Office Market Report

Dallas/Fort Worth 2nd Quarter 2014 Office Market Report

In partnership with

Table of Contents/Methodology of Tracked Set

Table of Contents/Methodology of Tracked Set 2

Office Market Map 3

2nd Quarter 2014 4-8

Under Construction & Leasing Activity 9-10

Key Deals Signed in the 2nd Quarter 11

Future Occupancies/Vacancies 12

Advisory Board Members 13

DFW Xceligent Team 14

The Dallas-Fort Worth tracked set consists of an inventory of buildings considered to be competitive within the brokerage community. All buildings within the competitive tracked set have been reviewed and verified by members of the Advisory Boards for each market area.

The total square feet of all single and multi-tenant buildings greater than 10,000sf, Tracked Inventory including owner occupied facilities. Medical, government, data centers and (Office) obsolete/remediation properties are excluded.

All of the available leasable space within a building, whether it is occupied or vacant, for direct lease or sublease space. Space can be available but not vacant, Total Available SF for example, if the landlord, or his agent, is marketing space that will be coming available at a future date because a tenant is planning to move. The total of the vacant square footage in a building that is being marketed by an Direct Vacant SF agent representing the landlord.

The net change in occupied square feet from quarter to quarter, expressed in Net Absorption square feet.

Note This report reflects Direct Vacancy and Absorption, Sublease space is excluded

Office Market Map

2nd Quarter 2014

Overview Throughout the second quarter of 2014 the Dallas/Fort Worth office market has continued to see overall positive activity with approximately 483,000 square feet absorbed compared to around 770,000 square feet in the first quarter of 2014. Major tenants contributing to this quarters absorption were Bell Helicopter, Verizon and USAA.

1st Quarter Statistics (Overall)

# of Total Available Total Vacant Total Vacancy Qtrly Net YTD Net Inventory (SF) Bldgs (SF) (SF) Rate (%) Absorption (SF) Absorption (SF)

A 506 122,756,678 25,939,668 20,102,757 16.4% 167,804 337,658 B 1,271 113,950,956 19,779,840 16,830,642 14.8% 266,535 855,799

C 246 8,367,810 1,697,954 1,522,347 18.2% 48,849 9,633 Total 2,023 245,075,444 47,417,462 38,455,746 15.7% 483,188 1,203,090

Historical Stats for DFW Office Inventory (SF) Total Vacancy Rate (%) Qtrly Net Absorption (SF) 2014 Q2 245,075,444 15.7% 483,188 A 122,756,678 16.4% 337,658 B 133,950,956 14.8% 855,799 C 8,367,810 18.2% 9,633 2014 Q1 242,646,849 15.7% 770,923 A 120,660,961 16.6% 172,257 B 113,701,850 14.6% 600,926 C 8,284,038 18.2% -2,260 2013 Q4 242,616,909 16.3% 1,737,043 A 119,997,753 17.2% 1,499,937 B 114,359,228 15.3% 309,043 C 8,259,928 17.8% -71,937 2013 Q3 242,762,607 17.0% 1,232,575 A 119,986,127 18.5% 188,750 B 114,513,684 15.5% 1,037,906 C 8,262,796 17.0% 5,919 2013 Q2 241,295,900 17.2% 850,945 A 118,424,868 18.0% 1,051,085 B 114,647,316 16.5% -201,677 C 8,223,716 16.6% 1,537 2013 Q1 240,485,340 17.4% 661,318 A 117,906,599 19.1% -94,788 B 114,332,738 15.8% 736,085 C 8,246,003 16.2% 20,021 2Q 2014 Market Trends © 2014 by Xceligent, Inc. All Rights Reserved 4

2nd Quarter 2014

Overview

The markets overall vacancy rate is expected to drop further this year, due to several additional large deals that are in the works. For example State Farm will be moving into the first phase of its new campus at Cityline in Richardson for approximately 500,000 sf.

Q2 Vacancy Rates by Class Q2 Absorption by Class

16.4% 266,535

167,804 14.8%

A B A B

As vacancy rates decrease and rental rates rise many areas of Dallas/Fort Worth are becoming more of a Landlord’s market.

