancy ticked up significantly from 12 percent in 2014 2015 2016 2017 2018 2019 2020 3Q20 to 13.7 percent in 4Q20. This is the highest vacancy Source: Costar; Colliers International Research Absorption Vacancy for the West Loop in two years. Negative contributing factors AskingAsking Gross GrossRental Rates Rental Rates were sublease vacancies ticking up significantly in Class B West Loop Submarket $60.00 assets, moving the total sublease vacancy in this submarket Class A from 1.2 percent to 2.2 percent in one quarter. $50.00 Class B

» Class A vacancy increased by 60 basis points quarter-over- $40.00 quarter to 11.7 percent, mostly in direct space. Total net Class C absorption in Class A space was positive 128,078 square $30.00

feet. Year-over-year, Class A space remains 40 basis points $20.00 lower than 12.1 percent in 4Q19. $10.00 » 433 W Van Buren St, which delivered in 4Q2019, was the $0.00 positive needle mover this quarter with PepsiCo moving into 2014 2015 2016 2017 2018 2019 2020 Source: Costar; Colliers International Research 192,000 square feet. Large Blocks of Available Space Rents Large Blocks of Available Space 320 S Canal St 484,601 » Overall West Loop average asking rates dropped by 15 cents 120 S Riverside Plz 257,971 550 W Randolph St 197,500 to $46.06 per-square-foot gross. Year-over-year, overall 1 S Wacker Dr 170,170 West Loop asking rental rates are down 17 cents. It is likely 320 S Canal St 127,824 that rents in this submarket will stay in the low $46 range 311 S Wacker Dr 114,453 101 N Wacker Dr 106,732 overall and not fluctuate dramatically. 233 S Wacker Dr 106,023 222 W Adams St 104,708 191 N Wacker Dr 104,279

CLASS A CLASS B 14 » Class A office average asking rental rates decreased by 17 Sales cents to $50.28-per square-foot gross, quarter-over-quarter. This is the second consecutive quarter that class A rates have » There were no notable office buildings sold in the West Loop in decreased. Year-over-year, Class A rates have decreased the fourth quarter. However, investors continue to watch two nominally by 7 cents per square foot. pending deals in this submarket: 225 W Randolph St and 200 W Jackson Blvd. There are four additional office buildings over » Class B office direct average asking rental rates decreased $0.11 100,000 square feet for sale in the area. A total potential of over quarter-over-quarter to $43.87-per-square-foot gross. Class B 1 million square feet could be sold in the West Loop in 2021. property direct asking rates has been decreasing incrementally for two consecutive quarters. Unlike other submarkets, Class B » A few major buildings that were offered in the beginning of 2020 rates are not expected to dramatically decline in the next few were pulled off the market temporarily. As market conditions quarters as the quality of space in this area outclasses other improve and pandemic issues subside, it is expected that, a few submarkets at this time. more high-quality buildings will be offered in this submarket by the end of 2021. » Surprisingly, Class C rates in the West Loop increased this quarter to $33.00 per square foot compared to $32.51 last Construction quarter. Class C vacancy increased significantly to 17.1% from » Riverside Investment & Development Company and the Howard 14.8%. Therefore, more higher-grade properties in this subclass Hughes Company completed 110 N Wacker Dr, a 55-story came onto the market with slightly higher asking rates. This office tower, adding 1,546,909 square feet in the fourth quarter increase in Class C rates is not an indicator of more interest in of 2020. To date, 110 N Wacker Dr is 80 percent preleased this class. It is expected that these rates will lower in the next (1,227,658 square feet), with Bank of America as the anchor few quarters. tenant. Large Blocks of Availability » Currently, the only building under construction in the West Loop » There are ten large blocks of space available over 100,000 is the BMO Tower (320 S. Canal St). Upon completion, this Union square feet in nine buildings in the West Loop. Six are class Station redevelopment by Riverside Investment & Development A buildings and three are class B buildings. The largest block Company would add 1,491,211 square feet of Class A office of space available is still under construction - BMO Tower, space to Chicago. To date, the building is roughly 49.9 percent 320 N Canal St, which began construction in 2019 and is not preleased (750,659 square feet), with BMO as the anchor tenant. expected to deliver until January 2022. This building has a This building is expected to hit the market in January 2022. 484,601-square-foot block available on floors 34-50. This Forecast building also has a second block of 127,824 square feet available. » Despite high negative absorption this quarter, the West Loop » The largest block of space available in an existing office tower is remains one of the most popular submarkets. Signing activity has at 555 W Monroe St for 422,000 square feet, which is a result of been higher in this area than in any other submarket. With the PepsiCo completing its move into 433 W Van Buren St. delivery of Bank of America Tower at 80 percent preleased, new Leases constructions have not made a major impact on raising vacancy as anticipated. Rates are expected to hold in this submarket in » The West Loop submarket had the largest notable lease activity the coming year. Although the West Loop has the most amount this quarter. The most notable was Industrious signing for of sublease space available at just over 1.2 million square feet, 52,000 square feet in 233 S Wacker Dr. higher demand in this submarket should see this space lease over the next year. » Primera Engineers signed a new lease for 25,569 square feet at 550 W Jackson Blvd.

