Office Outlook

United States | Q1 2015 RENTS

Despite slower activity in the first quarter, office markets across the U.S. are on the brink of a tipping point as evidenced by more expansionary leasing activity and consistently- increasing tour velocity. Landlords are responding to this environment by increasing rents aggressively, with first quarter rent growth posting the highest increase of the recovery so far, by a multiple of three.

JLL | United States | Office Outlook | Q1 2015 2 Table of contents

Executive summary 4 Milwaukee 41 United States office market 5 Minneapolis 42 2015 United States office clock 8 New Jersey 43 United States economy 10 New York 44 United States investment sales 13 Oakland 45 Local U.S. office markets Orange County 46 Atlanta 17 Orlando 47 Austin 18 Philadelphia 48 Baltimore 19 Phoenix 50 Boston 20 Pittsburgh 51 Charlotte 21 Portland 52 Chicago 22 Raleigh-Durham 53 Cincinnati 24 Richmond 54 Cleveland 25 Sacramento 55 Columbus 26 San Antonio 56 Dallas 27 San Diego 57 Denver 28 San Francisco 58 Detroit 29 Seattle-Bellevue 60 East Bay 30 Silicon Valley 61 Fairfield County 31 St. Louis 62 Fort Lauderdale 32 Tampa 63 Hampton Roads 33 Washington, DC 64 Houston 34 Westchester County 65 Indianapolis 35 West Palm Beach 66 Jacksonville 36 Appendix 68 Kansas City 37 Contacts 76 Long Island 38 Los Angeles 39 Miami 40

JLL | United States | Office Outlook | Q1 2015 3 United States office market

Executive summary • Several companies transacted leases in multiple markets, further affirming corporate confidence and indicating a return to growth as The U.S. office expansion continued in the beginning of 2015, with some repeat deal-makers included established companies such as Comcast, indicators like absorption and leasing activity slowing, but other elements Morgan Stanley, New York Life, and Fannie Mae. of the market picking up, particularly, development, expansionary leasing activity, touring velocity and rent growth. Ahead, based on the massive We are consistently seeing rent growth, quarter in and quarter out, across uptick in expansionary activity, absorption will return to recent norms, 90 percent of markets JLL tracks with the only markets not consistently translating into further tightening and reason for landlords to continue to participating being the suburbs of NYC, parts of the Great Lakes and push rates. Houston, which recently shifted from a landlord-favorable market to a peaking market with rent declines over the past two quarters. Quarterly occupancy growth totaled 0.2 percent of inventory levels, down • Above-average growth was posted in the CBDs of Austin, NYC, from more recent norms of 0.5 percent, driven by space givebacks in Portland and Charlotte, among other cities. NYC and DC and a significant slowdown in Houston. As a result, vacancy remained unchanged across the U.S. at 15.6 percent, but is • Rent growth in the suburbs was led by select suburban submarkets in anticipated to fall below 15.0 percent by year-end as recent corporate Cambridge, MA, Orange County, and Silicon Valley, but gains will come in at about half of what a tighter and higher-velocity CBD posts ahead. expansions take occupancy over the next several quarters. • Tightening conditions across markets, especially among Trophy space • Central U.S. markets, led by Dallas and Austin, recorded 4.0 million and creative Class B office space, will continue driving rents upward square feet in occupancy gains in the first quarter, but losses throughout 2015 and into 2016, potentially surpassing forecasted anticipated in Houston through an on slot of sublease space will increases following such a strong start in the first quarter temper year-end absorption in the region. • Posting 2.7 million square feet of absorption, the West Coast Delivering 11.0 million square feet in the quarter, U.S. markets are set to anticipates significant absorption through the remainder of the year as deliver the highest amount of new product this cycle by year-end. tech companies such as Amazon, Google, Salesforce, and WeWork take occupancy of hundreds of thousands to millions of square feet in • Speculative development continues to increase, currently comprising markets from Seattle down to San Diego. more than 75.0 percent of all projects. With preleasing rates for speculative product registering just shy of 35.0 percent, tenants will • First quarter losses of over 1.0 million square feet in DC and NYC are likely find some supply relief across the development pipeline, especially now likely a thing of the past. Moving forward, diverse industry niches mid-sized tenants that occupy a floor or two. taking hold in markets like Atlanta as an HQ location and Charlotte as a banking and finance annex, in addition to tech and banking and • Houston, NYC, Dallas and Seattle, led in development underway, and finance growth in Boston and NYC may likely push East Coast aside from Amazon, only 39.0 percent of projects in these markets are markets ahead in occupancy gains. pre-leased, which will create some space relief. • Rents across the construction pipeline are averaging a 22.7 percent Leasing activity increased by 2.0 percent, dominated by expansionary premium to existing Class A rents, signaling a continued rent spike transactions across all markets. ahead over the next 18 months. • Expansionary activity continues to mount among lease transactions • Although currently placing upward pressure on rents, the significant larger than 20,000 square feet reflecting company growth. New York, uptick in development activity will eventually stabilize fundamentals as DC, and Northern Virginia recorded the highest amount of leasing vacant supply is delivered over the next 24 months. activity, which will help to recapture losses incurred in the first quarter, across those markets. As we move through 2015 and into 2016, look for occupancy growth to • Technology, followed by banking and finance, remained the active revert back to recent quarterly averages of 0.4 to 0.5 percent, shifting drivers of leasing activity at 3.0 and 2.0 million square feet, vacancy below 15.0 percent for the first time in a decade, which will create respectively. In fact, STEM-based sectors comprised 35.0 percent of greater challenges for tenants in procuring space and opportunity for leasing volume in the first quarter with 75.0 percent of those leases landlords to continue to aggressively grow rents at double-digit rates over posting occupancy growth. the next 18 months.

JLL | United States | Office Outlook | Q1 2015 4 Corporate occupiers committing to new employees and new space Absorption declines, promises to bounce back by year-end

While total leasing activity posted minimal gains quarter-over-quarter at Absorption volume posted its lowest quarterly result in more than three 55 million square feet, markets have finally fallen into a steady stride with years, declining by 61.0 percent quarter-over-quarter from 16 million hiring that’s leading corporate occupiers to commit to expansionary square feet down to 6.3 million square feet. While the numbers are leases at a rate not yet seen in this cycle. As a result, 56.0 percent of startling, there’s likely to be a more significant build-up of absorption leases larger than 20,000 square feet will result in net expansion in the through the remainder of the year. Expansionary activity among leases coming quarters as companies from a broad spectrum of industries larger than 100,000 square feet has increased steadily over the past increase headcounts. three quarters with nine occupiers committing to expansion space in the third quarter of 2014, increasing to 25 and 30 transactions in the Technology companies continue to lead in this expansionary activity in following fourth and first quarters. As a result, a spike in net absorption both primary tech hubs as well as emerging secondary (and tertiary) by the end of the year is projected as companies like Apple, Comcast, markets, but financial, and professional and business services are Facebook, Google, Fannie Mae and Indeed take occupancy of new making a comeback in a significant way that’s leading to leasing activity leases across the country. broadly across the country. Nearly 10.0 million square feet of leases larger than 20,000 square feet were signed by these two sectors in the Additionally, the increase in expansionary activity is a pronounced shift first quarter as companies like State Street Bank signed on to open a away from renewal transactions that were heavily favored in the early new location in New Jersey’s suburbs and newcomer WeWork forged part of the recovery. Though leasing activity has registered lower results ahead with its aggressive expansion plans, leasing more space in both in the last two quarters, the number of renewals has consistently New York and San Francisco. Even law firms, which have steadily shed decreased, comprising only 22.0 percent of transactions larger than real estate over the past five years, inked a handful of expansionary 20,000 square feet in the first quarter. As tenants commit to more deals across the country. expansion space, the lag time between a transaction’s close and its physical occupancy will delay occupancy gains. However, absorption is Leasing activity by office-using sector likely to reach the 2014 high watermark of 55 million square feet. Scientific & technical 34.1% Finance 23.2% Rental rates beginning to grow at an accelerated pace Professional and business services 23.2% Consumer-oriented 7.1% As the economy improves and occupiers increase headcounts, landlords Creative 5.6% are feeling much more comfortable pushing rental rates, resulting in the Non-profit 4.9% highest quarterly gain of the cycle at 3.1 percent. At the end of the first Other 1.9% quarter, rental rates in CBDs averaged $40.73 per square foot, versus a *Leasing activity >20,000 s.f. suburban average of $24.52 per square foot. Even segmented by building class CBDs beat suburbs, with overall CBD rents in the Class B Vacancy steady in Q1, anticipating sharp decline by year-end segment consistently and historically beating Class A rents in the suburbs. The delta between CBD Class B and suburban Class A, at Vacancy remained at its lowest post-recession level in the first quarter at approximately $4.00 per square foot, is likely to widen in the coming 15.6 percent, but is still 180 basis points above its pre-recession low of quarters as Class A availability declines in CBDs, forcing both occupiers 13.8 percent. That rate is projected to fall through the remainder of 2015 and developers to consider Class B buildings that can be renovated to as in-demand submarkets near total saturation, forcing tenants to look to meet today’s workplace standards. next-best spillover options. This trend is most pronounced in submarkets that are driven by technology demand or those in which amenities, Despite slower rent growth in suburban markets, landlord confidence is density, and a diverse mix of office inventory create a dynamic location. increasing across the country, moving from the tech- and energy-driven As a result, CBDs continue to post the lowest vacancy rates, totaling markets in the early part of the recovery to metro areas that are finally 12.7 percent overall versus 17.3 percent in the suburbs, as occupiers enjoying economic expansion and increasing employment. Only seven of seek urbanized and amenity-rich locations that meet the demands of the the 48 markets tracked by JLL reported tenant-favorable conditions for workforce. Not all suburbs are feeling the drawback of their location, 2015 as rental rate increases accelerate. By 2017, two-thirds of all however, as industries like banking and finance, professional and markets expect negotiating leverage to favor landlords with rental rates business services, and technology focus on expanding in suburbs that overall breaking the $30-mark and continuing upward, pressured by new generally appeal to an increasingly millennial-based employee pool. and more costly office product.

CBDs with lowest Suburbs with lowest vacancy rates vacancy rates New York-Midtown South 6.1% Salt Lake City 6.0% Portland-Central City 7.6% Boston-Cambridge 8.7% Charlotte 8.7% Portland-Eastside 9.1% Raleigh-Durham 9.3% Seattle-Eastside 9.6% Philadelphia 9.9% Portland-Vancouver 10.9%

JLL | United States | Office Outlook | Q1 2015 5 Development is showing no signs of slowing national average of 2.2 percent. Markets like Denver, Dallas and Phoenix, which continue to welcome new entrants to the market, saw Although activity is still 22.0 percent below the previous peak in 2007, at development activity increase by 37.0, 29.0, and 56.0 percent, 84 million square feet, it’s the highest level recorded in this cycle and respectively, since the end of last year for a cumulative total of 3.8 million expected to increase. As the economic recovery began to take hold and square feet. Meanwhile, tech markets on the West Coast continue to look occupiers asserted their voice, with millennials and efficiencies in mind, ahead with the San Francisco Peninsula, Silicon Valley, and Seattle functional obsolescence within office inventories has increased where increasing activity by an additional 3.0 million square feet. Only Houston product is both limited by its location and lacking in its design. Today’s reported a reversal of activity, with 3.4 million square feet of projects office developments are being built with the ideas of collaboration and coming offline. efficiency ingrained in their design. As a result, more and more tenants are looking to new construction rather than existing product to Though preleasing activity varies from market to market, currently 50.0 accommodate their workplace strategy and expansion plans. percent of new supply will hit the market without a tenant in place, both allowing for continued expansion while tempering supply constraints and In the first quarter, 25.0 percent of markets tracked by JLL reported potentially discouraging spikes in rental rates. construction activity as a percent of total inventory that’s above the

JLL | United States | Office Outlook | Q1 2015 6 Expansionary leases account for more than half of all Absorption as a % of inventory declined from previous quarters, but still large-block activity in-line with historical average 1.5% 56% 33% 11% 1.0% of companies of companies of companies 15-year trailing grew in Q1 were stable in Q1 shrunk in Q1 0.5% annual average

of inventory) 0.0%

Technology Banking, finance, insurance Law firm 26.5% of companies 32.6% of companies 16.5% of companies -0.5% Banking, finance, insurance Technology Aerospace, defense, trans. Quarterly net absorption (as % 17.2% of companies 9.4% of companies 14.4% of companies -1.0% Healthcare Government Energy & utilities 10.7% of companies 9.1% of companies 12.9% of companies 2008 2009 2010 2011 2012 2013 2014 2015

Despite overall slowdown, many markets continued to post solid Central U.S. markets recorded highest occupancy gains in Q1, occupancy growth in Q1 supplanting East Coast for first time in a year

2,000,000 100% 1,800,000 1,600,000 1,400,000 50% 1,200,000 1,000,000

800,000 absorption 600,000 0% 400,000 Share of quarterly net net quarterly of Share

YTD net absorption (s.f.) 200,000 0 -50% East Coast Central West Coast

-100% 2010 2011 2012 2013 2014 2015

Although more space is expected to come to the market, high Since Q1 2010, CBD Class A rents have grown by more than one-fifth; preleasing should allow for further drops in vacancy in 2015 Suburban Class B barely increased in nominal terms

Class A (CBD) Class A (suburban) +21.0% 20.0% 30.0% Class B (CBD) Class B (suburban) CBD Class A Class C (CBD) Class C (suburban) +10.8% 15.0% Suburban 20.0% Class C +9.5% CBD Class C 10.0% 10.0%

Total vacancy (%) vacancy Total +6.8% Suburban 5.0% Class A 0.0% +5.8% CBD Class B 0.0% rents ($ asking Average p.s.f.) -10.0% +0.9% 19901992199419961998200020022004200620082010201220142015 Suburban 2010 2011 2012 2013 2014 2015 Class B

After narrowing in 2014, the rent gap grew to new heights in Q1: CBDs Roughly 49.3 percent of the space under construction is preleased, are now $16.21 (+66.1 percent) more expensive limiting options for tenants $45.00 CBD Suburbs Available Pre-leased $40.00 50,000,000

40,000,000 $35.00 $16.21 30,000,000 $30.00 $11.36 20,000,000 $25.00 Completions (s.f.) 10,000,000 Average asking rent rent ($ asking Average p.s.f) $20.00 0 2010 2011 2012 2013 2014 2015 2015 2016 2017 2018

Source for all above: JLL Research

JLL | United States | Office Outlook | Q1 2015 7 United States overall office clock

Reading the clock

The JLL office clock demonstrates where each market sits within its real and Tempe (Phoenix), among other submarkets. Demand far outstripping estate cycle. Markets generally move clockwise around the clock. supply has led to a wave of new development in and around these areas Geographies on the left side of the clock are generally landlord-favorable, to varying extents. while markets on the right side of the clock are typically tenant-favorable and as of the first quarter, the vast majority of markets are firmly Previously a leader in most fundamentals, Houston has begun to show positioned on the left side of the clock. signs that its reaching its peak, as rapid declines in energy prices have yielded several million square feet of sublease space coming to the Sustained macroeconomic growth, job creation and diversification over market, which coupled with slower demand levels, depressed rents by the past year continue to power the office-market recovery into the first 3.4 percent during the quarter. The Katy Freeway submarket, the nexus quarter of 2015. During the first quarter, occupancy gains of 6.3 million of the U.S. energy industry, posted an even sharper drop of 4.8 square feet added to the more than 54.0 million square feet of net percent. With 5.1 million square feet of development underway in the absorption seen over the previous four quarters, pushing vacancy down submarket alone, oversupply may become an even greater issue in the to a cyclical low of 15.5 percent. Combined with a high rate of coming quarters. expansionary leasing activity over a similar time frame, these factors are placing even greater upward pressure on asking rents across building Over the next 12 to 18 months across the country, we expect to see classes and geographies. trends of supply constraints, limited options for tenants and a delay in new space coming to the market beginning in late 2015 and into 2016 Quarter-on-quarter, asking rents increased by 3.1 percent, the highest result in even further tightening, while the available supply that does rate of growth yet in the recovery, helping rents reach a cyclical high of deliver will come at a sharp premium, averaging approximately 22.7 $29.48 per square foot. Greater supply constraints in CBDs resulted in a percent when looking at new construction. The broad-based growth in 6.1 percent quarterly jump in rents compared to 0.9 percent in the output and job creation, not just in tech and creative sectors, but in life suburbs. In both cases, as well as with the market as a whole, gains sciences, leisure, manufacturing, construction, logistics, trade and even were strong enough to warrant movement along the office clock. Led by financial activities will serve to maintain the momentum that emerged in tech-heavy markets such as Cambridge, Midtown South (New York), 2013 and took off throughout 2014, causing markets to move steadily Austin and San Francisco, where rents spiked by 10.1, 8.3, 7.3 and 3.5 through the rent cycle in the coming quarters. percent, respectively, during the quarter, movement has been so consistent across geographies that only three markets have yet to enter the rising phase of the rent cycle.

Notably, diversified metro areas such as Atlanta, Chicago, Dallas, Miami, Philadelphia and Phoenix are posting smaller, but just as significant, gains in rental rates. In Atlanta, nearly 2.8 million square feet of occupancy growth since the beginning of 2014, coupled with minimal new supply coming to the market, have helped to push Class A rents up by 7.1 percent over the same time period. A similar story emerged in Philadelphia, where Class A rents rose by 5.4 percent year-on-year. Inward movement to urban and core suburban submarkets means even more pressure on rents for space in Central Perimeter (Atlanta), River North (Chicago), Uptown (Dallas), Brickell (Miami), Market Street West (Philadelphia)

JLL | United States | Office Outlook | Q1 2015 8 United States CBD office clock

United States suburban office clock

JLL | United States | Office Outlook | Q1 2015 9 United States economy

The U.S. economy continues to cement its position as one of the top upcoming quarters, this demand for talent, as well as the expansionary performers globally as other countries and regions shift. Some of the tensions activity that many companies have undertaken of late, should help to boost that have diverted the global economic forecast include geopolitical tensions wages, which have largely been stagnant until recently. Weekly wages rested in the Middle East and Eastern Europe, increasingly-divergent fiscal, at $857.39 in February, growing by 2.6 percent over the year as annual monetary and political issues in the Eurozone and changes in the previously- increases have begun to surpass 2.5 percent on a consistent basis. For more dominant macroeconomic situation of emerging markets, including China and specialized sectors such as data processing and financial activities, however, Brazil. These events have combined to create a tenser global economic strong demand and scarce talent are boosting wages by 5.4 and 3.1 percent, outlook, resulting in an even greater flow of demand across the economic, respectively. Stronger wage growth will be even more impactful as the leasing and capital perspective in the United States. However, with enhanced consumer price index flatlines due to lower energy costs, leading to greater growth comes newfound challenges, particularly a rapidly-strengthening consumer expenditures and retail sales. dollar, which will eventually impact the export-driven part of the domestic economy and near-term hikes, albeit slow ones, in interest rates, which could Confirming this improved confidence are the consistent bumps up in job impact the public markets and even real estate investment volumes both openings, hires and quits. Corporates are keener than ever to hire, and the across the residential and commercial front. Despite those challenges, the overall labor market saw 1.9 million net new job openings over the course of domestic outlook remains positive with growth forecasts escalating at least the year to a new high of slightly under 5.0 million, representing growth of until the middle of 2016. 48.7 percent. The Bureau of Labor Statistics’ JOLTS survey also recorded 396,000 new hires (+8.6 percent year-on-year) and 415,000 quits (+14.7 Overall, indicators are aligning well domestically. In fact, over the past year, percent year-on-year) during the same time period, suggesting once again employment gains have totaled roughly 3.3 million, representing an increase that employees increasingly have the upper hand and have a more optimistic of 2.4 percent, far above the roughly 1.7 to 1.9 percent seen earlier in the outlook of the job market than earlier in the cycle. Quits are rapidly recovery. Similarly, real gross domestic product is up 2.4 percent and stands approaching their previous peak of 3.0 million and currently lag by only at a record $16.3 trillion. Other metrics, such as consumer confidence, 250,000. corporate bond issuance, international assets and corporate profits mirror the upward trajectory that the overall economy has taken and are nearing either Private business investment and personal consumption are driving cyclical or historic highs. This confidence is spurring balanced and diversified output growth growth, and in turn boosting the office market across markets throughout the United States. Real GDP has risen by 2.4 percent over the past year to a record high of $16.3 trillion. Driven almost entirely by personal consumption expenditures Job creation is at its highest rate since the late ‘90s, paving the way for (PCE) and gross private domestic investment, segments such as intellectual wage growth property and equipment are up 7.3 and 5.3 percent, respectively, cemented by business confidence. Consumption of goods now exceeds services, with Employment growth over the past 12 months is up 3.3 million, with a record annual growth in goods consumption reaching 4.1 percent, 1.9 times that of 141.1 million Americans in work as of February 2015. The 2.4 percent annual services. Currently at $417.6 billion, motor vehicles experienced 9.8 percent increase in employment surpasses the 1.7-to-1.9 percent rate seen growth in spending, while clothing sales rose by 3.0 percent year-on-year. throughout the first few years of the recovery when tech, energy and Despite energy prices falling so much that they have impacted the consumer innovative segments of professional and business services (PBS) price index considerably, real spending on gasoline and other energy disproportionately contributed to growth. While PBS still leads in absolute products slowly rose on a quarterly basis, and finished off 2014 at $278.7 figures, up 660,000 jobs from this time last year, it has been joined by the billion during the fourth quarter. high-growth industries of health care, education, leisure, construction, trade and transportation, with smaller but significant boosts from manufacturing and Traditionally the largest services expenditures, combined spending on financial activities, among other industries. housing, utilities and health care totaled nearly $3.9 trillion, or 23.6 percent of real output. However, they have grown around the same rate as the As a result of this sustained momentum, unemployment remains on a economy: since the fourth quarter of 2014, housing and health. care spending downward trend, falling to 5.5 percent compared to 6.7 percent in February has increased by just $106.8 billion, or 2.8 percent. Mirroring its employment 2014. For those with a bachelor’s degree, unemployment is at near-historic upswing over the last few months, financial activities was the fastest-growing lows of only 2.7 percent. Employers now face a labor shortage, and the service component of GDP, jumping 4.0 percent. competition for jobs has now flipped to a competition for talent. Over the JLL | United States | Office Outlook | Q1 2015 10 Government, on the other hand, remains a drag on overall productivity. While macroeconomic recovery. According to the Consumer Price Index, energy contributing around $2.9 trillion (17.8 percent) to GDP, it has contracted by prices have fallen by 19.8 percent since they began tumbling in June, but more than $186.4 billion, or 6.0 percent, since 2010 and is on track to began to stabilize in February. For crude oil, the drop is even more continue its downward trajectory in the coming quarters, although the rate of pronounced at 52.9 percent. Like energy overall, crude oil prices look to have decline should continue to slow and potentially rise slightly into 2016 as stalled somewhat in February. deficits continued to decline. Importantly, this decline is the result of even sharper drops in federal consumption and investment, which is 10.2 percent Due to energy’s large presence in the overall basket of goods used to lower than in the first quarter of 2010, while state and local government calculate the CPI, the index is down 0.9 percent over the past six months spending is largely flat. Similarly, net exports are also down by $87.4 billion to and, with the exception of February, registered six consecutive months of -$471.4 billion as import growth, in part due to improving consumer declines. For consumers, this has meant a moderate level of deflation, while expenditures, is outpacing that of exports. Despite these less-than-stellar wages rise, providing some relief and extra savings consumers can store metrics, we expect that continued consumer and business confidence will away or invest back into the consumption-fueled economy. However, lead to further gains in real GDP excluding energy, the CPI has risen by 1.9 percent. Still, this is below the 2.6 percent rate of weekly wage growth and ultimately benefits consumers. Other Consumer confidence and corporate profits are flourishing possible changes to oil prices include a potential shortage in storage locations, which could push up holding costs and be passed onto consumers, The Conference Board’s Consumer Confidence Index once again broke 100 as well as legislation regarding fracking and energy extraction. points, bringing its year-to-date 2015 average to 101.3 points and trailing 12- month rate to 92.1 points. While the index has risen by 300.4 percent since For the office sector, these declines in energy have already begun to make the depths of the recession in 2009, in the past year alone it has grown by their impact. Houston registered a 3.4 percent decline in asking rents in the 20.7 percent, faster than almost any economic measure. Not only is the first quarter of 2015 due to sublease space beginning to flood the market, index’s current rate of 101.3 points higher than its 75.9-point average since while construction has fallen by roughly four million square feet and the 2005, it is just 10.6 points shy of its 2007 peak. With an additional 3.3 million market’s streak of 900,000+ square feet of quarterly absorption has come to jobs created during the same 12 months and wages now growing faster than an end. Submarkets such as Katy Freeway, Greenway Plaza, Westchase, average, consumer confidence should pick up yet again, potentially the Woodlands and Galleria, which have deep connections to the energy surpassing its previous peaks if it grows at its current rate. industry, may be affected even more in the coming quarters due to potential oversupply issues. Reports of hiring freezes and even layoffs have become As with consumer confidence, corporate profits are yet another bright spot of increasingly common, although the picture remains unclear. Despite the the recovery. With a fourth quarter 2014 level of $2.1 trillion, profits are largely impact on Houston and to a lesser extent Denver and Pittsburgh, declining stable year-on-year due to a decrease from international firms; domestic energy prices will likely benefit the overall economy and boost expenditures corporate profits have increased by 2.7 percent over the year to $1.8 trillion. even further. Speaking to the diversification of the economic recovery, most of this growth came from non-financial firms, whose profits are up 20.6 percent to $1.8 The outlook for 2015 and 2016 looks bright and stable trillion. In particular, profits for information, manufacturing and other non- financial companies are up 21.7, 19.6 and 18.5 percent, far exceeding the The combination of sustained job creation, falling unemployment, improving national average. These figures echo the accelerated growth in consumer and employee confidence, rising wages and plateauing inflation, as manufacturing and trade, as well as tech, particularly data processing, well as low interest rates, have created a highly-optimistic environment. Most hosting and software. On the public companies side, in addition to growing metrics point in an upward direction, boosting output and broadening the sales growth, revenue growth and profitability, 75 percent of companies scope of the recovery. Secondary and tertiary markets have picked up the are routinely beating analyst expectations on the Street, quarter in and pace, with mid-sized markets in the Sunbelt and the West in particular quarter out. ranking among the fastest-growing in terms of job creation and population.