Q2 Absorption Q2 Vacancy Rates CBD/Suburban CBD/Suburban

61,455 20% 15%

(2,429)

Dallas CBD Suburban Dallas CBD Suburban

1st Quarter 2014

Q1 Average Asking Rates (FSG) Historical Vacancy Rates by Quarter (DFW) A B 17.4% 17.2% 17% Central Expy $23.66 $18.74 16.3% 15.7% 15.7% Dallas CBD $21.78 $16.53 East Dallas $20.75 $14.52 Far North Dallas $25.54 $17.68 Las Colinas $25.74 $23.45 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 LBJ Corridor $21.92 $20.30 Preston Center $31.41 $28.66 Richardson/Plano $20.78 $20.08 Historical Net Absorption by Quarter (DFW) Southwest Dallas $20.00 $14.61 1.7m Stemmons Corridor $15.78 $11.60 1.2m Uptown $30.32 $22.60 851k 661k 770k Greater Fort Worth $23.82 $17.64 483k Mid Cities $21.58 $15.87 Fort Worth CBD $27.53 $17.71 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 Denton/Lewisville $24.33 $18.49

Q1 Largest Changes in Occupancy

Property Name Class SF occupied or vacated Company Name Market Bell Helicopter Campus A 200,000 Bell Helicopter Mid Cities 2200 W Airfield Dr B 185,000 Verizon Mid Cities Legacy Business Park Bldg 2 A 105,000 USAA Far North Dallas Lake Vista Pointe B 41,006 Ally Financial Denton/Lewisville Plaza of the Americas North A 40,000 HUB International Dallas CBD Ross Tower A 38,611 Perkins Coie Dallas CBD Trinity Towers A 33,967 Childrens Medical Stemmons Corridor The Commons at Las Colinas II A 32,187 Epsilon Las Colinas International Business Park B 26,847 Great Lakes Educational Loan Services Far North Dallas Savoye Squared B 26,657 HCK2 Far North Dallas Parkway Plaza Bldg I B (18,318) GHA Far North Dallas Trammell Crow Center A (19,096) Perkins Coie Dallas CBD Bluffview Towers East A (25,057) Atrium Windows Preston Center One Ridgmar Centre A (26,580) PAE Applied Technologies Greater Fort Worth Three Forest Plaza B (29,462) QRX Medical Management LBJ Corridor Westway One B (30,000) U of Phoenix Las Colinas Westway One B (33,240) Lennar Homes Las Colinas 801 Cherry St A (81,516) Thompson Reuters Fort Worth CBD Tollway Office Center II B (160,000) Capital One Far North Dallas 5851 Legacy Cir A (318,582) Encana Oil & Gas Far North Dallas

2nd Quarter 2014

2nd Quarter Statistics (By Submarket)

# of Total Vacancy Qtrly Net Inventory (SF) Total Available (SF) Total Vacant (SF) YTD Net Absorption Bldgs Rate (%) Absorption (SF)

