Demand Rift Widens Will Goldstick Research Analyst

Home , 71 South Wacker, One Prudential Plaza, Tribune Tower

Research & Forecast Report DOWNTOWN CHICAGO | OFFICE Fourth Quarter 2018

Demand Rift Widens Will Goldstick Research Analyst | Downtown Chicago

Chicago’s Central Business District Market Indicators Q4 2017 Q3 2018 CURRENT reported 3,496 square feet of negative VACANCY 12.5% 12.8% 12.9% net absorption in the fourth quarter 381,592 179,450 (3,496) and ended the year with 1,365,000 QTR ABSORPTION YTD ABSORPTION 1,202,213 1,368,496 1,365,000 square feet of positive net absorption. RENTAL RATE $39.37 $40.74 $41.19 Although there was minimal negative net absorption in the fourth quarter, the delivery of 210 N. Carpenter with in Chicago. Google will expand its Chicago footprint by 132,000 square feet, bringing the company to 570,000 square feet in Google’s space still vacant was a factor total across Chicago. Facebook announced it would move into in the vacancy rate increasing by 10 151 N. Franklin for 263,000 square feet. Lastly, Salesforce plans on occupying 500,000 square feet in Salesforce Tower, or Wolf basis points to 12.9 percent. Point South, which is expected to begin construction sometime in 2020. Overall, 895,000 square feet will be absorbed due to Year-to-date, Chicago’s central business district vacancy rate coastal migration over the next couple of years. increased by 40 basis points with six new office buildings delivering. Chicago’s CBD delivered over 5.2 million square feet Tenant demand for quality space in modern assets with best of office space since 2015. Of the six buildings that delivered in in class amenities and transit-oriented locations has created 2018 (2,099,388 SF in total), 86 percent of such space had been a deep divide in performance between such assets and older either preleased or occupied at the end of the year. assets in suboptimal locations throughout the CBD. Including new supply that delivered preleased in 2018, Class A assets reported Throughout 2018, Chicago’s CBD displayed three types of 2,112,598 of positive net absorption year-to-date, while Class B demand: suburban migration, coastal migration, and the need for assets reported 631,036 of negative net absorption—a difference efficient space. Five suburban companies: Walgreens (200,000 of 2,743,634 square feet. Professional service firms continue SF), Ferrara Candy (77,000 SF), McGraw-Hill (65,000 SF), FTD firms continued the trend of densification, or shedding space (40,000 SF), and One Span (11,800 SF) signed leases throughout without reducing headcount, in relocations to desirable assets 2018, and will bring 393,800 square feet in total of positive gross and growing technology firms continue to cite their office spaces absorption to Chicago’s CBD over the next twelve months. The as key tools for recruitment and retention purposes. Landlords biggest suburban migrator will be Walgreens, which announced of modern assets with tenant amenity packages in vogue with plans to bring 1,300 employees from its Deerfield HQ into the occupiers continue to hold record high rental rates in place, city as it opens a new 200,000 square foot office at the Old Main while Landlords of older Class B assets that have yet to properly Post Redevelopment (433 W. Van Buren) upon the building’s reposition themselves are experiencing substantial vacancy and delivery in 2019. Established coastal technology firms, such as implementing aggressive tenant concession packages and rental Google, Facebook, and Salesforce, also plan to expand footholds rates in an effort to lure tenants. Therefore, tenants in the market for high-quality, Class A space will continue to experience a tight market through 2019, while more cost-conscious users willing to occupy space in older assets are facing an increasingly favorable market in the near term.

In 2019, Chicago will add 3,570,116 square feet of office supply, of which only 9.5 percent (340,000 SF) is preleased. The largest contributor of the upcoming office supply is The Old Main Post Office, which will deliver 2.5 million square feet of office supply by mid-2019. So far, 322,000 square feet have been preleased by four companies (Walgreens, Ferrara Candy, Chicago Agency for Planning.) While the CBD’s vacancy rate will climb, the Post Office’s ultimate impact on the market will depend upon which tenants elect to relocate to the property and the quality of space they are leaving behind, as the Post Office’s peripheral location doesn’t appeal to all tenants and tenants vacating older assets that don’t appeal to many users will not have a substantial impact on the current market dynamics.

Leasing & Sale Highlights

Large leasing activity was quite active in the fourth quarter, with seven leases signed, or 1,228,123 square feet of office space. Salesforce announced it would anchor a Hines development at Wolf Point South, or Salesforce Tower for 500,000 square feet, helping accommodate an additional 1,000 employees over the next few years. CDW announced it would occupy 625 W. Adams for 300,000 square feet, expanding by about 75,000 square feet. UBS agreed to give back more than 100,000 square feet at 1 N. Wacker over the next few years, for a total footprint of about 175,000 square feet. Google, having outgrown its 1000 W. Fulton office, signed a 132,000 square foot lease at 210 N. Carpenter in Fulton Market, bringing the tech company’s footprint to over 570,000 square feet in Chicago. Lastly, two co-working providers signed leases: New York based Bond Collective will be entering the Chicago arena with 68,123 square feet at 20 N. Wacker and WeWork signed a lease for its ninth Chicago location at 222 S. Riverside for 60,000 square feet. Over the past year, co-working throughout the Chicago area has grown immensely, growing by 538,237 square feet. Chicago ended the year with thirty-two leases over 50,000 square feet signed, or 4,966,593 square feet.

Investment sales activity within the CBD during the fourth quarter consisted of four transactions: Manulife’s sale of 1 S. Wacker for $310,000,000 ($259.38/SF) to 601W Companies, Blue Star Properties sale of 125 S. Clark (The National) for $194,600,000 ($337.26/SF) to Commerz Real, GLL Real Estate’s sale of 444 N. Michigan for $138,000,000 ($274.35/SF) to CIM Group, and Sterling Bay’s sale of 121 W. Wacker for $118,500,000 ($241.71/SF) to Ameritus Real Estate. At the time of purchase, the 444 N. Michigan was 86 percent leased. 18 office sales closed in 2018, amounting to a total of $3,527,050,000. In 2018, the sales transaction volume increased by six buildings or $2,197,450,000 compared to 2017. The increase in sales volume was primarily driven by local developer Sterling Bay’s acquisitions, the two largest office purchases in 2018. Sterling Bay purchased Prudential Plaza for $680,000,000 ($308.78/SF) from 601W Companies and alongside JP Morgan Asset Management, acquired technology hub 600 W. Chicago from Equity Commonwealth for $510,000,000 ($324.55/ SF.) Despite the surge in investment sales activity, the CBD is unlikely to match the rapid investment sales activity it enjoyed in 2015, as the increasing interest rate environment, transitioning office market, and high-pricing achieved in recent sales offer potential buyers few opportunities to attain strong yields in the short term. While Chicago’s investment sales activity likely reached this cycle’s peak in 2015, Blackstone’s ongoing $667.8 million-dollar rehabilitation of the Willis Tower, 601W Companies current $500 million-dollar rehabilitation of the Old Post Office, and Sterling Bay’s land acquisitions in the Clybourn Corridor illustrate investors’ optimism in Chicago’s long-term health.

Outlook

Among the uncertainties of a global economic slowdown, the state budget deficit, the frequency of increasing interest rates, a new assessor, and local crime rates in Chicago, tenants, landlords and investors have so far veiled such uncertainties with optimism as continued corporate migration from the suburbs in conjunction with an increasing number of technology firms on the coasts consider Chicago for additional offices. In 2019, about 3,570,116 square feet of new Class A office space is expected to hit the market, of which about 9.5 percent has been preleased. With so much new supply coming to market, landlords of older assets will have a hard time contending with newer product with first in-class amenities. This rift between quality assets and older assets had widened throughout 2018 and is expected to widen further. Despite the number of options available to tenants increasing alongside the CBD’s vacancy rate over the next twelve months, Chicago’s Class A assets, appear to have a bright future as companies remain attracted to Chicago’s diverse local economy, talented labor pool, and world class infrastructure. As newer supply comes online and attracts tenants from older Class A assets, a vacuum of older high-quality space is expected to become available. Class B tenants looking for more value in their leases could have an opportunity to absorb the aforementioned space, resulting in the bulk of shadow space occurring in Class B assets. Overall, the market will gradually shift in favor of tenants as over 5 million square feet of office space delivers over the next twenty-four months.

-800,000 (758,470) 2.0% Net Absorption$5.00 & Vacancy $5.00 -1,000,000 0.0% River North$0.00 Submarket $0.00 Asking Gross Rental Rates 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 River North Submarket 500,000 14.0% $50.00 $50.00 415,786 Class A Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; 12.5%Colliers International Research 400,000 12.0% $45.00 $45.00 11.5% Class B $40.00 $40.00 300,000 278,313 10.0% 9.6% 9.1% 9.3% $35.00 $35.00 Net Absorption & Vacancy 8.5% Asking Gross Rental174,978 Rates Class C North Michigan Avenue Submarket 200,000 154,656 8.0% 8.0% $30.00 $30.00 80 10 800 44.25 North Michigan Avenue Submarket 30 300 600 400,000 18.0% 376,530 90,726 $25.00 $25.00 100,000$50.00 6.0% $50.00 350,000 16.0% $20.00 $20.00 15.4% 15.3% $45.00 Class A $45.00 14.5% 0 4.0% 14.0% $15.00 $15.00 300,000 13.4% $40.00 (7,558) $40.00 Class B $10.00 $10.00 12.0% (100,000)$35.00 2.0% $35.00 250,000 231,217 216,083 (128,241) $5.00 $5.00 9.9% 10.0% $30.00 Class C $30.00 183,209 (200,000) 0.0% 200,000 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 8.2% 8.0% $25.00 $25.00 2012 2013 2014 2015 2016 2017 2018 7.4% 150,000 Source: Costar;$20.00Colliers International Research Absorption Vacancy $20.00 6.0% Source: Costar; Colliers International Research 100,000 89,871 $15.00 $15.00 4.0% $10.00 $10.00 50,000 Net Absorption & Vacancy 25,405 2.0% Asking Gross Rental Rates West Loop Submarket 2,228 $5.00 $5.00 West Loop Submarket 0 0.0% 1,400,000 16.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 1,226,554 $0.00 $50.00 Class A $50.00 2012 2013 2014 2015 2016 2017 2018 1,200,000 1,151,823 13.8% 14.0% $45.00 $45.00 Source: Costar; Colliers International Research Absorption Vacancy 13.6% Source: Costar; Colliers12.9% International Research Class B 1,000,000 12.4% $40.00 $40.00 11.9% 12.0% 11.5% 11.7% 800,000 $35.00 $35.00 10.0% 571,910 Class C Net Absorption & Vacancy 600,000 $30.00 $30.00 River North Submarket Asking Gross Rental Rates445,517 8.0% 400,000River North Submarket $25.00 $25.00 500,000 14.0% 232,174 $50.00 6.0% $50.00 $20.00 $20.00 415,786 200,000 Class A 12.5% 400,000 12.0% $45.00 4.0% $45.00 $15.00 $15.00 11.5% 0 Class B $40.00 $40.00 $10.00 $10.00 300,000 278,313 10.0% (85,458) 2.0% 9.6% (200,000) 9.1% 9.3% $35.00 (212,050) $35.00 $5.00 $5.00 8.5% 174,978 (400,000) Class0.0% C 200,000 154,656 8.0% 8.0% $30.00 2012 2013 2014 2015 2016 2017 2018 $30.00 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 90,726 Source: Costar;$25.00Colliers International Research Absorption Vacancy $25.00 100,000 Statistical Highlights 6.0% Source: Costar; Colliers International Research $20.00 $20.00 0 4.0% Net Absorption$15.00 & Vacancy | Chicago CBD Office Market $15.00 (7,558) The CBD posted 3,496 square feet of negative net absorption Net Absorption & Vacancy Asking Gross Rental Rates (100,000) in the fourth quarter, ending the year with a total amount of2.0% Overall $10.00CBD $10.00Overall CBD (128,241) 1,600,000 $5.00 16.0% $5.00$50.00 $50.00 (200,000) positive net absorption at 1,365,000 square feet. Tenant flight0.0% 1,427,615 Class A 2012 2013 2014 2015 2016 2017 2018 $0.00 1,365,000 $0.00$45.00 $45.00 1,400,000 13.7% 14.0% to quality inventory in optimal locations was apparent with 2012 201313.3% 2014 2015 20161,202,213 2017 2018 12.9% 12.8% 12.5% $40.00 Class B $40.00 Source: Costar; Colliers International Research Absorption Vacancy 1,200,000 12.0% Source: Costar; Colliers International Research 11.9% 11.6% Class A buildings reporting 456,756 square feet of positive net $35.00 $35.00 1,000,000 10.0% absorption in the fourth quarter. Conversely, Class B assets $30.00 Class C $30.00 813,307 765,142 reported 364,151 square feet of negative net absorption in the 800,000 8.0% Net Absorption & Vacancy Asking Gross Rental Rates $25.00 $25.00 West Loop Submarket fourth quarter. West Loop561,706 Submarket $20.00 $20.00 1,400,000 16.0% 600,000 6.0% 1,226,554 $50.00 Class A $50.00$15.00 $15.00 1,151,823 400,000 4.0% 1,200,000 14.0% The average direct asking rental rate in the CBD13.8% ended 201813.6% $45.00 236,492 $45.00$10.00 $10.00 12.9% Class B 1,000,000 12.4% 200,000$40.00 2.0% $40.00 11.9% 12.0% $5.00 $5.00 at $41.19 per square 11.5%foot gross,11.7% and increase of $1.82 from the 800,000 0$35.00 0.0% $35.00 $0.00 $0.00 beginning of the year. Class A inventory reported an average 10.0% 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 571,910 Class C 600,000 direct asking rental rate of $45.88 per square foot gross during $30.00 $30.00 445,517 8.0% Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research 400,000 the fourth quarter and Class C inventory reported $30.37 per $25.00 $25.00 232,174 6.0% $20.00 $20.00 200,000 square foot gross. Continued demand for high-quality space has 4.0% $15.00 $15.00 0 caused such space to come off of the market, leaving landlords $10.00 $10.00 (200,000) of large tenants in advantageous(85,458) positions when negotiating 2.0% (212,050) $5.00 $5.00 (400,000) with their tenants, as tenants looking to relocate or renegotiate 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 more favorable terms have fewer options to use as leverage. 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Following a slight increase of aggregate rates, rates are likely to Source: Costar; Colliers International Research stabilize, depending on the space left behind as tenants move Asking Gross Rental Rates | Chicago CBD Office Market Net Absorptioninto & newerVacancy developments in Fulton Market or the Old Main Post Asking Gross Rental Rates Overall CBD Office, together delivering over 3 million square feet of office Overall CBD 1,600,000 16.0% $50.00 $50.00 supply by the second half 1,427,615of 2019. Due to the continued tenant Class A 1,365,000 $45.00 $45.00 1,400,000 13.7% 14.0% 13.3% 1,202,213 flight to quality witnessed over the past two years, landlords12.9% 12.8% 12.5% $40.00 Class B $40.00 1,200,000 12.0% 11.9% 11.6% of quality assets in optimal locations are unlikely to experience $35.00 $35.00 1,000,000 10.0% downward pressure on rates through 2019, whereas older $30.00 Class C $30.00 813,307 765,142 800,000 assets that have not properly maintained and upgraded amenity8.0% $25.00 $25.00

561,706 600,000 packages in demand from tenants are likely to soften rental6.0% $20.00 $20.00 rates in an effort to offset mounting vacancy. $15.00 $15.00 400,000 4.0% 236,492 $10.00 $10.00 200,000 2.0% Large Blocks of Availability $5.00 $5.00 0 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 There are currently 31 contiguous blocks of space 100,000 Source: Costar; Colliers International Research square feet or largerAbsorption available Vacancyon a direct basis, a decrease Source: Costar; Colliers International Research of one such blocks since last quarter. The largest contiguous block of space is at the Old Main Post Office for 859,600 square feet on floors five through nine. The redevelopment Chicago Central Business District | Local Standards - 4th Quarter 2018 also has 590,000 square feet available on floors one through Office Market Statistics | Charts three. Both large blocks in the Old Main Post Office together comprise of 58 percent of all space in the building. The second Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) largest block of contiguous office space consists of a little over Submarket Vacancy Rates Net Absorption & Vacancy Asking Gross Rental Rates Submarket Vacancy Rates | Chicago CBD Office Market Row Reference: Central Loop Submarket 2016 - 2018 Central Loop Submarket730,000 square feet and is located in the high-rise portion on 2 Central Loop 1,000,000 16.0% Q3-17 Q3-18 Arrow $50.00 $50.00 Vacancy rate 13.1% 14.4% Up 791,288 floors twenty-six through fifty-one of Riverside Investment 20.0% 800,000 14.1% 14.1% 14.2% 14.3% 14.0% Absorption (Qtr.) -281,643 -92,494 Up $45.00 $45.00 13.4% & Development’s planned tower at 110 N. Wacker,Class A which is Rents $37.56 $38.89 Up 12.2% Inventory 37,342,427 37,342,427 Same 600,000 12.1% 12.0% $40.00 $40.00 14.7% currently under construction and will deliverClass to B the market 15.0% 14.3% 13.4% 13.8% 13.6% $35.00 $35.00 3 East Loop 400,000 10.0% 12.2% 12.3% 12.0% 11.9% in late 2020. In the fourth quarter, CDW announced it would Q3-17 Q3-18 Arrow $30.00 Class C $30.00 9.9% Vacancy rate 12.1% 14.2% Up 200,000 8.0% 9.3% 9.6% relocate from 120 S. Riverside to 625 W. Adams, leaving behind 10.0% Absorption (Qtr.) 23,181 -110,248 Down $25.00 $25.00 8.2% 8.0% 25,019 7.4% Rents $34.90 $35.20 Up 0 6.0% 257,971 square feet of office which is currently being marketed $20.00 $20.00 Inventory 26,530,972 26,530,972 Same (48,825) (79,388) (52,235) -200,000 (145,490) 4.0% available for occupancy in 2021. Of the 31 contiguous blocks of Vacancy(%) 5.0% $15.00 $15.00 4 North Michigan Avenue $10.00 space 100,000 square feet or larger, six are in developments$10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) $5.00 under construction or under renovation. Tenants in the$5.00 market 0.0% Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 $0.00 seeking immediate space in excess of 200,000 square$0.00 feet Inventory 10,936,344 10,936,344 Same 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy have one option: 311 W. Monroe for 394,020 square feet. -5.0% Source: Costar; Colliers International Research Central Loop East Loop North Michigan Ave. River North West Loop 5 River North Chicago’s CBD ended the year with nineteen Class A large Q3-17 Q3-18 Arrow 2016 2017 2018 Vacancy rate 9.7% 7.6% Down Absorption (Qtr.) 39,206 255,516 Up blocks of contiguous space and twelve Class B large blocks Source: Costar; Colliers International Research Net Absorption & Vacancy Asking Gross Rental Rates Rents $41.83 $42.92 Up East Loop Submarket East Loop Submarketof contiguous space. Overall, 6,458,804 square feet of large Inventory 17,016,381 17,072,381 Up 600,000 16.0% $50.00 contiguous blocks of space is available in Chicago’s $50.00CBD, an 15.0% 414,976 6 West Loop 14.4% 14.6% 14.7% 400,000 14.0% $45.00 Class A $45.00 Q3-17 Q3-18 Arrow 197,217 increase of 1,048,170 square feet since the fourth quarter a Vacancy rate 14.4% 14.0% Down 13.1% $40.00 $40.00 12.3% Absorption (Qtr.) 129,305 60,932 Down 200,000 149,919 12.0% 12.0% year prior. Class B $35.00 $35.00 Rents $42.69 $43.93 Up Inventory 50,480,672 51,726,211 Up 0 10.0% $30.00 Class C $30.00 (30,598) (46,154) 7 Overall CBD -200,000 (110,877) 8.0% $25.00 $25.00 Q3-17 Q3-18 Arrow $20.00 $20.00 Vacancy rate 20.5% 10.3% Down -400,000 6.0% Absorption (Qtr.) 152,624 442,489 Up $15.00 3 Research & Forecast Report | Fourth Quarter$15.00 2018 | Downtown Chicago / Office | Colliers International Rents $37.94 $32.84 Down -600,000 4.0% Inventory 144,732,717 146,631,696 Up $10.00 $10.00 -800,000 2.0% (758,470) $5.00 $5.00