Other metrics of business health are positive as well. Corporate bond Challenges still remain, however. Current interest rates will undoubtedly issuance in 2014 reached a record high of $1.5 trillion according to recent increase slowly as the Federal Reserve has signaled that they may rise as SIFMA estimates, up 3.8 percent compared to 2013. Year-to-date issuance in early as June due to numerous economic criteria – particularly job, wage and 2015 rests at $256.6 billion, an 11.3 percent increase compared to YTD 2014. output growth –being met. The uptick in bond issuance is indicative of corporates seeking to raise money while interest rates remain low, and as the Federal Reserve is The slowdown in emerging markets such as China and Brazil may cause increasingly likely to raise rates. Additionally, metrics such as CEO major changes in international trade, logistics and consumer demand, while confidence are on the rise: Chief Executive’s CEO Confidence Index is up 9.7 geopolitical tensions have yet to be resolved. So long as the U.S. economy percent year-on-year and has remained above 6.4 points since November. maintains the momentum it has built over the past four to six quarters and Strengthening macroeconomic indicators should sustain this level of further builds upon it, the office market will benefit. Since the first quarter of confidence and incrementally push it higher in the coming months. 2014, occupancy growth has totaled 61.0 million square feet, rents are on the rise across building classes and geographies and development activity has The energy question lingers reached 84.2 million square feet. Through 2016, these fundamentals are likely to only jump, causing increased confidence among landlords and The late 2014 and early 2015 collapse in energy prices remains one of the challenges for tenants from the real estate perspective, but not necessarily most important questions regarding the short-term direction of the the business perspective.

JLL | United States | Office Outlook | Q1 2015 11 Real GDP reached $16.3 trillion in Q4 2014; rate of growth stable at Job creation continues to surpass 200,000 per month, resulting in 2.5 percent unemployment falling to 5.5 percent Real GDP Annual growth Monthly employment change Unemployment rate $16,500.0 6.0% 600.0 12.0% 400.0 $16,000.0 4.0% 10.0% 200.0 $15,500.0 2.0% 0.0 8.0% $15,000.0 0.0% -200.0 6.0% $14,500.0 -400.0 4.0% (thousands)

-2.0% (%) growth Annual $14,000.0 -600.0 Real GDP ($ billions) 1-month net change net 1-month -800.0 2.0% $13,500.0 -4.0% (%) rate Unemployment -1,000.0 0.0% $13,000.0 -6.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: JLL Research, Bureau of Economic Analysis Source: JLL Research, Bureau of Labor Statistics

Both hires and quits continue to rise, with a faster rate of increase over Consumer confidence once again breaks 100 points in March, the past six months mirroring gains in spending and hiring

+11.6% 120.0 Growth since Q1 2010 9,000 100.0 8,000 7,000 80.0 6,000 5,000 60.0 4,000 40.0 3,000 2,000 20.0 1,000 Consumer Confidence Index Confidence Consumer Hires and quits (thousands) quits and Hires 0 0.0 2010 2011 2012 2013 2014 2015 Source: JLL Research, Bureau of Labor Statistics Source: JLL Research, Conference Board

Corporate profits have grown fastest in goods-producing industries Rapid decreases in energy prices have pushed down the overall CPI; such as motor vehicles and electronic equipment excluding energy, CPI shows steady rise

Motor vehicles 50.8% CPI CPI less energy Other durable goods 39.3% Electrical equipment 34.6% 250.0 Electronic products 34.2% Fabricated metal products 23.7% Information 21.7% 240.0 Other nondurable goods 20.9% Wholesale trade 20.4% CPI 230.0 Other nonfinancial 19.6% Retail trade 17.3% Transportation and warehousing 11.3% 220.0 Chemical products 9.7% Machinery 6.1% Food and beverage 5.9% 210.0 Petroleum and coal products -5.5% Finance -5.8% 200.0 -20.0% 0.0% 20.0% 40.0% 60.0% 2010 2011 2012 2013 2014 2015 Year-on-year growth (%) Source: JLL Research, Bureau of Economic Analysis Source: JLL Research, Bureau of Labor Statistics

Energy and energy commodities are beginning to plateau from their Corporate bond issuance neared $1.5 trillion in 2014 and will likely see dramatic falls over the past year further growth in 2015

Energy Energy commodities $1,600.0 50.0% $1,400.0 40.0% $1,200.0 30.0% -18.3% $1,000.0 20.0% Energy $800.0 10.0%

($ billions) $600.0 0.0% -31.2% -10.0% Energy $400.0 commodities -20.0% issuance bond Corporate $200.0 -30.0% $0.0

Change in CPI Q1 2010 (%) CPI since Change in 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: JLL Research, Bureau of Labor Statistics Source: JLL Research, SIFMA

JLL | United States | Office Outlook | Q1 2015 12 United States Investment Sales

U.S. economic strength persists as global economic tensions expand… deal flow and thus was a key driver of the $5.7 billion dollars of Trophy spurring both expected and newfound challenges transactions in the first quarter, a nearly 80.0 percent increase over fourth quarter figures. In the largest trade of the quarter, Canada-based With job creation hitting its highest rate in nearly two decades, real GDP Ivanhoe Cambridge and Callahan Capital Partners acquired 1095 achieving a record high and consumer confidence again breaking 100 Avenue of the Americas from Blackstone for $2.2 billion, or $2,122 per points, the economic strength of the United States is not only square foot. The Trophy asset, which sits on Bryant Park in the Times outperforming prior peak levels but also, in some instances, reaching Square submarket, represents the largest single asset trade since 2008 historic highs. This continues to capture the attention of global investors, in the U.S. faced with a range of geopolitical tension, softening economic growth and divergent monetary and fiscal policies at home. However, divergent This further reinforces the expanding appetite of foreign buyers for Core global performance has come with bumps along the road. Notably, the and Core Plus assets in gateway markets. Foreign investment trends strength of the dollar is increasing rapidly, and the Federal Reserve will were further reinforced across the primary markets with other large undoubtedly slowly increase interest rates this year. While these trades this quarter: Norges Bank Investment Management (Norway) challenges pose risks to export-driven segments of the domestic purchased 11 Times Square in New York, Mirae Asset Financial Group economy as well as investment activity, the U.S. outlook remains (South Korea) acquired 1801 K Street in Washington, DC and GLL Real positive with growth forecasts escalating into 2016. Estate Partners (Germany) acquired 550 W Adams Street in Chicago. Given continued occupancy gains, constrained office deliveries and thus Office investment sale activity up 63.0 percent year-to-date limited blocks of available space, current underwriting standards are favoring assets with quality vacancy or near-term rollover to capitalize on With $36.5 billion of first quarter office investment sale activity, the strong rent growth and forecasts, driving aggressive cap rates on select United States saw its highest level of first quarter activity since 2007, up assets. 63.0 percent from comparable 2014 deal flow, while closing 30.0 percent of full-year 2014 transaction volumes. Strong momentum in New York Non-CBD investment in Boston, West Coast submarkets expanding was a key driver of this, having seen first quarter volumes nearly triple relative to comparable 2014 figures with $6.5 billion of activity. These Major investment hubs in the East and Central regions are not only gains have paralleled an increase in large deals across primary markets, seeing strong CBD investment activity, but capital is increasingly as six of the eight primary markets saw volumes exceed $1.0 billion this focusing on the urban cores. In 2014, New York, Chicago, Houston and quarter. Relative to the 41 deals transacted over $300 million in 2014, Washington, DC saw 76.8 percent of activity in its downtown the first quarter alone saw 16 deals trade above this threshold. As a submarkets. Year-to-date, CBD activity across these markets ramped up result, the average investment sale size has grown 73.0 percent in to 95.5 percent with the latter three markets notably seeing 99.0, 92.7 primary markets year-to-date. Deal sizes remained stable in the and 89.6 percent of market-level investment volumes, respectively, secondary markets with nominal pricing two-fifths the size of primary concentrated in their CBDs. market transactions on average. However, continued strength in the Boston and primary West Coast Growing concentration of CBD activity in primary markets markets is supporting the diversification of capital into non-CBD submarkets. On the heels of 2.7 million square feet of first quarter Primary market investment remains strong, hitting its highest level since absorption, strong market fundamentals throughout the West Coast are the fourth quarter of 2013. Despite record low cap rates and continued shifting investment strategies. Year-to-date, CBD investment in San value appreciation, capital continues to focus on urban over suburban Francisco and Los Angeles dropped to 13.0 and 12.0 percent, product. As a result, the CBDs of the primary markets continue to be the respectively. While local developers, private equity funds and high net dominant driver of U.S. volumes, having accounted for 55.5 percent of worth investors are acquiring select assets in outlying suburban markets, total deal flow and 88.0 percent of CBD volumes nationally this quarter. institutional groups continue to focus on core, strategically-positioned A central driver of this in early 2015 has been the momentum of the New suburban assets. Morgan Stanley acquired 3301-3307 Hillview Drive in York Trophy segment, which accounted for 71.9 percent of U.S. Trophy Palo Alto’s Stanford Research Park for $330 million, or $1,130 per

JLL | United States | Office Outlook | Q1 2015 13 square foot. Invesco additionally has been active in this segment, acquiring The Reserve in the Playa Vista micromarket of Westside Los Angeles and a 49.0 percent interest in Sand Hill Commons in Menlo Park for $791 and $1,803 per square foot, respectively. Within these submarkets, compressed yields for core suburban product have expanded core-to-outlying suburban cap rate spreads to in excess of 150 basis points with top assets trading at sub 6.0 percent levels.

Secondary suburban liquidity diversifying with a focus on scale and value add

Suburban investment trends are not exclusive to the West Coast. With more than 30 million square feet transacted, secondary suburban product drove 21.0 percent of U.S. investment sale volumes this quarter, exceeding the modest 7.6 percent driven by secondary CBDs. Activity was notably led by the Denver, Phoenix and Raleigh-Durham markets— each of which closed in excess of $0.5 billion—and large portfolio sales, a strategy increasingly utilized by investors with an emphasis on scale in secondary suburban submarkets. On the heels of Hudson Pacific’s $3.5 billion portfolio acquisition from Blackstone at the end of 2014, Starwood Capital acquired a 6.9 million-square-foot, 62-property portfolio from Duke Realty for $1.1 billion this quarter. The portfolio notably comprises Duke’s entire office portfolio across Raleigh, Nashville, St. Louis and South Florida, including the entirety of its Research Triangle Park portfolio and remaining development sites in the Perimeter Park office park. The trade positions Starwood to expand its portfolio of Core suburban, Class A product while enabling Duke to rightsize its portfolio toward its current industrial and medical office focus.

Secondary, suburban value-add transactions additionally are on the rise, a trend evidenced by the growth of well-located, Class B suburban office park acquisitions. As a result, of all suburban transactions in the first quarter, 45.0 were of Class B assets—a shift from a consistent 25.0 percent over the prior two years. Portland-based ScanlanKemperBard Companies (SKB) acquired Greenwood Corporate Plaza in the Southeast Suburban submarket of Denver, a six-property suburban office campus, for $91.5 million, and Crown Properties acquired a three- property, net leased office campus in the Airport Area submarket of Phoenix for $183 million from American Realty Capital Properties.

While risks exist, office investment outlook strong

With a strong start to 2015, the U.S. office investment sale segment is positioned to see its sixth consecutive year of volume growth, forecasted to reach between 15.0 and 20.0 percent. The broadening of investment profiles evidenced in the first quarter will persist into 2016, as an expanding buyer spectrum continues to seek creative tactics to deploy capital into a tightening, competitive marketplace. However, the strengthening dollar and anticipated tightening of U.S. monetary policy pose threats to current momentum. With that said, healthy yield spreads relative to prior peak levels have positioned investors favorably, and transparency into Federal Reserve decision making will begin to preemptively impact asset underwriting standards, driving cap rates to stabilize nationally with potential softening for assets with limited opportunities for near-term value creation.

JLL | United States | Office Outlook | Q1 2015 14 With $36.5 billion of office transactions, nearly one-third of full-year 6 of the 8 primary markets exceeding $1.0 billion 2014 deal flow closed in first quarter

$250.00 $7,000 $6,320 $6,000 $5,000 $200.00 $1,648 $4,000 $1,538 $150.00 $3,000 $1,218 $2,000 $1,118 $1,092 $100.00 $1,000 $755 $745 $734 $685 $639

$US, Q1 2015) Q1 $US, $-

(billions of $US) $50.00

$0.00 (millions of volumesTotal sale Office investment sale volumes volumes sale investment Office 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4 Source: JLL Research Source: JLL Research Primary markets Secondary markets

Average deal size is up 73.0 percent in primary markets Resurgence in Trophy activity with one-third of comparable full-year As value appreciation continues, all primary markets seeing deal sizes increase with the 2014 sales in first quarter exception of Boston—a trend driven by expansion of value add suburban transactions Trophy $400.0 Class A $300.0 14.1% Class B $200.0 23.7% 26.8% 28.0% $100.0 $- of $US) of

62.2% 45.2% Average deal size (millions

Source: JLL Research 2014 Q1 2015 Q1 Source: JLL Research

As East Coast CBD investment increases, Boston and West Coast Secondary market activity continues to rise on a square footage basis, investment strategies diversifying further into the suburbs accounting for 57.8 percent of 2015 activity year-to-date Cambridge / Lake Union / 495 Mass Pike Belltown 100.0% Palo Alto / 80.0% Santa Clara 100% 60.0% Westside 100% 99% 93% 90% 40.0% 65% 55% 81% 60% 66% 59% 55% 20.0% 50% 25% 13% 12%

total volumes) 0.0% CBD investment sales (as a % a (as of % sales CBD investment

Source: JLL Research 2014 2015 Q1 Source: JLL Research

More than 30.0 million square feet of non-CBD deal flow drives While stable in the primary markets, composition of non-CBD secondary market volumes in the first quarter investments diversifying into Class B in secondary markets

100% 7% Primary, non-CBD activity Secondary, non-CBD activity 16% 15% 13% 13% 17% 9% 21% 17% 21% 80% 10% 7% 100% 100% 13% 17% 14% 15% 10% 14% 8% 24% 24% 24% 28% 25% 24% 60% 27% 17% 16% 80% 80% 27% 28% 27% 24% 45% 40% 60% 60% 69% 57% 56% 44% 50% 43% 52% 45% 20% 40% 40% 76% 76% 72% 40% 75% 76% 55% 0% 20% 20% 2013 2013 2013 2013 2014 2014 2014 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0% 0% 2013 2014 2015 Q1 2013 2014 2015 Q1 Primary CBD Primary Non-CBD Secondary CBD Secondary Non-CBD Class A Class B Class A Class B Source: JLL Research Source: JLL Research

JLL | United States | Office Outlook | Q1 2015 15 Local U.S. office markets

JLL | United States | Office Outlook | Q1 2015 16 Atlanta

- Ryan Harchar Senior Research Analyst, Atlanta Shifting landscape offers opportunity for investors

Activity beginning to broaden to second-tier, occupiers taking note Class B rental rate appreciation year-over-year As the market continues to heat up, tenants are finding fewer options to select from. Available large blocks in top-tier buildings have vanished over the previous Central Perimeter 7.6% 12 months. Buckhead, for example, offered 12 contiguous blocks larger than 6.2% Northwest 5.3% 50,000 square feet at this time last year, now only eight remain. With no 1.9% Northeast 1.9% development to relieve the pressure, occupiers are forced to either renew their 1.8% existing lease at inflated rates or consider Class B options. Landlords of this Midtown 0.3% ‐2.7% second-tier set are taking note. Class B rates have increased in seven out of Downtown ‐4.9% nine of Atlanta’s submarkets year-over-year. Continued upward pressure on asking rates and concessions compression is expected in the remainder of 2015. Source: JLL Research

M&A volume to impact healthcare industry, office market affected Worldwide healthcare mergers and acquisition volume ($bil) Anticipated increases in M&A activity will likely influence office dynamics near- term, particularly in the healthcare sector. In a recent KPMG survey of M&A $200 professionals 84.0 percent of respondents believe the sector will be the most $150 active in 2015. Catalyzed by recent legislation and shareholder expectations to $100 cut costs, Atlanta’s value is likely to draw new demand as a resulting from real $50 estate strategy. Owners can also anticipate lease-term sensitivity from occupiers $0 hoping to be acquired. With the sector occupying 5.5 percent of Atlanta’s office 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 inventory, M&A transactions in 2015 are likely to impact the market. Source: Thomson Reuters, JLL Research

NCR commits to Midtown, chooses to maintain suburban presence Suburban tech companies seeking an urban setting With the announcement that they would move forward with plans to build a mid- rise urban headquarter campus in Midtown, NCR joined WorldPay, RIB Of all known requirements for Software, and athenahealth on the list of tech companies flocking to urban office space associated with locations. However, NCR’s strategy to maintain a significant presence in the suburban tech occupiers, sixty-two northern suburbs differentiates them from other tech companies. The decision to percent by volume are targeting operate two very different work environments may be advantageous in the short options in Buckhead and/or 62% Midtown. 2,257 term, as they will be well positioned to attract top millennial talent in Midtown, and the long term, giving NCR a competitive advantage should millennials ever choose to migrate out to the suburbs. Source: JLL Research

1,034,051 19.7% 233,577 3.8% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 17.9% Total preleased

JLL | United States | Office Outlook | Q1 2015 17 Austin

- Travis Rogers Research Analyst, Austin Rising rates and low vacancy in midst of new inventory Large wave of inventory delivers downtown with next wave southwest Citywide construction deliveries by quarter More than 600,000 square feet of new construction delivered downtown in the first quarter, representing a 7.6 percent increase in downtown inventory. Still, 2,000,000 1,595,850 s.f. leased tenants are surprised by the lack of vacant available space in the presence of 1,547,529 1,500,000 prolific office development. Class A downtown deliveries during the first quarter 1,000,000 748,835 were over 90.0 percent leased. Other downtown projects continue to take shape, 625,060 418,558 500,436 the most noteworthy being the 500,000-square-foot development delivering in 500,000 355,500 the first quarter of 2017 known as 500 W 2nd. Google signed a 200,000-square- foot lease at this Trammell Crow project, taking 42.0 percent of available space. 0 The next wave of construction will deliver approximately 900,000 square feet to Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q1 2017 the southwest market in the second quarter, representing a 10.0 percent Source: JLL Research New Construction Leased s.f. increase in inventory with 50.0 percent of available space already leased.

