Savills Studley Research /Fort Worth

Savills Studley Report Dallas/Fort Worth office sector Q1 2015

SUMMARY Market Highlights

AVAILABILITY RATES RISE Dallas CBD (+6.6% to $23.34) and Uptown (+4.6% to $31.65). “As rents in Plano, Frisco and The overall availability rate rose for the second quarter in a row, jumping by 0.6 LEASING SLOWS Uptown spike, tenants have started pp from 21.7% to 22.3%. The Class A rate to tap into the ample and more grew by 0.7 to 23.6% and has increased by Quarterly leasing volume, 2.4 msf, fell below 2.3 pp year-on-year. 3.0 msf for the first time since the fourth reasonably priced options in West quarter of 2012. Tenants have leased 12.8 LBJ and Central Expressway. CONTINUED INCREASE IN msf in the last four quarters, with volume ASKING RENTS decreasing by 3.9 msf from the total of 16.7 Investors, as well, are taking note of msf a year ago. opportunities in this area.” The regional average Class A rent rose by 1.5% to $24.70 and has jumped by 5.2% year-on-year, with particularly sharp annual Ric Kanatzar growth in Las Colinas (+6.3% to $24.92), the Managing Director Savills Studley Report | Dallas/Fort Worth

Growth Strong Yet Stable Office-Using Employment Trends The Metroplex’s economy is growing at a pace that puts it in the top quartile of Millions cities around the world. According to the 0.80 6.0% Brooking Institution's Metropolitan Policy Program, Dallas ranked 69th among the 0.70 4.0% world’s 300 largest metros in terms of 0.60 economic growth during 2014. Macau, 2.0% China, took the top spot. Two other 0.50 metros – Austin and Houston – ranked 38th 0.0% and 39th. In contrast to many cities around 0.40 -2.0% the world and its Texas counterparts on 0.30 the list, Dallas/Fort Worth’s economy is -4.0% not as volatile because its growth comes 0.20 from a diverse set of sectors. In contrast to Silicon Valley, Houston or New York City, the 0.10 -6.0% lack of one dominant industry helps buoy 2010 0.00 2006 2007 2008 2009 2011 2012 2013 2014 2015 -8.0% the regional economy. Moody's Analytics DFW. Office Emp. DFW. - % Annual Change U.S. - % Annual Change recently reported that Dallas enjoys one of Source: Bureau of Labor Statistics the most stable employer bases nationally, with 17.5% of companies in business and professional services, 12.3% in government, Availability Rate Trends 12.2% in education and health services and (%) Availability Rate Trends 10.1% in retail trade. 30% Leasing Takes a Breather 26.4% Quarterly leasing volume fell below 3.0 25% 23.6% msf for the first time since year-end 2012. 25.4% Leasing volume has dropped off due to fewer tenants ingesting massive blocks 20% 21.0% of 200,000 sf or larger. This could be a temporary situation, though. JPMorgan 15% Chase is looking for up to 75 acres of land to build a new campus for about half of its 12,000 employees based in the region. 10% Additionally, TD Ameritrade is reportedly seeking more than 500,000 sf in Dallas/Fort 5% Worth. Class A Class B It remains to be seen whether TD Ameritrade 0% and JPMorgan Chase will join other 2010 1Q 2011 1Q 2012 1Q 2013 1Q 2014 1Q 2015 1Q corporations that have chosen to be based in Richardson, Frisco and Plano. Plano’s emergence as a major corporate center Asking Rent Trends continues. The mayor recently noted that ($/sf) Rental Rate Trends Plano has 34 companies with more than 500 employees, another 17 with more than $30 1,000 employees and nearly half a dozen with more than 3,000. Plano is also seeing $24.70 extensive expansion by smaller and mid- $25 $22.74 sized businesses. Appropriately enough, Plano-based relocation management $20 company Altair Global is one of the expanding firms. The company added $18.93 $15 $17.58 13,960 sf at 7800 N. Dallas Parkway in the Corridor, a 20% increase from the space it already occupies at nearby $10 7500 N. Dallas Parkway.