-1,000,000 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research

Net Absorption & Vacancy North Michigan Avenue Submarket Asking Gross Rental Rates 80 10 800 44.25 North Michigan Avenue Submarket 30 300 600 400,000 18.0% 376,530 $50.00 $50.00 350,000 16.0% 15.4% 15.3% $45.00 Class A $45.00 14.5% 14.0% 300,000 13.4% $40.00 $40.00 Class B 12.0% $35.00 $35.00 250,000 231,217 216,083 9.9% 10.0% $30.00 Class C $30.00 200,000 183,209 8.2% 8.0% $25.00 $25.00 7.4% 150,000 $20.00 $20.00 6.0% 100,000 89,871 $15.00 $15.00 4.0% $10.00 $10.00 50,000 25,405 2.0% 2,228 $5.00 $5.00 0 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research

Net Absorption & Vacancy River North Submarket Asking Gross Rental Rates River North Submarket 500,000 14.0% $50.00 $50.00 415,786 Class A 12.5% 400,000 12.0% $45.00 $45.00 11.5% Class B $40.00 $40.00 300,000 278,313 10.0% 9.6% 9.1% 9.3% $35.00 $35.00 8.5% 174,978 Class C 200,000 154,656 8.0% 8.0% $30.00 $30.00

90,726 $25.00 $25.00 100,000 6.0% $20.00 $20.00 0 4.0% $15.00 $15.00 (7,558) (100,000) 2.0% $10.00 $10.00 (128,241) $5.00 $5.00 (200,000) 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research

Net Absorption & Vacancy Asking Gross Rental Rates West Loop Submarket West Loop Submarket 1,400,000 16.0% 1,226,554 $50.00 Class A $50.00 1,151,823 1,200,000 14.0% 13.8% 13.6% $45.00 $45.00 12.9% Class B 1,000,000 12.4% $40.00 $40.00 11.9% 12.0% 11.5% 11.7% 800,000 $35.00 $35.00 10.0% 571,910 Class C 600,000 $30.00 $30.00 445,517 8.0% 400,000 $25.00 $25.00 232,174 6.0% $20.00 $20.00 200,000 4.0% $15.00 $15.00 0 $10.00 $10.00 (200,000) (85,458) 2.0% (212,050) $5.00 $5.00 (400,000) 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research

Net Absorption & Vacancy Asking Gross Rental Rates Overall CBD Overall CBD 1,600,000 16.0% $50.00 $50.00 1,427,615 Class A 1,365,000 $45.00 $45.00 1,400,000 13.7% 14.0% 13.3% 1,202,213 12.9% 12.8% 12.5% $40.00 Class B $40.00 1,200,000 12.0% 11.9% 11.6% $35.00 $35.00 1,000,000 10.0% $30.00 Class C $30.00 813,307 765,142 800,000 8.0% $25.00 $25.00

561,706 600,000 6.0% $20.00 $20.00 $15.00 $15.00 400,000 4.0% 236,492 $10.00 $10.00 200,000 2.0% $5.00 $5.00

0 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research The number of high-rise view spaces that are immediately available in top-tier assets has diminished over the past few Large Block Availabilities | CBD Office Market years to only one block: 30 S. Wacker which has a large block of contiguous space for 117,027 square feet on floors thirty-one through thirty-four. For high-rise view spaces that are available 100,000+ square feet in the next couple of years, 110 N. Wacker has a large block of BUILDING CLASS SIZE (SF) FLOOR TYPE SUBMARKET contiguous space for 622,987 square feet on floors thirty-one 433 W. Van Buren A 859,000 5-9 Direct West Loop through fifty-one which will become available in 2020. 425 S. 110 N. Wacker A 734,865 26-51 Direct West Loop Financial Plaza is also advertising Morgan Stanley’s space, a 102,753 square feet on floors thirty-seven through forty which 433 W. Van Buren A 590,000 1-3 Direct West Loop will become available in 2021. 311 W. Monroe B 394,020 LL-15 Direct West Loop 120 S. Riverside B 257,971 4-10 Direct West Loop Construction 145 S. Wells A 202,218 3-19 Direct Central Loop 222 W. Adams A 198,470 3-8 Direct West Loop Seven office developments delivered within Chicago’s CBD in 2018, adding 2,099,388 square feet of Class A office inventory. 203 N. LaSalle B 183,672 15-19 Direct Central Loop By the end of 2019, 3,570,116 square feet of Class A office space 350 N. Orleans B 177,083 11-12 Direct River North is expected to deliver, with 9.5 percent (340,000 SF) of the 555 W. Monroe A 172,393 11-17 Direct West Loop space already preleased. Looking farther ahead, there are seven 300 S. Riverside B 158,938 3-5 Direct West Loop additional office developments under construction or will break 333 N. Green A 156,812 9-12 Direct Fulton Market ground in the next twelve months; if successfully delivered, all 625 W. Adams A 154,699 16-20 Direct West Loop seven developments would deliver about 5,446,624 square feet 2 N. LaSalle B 152,701 Mezz-6 Direct Central Loop of new office supply, 24 percent which is already preleased. 233 N. Michigan B 143,067 22-25 Direct East Loop A Joint Venture of local developer Riverside Investment and 175 W. Jackson A 137,111 18-19 Direct West Loop Development and Dallas-based Howard Hughes Corporation 1 S. Dearborn A 133,224 13-17 Direct Central Loop continued the construction on its planned trophy tower at 110 N. 175 W. Jackson A 133,071 11-12 Direct Central Loop Wacker, which commenced in the second quarter. The planned 550 W. Jackson A 130,413 2-6 Direct West Loop 55-story, 1,415,000 square foot trophy tower secured anchor 222 N. LaSalle B 126,387 4-6 Direct Central Loop tenant Bank of America to prelease approximately 490,000 square feet, or approximately 35% of the building, and added 71 S, Wacker A 126,099 10-14 Direct West Loop Lincoln Financial to its tenant roster as the firm announced that it 1201 W. Lake A 123,500 2-6 Direct Fulton Market plans to occupy 60,000 square feet at the development. 222 Merchandise Mart A 122,932 5 Direct River North 515 N. State A 120,716 4-8 Direct River North 30 S. Wacker A 117,027 31-34 Direct West Loop Class A Large Blocks | Chicago CBD Office Market 333 S. Wabash B 113,864 21-24 Direct East Loop 19 111 S. Wacker A 112,380 12-16 Direct West Loop large direct blocks of 2 N. LaSalle B 112,180 23-26 Direct Central Loop CBD Class A space 222 S. Riverside B 106,263 24-26 Direct West Loop consisting of 123 N. Wacker B 104,375 24-30 Direct West Loop 4,428,683 425 S. Financial A 102,753 37-40 Direct Central Loop square feet 12 large direct blocks of West Loop Class A space consisting of 2,030,521 square feet

2 large direct blocks of West Loop Class A high-rise space consisting of 740,014 square feet

4 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International If delivered as scheduled in late 2020, 110 N. Wacker will be the fifth trophy asset added to the market during this cycle, adding to the Investment Sales Activity | Chicago CBD Office Market combined 5.0 million square feet of trophy space added to the market Investment Sales Activity between late 2016 and late 2020. 2011 - 2018

35 35 Rehabilitation work on the Old Main Post Office continued during the 30 30 fourth quarter, as developer 601W Companies continues to deploy 31 25 27 25 $500 million dollars into the 2.7 million square foot building, which 26 26 20 20 19 was left empty and decaying for 22 years. This redevelopment 18 15 17 17 15 is transforming the property into an office building consisting of 10 10 approximately 2.5 million square feet and is slated to be completed 5 5 in mid-2019. The renovations include replacing the building’s existing 0 0 mechanical systems, removing asbestos, fixing the building’s façade, 2011 2012 2013 2014 2015 2016 2017 2018 and several other capital-intensive projects. The landlord landed its Source: Costar; Colliers International Research Class A Class B Class C first tenant in the second quarter, as Walgreens announced that it will occupy 200,000 square feet in the development. Likewise, Ferrara Candy announced it would relocate its suburban office to the Old Main Post Office for 77,000 square feet and more are likely to follow in the coming months.

Local developer Sterling Bay completed 210 N. Carpenter in the fourth quarter, delivering 203,589 square feet of office space. Google announced it would lease 132,000 square feet in the new development, NewNew Construction Construction Deliveries | Chicago CBD Office Market in addition to its 1K Fulton regional headquarters. In the third quarter 2003 - 2018 4,000,000 Sterling Bay broke ground on 333 N. Green, a 19-story, 555,524 square 3,652,913 foot office, which is 56 percent leased with WPP having preleased over 3,500,000 3,000,000 250,000 square feet of office space and Convene taking two floors, in 2,500,000 1,897,981 2,099,388 addition to the first floor. 333 N. Green Street is expected to conclude 2,000,000 1,892,460 1,504,364 1,572,332 construction in mid-2020, when it may have additional neighbors 1,500,000 1,081,702 933,710 under construction as Sterling Bay has additional developments 1,000,000 665,000 479,000 531,190 planned at 330 N. Green Street and 360 N. Green Street, which would 500,000 0 0000 0 add an additional 1.1 million square feet combined of Class A space to 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD YTD the rapidly emerging Fulton Market submarket. Source: Costar; Colliers International Research

Thomas Roszak continued construction on a 20-story, 224,300 square foot creative loft-office building at 145 S. Wells in the Central Loop during the third quarter. The developer, Moceri & Roszak LLC, landed construction financing from Bentall Kenedy’s U.S. Core Fund with the developer planning to finish construction on speculation, meaning the group has not secured any preleasing. 145 S. Wells joins a slew of smaller developments under construction throughout the city, as McCaffrey Interests is developing a speculative office building consisting of 123,500 square feet at 1201 W. Lake Street and Next Realty is redeveloping a loft office building consisting of 78,000 square feet at 620 N. LaSalle.

151 N FRANKLIN STREET RENDERING

5 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International Significant Lease and Sale Activity

Chicago CBD Office Leasing Activity – 4Q 2018

TENANT BUILDING CLASS SUBMKT SIZE (SF) DEAL TYPE BMO Financial Group 310 S. Canal (BMO Tower) A WL 500,000 New Salesforce Wolf Point South A RN 500,000 New CDW 625 W. Adams A WL 300,000 New UBS 1 N. Wacker A WL 175,000 New Google 210 N. Carpenter A FM 132,000 New Bond Collective 20 N. Wacker B WL 68,123 New WeWork 222 S. Riverside B WL 60,000 New

CL = Central Loop EL = East Loop NMA = North Michigan Avenue RN = River North WL = West Loop FM = Fulton Market

6 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International Significant Lease and Sale Activity (continued)

Chicago CBD Office Investment Sales – 4Q 2018

STATUS ADDRESS SUBMKT CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER S 1 S. Wacker WL A 1,195,170 $310,000,000 $259.38 Manulife John Hancock 601W Companies S 125 S. Clark CL B 577,000 $194,600,000 $337.26 Blue Star Properties Hauslnvest S 444 N. Michigan NMA B 503,000 $138,000,000 $274.35 GLL Real Estate CIM Group S 121 W. Wacker CL B 490,259 $118,500,000 $241.71 Sterling Bay Ameritus Real Estate S 310 N. Sangamon FM B 25,103 $15,800,000 $629.41 Patrick Arlis Mark Goodman & Associates Tishman Speyer JV P 412 N. Wells RN A 42,386 $31,000,000 $731.37 Hubbard Street Group/ Spanish Family-- Centrum Realty Undisclosed Development P 225 W. Randolph WL B 849,252 TBD TBD Kushner Cos. Angelo Gordon FS 200 S. Michigan EL B 354,382 $35,000,000 $98.76 Shidler Group TBD FS 105 W. Adams CL C 314,855 TBD Crown Commercial Real TBD Estate

S = Sold P = Pending FS = For Sale

7 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International CLARK WILLOW

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FULTON WACKER Submarket HighlightsSOUTH WATER & Forecast

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JACKSON JACKSON JACKSON JACKSON With the exception GRANTof a couple, financial firms in the Central Loop have particularly been keen on adapting an ethos of higher-quality,P ARK more efficient space, directing operations to other submarkets. In the third VAN BUREN VAN BUREN VAN BUREN VAN BUREN