Rental rates continue to climb citywide driving suburban development Class A downtown rent growth Demand for larger blocks of space has increased, coupled with a limited supply $50 of 50,000-square-foot blocks of contiguous space, has caused rental rates to 23% $15.75 rise. While operating expenses have risen substantially due to increased $40 $14.98 $14.42 Rate growth appraisal values, the largest contribution to rent growth over the last five years is $13.18 $13.69 $30 $12.86 attributed to increases in base rent. East Austin, having fewer development $30.85 35% $26.36 $27.69 barriers, lower land values and close proximity to downtown is witnessing a large $20 $22.85 $24.28 $24.08 push in planned Class A construction. 1645 E. 6th At The Arnold, at 95,000 Full Service Rate Full Service square feet and delivering in Q1 2016, is the first large Class A mixed-use office $10 development to begin construction and is over 50.0 percent leased to C3 $0 Presents. Other large Eastside planned developments include Cityline at MLK 2010 2011 2012 2013 2014 Q1 2015 Station, 310 Comal and The Waterfront, representing over 800,000 square feet Base Rent Operating Expenses of Class A office space. Source: JLL Research

Large portfolio sales and leases northwest Sales Transactions > 50,000 s.f. by submarket Approximately 68.0 percent of total sales transactions traded in the northwest submarket in the first quarter. The largest sale, Apple’s four-building purchase at 122,514 Riata Crossing totaling 357,000 square feet, closed for an undisclosed price. 155,385 1,208,075 s.f. Prominent Point I, II and Stratum Executive Center also sold for a total of $120 107,648 in transactions million. The second largest lease of the quarter took place northwest with Indeed CBD Northwest leasing 198,000 square feet at Champion Office Park, bringing the recently 822,528 delivered development to 100.0 percent leased. Other notable sales were Southeast Southwest Lavaca Plaza downtown and Rialto I & II southwest. Source: JLL Research

3,447,083 12.7% 567,318 7.2% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 28.4% Total preleased

JLL | United States | Office Outlook | Q1 2015 18 Baltimore

- Patrick Latimer Senior Research Analyst, Baltimore Investment activity heats up in first quarter

High profile buildings from suburbs to downtown hit market for sale Historical investment sales and deals in the market (millions) Following an active first quarter of closed deals and a multitude of Class A $1,500 buildings hitting the market for sale, office investment activity in the Baltimore Historical Sale Volume Deals in the Market metro area is on pace for its busiest year since 2007. Among the highlights, $1,000 Corporate Office Properties Trust finalized their acquisition of 250 W Pratt Street in the CBD for approximately $172 per square foot, or $63.5 million. Deals on the $500 market included 100 Light Street downtown and 7021 Columbia Gateway Drive in the suburbs. In the past, including 2007, portfolio trades have driven large $- transaction volume; the current deal pipeline for 2015, however, is comprised of (millions) 2007 2008 2009 2010 2011 2012 2013 2014 2015 well-leased individual assets. Source: JLL Research

Leasing activity drops significantly at the beginning of 2015 Annual change in leasing activity in select submarkets With only a handful of significant leasing transactions in the first quarter, overall leasing activity dropped 30.0 percent at the beginning of the year compared to I-83 Corridor 15.6% the first quarter of 2014. Baltimore City experienced the steepest decline, which Harford County 3.4% was accentuated by a number of large renewals inked in the first quarter of 2014. Howard County -2.3% The finance sector along with technology comprised the bulk of leasing activity BWI -26.0% during the quarter. Tenants actively searching in the market, however, increased Baltimore City by 9.3 percent year-over-year as larger tenants explored their options well in -31.3% advance of their expirations due to a lack of existing large blocks of availability. -40% -30% -20% -10% 0% 10% 20% Source: JLL Research

Southern suburban submarkets and CBD outpace northern areas Net absorption YTD (s.f.) Columbia South and the BWI submarket, which have benefitted from a diverse 150,000 set of demand drivers, drove absorption in the suburban market. In Columbia 98,654 Gateway, Sandy Spring Bank moved into 56,700 square feet of new construction 100,000 78,850 at 6831 Benjamin Franklin Drive. Increased tour and leasing activity in downtown 50,000 Baltimore translated into occupancy gains, with 107,435 square feet of positive net absorption in the CBD primarily due to Pandora’s 88,500-square-foot move- - in at 250 W Pratt Street. As companies increasingly focus on recruiting and (50,000) (35,742) retaining talent with rich and walkable amenities, the CBD and peripheral Northern Suburbs Southern Suburbs Baltimore City downtown submarkets have witnessed increased tenant demand. Source: JLL Research

870,288 13.9% 141,762 -0.9% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 79.8% Total preleased

JLL | United States | Office Outlook | Q1 2015 19 Boston

- Lisa Strope Research Manager New England Record-breaking snowfalls cool the urban cores

Suburban absorption propels first quarter growth Q1 direct absorption by class (s.f.) Greater Boston showed measured growth in the first months of 2015 as direct rents grew 40 basis points quarter-over–quarter. Winter storms slowed activity in 350,000 Class A the CBD and Cambridge, but the suburban markets did not skip a beat, recording 250,000 Class B quarterly total direct absorption of 780,000 square feet. This expansion was driven Class C by life sciences and tech companies, led by Shire Pharmaceuticals’ 150,000 200,000-square-foot lease at Two Ledgemont Center in Lexington and its 104,000 50,000 square foot interim space lease at 235 Wyman in Waltham. Two Ledgemont (50,000) Center is adjacent to Shire’s existing 650,000-square-foot laboratory and will Boston CBD Cambridge Suburbs become the largest suburban biotech campus in Greater Boston. Source: JLL Research

Class A and best-in-class, creative, Class B top sales transactions Sales volume $ by submarket (millions) An impressive 27 office transactions closed totaling over 3.5 million square feet $50 $26 Downtown this quarter, with the CBD and Cambridge accounting for the majority of sales $58 Back Bay volume. While Class A transactions accounted for 70.0 percent of sales volume, $65 $328 Cambridge several Class B transactions raised the bar for high-quality, creative spaces. $68 Seaport Amongst these was DivcoWest’s portfolio sale of 300 A Street, 313 and 330 $69 South End Congress Street to Multi-Employer Property Trust for $105.6 million. Downtown $75 128/Mass Pike $206 saw the highest sale price with Mass Development’s sale of the100 Cambridge $114 North 495/North Street to Intercontinental Real Estate Corporation for $280.0 million. $177 Source: JLL Research Northwest

Build-to-suit (BTS) projects dominate construction pipeline Historical and projected deliveries by year (s.f.) 2015 is set to deliver triple the amount of space delivered in 2014, but 65.0 4,000,000 percent of the projects underway are BTS projects. The largest of these projects 3,447,142 broke ground this quarter, the 700,000-square-foot headquarters for Partners 3,000,000 Healthcare in Somerville. Other BTS slated to deliver this year include a 440,000- 2,000,000 1,629,359 square-foot tower anchored by PwC at 101 Seaport Boulevard and Vistaprint’s 1,123,749 315,000-square-foot headquarters at Hobbs Brook Office Park in Waltham. The 1,000,000 665,846 238,173 387,926 lack of availability in quality office space combined with unemployment levels 141,658 0 dipping below 4.3 percent are expected to contribute to rising rents and tightening 2010 2011 2012 2013 2014 2015 2016 fundamentals this year. Source: JLL Research

5,076,501 14.5% 479,407 9.3% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 52.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 20 Charlotte

- Taylor Allison Research Analyst, Charlotte New development driving asking rates

New developments in CBD and SouthPark are pushing rates to Spike in CBD Class A asking rents unseen highs $30.00 The 300 S Tryon development in the CBD and Capitol Towers – Phase 1 in SouthPark are the two major speculative developments underway in the Charlotte market. Both quoting rates in the mid-30’s per-square-foot, they are not $25.00 only driving up the market’s average asking rate, but pushing existing Class A $28.19 $26.05 $24.88 $25.28 $25.27 $25.68 $25.76 $25.77 $25.76 $25.62 product to raise their rents. At $34.00 per square foot, Hearst Tower remains the $20.00 highest-priced existing asset in the Charlotte market, while still remaining a value Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 option to the new developments. 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 Source: JLL Research

Chiquita leaving the market brings a quality large block to the CBD Chiquita space is only CBD block of 100,000+ Class A+ available After being purchased by Cultrale-Safra, the Chiquita headquarters, which relocated to Charlotte in 2012, will be closed. In doing so, Cutrale-Safra has brought Chiquita’s 137,539-square-foot space to the market for sublease. There are currently no other existing spaces available within CBD Trophy or Class A+ 1 assets that are larger than100,000 contiguous square feet. With this in mind, and barring leasing space in one of the planned or under construction developments, Number of 100,000 square-foot blocks available in Chiquita’s space brings an option that was previously unavailable to existing or premier CBD assets out-of-market tenants that are looking for space in Charlotte. Source: JLL Research

New-to-market deals taking longer to land due to lack of available space Number of existing available blocks over 50,000 square feet With a total of 15 existing blocks of space larger than 50,000 square feet, there are limited options for companies with specific needs. Lately, as deals have CBD 2 become more complicated, in large part because they can not find adequate Airport space options, landlords with existing space are being forced to offer large tenant 3 7 improvement packages in order to accommodate needed renovations. University Furthermore, tenants in need of Class A space are often finding themselves Highway 51 / Ballantyne forced to consider build-to-suit options or waiting for new developments 5 to deliver. Source: JLL Research

978,309 12.9% 104,364 6.7% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 20.4% Total preleased

JLL | United States | Office Outlook | Q1 2015 21 Chicago (CBD)

- Joe Klosterman Research Analyst, Chicago CBD Measured growth in the first months of 2015

January average wages showed sharpest increase since 2008 U.S. average hourly wages Consumer confidence has trended upward for the past two years. This is $24.90 occurring as the employment market is accelerating toward full recovery. At 6.8 $24.78 percent, unemployment is down 200 basis points year-to-year. Office-using $24.80 $24.75 sectors have contributed to much of the gain, including information and $24.70 government, which is a positive sign that as the employment market expands it $24.60 continues to draw strength from a diverse set of industries. Looking ahead, the $24.62 resurgent job market and growing payrolls make it more likely that the Federal $24.50 Reserve will raise the short-term interest rate in the coming months. December-14 January-15 February-15 Source: JLL Research, Bureau of Labor Statistics

Vacancy dropped 10 basis points and direct rents rose $0.31 p.s.f. Square feet of sublease space on the market Negative absorption in Class A and C spaces was balanced by 242,000 square feet absorbed in the Class B market, resulting in positive absorption of 15,000 6,000,000 square feet. The inventory expanded for the first time since 2009 with the delivery of 1K Fulton in River West. The 534,000-square-foot former cold 4,000,000 storage facility will be home to Google and SRAM when both companies 2,000,000 occupy later this year. Also noteworthy, 210,000 square feet of former retail space at the Merchandise Mart is now available as office space. This is an 0 indicator of the tight market conditions that tech and creative tenants are 2009 2010 2011 2012 2013 2014 Q1 2015 creating in River North and landlords are maximizing on this opportunity. Source: JLL Research

Robust demand from tenants River North total vacancy Leasing momentum is driving some of the strongest growth that the Chicago 20.0% 16.8% market has experienced during this business cycle. 87,000 jobs have been 14.6% 14.9% added in the past 12 months, forcing employers to expand their footprints. With 15.0% 11.3% 10.9% 8.6% organic growth from tech companies and start-ups, the sector has accounted 10.0% 7.2% for over 4.7 million square feet of leases since 2012 and more than 150,000 5.0% square feet in the first quarter. Gains have also been made from tenants 0.0% relocating from the suburbs, bringing 2.1 million square feet of demand to the 2009 2010 2011 2012 2013 2014 Q1 2015 market since 2012 and most recently, Mead Johnson signed a lease for 75,000 square feet in the development at 150 N Riverside. Source: JLL Research 2,250,000 12.7% 15,319 4.7% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 55.8% Total preleased

JLL | United States | Office Outlook | Q1 2015 22 Chicago (Suburban)

-Amy Binstein Research Analyst, Chicago Suburban First months of 2015 show strength of suburbs

Continued growth in metro employment market Chicago metro unemployment rate Unemployment increased 110 basis points to 6.8 percent in January, but was still 12.0% down from 8.8 percent in January 2014. Gains are being made across many 10.4% 9.2% office-using sectors including information, government, and professional & 10.0% 10.0% 9.9% business services. Along with this growth the housing market also moved toward 8.0% 9.0% 5.7% full recovery. The Case-Schiller Chicago Index closed 2014 at 127.0, 1.4 percent 6.0% 6.1% 6.8% higher than December 2013. The Chicago Case-Schiller Condo Index was also 4.0% 4.5% 4.9% up at the end of 2014 closing at 1.1 percent higher than December 2013. With 2.0% employment numbers improving, the real estate market can expect to see more 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 demand as companies expand their footprint. Source: JLL Research

Class A total vacancy rates hit post-recession lows Class A total vacancy by submarket Across all submarkets Class A vacancy rates dipped to post-recession lows, falling as far as 12.9 percent in North Cook County. The most significant drop Northwest 14.8% was seen in the Northwest market, which decreased to 14.8 percent as a result O'Hare 16.3% of 102,000 square feet of positive absorption, primarily at Continental Towers, North (Lake County) 29.1% Centennial Center and Woodfield Corporate Center. Meanwhile, North Lake North (Cook County) 12.9% County recorded an increase in vacancy with the addition of 1.1-million-square- Westerm E/W 17.1% foot Innovation Park Lake County to the inventory, which is currently vacant. Eastern E/W 16.8% However, the submarket still had 51,000 square feet of positive absorption. 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Source: JLL Research

Suburbs outpace CBD in first quarter of leasing activity Suburban leasing activity This quarter the suburbs had 7.8 percent more square footage leased than the CBD. Several major transactions contributed to this surge. The largest transaction was by Baxalta, a biopharmaceutical spinoff company of Baxter, which signed a lease for 260,000 square feet at 1200 Lakeside Drive. Pasta giant, Barilla, currently located at 1200 Lakeside Drive, will be moving to 75,000 1,550,234 s.f. square feet at 885 Sunset Ridge Road in August. Continuing the large lease trend in the North submarket was CDW which signed for 209,000 square feet, or Square footage leased this quarter in the suburbs. two buildings, in the Tri State International office park in Lincolnshire. Source: JLL Research

753,000 21.3% 110,024 -6.2% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 100% Total preleased

JLL | United States | Office Outlook | Q1 2015 23 Cincinnati

- Cody Brooks Research Analyst, Great Lakes Expanding economy driving down vacancy

Class A vacancy continues to drop with flight to quality Office vacancy by Class Fueled by an improving local economy and tenant’s appetite for new and efficient Class A vacancy Class B vacancy space, Class A vacancy once again dipped below that of Class B properties. 25.0% Class B vacancy momentarily fell below Class A vacancy in the years following 20.0% the recession as cautious tenants were weary to commit to more costly space, but as those leases begin to expire and fundamentals once again fall into 15.0% alignment, corrections in the market now portray Class A vacancy nearly 6.0 10.0% percent lower than in Class B assets. 2010 2011 2012 2013 2014 Q1 2015 Source: JLL Research

Local economy continues to grow Annual percentage change of real GDP (chained 2009 dollars) Cincinnati’s economy continues to grow at a healthy pace, posting five consecutive years of real GDP growth since 2009 and outpacing growth at a 5% United States Cincinnati MSA national level between the years 2010 and 2012. Looking ahead, local real GDP is expected to expand by 2.7 percent during 2015, an increase of 60 basis points 0% from the previous year. Employment is also expected to rise. Job growth boomed over 2014, thanks largely to increased hiring in Cincinnati’s growing professional -5% and business services and industrial sectors. Currently, total non-farm 2009 2010 2011 2012 2013 2015

employment now sits at roughly 1.1 million. Forecast Source: JLL Research Est. 2014

Suburban submarkets remain hot Top 5 lowest vacancies by submarket (500,000 SF min. inventory) Cincinnati’s suburban submarkets compose the five lowest vacancies in the region and continue to see increasing activity – overall total vacancy for the West Chester suburbs fell 70 basis points, year-over-year. A number of companies with major Kenwood operations in the area announced significant investments over the past year in Cincinnati’s tightest submarkets, including AdvancePierre, AtriCure, Masters East Pharmaceutical and numerous others. The top five submarkets also comprise Fields Ertel/Mason over 450,000 square feet of current construction, 22.0 percent of which is preleased. Blue Ash/Montgomery 0% 5% 10% 15% 20% Source: JLL Research

2,164,533 19.1% 206,245 -0.8% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 52% Total preleased

JLL | United States | Office Outlook | Q1 2015 24 Cleveland

- Andrew Batson Senior Research Analyst, Great Lakes Vacancy compression is steady; rents diverging

Office-using employment sectors record steady gains in 2014 Office employment trends (12-month change) Continued employment growth will translate into moderately-increased office 15.0 Financial Activities Professional & Business Services Information Government demand in Cleveland in 2015. According to the most recent estimates from the BLS, total non-farm employment in Cleveland stood at ~1.0 million payrolls, 5.0 representing an annualized increase of 11,000 jobs or 1.1 percent. Meanwhile, unemployment decreased 1.3 percentage points year-over-year to 6.0 percent. -5.0 Office-using employment sectors have experienced stable employment expansion over the last year, recording an annualized net gain of 3,500 jobs -15.0 across the metro. Employment gains were led by the professional and business 2011 2012 2013 2014 Q1 2015 services sector, which added 3,400 jobs year-over-year. Source: JLL Research

Vacancy rates remain elevated, yet gradually contracting downtown Vacancy rates Total vacancy in Cleveland stands at 20.3 percent, one of only six metropolitan Suburban Urban areas in the U.S. with vacancy above 20.0 percent. Elevated as it may be, the 25.0% rate has decreased steadily from its recent high watermark of 22.0 percent in 2011. With no multi-tenant office construction currently underway or scheduled to break ground in 2015, any absorption gains will further tighten vacancy rates, 21.0% particularly downtown, where office-to-residential conversions are reducing the available inventory. Exactly how far vacancy rates fall downtown in 2015 remains 17.0% to be seen as Key Bank hands back several floors at Key Tower and 2011 2012 2013 2014 Q1 2015 BakerHostetler sheds up to 45,000 square feet through a planned move. Source: JLL Research

Class A and B asking rents are slowly, very slowly, diverging Asking rents Asking rents are not particularly volatile in Cleveland, in fact, one might call them unwavering. The average full service gross asking rent in Cleveland was $18.95 Class A Class B per square foot at the end of the first quarter, representing an increase of just $24.00 $0.18 per square foot over the last four years. We are however beginning to see a divergence of asking rents between classes. Class A asking rents averaged $20.00 $22.94 per square foot at the end of the first quarter, up $0.17 per square foot year-over-year. Oppositely, Class B asking rents averaged $17.36 per square foot, down $0.19 per square foot year-over-year. Over the coming year, Class A $16.00 2011 2012 2013 2014 Q1 2015 asking rents are forecasted to continue their gradual ascent, while Class B Source: JLL Research asking rents will likely remain flat.

0 20.3% 38,870 -0.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 25 Columbus

- Cody Brooks Research Analyst, Great Lakes Construction to breathe life into aging inventory

CBD vacancy outpaces suburbs at start of the year CBD vs. suburban vacancy Demand remains strong in the CBD as vacancy continued its slow decline over CBD vacancy Suburban vacancy the start of the year, falling to 12.9 percent, while outpacing the suburban market 22.0% 19.4% 20.0% by over 2.0 percent. Meanwhile, the suburbs saw a slowdown in activity, posting 17.7% 18.6% roughly 50,000 square feet of negative absorption. Continued interest in the CBD 18.0% 16.5% 16.0% is also evidenced by the increasing number of construction projects as of late. 15.2% 15.1% 16.0% 15.0% Columbia Gas recently moved into its newly-constructed, 286,000-square-foot 14.0% headquarters in the Arena District, development continues on the market’s 14.0% 15.5% 12.9% 14.4% largest project currently under construction at 250 S. High, while an additional, 12.0% newly announced project at the Columbus Commons will add roughly 125,000 2010 2011 2012 2013 2014 Q1 2015 square feet of Class A office space in the downtown area. Source: JLL Research

Rental rate growth on the horizon Average direct asking rent by submarket cluster (p.s.f) Average direct asking rents in the Columbus market continue to stabilize amid slowly declining vacancy rates. The average Class A direct asking rent in the Northwest $17.93 CBD currently stands at $19.23 per square foot, while the average Class A direct CBD $17.40 asking rent in the suburbs is $19.68 per square foot, a difference of $0.45 per square foot, or 2.3 percent. As demand continues to grow, particularly in North $17.11 conjunction with the delivery of competitive, modern space, incremental rental Northeast $16.65 rate growth will be soon to follow. A number of projects currently under construction will provide tenants with high-class, contemporary options and $16.00 $16.50 $17.00 $17.50 $18.00 $18.50 breathe life into an aging product inventory. Source: JLL Research

Columbus fosters business development Current expansion and attraction projects by sector Columbus continue to attract a number of new business, both domestically and Expansion projects Attraction projects internationally, as well as expand existing ones thanks to its highly competitive 40 business environment and well-educated population, among other factors. 30 Currently, there are 38 expansion projects and 86 attraction projects active in the 20 Columbus region. Active expansion projects are comprised of 87.0 percent 10 domestic businesses and 13.0 percent international businesses, while active 0 attraction projects are comprised of 45.0 percent domestic businesses and 55.0 Manufacturing Logistics HQ & Business Science and percent international businesses. Services Technology Source: JLL Research

484,000 14.4% -53,468 -1.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 38.2% Total preleased

JLL | United States | Office Outlook | Q1 2015 26 Dallas

- Walter Bialas Vice President, Research, Dallas Built-to-suit deliveries drive strong absorption

Job growth has accelerated over recent months, resulting in near First quarter job growth and absorption outpacing 2014 record- high absorption in early 2015 Like much of the country, there was a notable uptick in job growth in the early part of 2015, with Dallas recording an annual 140,800 net job gain. This job growth has been from a broad spectrum of industries and is expected to fuel January 2015 = 141K jobs 2014 strong demand for space for the foreseeable future. As a result of job growth, strong absorption moved the total vacancy rate to 19.0 percent. This vacancy =123K jobs rate is extremely low by historical standards. As vacancy declines, upward Annualized net job growth pressure on rates has continued, with average asking rates rising more than 5.0 percent over the past year. Source: BLS, JLL Research

Construction deliveries of large built-to-suits drive demand Pipeline expands, built-to-suit is significant component A majority of the 1.9 million square feet of positive net absorption in the first quarter was driven by the completion of State Farm’s and the Richard Group’s 8,000,000 built-to-suit projects. Neither company was a corporate relocation, which have 6,000,000 been a positive catalyst for the Dallas market, as both companies expanded their 4,000,000 employment and real estate footprints in Dallas. Of the current 7.2 million- square-foot construction pipeline, there are significant additional built-to-suits, 2,000,000 including Toyota, FedEx, 7-Eleven and Raytheon. Most of these projects are in 0 the early stages and won’t be delivered to the market until 2016 or 2017. 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 Source: JLL Research 2015

Class A properties continue to dominate leasing activity Despite price premium, Class A continues to pace Class B Despite higher rates and rate increases, tenants have been willing to lease and 4,000,000 expand within Class A product. To date, most tenants have opted to mitigate rate 3,000,000 increases through higher density instead of lower cost alternatives. With the 2,000,000 robust construction pipeline underway, this concentration on Class A space is 1,000,000 expected to continue for at least the next two years. 0 -1,000,000 2011 2012 2013 2014 Q1 2015

Class A Net absorption (sf) Class B Net absorption (sf) Source: JLL Research

7,177,086 19.0% 1,855,788 5.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 59.4% Total preleased

JLL | United States | Office Outlook | Q1 2015 27 Denver

- Amanda Seyfried Research Analyst, Denver Increasingly attractive to investors & employers

Construction levels buzzing and rental rates eye-popping Developers working feverishly throughout entire region As of the first quarter, 2.3 million square feet of office space are under construction—the roster of which is roughly split in half between the CBD and suburban markets. Nearly one-third of all inventory set to come online in the next two years will be located in LoDo. These projects are already commanding record-setting rents, with Downtown-area owners seeking, on average, nearly 15 years $47.00 gross per square foot. Boulder’s new development offers no discounts— Since Denver metro last had more office product just a few cents shy of CBD rents. Tenants seeking more affordable space in under construction new construction need to look nearer the metro’s southeast, where asking rents are currently 16.1 percent lower. Source: JLL Research

Attractiveness of CBD helping drive relocations to urban core More than just oil and gas firms make CBD new home Since 2011 (and excluding CenturyLink’s 1801 California move-out), new-to- 2.1% CBD tenants have increasingly represented a larger share of the market’s total 22.4% Education 2.2% Business services net absorption: in 2012, one of every five square-feet; in 2013, one of every three 2.6% Financial services square-feet; by 2014, seven of every 10 square-feet absorbed in the CBD were Energy 4.7% 17.1% occupied by businesses newly arriving from a suburban area or a different metro Manufacturing 8.4% Healthcare area. During this time, these migrated-to-CBD tenants have signed 23 full-floor High‐tech or larger leases – activity that has totaled 1.0 million square feet These Leisure & hospitality 10.6% 16.5% transactions have not been dominated by a single sector; instead, a wide variety Law firm of business types have selected the CBD as the most attractive option. Source: JLL Research 13.5% Information

Strong economic fundamentals make Colorado magnet for highly educated Higher education degrees in Denver and CO According to the U.S. Census Bureau, 37.0 percent of Colorado residents held 50% bachelor’s degrees or higher between 2009 and 2013, with only Washington D.C. Bachelor's degree 40% Graduate degree and Massachusetts outranking the Centennial State. The City and County of 16.7% Denver is home to an even greater percentage of highly-educated residents; 30% 13.4% 10.8% 42.9 percent hold a bachelor’s degrees or higher. Denver’s total nonfarm payrolls 20% 26.2% have expanded at a rate not seen since 2000, which helped solidify its top-spot 10% 23.6% 18.1% national ranking for in-migration among college-educated workers. The attraction 0% to Colorado and Denver will remain strong and steady, as it has for the past City & County of Denver Colorado United States three years—a time during which nearly 90 people daily have relocated here. Source: JLL Research

2,340,203 13.8% 28,729 -0.4% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 32.7% Total preleased

JLL | United States | Office Outlook | Q1 2015 28 Detroit

- Andrew Batson Senior Research Analyst, Great Lakes Further vacancy compression, rising rents

Jobs growth tapered in 2014, but remained in positive territory Office employment trends (12-month change) Job growth within the office-using employment sectors subsided toward the end of Financial Activities Professional & Business Services Information Government 2014, but overall employment growth remained above the national average, which 25.0 will translate into continued increased office demand over the coming year. According to the most recent estimates from the BLS, total non-farm employment 10.0 in Detroit stood at ~1.9 million payrolls, representing an annualized increase of 41,600 jobs or 2.2 percent. Meanwhile, unemployment decreased 3.2 percentage (5.0) points year-over-year to 6.3 percent. Office-using employment sectors recorded an (20.0) annualized net gain of 12,500 jobs. Gains were led by the professional and 2011 2012 2013 2014 Q1 2015 business services sector, which added 12,100 jobs year-over-year. Source: JLL Research

Office demand is compressing vacancy rates across most submarkets Office vacancies Total vacancy in Detroit was 24.4 percent at the end of the first quarter, second Suburban CBD highest in the country (New Jersey took the top spot at 25.3 percent). Yet, 33.0% substantial absorption gains over the last four years have reduced the rate from a high watermark of 32.9 percent in 2010. Since that time, more than 4.8 million 27.0% square feet of office space has been absorbed by local companies growing operations and expanding footprints. Office demand growth has favored 21.0% downtown, but has not been limited to it. As a result, vacancy rates are 15.0% compressing across most submarkets and are forecasted to continue to 2011 2012 2013 2014 Q1 2015 decrease over the coming year as the region records further demand growth. Source: JLL Research

Landlords slowly begin to push rents as market fundamentals tighten Asking rents Detroit’s average asking rent recorded year-over-year declines for much of the last decade, a product of the region's elevated vacancy rate and negotiating $24.50 Class A Class B leverage resting firmly with tenants. However, with significant demand gains in recent years and steadily decreasing vacancy rates, landlords have begun to $21.50 push rents. Class A asking rents averaged $22.95 per square foot at the end of $18.50 the first quarter, up $0.65 per square foot or 2.9 percent year-over-year while Class B asking rents averaged $16.98 per square foot, up $0.24 per square foot $15.50 or 1.5 percent year-over-year. Further rent increases are forecasted over the 2011 2012 2013 2014 Q1 2015 coming year, particularly downtown and in other key submarkets where demand Source: JLL Research is concentrated.