15 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Submarket Indicators Fulton Market FULTON MARKET Q4 2020 Q3 2020 Q4 2019 VACANCY RATE 28.3% 22.0% 7.5% The Fulton Market’s reputation as Chicago’s top emerging submarket is the result of it possessing the most unique inventory. AVAILABILITY RATE 31.3% 22.8% 12.8% It is the trendy image and concentration of many of the city’s QUARTERLY NET ABSORPTION (SF) 39,205 (4,369) 20,875 creative companies that has transformed Fulton Market from YTD NET ABSORPTION (SF) 220,958 181,753 235,653 an underdeveloped area consisting of warehouse and industrial properties into a rapidly emerging office and residential environment. RENTAL RATES (PSF) $30.01 $30.06 $30.72 Fulton Market submarket contains a mix of office options ranging SUBLEASE VACANCY (SF) 174,694 165,745 14,382 from Class B and C brick and timber loft style properties to new A SUBLEASE AVAILABLE (SF) 372,072 257,593 30,565 Plus modern loft space starting in 2015 with the first major Class A+ build at 1000 W Fulton S to most recent notable new builds, 333 N UNDER CONSTRUCTION (SF) 1,518,847 1,848,911 2,109,957 Green St and 1375 W Fulton St completed in 2020. The submarket INVENTORY (SF) 5,568,032 4,716,726 3,672,498 has experienced significant growth since Google and McDonald’s moved in, propelling the submarket’s development forward Net Absorption & Vacancy substantially. In the near term, this area has seen high vacancy due NetFulton AbsorptionMarket Submarket & Vacancy to a series of new builds completing vacant and pandemic vacancies 800,000 32% from coworking and some tech. The submarket’s boundaries include 700,000 27% on the north, Washington Boulevard on the south, 600,000

500,000 Ashland Avenue on the west, and Halsted Street on the east. 22%

400,000 Vacancy Rate Net Absorption (SF) 17% Vacancy & Net Absorption 300,000

200,000 » Fulton Market had the most vacancy of any submarket reaching 12% a record high of 28.3 percent total vacancy in 4Q20. This is an 100,000 increase of 6.3 percent in just one quarter. This record high 0 7% 2017 2019 2015 2018 2016 2014 was primarily due to the impact of three new Class A buildings 2020 delivering this quarter with a combined 75.2 percent of these AskingAsking Gross Rental Gross Rates Rental Rates three buildings vacant and available. Fulton Market Submarket

» There was 39,205 square feet of total net positive absorption in $50.00 Class A the Fulton Market submarket with Class A recording a total net positive of 83,539 square feet and Class B and C recording over $45.00

43,000 Square feet combined in negative absorption. $40.00 Class B Average » There remains very little new signing activity in the Fulton $35.00 market for the past two quarters, and any future activity is $30.00 expected to be primarily in Class A space. Class C