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NORMAL 24TH PL 24TH PL Stevenson Expwy CORBETT 55 KING DR Chicago Central Business District | Local Standards - 4th Quarter 2018 Office Market Statistics | Charts consolidate its offices in Chicago and move to 110 N. Wacker, Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) leaving behind 337,534 square feet in the process. In the fourth Submarket Vacancy Rates Net Absorption Absorption & Vacancy & Vacancy | Central Loop Office Market Asking Gross Rental Rates Row Reference: Central Loop Submarket 2016 - 2018 quarter, BMO announced its intention to become the anchor Central Loop Submarket 2 Central Loop 1,000,000 16.0% Q3-17 Q3-18 Arrow tenant in a 50-story office development next to Union Station. $50.00 $50.00 Vacancy rate 13.1% 14.4% Up 791,288 20.0% 800,000 14.1% 14.1% 14.2% 14.3% 14.0% Absorption (Qtr.) -281,643 -92,494 Up $45.00 $45.00 BMO plans to consolidate its three Chicago offices (200 W. 13.4% Class A Rents $37.56 $38.89 Up 12.2% Inventory 37,342,427 37,342,427 Same 600,000 12.1% 12.0% $40.00 $40.00 14.7% Adams, 111 W. Monroe, 115 S. LaSalle) into 500,000 square Class B 15.0% 14.3% 13.4% 13.8% 13.6% $35.00 $35.00 3 East Loop 400,000 10.0% 12.2% 12.3% 12.0% 11.9% feet, leaving behind 800,000 square feet between all three Q3-17 Q3-18 Arrow $30.00 Class C $30.00 9.9% Vacancy rate 12.1% 14.2% Up 200,000 8.0% 9.3% 9.6% buildings in the process. Lastly, Morgan Stanley indicated it 10.0% Absorption (Qtr.) 23,181 -110,248 Down $25.00 $25.00 8.2% 8.0% 25,019 7.4% Rents $34.90 $35.20 Up would consolidate its 70 W. Madison and 425 S. Financial Plaza 0 6.0% $20.00 $20.00 Inventory 26,530,972 26,530,972 Same (48,825) (79,388) (52,235) offices into 233 S. Wacker, shedding 190,000 square feet in the -200,000 (145,490) 4.0% Vacancy(%) 5.0% $15.00 $15.00 4 North Michigan Avenue process. With more than 750,000 square feet being left behind $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) in the Central Loop over the coming years, the submarket will $5.00 $5.00 0.0% Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 Inventory 10,936,344 10,936,344 Same inherently see its vacancy rise if enough demand cannot be 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy -5.0% secured in time. In 2019, demand for quality office space is Source: Costar; Colliers International Research Central Loop East Loop North Michigan Ave. River North West Loop 5 River North Q3-17 Q3-18 Arrow expected to gain momentum: landlords will have to make the 2016 2017 2018 Vacancy rate 9.7% 7.6% Down Absorption (Qtr.) 39,206 255,516 Up Source: Costar; Colliers International Research decision of how to retain tenants, such as renovating and Net Absorption & Vacancy Asking Gross Rental Rates Rents $41.83 $42.92 Up deploying amenities, friendly tenant improvement packages or East Loop Submarket East Loop Submarket Inventory 17,016,381 17,072,381 Up Chicago Central Business District | Local Standards - 4th Quarter 2018 600,000 16.0% $50.00 $50.00 Office Market Statistics | Charts 15.0% 414,976 6 West Loop a combination of the two. Overall, the expectation is that the 14.4% 14.6% 14.7% 400,000 14.0% $45.00 Class A $45.00 Q3-17 Q3-18 Arrow 197,217 Vacancy rate 14.4% 14.0% Down Central Loop submarket will continue to soften over the next 13.1% $40.00 $40.00 12.3% Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) Absorption (Qtr.) 129,305 60,932 Down 200,000 149,919 12.0% 12.0% Class B $35.00 $35.00 Rents $42.69 $43.93 Up Net Absorption twelve& Vacancy months. Submarket Vacancy Rates Row Reference: Inventory 50,480,672 51,726,211 Up Asking0 Gross Rental Rates 10.0% Central Loop Submarket Asking Gross Rental Rates | Central Loop Office Market $30.00 2016 - 2018 Class C $30.00 2 Central Loop Central Loop Submarket (46,154) (30,598) Q3-17 Q3-18 Arrow 7 Overall CBD 1,000,000 16.0% -200,000 (110,877) 8.0% $25.00 $25.00 $50.00 $50.00 Vacancy rate 13.1% 14.4% Up Q3-17 Q3-18 Arrow Statistical Highlights791,288 20.0% 14.3% Absorption (Qtr.) -281,643 -92,494 Up Vacancy rate 20.5% 10.3% Down 800,000 14.1% 14.1% 14.2% 14.0% -400,000 6.0% $20.00 $20.00 13.4% $45.00 $45.00 Rents $37.56 $38.89 Up Absorption (Qtr.) 152,624 442,489 Up Class A $15.00 $15.00 Rents $37.94 $32.84 Down 12.2% Inventory 37,342,427 37,342,427 Same 600,000 The Central Loop’s aggregate12.1% vacancy rate increased by 9012.0% -600,000$40.00 4.0%$40.00 14.7% Inventory 144,732,717 146,631,696 Up Class B 15.0% 14.3% $10.00 13.4% $10.00 13.8% 13.6% basis points over the past year to 14.3 percent. Class A vacancy $35.00 $35.00 3 East Loop 400,000 10.0% -800,000 (758,470) 2.0% 12.2% 12.3% 12.0% 11.9% $5.00 $5.00 Q3-17 Q3-18 Arrow managed to buck the trend by absorbing roughly 135,074 $30.00 Class C $30.00 9.9% Vacancy rate 12.1% 14.2% Up 200,000 8.0% -1,000,000 0.0% $0.00 9.3% 9.6% $0.00 2012 2013 2014 2015 2016 2017 2018 2012 10.0%2013 2014 2015 2016 2017 2018 Absorption (Qtr.) 23,181 -110,248 Down $25.00 $25.00 8.2% 8.0% square25,019 feet over the course of the fourth quarter, bringing 7.4% Rents $34.90 $35.20 Up 0 6.0% Source:$20.00 Costar; Colliers International Research Absorption Vacancy $20.00 Source: Costar; Colliers International Research Inventory 26,530,972 26,530,972 Same Class A vacancy down 90 basis points(48,825) to 13.4 percent. Class (79,388) (52,235) -200,000 (145,490) 4.0% Vacancy(%) 5.0% B vacancy continued its upward trend, increasing by 20 basis $15.00 $15.00 4 North Michigan Avenue $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Net Absorption & Vacancy Vacancy rate 8.0% 7.1% Down points ending the year at 14.7 percent. Year-to-date,(418,196) Class A Asking Gross Rental Rates 80 10 800 44.25 North$5.00 Michigan Avenue Submarket $5.00 0.0% Absorption (Qtr.) 7,671 21,555 Up North Michigan Avenue Submarket 30 300 600 -600,000 0.0% 400,000 18.0% assets reported negative 44,727 square feet of negative net 376,530 Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 $50.00 $50.00 Inventory 10,936,344 10,936,344 Same 2012 2013 2014 2015 2016 2017 201816.0% absorption while Class B assets reported 92,611 square feet 350,000 $45.00 $45.00 Source: Costar; Colliers International Research 15.4% 15.3% -5.0% Class A Absorption Vacancy 14.5% Source: Costar; Colliers International Research 14.0% Central Loop East Loop North Michigan Ave. River North West Loop 5 River North of negative net absorption, highlighting the disparity between 300,000 13.4% $40.00 $40.00 Class B Q3-17 Q3-18 Arrow 12.0% $35.00 2016 2017 2018 $35.00 Vacancy rate 9.7% 7.6% Down older and newer assets. 250,000 231,217 216,083 Absorption (Qtr.) 39,206 255,516 Up 9.9% 10.0% $30.00 Source: Costar; Colliers International Research Class C $30.00 Net Absorption & Vacancy Asking Gross Rental Rates 183,209 Rents $41.83 $42.92 Up 200,000 Inventory 17,016,381 17,072,381 Up East Loop Submarket East Loop Submarket 8.2% 8.0% $25.00 $25.00 The direct average asking rent in the submarket finished the 7.4% 600,000 16.0% 150,000$50.00 $50.00 $20.00 $20.00 6.0% 6 West Loop 15.0% 414,976 14.7% year at 14.4%$39.84 per14.6% square foot gross, an increase of $0.95 $45.00 $45.00 400,000 14.0% 100,000 89,871Class A $15.00 $15.00 Q3-17 Q3-18 Arrow 4.0% 13.1% 197,217 Vacancy rate 14.4% 14.0% Down since last quarter and an increase of $2.36 year-over-year. $40.00 $40.00 $10.00 $10.00 149,919 12.3% Absorption (Qtr.) 129,305 60,932 Down 200,000 12.0% 12.0% 50,000 2.0% Large Block25,405 Availabilities | Central Loop Office Market Class B Rents $42.69 $43.93 Up One contributor to the rise of average direct asking rents in $35.00 2,228 $35.00 $5.00 $5.00 Inventory 50,480,672 51,726,211 Up 0 10.0% 0 0.0% $30.00 2012 2013 2014 2015 2016 2017 2018 Class C $30.00 $0.00 $0.00 the fourth quarter(46,154) was Holland & Knight (30,598)putting its Class A, 2012 2013 2014 2015 2016 2017 2018 (110,877) 100,000+ square feet 7 Overall CBD -200,000 8.0% Source:$25.00 Costar; Colliers International Research Absorption Vacancy $25.00 mid-rise and-high-rise space on the market. It is conceivable Source: Costar; Colliers International Research Q3-17 Q3-18 Arrow BUILDING$20.00 CLASS SIZE (SF) FLOOR TYPE $20.00 Vacancy rate 20.5% 10.3% Down -400,000 to prefigure a decrease in rents throughout 2019 in the Central6.0% Absorption (Qtr.) 152,624 442,489 Up $15.00 $15.00 Rents $37.94 $32.84 Down -600,000 Loop submarket as space compiles and landlords of lower-4.0% Net145 Absorption S. Wells & Vacancy A 202,218 3-19 Direct Inventory 144,732,717 146,631,696 Up River$10.00 North Submarket $10.00 Asking Gross Rental Rates -800,000 quality assets offer more aggressive concession packages;2.0% 203 N. LaSalle B 183,672 15-19 Direct River North Submarket (758,470) 500,000$5.00 14.0%$5.00 $50.00 $50.00 415,786 Class A -1,000,000 however, if more Class A high-asking rent space comes0.0% 2 $0.00N. LaSalle 12.5% B 152,701 Mezz-6 Direct $0.00 2012 2013 2014 2015 2016 2017 2018 400,000 2012 2013 2014 2015 2016 2017 201812.0% $45.00 $45.00 to market, that may slow the rate to which rents decrease. 11.5% Class B 1 S. Dearborn A 133,224 13-17 Direct $40.00 $40.00 Source: Costar; Colliers International Research Absorption Vacancy 300,000Source: Costar; Colliers International Research 278,313 10.0% 9.6% Regardless of the rate of change in rents, Class A assets in the 9.1% 9.3% $35.00 $35.00 175 W. Jackson A 133,0718.5% 11-12 Direct 174,978 Class C Central Loop submarket continue to offer significant discounts 200,000 154,656 8.0% 8.0% $30.00 $30.00 222 N. LaSalle B 126,387 4-6 Direct 90,726 $25.00 $25.00 Net Absorption &compared Vacancy to West Loop Class Assets, which ended the fourth 100,000 6.0% Asking Gross Rental Rates 80 10 800 44.25 North Michigan Avenue Submarket $20.00 $20.00 North2 N. MichiganLaSalle Avenue Submarket B 112,180 23-26 Direct 30 300 600 400,000 quarter at $47.93 per square foot gross, a difference of $4.8118.0% 0 4.0% 376,530 $50.00 $50.00 $15.00 $15.00 425 S. Financial A 102,753 37-40 (7,558) Direct 350,000 per square foot gross. 16.0% 15.4% 15.3% (100,000)$45.00 Class A2.0% $45.00 $10.00 $10.00 14.5% 14.0% (128,241) $5.00 $5.00 300,000 13.4% $40.00 $40.00 (200,000) Class B0.0% 12.0% $35.00 2012 2013 2014 2015 2016 2017 2018 $35.00 $0.00 $0.00 250,000 231,217 2012 2013 2014 2015 2016 2017 2018 216,083 9.9% 10.0% Source:$30.00 Costar; Colliers International Research Absorption Vacancy Class C $30.00 200,000 183,209 Source: Costar; Colliers International Research 8.2% 8.0% $25.00 $25.00 7.4% 150,000 $20.00 $20.00 6.0% Net Absorption & Vacancy 89,871 Asking Gross Rental Rates 100,000 West$15.00 Loop Submarket $15.00 4.0% West Loop Submarket 1,400,000$10.00 16.0%$10.00 $50.00 $50.00 50,000 25,405 2.0% 1,226,554 Class A 1,151,823 2,228 1,200,000$5.00 14.0%$5.00 13.8% 13.6% $45.00 $45.00 0 0.0% 12.9% Class B 2012 2013 2014 2015 2016 2017 2018 1,000,000$0.00 12.4% $0.00 $40.00 $40.00 11.9% 12.0% 2012 2013 201411.5% 201511.7% 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy 800,000 $35.00 $35.00 Source: Costar; Colliers International Research 10.0% 571,910 Class C 9 Research & Forecast Report | Fourth Quarter 2018 | Downtown600,000 Chicago / Office | Colliers International $30.00 $30.00 445,517 8.0% 400,000 $25.00 $25.00 232,174 Net Absorption & Vacancy 6.0% $20.00 $20.00 River North Submarket 200,000Asking Gross Rental Rates River North Submarket 4.0% $15.00 $15.00 500,000 14.0% 0 $50.00 $50.00 415,786 Class A $10.00 $10.00 12.5% (200,000) (85,458) 2.0% 400,000 12.0% $45.00 $45.00 11.5% (212,050) Class B $5.00 $5.00 (400,000)$40.00 0.0% $40.00 300,000 278,313 10.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 9.6% 2012 2013 2014 2015 2016 2017 2018 9.1% 9.3% $35.00 $35.00 8.5% Source: Costar; Colliers International Research Absorption Vacancy 174,978 Class C Source: Costar; Colliers International Research 200,000 154,656 8.0% 8.0% $30.00 $30.00

90,726 $25.00 $25.00 100,000 6.0% Net $20.00Absorption & Vacancy $20.00Asking Gross Rental Rates 0 4.0% Overall CBD Overall CBD $15.00 $15.00 (7,558) 1,600,000 16.0% $50.00 $50.00 $10.00 1,427,615 $10.00 Class A (100,000) 2.0% 1,365,000 $45.00 $45.00 1,400,000 13.7% 14.0% 13.3% 1,202,213 (128,241) $5.00 12.9% $5.00 12.8% 12.5% $40.00 Class B $40.00 (200,000) 0.0% 1,200,000 12.0% 11.9% 11.6% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 $35.00 $35.00 2012 2013 2014 2015 2016 2017 2018 1,000,000 10.0% Source: Costar; Colliers International Research Absorption Vacancy $30.00 Class C $30.00 Source: Costar; Colliers International813,307 Research 765,142 800,000 8.0% $25.00 $25.00

561,706 600,000 6.0% $20.00 $20.00 Net Absorption & Vacancy Asking Gross Rental Rates $15.00 $15.00 West Loop Submarket 400,000 West Loop Submarket 4.0% 1,400,000 16.0% 236,492 $10.00 $10.00 1,226,554 200,000$50.00 Class A 2.0% $50.00 1,151,823 $5.00 $5.00 1,200,000 14.0% 13.8% 13.6% $45.00 $45.00 0 0.0% $0.00 12.9% Class B $0.00 1,000,000 12.4% $40.00 2012 2013 2014 2015 2016 2017 2018 $40.00 2012 2013 2014 2015 2016 2017 2018 11.9% 12.0% 11.5% 11.7% 800,000 Source:$35.00 Costar; Colliers International Research Absorption Vacancy $35.00 Source: Costar; Colliers International Research 10.0% 571,910 Class C 600,000 $30.00 $30.00 445,517 8.0% 400,000 $25.00 $25.00 232,174 6.0% $20.00 $20.00 200,000 4.0% $15.00 $15.00 0 $10.00 $10.00 (200,000) (85,458) 2.0% (212,050) $5.00 $5.00 (400,000) 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research

561,706 600,000 6.0% $20.00 $20.00 $15.00 $15.00 400,000 4.0% 236,492 $10.00 $10.00 200,000 2.0% $5.00 $5.00

0 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Lease & Sale Highlights

While no large lease transactions occurred in the Central Loop during the fourth quarter, the largest lease transaction of 2018 occurred within the submarket: Leo Burnett Worldwide (Publicis) renewed and expanded its lease for a total of 678,505 square feet. The second largest lease to occur in the Central Loop in 2018 was CIBC’s renewal and expansion at 120 S. LaSalle for 220,000 square feet. Throughout 2018, the Central Loop had six large-lease transactions, down from eight large-lease transactions in 2017. Overall, 1.2 million square feet of office space was retained or will be added in the near future within the Central Loop submarket.

Investment sales activity kept moderate pace with two transactions closing in the fourth quarter. 125 S. Clark was sold for $194,600,000 ($337.26/SF) to Commerz Real, a German real estate investor. Additionally, Sterling Bay sold the office portion of 121 W. Wacker for $118,500,000 ($241.71/SF) to Ameritus Real Estate. The most expensive transaction to finalize in the Central Loop during 2018 was Olen Properties’ sale of 1 S. Dearborn to Starwood Capital Group for $360,300,000 ($434.86/SF). In 2018, eight buildings changed hands, up from three finalized sales the previous year. The aggregate dollar amount of buildings sold in the Central Loop during 2018 was $1,358,050, a $625,050,000 increase from 2017.

Large Blocks of Availability

The fourth quarter ended with eight large blocks of contiguous and direct space. 145 S. Wells, still under construction, has 202,218 square feet, making it the largest block of contiguous space in the Central Loop. The largest immediately available large block of contiguous and direct space is located in 203 N. LaSalle, DLA Piper’s former space for 183,672 square feet. The second largest block of contiguous and direct space is 202,763 square feet at 2 N. LaSalle relaying the pattern of older assets struggling to retain tenants without adding amenities or renovating portions of the building.

Construction

Architect-developer Thomas Roszak continued construction on 145 S. Wells, which began construction in the second quarter. Though the development began on speculation, the developer is expecting enough demand from creative users looking in the Central Loop to warrant a risky bet on the future of the market. The Central Loop office tower will be twenty stories and consist of 224,300 square feet of creative-loft office space featuring small floor plates between 11,400 and 12,600 square feet and is due to deliver in the Spring of 2019.

Significant Lease and Sale Activity

Central Loop Office Leasing Activity – 4Q 2018

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

NO SIGNIFICANT ACTIVITY

Central Loop Office Investment Sales Activity – 4Q 2018

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

S 125 S. Clark B 577,000 $194,600,000 $337.26 Blue Star Properties Commerz Real

S 121 W. Wacker B 490,259 $118,500,000 $241.71 Sterling Bay Ameritus Real Estate

FS 105 W. Adams C 314,855 $50,000,000 $158.80 Crown Commercial Real Estate TBD

FS = For Sale P= Pending S = Sold

10 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International CLARK WILLOW

LA SA LLE EUGENIE

CONCORD CONCORD

CONCORD VINE NORTH

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CHERRY ELM ELM ELM CEDAR HILL RUSH HICKORY East Loop MAPLE BLISS HOBBIE WENDELL BELLEVUE HAINES OAK OAK OAK The East Loop possesses a dynamic inventory base that includes office towers WALTON WALTON

interspersed MICHIGAN amongst residential condominium buildings. With Millennium Park, DELAWARE LOCUST the city’s largest public space, serving as the submarket’s focal point, the East Loop CHESTNUT CHESTNUT T RABEE LLE R Y FRY S VAN DER ROHE S VAN CLARK DEARBORN SA

offers a unique officeDE WIT environment that is conducive to the work-life balance often LA SEDGWICK HUDSON INSTITUTE PL. PEARSON MA SING

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S CHICAGO

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E ANGAMON O Market Indicators Q4 2017 Q3 2018 CURRENT

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G 33,542 -110,248 -160,233 B QTR ABSORPTION

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HUBBARD TH CITY FRONT NEW ARK AZA DRIVE

Michigan on the East, and State StreetP on the West.

NOR PL NORTH WATER PE ORIA Submarket Highlights & Forecast KINZIE KINZIE

WACKER The East Loop submarket reported the largest wave of negative net 90 absorption out of any other Chicago CBD submarket, creating an additional 758,470 square feet of shadow space throughout 2018; FULTON WACKER SOUTH WATER as a result, the year-over-year vacancy rate increased by 270 basis

94 SON

ET points, ending the year at 14.7 percent. The largest contributor to the LAKE LAKE LAKE LAKE ST negative net absorption was CNA’s departure in the second quarter, EAST LOOP 41 leaving behind 750,000 square feet of office space in 333 S. Wabash

RANDOLPH RANDOLPH RANDOLPH RANDOLPH HARBOR as the company relocated into roughly 300,000 square feet at 151 N. GREEN RACINE PE ORIA WEST CENTRAL Franklin in the West Loop. Another contributing factor occurred when MORGAN

WASHINGTON HALSTED WASHINGTON WASHINGTON WASHINGTON MILLENNIUM ANGAMON ABERDEEN S

CARPENTER Performics and Zenith Optimedia vacated roughly 94,955 square feet LOOP LOOP P ARK at 111 E. Wacker as Publicis consolidated its subsidiaries into 35 W. MADISON MADISON MADISON MADISON MADISON Wacker.