$5 Class A Class B Significant Cost Savings Draw Tech Firms $0 The region’s lower costs of living and 2010 1Q 2011 1Q 2012 1Q 2013 1Q 2014 1Q 2015 1Q doing business are an easy sell for West

02 Q1 2015

Coast and Northeast tech companies encountering spiraling real estate and labor Availability Rate Comparison Rental Rate Comparison costs. San Francisco-based software firm Availability Rate Comparison Overall Rental Rate Comparison South Fort Worth 5.9% US Index $33.15 AppDynamics is tripling its occupancy in 7.8% Preston Center $31.63 Uptown Dallas, relocating from 5,000 sf at 5340 Southwest Dallas 8.2% $30.54 Fort Worth CBD $26.44 Preston Center 12.5% Legacy Drive in Plano to 15,000 sf at 16000 Central Expressway $23.89 N. Dallas Parkway in Dallas. The company Fort Worth CBD 13.9% North Dallas Corridor $23.72 expects its Dallas headcount to jump from Uptown 16.8% Las Colinas $23.37 US Index 17.0% Dallas CBD $22.61 45 currently to 100 or more within the next DFW Region Far North Stemmons 18.4% $22.10 North Fort Worth $22.00 two years. West LBJ 18.5% South Fort Worth $20.71 Suburban Fort Worth 18.5% Suburban Fort Worth $20.15 Considering its low real estate costs and Richardson Tlcm Corr 18.6% LBJ $19.76 the extensive incentives offered by the city, North Dallas Corridor 18.7% Richardson Tlcm Corr $19.72 West LBJ Central Expressway 21.1% $19.50 provides even stronger Mid-Cities $18.86 DFW Region 22.3% values. Some tech companies are seizing Far North Stemmons $18.32 Mid-Cities 24.9% Northeast Fort Worth $16.57 the opportunity. Comparex USA, a cloud Stemmons 25.7% Southwest Dallas $16.23 solutions and software company based in North Fort Worth 26.4% Stemmons $15.22 East Dallas Germany, will open a sales and operations Las Colinas 26.8% $13.88 Type LBJ 29.2% center housing 200 employees on the New $28.13 19th floor of the Plaza of the Americas Dallas CBD 31.7% Existing - Relet $21.79 Northeast Fort Worth (600 N. Pearl Street). The city’s economic 32.8% Sublet $19.79 0% 5% 10% 15% 20% 25% 30% 35% $0 $5 $10 $15 $20 $25 $30 $35 development director has been working (%) ($/sf) with the company for about two years, and Comparex USA ultimately chose Dallas over Iselin, Cupertino and Seattle. The company Major Transactions plans to have 200 local employees with an average compensation of $85,000 by 2016. Tenant Sq Feet Address Market Area NEC Corporation of America 119,611 3929 W John Carpenter Fwy West LBJ Availability Rising, Rents CenseoHealth 65,516 4055 Valley View Ln LBJ Push Higher Gray Reed & McGraw 58,000 1601 Elm St Dallas CBD With all of the news about relocating firms CEC Entertainment Inc. 55,257 1707 Market Place Blvd Las Colinas and business expansion, a steady increase Huckabee Inc. 44,582 801 Cherry St Fort Worth CBD in availability has been overlooked. Slower Sabre Hospitality Solutions 44,201 2 Campus Cir Mid-Cities leasing, coupled with mounting construction TopGolf USA, Inc. 36,221 8750 N Central Expy Central Expressway activity, appears to be pushing availability Clearsprings Loan Services 34,000 