Dallas CBD 72 33,126,552 7,332,392 6,730,292 20.3% 61,455 349,379 A 24 20,275,918 5,750,391 5,173,448 25.5% 60,994 336,820 B 39 11,900,398 1,434,726 1,409,569 11.8% 461 27,898 C 9 950,236 147,275 147,275 15.5% 0 -15,339 Uptown 65 10,596,304 1,471,133 1,138,082 10.7% 56,759 71,260 A 40 8,861,710 1,159,129 870,058 9.8% 46,701 57,085 B 22 1,645,546 278,155 236,539 14.4% 10,058 14,175 C 3 89,048 33,849 31,485 35.4% 0 0 Stemmons Corridor 110 11,266,567 3,457,825 2,937,007 26.1% 59,951 -127,710 A 12 3,970,178 1,124,074 989,248 24.9% 40,006 -136,971 B 68 6,171,391 2,006,249 1,726,289 28.0% -3,889 -5,383 C 30 1,124,998 327,502 221,470 19.7% 23,834 14,644 Preston Center 32 4,018,433 430,025 308,582 7.7% 4,637 9,206 A 19 3,131,126 337,288 222,947 7.1% -14,419 -1,497 B 11 819,629 81,789 74,687 9.1% 17,231 13,579 C 2 67,678 10,948 10,948 16.2% 1,825 -2,876 Central Expy 59 10,835,306 2,516,505 2,024,197 18.7% 26,193 43,194 A 19 6,347,735 1,821,940 1,439,318 22.7% -317 18,026 B 34 4,143,886 629,231 519,545 12.5% 27,375 29,427 C 6 343,685 65,334 65,334 19.0% -865 -4,259 LBJ Corridor 148 20,934,737 6,162,268 5,339,916 25.5% -11,207 -6,838 A 29 9,542,205 2,857,514 2,200,809 23.1% 11,038 41,519 B 94 10,419,606 3,012,657 2,861,913 27.5% -14,959 -25,722 C 25 972,926 292,097 277,194 28.5% -7,286 -22,635 Far North Dallas 359 45,995,541 6,901,477 5,574,451 12.1% -215,008 214,505 A 133 26,101,071 4,007,070 3,051,579 11.7% -161,106 146,868 B 216 19,056,354 2,825,554 2,454,877 12.9% -54,206 61,025 C 10 838,116 68,853 67,995 8.1% 304 6,612 Las Colinas 236 32,453,573 6,210,184 4,928,260 15.2% -6,824 -213,255 A 75 18,193,494 3,305,128 2,512,140 13.8% 19,175 -300,825 B 152 13,950,865 2,882,811 2,393,875 17.2% -25,999 87,570 C 9 309,214 22,245 22,245 7.2% 0 0 East Dallas 63 3,158,473 469,045 442,697 14.0% -3,367 -6,376 A 5 231,927 53,606 50,175 21.6% -782 -2,262 B 40 2,334,639 343,228 320,311 13.7% -2,585 -2,650 C 18 591,907 72,211 72,211 12.2% 0 -1,464

2nd Quarter 2014

2nd Quarter Statistics (By Submarket) [continued]

# of Total Vacancy Qtrly Net Inventory (SF) Total Available (SF) Total Vacant (SF) YTD Net Absorption Bldgs Rate (%) Absorption (SF)

Richardson/Plano 243 24,115,300 4,510,422 2,980,859 12.4% 113,922 445,483 A 57 10,211,601 2,294,320 1,172,651 11.5% 32,021 99,937 B 166 13,387,838 2,124,896 1,720,813 12.9% 66,993 326,306 C 20 515,861 91,206 87,395 16.9% 14,908 19,240 Southwest Dallas 25 1,552,277 267,338 228,762 14.7% -36,987 -40,487 A 3 354,900 90,813 52,781 14.9% 0 0 B 15 960,941 98,893 98,349 10.2% -17,275 -17,902 C 7 236,436 77,632 77,632 32.8% -19,712 -22,585 Mid Cities 290 18,949,010 3,629,235 2,449,444 12.9% 493,523 483,673 A 45 5,658,396 1,639,115 1,133,265 20.0% 209,704 198,599 B 185 12,255,229 1,701,382 1,049,598 8.6% 237,352 238,923 C 60 1,035,385 288,738 266,581 25.7% 46,467 46,151 Denton/Lewisville 82 5,285,893 852,345 674,858 12.8% 17,946 -12,182 A 10 946,245 133,733 115,300 12.2% 1,039 -36,868 B 62 4,054,736 690,719 541,312 13.4% 16,607 23,837 C 10 284,912 27,893 18,246 6.4% 300 849 Greater Fort Worth 169 11,277,108 1,368,916 1,151,943 10.2% -42,364 43,618 A 23 3,740,535 179,282 103,408 2.8% -31,816 -28,716 B 116 6,880,388 1,048,133 912,893 13.3% 1,383 81,039 C 30 656,185 141,501 135,642 20.7% -11,931 -8,705 Fort Worth CBD 55 9,928,213 1,522,058 1,373,467 13.8% -34,234 -50,910 A 11 4,864,418 1,027,489 990,840 20.4% -44,434 -54,057 B 39 4,775,049 472,829 368,113 7.7% 9,195 3,147 C 5 288,746 21,740 14,514 5.0% 1,005 0 South Irving/Grand 15 1,582,157 316,294 172,929 10.9% -1,207 530 Prairie A 1 325,219 158,776 24,790 7.6% 0 0 B 12 1,194,461 148,588 141,959 11.9% -1,207 530 C 2 62,477 8,930 6,180 9.9% 0 0