273,000 24.4% 557,459 1.6% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 93.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 29 East Bay

- Hailey Harrington Research Analyst, Oakland - East Bay Second-tier submarkets benefit from core tightening

Large blocks diminishing with some potential relief in sight Large blocks available in Class A, B & Flex space in the East Bay Large blocks of space to accommodate growing companies are few and far between. There are currently four 100,000-square-foot and larger blocks of 100,000+ 4 available space in the 680 Corridor compared to a year ago there were nine 75,000 - 99,999 100,000-square-foot options. However, consolidation of corporate footprints may 8 be key in large block relief as dominant market players look to utilize space 50,000 - 74,999 1 efficiently by shrinking footprints. In addition, companies like Safeway are 40,000 - 49,999 1 evaluating their long-term real estate needs post buyout and could potentially 30,000 - 39,999 bring multiple 100,000-square-foot blocks to the market. And, San Francisco 6 corporate users continue to look to push back-office functions to the Tri-Valley. Source: JLL Research

Tri-Valley rising rents parallel with strong employment gains North 680 vs. South 680 Rental Rates Pricing differentials can be seen throughout the East Bay, with accelerated increases in submarkets that house growing industry sectors. Strong $3.00 employment gains in healthcare and professional services are translating to $2.50 robust Tri-Valley occupancy gains and rental rate increases. Rent growth in the

North 680 Corridor has been more tempered but landlords will continue to push $2.00 rents as long as tenant demand remains strong. Currently there are more than North 680 South 680 one million square feet of active requirements in the 680 Corridor. $1.50 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Source: JLL Research

Second tier submarkets benefit from spillover as core tightens Average asking rents across East Bay Tightening vacancy and rising costs in core submarkets have pushed companies Downtown Walnut Creek $3.13 seeking affordable quality space to the second tier submarkets. As a result, Pleasant Hill BART $3.08 second tier submarkets such as: Livermore, Concord, and San Ramon-other Pleasant Hill $2.85 LaMorinda $2.84 experienced an increase in leasing activity this quarter driven by small-size FIRE Pleasanton-North $2.60 San Ramon-Bishop Ranch $2.48 users. In the North 680 Corridor, Concord is positioning itself as a relative Alamo/Danville $2.41 bargain with access to the same amenities neighboring Downtown Walnut Creek Dublin $2.31 Pleasanton-South $2.30 and Pleasant Hill BART offer at half the price. Second tier submarkets will Concord $2.14 continue to benefit from spillover in the next 18 to 24 months ahead as core $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 submarkets see little slowdown. Source: JLL Research

0 13.8% 93,413 8.0% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 30 Fairfield County

- Kevin Interlicchio Research Analyst, Fairfield County 2015 outlook brightens as leasing increases

Suburban submarkets continue growth during first quarter Percentage of stock absorbed Despite the national trend of companies moving toward urban locations, the suburban markets continue to outperform Stamford in Fairfield County. The Norwalk/ I-95 -0.02 Greenwich CBD had its strongest quarter in nearly two years in terms of leasing Route 7 Corridor 0.01 activity and absorption. The relocations of AMG and Security Benefit Life to 600 Route 8/Shelton 0.02 Stamford CBD 0.02 Steamboat Road helped drive a large portion of leasing activity in the submarket. Greenwich CBD 0.05 In addition, Sikorsky Aircrafts’ 121,041-square-foot sublease led to nearly 115,000 square feet being absorbed in the Route 8 Corridor. Competitive rental -3% -1% 1% 3% 5% 7% rates for buildings comparable in quality and amenities to those of the Stamford CBD have generated recent requirements in the suburban markets. Source: JLL Research

Leasing increases in Fairfield County Increase in leasing velocity Fairfield County saw its leasing activity return to normal levels after an extremely slow fourth quarter of 2014. The repositioning of Merritt 7 in the Route 7 Corridor paid dividends as another 103,361 square feet were leased in the first quarter. With financial services inking seven out of eight deals during the first quarter, Greenwich CBD maintained is reputation as a finance hub. The largest deal of 27.0% the quarter occurred in the Stamford North/Merritt Parkway submarket, where Increase in Fairfield leasing velocity Sychrony Financial signed a 312,000-square-foot lease at 777 Long Ridge Road. This marked the largest deal in the market since early 2013. Greenwich CBD and from last quarter Route 7 will continue to lease space at an market-highs based on current touring activity. Source: JLL Research

Large blocks of available contiguous space drive vacancy Large blocks of contiguous space available (>25,000 sf) The high vacancy rate of 26.5 percent in the Stamford CBD is being driven by large blocks of unoccupied space. There are currently 22 blocks of contiguous 8 Danbury/Bethel space of 25,000 square feet and greater available in the submarket. As job cuts Greenwich CBD continue at UBS and RBS, this number is expected to increase in coming months. 5 22 Norwalk The impact of these larger blocks of space has a greater effect in smaller markets such as Norwalk where the vacancy is nearly 30.0 percent. Additionally, 8 Route 8/Shelton these blocks of space could remain vacant for a prolonged period of time, as they 2 Stamford are not readily adaptable to current tenant requirements. Source: JLL Research

227,937 22.1% -84,744 -1.7% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 57.6% Total preleased

JLL | United States | Office Outlook | Q1 2015 31 Fort Lauderdale

- Marc Miller Research Manager, Florida Fort Lauderdale Investment activity and expectations of a tight market

First significant office product since 2009 is under construction. Construction activity claws out of long drought With the market on solid ground, Duke Realty broke ground on their first of four new 145,000-square-foot office buildings. With Class A suburban vacancy at 200,000 13.3 percent, 350 basis points below the five-year average, and rents at a four- 150,000 year high, there is positive sentiment surrounding new construction. The new Square Feet complex, Pembroke Pointe, will bring approximately 580,000 square feet to 100,000 market, with the first building specifically targeting full-floor users and corporate headquarters. Given the project’s location and submarket, this strategy will likely 50,000 be successful. This is the first notable office development in Broward since early 0 2009 and reports indicate that there may be another speculative development 2009 2010 2011 2012 2013 2014 2015 project in the pipeline in Sawgrass Park. Source: JLL Research

Absorption numbers low for the quarter, but gains expected ahead Absorption as a percent of total RBA Absorption gains were quiet to start 2015, as gains from Bayview Financial’s CBD Absorption Suburban Absorption occupancy of 62,000 square feet were offset by UnitedHealthcare closing their 4.0% office, among other smaller move-outs. However, several sizable leases were 2.0% signed in suburban markets toward the end of 2014 and are expected to take 0.0% occupancy over the next few months. Also, as the market continues to tighten, specifically downtown, the lack of move-ins is not necessarily due to lack of -2.0% -4.0% interest in the market, rather limited availabilities. While leasing activity was 2009 2010 2011 2012 2013 2014 2015 down this quarter, activity among touring tenants remains strong. Source: JLL Research

Expectations for a tightening market Available blocks in the CBD With only four Class A blocks available larger than 20,000 square feet in the CBD, the limited large block availabilities are filling up quickly. At the same time, Class A Class B rents are growing as they are up to $34.07 per square foot, a 5.5 percent 20K+ increase year-to-date. As the CBD continues to tighten, rents are expected to 10K to 20K increase more as the market shifts further toward a landlord-controlled environment. Among the Trophy set, where vacancy is under 9.0 percent, full 5K to 10K service rents have reached a record high of $43.39 per square foot, which is nearly 5.0 percent higher than this time last year. 0 5 10 15 20 25 Source: JLL Research

143,565 15.4% 7,156 2.8% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 32 Hampton Roads

- Geoff Thomas, Senior Research Analyst, Richmond Limited new leasing and expansions may offset consecutive years of positive net absorption

Investment sale volume falters in the first quarter of 2015 Historical office investment sales volume (sales over $2.0 million) The inherent risks from a market tied to defense spending and poor rental rate 182 growth have been the most cited concerns to investors searching for yields in $200 secondary and tertiary markets. While multifamily and retail investment sales $150 109 107 remained strong in Hampton Roads, traditional office sales (excluding medical) $100 have struggled to gain ground and return to prerecession levels. Additionally, 53 64 55 transactions have been more opportunistic rather than core institutional-grade $50 28 Dollar volume (M) Dollar volume 10 4 - trades, which compressed per-square-foot values to $81 per square foot in 2014, $0 a far cry from the prerecession average of $135 per square foot (2006-2008). 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: JLL Research

Leasing volume still driven by in-market relocations and renewals Office leasing volume by deal type (deals over 5,000 s.f.) New-to-market leases have been scarce, but the current tenant base has 5,557 managed to keep net absorption positive since 2008 with in-market expansions. Relocation within market While relocations and renewals contributed the bulk of leasing volume in the first 27,050 quarter of 2015, overall volume fell by 42.9 percent compared to the first quarter Renewal of 2014 and total annual volume has gradually decreased per year since 2012. 31,588 With net absorption accounting for 0.1 percent of the total inventory in 2014 and 104,086 Expansion in market less than 0.01 percent the first quarter of 2015, Hampton Roads may not be able Expansion in building to sustain notable occupancy gains for the remainder of the year. Source: JLL Research

Class B vacancy has yet to stabilize Class A vacancy vs Class B vacancy Flight-to-quality, downsizes and limited new lease volume have perpetually inflated Class B vacancy since 2006 and this segment of the market may remain 20% 18.9% soft until Class A fundamentals tighten further. In a cost-conscience market, 15% 10.6% 11.8% rising Class A rates and limited Class A availabilities should eventually create 10% spill-over demand into lower segments, but in Hampton Roads there is a Class A 8.0%

Vacancy rate 5% significant quality gap between these two asset classes. With an average building Class B age of 15.5 years for Class A and 30.1 years for Class B, many tenants cannot 0% make the jump to lower-quality space options without significant tenant 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 improvement allowances. Source: JLL Research

50,000 15.4% 1,284 0.4% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 33.3% Total preleased

JLL | United States | Office Outlook | Q1 2015 33 Houston

- Graham Hildebrand Research Manager, Houston Oil price impact begins to shift office market

Energy headlines impact office space 2.5 MSF of Sublease space arrives in Q1 2015 Following multiple oil and gas companies announcing cuts in capital spending budgets and planned layoffs, Houston’s office market began to feel the brunt of CBD the impact in the first quarter. As large scale tenants such as ConocoPhillips, Katy Freeway Westchase Statoil, Sasol, and BP reduced their footprint in certain submarkets, over 2.5 274,488 Bellaire 882,609 million square feet of full-floor sublease space came online within the first three Greenway months. While some of this sublease space was expected roughly half came as Greenspoint 398,907 a result of the cuts in upstream companies’ capital budgets. Additionally, as Galleria small and mid-size E&P companies struggle to repay debt obligations and are NW Woodlands forced to declare bankruptcy, additional office space will come to market through 663,971 those proceedings or the increase in M&A activity that is expected in 2015. Source: JLL Research

Demand remains within pockets of Houston Q1 2015 Class A Absorption for 8 major submarkets While much of the activity and headlines in the first quarter reinforced the notion that Houston has begun to shift toward a tenant-favorable market, there 300,000 164,245 161,508 153,111 210,393 150,000 33,371 remained a steady demand among the more tenant-diverse submarkets. In the 0 first quarter leasing velocity remained on par year-over-year as more than -150,000 (17,421) -300,000 900,000 square feet of transactions signed. While velocity slowed in energy- (239,516) -450,000 dominant submarkets such as Katy Freeway and Westchase submarkets with a (369,543) diverse tenant base such as Greenway Plaza, Galleria, and the CBD maintained active tenants in the market and will continue to do so even in a leaner 2015. Source: JLL Research

Construction pipeline slows significantly Projects commencing construction in Q1 2015 Much of the discussion within the Houston market in the past 24 to 36 months has centered around the explosive growth of under construction and proposed buildings. As oil prices have continued to fall, development has come to a rapid halt within the market. While there is still in excess of 12.8 million square feet of space under construction, the next cycle of speculative development is not 389,700 SF anticipated for 18 to 24 months. The combination of tighter construction financing West Memorial Place Phase II was the only 100,000 SF or and slower than anticipated job growth has given developers and investors greater building to begin construction in Q1 2015 pause in Houston. Source: JLL Research

12,833,724 14.8% 166,916 -4.6% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 41.2% Total preleased

JLL | United States | Office Outlook | Q1 2015 34 Indianapolis

- Mike Cagna Senior Research Analyst, Indianapolis Investment occurs in Indianapolis office market

Diversity in Indianapolis office market Most active office sectors currently in the market Indianapolis is enjoying solid activity across a number of office sectors. Healthcare, business services, high-tech, financial services and law firms are the Healthcare 4.4% most active segments currently in the market for office space within the Business Services 5.9% Indianapolis MSA. These five sectors accounted for more than 60.0 percent of the leasing activity that occurred throughout the first quarter. They also account High-tech 21.6% for nearly half of tenant requirements still actively looking for office space in Financial Services 7.1% the market. Law firms 9.1% Source: JLL Research

New construction project breaks ground Recent office completions New speculative office space is coming to the Keystone submarket. PK Partners recently broke ground on River North at Keystone. The mixed-use project will 300,000 have a 100,000-square-foot Class A office building, a 190-unit luxury apartment 212,500 200,000 171,799 complex and a parking garage. Roughly 30,000 square feet of the office space is 104,699 already pre-leased to the Gene B. Glick Co., a local real estate management and 100,000 development firm. Several other companies are interested in leasing space at River North and it’s likely that the building will be at least 50.0 percent leased by 0 the time it’s finished in 2016. Meanwhile, Duke Realty is wrapping up a 112,500- 2013 2014 2015 square-foot expansion for Interactive Intelligence in the Northwest submarket. Source: JLL Research

Office investment activity continues throughout Indianapolis Several office properties changed hands during the first quarter Investors continue to eye Indianapolis as several significant transactions closed this quarter. Onward Investors purchased College Park Plaza, a 181,000-square- foot, Class A building in the Northwest submarket. Meanwhile, the Century Building, a 154,000-square-foot Class B building located in downtown $32 million Indianapolis sold to Hendricks Commercial Properties. Finally, Zotec Partners Total dollar amount of office investment sales that purchased Fidelity Tower II, a 72,000-square-foot, Class B property in the North Meridian/Carmel submarket. occurred in Indianapolis so far this year

Source: JLL Research

212,500 17.4% -36,346 7.0% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 67.0% Total preleased

*Significant alterations to our tracked inventory and methodology were made in the first JLL | United States | Office Outlook | Q1 2015 35 quarter, rendering statistical results that diverge from the recent historical trend. Jacksonville

- Drew Gilligan Research Analyst, Central Florida Continued interest in Butler Boulevard and Jax CBD

Large tenants are seeking space in excess of 50,000 square feet Large blocks of Class A space limited Jacksonville remains a popular destination for back-office locations, especially in 100k+ 3 the banking and financial services industry. There are currently two unnamed Available large blocks groups seeking 100,000 square feet of office space for their back-office 70k-100k 2 operations. A number of other tenants in the market are looking for space larger 50k-70k than 50,000 square feet, primarily in downtown Jacksonville and Butler 40k-50k Boulevard, but are finding their options limited. With declining vacancy over the 30k-40k 4 past few years, large blocks remain in high demand. There are currently only 20k-30k 8 three viable spaces for companies seeking space larger than 100,000 0246810 square feet. Source: JLL Research

Local economy continues to grow; unemployment outpacing the nation 12-month growth of each industry in Jacksonville MSA Jacksonville’s unemployment rate has dropped 60 basis points over the past year to 5.2 percent as companies continue to grow and strengthen their positions Construction 7.1% Manufacturing 1.8% in the local economy. Local home prices are on the rise and Jacksonville saw a Trade, Transportation, and Utilities 1.3% record number of tourists in 2014. Shahid Khan, owner of the Jacksonville Information -2.2% Jaguars, continues to invest in the city to elevate the city to a higher national Financial Activities 0.2% profile. He hopes to become the master planner of 80 acres of city-owned Professional and Business… 3.6% property, enhancing the urban core. With the strengthening economy and Education and Health Services 2.8% Leisure and Hospitality 5.2% success of financial groups moving their back office operations to the city and Government 1.3% surrounding suburbs, we expect interest to continue to grow for office space. Other 5.2% Source: JLL Research -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

Rent growth continues in submarkets with lack of construction activity Butler Boulevard rents approaching record highs, but CBD lags Rental rates have increased 5.9 percent and 2.8 percent over the past year in $22.50 Butler Boulevard and Jacksonville CBD, respectively. Butler Boulevard remains Q1 2015 Pre-recession high $22.00 one of the most popular locations for companies and vacancy is approaching an $21.26 all time low. As a result, rental rates are approaching pre-recession levels. $21.50 $21.06 $21.09 Jacksonville CBD has not shown the growth that Butler Boulevard has, but $21.00 $20.59 continues to be a popular location for tenants. Vacancy rates continued to $20.50 decline, dropping 130 basis points from last quarter. Replacement costs remain $20.00 high, creating a barrier for construction but with demand expected to continue $19.50 groups are considering build-to-suit opportunities. $19.00 Source: JLL Research Jax CBD Butler Boulevard

0 17.2% -45,717 3.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 36 Kansas City

- Gary O’Dell Vice President, Brokerage Kansas City Kansas City continues to recover The nuanced recovery continues Overall - Class A Vacancy Rate Class B space led the charge in the first quarter, with nearly 70,000 square feet of positive net absorption (0.2 percent of stock). Over the past 12 months, Class B 20.0% direct asking rents were up 2.8 percent (to $17.08 per square foot), and Class A 15.0% direct asking rates were up 0.9 percent (to $21.24 per square foot). Across both 16.9% 15.7% classes, landlords are holding more firmly to asking rents and have been less 14.0% 10.0% generous with free rent and tenant improvement allowances. The South Johnson 12.3% 11.9% 12.2% 10.6% 10.1% County submarket continues to lead the recovery as demand for Class A space 5.0% remains high, but new supply has been introduced with Sprint’s placing 228,000 square feet of its campus space on the market in the first quarter. While this new 0.0% availability has negatively impacted the vacancy statistics for the South Johnson 2008 2009 2010 2011 2012 2013 2014 YTD County submarket, activity remains brisk. Source: JLL Research

Developers are active and gearing up for more South Johnson County - Class A Vacancy Rate After extended periods of activity solely driven by build-to-suit demand, the development community is more actively pursuing multi-tenant office projects. There 20.0% is currently over 1.3 million square feet of development projects that have secured 15.0% 17.7% entitlements and would be able to break ground in 2015 if anchor tenants are 16.2% secured. The projects are concentrated in the South Johnson County and County 13.8% 13.6% Club Plaza submarkets. A steady theme among these projects is a heavy emphasis 10.0% 10.4% on quality of life with a mixed used component designed to attract and retain talent. 9.0% 5.0% Additionally, developers are extremely active in overhauling functionally obsolete 6.3% Class C office buildings to Class A space on both a speculative and preleased basis. 4.9% 0.0% This has served the office market in two ways by both removing less desirable 2008 2009 2010 2011 2012 2013 2014 YTD vacancy from the lower building classes and increasing supply in the tightening Source: JLL Research Class A market.