Rents $25.00

» Class A gross average asking rates decreased by $0.07 per $20.00

square foot quarter-over-quarter to $46.58 PSF gross. $15.00 2017 2019 2018 2016 » Class B rates decreased 41 cents to $34.67 PSF gross. 2020 » Class C rates decreased by 21 cents to $27.95 PSF gross. Large Blocks of Available Space » This is the third consecutive quarter of overall rates dropping in FultonLarge Market Submarket Blocks of Available Space this submarket. Rates are expected to continue to drop over the 400 N Aberdeen St 407,519 next few quarters as new builds will complete and compete in a 800 W Fulton St 217530 market flooded with vacant space. 320 N Sangamon St 250,800 1375 W Fulton St 203,214 167 N Green St 185,733 1043 W Fulton Market 155,292

CLASS A

16 Large Blocks of Availability Forecast » There are six large blocks of space available over 100,000 square » Fulton Market vacancy reached a disquieting high this year. With feet in six Class A buildings in the Fulton Market. Four of the six its continued construction and its exposure to coworking and buildings are still under construction. The largest block of space other social based business, it is not expected that this market is 400 N Aberdeen St where 407,519 contiguous square feet is will continue to maintain high vacancies. It is expected that as available and construction is expected to complete by December new constructions are completed, tenants will be able to sign very 2021. The largest block immediately available (203,214 square feet) competitive lease packages with flexible terms, rates, and incentives. is at 1375 W Fulton St which is also slated as lab space. Leases » There were no large notable leases over 50,000 square feet in the fourth quarter. Platform Portal Innovations signed a new lease at 400 N Aberdeen St, which is still under construction, for 34,125 square feet, which helped bring this new lab building’s availability down to 80 percent. Sales » The Fulton Market area had the most notable sale of all the submarkets this quarter. 110 N Carpenter (1045 W Randolph St), also known as McDonald’s Corporation new downtown headquarters, sold for $412 million or $717 per square foot. This property was sold by JP Morgan Asset Management in joint Venture with Sterling Bay and purchased by investor, Normandy properties LLC. Construction » Three buildings were delivered to Fulton Market in the fourth quarter of 2020. These new deliveries added over 837,493 square feet to the market. Year to date, 1.9 million square feet completed in this area. Of these three new builds, only one was is preleased: » 215 N Peoria St, Fulton East, delivered 89,865 square feet completely vacant » 318 N Carpenter St, a Murphy Development Group project, 104,745 square feet building delivered vacant » 167 N Green St, a Walton Street Capital building, 642,883 square feet building delivered 53 percent leased » Currently, there is 1.5 million square feet of office space under construction in the Fulton Market. The largest building is 800 W Fulton St, a Thor Equities project that is expected to deliver 480,490 square feet of Class A space by the first quarter of 2021. The most notable project is 400 N Aberdeen St, also called Fulton Labs, which will deliver 423,454 square feet of much needed lab/ bio tech space to the Chicago market by the end of 2021. » Six of the eight buildings under construction now, are expected to deliver before the end of 2021, adding an additional 1.4 million square feet by the end of 2021. Any new construction proposed for the area may be paused and not break ground until an anchor tenant signs for a significant portion of the property.

“In the midst of the COVID-19 outbreak, information and data is emerging at a quick and uneven rate. The information contained herein has been obtained from sources deemed reliable at the time the report was written. 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.”