MONROE S MONROE MONROE MONROE Despite the influx of vacant space, the East Loop remains pervasive; in

LLE 2020, Northern Trust is scheduled to occupy at least 400,000 square E ASH B CKER SA

TAT feet of the 750,000 square feet CNA Financial left behind. Throughout FRANKLIN WELLS LA DESPLAINE JEFFERSON CLINTON CANAL WA ADAMS ADAMS CLARK DEARBORN S WA MICHIGAN 2018, 200 E. Randolph particularly was a focal point of much leasing

JACKSON JACKSON JACKSON JACKSON activity within the East Loop submarket as the building leased over GRANT 147,000 square feet (Kemper Corporation, Slalom Consulting, Rio P ARK Tinto etc.) of office space, eliminating any large Class A blocks of VAN BUREN VAN BUREN VAN BUREN VAN BUREN AKE SHORE DRIVE L 290 Eisenhower Expwy CONGRESS CONGRESS COLUMBUS HARRISON HARRISON HARRISON LLE VERNON PARK

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15TH PL

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19TH

CANAL 19TH CANALPORT NORMAL

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NORMAL 24TH PL 24TH PL Stevenson Expwy CORBETT 55 KING DR Chicago Central Business District | Local Standards - 4th Quarter 2018 Office Market Statistics | Charts

Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) Submarket Vacancy Rates Net Absorption & Vacancy Asking Gross Rental Rates Row Reference: Central Loop Submarket 2016 - 2018 Central Loop Submarket 2 Central Loop 1,000,000 16.0% Q3-17 Q3-18 Arrow $50.00 $50.00 Vacancy rate 13.1% 14.4% Up 791,288 20.0% 800,000 14.1% 14.1% 14.2% 14.3% 14.0% Absorption (Qtr.) -281,643 -92,494 Up $45.00 $45.00 13.4% Class A Rents $37.56 $38.89 Up 12.2% Inventory 37,342,427 37,342,427 Same 600,000 12.1% 12.0% $40.00 $40.00 14.7% Class B 15.0% 14.3% 13.4% 13.8% 13.6% $35.00 $35.00 3 East Loop 400,000 10.0% 12.2% 12.3% 12.0% 11.9% Q3-17 Q3-18 Arrow $30.00 Class C $30.00 9.9% Vacancy rate 12.1% 14.2% Up 200,000 8.0% 9.3% 9.6% 10.0% Absorption (Qtr.) 23,181 -110,248 Down $25.00 $25.00 8.2% 8.0% 25,019 7.4% Rents $34.90 $35.20 Up 0 6.0% $20.00 $20.00 Inventory 26,530,972 26,530,972 Same (48,825) (79,388) (52,235) -200,000 (145,490) 4.0% Vacancy(%) 5.0% $15.00 $15.00 4 North Michigan Avenue $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) $5.00 $5.00 0.0% Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 Inventory 10,936,344 10,936,344 Same 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy -5.0% contiguous space within the submarket. The Prudential Plaza was Source: Costar; Colliers International Research Central Loop East Loop North Michigan Ave. River North West Loop 5 River North Q3-17 Q3-18 Arrow a second focal point in 2018 as the Chicago Tribune left its historic 2016 2017 2018 Vacancy rate 9.7% 7.6% Down Absorption (Qtr.) 39,206 255,516 Up Net Absorption & Vacancy | East Loop Office Market Source: Costar; Colliers International Research headquarters and occupied about 130,000 square feet at 130 E. Net Absorption & Vacancy Asking Gross Rental Rates Rents $41.83 $42.92 Up Chicago Central Business District | Local Standards - 4th Quarter 2018 East Loop Submarket East Loop Submarket Inventory 17,016,381 17,072,381 Up Office Market StatisticsRandolph | Charts and Wilson Sporting Goods moved in at the beginning of 600,000 16.0% $50.00 $50.00 15.0% 414,976 6 West Loop 14.4% 14.6% 14.7% the year for 80,000 square feet. Class A vacancy in the East Loop 400,000 14.0% $45.00 Class A $45.00 Q3-17 Q3-18 Arrow 197,217 Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) Vacancy rate 14.4% 14.0% Down 13.1% $40.00 $40.00 ended the year with a 9.7 percent, the tightest Class A vacancy has 149,919 12.3% Absorption (Qtr.) 129,305 60,932 Down Net Absorption & Vacancy 200,000 12.0% 12.0% Submarket Vacancy Rates Class B Asking Gross Rental Rates $35.00 $35.00 Row Reference: Rents $42.69 $43.93 Up Central Loop Submarketbeen in ten years—further illustrating the high demand for quality 2016 - 2018 Inventory 50,480,672 51,726,211 Up 0 10.0% 2 Central Loop Central Loop Submarket $30.00 Class C $30.00 1,000,000 16.0% (30,598) Q3-17 Q3-18 Arrow space. Over the next twelve months, the submarket’s Class B assets (46,154) 7 Overall CBD -200,000$50.00 (110,877) 8.0%$50.00 $25.00 $25.00 Vacancy rate 13.1% 14.4% Up 791,288 20.0% Q3-17 Q3-18 Arrow 800,000 will14.1% be focusing14.1% on filling14.2% in vacating tenants such as CNA 14.3%Financial14.0% Absorption (Qtr.) -281,643 -92,494 Up 13.4% $45.00 $45.00 $20.00 $20.00 Rents $37.56 $38.89 Up Vacancy rate 20.5% 10.3% Down -400,000 Class A 6.0% Absorption (Qtr.) 152,624 442,489 Up 12.2% Inventory 37,342,427 37,342,427 Same 600,000 (350,000 SF after Northern Trust12.1% moves in) Walgreens (80,00012.0% SF) $40.00 $40.00 $15.00 14.7% $15.00 Rents $37.94 $32.84 Down Class B 15.0% 14.3% -600,000 4.0% 13.4% 13.8% 13.6% Inventory 144,732,717 146,631,696 Up at the Sullivan Center and Kemper Corporation (66,000 SF) at 1 $35.00 $35.00 $10.00 $10.00 3 East Loop 400,000 10.0% 12.2% 12.3% 12.0% 11.9% -800,000 2.0% Q3-17 Q3-18 Arrow $30.00 (758,470)Class C $30.00 $5.00 $5.00 E. Wacker. In order to attract tenants, Class B assets are likely to 9.9% 9.6% Vacancy rate 12.1% 14.2% Up 200,000 8.0% 10.0% 9.3% -1,000,000 0.0% $0.00 8.2% $0.00 Absorption (Qtr.) 23,181 -110,248 Down 25,019 $25.00 $25.00 8.0% offer increasingly aggressive tenant concession packages or ramp 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 7.4%2017 2018 Rents $34.90 $35.20 Up 0 6.0% $20.00 $20.00 Inventory 26,530,972 26,530,972 Same up amenity packages in order to compete(48,825) with Class A assets within Source: Costar; Colliers International Research Source: Costar; Colliers International Research (79,388) (52,235) Absorption Vacancy -200,000 (145,490) 4.0% Vacancy(%) 5.0% the same submarket. $15.00 $15.00 4 North Michigan Avenue $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) Net Absorption & Vacancy $5.00 $5.00 Asking Gross Rental0.0% Rates Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% North Michigan Avenue Submarket Rents $36.17 $37.40 Up 80 10 800 44.25 2012Statistical2013 Highlights2014 2015 2016 2017 2018 North Michigan Avenue Submarket 30 300 600 400,000$0.00 18.0%$0.00 Inventory 10,936,344 10,936,344 Same 2012 2013 2014 2015 376,5302016 2017 2018 $50.00 $50.00 Source: Costar; ColliersIn Internationalthe fourth Research quarter,Absorption the East VacancyLoop reported 160,233 square feet 350,000 16.0% -5.0% Source: Costar; Colliers International Research15.4% 15.3% $45.00 Central Loop East Loop North Michigan Ave. RiverClass North A $45.00 West Loop 5 River North 14.5% of negative net absorption. Year-to-date, the East Loop posted the 14.0% Q3-17 Q3-18 Arrow 300,000 13.4% $40.00 $40.00 2016 2017 2018 Class B Vacancy rate 9.7% 7.6% Down 12.0% $35.00 $35.00 Absorption (Qtr.) 39,206 255,516 Up largest amount of negative net absorption, 758,470 square feet, more Source: Costar; Colliers International Research 250,000Asking Gross 231,217Rental Rates | East Loop Office Market Rents $41.83 $42.92 Up Net Absorption & Vacancy Asking Gross Rental Rates 216,083 East Loop Submarketthan any other submarket in Chicago’s CBD. The massive wave of East Loop Submarket 9.9% 10.0% $30.00 Class C $30.00 Inventory 17,016,381 17,072,381 Up 200,000 183,209 600,000 16.0% $50.00 8.2% 8.0%$50.00 $25.00 $25.00 vacant space brought back to market was largely attributed to CNA 7.4% 6 15.0% 414,976 150,000 West Loop 14.4% 14.6% 14.7% $20.00 $20.00 400,000 leaving behind 750,000 square feet (19 percent of all vacant space14.0% $45.00 Class A 6.0%$45.00 Q3-17 Q3-18 Arrow 197,217 89,871 $15.00 $15.00 Vacancy rate 14.4% 14.0% Down 13.1% 100,000$40.00 $40.00 12.3% 4.0% Absorption (Qtr.) 129,305 60,932 Down 200,000 149,919 12.0% 12.0% in the East Loop) at 333 S. Wabash for 151 N. Franklin. Of all of the Class B $10.00 $10.00 Rents $42.69 $43.93 Up 50,000$35.00 $35.00 25,405 2.0% Inventory 50,480,672 51,726,211 Up 0 asset classes within the submarket, Class A buildings were the10.0% only 2,228 $5.00 $5.00 $30.00 Class C $30.00 (46,154) (30,598) 0 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 7 Overall CBD -200,000 (110,877)asset class to shed vacancy rate—eliminating 110 basis points 8.0%from $25.00 $25.00 2012 2013 2014 2015 2016 2017 2018 Q3-17 Q3-18 Arrow Source: Costar; Colliers International Research Absorption Vacancy Vacancy rate 20.5% 10.3% Down its vacancy rate since last quarter, ending at 9.7 percent. Conversely, $20.00 $20.00 Source: Costar; Colliers International Research -400,000 6.0% Absorption (Qtr.) 152,624 442,489 Up Class B assets increased its vacancy by 150 basis points since last $15.00 $15.00 Rents $37.94 $32.84 Down -600,000 4.0% Inventory 144,732,717 146,631,696 Up quarter and 620 basis points year of year, the highest increase Net$10.00 Absorption & Vacancy $10.00 -800,000 2.0% Asking Gross Rental Rates (758,470) River$5.00 North Submarket $5.00 River North Submarket within any Chicago CBD submarket ending at 20.4 percent. 500,000 14.0% -1,000,000 0.0% $0.00 $0.00 $50.00 $50.00 2012 2013 2014 2015 2016 2017 2018 415,786 Class A 2012 12.5% 2013 2014 2015 2016 2017 2018 400,000 12.0% $45.00 $45.00 The average direct asking rent in the East Loop increased by $0.82 11.5% Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Class B $40.00 $40.00 300,000 278,313 10.0% since last quarter, ending at $36.02 per square foot gross across all 9.6% 9.1% 9.3% $35.00 $35.00 8.5% Class C asset classes. Year-over-year, average direct asking rents in the East 200,000 174,978 8.0% 8.0% Net Absorption & Vacancy 154,656 $30.00 $30.00 Loop increased by $1.41. Class A assets were the only asset to have Asking Gross Rental Rates 90,726 $25.00 $25.00 80 10 800 44.25 North Michigan Avenue Submarket 100,000 6.0% North Michigan Avenue Submarket 30 300 600 400,000 18.0% decreased as a result of high-quality,376,530 large blocks of space being $50.00 $50.00 $20.00 $20.00 0 4.0% 350,000 16.0% $15.00 $15.00 taken off 15.4%of the market,15.3% decreasing the overall average direct asking $45.00 (7,558) Class A $45.00 14.5% 14.0% (100,000) 2.0% $10.00 $10.00 300,000 rent. Class B assets increased13.4% by $0.33 and Class C assets increased Large$40.00 Block Availabilities | East Loop Office Market $40.00 (128,241) Class B $5.00 $5.00 12.0% $35.00 $35.00 250,000 by $0.65231,217 per square foot gross. Looking ahead, asking rates in the (200,000) 0.0% 216,083 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 9.9% 10.0% $30.00 Class C $30.00 2012 2013 2014 2015 2016 2017 2018 200,000 East Loop are likely to remain flat. The submarket’s183,209 Class A asking 100,000+ square feet Source:$25.00 Costar; Colliers International Research Absorption Vacancy $25.00 8.2% 8.0% Source: Costar; Colliers International Research rates are likely to climb due to the Aon Center commanding7.4% higher BUILDING CLASS SIZE (SF) FLOOR TYPE 150,000 $20.00 $20.00 6.0% 100,000 asking rates in conjunction with its ongoing $25 million89,871 renovation 233$15.00 N. Michigan B 143,067 22-25 Direct $15.00 4.0% Net Absorption & Vacancy Asking Gross Rental Rates and high volume of leasing activity. At the same time, this increase West$10.00 Loop Submarket $10.00 50,000 333 S. Wabash B 113,864 21-24 Direct West Loop Submarket 25,405 2.0% 1,400,000 16.0% $5.00 $5.00 in rents is likely to2,228 be offset by the submarket’s Class B asking rates, 1,226,554 $50.00 Class A $50.00 0 0.0% 1,151,823 1,200,000 14.0% 2012which are2013 likely to2014 fall in favor2015 of tenants2016 as 2017Landlord’s2018 struggle to $0.00 13.8% 13.6% $0.00 $45.00 $45.00 2012 12.9% 2013 2014 2015 2016 2017 2018 Class B 1,000,000 12.4% $40.00 $40.00 Source: Costar; Colliers International Research Absorption Vacancy 11.7% 11.9% 12.0% compete with the Class A inventory. Source: Costar; Colliers International Research 11.5% 800,000 $35.00 $35.00 10.0% 571,910 Class C 600,000 $30.00 $30.00 Construction 445,517 8.0% Net AbsorptionLarge & Vacancy Blocks of Availability 400,000 $25.00 $25.00 River North Submarket Asking Gross Rental232,174 Rates River North Submarket 6.0% $20.00 $20.00 500,000 The number of large, contiguous blocks of space available on a14.0% direct 200,000No new construction was delivered to the East Loop during the fourth $50.00 $50.00 $15.00 $15.00 415,786 Class A 4.0% basis12.5% currently resides at two such blocks, down from three, the quarter.0 There are no ground-up office developments currently 400,000 12.0% $45.00 $45.00 $10.00 $10.00 11.5% (200,000)planned in the submarket; however,(85,458) The Macy’s Department StoresClass B 2.0% largest of which is 143,067 square feet on floors twenty-two through $40.00 (212,050) $40.00 $5.00 $5.00 300,000 278,313 10.0% 9.6% (400,000) 0.0% twenty-five at 2339.1% N. Michigan. The 9.3%second largest block of space Company$35.00 2012 sold the2013 top seven2014 floors 2015of its department2016 2017store at 1112018 N. $35.00 $0.00 $0.00 8.5% 2012 2013 2014 2015 2016 2017 2018 174,978 Class C 200,000 8.0% 8.0% $30.00 $30.00 154,656is at 333 S. Wabash, part of CNA’s old space, for 113,864 on floors Source:State Costar; toColliers BrookfieldInternational Research Asset ManagementAbsorption in Vacancy late 2017 for $30,000,000 Source: Costar; Colliers International Research 90,726 $25.00 $25.00 100,000 twenty-one through twenty-four. 6.0% ($42.86/SF), which Brookfield is actively marketing to prospective office$20.00 tenants. $20.00 0 4.0% Net$15.00 Absorption & Vacancy $15.00 Asking Gross Rental Rates (7,558) Overall CBD Overall CBD (100,000) 2.0% 1,600,000$10.00 16.0%$10.00 $50.00 $50.00 1,427,615 Class A (128,241) $5.00 1,365,000 $5.00 $45.00 $45.00 1,400,000 13.7% 14.0% (200,000) 0.0% 13.3% 1,202,213 2012 2013 2014 2015 2016 2017 2018 $0.00 12.9% $0.00 12.8% 12.5% $40.00 Class B $40.00 1,200,000 2012 2013 2014 2015 2016 2017 201812.0% 11.9% 11.6% Source: Costar; Colliers International Research Absorption Vacancy $35.00 $35.00 1,000,000Source: Costar; Colliers International Research 10.0% $30.00 Class C $30.00 12 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago813,307 / Office | Colliers International 765,142 800,000 8.0% $25.00 $25.00

Net Absorption & Vacancy 561,706 Asking600,000 Gross Rental Rates 6.0% $20.00 $20.00 West Loop Submarket West Loop Submarket $15.00 $15.00 1,400,000 16.0% 400,000 4.0% 1,226,554 $50.00 $50.00 236,492 Class A $10.00 $10.00 1,200,000 1,151,823 13.8% 14.0% 200,000$45.00 2.0%$45.00 13.6% $5.00 $5.00 12.9% Class B 1,000,000 12.4% $40.00 $40.00 11.9% 12.0% 0 0.0% 11.5% 11.7% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 800,000 $35.00 $35.00 10.0% 571,910 Source: Costar; Colliers International Research Absorption Vacancy Class C Source: Costar; Colliers International Research 600,000 $30.00 $30.00 445,517 8.0% 400,000 $25.00 $25.00 232,174 6.0% $20.00 $20.00 200,000 4.0% $15.00 $15.00 0 $10.00 $10.00 (200,000) (85,458) 2.0% (212,050) $5.00 $5.00 (400,000) 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research

561,706 600,000 6.0% $20.00 $20.00 $15.00 $15.00 400,000 4.0% 236,492 $10.00 $10.00 200,000 2.0% $5.00 $5.00

0 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Lease and Sale Highlights There were no lease transactions occurring over 50,000 square feet in the East Loop during the fourth quarter; Sheehan Nagle Hartray Architects signed a 24,000 square-foot agreement, expanding its footprint by 11,000 square feet, which would relocate the company from its current office at 30 W. Monroe into 130 E. Randolph. Two large lease transactions occurred throughout 2018 in the East Loop: Slalom Consulting (65,000 SF) and Kemper Corporation (64,956 SF) bringing the year- end large lease transaction volume to 130,000 square feet.

No investment sale finalized in the East Loop during the fourth quarter. The sale of the Prudential Plaza was the most expensive finalized office sale throughout Chicago’s CBD in 2018; local developer Sterling Bay had purchased the towers (130 E. Randolph and 180 N. Stetson) for $680,000,000 ($308.78/SF) in the second quarter from 601W Companies. A total of three office buildings, or an aggregate sales volume of $889,000,000, sold in the East Loop during 2018.