Office Investment sales activity picking up CBD – Class A Vacancy Rate There was a strong uptick in the amount of stabilized office investment sale offerings brought to market in the first quarter. Asset owners, who have delayed dispositions 30.0% over the past several years waiting for market conditions to improve, are waiting no 20.0% longer. The position of sellers has improved for three reasons: Kansas City’s 21.6% 19.1% 10.0% 19.0% 17.5% 17.7% improved standing for investors seeking yield that have been “boxed out” of the 15.6% 14.4% primary markets, leases that signed during periods of heavy tenant advantage are 11.0% 0.0% beginning to roll, and improvement in the fundamentals of the office market are 2008 2009 2010 2011 2012 2013 2014 YTD enhancing asset value. Source: JLL Research

67,924 15.5% -16,160 2.8% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 60.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 37 Long Island

- Margaret Heavey Senior Research Analyst, Long Island Technology sector driving market activity

Technology leads Nassau and Suffolk office requirements 2015 Nassau and Suffolk County tenants in the market by industry The technology industry is expected to remain among the most active sectors in 4.3% 3.6% 1.7% 2015, as employment in the thriving industry increased 1.3 percent year-over- Technology year. The software segment was active in the first quarter, representing 6.8% Healthcare approximately 25.0 percent of leases signed. Openlink renewed a 95,000- 7.9% 29.0% Financial Services Banking square-foot lease at RXR Plaza, keeping its headquarters in Central Nassau. Law Firms Verint is reportedly moving its 49,000-square-foot headquarters in Melville, 9.6% Retail Trade Western Suffolk from 330 South Service Road to 175 Broadhollow Road. Kemp Government 10.0% Business Services 27.0% Technologies committed to a 13,000-square-foot lease at 3 Huntington Entertainment Quadrangle in Melville. Dealertrack Technologies’ new built-to-suit headquarters in North Hills, Western Nassau will be completed in the first quarter of 2016. Source: JLL Research

New leases drive first quarter leasing activity Nassau and Suffolk large leases by lease type In 2015, four of the largest leases signed were relocations within the market, compared to only one new lease signed in the fourth quarter of 2014. This New indicates positive momentum in the office market, as occupiers are willing to 1 1 2 consider the additional cost of relocation. Publishers Clearing House is moving Renewal its corporate headquarters from Western Nassau to 165,000 square feet at 300 Q4 2014 Q1 2015 4 Jericho Quadrangle in Jericho, Eastern Nassau, due to transit accessibility. Renewal/ Exclusive Group Travel expanded and signed a 21,000-square-foot lease at 999 Expansion 2 Stewart Avenue in Bethpage, Eastern Nassau. Eastern Nassau is the most 3 expensive Class A submarket, with average rents over $36.00 per square foot. Source: JLL Research *Leases 20,000 square foot and greater

Transit hub development is forecasted to increase Nassau and Suffolk planned transit hub development projects As many occupiers desire to relocate to buildings within walking distance of a train station, transit hub development will increase. Wyandanch Village, a 60 acre multi-use transit hub development, is currently under construction in Western Suffolk. A built-to-suit 101,025-square-foot Class A office building will break ground in 2015 at 20 Station Drive, Wyandanch. Additionally, the historic 611,000 s.f. East Side Access Project will connect the Long Island Rail Road (LIRR) with Grand Central Terminal in Manhattan by 2020. The East Side Access Project will Total square feet of transit-hub projects planned for also expand the 50 acre Ronkonkoma Hub in Brookhaven, Central Suffolk, which development includes 360,000 square feet of office space. LIRR’s growth is projected to generate additional development over the next few years. Source: JLL Research

368,806 17.0% 64,840 1.5% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 78.6% Total preleased

JLL | United States | Office Outlook | Q1 2015 38 Los Angeles

- Henry Gjestrum Senior Research Analyst, Los Angeles Creative product bolsters market performance

Assets continue to trade at or near-record prices Sales velocity remains high as values continue to soar Sales volume remained elevated as a number of high-profile assets hit the market. Eight properties larger than 30,000 square feet traded hands at an Westside $471 average price per square foot of $504, most notably the 100 percent leased, CBD $93 creative asset The Reserve. The Reserve, a converted post office distribution center in Playa Vista, serves as the market example for multi-tenanted creative LA North $89 office conversions. The 399,373-square-foot complex was purchased by Invesco Tri-Cities $53 Real Estate for $316 million, or $791 per square foot. Additionally, the Beats by Dre Headquarter Complex, a three-building, 127,447-square-foot, fully-occupied South Bay $50 Total sales volume in millions project, which IDS Real Estate Group purchased for $847 per square foot. $0 $200 $400 Source: JLL Research

Creative redevelopment is taking hold in the South Bay South Bay creative redevelopments command rental premium As has been the case in the neighboring Westside market for some time, the $3.50 creative office trend is now trickling south into markets like El Segundo. Due to $3.00 18% great success in Santa Monica, Venice and most recently, Playa Vista, owners $2.50 premium $2.00 and developers in El Segundo have embraced this new office environment and Creative $1.50 Conversion are working to provide product and attract tenants to move southward. And it $1.00 appears that the appetite for creative product transcends industry types. Users Average Asking Asking Rates Average Rental from healthcare to trade and imports to fashion and apparel have all recently 2007 1Q 2007 3Q 2008 1Q 2008 3Q 2009 1Q 2009 3Q 2010 1Q 2010 3Q 2011 1Q 2011 3Q 2012 1Q 2012 3Q 2013 1Q 2013 3Q 2014 1Q 2014 3Q 2015 1Q signed on to pay the average 18 percent rental premium to occupy El Segundo’s El Segundo Rents Creative Rents new creative product. Source: JLL Research

Rental rates vary wildly throughout Los Angeles Urban markets command significantly higher rents Average asking rental rates increased by 6.7 percent, year-over-year for the market as a whole. That said, there remains a large pricing differential between 37% submarkets. Markets that are home to growing industry sectors, namely 20% technology and creative media, continue to see the largest rental gains. We expect to see forthcoming gains in those markets, which have actively embraced the creative office trend, such as pockets in the South Bay and the Hollywood ‐3% ‐18% area of the Mid-Wilshire market. Rent growth in Downtown, Los Angeles North ‐27% ‐27% ‐23% SGV Mid‐Wilshire South Bay LA North Tri‐Cities CBD Westside and the Tri-Cities, with a concentration of traditional industries, should remain more tempered. Source: JLL Research

2,069,739 16.2% 48,422 6.7% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 38.1% Total preleased

JLL | United States | Office Outlook | Q1 2015 39 Miami

- Roberta Steen Senior Research Analyst, Miami Class A vacancy declines 23% in Suburbs, 14% in CBD

Positive employment picture reflects local market activity Industry sector job growth continues to aid office fundamentals Annual job growth in the state has exceeded the nation’s rate since early 2012. 7.0% Boding well for the office sector, professional and business services (PBS) led all 6.0% industries in Florida during January 2014 to January 2015 with Miami (and 5.0% Orlando) leading the state during this period with the most job gains at nearly 4.0% Miami 3.0% 43,000 each. Miami’s unemployment rate hovered under 6.0 percent for the last 2.0% Florida few months – rates not seen since late 2008. In addition to job gains among 1.0% office-using industries, on-going intense development activity is fueling Miami’s 0.0% construction sector, which grew over 9.0 percent with the specialty trade PBS Financial Ed/Hlthcare contractors category increasing by nearly 14.0 percent during the same Source: JLL Research Office-using employment sectors, 12-month period. Percent change Jan 2014 – Jan 2015

Overall market performance: pricing up, vacancy down Class A dominates absorption activity, lowers vacancy levels Miami’s direct vacancy fell to 14.1 percent, the lowest recorded since midyear 2009 while asking rates remained above $33.00 p.s.f. for the last two quarters – 20.0% the highest averages since late 2010. Quoted rates were up over the last 12 15.0% months for both the CBD and Suburbs with vacancy moving in the opposite 10.0% CBD direction – except for Class B product in the CBD. 2015 started off on the same SUBURBS general course of landlord favorability with sustained pricing confidence. Rental 5.0% % rate abatements and concessions do remain available but are not so generous. Vacant 0.0% Average direct Class A rental rates in the CBD stood at $42.00+ per square foot 2015 Q1 2014 Q4 2014 Q3 2014 Q2 2014 Q1 – nearly $8.00 per square foot more than its Suburban counterpart. Source: JLL Research

Flight to quality + Miami’s global appeal = room to grow on the CBD 2010 – average at each Trophy asset fell below $40.00 p.s.f. pricing front Now ranked and recognized among the world’s top global markets, demand 20 CBD Competitive Trophy Assets exists for quality specific space in the CBD – offering tenants and residents a 18 Existing and 2 Under Construction glamorous, international waterfront metropolis accompanied by a soon-to-be extensive and luxury retail/entertainment base. Relative to other world class 15 or 75% now have minimum quotes at $40.00 p.s.f markets, Miami’s urban office pricing is comparatively inexpensive. As such, the 12 or 60% now have quotes at or above $48.00 p.s.f. last year ending February 2015 saw Trophy landlords raising CBD rates by as 9 or 45% now have quotes at or above $50.00 p.s.f. much as a low of 9.0 percent and ranging up to 23.0 percent. One of the few remaining Downtown Penthouses witnessed a 30.0 percent bump. CBD space Source: JLL Research now under construction is being quoted at $50.00 p.s.f.

303,103 14.4% 105,535 4.0% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 36.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 40 Milwaukee

- Abel Balwierz Senior Research Analyst, Minneapolis Repositioning reduces Downtown vacancy

Economic news a mixed bag Total jobs vs. unemployment rate

Milwaukee’s unemployment rate rose 60 basis points in the most recent data 800,000 12.0% unemployment rate from the BLS, and now stands at 5.6 percent. Year-over-year job growth was 0.9 780,000 total jobs 10.0% 760,000 percent. Wells Fargo recently announced that it will close its West Parkland 8.0% 740,000 Home Lending Service Facility in northwest Milwaukee in July and cut 1,000 6.0% 720,000 Milwaukee-area jobs. On a more positive note, Milwaukee’s urban core has been 4.0% 700,000 successful in attracting new office tenants, including marketing firm Versant, 680,000 2.0% healthcare IT company ConsortiEX, and global manufacturing company Gardner 660,000 0.0% Denver, which relocated its headquarters from Wayne, Pa to 222 E. Erie Street in the 3rd Ward. Source: Bureau of Labor Statistics

Milwaukee streetcar a potential driver for downtown Milwaukee Milwaukee streetcar funding sources A controversial $123.9 million streetcar project was approved by the Milwaukee In millions of $’s Funding Sources Common Council in February. The project, which could commence in late 2015 $60 would rely on federal funding and local TID funding. While it has its opponents, there is also widespread support for the project and its potential economic $40 $54.9 benefits. Johnson Controls Inc., which is considering a 50-story 1.1 million- $20 $9.7 $31.0 square-foot build-to-suit project near the lakefront has indicated that the streetcar $10.0 $18.3 $0 project would be a positive factor in its ultimate decision. The proposed initial Federal: ICE Federal: TIGER Local: Cathedral Local: Erie Local: East route would run from the Milwaukee Intermodal Station to the lakefront through Funding application Square TID Street TID Michigan TID parts of the Third Ward and Downtown East. Source: City of Milwaukee

Office to multifamily conversions reduce Downtown West vacancy Vacancy by submarket Despite slightly negative absorption, the Downtown West vacancy rate declined from 27.3 percent in the fourth quarter of 2014 to 19.5 percent in the first quarter 50% 41.6% 28.9% 31.3% of 2015. Conversions of two specific buildings from Class B office to multifamily 24.0% 21.4% 25% 17.9% 19.5% 18.9% 10.2% 13.3% were largely responsible for this. The first is the vacant former Blue Cross Blue 6.0% Shield office building, a 249,334-square-foot building at 401 W. Michigan St. The 0% second is the 131,660-square-foot office building at 801 W. Michigan Street, which was more than 50 percent vacant. Developers are repositioning functionally obsolete office buildings into alternative uses which is taking pressure off of the downtown office market and uncovering value for obsolete office product. Source: JLL Research

358,000 19.0% -2,832 4.0% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 46.9% Total preleased

JLL | United States | Office Outlook | Q1 2015 41 Minneapolis-St. Paul

- Abel Balwierz Senior Research Analyst, Minneapolis Minneapolis CBD attracting new tenants

Effects of Target Corp. layoffs remain unclear Total jobs vs. unemployment rate Unemployment in the Twin Cities rose 90 basis points in the most recent data 1,900,000 unemployment rate Peak: 10.0% from the BLS, and now stands at 4.1 percent, fourth lowest among large metro 1,854,911 jobs 1,850,000 total jobs 8.0% areas. Target Corp., the largest employer in the Minneapolis CBD, recently laid 1,800,000 6.0% off 1,700 workers and eliminated 1,400 unfilled positions in the Twin Cities. While 1,750,000 4.0% this is certainly a significant setback, it remains unclear as to what the full effects 1,700,000 will be on the downtown office market. Target Corp. owns its 1.9 million-square- 1,650,000 2.5% 2.0% foot headquarters on Nicollet Mall and has long-term leases for more than 1.2 1,600,000 0.0% million square feet combined at two Class A multi-tenant buildings. Source: Bureau of Labor Statistics

I-394 corridor sees strong rate growth Average gross asking rates The West continues to be one of the most highly-demanded and well-balanced submarkets in the Twin Cities with low vacancy rates for both Class A and Class Class A Class B $32 $29.96 $29.63 B properties. This has translated into rising asking rates as landlords recognize $27.15 $28 that options are limited, particularly for large users. Average gross asking rates $24.48 $25.19 $25.07 $24.75 $23.04 $23.30 rose 3.3 percent overall during the first quarter, and now average $29.63 per $24 $22.23 $20.27 $19.61 square foot for Class A properties and $24.48 per square foot for Class B. The $20 $18.08 $18.32 combination of limited large options, forecasted increases in construction costs $16 and likely upward pressure on interest rates could potentially spur new Minnneapolis CBD West Southwest Southeast Northwest Northeast St. Paul CBD development along I-394 as occupiers look to lock in longer-term leases sooner rather than later. Source: JLL Research

Minneapolis CBD is currently an active and fluid market Relocations to Minneapolis CBD The Minneapolis CBD has been successful of late in attracting new tenants as three notable lease deals totaling more than 70,000 square feet were completed SF 70,216 during the first quarter which will relocate suburban tenants to the Minneapolis 80,000 67,782 54,754 CBD. The increased demand means that quality availabilities are currently 60,000 45,000 seeing an increase in competing deals, requiring tenants to react more quickly. 40,000 21,400 While less desirable office space hasn’t seen the uptick in activity, more 20,000 desirable availabilities oftentimes have multiple proposals out at a time, creating 0 increased competition among tenants. This is encouraging news for landlords, Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 particularly as the market digests the recent Target layoffs. Source: JLL Research

916,560 16.5% 341,357 2.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 53.2% Total preleased

JLL | United States | Office Outlook | Q1 2015 42 New Jersey

- Steve Jenco Vice President, Research, New Jersey Vacancy climbs despite pockets of activity

Positive absorption emerges in Northern New Jersey Class A market Northern New Jersey Class A net absorption (s.f.) After posting 10 consecutive quarters of negative net absorption dating back to 500,000 the third quarter of 2012, a rebound in demand for Class A space led to 114,560 114,560 square feet being absorbed in Northern New Jersey during the first quarter of 0 2015. A large portion of this activity was focused in the Parsippany submarket -500,000 -646,841 where the Class A vacancy rate retreated to 27.3 percent, after ranging near -1,064,619 -1,000,000 30.0 percent for the past two years. Leases involving Arthur J. Gallagher & Co., -1,371,643 Langan Engineering and Securitas led to the lower Parsippany Class A vacancy -1,500,000 rate. Competitive rental rates combined with this submarket’s proximity to 2012 2013 2014 Q1 2015 several major highways contributed to the recent uptick in activity. Source: JLL Research

Relocations and consolidations overshadow Bergen North submarket Bergen North overall vacancy rate trends A rising supply of office availabilities presents opportunities for tenants seeking 40.0% space in the Bergen North submarket. Since bottoming out at 15.4 percent in 38.9% mid-2013, the overall vacancy rate ticked higher and reached 30.0 percent by 35.0% year-end 2014 as companies including Pearson Education and Hertz vacated 30.0% space in this market. Three months later, the vacancy rate was just below 40.0 30.7% 30.0% percent. Contributing to the higher vacancy rate in early 2015 was 217,520 25.0% 27.5% 22.9% square feet marketed for sublease by A&P at its 2 Paragon Drive headquarters 20.0% in Montvale. The vacancy rate is poised to climb higher as Mercedes-Benz Q1 2014 Q2 2015 Q3 2014 Q4 2014 Q1 2015 begins moving its U.S. headquarters from Montvale to Atlanta. Source: JLL Research

Aging office inventory will provide headwinds to market’s recovery Office inventory by decade of development A rapidly aging office inventory will continue to challenge users seeking modern, 1.5% more efficient buildings to house their operations. Approximately one-half of the Pre-1970 14.3% 8.9% 159.2 million-square-foot Northern and Central New Jersey office market was 13.0% 1970s developed during the 1980s, as once free-flowing capital produced a tidal wave 12.4% 1980s of new inventory. By 2020, the average age of a building in the state’s office 1990s market will be nearly 35 years old. Furthermore, while the overall office vacancy 49.9% rate was 25.3 percent in early 2015, buildings developed during the 1980s 2000-2009 posted an average vacancy rate of more than 26.0 percent. Office buildings 2010-Present completed since 2010 registered a vacancy rate of just 15.3 percent. Source: JLL Research

161,200 25.3% -871,101 -0.6% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 80.6% Total preleased

JLL | United States | Office Outlook | Q1 2015 43 New York

- Tristan Ashby Vice President, Research, New York City Vacancy up despite strong activity

FIRE tenants reclaimed top spot in the first quarter of 2015 Leasing activity as a percentage of total square feet leased After TAMI tenants dominated Manhattan leasing activity in 2014, FIRE tenants, FIRE (financial services, insurance and led by financial services, accounted for almost half (42.9 percent) of all square 6.6% real estate) feet leased in Manhattan in the first quarter. Major commitments included MetLife TAMI (technology, advertising, media and information) and Bank of America, both at 200 Park Avenue. Although FIRE employment has 18.8% 42.9% Other not reached pre-recession levels, job growth has increased recently and both Education/Health/Nonprofit midsize and large tenants have become active in the market. While tech (of the TAMI sector) experienced record activity in 2014, it accounted for just 7.9 28.9% Legal percent of all leasing in 2014. Advertising & marketing instead led leasing in the Retail/Wholesale TAMI sector, with 17.0 percent of activity. Source: JLL Research

Large leasing activity on the rebound in Midtown Number of Q1 Midtown leases 100,000+ square feet Eight large-block leases, those totaling 100,000 square feet or greater, were 15 signed in the first quarter in Midtown compared to only five at this time last year. 10 All but three were located on the East Side, reversing—at least temporarily— 10 8 what had been a trend of westward migration. An increase in East Side activity is 7 5 5 4 the result of leases by large financial services tenants, which have historically 5 been attracted to the more established submarkets of Grand Central and the Plaza District. New Midtown leases and expansions also experienced an uptick 0 during the quarter, with five leases compared to only two in the first quarter of 2010 2011 2012 2013 2014 2015 last year. Source: JLL Research

Trophy blocks push Downtown Class A metrics upward New large blocks escalate Trophy vacancy in Lower Manhattan Former JPMorgan Chase and NYMEX spaces totaling 1.3 million square feet 25.0% were introduced to the market in the first quarter at 28 Liberty Street and 300 22.5% 22.8% 20.0% 17.6% Vesey Street, respectively, resulting in considerable bumps in Downtown vacancy and pricing. Class A vacancy increased 1.9 percentage points to 13.5 15.0% 15.4% percent, while Class A asking rents increased by $2.72 to $61.33 per square foot 10.0% 11.5% from December to March. Without the aforementioned large blocks, the vacancy 5.0% 9.2% 5.2% 6.1% 7.4% 7.0% would have decreased by 0.3 percentage points and the pricing would have 0.0% 3.4% increased only $1.20 per square foot in that timeframe. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q115 Source: JLL Research

7,206,342 10.0% -1,614,106 3.9% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 26.5% Total preleased

JLL | United States | Office Outlook | Q1 2015 44 Oakland

- Hailey Harrington Research Analyst, Oakland - East Bay Landlords gain leverage in most submarkets

Large blocks in short supply with no relief in sight Large blocks available in Class A, B & Flex space in Oakland Large blocks of space to accommodate growing companies are few and far between. Tightening vacancy and rising costs downtown have pushed 100,000+ companies seeking large blocks and expansion options to the surrounding 4 Oakland suburbs. As a result, we are beginning to see peripheral submarkets re- 75,000 - 99,999 8 position business parks and buildings to create a live-work-play atmosphere. 50,000 - 74,999 2 Landlords are renovating shared common areas, adding free tenant amenities, 40,000 - 49,999 and offering free shuttles to major transit hubs in order to capture the CBD 30,000 - 39,999 1 spillover tenants. 4 Source: JLL Research

Competitive leasing pushes higher rents Average asking rents across Oakland The battle for talent is intense, and being downtown is a competitive advantage for recruitment and retention. Competition for space in close proximity to BART Oakland-CBD $2.97 Emeryville $2.88 is increasing, with both small-and-mid-size users driving leasing activity in the Oakland-JLS $2.41 Berkeley $2.31 CBD. In turn, the CBD has seen significant rental rate increases. More notably, Alameda-North $2.09 average Class B rents have increased 25 percent year-over-year shrinking the Alameda-South $1.97 Richmond $1.96 price difference between commodity Class A space. Furthermore, landlords will Hayward/Castro Valley $1.80 continue to push asking rates more aggressively as office availabilities decline Oakland-Airport $1.55 and tenant demand builds. $1 $2 $3 $4 Source: JLL Research

Diverse tenant base driving demand Strong tenant demand in 2015 Tenant demand remains strong with more than 2.3 million square feet of requirements and 80.0 percent of those requirements looking for space in the Emeryville and Oakland-CBD submarkets. Health care, non-profit, and professional services tenants are the top three industries looking for space in the market. Touring activity from San Francisco tenants is dominated by non-profits 2.3 million looking for more affordable options. Tenant spillover is expected to continue and may will result in a real migration trend for the booming technology sector. Square feet of tenant requirements

Source: JLL Research

0 13.8% 175,991 11.3% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 45 Orange County

- Jonathan Ruffalo Senior Analyst, Research Southwest OC’s Airport Area poised for acceleration

Healthcare industry steady; financial services to gain momentum Number of employees by sector Following the recession, the financial services, insurance, real estate and escrow Financial Services Health Care & Social Assistance industry (FIRE) underwent a massive employment and leasing activity pullback, 220,000 whereas the healthcare industry stood untouched and continued to add jobs and office space. Today the healthcare industry continues to make gains without any 170,000 sign of slowing and the financial services sector is pointing toward momentum growth. Over the course of the next two years, Orange County anticipates 2.9 120,000 million square feet of additional tenant requirements with 29.0 percent of demand coming from the banking and finance sector and 20.0 percent of active tenants 70,000 demand stemming from the healthcare industry. 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: JLL Research & EDD

South County tenants forced to broaden search for expansion efforts Class A total vacancy (OC vs. South County) Tightening vacancy rates and escalating rental costs have pushed active tenants located in the south county market to contemplate migration into other markets 40.0% OC Total Class A South County Class A as their lease terms near expiration. Currently a two-story campus owned by the Irvine Company is 98 percent occupied and there are only eight Class A spaces with availability in excess of 15,000 square feet. Going forward developers would 20.0% be best suited to focus attention on creating Class A projects in the south county to satisfy a growing demand base and capitalize on the fact that the county has 0.0% the highest aggregate rental rate in all of Orange County. 2010 2011 2012 2013 2014 YTD Source: JLL Research

Sales activity and pricing gaining momentum Office sales pricing and asking rents (per square foot) Core deals will represent a majority of sales activity going forward, rendering a Sale Price Asking Rent yearly growth rate of 6.0 percent in price per square foot until 2017. The spike in $300/fs $2.50/fs 2012 was due to the sale of 3161 Michelson, and the 2013 to 2014 sales price $2.00/fs drop transpired from a majority of deals representing value-add opportunities $200/fs with significant vacancy rates. As rental rates continue to appreciate due to $1.50/fs tightening vacancy rates, investors will capitalize on the higher income $100/fs $1.00/fs translating into higher sales prices. We forecast cap rates remaining relatively 2010 2011 2012 2013 2014 2015 unchanged in Orange County due to a stagnant treasuries market. Source: JLL Research

645,705 13.2% 3,295 7.6% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 5.1% Total preleased

JLL | United States | Office Outlook | Q1 2015 46 Orlando

-Austin Carter Research Analyst, Central Florida Office fundamentals continue to tighten

Class A demand remains the driving force in the market Total net absorption by submarket (Q1-2015) The overall market posted its largest quarterly absorption gain since the second 200,000 quarter of 2013. The downtown CBD and Lake Mary submarkets recorded the Class A Class B largest gains during the quarter, driven by two large move-ins, totaling roughly 100,000 220,000 square feet. Demand for space throughout the metro area remained concentrated in Class A space. Out of the seven submarkets tracked, six posted - positive Class A absorption during the quarter. Furthermore, since the end of the recession, Class A space has absorbed roughly 1.2 million square feet of space, (100,000) compared with only 113,700 square feet absorbed in Class B space. CBD Lake Mary University Maitland Altamonte Southwest 436 Area Corridor Source: JLL Research

Investors remain active in the market Sales activity concentrated in Southwest submarkets Sales volumes reached $38 million in the first quarter, as eight properties traded hands. Compared with the first quarter of 2014, the dollar volume was lower by 436 Corridor 1 Orlando Central Park $16 million, but the number of properties traded increased by four. The majority Tourist Corridor of the sales activity was concentrated in the Southwest area, particularly in the CBD 2 Orlando Central Park submarket, where investors are looking to acquire properties with lease up opportunities. For example, Cardinal Point Management Southwest 3 2 purchased a 133,000-square-foot, Class A building for roughly $5.8 million ($44.00 per square foot) that was 36.2 percent leased at the time of sale. - 1 2 3 4 5 6 Source: JLL Research Number of sales transactions

Sights set on the downtown CBD Tenant requirements by submarket Downtown Orlando remains one of the metro’s most sought-after areas for office users. More than a third of tenant requirements tracked in the market are 5% targeted toward space in the submarket. During the quarter, Wells Fargo 15% CBD Lake Mary renewed their lease for 82,000 square feet at One Orlando Centre in downtown, 37% and Red Lobster moved into their new 91,000 square foot headquarters in the Maitland University CNL I Tower. A scarce supply of large blocks of available space will limit options 16% for larger users looking for space in the downtown market. Currently, there are Southwest Remaining only four blocks of available contiguous space greater than 30,000 square feet 10% 15% and no blocks available above 60,000 square feet. Source: JLL Research

80,000 16.5% 309,321 3.2% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 5.4% Total preleased

JLL | United States | Office Outlook | Q1 2015 47 Philadelphia CBD

- Clint Randall Research Analyst, Vacancy down; fundamentals tight Philadelphia despite slow leasing activity