Total 2,023 245,075,444 47,417,462 38,455,746 15.7% 483,188 1,203,090

Office Under Construction & Leasing Activity

New Construction New construction activity continues to increase in the DFW office market with over 7 million square feet underway in the metroplex. For submarkets closer to the Dallas CBD new key buildings such as McKinney & Olive, KPMG at Hall Arts, Frost Tower, and the new Richards Group building on Central Expressway are expected to draw new interest. These buildings have already seen quite a bit of preleasing activity. As construction activity continues to climb particularly in Far North Dallas a majority of the new construction is found around Legacy, the Toll-way and in Richardson.

Notable Projects Underway

Property Name Market Class Bldg Size

CityLine - State Farm Richardson/Plano A 2,000,000

McKinney & Olive Uptown A 530,000

KPMG Plaza at Hall Arts Dallas CBD A 500,000

CityLine - Raytheon Richardson/Plano A 489,000

USAA Building Greater Fort Worth A 357,214

FAA Corporate Campus Mid Cities A 357,214

Legacy Towers Far North Dallas A 342,066

FedEx Office & Print Services Inc. Far North Dallas A 265,000

Richards Group Tower Central Expy A 250,000

8111 Westchester Ave Preston Center A 200,000

Cypress Waters Phase I Las Colinas A 188,440

International Business Park XVI Far North Dallas A 186,000

Cowboy Alley - Office Far North Dallas A 180,000

Cowboy Alley - Office 2 Far North Dallas A 180,000

Cypress Waters - Nationstar HQ Las Colinas B 175,585

Frost Tower Uptown A 167,251

Cypress Waters Phase II Las Colinas A 165,000

Hillwood Commons I Mid Cities A 157,909

Parkland Hall Uptown A 154,000

Office Under Construction & Leasing Activity

Notable Projects Density Map

This map illustrates the density of notable projects.

Office Leasing Activity Density Map

This map illustrates the density of office leasing activity across the metro. This is reflective of the number of leases signed not the aggregate of the total square footage. (1st Half of 2014)

Office Key Deals Signed in the 2nd Quarter

The following are notable deals signed during the 2nd Quarter 2014. These include New Deals, Renewals, Expansions, and Relocations that may not have taken immediate occupancy.

Tenant Class Property Name Leased SF Market

Tenet Healthcare Corporation A Fountain Place 219,795 Dallas CBD

Toyota A The Campus At Legacy 125,742 Far North Dallas

Gardere Wynne Sewell LLP A McKinney & Olive 109,000 Uptown

Norton, Rose, Fulbright A Chase Tower 107,428 Dallas CBD

Amazon.com A Two Galleria Tower 88,615 LBJ Corridor

Heartland Payment A Granite Park IV 81,000 Far North Dallas

Mitel A Granite Park IV 52,834 Far North Dallas

Bre/Coh TX, LLC B Legacy Commons 52,386 Far North Dallas

Grant Thornton, LLP A Comerica Bank Tower 52,330 Dallas CBD

Childrens Medical Center of Dallas A Trinity Towers 33,976 Stemmons Corridor

ZeOmega B Tennyson Office Center II 30,986 Far North Dallas

HCK2 B Savoye Squared 26,657 Far North Dallas

Triumph Savings Bank B 3 Park Central 26,199 LBJ Corridor

Fischer & Company A Galleria North Tower II 25,127 Far North Dallas

Sirius XM Satellite Radio B Freeport Corporate Center Bldg 2 24,958 Las Colinas

The Middleberg Riddle Group A KPMG Centre 24,515 Dallas CBD

Hartline Dacus Barger Dreyer LLP A Northpark Central I 24,370 Central Expy

Houlihan Lokey A The Crescent 21,611 Uptown

Lanyon Inc A KPMG Centre 21,304 Dallas CBD

Medigain, LLC B Willow Bend Park 20,902 Far North Dallas

Office- Future Occupancies/Vacancies

The occupancy/vacancy reflected below should be considered as a forecast and is subject to change. Future Occupancies

