Dallas-Fort Worth Office Marketview

MARKETVIEW Dallas/Fort Worth Office, Q3 2018 Market fundamentals trend upward across the board

20.8% $25.03 PSF (FSG) 847,191 SF 1.4 MSF 4.0 MSF

Figure 1: Historical Absorption and. Vacancy Rate *Arrows indicate change from previous quarter. Net Absorption (MSF) Vacancy Rate (%) 6 22 5 21 4 20 3 19 2 18 1 17 0 16 (1) 15 (2) 14 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate Source: CBRE Research, Q3 2018. NEW DELIVERIES UP ABSORPTION MOST SQ. FT. DELIVERED IN 2018

DFW JOB MARKET REMAINS STOUT ASKING RENTS SEE SLIGHT INCREASE

Figure 2: Dallas/Fort Worth Office Market Statistics Average Net Total Total Under Q3 2018 2018 YTD Asking Deliveries Submarket Rentable Vacancy Availability Construction Net Net Rate FSG (SF) Area (%) (%) (SF) Absorption Absorption ($/SF/YR) Central Expressway 10,678,256 14.4 20.2 28.48 - - 151,663 (31,585) Class A 7,101,825 14.6 19.7 32.05 - - 126,238 (78,425) Class B 3,463,543 14.1 21.7 25.40 - - 26,703 45,364 Dallas CBD 26,183,962 28.0 33.6 25.49 163,025 - 88,759 298,033 Class A 20,922,462 29.6 35.5 28.16 163,025 - 142,784 456,899 Class B 4,824,143 23.3 28.1 20.74 - - (54,025) (178,074) East Dallas 2,130,164 14.7 17.4 19.40 294,820 - (18,425) (56,304) Class A 110,000 5.9 5.9 - 294,820 - (6,500) (6,500) Class B 1,668,863 16.7 19.1 18.23 - - (11,925) (90,656) Far North Dallas 42,300,279 20.1 25.7 26.76 858,387 240,000 449,022 (188,261) Class A 28,125,582 20.2 26.2 32.44 858,387 240,000 192,282 (43,245) Class B 14,174,697 20.1 24.9 21.46 - - 256,740 (137,607) Las Colinas 31,264,586 19.1 25.8 25.82 1,591,400 364,500 (117,696) 79,012 Class A 17,783,812 16.8 26.2 29.87 1,591,400 250,000 71,402 571,940 Class B 12,875,419 22.7 25.4 22.23 - 114,500 (190,361) (465,602) LBJ Freeway 19,512,524 22.2 26.9 21.22 - - (211,796) (114,810) Class A 10,712,557 20.5 26.8 24.58 - - (120,941) (11,979) Class B 8,630,405 24.5 27.3 19.59 - - (92,935) (113,059) Lewisville/Denton 3,402,455 11.2 14.5 22.04 - - 219,774 (50,055) Class A 189,124 21.5 29.8 25.00 - - - (35,553) Class B 3,147,579 10.8 13.8 20.86 - - 219,774 (14,502) Preston Center 4,134,520 12.3 14.7 38.85 119,000 - 38,185 106,474 Class A 3,508,506 12.1 15.1 41.40 119,000 - 36,338 112,878 Class B 558,336 14.6 14 30.73 - - 1,847 (6,404) Richardson/Plano 23,031,902 23.1 26.5 22.17 90,000 145,000 (94,924) 49,894 Class A 11,983,728 28.1 30.7 25.79 - 145,000 (5,053) 126,953 Class B 10,730,469 18.1 21.5 19.21 90,000 - (92,050) (92,124) SW Dallas 1,503,736 10.3 10.9 20.25 - - 8,339 61,009 Class A 280,592 11.1 12.8 31.00 - - - - Class B 1,037,490 12.0 12.1 19.16 - - 8,339 54,109 Stemmons Freeway 9,056,184 28.0 30.2 16.60 - - (8,578) (77,764) Class A 4,230,561 20.5 23.8 19.51 - - 47,806 (29,902) Class B 4,380,694 36.2 37.5 15.40 - - (63,103) (88,062) Uptown/Turtle Creek 11,857,856 15.0 21.6 45.16 649,230 624,300 309,175 251,335 Class A 9,906,926 14.3 20.7 47.90 649,230 624,300 297,058 243,578 Class B 1,813,046 20.1 28.1 35.71 - - 12,117 7,757