18451 N Dallas Pky North Dallas Corridor higher. The overall availability rate rose for Compass Productions Partners, LP 30,786 15601 Dallas Pky North Dallas Corridor the fourth quarter in a row, jumping by 0.6 McKinsey & Co. 30,000 2021 McKinney Ave Uptown pp from 21.7% to 22.3%. The Class A rate Sum of Top 10 Leases 518,174 Sum of 1st Qtr Leasing Activity 2.4 MSF rose by 0.7 to 23.6% and has increased by 2.3 pp year-on-year. may arise from Downtown’s extensive occupies 350,000 sf and has more than Landlords are still bullish about the market redevelopment activity as one reason for the 1,000 employees at the Solana office and continue to push asking rents higher. move. Diamond McCarthy also highlighted campus in Westlake. Additionally, as new product flows onto the DART line running under the building as the market it is boosting average rents, a reason for its choice. Investors are also targeting the LBJ Freeway. particularly in the North Dallas Corridor and Florida-based Parmenter Realty is reportedly Uptown. The regional average Class A rent While West Plano and Frisco are poised to under contract to buy the three-building rose by 1.5% to $24.70 and has jumped by capture large tenants for years to come, Galleria Towers. This would be Parmenter's 5.2% year-on-year, with particularly sharp Cypress Waters in West LBJ will give them second purchase in the Metroplex; it paid year-on-year growth in Las Colinas (+6.3% a run for their money. The master-planned $130 million for the 1.35-msf CityplaceTower to $24.92), the Dallas CBD (+6.6% to community has already secured 7-Eleven, and plans new development around $23.34) and Uptown (+4.6% to $31.65). Cheddar’s corporate headquarters and the property. Demand from tenants and Nationstar Mortgage. The developer is investors along the LBJ Freeway Corridor West LBJ and Central reportedly in talks with AMN Healthcare has jumped in the last few quarters as the Expressway Rebounding to move its regional office from Irving to a highway construction has gained traction. As rents rise in Las Colinas, the North Dallas new 165,000-sf building to be constructed Buchanan Street Partners mentioned Corridor and Uptown, more tenants are at 8840 Cypress Waters Boulevard. The "significant upgrades" to the highway as leasing space in Central Expressway and healthcare company, currently based at one reason for its recent acquisition of West LBJ. Diamond McCarthy LLP recently 5001 Statesman Drive in Irving, would Granite Tower at 4055 Valley View Lane. In moved its Dallas branch from Downtown to transfer at least 500 jobs to the complex. In addition, rents in this submarket are below a 15,000-sf space at the Tower at CityPlace an even bigger potential victory for Cypress those throughout the region, so investors on the North Central Expressway near Waters, CoreLogic is reportedly negotiating see a strong upside. the West Village. Ironically, the firm noted for a 350,000-sf build-to-suit. The Irvine, concerns about potential disruptions that California-based research firm currently