17 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Large Blocks of Available Space Overall CBD Appendix A - Large Blocks of Available Space (Overall CBD)

135 S LaSalle St 672,618 24 E Washington St 616,218 320 S Canal St 484,601 400 N Aberdeen St 407,519 222 Merchandise Mart Plz 304,815 333 W Wolf Point Plz 291,300 120 S Riverside Plz 257,971 320 N Sangamon St 250,800 30 N LaSalle St 225,500 800 W Fulton St 217,530 1375 W Fulton St 203,214 550 W Randolph St 197,500 167 N Green St 185,733 200 E Randolph St 170,462 77 W Wacker Dr 170,267 1 S Wacker Dr 170,170 111 W Monroe St 164,387 350 N Orleans St 164,136 145 S Wells St 160,195 200 E Randolph St 158,450 175 W Jackson Blvd 157,830 1043 W Fulton Market 155,292 600 W Chicago Ave 150,000 33 W Monroe St 144,727 161 N Clark St 144,710 233 N Michigan Ave 143,067 2 N LaSalle St 139,669 311 W Huron St 139,500 320 S Canal St 127,824 311 S Wacker Dr 114,453 10 S LaSalle St 108,090 111 W Washington St 107,983 203 N LaSalle St 106,849 101 N Wacker Dr 106,732 1 S Dearborn St 106,624 233 S Wacker Dr 106,023 70 W Madison St 105,230 55 E Washington St 105,000 222 W Adams St 104,708 191 N Wacker Dr 104,279 131 S Dearborn St 102,840 CLASS A CLASS B 425 S Financial Pl 102,756

Appendix B - Construction Outlook

COMPLETED UNDER CONSTRUCTION PROPOSED

2020 2021 2022

ADDRESS SF PRELEASED SUBMARKET ADDRESS SF PRELEASED SUBMARKET ADDRESS SF PRELEASED SUBMARKET 110 N Wacker Dr 1,546,909 79% West Loop 800 W Fulton St 480,490 49% Fulton Market BMO Tower - 320 S Canal 1,497,211 50% West Loop 24 E Washington St 672,590 8% East Loop 400 N Aberdeen St 423,454 4% Fulton Market 590 W Madison St 1,200,000 West Loop 167 N Green St 642,883 53% Fulton Market 320 N Sangamon St 301,979 14% Fulton Market 330 N Green St 671,000 5% Fulton Market

333 N Green St 553,412 91% Fulton Market 448 N Lasalle St 174,599 28% River North 1200 W Fulton St 500,000 Fulton Market 1375 W Fulton St 301,260 20% Fulton Market 1043 W Fulton Market 159,900 3% Fulton Market 925 W Fulton St 449,600 Fulton Market 318 N Carpenter St 104,745 0% Fulton Market 311 W Huron St 146,687 0% River North 375 N Morgan St 185,000 Fulton Market 1155 W Fulton St 102,642 0% Fulton Market 306 W Erie St 93,535 23% River North 320 W Erie St 150,000 River North 905 W Fulton Market 98,000 97% Fulton Market 732 W Randolph St 48,000 West Loop 777 Franklin Ave 127,000 River North 215 N Peoria St 89,865 0% Fulton Market 1100 W Fulton Market 45,000 100% Fulton Market 150 N Clinton St 79,989 West Loop 400 N Noble St 57,173 0% Fulton Market 312 N Laflin St 37,500 0% Fulton Market 609 W Randolph St 75,000 West Loop 1040 W Fulton Market St 29,401 90% Fulton Market 900 W Fulton St 62,302 Fulton Market 1020 W Randolph St 40,000 25% Fulton Market 1514 W Carroll Ave 31,500 Fulton Market 932 W Randolph St 30,524 0% Fulton Market

2023+

ADDRESS SF PRELEASED SUBMARKET 655 W Madison St 1,250,000 West Loop 130 N Franklin St 1,190,629 West Loop Salesforce Tower 1,200,202 45% River North 333 W Wolf Point 450 N Dearborn St 674,256 6% River North

1000 W Carroll St 536,000 Fulton Market

1200 Caroll St 462,000 Fulton Market

360 N Green St 450,000 Fulton Market

345 N Morgan St 230,000 Fulton Market

424-434 S Wabash Ave 200,000 East Loop

609 W Randolph St 75,000 West Loop

Clybourn Lincoln Yards Corridor The 78 South Loop

18 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International Fourth Quarter 2020 Office Market Statistics | Local Standards (includes competitive owner-occupied properties)