University City sees vacancy dip below 2% as rents continue to climb Q1 2015 vacancy across CBD submarkets Already among the tightest office submarkets nationwide, University City 12.0% continued to experience positive net absorption through the first quarter of 2015. 10.4% 10.8% New leasing activity drove vacancy below 2.0 percent. Notably, Penn Medicine 10.0% signed for an additional 56,000 square feet at 3737 Market Street, bringing the area’s newest Class A asset to 100 percent occupancy. With a first quarter 8.0% average asking rate increase of 3.4 percent, University City is commanding 6.0% replacement cost level rents. With only two major development sites remaining in 4.0% 3.2% the Science Center, area institutions continue to open up market opportunities for 1.9% new and expanding tenants, including the Pennovation Center at the former 2.0% th DuPont site, Drexel’s Innovation Neighborhood surrounding 30 Street Station, 0.0% CHOP’s Schuylkill River campus, and the planned redevelopment of the University City Navy Yard Market East Market West University City High School site, where demolition is underway. Source: JLL Research

CBD adding significant supply of coworking space to the office market Coworking operators Leasing activity by coworking operators has been driven by the changing nature of work and a 149 percent increase in sole proprietor employment in Philadelphia since 1999. The CBD’s 17 open or under construction coworking spaces occupy 209,000 square feet of office space, with active requirements in the market of up to 17 an additional 150,000 square feet. Benjamin’s Desk is in aggressive expansion coworking spaces are currently under construction mode, targeting multiple submarkets both in and out of the CBD, while numerous or operating in the CBD out-of-market and national operators are touring for one or more locations. Source: JLL Research

Comcast executes new leases to fill both of its towers Q1 2015 availability of large, contiguous blocks Comcast Corporation’s Innovation and Technology Center is now 100 percent leased by its namesake corporation. The company will occupy the entirety of the new skyscraper’s 1.33 million square feet of office space, though Comcast will 6 still operate an incubator in a portion of the tower, housing startups and spinoffs 5 1 200,000+ sf related to Comcast’s expanding technology development business. Comcast 4 also negotiated an early exit for Citizens Bank from its existing tower in order to 1 100,000 - 200,000 sf 3 grow at its current headquarters. The lease up of 1800 Arch removes a large 50,000 - 100,000 sf 2 block of Trophy space from an already tight market, but options will expand 3 1 through 2015 and 2016: 220,000 square feet remain available in FMC Tower, set 1 to deliver in Q3 of 2016. FMC Corporation’s current location at 1735 Market will 0 see several leases roll in the next 12 to 18 months, freeing up several contiguous Class A Class B Trophy blocks in the CBD. Source: JLL Research

2,210,914 9.9% 142,114 2.9% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) Class A 12-month rent growth 80.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 48 Philadelphia Suburban

- Geoff Wright Senior Research Analyst, Renovation projects finally expanding to Philadelphia non-core submarkets; strong sales activity continues into 2015

Renovation projects expanding to non-core submarkets Average asking rents in the Philadelphia Suburbs Activity will soon spread to non-core submarkets as the first non-core renovation project since 2012 will begin shortly in Fort Washington. Following a successful, $3.6 million project in 2014 in King of Prussia, and driven by strong returns on Class A $28.12 high-quality renovations, Kairos Real Estate partners, along with Artemis Real Estate Partners, will begin renovating 600, 601, and 602 Office Center Drive, a 393,561-square-foot campus recently purchased for $77 per square foot. Between Fort Washington and adjacent submarket Horsham, only three new Class B $22.04 buildings have been built in the last 10 years, and Class B vacancy is over 24 percent. Renovating to Class A will go a long way toward diminishing non-core Class B vacancy and ultimately driving Class A rents in markets that desperately $0 $5 $10 $15 $20 $25 $30 need new supply. Source: JLL Research

Plymouth Meeting / Blue Bell exceeds expectations Plymouth Meeting / Blue Bell at a glance Since 2010, no suburban market has changed as much as Plymouth Meeting/Blue Bell. Building renovations have led to successful preleasing, a key factor in Class A rent grown. This quarter, Hillcrest III delivered in Blue Bell and was responsible for 131,000 out of 213,000 square feet of positive absorption in this submarket. Amazingly, Class A vacancy has dropped from 26.7 percent at 3.0% the end of 2010 to a staggering 3.0 percent in the first quarter of 2015. With no new development planned, the renovation of Woodlands I, a 220,000-square-foot Class A vacancy in Plymouth Meeting / Blue Bell office building in Blue Bell, will be the next source of new Class A office in a market that has incredibly limited options. Source: JLL Research

Strong suburban sales activity continues Philadelphia Suburbs sales activity After ending the year with two Trophy sales, suburban sales activity remained strong from late December through the end of the first quarter. There were five sales totaling $77 million, but assets in core submarkets like King of Prussia/Wayne received a premium on a per square foot basis compared to secondary, non-core suburban markets. In King of Prussia, the Merion Building sold for $254 per square foot, while buildings in non-core suburban markets have $77,068,810 sold at a fraction of the cost of core markets. Non-core sales of the Horsham Business Center for $131 per square foot, 600-602 Office Center Drive in Fort Total value of Q1 Philadelphia suburban sales Washington for $77 per square-foot, and 3600 Horizon Boulevard in Lower Source: JLL Research Bucks County for $75 per square foot, are all examples of assets trading at a discount compared to core suburban assets.

836,465 16.3% 428,884 -2.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 53.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 49 Phoenix

- Matt Kolano Senior Research Analyst, Phoenix New development returning to pre-recessionary levels

Bifurcated market Total vacancy – Q1 2015 The overall Phoenix office market currently stands 22.2 percent vacant, significantly lower than its recessionary high of 27.1 percent vacant back in 2010, West Phoenix, but has a long was to go before it reaches its previous low of 11.2 percent in 27.9% 2006. As the Valley becomes a much more active market, the divide between the West Valley and East Valley continues to grow. Tenants are choosing to locate along the Loop 101 corridor spanning from Chandler and Tempe in the south to East Phoenix, Scottsdale in the North. This activity has brought vacancy in the east below 20 19.6% percent as opposed to the west side of Phoenix that continues to struggle with a 27.9 percent vacancy rate. Source: JLL Research

Active development pipeline Office developers returning in force Four submarkets boast vacancy rates below 15 percent in Phoenix: Tempe (10.5 $5 percent), South Scottsdale (11.7 percent), South Tempe/Ahwatukee (14.4 Deliveries $4 percent), and Downtown (14.9 percent). Landlords are capitalizing on the strong Millions Under Construction demand and limited supply within these submarkets and developers are working $3 to alleviate some of that imbalance by building new projects. The current level of $2 construction in early 2015 has not been seen since the peak in 2008. $1 Accelerating rents, steady demand, and positive economic indicators in Phoenix $0 are reigniting confidence in developers. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 Source: JLL Research

Financial services driving Phoenix forward Financial Services in Phoenix Phoenix has experienced a much more diverse recovery since 2008, steadily adding a healthy balance of jobs in contrast to previous market cycles when the Valley would be flooded with construction employment. One specific industry that has been driving the local economy is the banking and finance sector, which has 24.9% been the fastest growing industry in the Valley. The general metropolitan area lost over 300,000 jobs in the recession and has yet to exceed that number in Percent of overall market occupied by industry early 2015, but financial services exceeded its employment peak back in 2013. The sector’s positive employment gains are translating into greater absorption of office space in some of the Valley’s premier submarkets. Source: JLL Research

3,661,725 22.2% 279,629 4.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 67.3% Total preleased

JLL | United States | Office Outlook | Q1 2015 50 Pittsburgh

- Andrew Batson Senior Research Analyst, Great Lakes Tenants are soon to find more options downtown

Office employment sectors waver in 2014 Office employment trends (12-month change) Uneven employment results among the office-using employment sectors during 2014 will translate into muted office demand over the next year. According to the Financial Activities Professional & Business Services Information Government most recent estimates from the BLS, total non-farm employment in Pittsburgh 10.0 stood at ~1.1 million payrolls, representing an annualized increase of 10,000 jobs or 88 basis points. Meanwhile, unemployment decreased 0.7 percentage points 0.0 year-over-year to 5.9 percent. Office-using employment sectors contracted over the last year, recording an annualized net loss of 1,800 jobs across the metro. (10.0) The largest job losses occurred in the financial activities sector, where total 2011 2012 2013 2014 Q12015 employment declined by 2,500 jobs year-over-year. Source: JLL Research

Deliveries and rightsizings to increase vacancy downtown CBD vacancies While Pittsburgh’s downtown Class A vacancy rate has been among the lowest Class A Class B in the U.S. for the last several years, its Class B vacancy rate, currently at 25.0 30% percent, is among the highest in the country. And before the end of the year, the Class B vacancy rate is forecasted to rise higher still. The increase will be the 15% result of two major factors. First, the 800,000-square-foot Tower at PNC Plaza will deliver in the summer and PNC will relocate some operations from leased offices, and second, BNY Mellon intends to consolidate its operations in the 0% region and vacate up to 650,000 square feet at 525 William Penn Place. 2011 2012 2013 2014 Q1 2015 Source: JLL Research

Landlords are pushing rents irrespective of class or geography Average asking rents Office landlords in Pittsburgh have been effectively increasing rents over the last Class A Class B several years. The average full service gross asking rent for the metro was recorded at $21.91 per square foot at the end of the first quarter, an increase of $24.00 3.4 percent year-over-year. When compared to peer cities of Cleveland, Columbus, Philadelphia and Baltimore, rents have increased the most in $21.00 Pittsburgh. Over the coming year, rent increases are forecasted to continue within the Class A product type while asking rents for Class B assets are $18.00 forecasted to hold firm as vacancy increases and negotiating leverage shifts. 2011 2012 2013 2014 Q1 2015 Source: JLL Research

500,000 14.7% 194,471 3.4% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 52.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 51 Portland

- Nik Ignjatovic Research Analyst Portland 2015 will be significant year for Portland

Vacancy falls and will drop further throughout the year Total Market Vacancy Total market vacancy has fallen to 9.4 percent, down 160 basis points year-over- 18.0% 15.7% year, making Portland the second tightest office market in the country after Salt 15.0% 16.0% Lake City. Other tight markets like New York and San Francisco have seen 14.2% significant deliveries bump up vacancy, but Portland has seen limited vacant 14.0% 11.9% 11.0% space deliver to the market, with most projects coming onto the market partially 12.0% 9.4% or fully-leased. Although there are a number of smaller developments in the 10.0% pipeline set to deliver in 2015, it is not expected that vacancy will be significantly 8.0% hindered until the delivery of Park Avenue West, 1320 Broadway, and Pearl 2010 2011 2012 2013 2014 2015 YTD West in early 2016, though they are collectively over 50.0 percent pre-leased. Source: JLL Research

Construction activity brisk; Close-in Eastside emerging Construction Activity Construction activity has picked up significantly over the past two years in Under Construction 957,947 response to declining vacancy and increased demand in urban submarkets. The 1,000,000 887,648 Close-in Eastside is emerging as a more significant submarket, with the Delivered submarket housing four of the ten projects expected to deliver in 2015. The 393,851 422,934 submarket has seen a significant increase in activity over the past few years with 500,000 292,690 average rents up 39.8 percent year-over-year, mainly due to high-in-demand new and renovated product hitting the market. Renovations of well-located but 0 currently under-utilized buildings are becoming increasingly important – six of ten 2011 2012 2013 2014 2015 YTD projects expected to deliver in 2015 are renovations. Source: JLL Research

Institutional interest in Portland increasing Total Sales Volume ($10M +) Interest in the Portland market from institutional investors is accelerating. Total $1,000,000,000 $902 M investment volume for properties over $10 million is expected to be robust in $800,000,000 2015, with total sales exceeding $900 million. Bidding for property in Portland is $638 M $600,000,000 becoming increasingly competitive with the pool of institutional buyers deepening $437 M and an increasing number of assets trading in off-market transactions. The sale $400,000,000 $282 M $200 M $247 M of the Overton Pearl in January set a new high-watermark price per square foot, $200,000,000 trading at over $490 per square foot at a cap rate of 4.7 percent. $0 2010 2011 2012 2013 2014 2015* Source: JLL Research *Estimate

957,947 9.4% 203,148 9.5% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 40.1% Total preleased

JLL | United States | Office Outlook | Q1 2015 52 Raleigh-Durham

- Mehtab Randhawa Research Manager, Carolinas First quarter sees a boom in investment sales

Large blocks remain in short supply RTP / RDU submarket posts strongest leasing activity The market has limited availabilities for big-box tenants seeking to consolidate 20 18 multiple operations or expand. Tightening vacancy and higher costs of new 16 speculative development have pushed companies looking for greater than 15 100,000 square feet toward build-to-suit options. Although 1.5 million square feet 10 of construction is underway, more than 75.0 percent is pre-leased. Multiple 7 projects such as MetLife, Charter Square, Alliance One and Wade III are nearing 5 2 completion, and no new project was added to the development pipeline this 0 quarter. As the demand outpaces supply, it is likely that new developments will > 200,000 100,000-199,999 50,000-99,999 25,000-49,999 break ground toward the end of the year. Source: JLL Research

Rent growth not expected to slow down in near term Average asking rents rise across Raleigh-Durham In the past 18 months, the asking rents of Class A assets increased by over 5.0 percent. The rates have risen organically in the Triangle and not limited to a Class A Class B $22.95 $23.41 particular submarket. There exists a reasonably stable demand to see more 25 $21.80 $21.27 $21.78 $22.54 urbanized, mixed-use projects with walkable amenities. Trophy assets, like 20 CapTrust Tower II and Charter Square, have pre-leased space, despite having 15 the highest asking rents – over $30.00 per square foot – in the market. This 10 serves as evidence that quality assets in dense urban environments are 5 successfully attracting tenants. This quarter, Gibbs & Soell and BusinessSuites 0 together pre-leased approximately 40,892 square feet, becoming the first anchor 2010 2011 2012 2013 2014 YTD 2015 tenants of the building. Source: JLL Research

Triangle job growth running strong in 2015 Total metro unemployment rate (%) Over the 12-month period ending January 2015 , the unemployment rates in the 10% Durham and Raleigh MSAs dropped to 5.0 and 4.8 percent, respectively. Increasing profitability in the primary office-using sectors of professional business services, financial activities and information fueled increased business 5 confidence and drove new hiring activity. Strong leasing activity in late 2014 generated high volumes of positive net absorption in early 2015. Continued Durham-Chapel Hill Raleigh-Cary economic growth is expected to lead unemployment and vacancy rates lower 0 over the course of 2015. 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: JLL Research

1,532,995 13.1% 484,730 4.8% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 76.6% Total preleased

JLL | United States | Office Outlook | Q1 2015 53 Richmond

- Geoff Thomas Senior Research Analyst, Richmond Established suburban-based financial services firms continue transition to the CBD

CBD absorption takes shape with its first new lease in four quarters New lease volume in the CBD Richmond’s flagship suburban submarket, Innsbrook, has been the leader in attracting in-market and new-to-market tenants, but has lost several financial- service occupiers over the past two years. In the first quarter, Dixon Hughes’s 20,866-square-foot relocation from Innsbrook to One James Center in the CBD marked the third financial services firm to move to a Downtown office location. Private Advisors and Elliot Davis made similar decisions, and combined with 70,000 Dixon Hughes, have backfilled nearly 70,000 square feet of vacant space Square feet signed by financial service firms created by law firm downsizes. Source: JLL Research

Limited Class A blocks have sparked construction Available Class A blocks larger than 50,000 square feet With suburban Class A rates rising steadily and vacancy falling to all-time lows (8.5 percent), two regional developers, Brandywine and Highwoods, have began Suburban CBD pushing new construction options. The most recent is Highwoods’s North Shore 83,414 Commons III in the Innsbrook submarket. Marketed since 2012, the building has shifted from a nearly 100.0 percent preleased requirement to 27.5 percent and 220,000 has been significantly redesigned. Second, Brandywine’s Alterra project in the 3 122,762 West Creek submarket has set a 50.0 percent preleased requirement and Buildings marketed competitive new-construction rates. Largest contiguous Average block size Source: JLL Research Class A block (SF)

New construction volume highest in five years and asking rates rise Square feet delivered in the Richmond market Richmond’s construction pipeline finally made headway with four buildings totaling 388,158 square feet set to deliver in the first half of 2015 and additional 800 760 suburban projects may break ground this year as well. One drawback is that 600 material and construction costs have risen, which has pushed full service asking 388 400 rates to $25.00 per square foot in the suburbs and $37.00 per square foot in the 210 CBD – dramatically higher than average Class A rates for existing buildings in 200 87 25 24 the market. This sticker shock may be the greatest obstacle facing tenants when 0 Square feet(in thousands) they plan expansions and may delay preleased targets moving forward. 2008 2009 2010 2011 2012 2013 2014 2015 Source: JLL Research

388,158 14.1% 66,698 1.0% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 73.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 54 Sacramento

- John Sheaffer Research Analyst, Sacramento Market tightening in the wake of steady employment gains

First quarter positive absorption approaches 2014 total Market steadily gaining steam The State government continues to add jobs (3,200 jobs year over), business confidence is up and professional services are expanding, all of which are 25% Total net absorption Vacancy 900,000 translating into a rising office market tide. The first quarter of 2015 marked the 20% largest quarterly occupancy gain (227,539 square feet of positive net absorption) 400,000 since the banner year of 2013, clocking in above the 10-year average of 149,884 15% square feet. Perhaps more telling of the business climate is the fact that demand 10% (100,000) was distributed more evenly among a wide variety of industries rather than a few large deals; governmental agencies, insurance groups and education users were especially active in suburban submarkets. Source: JLL Research

“Arena effect” elevating CBD rents on historical run CBD average asking rate surpasses 10-year average Downtown asking rents have been on a sustained climb since bottoming out in $2.60 the fourth quarter of 2013 and posted the largest annual increase in the first $2.55 $2.52 quarter of 2015 (6.8 percent) since the previous peak in 2008. Occupancy gains $2.50 downtown have been negligible during the past 12 months; however, rent growth $2.40 $2.47 has been more reflective of the announcement and groundbreaking timeline of $2.45 $2.30 $2.39 the new Kings’ arena. Recent transactions, such as Murphy Austin’s relocation to $2.32 555 Capitol Mall (across the street from the arena site), suggest landlords are $2.20 correct in assuming an imminent tenant in-migration to the urban core. 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Q4 Q1 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 Source: JLL Research

Insurance and expansion deals fuel leasing activity Insurance dominates leasing landscape Leasing demand ramped up in the first quarter and insurance users accounted for 43 percent of inked deals by volume, primarily due to one giant transaction: Insurance Blue Shield took 175,000 square feet between two Highway 50 Corridor Communications buildings, marking the market’s largest office transaction in over 24 months. Government Professional Services Demand will hold steady through the next three quarters, with more than 800,000 Other square feet of government and healthcare requirements alone anticipated to land Healthcare in 2015. Look for rising rental rates in continually tightening South Placer Legal submarkets and additional tenant gravitation toward the urban core. Education Source: JLL Research

0 17.8% 233,533 0.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 55 San Antonio

- Travis Rogers Research Analyst, Austin Large construction deliveries and record-breaking sales

Large deliveries with continued construction north and northwest Square feet under construction by class and submarket Over 500,000 square feet of construction delivered in San Antonio’s north and northwest markets in the first quarter. All of the new inventory to hit the market was 100 percent leased and three of the four delivered buildings are occupied by a single tenant. These major tenants include CyrusOne at 180,000 square feet, 357,181 Harland Clarke at 129,000 square feet and the United States Government at Class A square feet under construction 160,000 square feet. There are currently six buildings under construction, Class A North Central representing over 600,000 square feet of new office inventory. All of the projects are being developed by one of two companies, Stream or RL Worth & Class B North Central 207,195 Associates. A few of these buildings include Lockhill Crossing, Heritage Oaks III 256,000 and Ridgewood II, which is 100 percent leased by Avnet. All of the new Class A Northwest construction is expected to deliver by the end of 2015. Class B Northwest 101,181 54,217 Source: JLL Research

Large sale in north market breaks San Antonio record Square feet sold by submarket Almost a million square feet of office space traded hands this quarter across the north and northwest markets. The largest trade was RidgeWood Park Office Far North 618,017 Campus in northern San Antonio with 618,000 square feet selling for over $150 million. Select Income REIT purchased the campus and broke a record for the highest total price paid for an office development in San Antonio’s history. The Far Northwest 145,025 second highest transaction took place last quarter with the purchase of Bank of America Plaza, a high-rise in downtown San Antonio. This sale was also Northwest 56,494 rumored to have also broken the $100 million dollar threshold. Other notable transactions involved Overlook at the Rim, Heart Plaza One and the North Central 120,147 iHeartCommunications building northwest. Together, these transactions represent a sales volume of more than $220 million. 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 Source: JLL Research

618,593 17.8% 185,100 1.6% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 24.9% Total preleased

JLL | United States | Office Outlook | Q1 2015 56 San Diego

- Eileen Turnalad Senior Research Analyst, San Diego Steady rent growth continues

11th consecutive quarter of rent growth Year-over-year rent growth across San Diego Rent continued to increase as the supply of large blocks and high-end Class A th Kearny Mesa 8.9% space continued their decline. This quarter marked the 11 straight quarter of UTC/Eastgate 8.7% positive rent growth and countywide, rents increased 5.3 percent year-over-year. Mission Valley 8.4% Sorrento Mesa 6.6% While there remains areas of value and opportunity in lower-demand Carlsbad 6.3% submarkets, rents in these submarkets are also seeing robust growth. Kearny Del Mar Heights 3.7% Mesa, while still a more affordable submarket, had the highest year-over-year Downtown 2.2% Rancho Bernardo 1.1% rent growth at 8.9 percent. Torrey Pines 0.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Source: JLL Research

Vacancy continues to drop Direct vacancy rate – Class A and B Vacancy continued on its downward trajectory, dropping 120 basis points year- 30% over-year. While net absorption was slightly negative this quarter, 2014 posted Class A Class B the highest net absorption since the recession, which contributed to the decrease 20% in vacancy. With the flight to quality, much of the activity has been among Class

A properties, which now have a direct vacancy rate in the single digits (9.4 10% percent) down from a high of over 20 percent during the recession. Class B assets have also experienced a drop in vacancy, though not as dramatic. The 0% direct vacancy rate at end of the quarter closed at 15.4 percent. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: JLL Research

Increased tenant demand in I-15 corridor Change in tenant demand in I-15 Corridor Since year-end 2014, tenant demand in the I-15 corridor has increased by over 50 percent. There are nearly 730,000 square feet of active requirements from a range of industries including defense, healthcare, technology, engineering, and life sciences. With a relatively low total vacancy rate of 12.8 percent, the increased tenant demand will contribute to the tightening of this submarket. 56.7% Increase in tenant demand in I-15 Corridor Source: JLL Research

878,164 13.5% -5,258 5.3% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 39.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 57 San Francisco

- Ruby Bolaria Research Analyst, San Francisco Consistent growth shrinks availability

No near-term end in sight for tech growth in the market Technology comprises largest share of office-using employment San Francisco is one of the most active office markets in the country today, largely fueled by a strong high-tech sector. High-tech jobs now make up 28.6 Legal Services 6.8% percent of all office jobs in San Francisco, an all-time high. The unemployment Business Services 7.2% rate declined by 90 basis points year-over-year to a recent low of 3.8 percent, Real Estate 28.6% 5.3% compared to 6.9 percent statewide and 5.7 percent nationally. Despite fears that Government growth in the tech industry is too good to be true, the industry continues to drive Financial Institutions 12.0% the office market with large lease transactions and expansion. Uber, in addition to Technology their over 70,000 square foot lease at 685 Market last quarter, leased an 13.3% additional 172,000 square feet at 555 Market Street during the quarter. Source: JLL Research