Tenant Property Name SF Occupancy

State Farm CityLine 500,000 Q3 2014 FedEx Office & Print Services Inc. FedEx Office & Print Services Inc. 265,000 Q4 2015 Tenet Healthcare Corporation Fountain Place 219,795 Q1 2015 Envoy Air 4301-4401 Regent Blvd 150,232 Q3 2014 KPMG LLP KPMG Plaza at Hall Arts 150,000 Q2 2015 State Farm 8222 N Belt Line Rd 135,200 Q3 2014 Toyota The Campus At Legacy 125,742 Q3 2014 Gardere Wynne Sewell LLP McKinney & Olive 109,000 Q3 2016 Norton, Rose, Fulbright Chase Tower 107,428 Q1 2015 Jackson Walker KPMG Plaza at Hall Arts 104,064 Q4 2015 ReachLocal International Business Park XVI 100,000 Q3 2014 Heartland Payment Granite Park IV 81,000 Q4 2014 Sundown Energy Inc Knoll Trail Plaza 58,000 Q4 2014

Future Vacancies Tenant Property Name SF Vacancy State Farm Lakeside Campus 812,503 Q1 2016 AAA NEC Corporate Center II 172,674 Q2 2016 Capital Commercial Royal Ridge III 125,143 Q2 2015 Richards Group Northpark Central I 105,216 Q1 2015 Transamerica Long Term Care State National Centre 73,671 Q4 2014 Marsh & McLenna Companies 8 Campus Cir 57,548 Q3 2014 Sidley Austin LLP KPMG Centre 56,135 Q1 2015 NEC NEC Corporate Center II 54,231 Q2 2016 DDA Baylor Plano Pavilion I 45,000 Q4 2014 American Honda Finance Royal Ridge VII 42,396 Q4 2014 World Ventures Marketing, LLC The Campus At Legacy 38,244 Q3 2014 American Honda Finance Royal Ridge VII 33,389 Q4 2014 Noble Royalties Addison Circle One 30,786 Q4 2014

DFW Office Advisory Board Members

Dallas Fort Worth Research

CBRE Clay Gilbert CBRE Blake Lloyd CBRE CBRE Research Chelby Sanders Jones Lang LaSalle Whit Kelly Jones Lang LaSalle Steve Triolet Dennis Barnes Cannon Camp Colliers Mike Otillio David Glasscock Transwestern Kyle Poulson Swearingen Greg Bennett Transwestern Fletcher Cordell Leland Prowse Cushman & Wakefield Steve Harriss Justin Miller Peloton Jerry Bolz Henry S Miller Doug Prude Nora Hogan PM Realty Group Kurt Cherry PM Realty Group Ariel Guerrero Scott Walker Red Oak Realty Jack Clark Avison Young Greg Langston Silver Oak Russell Webb Younger Partners Kathy Permenter Coldwell Banker Alliance Theron Bryant Sean Dalton Peloton Dale Ray Trevor Franke Barbara Houlihan PM Realty Group Kurt Cherry Paladin Partners Ben Appleby Cassidy Turley Ward Eastman Holt Lunsford Byron McCoy Fults Commercial Tracy Fults Bob Buell Fobare Rick Currey Chris Doggett Lincoln Property Chris Axley Worthey Wiles Matt Craft Crescent Tony Click Parmenter Realty Partners Thom Ridnour Pegasus Ablon Mike Silliman Hall Brad Gibson KDC Jenny Houseman Henry S Miller Bill Knopick Stream Ramsey March Ryan Evanich Hudson Peters Cincha Kostman Michelle Hudson Granite Robert Jimenez

Xceligent DFW Team

This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy. For more information, please contact :

Chris Summers DFW Market Director (214) 735-2387 [email protected]

Regional Director of Brad Hauser (281) 782-3944 [email protected] Analytics

Director of Client Kyle Brookmole (214) 280-7067 [email protected] Services

Director of Client Tim Cover (214) 597-7740 [email protected] Services

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