DIRECT SUBLEASE TOTAL DIRECT SUBLEASE TOTAL DIRECT SUBLEASE TOTAL DIRECT NET SUBLET NET TOTAL NET YTD NET ASKING GROSS TOTAL INVENTORY DIRECT SUBLEASE TOTAL CLASS BLDGS AVAILABLE AVAILABLE AVAILABLE AVAILABILITY AVAILABILITY AVAILABILITY VACANCY VACANCY VACANCY ABSORPTION ABSORPTION ABSORPTION ABSORPTION DIRECT RENT SF VACANT (SF) VACANT (SF) VACANCY SF (SF) (SF) (SF) (%) (%) (%) % % % (SF) (SF) (SF) (SF) PER SF CENTRAL LOOP

Class A 16 15,370,105 3,247,082 206,398 3,453,480 21.1% 1.3% 22.5% 2,146,275 65,932 2,212,207 14.0% 0.4% 14.4% (31,652) (30,166) (61,818) (139,498) $46.35

Class B 31 19,401,473 4,276,041 872,002 5,148,043 22.0% 4.5% 26.5% 2,716,710 405,744 3,122,454 14.0% 2.1% 16.1% (243,529) (98,775) (342,304) (613,431) $38.56

Class C 14 2,382,386 510,548 17,887 528,435 21.4% 0.8% 22.2% 487,294 17,887 505,181 20.5% 0.8% 21.2% (10,691) (6,695) (17,386) (110,134) $28.07

Subtotal 61 37,153,964 8,033,671 1,096,287 9,129,958 21.6% 3.0% 24.6% 5,350,279 489,563 5,839,842 14.4% 1.3% 15.7% (285,872) (135,636) (421,508) (863,063) $40.99

EAST LOOP

Class A 5 7,470,360 1,293,038 129,071 1,422,109 17.3% 1.7% 19.0% 813,969 102,944 916,913 10.9% 1.4% 12.3% (15,489) (27,624) (43,113) 92,020 $45.15

Class B 16 12,841,349 2,588,959 497,920 3,086,879 20.2% 3.9% 24.0% 2,316,143 206,738 2,522,881 14.0% 2.1% 16.1% (243,529) (11,825) (220,871) 165,267 $39.03

Class C 34 7,194,799 1,060,757 37,180 1,097,937 14.7% 0.5% 15.3% 1,137,766 25,809 1,163,575 15.8% 0.4% 16.2% (15,024) (2,228) (17,252) (120,351) $30.92

Subtotal 55 27,506,508 4,942,754 664,171 5,606,925 18.0% 2.4% 20.4% 4,267,878 335,491 4,603,369 15.5% 1.2% 16.7% (239,559) (41,677) (281,236) 136,936 $37.51

NORTH MICHIGAN AVENUE

Class A 6 3,801,817 356,909 122,934 479,843 9.4% 3.2% 12.6% 244,671 84,810 329,481 6.4% 2.2% 8.7% 39,194 0 39,194 (112,996) $45.91

Class B 22 5,928,910 743,305 140,014 883,319 12.5% 2.4% 14.9% 681,391 85,313 766,704 11.5% 1.4% 12.9% (41,256) (6,979) (48,235) (232,610) $39.30

Class C 9 1,435,318 28,182 0 28,182 2.0% 0.0% 2.0% 16,849 0 16,849 1.2% 0.0% 1.2% 960 0 960 (39,948) $25.95

Subtotal 37 11,166,045 1,128,396 262,948 1,391,344 10.1% 2.4% 12.5% 942,911 170,123 1,113,034 8.4% 1.5% 10.0% (1,102) (6,979) (8,081) (385,554) $40.04

RIVER NORTH

Class A 10 11,446,996 1,488,673 404,834 1,893,507 13.0% 3.5% 16.5% 924,133 262,651 1,186,784 8.1% 2.3% 10.4% (96) (35,885) (35,981) (306,434) $47.57

Class B 30 4,463,820 861,606 259,983 1,121,589 19.3% 5.8% 25.1% 639,214 81,527 720,741 14.3% 1.8% 16.1% (71,671) (29,737) (101,408) (234,280) $38.95