Significant Lease and Sale Activity

East Loop Office Leasing Activity – 4Q 2018

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE NO SIGNIFICANT ACTIVITY ONE PRUDENTIAL PLAZA | 130 E RANDOLPH

East Loop Office Investment Sales Activity – 4Q 2018

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

NO SIGNIFICANT ACTIVITY

FS = For Sale P= Pending S = Sold

13 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International CLARK WILLOW

LA SA LLE EUGENIE

CONCORD North Michigan Avenue CONCORD

CONCORD VINE NORTH

NORTH NORTH NORTH R WEED The North Michigan Avenue submarket possesses a unique building composition STO ON A 1000 FEET ARK YT BURTON

DA BLACKHAWK made up hotels, retail space, office buildings, medical facilities and residential FREMONT TH P BLACKHAWK

OGDEN NOR

WELLS 300 METERS ORLEANS SEDGWICK WIELAND properties. This, along with its peripheral location, makes it an appealing home for EASTMAN SCHILLER less traditional office tenants. CLEVELAND MOHAWK HUDSON EVERGREEN EVERGREEN BANKS TH BRANCH GOETHE The submarket’sRITCHIE small office tenant base is comprised of NOR primarily advertising firms, media agencies and a growing Market Indicators Q4 2017 Q3 2018 CURRENT HOOKER SCOTT SCOTT SCOTT EVERGREEN number of medical office users that desire close proximity to VACANCY 8.2% 7.1% 7.4% DIVISION DIVISION theDIVISION large ST ONE hospitals in the area. The submarket is bordered by QTR ABSORPTION -30,807 21,555 -33,507 CHERRY OakELM Street on the north, the Chicago River on the south, State ELM ELM 183,209 123,378 89,871 StreetCEDAR on the west and Lake Michigan on the east. YTD ABSORPTION HILL RUSH HICKORY MAPLE BLISS HOBBIE WENDELL BELLEVUE RENTAL RATE $35.82 $37.40 $37.70 HAINES OAK OAK OAK

WALTON WALTON MICHIGAN LOCUST DELAWARE Submarket Highlights & Forecast

CHESTNUT CHESTNUT T RABEE LLE R Y FRY S VAN DER ROHE S VAN CLARK DEARBORN The North Michigan Avenue submarket reported 33,507 square SA DE WIT LA HUDSON SEDGWICK INSTITUTE PL. PEARSON MA SING

E S LA MIE

L LE feet of negative net absorption in the fourth quarter, increasing the CHICAGO I

S CHICAGO

E submarket’s vacancy rate by 30 basis points to an overall vacancy SUPERIOR CARPENTER L Y

SUPERIOR T A

HURON GREEN K MORGAN TAT E rate of 7.4 percent. Over the past year, the North Michigan Avenue

AIRBANK F S S H

E ANGAMON O

S HURON R C submarket consistently had the lowest vacancy rate of any other E KINGSBUR I

HALSTED D PE ORIA

AIR R

F NORTH Ke nn e d y E x p w y ERIE I

V Chicago CBD submarket, largely attributed to its limited amount of I ERIE E

. CL N ST

ONTARIO ASH MICHIGAN inventory and its peripheral location relative to mass transit hubs. Over G B

RUSH A OHIO RIVER WA the past four years, demand for office space in the North Michigan

OHIO M

AVENUE G

NORTH Avenue submarket has caused the submarket’s vacancy rate to

GRAND E GRAND McCLUR H decrease by roughly 790 basis points. The submarket’s transformation ILLINOIS T HUBBARD has been driven by increased demand from medical and educational ORLEANS FRANKLIN WELLS

HUBBARD TH CITY FRONT NEW ARK AZA DRIVE

P office users seeking to be near Northwestern Memorial Hospital, Lurie

NOR PL NORTH WATER PE ORIA KINZIE KINZIE Children’s Hospital and the $550 million dollar, 1.2 million square foot

WACKER world-class research hospital coined the Shirley Ryan Ability Lab 90 (formerly the Rehabilitation Institute of Chicago).

FULTON WACKER SOUTH WATER

94 SON LAKE LAKE LAKE LAKE ET ST EAST LOOP 41

RANDOLPH RANDOLPH RANDOLPH RANDOLPH HARBOR GREEN RACINE

PE ORIA WEST CENTRAL MORGAN

WASHINGTON HALSTED WASHINGTON WASHINGTON WASHINGTON MILLENNIUM ANGAMON ABERDEEN S CARPENTER LOOP LOOP P ARK

MADISON MADISON MADISON MADISON MADISON

MONROE S MONROE MONROE MONROE LLE E ASH B CKER SA TAT FRANKLIN WELLS LA DESPLAINE JEFFERSON CLINTON CANAL WA S MICHIGAN CLARK WA ADAMS ADAMS DEARBORN

JACKSON JACKSON JACKSON JACKSON GRANT P ARK VAN BUREN VAN BUREN VAN BUREN VAN BUREN AKE SHORE DRIVE L 290 Eisenhower Expwy CONGRESS CONGRESS COLUMBUS HARRISON HARRISON HARRISON LLE VERNON PARK

SA BALBO INANCIAL CLARK PLYMOUTH FEDERAL F LA WELLS DEARBORN

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JEFFERSON CABRINI CABRINI ARK TER CARPENTER MILLER MORGAN E P 9TH ASH B

TAYLOR TAT WA MICHIGAN S

11TH COLUMBUS

ROOSEVELT ROOSEVELT

12TH PL RY O’BRIEN 90 SOLIDARITY

MORGAN 13TH 13TH NEWBER MAXWELL MAXWELL MAXWELL McFETRIDGE FEDERAL PLYMOUTH LIBERTY 94 CLARK 14TH 14TH 14TH

an Expwy w p x E n ya R n a D RAIRIE P

14TH PL 14TH PL

15TH PL

16TH 16TH LAKE SHORE DRIVE S 17TH RY

MILLER 17TH PE ORIA 17TH PL JEFFERSON CLINTON DESPLAINE FEDERAL NEWBER DEARBORN 18TH 18TH 18TH

19TH

CANAL 19TH CANALPORT NORMAL

Y 19TH PL T CLINTON CULLERTON ANGAMON

MORGAN CULLERTON CARPENTER MILLER SHELB S PE ORIA RAIRIE CALUME P E R UBLE ASH B CHINA PL TAT

LUMBER S INDIANA WA MICHIGAN CLARK

CERMAK CERMAK N

22ND PL RTH TO ARCHER GROVE ALEXANDER

RINCE 23RD WENTWO P 23RD

23RD PL LUMBER

WALLACE 24TH 24TH

NORMAL 24TH PL 24TH PL Stevenson Expwy CORBETT 55 KING DR Chicago Central Business District | Local Standards - 4th Quarter 2018 Office Market Statistics | Charts

Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) Submarket Vacancy Rates Net Absorption & Vacancy Asking Gross Rental Rates Row Reference: Central Loop Submarket 2016 - 2018 Central Loop Submarket 2 Central Loop 1,000,000 16.0% Q3-17 Q3-18 Arrow $50.00 $50.00 Vacancy rate 13.1% 14.4% Up 791,288 20.0% 800,000 14.1% 14.1% 14.2% 14.3% 14.0% Absorption (Qtr.) -281,643 -92,494 Up $45.00 $45.00 13.4% Class A Rents $37.56 $38.89 Up 12.2% Inventory 37,342,427 37,342,427 Same 600,000 12.1% 12.0% $40.00 $40.00 14.7% Class B 15.0% 14.3% 13.4% 13.8% 13.6% $35.00 $35.00 3 East Loop 400,000 10.0% 12.2% 12.3% 12.0% 11.9% Q3-17 Q3-18 Arrow $30.00 Class C $30.00 9.9% Vacancy rate 12.1% 14.2% Up 200,000 8.0% 9.3% 9.6% 10.0% Absorption (Qtr.) 23,181 -110,248 Down $25.00 $25.00 8.2% 8.0% 25,019 7.4% Rents $34.90 $35.20 Up 0 6.0% $20.00 $20.00 Inventory 26,530,972 26,530,972 Same (48,825) (79,388) (52,235) -200,000 (145,490) 4.0% Vacancy(%) 5.0% $15.00 $15.00 4 North Michigan Avenue $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) $5.00 $5.00 0.0% Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 Inventory 10,936,344 10,936,344 Same 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy -5.0% Source: Costar; Colliers International Research Central Loop East Loop North Michigan Ave. River North West Loop 5 River North Q3-17 Q3-18 Arrow 2016 2017 2018 Vacancy rate 9.7% 7.6% Down Absorption (Qtr.) 39,206 255,516 Up Chicago Central Business District | Local Standards - 4th Quarter 2018 Source: Costar; Colliers International Research Net Absorption & Vacancy Asking Gross Rental Rates Rents $41.83 $42.92 Up Office Market Statistics | Charts East Loop Submarket East Loop Submarket Inventory 17,016,381 17,072,381 Up 600,000 16.0% $50.00 $50.00 15.0% 414,976 Up-Down Indicators (Input the Quarters You Wish to Compare in the Black Boxes) 6 West Loop 14.4% 14.6% 14.7% 400,000 14.0% $45.00 Class A $45.00 Q3-17 Q3-18 Arrow Net Absorption & Vacancy 197,217 Submarket Vacancy Rates Row Reference: Vacancy rate 14.4% 14.0% Down Asking Gross Rental Rates 13.1% $40.00 $40.00 12.3% Absorption (Qtr.) 129,305 60,932 Down Central Loop Submarket 200,000 149,919 12.0% 12.0% 2016 - 2018 2 Central Loop Central Loop Submarket Class B Rents $42.69 $43.93 Up 1,000,000 16.0% $35.00 $35.00 Q3-17 Q3-18 Arrow Inventory 50,480,672 51,726,211 Up $50.00 0 10.0%$50.00 Vacancy rate 13.1% 14.4% Up 791,288 $30.00 20.0% Class C $30.00 14.3% 800,000 14.1% 14.1% 14.2% 14.0% (46,154) (30,598) Absorption (Qtr.) -281,643 -92,494 Up $45.00 $45.00 7 Overall CBD 13.4% -200,000 (110,877) 8.0% $25.00 $25.00 Rents $37.56 $38.89 Up Class A Q3-17 Q3-18 Arrow 12.2% Inventory 37,342,427 37,342,427 Same 600,000 12.1% 12.0% $40.00 $40.00 14.7% Vacancy rate 20.5% 10.3% Down -400,000 Class B 6.0% $20.00 15.0% 14.3% $20.00 13.4% 13.8% 13.6% Absorption (Qtr.) 152,624 442,489 Up $35.00 $35.00 3 East Loop 400,000 10.0% $15.00 12.2% 12.3% 12.0% $15.0011.9% Rents $37.94 $32.84 Down -600,000 4.0% Q3-17 Q3-18 Arrow Inventory 144,732,717 146,631,696 Up $30.00 Class C $30.00 $10.00 9.9% $10.00 Vacancy rate 12.1% 14.2% Up 200,000 8.0% 9.3% 9.6% -800,000 2.0% 10.0% Absorption (Qtr.) 23,181 -110,248 Down $25.00 (758,470) $25.00 $5.00 8.2% 8.0%$5.00 25,019 7.4% Rents $34.90 $35.20 Up 0 6.0% -1,000,000$20.00 0.0%$20.00 $0.00 $0.00 Inventory 26,530,972 26,530,972 Same (48,825) 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 (79,388) (52,235) -200,000 (145,490) 4.0% Vacancy(%) 5.0% $15.00 $15.00 4 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research North Michigan Avenue In the first half of 2018, the Tribune Tower halted leasing office $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) space as the building started the deconversion process from $5.00 $5.00 0.0% Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% Net Absorption & Vacancy | N Michigan Ave Office Market Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 Net Absorption & Vacancy an office building into 165 condo units, inherently decreasing $0.00 $0.00 Asking Gross Rental Rates Inventory 10,936,344 10,936,344 Same North Michigan2012 Avenue 2013Submarket 2014 2015 2016 2017 2018 80 10 800 44.25 North Michigan Avenue Submarket 30 300 600 Source: Costar; Colliers Internationalthe submarket’s Research overallAbsorption office Vacancy inventory. The North Michigan 400,000 18.0% -5.0% Source: Costar; Colliers International Research 376,530 $50.00 Central Loop East Loop North Michigan Ave. River North $50.00 West Loop 5 River North Q3-17 Q3-18 Arrow Avenue’s vacancy rate is expected to shrink further with the 350,000 16.0% 15.4% 15.3% $45.00 2016 2017 2018 Class A $45.00 Vacancy rate 9.7% 7.6% Down 14.5% 14.0% Absorption (Qtr.) 39,206 255,516 Up arrival of Rent24, a European co-working provider that agreed 300,000 13.4% $40.00 Source: Costar; Colliers International Research $40.00 Net Absorption & Vacancy Asking Gross Rental Rates Class B Rents $41.83 $42.92 Up 12.0% $35.00 $35.00 Inventory 17,016,381 17,072,381 Up East Loop Submarketto take 100,000 square feet at 500 N. Michigan, the largest lease East250,000 Loop Submarket 231,217 216,083 600,000 16.0% $50.00 9.9% 10.0%$50.00 $30.00 Class C $30.00 transaction since 2013 when ComPsych renewed and expanded 183,209 15.0% 200,000 6 West Loop 14.6% 414,976 14.7% 14.4% $45.00 8.2% Class A 8.0%$45.00 $25.00 $25.00 Q3-17 Q3-18 Arrow 400,000 at 455 N. Cityfront Plaza. 14.0% 7.4% 197,217 150,000 Vacancy rate 14.4% 14.0% Down 13.1% $40.00 $40.00 $20.00 $20.00 12.3% 6.0% Absorption (Qtr.) 129,305 60,932 Down 200,000 149,919 12.0% 12.0% 89,871Class B 100,000$35.00 $35.00 $15.00 $15.00 Rents $42.69 $43.93 Up 4.0% Inventory 50,480,672 51,726,211 Up 0 Stastical Highlights 10.0% $10.00 $10.00 $30.0050,000 Class C $30.00 (46,154) (30,598) 25,405 2.0% $5.00 $5.00 7 Overall CBD -200,000 (110,877) 8.0% $25.00 2,228 $25.00 0 0.0% Q3-17 Q3-18 Arrow The North Michigan Avenue submarket ended with 33,507 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 $20.00 $20.00 2012 2013 2014 2015 2016 2017 2018 Vacancy rate 20.5% 10.3% Down -400,000 6.0% Absorption (Qtr.) 152,624 442,489 Up square feet of negative net absorption in the fourth quarter, Source: Costar; Colliers International Research Absorption Vacancy $15.00 $15.00 Source: Costar; Colliers International Research Rents $37.94 $32.84 Down -600,000 4.0% Inventory 144,732,717 146,631,696 Up finishing the year with 89,871 square feet total of positive net $10.00 $10.00 -800,000 absorption. Class A assets ended the quarter with 2,946(758,470) square2.0% Net$5.00 Absorption & Vacancy $5.00 Asking Gross Rental Rates -1,000,000 feet of negative net absorption, while Class B assets finished0.0% the River$0.00 North Submarket $0.00 2012 2013 2014 2015 2016 2017 2018 River North Submarket 500,000 2012 2013 2014 2015 2016 2017 201814.0% $50.00 $50.00 fourth quarter with 30,916 square feet of negative absorption 415,786 Class A Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers12.5%International Research 400,000 12.0% $45.00 $45.00 and Class C assets finished with 355 square feet of positive 11.5% Class B $40.00 $40.00 300,000 278,313 10.0% absorption. 9.6% 9.1% 9.3% $35.00 $35.00 Net Absorption & Vacancy Asking Gross Rental Rates | N Michigan8.5% Ave Office Market Asking Gross Rental174,978 Rates Class C North Michigan Avenue Submarket 200,000 154,656 8.0% 8.0% $30.00 $30.00 80 10 800 44.25 North Michigan Avenue Submarket 30 300 600 400,000 The North Michigan Avenue’s average direct asking rental18.0% rate 376,530 90,726 $25.00 $25.00 increased by $0.31 per square foot in the fourth quarter ending 100,000$50.00 6.0%$50.00 350,000 16.0% $20.00 $20.00 15.4% 15.3% $45.00 Class A $45.00 14.5% 0 4.0% at $37.71 per square foot gross. Over the course of a year,14.0% the $15.00 $15.00 300,000 13.4% $40.00 (7,558) $40.00 Class B $10.00 $10.00 submarket’s average direct asking rental rate increased by $1.8912.0% (100,000)$35.00 2.0%$35.00 250,000 231,217 216,083 (128,241) $5.00 $5.00 per square foot gross. 9.9% 10.0% $30.00 Class C $30.00 183,209 (200,000) 0.0% 200,000 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 8.2% 8.0% $25.00 $25.00 2012 2013 2014 2015 2016 2017 2018 7.4% 150,000 Source:$20.00 Costar; Colliers International Research Absorption Vacancy $20.00 Lease and Sale Highlights 6.0% Source: Costar; Colliers International Research 100,000 89,871 $15.00 $15.00 4.0% $10.00 $10.00 50,000 Overall, there was one large lease transaction that signed for Net Absorption & Vacancy 25,405 2.0% Asking Gross Rental Rates West$5.00 Loop Submarket $5.00 100,000 square2,228 feet in 2018, Rent24 agreed to occupy 100,000 West Loop Submarket 0 0.0% 1,400,000 16.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 1,226,554 $0.00 $50.00 $50.00 2012 2013 2014 2015 2016 2017 2018 Class A square feet of office space at 500 N. Michigan, marking the first 1,200,000 1,151,823 14.0% $45.00 $45.00 Source: Costar; Colliers International Research Absorption Vacancy 13.8% 13.6% major entry of a co-working provider coming to North Michigan Source: Costar; Colliers12.9%International Research Class B 1,000,000 12.4% $40.00 $40.00 11.9% 12.0% 11.5% 11.7% Avenue. The first few floors are expected to open in 2019. 800,000 $35.00 $35.00 10.0% 571,910 Class C Net Absorption & Vacancy 600,000 $30.00 $30.00 River North Submarket Asking Gross Rental Rates 445,517 8.0% The North Michigan Avenue submarket had one investment River North Submarket $25.00 $25.00 500,000 14.0% 400,000 $50.00 232,174 6.0%$50.00 sale close in415,786 the fourth quarter, 444 N. Michigan. GLL Real Class A $20.00 $20.00 12.5% 200,000 400,000 12.0% $45.00 4.0%$45.00 $15.00 $15.00 Estate 11.5%sold 444 N. Michigan to CIM Group for $138,000,000 0 Class B $40.00 $40.00 $10.00 $10.00 300,000 278,313 10.0% Large Block Availabilities | N Michigan(85,458) Ave Office Market 2.0% ($274.35/SF), the company that started the9.6% deconversion of (200,000) 9.1% 9.3% $35.00 (212,050) $35.00 $5.00 $5.00 8.5% (400,000) Class C 0.0% 200,000 the174,978 Tribune Tower’s office space into a mixed-use 8.0%space8.0% with 154,656 $30.00 2012 2013 2014 2015 2016 2017 2018 $30.00 $0.00 $0.00 100,000+ square feet 2012 2013 2014 2015 2016 2017 2018 condominiums. Earlier90,726 in the year, Joe Mansueto bought 400- $25.00 $25.00 100,000 6.0% Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research 410 N. Michigan Avenue for $240,000,000 ($508.47/SF.) BUILDING$20.00 CLASS SIZE (SF) FLOOR TYPE $20.00 0 4.0% $15.00 $15.00 With the 875 N. Michigan deal terminating,(7,558) the North Michigan ------Net Absorption & Vacancy $10.00 $10.00 Asking Gross Rental Rates (100,000) Avenue submarket finished the year with two finalized2.0% office Overall CBD Overall CBD transactions for a total sales volume(128,241) of $378,000,000. 1,600,000$5.00 16.0%$5.00 $50.00 $50.00 (200,000) 0.0% 1,427,615 Class A 2012 2013 2014 2015 2016 2017 2018 $0.00 1,365,000 $0.00 $45.00 $45.00 1,400,000 2012 13.7% 2013 2014 2015 2016 2017 201814.0% 13.3% 1,202,213 12.9% Source: Costar; Colliers International Research Absorption Vacancy 12.8% 12.5% $40.00 Class B $40.00 1,200,000 12.0% Large Blocks of Availability Source: Costar; Colliers International Research 11.9% 11.6% $35.00 $35.00 1,000,000 10.0% $30.00 Class C $30.00 813,307 There are currently no large, contiguous blocks of space available 765,142 Net Absorption & Vacancy Asking800,000 Gross Rental Rates 8.0% $25.00 $25.00 West Loop Submarket within the North Michigan Avenue submarket. The submarket’s West Loop Submarket561,706 $20.00 $20.00 1,400,000 16.0% 600,000 6.0% $50.00 $50.00 small inventory compared to competing markets,1,226,554 in addition to Class A $15.00 $15.00 1,200,000 1,151,823 400,000 4.0% 13.8% 14.0% $45.00 $45.00 13.6% 236,492 $10.00 $10.00 12.9%sustained tenant demand for space, has eliminated blocks of Class B 1,000,000 12.4% 200,000$40.00 2.0%$40.00 11.9% 12.0% $5.00 $5.00 contiguous space11.5% in excess11.7% of 100,000 square feet over the past 800,000 $35.000 0.0%$35.00 10.0% $0.00 $0.00 571,910 twenty four months. 2012 2013 2014 2015 2016 2017 2018Class C 2012 2013 2014 2015 2016 2017 2018 600,000 $30.00 $30.00 445,517 8.0% Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research 400,000 $25.00 $25.00 232,174 6.0% $20.00 $20.00 200,000 4.0% $15.00 $15.00 0 $10.00 $10.00 (200,000) (85,458) 2.0% (212,050) $5.00 $5.00 (400,000) 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research 15 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International

561,706 600,000 6.0% $20.00 $20.00 $15.00 $15.00 400,000 4.0% 236,492 $10.00 $10.00 200,000 2.0% $5.00 $5.00

0 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Construction

No new construction was delivered to the North Michigan Avenue submarket during the fourth quarter; however, the National Association of Realtors announced a plan to renovate 430 N. Michigan for $45 million which would include the addition of an 18,000 square foot glass-enclosed office on top of the building. There are no other office developments anticipated in the submarket in the near future.