The race for space and the rise of subleases Average asking rents across San Francisco The insatiable appetite for space is forcing some tenants to lease more space than their immediate needs require in anticipation of future growth and to secure Mission Bay $76.93 South Financial $66.62 space before rents increase further. However, as tenants plan for future rent North Financial $66.09 South of Market $63.49 growth, some have their space back on market. Sublease availability grew by Showplace Square $56.49 37.4 percent since last quarter. Tenants across industries are adding to the North Waterfront $54.03 Mid-Market $53.29 sublease market. However, the influx of subleases are not sitting idle. Tech firms Union Square $51.37 Jackson Square $50.71 in particular are absorbing sublease space but as a short term solution to longer Van Ness Corridor $47.03 term real estate needs. The majority of subleases leased this quarter were listed $35 $40 $45 $50 $55 $60 $65 $70 $75 $80 for less than six months as demand for direct and sublet space remains high. Source: JLL Research

Stable, low-risk market attracts investment Office building sales Swelling employment growth and escalating rents continue to stimulate demand and make San Francisco one of the most desired investment markets globally. There were four sales transactions this quarter, three of which were outside the CBD. The limited Trophy and Class A supply in the CBD and the potential for $516.3 M tenant spill over from the saturated CBD market gives non-CBD properties more appeal than in previous years. Foreign investment is growing, and San Francisco Total building sales YTD, a 16 percent increase now ranks as third most desirable market globally behind New York and London. from last quarter. Source: JLL Research

3,134,205 9.9% 381,934 13.9% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 52.5% Total preleased

JLL | United States | Office Outlook | Q1 2015 58 San Francisco Mid-Peninsula

- Christan Basconcillo Senior Research Analyst, Silicon Valley Larger deals spur rent growth and leasing

South County hot with activity Y-o-Y % change in rent for core Mid-Peninsula submarkets Google’s acquisition and Box.com’s lease in the fourth quarter of 2014 signaled to the market that there is still pent-up demand for space. Single-floor users Redwood City 19.6% continue to carve away at vacancy, especially within campus-style projects. Menlo Park 13.2% Nevro secured a sizeable amount of space this quarter at Bayshore Tech Park, San Mateo 10.8% taking the largest availability in the project off the market while Boingo Wireless Foster City 8.5% signed a deal for one building at Seaport Center in Redwood Shores. The rise in Redwood Shores 7.9% demand has created heated market conditions for prime submarkets, and Mid-Peninsula overall 6.2% landlords have responded by raising asking prices for well-located space. 0% 5% 10% 15% 20% 25% Source: JLL Research

Developers push to get shovels in the ground New development to pick up in 2015 With the demand for large blocks of space outpacing supply, developers are rushing to get new development off the ground. Taking cues from Kilroy, Sobrato broke ground on his project in Menlo Park and already has EMC in tow to take one of the two, 135,000-square-foot Class A office buildings. Meanwhile, 775,614 s.f. Stockbridge and Hines started on their projects at Bay Meadows and Concar Drive, respectively, in San Mateo. There is approximately 1.1 million square feet Total volume of new development to break ground of new construction underway in the Mid-Peninsula, the most that the market has in Q1 2015 seen since the dot.com era. The sight of cranes and steel is expected to prompt tenant demand and additional spec development over the next 12 months. Source: JLL Research

Sales activity expected to maintain velocity Mid-Peninsula historical sales volume Acquisition activity continues to be a bright spot for sellers in the Mid-Peninsula $1,500M $1,354.5 as investors chase prime assets in core submarkets. During the first quarter of 2015, there were several headline transactions, including 700-900 Concar in San $1,000M Mateo, which sold for ±$600 per square foot to DivcoWest from JP Morgan. The $653.2 rise in tenant activity is attracting the attention of more buyers in the market and $500M $318.5 $219.8 $188.5 $137.5 many owners are preparing to launch offerings. Currently, there are more than $5.3 $62.3 $400 million of sales offerings on the market and multiple deals are expected to $M hit the market over the next six months. 2007 2008 2009 2010 2011 2012 2013 2014 Source: JLL Research

1,108,439 13.9% 54,661 6.2% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 51.5% Total preleased

JLL | United States | Office Outlook | Q1 2015 59 Seattle-Bellevue

- Alex Muir Senior Research Analyst, Seattle-Bellevue Seattle sees a surge in sales and leasing activity

Technology tenants continue to drive leasing activity Technology tenants dominated first quarter leasing activity Palantir and Uber became the latest in a growing list of major tech companies to Technology establish a beachhead in Seattle, Facebook signed a lease that will allow it to 3% grow its local headcount to as many as 2,000 employees, and Amazon agreed to Retail & hospitality 6% lease more than 800,000 square feet in a two-building project currently under Media & entertainment construction. With all of this recent activity, it is no surprise that King County Real estate broke a 24-year-old record for area migration in 2014. Approximately 64,000 people from out of state were issued driver’s licenses in the county last year, Life sciences and if the pace from January and February 2015 continues, that record will not Healthcare 87% last long. Source: JLL Research

Seattle is one of the most active markets in the nation for development Construction cost index comparison There are more than 6.9 million square feet of office product under construction $11,500 in the Seattle metro area, placing Seattle behind only Houston, New York and National CCI Seattle CCI Dallas as the primary markets driving inventory growth nationally. With local $11,000 market fundamentals continuing to tighten – vacancy dropping, rents escalating $10,500 and demand far exceeding annual averages – much of the development $10,000 underway is speculative. Prior to this quarter, just 26.2 percent of the space $9,500 under construction was preleased. However, that number increased to 38.3 $9,000 percent in the first quarter of 2015. The remainder of the year should be very $8,500 telling as to whether concerns about over-building were/are founded or not. 2015 2016 2017 2018 2019 2020 Source: JLL Research

Rampant investment sales activity to begin the year Historical sales volume ($10M+) It took just one quarter for 2015 to become the sixth consecutive year with more than $1 billion in office investment transactions in Puget Sound. Following a year $6,000M $4,900.0 in which sales activity declined nearly 38.0 percent to $1.8 billion, the first quarter $4,000M saw nearly $1.6 billion in office assets trade hands. This represents the largest $2,800.0 $1,700.0 $1,759.5 $1,592.8 quarter in terms of volume since the fourth quarter of 2012, when Amazon $2,000M $1,200.0 purchased its headquarters from Vulcan. Further, for the fifth consecutive year, the market record for per-square-foot pricing was eclipsed. This occurred in $M February when BioMed Realty Trust purchased the SBRI Building from Vulcan 2010 2011 2012 2013 2014 Q1 2015 and Seattle BioMed for $89.7 million, or $859 per square foot. Source: JLL Research 6,901,827 11.0% -227,802 4.4% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 38.3% Total preleased

JLL | United States | Office Outlook | Q1 2015 60 Silicon Valley

- Christan Basconcillo Senior Research Analyst, Silicon Valley Ongoing demand prompts more development

High-flying startup companies fueling demand for office U.S. high-tech VC funding market share Although the IPO pipeline during 2014 was mediocre, several Valley companies made headlines, including Box.net and Alibaba. Pre-IPO tech companies San Francisco continue to grow their operations through aggressive hiring, equating to a Silicon Valley 26.5% significant amount of office space demand in the Valley. In 2014, at least Los Angeles 31.5% 500,000 square feet of leasing activity was generated by well-funded startups New York (region) between Silicon Valley and the San Francisco Mid-Peninsula. As other VC- Boston 7.5% All other HT markets 9.5% 14.4% backed tech companies still look to grow or add headcount, the demand for 10.6% space will grow, keeping market conditions heated and competitive over the next Source: JLL Research, PwC Moneytree 12 months.

Class A rents continue to rise, pressured by demand and new supply Historical Class A asking rents Demand for quality product has yet to subside and tenants continue to actively $5 target prime locations. Santa Clara has been the focus of many space $3.80 $3.61 $3.75 requirements given that there are multiple availabilities in newer Class A $4 $3.07 $3.12 buildings. Hitachi recently leased approximately 41,000 square feet of new space $2.90 $2.66 $2.58 $2.68 on Scott Boulevard, while Hortonworks expanded into 27,000 square feet at $3 Santa Clara Gateway. Additionally, the Valley saw strong occupancy gains $1.89 thanks to Samsung and Synopsys moving into their new corporate campuses in $2 Mountain View, accounting for 62.9 percent of the positive net absorption in the 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 first quarter of 2015. With several large tenants still looking to land, upward 2015 Source: JLL Research pressure on rents is expected to stay the course.

San Jose developers prep for the next wave of tenant overspill Groundbreaks for North San Jose Development After a long absence of new construction since the last recession, development in San Jose has finally come to life. Both Legacy Partners and South Bay Development began phase 1 of their campus projects, 200,000 and 300,000 square feet, respectively, while Federal Realty’s 225,000-square-foot office 1,082,106 s.f. building at Santana Row is now well under way. Deke Hunter’s Coleman Highline project in the Airport submarket also began with 357,000 square feet of Total square feet of projects to break ground in the office. Despite high vacancy rates in many San Jose submarkets, large available greater San Jose area in Q1 2015 contiguous blocks in Class A buildings taller three stories have been in very short supply throughout the Valley. The demand for true high-image space over renovated R&D will prompt additional development in San Jose in 2015. Source: JLL Research

4,811,393 13.6% 1,154,784 6.4% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 47.9% Total preleased

JLL | United States | Office Outlook | Q1 2015 61 St. Louis

- Blaise Tomazic Senior Research Analyst, St. Louis Growth moves beyond Class A properties

Office-occupying employment keeps growing Office-occupying employment (in thousands) Office-occupying employment has now had year-over-year growth for 26 consecutive months. The four industries comprise approximately 36 percent of 490.0 all non-farm payrolls in the region. The rise in employment is spilling over into 480.0 the office market, which has had positive absorption in five of the last six 470.0 quarters. Of the office-occupying sectors, financial activities continues to shine. 460.0 Since June 2007, employment in the sector is up 11.3 percent, best in the nation 450.0 during that time. Look for employment growth to remain strong. In the most 440.0 recent Federal Reserve Burgundy Book, 95 percent of contacts reported 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 employment will either be the same or higher over the next 12 months. Source: JLL Research

Is the trade-up trend ending? Net absorption by class (s.f.) In 2014 Class B properties absorbed five times more square footage than Class A properties. This trend continued in the first quarter of 2015, signaling that the “move-up” trend over the past five years might be coming to an end. The Class B 135,215 vacancy gap between the two classes is down to 350 basis points, the lowest level since 2010. With Class A vacancy now stabilized below 15 percent and no new construction, tenants have fewer Class A options available, particularly in Class A (70,476) Clayton and West County. It is no coincidence that both submarkets had the highest Class B absorption this quarter. (150,000) (50,000) 50,000 150,000 Source: JLL Research

Healthcare dominates leasing activity Leasing activity by sector Led by Mercy’s 390,000 square feet of renewals, healthcare was responsible for more than half of all leasing activity in the first quarter. The transactions stabilize 10% Healthcare 6% several buildings in West County along the I-64 corridor in Chesterfield, where Law firm 7% Mercy is a major occupier. Total leasing activity also increased, rising 128 Government percent from the previous quarter. Expect future leasing activity to be driven by 10% 56% Manufacturing & distribution financial and business services in the next 12 months. The two industries Technology currently total almost 600,000 square feet of tenant demand, or 32 percent. 11% Other Source: JLL Research

0 15.8% 64,7396 2.6% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 62 Tampa

- Drew Gilligan Research Analyst, Central Florida Urban center growth approaching pre-recession levels

Tampa CBD submarket approaching pre-recession levels Average rate in Tampa CBD nearing submarket high The Tampa CBD submarket remains one of the strongest in Tampa Bay, $28.00 $26.99 $27.05 showing continued growth through the first quarter of 2015. Vacancy rates for Direct Average Rate $26.00 both Class A and B space are nearing pre-recession levels, with Class A space Direct Average rate high nearing a 10-year low. Asking rates are currently at or near all-time highs across $24.00 the submarket, with Trophy assets starting negotiations for rents at $28.00- $30.00 per square foot, depending on the space. During the first quarter, there $22.00 $21.25 $21.25 was only 20,100 square feet of positive absorption although this was not due to a $20.00 lack of demand with multiple large users touring the market. A number of groups Tampa CBD Class A Tampa CBD Class B relocated within the submarket, maintaining their footprint in downtown Tampa. Source: JLL Research

A number of large tenants in the market are seeking space within the Multiple large tenants in the market urban core, but lack of available blocks is hindering search Groups seeking large blocks of space have seen their options dwindle as tenants 100K+ 7 look to move into office locations within the urban core as the local economy Size improves. Seven groups are in the market seeking space larger than 100,000 70K to 100K requirements square feet, two of which are considering build-to-suit options, which showcases 50K to 70K 4 the growing strength of the local economy and lack of availability. There has only been one significant building delivered in the last three years, and there are 20K to 50K 14 currently zero buildings under construction; however, we expect this could change over the next 12 to 18 months with space conditions tightening and 0 5 10 15 Source: JLL Research groups looking to upgrade space.

Multifamily development on the rise throughout Tampa Bay, specifically Multi-family developments in Tampa Bay near downtown St. Petersburg and Tampa 1,500 Six projects, totaling 1,389 units, are currently under construction in downtown 1,389 Tampa or South Tampa. A few development groups are considering breaking 1,000 ground downtown to build more multifamily units within the next two years. Of the 743 six projects, two are high-rise buildings that will add to the Tampa Bay skyline. Downtown St. Petersburg is experiencing a similar multi-family boom with three 500 buildings currently under construction, totaling 743 units. These projects will units of Number increase the total population of the urban core of both cities, and we expect this - could lead to increased demand for office space in Tampa Bay CBD submarkets, Tampa St. Pete as the cities evolve into a “live-work-play” environment. Source: JLL Research

0 17.2% 220,421 3.5% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 63 Washington, DC (Metro Area)

- Scott Homa Senior Vice President, Research, Washington, DC Transit-oriented leasing demand exposes bifurcation of downtown vs. suburbs

Tenant demand remained robust in the District of Columbia, while suburban Occupancy growth continues downtown at expense of suburbs markets struggled in Q1 2015 due to consolidation activity and urban migration Driven by increased tenant demand among technology companies and 3.0 Suburban CBD 2.0 government affairs groups, the District of Columbia registered positive net 1.0 absorption during the first quarter of 2015 for the seventh time in nine quarters. 0.0 Since the start of 2011, the District of Columbia has recorded 2.7 million square -1.0 -2.0 feet of occupancy growth, relative to negative net absorption of 7.6 million square

Million square feet Million square -3.0 feet in Northern Virginia and Suburban Maryland. First quarter 2015 investment -4.0 activity reflected this same dynamic, as a record-high 77.9 percent of all sales 2011 2012 2013 2014 Q1 2015 volume was concentrated in the District of Columbia. Source: JLL Research

Off-Metro locations are quickly becoming obsolete Transit-served submarkets dominate Q1 2015 leasing activity 92.3 percent of all leasing activity in the first quarter of 2015 was focused in buildings that were within a half mile of an existing or planned Metro station. 7.7% Several tenants signed leases to move to more Metro-proximate locations, Metro-served 15.0% including the American Diabetes Association and Noblis. Meanwhile, vacancy Future Metro-served rates in many off-Metro submarkets spiked above 30.0 percent, including Rock Spring Park (30.1 percent) and Skyline/Baileys Crossroads (39.4 percent). Given Off-Metro the growth of the Millennial generation in urban-centric locations, Metro 77.3% accessibility is quickly becoming a key requirement for large leasing decisions. Source: JLL Research

Strongest job creation in two years suggests a sustainable recovery is underway Regional job growth gains velocity The regional economy added 46,300 jobs during the 12-month period ending January 2015. This represented the strongest employment growth in two years. 50.0 Gains were relatively evenly distributed across industries, and the largest office- 40.0 occupying sector of the economy – professional and business services – added 30.0 10,400 jobs. Although legal jobs continued to decline, scientific and technical 20.0 services jobs more than offset those mild losses, and contributed to more than 10.0 half of all growth within the PBS sector. Regional unemployment remained below 0.0 the national average at 4.9 percent, a testament to Washington, DC’s sturdy Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 position within the overall economic recovery. Source: JLL Research

4,892,802 17.5% -736,571 -1.2% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 50.7% Total preleased

JLL | United States | Office Outlook | Q1 2015 64 Westchester County

- Kevin Interlicchio Research Analyst, Fairfield County Westchester sees surge in leasing activity

Leasing velocity highest since early 2013 Increase in leasing velocity Quarter-over-quarter change in leasing velocity yielded a 70.6 percent increase in Westchester County. This is an encouraging indicator for a market that has recorded limited activity for the last few quarters. Current tenant requirements totaling 700,000 square feet are driven by cost-effectiveness and access to transportation. The repositioning of many of the buildings along Westchester 70.6% Avenue contributed to almost a quarter of the total leasing in 2015. Insurance Increase in Westchester leasing companies led all industries in terms of space leased in the quarter, followed velocity from last quarter closely by the financial services sector. Source: JLL Research

Staying put Westchester deal classifications Renewals played a leading role behind leasing activity seen in Westchester during the first quarter. Nine out of the 10 largest leases completed in early 2015 16% Renewal involved renewals, as limited comparable availabilities encouraged tenants to remain in their existing holdings. Growing pains also encouraged companies to 13% Relocation within tack on expansions to their renewals. Nearly one-third of the renewals completed Westchester in early 2015 involved tenant expansions. Among the largest such transactions 71% New to market was PURE Insurance’s signing of a renewal and expansion totaling nearly 42,850 square feet at 44 South Broadway in White Plains. Source: JLL Research

Return of the Central Business District Percentage of Westchester County velocity by submarket White Plains CBD recorded the highest leasing velocity in Westchester County 50% for the first time since 2010. Despite the County as whole reporting negative White Plains CBD I-287 East I-287 West absorption of 51,400 square feet, White Plains CBD posted positive absorption of 40% 45,463 square feet. Vacancy in the submarket also dropped by 1.2 percent. The 30% legal and financial services sectors continue to identify this submarket as a 20% suitable location because of its proximity to the railroad stations, major highways and courthouse. These two sectors accounted for 55.0 percent of all leasing in 10% White Plains. 2011 2012 2013 2014 YTD 2015 Source: JLL Research

634,000 21.0% -51,433 0.2% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 100% Total preleased

JLL | United States | Office Outlook | Q1 2015 65 West Palm Beach

- Marc Miller Research Manager, Florida Fort Lauderdale Rent growth being driven by capital demand

Boca rents jump, but driven by investment instead of demand Recent West Boca investment’s pushing rates higher Asking rents among Class A assets in West Boca Raton rose 5.6 percent since year-end 2014, the largest quarter-over-quarter increase in nearly 10 years. $40.0 $36.00 $35.55 $35.91 $35.51 $35.54 $37.83 $34.54 $33.84 However, the increased rents are being fueled by heavy investment over the last $35.0 12 months rather than strong demand among tenants. Nearly 940,000 square $30.0 feet of space (29.0 percent of the submarket’s inventory) traded toward the end $25.0 of last year, with Crocker Partners purchasing the majority of properties, most $20.0 notably One Town Center and One Boca Place. Collectively, these properties increased asking rents 6.6 percent compared to the 4.0 percent increase seen $15.0 2008 2009 2010 2011 2012 2013 2014 2015 throughout the balance of the market, this despite absorption gains of only 15,700 square feet submarket-wide. Source: JLL Research

Is Delray Beach becoming a viable office market? A market on the move – Delray rents and vacancy Fundamentals for the Delray Beach office market have been consistently improving in recent years. Total vacancy is now 18.8 percent, which is below that Direct Average Rate Total Vacant % $24.00/fs 30.0% of the County as a whole, and is currently 590 basis points below its five-year average. In addition, asking rents have increased 10.8 percent year-over-year to $23.00/fs 25.0% a five-year high of $23.20 per square foot (full service). Further, these figures do $22.00/fs 20.0% not include the mixed-use/smaller office product along/surrounding Atlantic $21.00/fs 15.0% Boulevard, the City’s vibrant retail corridor downtown, where rents can reach as $20.00/fs 10.0% $35.00 per square foot. Downtown Delray has been an up-and-coming $19.00/fs 5.0% neighborhood in the County, and while the odds of the area becoming a strong $18.00/fs 0.0% office market in the traditional sense are slim, the possibility for the quasi-office product to be attract traditional office tenants in Boca/South Palm Beach is definitely real. Source: JLL Research

Strong employment gains point to future tightening Office sectors outpacing economic cornerstone Employment levels in Palm Beach County are at a record high, with 8.0% 6.8% 6.0% unemployment falling to 5.2 percent from 6.4 percent this time last year. Much of 6.0% these gains have occurred in office-using sectors. For example, professional and 3.7% 3.4% 4.0% 2.6% business services employment increased 6.0 percent year-over-year, and 2.1% 2.0% financial services employment, on the heels of financial tenants entering the 0.0% market, was up 3.7 percent from last year. With financial services firms moving back into the market, employment growth is expected to continue; as a result, the County’s office market should gradually tighten as well, particularly with no new buildings in the pipeline. Source: JLL Research

0 19.1% 65,702 2.1% Total under construction (s.f.) Total vacancy Q1 2015 net absorption (s.f.) 12-month rent growth 0.0% Total preleased