savills-studley.com/research 03 Savills Studley Report | Dallas/Fort Worth

Leasing Available Availability Asking Rents Map Submarket Total Activity SF Rate Per SF

% pp % Last SF This Change Year This Change Year This Change Year 12 (1000's) Quarter from Ago Quarter from Ago Quarter from Ago Months Last Qtr. Last Qtr. (1) Last Qtr. Dallas CBD 24,862 1,644 7,879 -0.4% 8,758 31.7% -0.1% 35.2% $22.61 0.6% $20.94 1 Dallas CBD - Class A 19,521 1,442 6,579 0.1% 6,019 33.7% 0.0% 30.8% $23.34 0.6% $21.90 Uptown 11,315 833 1,895 15.1% 1,559 16.8% 2.2% 13.8% $30.54 3.5% $28.43 2 Uptown - Class A 8,776 696 1,346 15.6% 1,050 15.3% 2.1% 12.0% $31.65 4.5% $30.25 Central Expressway 10,128 806 2,137 -10.6% 2,527 21.1% -2.5% 25.0% $23.89 2.0% $22.71 3 Central Expressway - Class A 6,141 577 1,510 -12.8% 1,866 24.6% -3.6% 30.4% $25.02 2.1% $23.82 Preston Center 3,460 289 432 -0.1% 394 12.5% 0.0% 11.4% $31.63 1.5% $29.85 4 Preston Center - Class A 2,383 255 291 -1.2% 296 12.2% -0.1% 12.4% $31.33 0.2% $30.67 Stemmons 9,897 345 2,541 -1.0% 2,657 25.7% -0.2% 26.8% $15.22 -0.1% $15.18 5 Stemmons - Class A 3,131 99 580 -5.4% 756 18.5% -1.1% 24.1% $20.06 -0.1% $19.52 LBJ 21,389 1,549 6,248 -0.6% 6,512 29.2% -0.2% 30.7% $19.76 2.0% $18.12 6 LBJ - Class A 8,954 851 2,784 0.4% 2,659 31.1% 0.1% 29.7% $22.39 3.1% $20.24 Richardson Telecom Corridor 24,575 749 4,567 2.7% 3,181 18.6% 0.5% 12.9% $19.72 -0.1% $18.83 7 Richardson Telecom Corridor - Class A 9,034 398 2,029 1.7% 1,106 22.5% 0.4% 12.2% $23.29 -0.1% $22.57 East Dallas 1,151 32 90 8.5% 68 7.8% 0.6% 5.9% $13.79 -0.6% $15.46 8 East Dallas - Class A 185 0 7 0.0% 4 3.9% 0.0% 2.4% $24.25 0.0% $24.25 North Dallas Corridor 34,863 3,366 6,504 5.5% 6,272 18.7% 1.0% 18.2% $23.72 1.5% $23.03 9 North Dallas Corridor - Class A 20,628 2,138 3,515 6.1% 3,384 17.0% 1.0% 16.7% $26.80 0.6% $25.84 Far North Stemmons 3,635 153 667 8.2% 490 18.4% 1.4% 13.5% $18.32 1.1% $18.44 10 Far North Stemmons - Class A 308 0 0 N/A 0 0.0% 0.0% 0.0% N/A N/A N/A Las Colinas 19,170 1,056 5,147 15.8% 4,330 26.8% 3.7% 22.6% $23.37 1.1% $21.86 11 Las Colinas - Class A 12,642 595 3,420 27.1% 2,662 27.1% 5.8% 21.1% $24.92 0.8% $23.45 West LBJ 11,182 736 2,065 7.2% 1,354 18.5% 1.2% 12.3% $19.50 -0.1% $19.29 12 West LBJ - Class A 1,189 336 209 -28.0% 87 17.5% -6.8% 8.6% $21.25 2.6% $20.40 Southwest Dallas 1,642 25 134 6.0% 127 8.2% 0.5% 7.8% $16.23 3.2% $14.65 13 Southwest Dallas - Class A 281 0 16 -16.8% 24 5.5% -1.1% 8.7% $22.25 0.0% $22.25 Mid-Cities 13,470 416 3,349 0.7% 3,365 24.9% 0.2% 25.0% $18.86 -0.9% $19.03 14 Mid-Cities - Class A 4,264 164 1,504 0.0% 1,414 35.3% 0.0% 33.2% $21.37 -1.1% $22.21 Fort Worth CBD 9,016 534 1,251 -6.3% 1,546 13.9% -0.9% 17.2% $26.44 -1.2% $26.74 15 Fort Worth CBD - Class A 5,298 303 849 -8.2% 763 16.0% -1.4% 14.4% $29.34 -0.6% $29.07 Suburban Fort Worth* 7,778 314 1,441 3.9% 1,161 18.5% 0.7% 14.9% $20.15 2.8% $19.56 16 Suburban Fort Worth - Class A 1,932 108 69 13.3% 134 3.5% 0.4% 6.9% $23.88 4.5% $23.74 Dallas/Fort Worth Region Total 207,535 12,846 46,350 2.8% 44,300 22.3% 0.6% 21.4% $22.10 1.4% $21.03 1-16 Dallas/Fort Worth Region Total - Class A 104,666 7,964 24,705 3.1% 22,225 23.6% 0.7% 21.3% $24.70 1.5% $23.48

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(1) Percentage point change for availability rates. Unless otherwise noted, all rents quoted throughout this report are average asking gross (full service) rents psf. Statistics are calculated using both direct and sublease information. Short-term sublet spaces (terms under two years) were excluded.

The information in this report is obtained from sources deemed reliable, but no representation is made as to the accuracy thereof. Statistics compiled with the support of The CoStar Group. Copyright © 2015 Savills Studley

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