Significant Lease and Sale Activity North Michigan Avenue Office Leasing Activity – 4Q 2018

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

NO SIGNIFICANT ACTIVITY

401 N MICHIGAN AVENUE

North Michigan Avenue Investment Sales Activity – 4Q 2018

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

S 444 N. Michigan A 503,000 $138,000,000 $274.35 GLL Real Estate CIM Group

S = Sold P = Pending FS = For Sale

16 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International River North

River North continues to be one of the fastest growing submarkets in the CBD. The result of new office development, a booming residential community and most recently, an infiltration of the city’s technology companies, River North has transformed from a once fairly undeveloped area consisting of warehouses and loft properties into a

CLARK WILLOW

lively and dynamic office LA environment. SA LLE EUGENIE

CONCORD CONCORD River CNorthONCORD VINE now contains a mix of office options ranging NORTH NORTH NORTH NORTH R WEED from Class B and C brick and timber loft-style properties Market Indicators Q4 2017 Q3 2018 CURRENT STO ON A 1000 FEET ARK toYT some of its newest Class A trophy officeBURTON towers. The

DA BLACKHAWK FREMONT TH P BLACKHAWK VACANCY 9.6% 7.6% 8.0%

OGDEN NOR

WELLS 300 METERS ORLEANS SEDGWICK range in office space options WIELAND captures the interest of both EASTMANtraditional and unconventional office SCHILLERusers. This diverse QTR ABSORPTION 71,099 255,516 -60,206 CLEVELAND MOHAWK HUDSON mixEVERGREEN has contributed to theEVERGREEN submarket’s stabilityBANKS and is

TH BRANCH -7,588 338,519 278,313 GOETHE RITCHIE YTD ABSORPTION NOR one of the reasons it boasts a low vacancy rate. The HOOKER SCOTT SCOTT SCOTT EVERGREEN submarket’s boundaries include Oak Street on the north, RENTAL RATE $42.91 $42.92 $43.23 DIVISION DIVISION DIVISION ST ONE

CHERRY the Chicago River on the south and west and State Street ELM ELM ELM on the east. CEDAR HILL RUSH HICKORY MAPLE BLISS HOBBIE WENDELL BELLEVUE Submarket Highlights & Forecast HAINES OAK OAK OAK River North ended with 60,206 square feet of negative net absorption WALTON WALTON

MICHIGAN in the fourth quarter, raising the vacancy rate 40 basis points to 8 LOCUST DELAWARE

CHESTNUT CHESTNUT T percent. Year-over-year, River North ended with 278,313 square feet RABEE LLE R Y FRY S VAN DER ROHE S VAN CLARK DEARBORN SA DE WIT LA HUDSON SEDGWICK INSTITUTE PL. PEARSON MA SING of positive net absorption. WeWork accounted for over 70 percent of

E S LA MIE

L LE

CHICAGO I S allCHICAGO positive net absorption in during 2018, occupying 120,000 square M E SUPERIOR CARPENTER L Y

SUPERIOR T A K HURON GREEN MORGAN TAT E

N feet at 515 N. State and 65,000 square feet at 330 N. Wabash. Over AIRBANK

S F S H

E ANGAMON O

S HURON R

C E KINGSBUR I the past few years, co-working has rapidly spread throughout Chicago,

HALSTED D PE ORIA

AIR R

F NORTH Ke nn e d y E x p w y ERIE I

V I ERIE E

. CL

N particularly River North—to date, there is approximately 2,724,248 ST

ONTARIO ASH MICHIGAN G B

RUSH A OHIO RIVER WA square feet of co-working office space throughout Chicago’s CBD, and

OHIO M

AVENUE G

NORTH

GRAND E GRAND roughly 30 percent (815,824 SF) is located within the River North

McCLUR H ILLINOIS T submarket. WeWork alone has expanded its River North footprint to a HUBBARD WELLS ORLEANS FRANKLIN

HUBBARD TH CITY FRONT NEW ARK AZA DRIVE

P total of 320,000 square feet, more than half of all co-working space

NOR PL NORTH WATER PE ORIA KINZIE KINZIE in the submarket. Further adding to the co-working growth, Spaces,

WACKER 90 the sister company of Regus, is entering River North with 80,000

FULTON WACKER SOUTH WATER square feet at 620 N. LaSalle in 2019. While shared-office space has

94 SON become exponentially more prevalent, River North still maintains its LAKE LAKE LAKE LAKE ET ST EAST LOreputationOP as41 a technology hub. Tempus Labs (83,622 SF), Scientific RANDOLPH RANDOLPH RANDOLPH RANDOLPH Games HARBOR (57,071 SF), and Braintree (40,000 SF) all signed leases in GREEN RACINE

PE ORIA WEST CENTRAL MORGAN

WASHINGTON HALSTED WASHINGTON WASHINGTON WASHINGTON MILLENNIUM

ANGAMON 2018, adding to the already vibrant technology scene in the submarket. ABERDEEN S CARPENTER LOOP LOOP P ARK

MADISON MADISON MADISON MADISON MADISON

MONROE S MONROE MONROE MONROE LLE E ASH B CKER SA TAT FRANKLIN S MICHIGAN WELLS LA DESPLAINE JEFFERSON CLINTON CANAL WA ADAMS ADAMS CLARK DEARBORN WA

JACKSON JACKSON JACKSON JACKSON GRANT P ARK VAN BUREN VAN BUREN VAN BUREN VAN BUREN AKE SHORE DRIVE L 290 Eisenhower Expwy CONGRESS CONGRESS COLUMBUS HARRISON HARRISON HARRISON LLE VERNON PARK

SA BALBO INANCIAL CLARK PLYMOUTH FEDERAL LA F WELLS DEARBORN

POLK

ABERDEEN POLK 8TH R

JEFFERSON CABRINI CABRINI ARK TER CARPENTER MILLER MORGAN E P 9TH ASH B

TAYLOR TAT WA MICHIGAN S

11TH COLUMBUS

ROOSEVELT ROOSEVELT

12TH PL RY O’BRIEN 90 SOLIDARITY

MORGAN 13TH 13TH NEWBER MAXWELL MAXWELL MAXWELL McFETRIDGE FEDERAL PLYMOUTH LIBERTY 94 CLARK 14TH 14TH 14TH

an Expwy w p x E n ya R n a D RAIRIE P

14TH PL 14TH PL

15TH PL

16TH 16TH LAKE SHORE DRIVE S 17TH RY

MILLER 17TH PE ORIA 17TH PL JEFFERSON CLINTON DESPLAINE FEDERAL NEWBER DEARBORN 18TH 18TH 18TH

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NORMAL 24TH PL 24TH PL Stevenson Expwy CORBETT 55 KING DR Chicago Central Business District | Local Standards - 4th Quarter 2018 Office Market Statistics | Charts

Vacancy(%) 5.0% -200,000 (145,490) 4.0% $15.00 $15.00 Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research 4 North Michigan Avenue $10.00 $10.00 Q3-17 Q3-18 Arrow -400,000 2.0% Vacancy rate 8.0% 7.1% Down (418,196) $5.00 $5.00 0.0% Absorption (Qtr.) 7,671 21,555 Up -600,000 0.0% Rents $36.17 $37.40 Up 2012 2013 2014 2015 2016 2017 2018 Net Absorption & Vacancy $0.00 $0.00 Asking Gross Rental Rates Inventory 10,936,344 10,936,344 Same North Michigan2012 Avenue Submarket2013 2014 2015 2016 2017 2018 80 10 800 44.25 North Michigan Avenue Submarket 30 300 600 Source: Costar; Colliers International Research Absorption Vacancy 400,000 18.0% -5.0% Source: Costar; Colliers International Research 376,530 $50.00 Central Loop East Loop North Michigan Ave. River North $50.00 West Loop 5 River North Q3-17 Q3-18 Arrow 350,000 16.0% 15.4% 15.3% $45.00 2016 2017 2018 Class A $45.00 Vacancy rate 9.7% 7.6% Down 14.5% 14.0% Absorption (Qtr.) 39,206 255,516 Up 300,000 13.4% $40.00 Source: Costar; Colliers International Research $40.00 Net Absorption & Vacancy Asking Gross Rental Rates Class B Rents $41.83 $42.92 Up 12.0% $35.00 $35.00 Inventory 17,016,381 17,072,381 Up East Loop Submarket 250,000East Loop Submarket 231,217 216,083 600,000 16.0% $50.00 9.9% 10.0%$50.00 $30.00 Class C $30.00 183,209 15.0% 200,000 6 West Loop 14.6% 414,976 14.7% 14.4% $45.00 8.2% Class A 8.0%$45.00 $25.00 $25.00 Q3-17 Q3-18 Arrow 400,000 14.0% 7.4% 197,217 150,000 Vacancy rate 14.4% 14.0% Down 13.1% $40.00 $40.00 $20.00 $20.00 12.3% 6.0% Absorption (Qtr.) 129,305 60,932 Down 200,000 149,919 12.0% 12.0% 89,871Class B 100,000$35.00 $35.00 $15.00 $15.00 Rents $42.69 $43.93 Up 4.0% Inventory 50,480,672 51,726,211 Up 0 10.0% $10.00 $10.00 50,000$30.00 Class C $30.00 (46,154) (30,598) 25,405 2.0% $5.00 $5.00 7 Overall CBD -200,000 (110,877) 8.0% $25.00 2,228 $25.00 0 0.0% Q3-17 Q3-18 Arrow 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 Vacancy rate 20.5% 10.3% Down $20.00 $20.00 2012 2013 2014 2015 2016 2017 2018 -400,000 6.0% Absorption (Qtr.) 152,624 442,489 Up Source:$15.00 Costar; Colliers International Research Absorption Vacancy $15.00 Source: Costar; Colliers International Research Rents $37.94 $32.84 Down -600,000 In the next twenty-four months, River North’s creative loft4.0% Inventory 144,732,717 146,631,696 Up $10.00 $10.00 -800,000 office space inventory, popularly marketed toward technology2.0% (758,470) Net$5.00 Absorption & Vacancy | River North Office Market $5.00 and creative users, will face increasing pressure from other Net Absorption & Vacancy -1,000,000 0.0% River$0.00 North Submarket $0.00 Asking Gross Rental Rates 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 River North Submarket submarkets as additional supply is delivered. When the Old 500,000 14.0% $50.00 $50.00 415,786 Class A Source: Costar; Colliers InternationalMain Post Research OfficeAbsorption opens in Vacancy2019, it will directly compete with Source: Costar; Colliers12.5%International Research 400,000 12.0% $45.00 $45.00 the Merchandise Mart as both will be similar to one another 11.5% Class B $40.00 $40.00 300,000 278,313 10.0% in terms of large floorplates encompassing 200,000 square 9.6% Net Absorption & Vacancy 9.1% 9.3% $35.00 $35.00 8.5% Asking Gross Rental174,978 Rates Class C 80 10 800 44.25 North Michigan Avenuefeet Submarket and the amount of amenities both have to offer. As for 200,000 154,656 8.0% 8.0% $30.00 $30.00 North Michigan Avenue Submarket 30 300 600 400,000 18.0% creative loft office space, Fulton376,530 Market has continuously added $50.00 90,726 $50.00 $25.00 $25.00 100,000 6.0% 350,000 16.0% inventory;15.4% however,15.3% River North’s Class A inventory is six $45.00 Class A $45.00 $20.00 $20.00 14.5% 0 4.0% 14.0% $15.00 $15.00 300,000 times more expansive than13.4% Fulton Market’s Class A inventory. $40.00 (7,558) $40.00 Class B 12.0% (100,000)$35.00 2.0%$35.00 $10.00 $10.00 250,000 In addition,231,217 River North has several trophy towers on the 216,083 (128,241) $5.00 $5.00 Chicago River, which traditionally have9.9% attracted a variety10.0% of $30.00 Class C $30.00 200,000 183,209 (200,000) 0.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 8.2% 8.0% $25.00 $25.00 professional service firms. Landlords of River North’s7.4% trophy 2012 2013 2014 2015 2016 2017 2018 150,000 Source:$20.00 Costar; Colliers International Research Absorption Vacancy $20.00 assets, such as 300 N. LaSalle and 353 N. Clark, will have6.0% Source: Costar; Colliers International Research 100,000 89,871 $15.00 $15.00 an easier time retaining tenants already enjoying residential4.0% $10.00 $10.00 50,000 25,405 growth, a dynamic retail environment, river access, 2.0%and Net Absorption & Vacancy Asking Gross Rental Rates 2,228 West$5.00 Loop Submarket $5.00 0 accessibility to the L transit system. Tenants looking to move0.0% West Loop Submarket 2012 2013 2014 2015 2016 2017 2018 1,400,000$0.00 16.0%$0.00 2012 2013 2014 2015 2016 1,226,554 2017 2018 $50.00 Class A $50.00 from River North’s Class A assets will have a hard time finding 1,151,823 1,200,000 14.0% Source: Costar; Colliers International Research Absorption Vacancy 13.8% 13.6% $45.00 $45.00 Source: Costar; Colliers International Research comparable space in Chicago’s CBD; as large blocks of Class A 12.9% Class B 1,000,000 12.4% $40.00 $40.00 11.9% 12.0% high-rise space are already hard to come by. Nonetheless, as 11.5% 11.7% 800,000 $35.00 $35.00 Net Absorption &Fulton Vacancy Market continues adding more Class A office assets to 10.0% Class C Asking 571,910Gross Rental Rates | River North Office Market $30.00 $30.00 River North Submarket 600,000Asking Gross Rental Rates its repertoire, the submarket could begin luring more tenants River North Submarket 445,517 8.0% 500,000 14.0% 400,000 $25.00 $25.00 $50.00 232,174 $50.00 away from River415,786 North. Class A 6.0% $20.00 $20.00 12.5% 200,000 400,000 12.0% $45.00 $45.00 11.5% Class B 4.0% $15.00 $15.00 0 $40.00 $40.00 300,000 Statistical Highlights 278,313 10.0% $10.00 $10.00 9.6% (200,000) (85,458) 2.0% 9.1% 9.3% $35.00 $35.00 8.5% (212,050) $5.00 $5.00 174,978 Class C 200,000 154,656 In the fourth quarter of 2018, River North reported 60,2068.0% square8.0% (400,000)$30.00 0.0%$30.00 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 90,726 $25.00 $25.00 100,000 feet of negative net absorption. Roughly 105,703 square feet6.0% of Source: Costar; Colliers International Research Absorption Vacancy positive net absorption was recorded from Class A office assets $20.00 $20.00 Source: Costar; Colliers International Research 0 4.0% $15.00 $15.00 in River North while Class B and C assets(7,558) reported negative (100,000) 126,055 square feet and 39,224 of negative net absorption2.0% in Net$10.00 Absorption & Vacancy $10.00 Asking Gross Rental Rates Overall CBD Overall CBD the fourth quarter. Overall, River(128,241) North finished 2018 with a $5.00 $5.00 (200,000) 0.0% 1,600,000 16.0% $50.00 $50.00 2012 2013 2014 2015 2016 2017 2018 $0.00 1,427,615 $0.00 Class A total of 278,313 square feet of positive net absorption, year-to- 2012 2013 2014 2015 2016 2017 1,365,000 2018 $45.00 $45.00 1,400,000 13.7% 14.0% 13.3% 1,202,213 Source: Costar; Colliers International Research Absorption Vacancy 12.9% date, ending 2018 with a vacancy rate of 8.0 percent. Source: Costar; Colliers International Research 12.8% 12.5% $40.00 Class B $40.00 1,200,000 12.0% 11.9% 11.6% $35.00 $35.00 1,000,000 10.0% The average direct asking rental rate in River North increased $30.00 Class C $30.00 Net Absorption & Vacancy 813,307 Asking Gross Rental Rates 765,142 West Loop Submarketby $0.31 during the fourth quarter to $43.23 per square foot 800,000 8.0% $25.00 $25.00 West Loop Submarket 1,400,000 gross, securing the second most expensive option for tenants16.0% 561,706 $20.00 $20.00 1,226,554 600,000$50.00 Class A 6.0%$50.00 1,151,823 1,200,000 14.0% $15.00 $15.00 outside of the West Loop. Throughout 2018,13.8% average13.6% direct 400,000$45.00 4.0%$45.00 12.9% 1,000,000 12.4% 236,492 Class B $10.00 $10.00 asking rental rates within River North have steadily increased12.0% $40.00 $40.00 11.7% 11.9% Large200,000 Block Availabilities | River North Office Market 2.0% 11.5% $5.00 $5.00 800,000 every quarter, increasing by $1.23 overall. A portion of the $35.00 $35.00 10.0% 571,910 0 Class C 0.0% $0.00 $0.00 600,000 increase in average direct asking rental rates can be traced $30.00 2012 2013 2014 2015 2016 2017 2018 $30.00 2012 2013 2014 2015 2016 2017 2018 445,517 8.0% 100,000+ square feet 400,000 back to WeWork absorbing roughly 185,000 square feet of Source:$25.00 Costar; Colliers International Research Absorption Vacancy $25.00 Source: Costar; Colliers International Research 232,174 BUILDING CLASS SIZE (SF) FLOOR TYPE 6.0% $20.00 $20.00 200,000 Class A office space between 515 N. State and 330 N. Wabash. 4.0% 350$15.00 N. Orleans B 177,083 11-12 Direct $15.00 0 $10.00 $10.00 (200,000) Large Blocks of Availability(85,458) 2.0% 222 Merchandise Mart A 122,932 5 Direct (212,050) $5.00 $5.00 (400,000) 0.0% 515 N. State A 120,716 4-8 Direct 2012 The number2013 of2014 available2015 large, 2016contiguous2017 blocks 2018of space $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; Colliers Internationalcurrently Research resides atAbsorption three blocks. Vacancy The largest block of contiguous block of direct available space is 177,083 square feet at 350 N. Source: Costar; Colliers International Research Orleans, which will become vacant when WPP leaves for 333 Net Absorption & Vacancy AskingConstruction Gross Rental Rates Overall CBD N. Green in Fulton Market in the second quarter of 2020. The Overall CBD 1,600,000 second largest block of contiguous office space is located16.0% in $50.00No new construction commenced in the fourth quarter; however, $50.00 1,427,615 Class A 1,365,000 $45.00Salesforce officially announced its intention to anchor 333 W. Wolf$45.00 1,400,000 13.7%the Merchandise Mart on the 5th floor for 122,932 square 14.0%feet. 13.3% 1,202,213 12.9% 12.8% 12.5% $40.00Point (Salesforce Tower), a Hines development, for 500,000Class square B $40.00 1,200,000 Lastly, the third largest available space in the submarket is12.0% a 11.9% 11.6% 120,716 square foot block of space in the low-rise portion of $35.00feet. The tower, if completed, would comprise of 1.8 million square $35.00 1,000,000 10.0% $30.00feet and a 1,000 square foot Salesforce sign. The office developmentClass C $30.00 515 813,307N. State. The block of space significantly decreased from 765,142 800,000 its original 385,050 square foot size due to WeWork’s lease8.0% in $25.00is scheduled to begin construction in 2020. Additionally, Next Realty’s $25.00 561,706 600,000 the building. 6.0% $20.00redevelopment of 620 N. LaSalle continued during the quarter as $20.00 $15.00 $15.00 400,000 4.0% the developer readies the building for co-working provider SPACES 236,492 $10.00occupancy towards the beginning of 2019. $10.00 200,000 2.0% $5.00 $5.00