JLL | United States | Office Outlook | Q1 2015 66 Appendix

JLL | United States | Office Outlook | Q1 2015 67 United States office statistics Current Quarterly YTD total YTD total net quarter YTD Under total net net Direct Total Quarterly Under Market totals absorption direct Completions / construction Inventory (s.f.) absorption absorption vacancy vacancy percent construction (CBD and Suburban) (Including average deliveries as % of (Including (% of (%) (%) change (s.f.) subleases) marketed (s.f.) inventory subleases) inventory) rent ($p.s.f.) Atlanta 132,908,639 233,577 233,577 0.2% 18.8% 19.7% $21.03 1.4% 0 1,034,051 0.8% Austin 47,497,325 567,318 567,318 1.2% 11.3% 12.7% $32.19 7.3% 708,616 3,473,083 7.3% Baltimore 70,453,091 141,762 141,762 0.2% 13.5% 13.9% $22.38 0.6% 175,170 870,288 1.2% Boston 163,016,172 464,129 464,129 0.3% 12.4% 14.5% $32.03 4.1% 0 4,898,240 3.0% Charlotte 46,866,443 104,364 104,364 0.2% 12.3% 12.9% $21.95 1.5% 51,000 978,309 2.1% Chicago 232,492,544 125,343 125,343 0.1% 15.0% 16.3% $27.20 -2.2% 533,718 3,003,000 1.3% Cincinnati 34,671,460 206,245 206,245 0.6% 18.3% 19.1% $18.88 -0.1% 0 1,694,533 4.9% Cleveland 28,310,511 38,870 38,870 0.1% 18.7% 20.3% $19.08 0.0% 0 0 0.0% Columbus 31,186,614 -53,468 -53,468 -0.2% 13.9% 14.4% $17.38 -1.9% 286,000 484,000 1.6% Dallas 160,149,168 1,855,788 1,855,788 1.2% 18.0% 19.0% $23.09 3.1% 2,005,422 7,177,086 4.5% Denver 103,764,755 28,729 28,729 0.0% 12.6% 13.8% $23.96 -0.1% 0 2,340,203 2.3% Detroit 60,029,626 557,459 557,459 0.9% 23.4% 24.4% $18.09 0.7% 0 273,000 0.5% Fairfield County 47,764,858 -84,744 -84,744 -0.2% 20.3% 22.4% $31.50 -0.3% 0 0 0.0% Fort Lauderdale 22,271,001 7,156 7,156 0.0% 14.8% 15.4% $27.54 2.0% 40,000 143,565 0.6% Hampton Roads 12,998,206 -6,561 -6,561 -0.1% 15.5% 15.7% $18.52 1.0% 0 50,000 0.4% Houston 156,917,757 166,916 166,916 0.1% 13.1% 14.8% $28.34 -3.4% 1,621,581 12,833,724 8.2% Indianapolis 31,907,665 -36,346 -36,346 -0.1% 17.0% 17.4% $18.96 -0.1% 0 100,000 0.3% Jacksonville 20,041,013 -39,920 -39,920 -0.2% 16.8% 17.4% $18.60 1.0% 0 0 0.0% Kansas City 48,099,806 -16,160 -16,160 0.0% 15.3% 15.5% $17.97 0.0% 0 67,500 0.1% Long Island 42,537,977 64,840 64,840 0.2% 15.5% 17.0% $26.38 0.2% 174,400 368,806 0.9% Los Angeles 193,497,977 48,422 48,422 0.0% 15.5% 16.2% $33.72 -2.9% 0 2,069,739 1.1% Miami 35,467,168 105,535 105,535 0.3% 14.1% 14.4% $33.15 0.7% 0 303,103 0.9% Milwaukee 27,369,372 -2,832 -2,832 0.0% 16.6% 18.4% $17.79 2.0% 0 358,000 1.3% Minneapolis 68,369,802 341,357 341,357 0.5% 15.4% 16.5% $24.87 0.8% 0 916,560 1.3% New York 446,774,009 -1,614,106 -1,614,106 -0.4% 8.2% 10.0% $66.74 3.1% 0 7,206,342 1.6% New Jersey 159,197,242 -871,101 -871,101 -0.5% 22.5% 25.3% $25.25 0.8% 582,500 161,200 0.1% Oakland-East Bay 54,166,258 269,404 269,404 0.5% 13.1% 13.9% $29.16 0.7% 0 0 0.0% Orange County 93,658,237 3,295 3,295 0.0% 12.8% 13.2% $26.16 5.5% 0 645,705 0.7% Orlando 28,687,224 309,321 309,321 1.1% 16.0% 16.5% $20.45 -0.2% 0 0 0.0% Philadelphia 130,264,152 566,881 566,881 0.4% 13.1% 13.9% $24.85 0.5% 514,765 3,047,379 2.3% Phoenix 80,631,829 279,629 279,629 0.3% 21.4% 22.2% $21.80 1.4% 299,173 3,661,725 4.5% Pittsburgh 49,417,784 194,471 194,471 0.4% 13.2% 14.7% $21.91 1.5% 267,256 500,000 1.0% Portland 58,416,580 203,148 203,148 0.3% 8.9% 9.4% $23.12 2.8% 189,116 957,947 1.6% Raleigh / Durham 44,184,869 484,730 484,730 1.1% 12.5% 13.1% $20.64 0.0% 162,000 1,532,995 3.5% Richmond 24,471,916 64,964 64,964 0.3% 12.4% 14.1% $17.92 -1.1% 0 432,536 1.8% Sacramento 43,891,708 233,533 233,533 0.5% 17.5% 17.8% $22.32 0.0% 0 0 0.0% Salt Lake City 44,586,983 300,098 300,098 0.7% 6.8% 7.3% $19.96 1.7% 0 378,074 0.8% San Antonio 25,618,483 185,100 185,100 0.7% 16.6% 17.8% $22.55 1.9% 377,015 618,593 2.4% San Diego 78,499,212 -5,258 -5,258 0.0% 12.6% 13.5% $28.44 1.7% 0 878,164 1.1% San Francisco 74,643,941 381,934 381,934 0.5% 8.5% 9.9% $65.15 3.5% 451,000 3,134,205 4.2% San Francisco Peninsula 28,614,818 54,661 54,661 0.2% 12.1% 13.9% $48.71 2.1% 11,142 1,108,439 3.9% Seattle 89,578,326 -227,802 -227,802 -0.3% 10.6% 11.0% $32.10 1.6% 0 6,901,827 7.7% Silicon Valley 66,820,426 1,154,784 1,154,784 1.7% 12.1% 13.6% $41.84 1.3% 753,438 4,811,393 7.2% St. Louis 42,628,094 64,739 64,739 0.2% 15.0% 15.8% $19.84 2.2% 128,500 0 0.0% Tampa Bay 34,627,028 220,421 220,421 0.6% 16.7% 17.2% $22.05 0.6% 0 0 0.0% Washington, DC 331,021,518 -736,571 -736,571 -0.2% 16.4% 17.5% $35.88 0.5% 49,099 4,892,802 1.5% West Palm Beach 20,540,631 65,702 65,702 0.3% 18.9% 19.1% $28.59 2.8% 0 0 0.0% Westchester County 32,333,229 -51,433 -51,433 -0.2% 19.3% 21.0% $24.45 0.2% 0 0 0.0% United States totals 3,901,863,447 6,348,323 6,348,323 0.2% 14.4% 15.6% $29.48 3.1% 9,380,911 84,306,116 2.2%

JLL | United States | Office Outlook | Q1 2015 68 United States office rankings

Inventory Total vacancy rates (including sublease)

New York Salt Lake City Washington, DC Portland Chicago San Francisco Los Angeles New York Boston Seattle Dallas Austin New Jersey Charlotte Houston RaleighRaleigh-Durham / Durham Atlanta Orange County Philadelphia San Diego Denver Silicon Valley Orange County Denver Seattle Oakland-East Bay Phoenix Baltimore San Diego Philadelphia San Francisco San Francisco Peninsula Baltimore Richmond Minneapolis Columbus Silicon Valley Miami Detroit Boston Portland Pittsburgh Oakland-East Bay Houston Pittsburgh Fort Lauderdale Kansas City Kansas City Fairfield County Hampton Roads Austin St. Louis Charlotte Los Angeles Salt Lake City Chicago RaleighRaleigh-Durham / Durham Orlando Sacramento Minneapolis St. Louis Long Island Long Island Tampa Bay Miami BacksonvilleJacksonville Cincinnati Indianapolis Tampa Bay Washington, DC Westchester County Sacramento Indianapolis San Antonio Columbus Milwaukee Orlando Dallas San Francisco Peninsula West Palm Beach Cleveland Cincinnati Milwaukee Atlanta San Antonio Cleveland Richmond Westchester County Fort Lauderdale Phoenix West Palm Beach Fairfield County BacksonvilleJacksonville Detroit Hampton Roads New Jersey 0 200 400 0% 5% 10% 15% 20% 25% 30% Square feet (millions) Vacancy rate (%)

JLL | United States | Office Outlook | Q1 2015 69 United States office rankings

YTD total net absorption (including sublease) Marketed rents

Dallas New York Silicon Valley San Francisco Austin San Francisco Peninsula Philadelphia Silicon Valley Detroit Washington, DC RaleighRaleigh-Durham / Durham Los Angeles Boston Miami San Francisco Austin Minneapolis Seattle Orlando Boston Salt Lake City Fairfield County Phoenix Oakland-East Bay Oakland-East Bay West Palm Beach Atlanta San Diego Sacramento Houston Tampa Bay Fort Lauderdale Cincinnati Chicago Portland Long Island Pittsburgh Orange County San Antonio New Jersey Houston Minneapolis Baltimore Philadelphia Chicago Westchester County Miami Denver Charlotte Portland West Palm Beach Dallas Richmond San Antonio Long Island Baltimore St. Louis Sacramento San Francisco Peninsula Tampa Bay Los Angeles Charlotte Cleveland Pittsburgh Denver Phoenix Fort Lauderdale Atlanta Orange County RaleighRaleigh-Durham / Durham Milwaukee Orlando San Diego Salt Lake City Hampton Roads St. Louis Kansas City Cleveland Indianapolis Indianapolis BacksonvilleJacksonville Cincinnati Westchester County BacksonvilleJacksonville Columbus Hampton Roads Fairfield County Detroit Seattle Kansas City Washington, DC Richmond New Jersey Milwaukee New York Columbus -2,000 0 2,000 $0.00 $20.00 $40.00 $60.00 $80.00 Square feet (thousands) $ per square foot

JLL | United States | Office Outlook | Q1 2015 70 United States office rankings

Under construction Under construction as % of inventory

Houston Houston New York Seattle Dallas Austin Seattle Silicon Valley Boston Cincinnati Washington, DC Phoenix Silicon Valley Dallas Phoenix San Francisco Austin San Francisco Peninsula San Francisco RaleighRaleigh-Durham / Durham Philadelphia Boston Chicago San Antonio Denver Philadelphia Los Angeles Denver Cincinnati Charlotte RaleighRaleigh-Durham / Durham San Francisco Peninsula Richmond Atlanta Portland Charlotte New York Portland Columbus Minneapolis Washington, DC San Diego Minneapolis Baltimore Milwaukee Orange County Chicago San Antonio Baltimore Pittsburgh San Diego Columbus Los Angeles Richmond Pittsburgh Salt Lake City Long Island Long Island Miami Milwaukee Salt Lake City Miami Atlanta Detroit Orange County New Jersey Fort Lauderdale Fort Lauderdale Detroit Indianapolis Hampton Roads Kansas City Indianapolis Hampton Roads Kansas City Westchester County New Jersey West Palm Beach Westchester County Tampa Bay West Palm Beach St. Louis Sacramento Tampa Bay Orlando St. Louis Oakland-East Bay Sacramento BacksonvilleJacksonville Orlando Fairfield County Oakland-East Bay Cleveland BacksonvilleJacksonville Fairfield County 0 5,000,000 10,000,000 15,000,000 Cleveland Square feet 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

JLL | United States | Office Outlook | Q1 2015 71 Select large leases > 100,000 square feet Sorted by lease size and completed during Q1 2015

Market Tenant Address/building Size (s.f.) Lease type

Washington, DC Fannie Mae 1150 15th Street NW 700,000 Relocation within market New York Publicis 1675 Broadway 506,009 Renewal New York MetLife 200 Park Avenue 430,000 Expansion in building Silicon Valley Apple 505/555 N Mathilda Avenue 424,644 Expansion in market Philadelphia Comcast 1800 Arch Street 377,000 Expansion in market Northern Virginia U.S. Marshals Service 1215 S Clark Street 371,000 Relocation within market Seattle-Bellevue Facebook 1101 Dexter Avenue N 273,460 Expansion in market Chicago Baxalta 1200 Lakeside Drive 260,804 New to market New York WeWork 85 Broad Street 234,879 Expansion in market Fort Lauderdale Amsurg 8000 W Sunrise Boulevard 222,000 Expansion in market Washington, DC World Bank 1776 G Street NW 220,000 Renewal Chicago CDW 75 Tri State International 209,000 Relocation within market Austin Indeed 6500 Capital of Texas Hwy 208,000 Expansion in market New York Fortress Investment Group 1345 Avenue of the Americas 200,030 Renewal Silicon Valley Apple Stevens Creek @ Finch Street 200,000 Expansion in market Austin Google 500 W 2nd Street 200,000 Expansion in market Minneapolis Wells Fargo 1000 Blue Gentian Road 189,765 Renewal St. Louis Mercy 14528 S Outer Forty 187,000 Renewal Northern Virginia Fannie Mae 12000 Sunrise Valley Drive 186,002 Relocation within market Oakland-East Bay Confidential 4440 Rosewood Drive 180,495 New to market Orange County Hyundai Capital 4000 MacArthur Boulevard 177,616 New to market Portland MODA Health 601 SW 2nd Avenue 175,542 Renewal San Francisco Uber 555 Market Street 172,838 Expansion in market Houston Samsung Engineering 2050 W Sam Houston Parkway 160,632 Relocation within market Northern Virginia Noblis 2002 Edmund Halley Drive 160,503 Relocation within market Atlanta SITA 3100 Cumberland Boulevard 156,164 Renewal New York WebMD 395 Hudson Street 152,670 Relocation within market Washington, DC U.S. Federal Bureau of Investigation 1025 F Street NW 152,022 Renewal New York Bloomberg 919 Third Avenue 150,000 Expansion in market Minneapolis Prime Therapeutics 1305 Corporate Center Drive 141,000 Renewal Boston General Dynamics 100 Rustcraft Road 136,000 Relocation within market Detroit Truven Health Analytics 100 Phoenix Drive 135,000 Relocation within market Sacramento Blue Shield 3300 Zinfandel 134,497 Relocation within market Philadelphia Cooper Healthcare 100 Market Street 131,000 Expansion in market San Francisco Advent Software 600 Townsend Street 129,491 Expansion in building San Francisco Kirkland & Ellis 555 California Street 129,491 Expansion in building Los Angeles City of Los Angeles 350 S Grand Avenue 126,000 Relocation within market New York Fiduciary Trust 280 Park Avenue 126,000 Relocation within market New Jersey Dun & Bradstreet 103 JFK Parkway 123,000 Renewal Fairfield County Sikorsky Aircraft 1 Far Mill Crossing 121,041 Expansion in market Pittsburgh Chevron 700 Cherrington Parkway 120,000 Relocation within market Dallas NEC Corporation of America 3929 W John Carpenter Freeway 119,611 Relocation within market New York OnDeck Capital 1400 Broadway 117,000 Expansion in building Houston Swift Energy 17001 Northchase Drive 116,410 Extension (< 36-month term) Phoenix State of Arizona 3003 N Central Avenue 112,323 New to market Dallas AMN Healthcare 8840 Cypress Waters Boulevard 108,502 Expansion in market Orange County Mitsubishi Electric 5900 Katella A&C 107,471 Extension (< 36-month term) Silicon Valley Blue Coat Security 384 Santa Trinita Avenue 107,155 Relocation within market Indianapolis Hall Render/Blue & Co/Indiana Hospital 500 N Meridian Street 105,000 Relocation within market Boston Shire Pharmaceuticals 325 Wyman Avenue 104,372 Relocation within market

JLL | United States | Office Outlook | Q1 2015 72 Select large sales > 100,000 square feet Sorted by total sales price and completed in Q1 2015

Price per Market Building RBA (s.f.) Sale price $ square foot Buyer Seller ($ p.s.f.) New York 1095 Avenue of the Americas 1,036,534 $2,200,000,000 $2,122 Ivanhoe Cambridge Blackstone Wharton Properties/General New York 730 Fifth Avenue 394,473 $1,750,000,000 $4,436 40 North Properties/Spitzer Enterprises Growth Properties Chicago 233 S Wacker Drive 3,781,045 $1,500,000,000 $397 Blackstone Joseph Chetrit/American Landmark New York 230 Park Avenue 1,212,576 $1,000,000,000 $825 RXR Realty Invesco/NPS/Monday Properties New York 601 W 26th Street 2,309,739 $870,550,000 $754 Blackstone RXR Realty New York 1345 Avenue of the Americas 1,896,140 $786,855,000 $830 JP Morgan Rockpoint Group/Fisher Brothers Chicago 1 N Wacker Drive 1,373,754 $750,000,000 $546 Irvine Company Hines New York 590 Madison Avenue 1,005,330 $750,000,000 $1,492 M. Safra and Company OSTRS New York 32 Old Slip 1,132,340 $675,000,000 $596 RXR Realty Beacon Capital Partners New York 11 Times Square 1,016,406 $630,000,000 $1,377 Norges SJP Properties/Prudential New York 7 Bryant Park 470,000 $600,000,000 $1,277 Bank of China Hines/JP Morgan/Parcolet Miliken Starwood/Vanderbilt/Trinity Raleigh-Durham Part of national portfolio sale 2,700,000 $500,000,000 $185 Duke Realty Capital 51 Louisiana Avenue NW/300 Washington, DC 461,484 $496,905,750 $1,077 Jamestown Dweck Properties New Jersey Avenue NW New York 180 Maiden Lane 1,078,751 $470,000,000 $436 Murray Hill/Clarion Partners SL Green/The Moinian Group New York 605 Third Avenue 953,790 $463,144,000 $971 JP Morgan Rockpoint Group/Fisher Brothers New York 717 Fifth Avenue 465,000 $450,000,000 $968 Anbang Insurance Group Blackstone Washington, DC 1801 K Street NW 569,769 $445,000,000 $781 Mirae Somerset Partners Houston 1000 Main Street 837,130 $435,000,000 $520 Metzler Real Estate Invesco Chicago 55 E Monroe Street 1,271,427 $367,300,000 $289 Prudential/GlenStar Walton Street/GlenStar New York 757 Third Avenue 459,000 $360,000,000 $784 Bentall Kennedy RFR Realty New York 1375 Broadway 513,000 $356,250,000 $694 Westbrook Partners Savanna

New York 315 Park Avenue S 333,000 $353,851,113 $1,063 Columbia Property Trust Spear Street Capital New York 620 Sixth Avenue 670,000 $334,250,000 $998 Blackstone RXR Realty New York 1407 Broadway 1,100,000 $330,000,000 $300 Shorenstein Lightstone Group Silicon Valley 3301-3307 Hillview Drive 292,000 $330,000,000 $1,130 Morgan Stanley Vista Equity Partners New York 340 Madison Avenue 750,000 $328,050,000 $875 Blackstone RXR Realty Chicago 111 N Canal Street 839,601 $325,000,000 $387 - Sterling Bay Seattle-Bellevue 320-355 110th Avenue NE 524,130 $319,800,000 $610 Hines Ivanhoe Cambridge Los Angeles 13031 W Jefferson Boulevard 399,373 $316,000,000 $791 Invesco Shorenstein New York 132 W 31st Street 423,000 $294,000,000 $695 Westbrook Partners Savanna Boston 100 Cambridge Street 565,157 $279,600,000 $495 Intercontinental Real Estate Corp MassDevelopment American Realty Capital New New York 123 William Street 495,739 $253,000,000 $510 East End Capital/Green Oak York REIT San Francisco Peninsula 2882-2884 Sand Hill Road 133,000 $239,750,000 $1,803 Invesco Clarion Partners/Courson Company New York 1166 Avenue of the Americas 556,000 $209,500,000 $754 Blackstone RXR Realty Seattle-Bellevue 205-225 108th Avenue NE 305,835 $205,100,000 $671 Hines Brickman Philadelphia 1818 Market Street 981,743 $203,000,000 $207 Shorenstein Daymark Realty Advisors New York 1330 Avenue of the Americas 535,600 $201,850,000 $754 Blackstone RXR Realty San Francisco 301 Howard Street 307,395 $200,114,145 $651 Emmes Embarcadero Capital Partners Houston 1301 Fannin Street 784,000 $200,000,000 $255 Netrality Properties Center Square/Griffin Properties Chicago 550 W Adams Street 479,000 $185,000,000 $386 GLL SEB Boston 640 Memorial Drive 225,748 $176,500,000 $782 Alexandria RE Equities Massachusetts Institute of Technology Denver 1513-1530 Wynkoop Street 306,791 $171,937,500 $560 Invesco American Realty Advisors New York 321 W 44th Street 181,021 $165,000,000 $911 JOWA Holdings East End Capital/Green Oak Atlanta 3060 Peachtree Road NW 461,669 $157,000,000 $340 Parkway Properties Metzler Real Estate

JLL | United States | Office Outlook | Q1 2015 73 Select developments underway > 100,000 square feet Sorted by square feet and under way as of Q1 2015

Construction Expected Market Submarket Building RBA s.f. Preleased % type delivery year New York World Trade Center 3 World Trade Center Speculative 2,861,402 18.0% 2018 Dallas Far North Dallas Toyota Headquarters BTS 1,787,000 100.0% 2017 New York Penn Plaza/Garment 10 Hudson Yards Speculative 1,700,000 77.5% 2016 San Francisco South Financial District Salesforce Tower Speculative 1,420,081 50.3% 2017 Philadelphia Market Street West Comcast Innovation and Technology Center BTS 1,334,000 100.0% 2018 Chicago West Loop 150 N Riverside Plaza Speculative 1,200,000 61.5% 2016 Houston Westchase Phillips 66 Headquarters BTS 1,100,000 100.0% 2016 Houston CBD 609 Main at Texas Speculative 1,057,668 0.0% 2017 Chicago West Loop 444 W Lake Street Speculative 1,050,000 49.2% 2016 Silicon Valley Sunnyvale Moffett Place Speculative 945,816 100.0% 2015 New York Grand Central 390 Madison Avenue Speculative 858,710 0.0% 2016 New York Hudson Square One SoHo Square Speculative 768,000 0.0% 2016 Seattle-Bellevue Seattle CBD Fifth & Columbia Speculative 766,779 36.9% 2017 Chicago Northwest Zurich North American Insurance BTS 753,000 100.0% 2016 Seattle-Bellevue Seattle CBD Madison Centre Speculative 746,000 5.4% 2016 Seattle-Bellevue Bellevue CBD 400 Lincoln Square Speculative 724,693 5.8% 2016 Northern Virginia Eisenhower Avenue 2401 Eisenhower Avenue BTS 720,000 100.0% 2018 Boston North Partners Healthcare BTS 700,000 100.0% 2015 Philadelphia University City FMC Tower BTS 635,000 54.4% 2016 Charlotte CBD 300 S Tryon Street Speculative 630,000 31.7% 2017 Silicon Valley Santa Clara 2685 Augustine Drive Speculative 607,186 100.0% 2016 Silicon Valley Sunnyvale Moffett Gateway Speculative 600,864 0.0% 2015 Houston Energy Corridor Energy Center Four Speculative 600,000 100.0% 2016 Houston Galleria BHP Billiton Tower BTS 600,000 100.0% 2016 Phoenix Tempe Marina Heights - Building B Speculative 600,000 100.0% 2015 Houston CBD 6 Houston Center Speculative 600,000 0.0% 2016 Atlanta Central Perimeter State Farm Campus BTS 585,000 100.0% 2017 Philadelphia Market Street West 2400 Market Street Speculative 559,740 38.5% 2016 Northern Virginia Rosslyn Central Place Speculative 552,781 64.6% 2018 Houston Energy Corridor Energy Center Three Speculative 546,604 100.0% 2015 Dallas Uptown McKinney & Olive Speculative 530,000 40.5% 2017 Houston Westchase Southwestern Energy BTS 515,000 100.0% 2015 Houston Energy Corridor Energy Center Five Speculative 505,000 0.0% 2016 Austin CBD 500 W. 2nd Speculative 500,436 40.0% 2017 Boston Seaport District 100 Northern Avenue BTS 500,000 72.0% 2016 Atlanta Buckhead Three Alliance Speculative 500,000 5.0% 2016 Dallas Richardson/Plano Raytheon Headquarters BTS 490,000 100.0% 2016 Phoenix Tempe Marina Heights - Building E Speculative 480,000 100.0% 2016 Raleigh-Durham Cary MetLife I & MetLife II BTS 480,000 100.0% 2015 Northern Virginia Tysons Corner 1775 Tysons Boulevard Speculative 476,913 0.0% 2016 New York Penn Plaza/Garment 7 Bryant Park Speculative 473,672 0.0% 2015 Cincinnati Midtown 4590 Beech Street Speculative 470,000 - 2015 Seattle-Bellevue Bellevue CBD 929 Office Tower Speculative 462,000 0.0% 2015 Washington, DC East End 601 Massachusetts Avenue NW Speculative 460,449 83.2% 2015 Houston Energy Corridor Noble Energy Center II BTS 456,000 100.0% 2015 San Francisco South Financial District 222 2nd Street Speculative 452,418 99.5% 2015 Houston Energy Corridor Airliquide Speculative 452,370 37.8% 2015 Dallas CBD KPMG Plaza at Hall Arts Speculative 450,000 66.4% 2016 Boston Seaport District 101 Seaport Boulevard BTS 440,000 80.3% 2015 Seattle-Bellevue Lake Union Troy Block - North Tower Speculative 440,000 100.0% 2016

JLL | United States | Office Outlook | Q1 2015 74 If cracks exist in the growing economy, they aren’t yet visible in the leasing, sales or development markets. In fact, growth, both economic, as well as real estate-centric, is shifting from tech-heavy markets and spilling over into secondary and tertiary markets, giving legs to a longer-term economic expansion, despite slowdowns in the energy markets.

JLL | United States | Office Outlook | Q1 2015 75 For more information, please contact:

Julia Georgules John Sikaitis Director Managing Director Office Research Local Markets Research +1 415 354 6908 + 1 202 719 5839 [email protected] [email protected]

Phil Ryan Sean Coghlan Research Analyst Director Office and Economy Research Capital Markets Research + 1 202 719 6295 + 1 215 988 5556 [email protected] [email protected]

About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $50.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

About JLL Research JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions.

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