Class C 14 1,166,218 394,955 30,008 424,963 33.9% 2.6% 36.4% 353,503 25,255 378,758 30.3% 2.2% 32.5% (64,702) 9,106 (55,596) (155,810) $28.06

Subtotal 54 17,077,034 2,745,234 694,825 3,440,059 16.1% 4.1% 20.1% 1,916,850 369,433 2,286,283 11.2% 2.2% 13.4% (136,469) (56,516) (192,985) (696,524) $41.79

FULTON MARKET

Class A 15 3,760,014 1,012,299 298,516 1,310,815 26.9% 7.9% 34.9% 1,115,017 101,138 1,216,155 30.3% 2.7% 33.0% 83,539 0 83,539 331,536 $46.58

Class B 21 1,150,811 236,187 44,782 280,969 20.5% 3.9% 24.4% 169,578 44,782 214,360 14.7% 3.9% 18.6% (22,547) 0 (22,547) (39,098) $34.67

Class C 13 657,207 108,619 28,774 137,393 16.5% 4.4% 20.9% 115,758 28,774 144,532 17.6% 4.4% 22.0% (12,838) (8,949) (21,787) (71,480) $27.95

Subtotal 49 5,568,032 1,357,105 372,072 1,729,177 24.4% 6.7% 31.1% 1,400,353 174,694 1,575,047 25.5% 3.2% 28.7% 48,154 (8,949) 39,205 220,958 $30.01

WEST LOOP

Class A 33 33,514,181 4,496,782 1,193,192 5,689,974 13.4% 3.6% 17.0% 3,445,043 471,994 3,917,037 10.3% 1.4% 11.7% 194,086 (66,007) 128,079 687,133 $50.28

Class B 31 18,686,483 3,236,268 1,399,171 4,635,439 17.3% 7.5% 24.8% 2,455,655 674,290 3,129,945 13.1% 3.6% 16.7% (183,278) (120,478) (303,756) (149,163) $43.87

Class C 28 3,787,439 721,688 185,095 906,783 19.1% 4.9% 23.9% 561,799 84,733 646,532 14.9% 2.2% 17.1% (94,668) 5,391 (89,277) (226,316) $33.00

Subtotal 92 55,988,103 8,454,738 2,777,458 11,232,196 15.1% 5.0% 20.1% 6,462,497 1,231,017 7,693,514 11.5% 2.2% 13.7% (83,860) (181,094) (264,954) 311,654 $46.06

TOTAL CHICAGO CBD

Class A 85 75,363,473 10,581,138 1,929,667 12,510,805 14.0% 2.6% 16.6% 8,689,108 1,089,469 9,778,577 11.5% 1.4% 13.0% 269,582 (159,682) 109,900 551,761 $48.01

Class B 151 62,472,846 11,188,221 2,516,922 13,705,143 17.9% 4.0% 21.9% 8,978,691 1,498,394 10,477,085 14.4% 2.4% 16.8% (771,327) (267,794) (1,039,121) (1,103,315) $40.03

Class C 112 16,623,367 2,825,718 323,913 3,149,631 17.0% 1.9% 18.9% 2,672,969 182,458 2,855,427 16.1% 1.1% 17.2% (196,963) (3,375) (200,338) (724,039) $29.32

Subtotal 348 154,459,686 26,661,898 5,867,761 32,529,659 17.3% 3.8% 21.1% 20,340,768 2,770,321 23,111,089 13.2% 1.8% 15.0% (698,708) (430,851) (1,129,559) (1,275,593) $41.91

19 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International MARKET CONTACTS: 400 offices in Sandy McDonald Senior Director of Research | Chicago countries on +1 312 777 2616 68 [email protected] 6 continents United States: 159 Canada: 48 Latin America: 20 Asia Pacific:99 EMEA: 114

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Copyright © 2020 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. 20 Research & Forecast Report | Fourth Quarter 2020 | Downtown Chicago / Office | Colliers International