0 0.0% $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research 18 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International Lease and Sale Highlights The sole lease to be signed in River North was Salesforce’s announcement it would anchor the new Hines development, Salesforce Tower, for 500,000 square feet. WeWork’s lease for 120,000 square feet at 515 N. State was the largest lease transaction to occur in River North. W.W. Grainger signed the largest sublease in the submarket for 100,000 square feet at the Merchandise Mart, absorbing Motorola’s sublease space. There were eight lease transactions (1,080,143 SF) over 50,000 square feet signed in River North throughout 2018.

In the fourth quarter, Hubbard Street Group and Centrum Realty Development contracted to sell 412 N. Wells to an undisclosed family for $31,000,000 ($731.37/SF), making it the most expensive office building sold in Chicago on a per square foot basis. RxBar leased the building in 2017 and has a lease term of about eleven years. At the beginning of the year, Equity Commonwealth completed its sale of 600 W. Chicago to local developer Sterling Bay for $510,000,000 ($324.55/SF), netting the seller approximately $120,000,000. Two sales officially closed in River North throughout 2018 for a total sales transaction volume of $521,000,000.

Significant Lease and Sale Activity

River North Office Leasing Activity – 4Q 2018 350 N ORLEANS STREET TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

NO SIGNIFICANT ACTIVITY

River North Investment Sales Activity – 4Q 2018

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

P 412 N. Wells A 42,386 $31,000,000 $731.37 Hubbard Street Group/Centrum Realty Undisclosed Family

FS 435 N. LaSalle B 47,994 TBD TBD MJP Capital TBD

S = Sold P = Pending

19 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International CLARK WILLOW

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CHERRY ELM ELM ELM CEDAR HILL RUSH HICKORY MAPLE BLISS HOBBIE WENDELL BELLEVUE HAINES OAK OAK OAK

West Loop WALTON WALTON MICHIGAN LOCUST DELAWARE

CHESTNUT CHESTNUT T RABEE The West Loop’s reputation as the CBD’sLLE leading submarket is the result of it possessing R Y FRY S VAN DER ROHE S VAN CLARK DEARBORN SA DE WIT LA HUDSON SEDGWICK INSTITUTE PL. PEARSON MA SING

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RUSH A which addedOHIO several highly-efficient, stateRIVER of the art WA

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VACANCY 13.8%AVENUE14.0% G 13.6%

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GRAND E GRAND 309,368 60,932 161,454

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HUBBARD TH CITY FRONT NEW ARK $42.71 AZA DRIVE $43.93 $43.95 RENTAL RATE P NOR PL NORTH WATER PE ORIA KINZIE KINZIE

WACKER 90 Submarket Highlights & Forecast FULTON WACKER Over 1,151,823 square feet of positiveSOUTH WATER net absorption was reported

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RANDOLPH RANDOLPH 40RANDOLP basisH points,RANDOLP endingH the year with a 13.6 percent vacancyHARBOR rate. Tenant demand for high-quality office space was most apparent when GREEN RACINE PE ORIA WEST CENTRALconsidering approximately 98% of West Loop positive net absorption MORGAN

WASHINGTON HALSTED WASHINGTON WASHINGTON WASHINGTON MILLENNIUM ANGAMON ABERDEEN S

CARPENTER occurred in Class A buildings. CNA Financial absorbed 300,000 square LOOP LOOP P ARK feet (26 percent of all West Loop 2018 net absorption) as it moved to MADISON MADISON MADISON 151MADISON N. Franklin.MADISON In the fourth quarter, CDW’s lease, if finalized, would be the third largest office lease signed in 2018. CDW indicated it would

S vacate its current headquarters at 120 S. Riverside, last renovated in MONROE MONROE MONROE MONROE 1986, and expand by roughly 75,000 square feet, for a total of 300,000 LLE E ASH B CKER

SA square feet, into 625 W. Adams, which delivered in the second quarter TAT LA MICHIGAN DESPLAINE JEFFERSON CLINTON CANAL WA FRANKLIN WELLS S CLARK WA ADAMS ADAMS of 2018.DEARBORN Ferrara Candy, one of the first tenants to sign a lease with 625 W. Adams, rescinded its decision in the fourth quarter of 2018 JACKSON JACKSON toJACK moveSON intoJACK theSON Old Main Post Office (433 W. Van Buren) for slightly more space than originally intended.GRANT P ARK VAN BUREN VAN BUREN VAN BUREN VAN BUREN AKE SHORE DRIVE L 290 Eisenhower Expwy CONGRESS CONGRESS COLUMBUS HARRISON HARRISON HARRISON LLE VERNON PARK

SA BALBO INANCIAL CLARK PLYMOUTH FEDERAL F LA WELLS DEARBORN

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NORMAL 24TH PL 24TH PL Stevenson Expwy CORBETT 55 KING DR Chicago Central Business District | Local Standards - 4th Quarter 2018 Office Market Statistics | Charts

Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Net Absorption & Vacancy River North Submarket Asking Gross Rental Rates River North Submarket 500,000 14.0% $50.00 $50.00 415,786 Class A Net Absorption & Vacancy 12.5% North Michigan Avenue Submarket Asking400,000 Gross Rental Rates 12.0% $45.00 $45.00 80 10 800 44.25 North Michigan Avenue Submarket11.5% Class B 30 300 600 400,000 18.0% 376,530 $40.00 $40.00 300,000$50.00 278,313 10.0% $50.00 9.6% 9.3% 350,000 16.0% 9.1% $35.00 $35.00 15.4% 15.3% $45.00 8.5% Class A $45.00 Class C 14.5% 200,000 174,978 8.0% 8.0% 14.0% 154,656 $30.00 $30.00 300,000 13.4% $40.00 $40.00 90,726 Class B $25.00 $25.00 12.0% 100,000$35.00 6.0% $35.00 250,000 231,217 $20.00 $20.00 216,083 9.9% 10.0% $30.000 Class C4.0% $30.00 183,209 $15.00 $15.00 200,000 (7,558) 8.2% 8.0% $25.00 $25.00 7.4% (100,000) 2.0% $10.00 $10.00 150,000 $20.00 $20.00 6.0% (128,241) $5.00 $5.00 100,000 89,871 (200,000)$15.00 0.0% $15.00 4.0% 2012 2013 2014 2015 2016 2017 2018 $0.00 $0.00 $10.00 $10.00 2012 2013 2014 2015 2016 2017 2018 50,000 25,405 2.0% Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Professional service2,228 firms employed an ethos of densification, $5.00 $5.00 0 0.0% 2012 users occupying2013 2014fewer square2015 feet per2016 employee2017 without2018 reducing $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 NetNet Absorption Absorption & Vacancy & Vacancy | West Loop Office Market Source: Costar; CollierstheInternational amount Research of currentAbsorption employees Vacancy on staff, throughout 2018. Four Asking Gross Rental Rates West Loop Submarket Source: Costar; Colliers International Research West Loop Submarket professional service firms, currently occupying an aggregate of 1,400,000 16.0% 1,226,554 $50.00 Class A $50.00 1,268,000 square feet across Chicago’s CBD, announced plans 1,151,823 1,200,000 14.0% Net Absorption & Vacancy 13.8% 13.6% $45.00 $45.00 in 2018 to consolidate into more efficient space, which would 12.9% Class B 1,000,000Asking Gross Rental Rates12.4% $40.00 $40.00 River North Submarket 11.9% 12.0% decrease the total by about 461,028 square feet. In the fourth River North Submarket 11.5% 11.7% 500,000 14.0% 800,000 $35.00 $35.00 $50.00 $50.00 quarter, BMO announced415,786 it would consolidate its three offices Class A10.0% Class C 12.5% 571,910 $30.00 $30.00 400,000 12.0% 600,000$45.00 $45.00 11.5% 445,517 8.0% (111 W. Monroe, 115 S. LaSalle, and 200 W. Adams) and anchor Class B $25.00 $25.00 400,000$40.00 $40.00 300,000 278,313 10.0% 232,174 the planned 1.5 million square foot office development9.6% across 6.0% $20.00 $20.00 9.1% 9.3% 200,000$35.00 $35.00 the Union Station for 500,0008.5% square feet. In addition, BMO 174,978 Class C4.0% $15.00 $15.00 200,000 154,656 8.0% 8.0% $30.000 $30.00 would get naming rights, naming the development BMO Tower. $10.00 $10.00 90,726 (200,000)$25.00 (85,458) 2.0% $25.00 100,000 6.0% In the third quarter, Holland & Knight signed a lease to occupy (212,050) $5.00 $5.00 (400,000)$20.00 0.0% $20.00 $0.00 $0.00 0 56,972 square feet at 150 N. Riverside, a reduction of 47,0284.0% 2012 2013 2014 2015 2016 2017 2018 $15.00 $15.00 2012 2013 2014 2015 2016 2017 2018 (7,558) square feet from its current footprint at 131 S. Dearborn. In the Source: Costar; Colliers International Research Absorption Vacancy (100,000) second quarter, CNA completed its move into 151 N. Franklin2.0% $10.00 $10.00 Source: Costar; Colliers International Research (128,241) $5.00 $5.00 (200,000) for 300,000 square feet, leaving behind 450,000 square feet0.0% 2012 2013 2014 2015 2016 2017 2018 Net$0.00 Absorption & Vacancy $0.00Asking Gross Rental Rates at its old headquarters, 333 S. Wabash. Lastly, Morgan Stanley Overall CBD2012 2013 2014 2015 2016 2017 2018 Overall CBD Source: Costar; Colliers International Research Absorption Vacancy announced in the first quarter of 2018 it would shed 190,000 1,600,000Source: Costar; Colliers International Research 16.0% $50.00 $50.00 1,427,615 Class A 1,365,000 $45.00 $45.00 square feet and consolidate its two offices (425 S. Financial 1,400,000 13.7% 14.0% 13.3% 1,202,213 12.9% 12.8% 12.5% $40.00 Class B $40.00 Net AbsorptionPlaza, & Vacancy 70 W. Madison) and move into 233 S. Wacker for a total 1,200,000 12.0% Asking Gross Gross Rental Rental Rates Rates | West11.9% Loop 11.6%Office Market West Loop Submarketfootprint of 125,000 square feet. $35.00 $35.00 1,000,000West Loop Submarket 10.0% 1,400,000 16.0% $30.00 Class C $30.00 $50.00 $50.00 1,226,554 813,307 765,142 Class A 1,151,823 800,000 8.0% 1,200,000 14.0% $25.00 $25.00 Demand for high-quality Class A assets has 13.8%driven much13.6% of $45.00 $45.00 12.9% 561,706 Class B $20.00 $20.00 1,000,000 the absorption12.4% activity within the West Loop throughout 2018; 600,000$40.00 6.0% $40.00 11.7% 11.9% 12.0% 11.5% $15.00 $15.00 800,000 however, in doing so, the amount of lower-quality space which 400,000$35.00 4.0% $35.00 10.0% 236,492 $10.00 $10.00 571,910 Class C 600,000 will become available as the aforementioned tenants leave, will 200,000$30.00 2.0% $30.00 445,517 8.0% $5.00 $5.00 400,000 invariably increase vacancy rates across Chicago’s CBD. Within $25.00 $25.00 0 0.0% $0.00 $0.00 232,174 the West Loop submarket itself, it is conceivable that an increase6.0% $20.00 2012 2013 2014 2015 2016 2017 2018 $20.00 2012 2013 2014 2015 2016 2017 2018 200,000 in vacancy is on the horizon as the Old Main Post Office 4.0%(433 Source:$15.00 Costar; Colliers International Research Absorption Vacancy $15.00Source: Costar; Colliers International Research 0 W. Van Buren) delivers its 2.5 million square feet of office space $10.00 $10.00 (200,000) (85,458) 2.0% in 2019. The Old Main Post office(212,050) has attracted much attention $5.00 $5.00 (400,000) 0.0% 2012throughout2013 the year,2014 with2015 Walgreens2016 deciding2017 to take2018 200,000 $0.00 $0.00 2012 2013 2014 2015 2016 2017 2018 Source: Costar; CollierssquareInternational Researchfeet and FerraraAbsorption Candy Vacancy switching its original intent to occupy 625 W. Adams to occupy the Old Main Post Office for Source: Costar; Colliers International Research 77,000 square feet. Despite increased leasing activity, the sheer Net Absorptionamount & Vacancy of space that must be absorbed to ‘stabilize’ the vacancy Asking Gross Rental Rates Overall CBD Overall CBD 1,600,000 rate once 433 W. Van Buren delivers, will still be quite influential16.0% $50.00 $50.00 1,427,615 Class A going forward. 1,365,000 $45.00 $45.00 1,400,000 13.7% 14.0% 13.3% 1,202,213 12.9% 12.8% 12.5% $40.00 Class B $40.00 1,200,000 12.0% 11.9% 11.6% Large Block Availabilities | West Loop Office Market When the Old Main Post Office delivers in 2019, developers will $35.00 $35.00 1,000,000 10.0% have delivered over 6 million square feet of Class A product to $30.00 Class C $30.00 813,307 765,142 800,000 the submarket over a 36-month period, making it the largest8.0% $25.00100,000+ square feet $25.00

561,706increase of supply in a single submarket over a 36-month period 600,000 6.0% $20.00BUILDING CLASS SIZE (SF) FLOOR TYPE $20.00 in recent memory. The influx of supply coupled with the delivery $15.00 $15.00 400,000 4.0% 433 W. Van Buren A 859,000 5-9 Direct of an additional 1.35 million square236,492 feet from 110 N. Wacker in $10.00 $10.00 200,000 2.0% 110 N. Wacker A 734,865 26-51 Direct 2020 will likely ensure that the submarket’s tightest window of $5.00 $5.00

0 this cycle has likely passed. 0.0% $0.00433 W. Van Buren A 590,000 1-3 Direct $0.00 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 311 W. Monroe B 394,020 LL-15 Direct Source: Costar; Colliers International Research Absorption Vacancy Source: Costar; Colliers International Research Statistical Highlights 120 S. Riverside B 257,971 4-10 Direct The West Loop’s average direct asking rental rate increased by 222 W. Adams A 198,470 3-8 Direct $0.02 since last quarter and has increased by roughly $1.24 555 W. Monroe A 172,393 11-17 Direct ending 2018 at $43.95 per square foot gross. Class A average 300 S. Riverside B 158,938 3-5 Direct direct asking rental rates decreased by $0.01 ending at $47.92, 625 W. Adams A 154,699 16-20 Direct while Class B increased by $0.12 from the third quarter ending at $40.30 per square foot gross, respectively. 175 W. Jackson A 137,111 18-19 Direct 550 W. Jackson A 130,413 2-6 Direct The West Loop reported 161,454 square feet of positive net 71 S, Wacker A 126,099 10-14 Direct absorption in the fourth quarter and approximately 1,151,823 30 S. Wacker A 117,027 31-34 Direct square feet of positive net absorption over the course of 2018. Class A assets accounted for the majority of both quarterly and 111 S. Wacker A 112,380 12-16 Direct yearly positive net absorptions, 117,656 square feet of positive 222 S. Riverside B 106,263 24-26 Direct net absorption through the fourth quarter and 1,123,304 square 123 N. Wacker B 104,375 24-30 Direct feet of positive net absorption throughout the year.

21 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International Large Blocks of Availability

The fourth quarter ended with sixteen large, contiguous blocks of space available on a direct basis in the West Loop. Since CDW’s announcement of relocating its headquarters to 625 W. Adams, the building’s large block of space has been removed; however, its space at 120 S. Riverside has come on the market, advertising 257,971 square feet of large contiguous space. The largest contiguous block of space available is still at the Old Main Post Office, but broken into two blocks since Walgreens, Ferrara Candy and The Chicago Metropolitan Agency took space in the building: 859,600 square feet of that space is located on floors five through nine while 590,000 square feet is located on floors one through three. The second contiguous block of space is 734,865 square feet at 110 N. Wacker, which will be completed in 2020. For tenants seeking immediate availability, the two largest blocks of space are at 311 W. Monroe for 394,020 square feet of space and 222 W. Adams for 198,470 square feet. The fourth quarter ended with eleven Class A large contiguous blocks of space available and five Class B large contiguous blocks of space available.

Construction

Amidst 433 W. Van Buren (The Old Main Post Office) continuing its $500 million renovation and Riverside Investment & Development’s 110 N. Wacker 1,415,000 square foot development, 310 S. Canal or BMO Tower was proposed and accepted to begin construction in 2019 across from Union Station. Riverside Investment & Development’s will be developing the 1.5 million square foot office tower after BMO agreed to anchor the building, taking up 500,000 square feet (33 percent of the building’s space.) The West Loop submarket had been rife with on-going construction projects over the course of 2018. While not adding additional office space to the West Loop’s existing inventory, the $667.8 million-dollar overhaul at the Willis Tower is modernizing the office portion of the building, in addition to reconfiguring the asset’s retail and tourist spaces. The five-story retail addition will be officially named ‘Catalog’ and will feature a food hall, an outdoor-deck with a garden and event space through Convene.

110 N. Wacker, owned by a joint venture of Chicago-based Riverside Investment & Development and Dallas-based Howard Hughes Company, secured Bank of America as an anchor tenant for their office tower, and broke ground in the second quarter of 2018, with the building expected to deliver in the second half of 2020. In addition to Bank of America, Lincoln International signed a lease for 60,000 square in the second quarter, bringing the building to 36 percent preleased. The 55-story, 1,415,000 square foot trophy tower replaced the low-rise General Growth building at 110 N. Wacker. Bank of America signed a lease to occupy approximately 36 percent of the building, which enabled the joint venture to secure favorable financing.

22 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International Lease and Sale Highlights

Six office leases over 50,000 square feet were signed within the West Loop submarket during the fourth quarter, or a cumulative 1,180,123 square feet of office space. BMO Financial Group agreed to anchor Riverside Investment & Development Company’s newest Chicago proposal, a 1.5 million square foot office, which is to be built on the parcel across from Union Station. CDW announced it would leave its current headquarters at 120 S. Riverside and expand by 75,000 square feet into 625 W. Adams; an endorsement to the building’s appeal after delivering without any tenants for months. Additionally, Ferrara Candy, which originally intended to take about 65,000 square feet at 625 W. Adams, reverted its decision and plans to move into the Old Main Post Office for 77,000 square feet. UBS announced it would renew and contract its space—planning on shedding 100,000 square feet over the course of the next few years. WeWork signed its ninth location at 222 S. Riverside for 60,000 square feet and Bond Collective, another co-working provider, signed a 68,123 square foot lease at 20 N. Wacker. Throughout 2018, fourteen leases encompassing an aggregate of 2,291,827 square feet of large (50,000 SF and up) office lease transactions were signed to occupy West Loop office space.

West Loop investment sales activity remained sluggish in the fourth quarter with only one finalized transaction. Manulife completed its sale of 1 S. Wacker for $310,000,000 ($259.38/SF) to the THE FUTURE 110 N WACKER DRIVE 601W Companies which three years prior, Manulife had purchased the asset for $344,000,000, netting the insurance company a loss of $14,000,000. The total sales volume in dollars within the submarket for the year was $333,300,000, over two finalized transactions, while the total sales volume for 2017 was $399,700,000—a decrease of $66,400,000.

Significant Lease and Sale Activity

West Loop Office Leasing Activity – 4Q 2018

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

BMO Financial Group 310 S. Canal (BMO A 500,000 New

CDW 625 W. Adams A 300,000 New

UBS 1 N. Wacker A 175,000 New

Ferrara Candy 433 W. Van Buren A 77,000 New

Bond Collective 20 N. Wacker B 68,123 New

WeWork 222 S. Riverside B 60,000 New

West Loop Office Investment Sales Activity – 4Q 2018

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

S 1 S. Wacker A 1,195,170 $310,000,000 $259.38 Manulife 601W Co

P 225 W. Randolph B 849,252 TBD TBD Kushner Cos. Angelo Gordon

FS 225 W. Washington A 484,916 $120,000,000 $247.47 Kinship Capital TBD

S = Sold P = Pending FS = For Sale

23 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International `FULLERTON ASHLAND

LINCOLN Fulton MarketARMITAGE

The Fulton Market’sLINCOLN reputation asP ARKChicago’s top emerging submarket is the result of it possessing the most unique inventory ofCLARK any submarket, tenant desire for the LA SA LLE image associated with being located inEUGENIE the trendy Fulton Market Neighborhood, and CONCORD CONCORD

CONCORD VINE CLYBOURN the penetrationNORTH of the city’s creative companies.NORTH NORTH

90 R WEED STO ON A ARK 94 YT BURTON

DA BLACKHAWK FREMONT

TH P Submarket Highlights & Forecast Fulton Market is currentlyBLACKHAWK transforming from an

OGDEN NOR WELLS ORLEANS underdeveloped area consisting of warehouse andSEDGWICK WIELAND EASTMAN Fulton MarketSCHILLER continued the transformation into a competitive CLEVELAND MOHAWK industrial properties into a rapidly emerging officeHUDSON and GOLD GOOSE EVERGREEN OLD EVERGREENsubmarket for officeBANKS users throughout 2018: 797,849 square feet

TH BRANCH COAST residentialASHLAND environment. The submarket contains a mix of ISLAND TOWN GOETHE RITCHIE NOR of office space was completed construction while 1,162,922 square

office options ranging fromHOOKER Class B and C brickSCOTT and timber SCOTT SCOTT EVERGREEN feet of office space either started or continued construction in

loft- style properties to new A Plus modern loft space at ST ONE DIVISION DIVISION 2018. In the summerDIVISION of 2018, 1045 W. Randolph, McDonald’s new 1K Fulton and 1330 W.CHERRY Fulton. While the submarketNEAR has ELM ELM ELM headquarters, opened, and today accounts for 30 percent of all CEDAR experienced significant growth since Google announced HILL RUSH HICKORY MAPLE BLISS HOBBIE completed Class A office space in the submarket. The injection of its decision to move its regional headquarters to the WENDELL BELLEVUE HAINES NORTH 2,000 McDonalds jobsOAK in the submarket will inherently expedite the neighborhood, McDonalds Corporation’s moreOA K recent OAK WALTON rate of demandWALTON for other services (retail, multifamily, lodging) as

decision to relocate its global headquarters from the MICHIGAN LOCUST DELAWARE HALSTED SIDE evident by the Hyatt Hotel under construction for the main purpose

suburbs into the submarket has propelled the submarket’s CHESTNUT CHESTNUT T RABEE LLE R Y FRY of servicing McDonald’s and its clients at 105 N. May Street. In S VAN DER ROHE S VAN CLARK DEARBORN SA DE WIT LA HUDSON SEDGWICK INSTITUTE PL. PEARSON MA SING

E S LA development timeline substantially. The submarket’s MIE

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theCHICAGO fourth quarter, 210 N. I Carpenter completed construction with

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high volume of construction, Class. CL A office space remains extremely

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find the space and means to build officeP space for tenants seeking

NOR PL NORTH WATER MARKET PE ORIA 94 KINZIE Class KINZIEA space. Within the past two years, over $1.4 billion in capital has been deployed acrossWACKER the aforementioned assets resulting in

FULTON WACKER SOUTH WATER OGDEN over 2,000 residential units, 300 hotel rooms, and a 1.4 million SON

LAKE LAKE square feet of ClassLAKE A creative-loftET office space. Tenant demand for ST unique live, work, play environmentsEAST LO hasOP continued41 growing over

RANDOLPH RANDOLPH RANDOLPH HARBOR

A the past four years as McDonalds, Google, WPP, WeWork, Dyson, ENTER ASHLAND GREEN AD ELIZABETH RACINE

PE ORIA WEST CENTRAL MORGAN

WASHINGTON HALSTED WASHINGTON WASHINGTON MILLENNIUM ANGAMON ABERDEEN S CARP LOOP Glassdoor,LOOP and others have either relocated or announced plans P ARK MADISON MADISON to relocate regionalMADISON headquarters and other large offices to the neighborhood, using it as leverage to attract talented labor in one of MONROE S MONROE MONROE ASH B LLE E

the tightest job marketsWA in decades.

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NORMAL 24TH PL 24TH PL Stevenson Expwy CORBETT 55 KING DR Co-working providers continue considering Fulton Market for new locations which take advantage of the unique live, work, play environment the submarket offers. To date, there are three co-working providers operating in the submarket in addition to Convene’s recent announcement to take roughly 30,000 to 40,000 square feet at Sterling Bay’s 333 N. Green location. WeWork has 65,000 square feet at 210-220 N. Green, Spaces has 40,000 square feet at 900 W. Randolph, and Industrious has 45,000 square feet at 171 N. Aberdeen. With Convene announcing its fourth Chicago location, co-working will account for over 5 percent of all office space within Fulton Market.

Over 1.4 million square feet of office space has been absorbed over the course of two years in Fulton Market, yet, developers continue adhering to the strong demand for creative office space in the submarket. There is roughly 1,162,922 square feet of Class A office space under construction along with five proposals over 100,000 square feet totaling 1,930,418 square feet. In addition to the current developments under construction, if all five proposals completed construction, Fulton market will have added 3,124,981 square feet of Class A office space. Over 22 percent of all space under construction is pre-leased (265,269 SF), the majority share being from WPP, which preleased 252,614 square feet in Sterling Bay’s, 333 N. Green development. Overall, the submarket is unlikely to be flooded with space at any one point, allowing landlords to control rental rates in their favor, which is already evident as landlord’s preleasing of Class A space have been asking for base rents between $45.00 and $50.00 per square foot gross, making the submarket’s Class A space as expensive as some premier office space in the West Loop.

Lease and Sale Highlights

In the fourth quarter, only one lease transaction over 50,000 square feet occurred in Fulton Market: Google, having outgrown its regional headquarters at 1000 W. Fulton, signed a lease for a second office at 210 N. Carpenter comprising of 132,000 square feet of office space. With the expansion, Google will have a Chicago footprint of over 570,000 square feet.

Fulton Market had no office investment sale transaction close in the fourth quarter; however, Mark Goodman & Associates along with a JV of Tishman Speyer, bought the 310 N. Sangamon lot for $15,800,000 ($629.41/SF) and plan to construct an office building consisting of 250,000 square feet in the near future. There were two finalized sales of office properties in 2018: 113 N. May which Sterling Bay sold to Vista Property Group for $13,700,000 ($384.14/SF) and Shapack Partners, A.J. Capital Partners, and Shorenstein Properties sold 220 N. Green for $45,000,000 ($531.35/SF) to Leo Capital Holdings. It is worth noting that Sterling Bay sold 113 N. May for roughly $220/SF more than its original purchase, despite the building not being extensively renovated. In other words, the land and assets around in and around Fulton Market have appreciated greatly. Further evidence of land appreciation can be seen through the sale of two retail buildings, 1100-08 and 1114 W. Randolph to L3 Capital for $12,000,000—three times more expensive than the original purchase in 2014 for roughly $3.7 million.

1330 W FULTON MARKET

25 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International Fourth Quarter 2018 Office Market Statistics | Local Standards (includes competitive owner-occupied properties)

DIRECT SUBLEASE TOTAL DIRECT NET SUBLET NET TOTAL NET YTD NET ASKING GROSS TOTAL DIRECT SUBLEASE TOTAL CLASS BLDGS VACANCY VACANCY VACANCY ABSORPTION ABSORPTION ABSORPTION ABSORPTION DIRECT RENT INVENTORY SF VACANCY SF VACANCY SF VACANCY SF % % % (SF) (SF) (SF) (SF) PER SF CENTRAL LOOP Class A 15 15,143,125 1,832,298 194,625 2,026,923 12.1% 1.3% 13.4% 114,309 20,765 135,074 -44,727 $43.11 Class B 31 19,886,043 2,488,902 441,441 2,930,343 12.5% 2.2% 14.7% (5,515) (43,160) (48,675) (92,611) $37.96 Class C 14 2,313,259 374,611 2,763 377,374 16.2% 0.1% 16.3% -48,427 7,186 -41,241 -8,152 $30.33 Subtotal 60 37,342,427 4,695,811 638,829 5,334,640 12.6% 1.7% 14.3% 60,367 (15,209) 45,158 -145,490 $39.84 EAST LOOP Class A 4 6,787,969 598,482 56,887 655,369 8.8% 0.8% 9.7% 66,997 11,020 78,017 50,097 $42.33 Class B 16 12,803,947 2,320,549 290,415 2,610,964 18.1% 2.3% 20.4% (57,698) -134,203 (191,901) (790,250) $36.83 Class C 34 6,939,056 591,304 46,771 638,075 8.5% 0.7% 9.2% (31,506) (14,843) (46,349) (18,317) $30.09 Subtotal 55 26,530,972 3,510,335 394,073 3,904,408 13.2% 1.5% 14.7% (22,207) (138,026) (160,233) (758,470) $36.02 NORTH MICHIGAN AVENUE Class A 6 3,545,917 296,955 3,363 300,318 8.4% 0.1% 8.5% (21,133) 18,187 (2,946) 32,890 $42.68 Class B 22 5,936,989 442,991 42,446 485,437 7.5% 0.7% 8.2% -23,728 (7,188) -30,916 62,444 $35.30 Class C 9 1,453,438 18,475 7,396 25,871 1.3% 0.5% 1.8% 355 0 355 -5,463 $26.66 Subtotal 37 10,936,344 758,421 53,205 811,626 6.9% 0.5% 7.4% -44,506 10,999 (33,507) 89,871 $37.71 RIVER NORTH Class A 10 11,444,953 640,415 34,432 674,847 5.6% 0.3% 5.9% 100,219 4,854 105,073 264,732 $46.39 Class B 29 4,494,364 476,353 18,782 495,135 10.6% 0.4% 11.0% (114,115) -11,940 (126,055) 102,624 $41.43 Class C 13 1,133,064 165,164 28,140 193,304 14.6% 2.5% 17.1% -39,115 (109) -39,224 -89,043 $32.25 Subtotal 52 17,072,381 1,281,932 81,354 1,363,286 7.5% 0.5% 8.0% (53,011) -7,195 (60,206) 278,313 $43.23 FULTON MARKET Class A 6 1,712,563 324,273 0 324,273 18.9% 0.0% 18.9% 23,892 0 23,892 686,302 $48.13 Class B 19 886,972 59,313 2,957 62,270 6.7% 0.3% 7.0% 13,755 0 13,755 47,251 $0.00 Class C 14 627,415 57,121 10,300 67,421 9.1% 1.6% 10.7% 6,191 0 6,191 15,400 $26.80 Subtotal 39 3,226,950 440,707 13,257 453,964 13.7% 0.4% 14.1% 43,838 0 43,838 748,953 $32.67 WEST LOOP Class A 31 29,522,864 3,821,119 199,939 4,021,058 12.9% 0.7% 13.6% 115,286 2,360 117,646 1,123,304 $47.92 Class B 29 18,433,753 2,481,206 296,477 2,777,683 13.5% 1.6% 15.1% 13,691 5,950 19,641 39,506 $40.30 Class C 28 3,769,594 252,917 7,182 260,099 6.7% 0.2% 6.9% 24,680 (513) 24,167 -10,987 $31.00 Subtotal 88 51,726,211 6,555,242 503,598 7,058,840 12.7% 1.0% 13.6% 153,657 7,797 161,454 1,151,823 $43.95 TOTAL CHICAGO CBD Class A 72 68,157,391 7,513,542 489,246 8,002,788 11.0% 0.7% 11.7% 399,570 57,186 456,756 2,112,598 $45.88 Class B 146 62,442,068 8,269,314 1,092,518 9,361,832 13.2% 1.7% 15.0% (173,610) -190,541 (364,151) (631,036) $38.81 Class C 112 16,235,826 1,403,276 94,273 1,497,549 8.6% 0.6% 9.2% (101,307) 9,842 (91,465) (20,461) $30.06 Subtotal 331 146,835,285 17,242,448 1,684,316 18,926,764 11.7% 1.1% 12.9% 138,138 -141,634 (3,496) 1,365,000 $41.19 QUARTERLY COMPARISONS Q4-18 331 146,835,285 16,900,547 1,684,316 18,926,764 11.7% 1.1% 12.9% 138,138 -141,634 -3,496 1,365,000 $41.19 Q3-18 330 146,631,696 16,792,180 1,542,682 18,769,081 11.7% 1.1% 12.8% 326,863 -147,413 179,450 1,368,496 $40.74 Q2-18 328 146,581,739 17,485,409 1,395,269 18,880,678 11.9% 1.0% 12.9% 865,977 -208,178 657,799 1,189,046 $40.69 Q1-18 325 144,788,717 16,558,364 1,187,091 17,745,455 11.4% 0.8% 12.3% 561,452 -30,205 531,247 531,247 $39.83 Q4-17 325 144,788,717 16,916,046 1,156,886 18,072,932 11.7% 0.8% 12.5% 103,384 278,208 381,592 1,202,213 $39.37 Q3-17 324 144,732,717 16,963,430 1,435,094 18,398,524 11.7% 1.0% 12.7% -53,107 43,076 -10,031 820,621 $39.22 Q2-17 324 144,579,517 16,757,123 1,478,170 18,235,293 11.6% 1.0% 12.6% -295,927 27,521 -268,406 830,652 $38.95 Q1-17 323 144,489,173 16,370,852 1,505,691 17,876,543 11.3% 1.0% 12.4% 1,294,561 -195,503 1,099,058 1,099,058 $38.73 Q4-16 322 143,249,226 15,314,064 1,310,188 16,624,252 10.7% 0.9% 11.6% -729,038 96,836 -632,202 236,492 $37.97 Q3-16 321 142,167,524 14,585,026 1,407,024 15,992,050 10.3% 1.0% 11.2% 820,981 3,905 824,886 868,694 $37.33 Q2-16 321 142,167,524 15,406,007 1,410,929 16,816,936 10.8% 1.0% 11.8% 237,203 -392,877 -155,674 43,808 $36.87 Q1-16 321 142,167,524 15,643,210 1,018,052 16,661,262 11.0% 0.7% 11.7% 233,979 -34,497 199,482 199,482 $36.78 Q4-15 321 142,167,524 15,568,011 970,526 16,860,744 11.0% 0.7% 11.9% 1,211,985 -853 882,241 1,427,615 $36.75

26 Research & Forecast Report | Fourth Quarter 2018 | Downtown Chicago / Office | Colliers International MARKET CONTACT: 400 offices in William Goldstick Research Analyst | Chicago countries on +1 312 777 2616 69 [email protected] 6 continents CONTRIBUTORS: Stephanie Bujwit | Senior Financial Analyst United States: 145 Canada: 28 Colliers International | Chicago Latin America: 23 71 South Wacker, Suite 3700 Asia Pacific:86 Chicago, IL EMEA: 131 +1 312 648 9150

$2.7 billion in annual revenue

2 billion square feet under management

15,400 professionals and staff

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