Figure 2: Dallas/Fort Worth Office Market Statistics (continued) Average Net Total Total Under Q3 2018 2018 YTD Asking Deliveries Submarket Rentable Vacancy Availability Construction Net Net Rate FSG (SF) Area (%) (%) (SF) Absorption Absorption ($/SF/YR) Fort Worth CBD 8,628,287 15.1 15.9 26.42 - - (62,965) 95,318 Class A 6,182,699 16.2 17.5 30.76 - - (59,443) 128,628 Class B 2,343,213 12.8 12.4 20.33 - - (3,522) (33,310) Mid Cities 13,430,652 22.7 24.2 19.18 - - (63,116) 87,724 Class A 4,598,530 34.3 34.9 23.12 - - (26,543) 131,679 Class B 7,936,834 16.8 18.7 18.16 - - (45,123) (33,115) North Fort Worth 1,576,540 17.7 31.8 25.24 200,000 - (20,047) 46,687 Class A 930,044 19.1 38.2 24.38 200,000 - 2,543 2,543 Class B 608,778 16.7 24.0 19.69 - - (22,590) 44,144 NE Fort Worth 2,757,063 47.5 46.2 19.01 - - 33,816 189,177 Class A 415,921 74.2 60.0 21.47 - - (1,432) (1,432) Class B 2,188,608 44.5 45.5 18.82 - - 32,248 179,104 South Fort Worth 6,149,270 9.6 13.3 22.66 - - 146,005 209,330 Class A 2,205,534 6.7 13.6 28.17 - - 145,506 210,042 Class B 3,565,411 11.5 13.7 21.94 - - (8,373) 4,018 Dallas Total 185,056,424 20.9 26.0 25.71 3,765,862 1,373,800 813,498 326,978 Class A 114,855,675 21.1 27.0 31.31 3,675,862 1,259,300 781,414 1,306,644 Class B 67,304,684 21.1 24.8 20.97 90,000 114,500 21,121 (1,078,860) Fort Worth Total 32,541,812 20.1 22.2 20.95 200,000 - 33,693 628,236 Class A 14,332,728 22.4 25.0 25.94 200,000 - 60,631 471,460 Class B 16,642,844 18.8 20.5 19.15 - - (47,360) 160,841 DFW Total 217,598,236 20.8 25.5 25.03 3,965,862 1,373,800 847,191 955,214 Class A 129,188,403 21.3 26.8 30.72 3,875,862 1,259,300 842,045 1,778,104 Class B 83,947,528 20.7 23.9 20.44 90,000 114,500 (26,239) (918,019) Source: CBRE Research, Q3 2018. *Although Class C is not shown, totals are inclusive of all classes of data. Figure 3: Significant Leases / Sales of the Quarter Figure 4: 2018 Signed Leases by Industry

Lease (Tenant) Building Name Address Total SF 15% Fossil Fossil Headquarters 901 S Central Expy 535,731 21% The Sound at Cypress Nokia 3100 & 3201 Olympus Blvd 350,000 Waters 16% Common Desk Trammell Crow Center 2001 Ross Ave 52,000

Sale (Buyer) Building Name Address Total SF 12% 36% Highland Capital Cityplace Tower 2711 N Haskell Ave 1,350,267 Management Dundon Capital Financial Services Business Services One AT&T Plaza 208 S Akard St 965,800 Retailers/Wholesalers Information/Technology Partners Other Source: CBRE Research, Q3 2018. Source: CBRE Research, Q3 2018.

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DEFINITIONS Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full Service Gross, dependent upon Submarket. Availability All existing space being marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Central Business District; consists of Dallas’ Central Business District only.

SURVEY CRITERIA CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. Vacancy Rate Avg. Asking Rate Net Absorption Deliveries Under Construction

The first quarter of 2018 proved to be a muted version of the The development pipeline is pacing with demand as booming market Dallas/Fort Worth (DFW) has been three new projects broke ground over the quarter, characterized by in recent years. Coming off the heels of the adding 543,000 sq. ft. of new construction to the tally first quarter with negative absorption in nearly a decade, now underway, bringing the current total count to 20 DFW’s fundamentals have rebounded with charisma. Total projects, totaling 5.5 million sq. ft. with a strong pre- quarterly demand leapt by nearly 580,000 sq. ft. during the leased rate close to 60%. The bulk of it is speculative past 90 days. With 62% of total absorption, Class A projects with only four build-to-suits, and 63% of the buildings naturally saw the lion’s share of activity. The pipeline is the Uptown/Turtle Creek and Las Colinas market registered a small increase in vacancy of 40 basis points (bps) closing at 20.9% as new speculative submarkets, each with over 1.2 million sq. ft. There construction came online. were two deliveries totaling 225,000 sq. ft. in the Las Colinas and Richardson/Plano submarkets.

According to the Bureau of Labor Statistics, the DFW maintained its robust job growth by adding 122,000 non- Overall asking rents experienced upward momentum farm jobs since June 2017, a 3.4% annualized gain, with the average increasing 27 bps to $24.49 per sq. ft. strongest among the 12 largest U.S. metros, essentially more on a full service gross basis. Class A rates expanded to than double the U.S. average of 1.6%. Of the office-using $30.06 per sq. ft., representing a $1.46 increase from Q2 sectors, professional and business services experienced the 2017. Class B and C average rents increased as well by largest expansion, creating 25,500 payrolls during the same 27 bps and 365 bps, respectively. The Dallas side of the period. Meanwhile, financial activities and information Metroplex currently has an average asking rate of sectors also expanded with 5,400 and 900 new jobs, respectively. DFW’s durable job market is keeping a tight lid $25.40 per sq. ft., while Fort Worth averages a lower on unemployment, settling at a low of 3.7%, below the five- rate of $20.75 per sq. ft. year average of 4.5%.

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Alex Stewart Research Coordinator +1 214 979 6530 [email protected] MARKETVIEW Dallas/Fort Worth Office, Q1 2018 Easing off the accelerator after two years going red hot

20.5% $24.25 PSF (FSG) (470,212) SF 1.2 MSF 4.9 MSF

*Arrows indicate change from previous quarter. Figure 1: Quarterly Absorption vs. Vacancy Net Absorption (MSF) Vacancy Rate (%) 6 22.0 5 21.5 21.0 4 20.5 3 20.0 2 19.5 1 19.0 18.5 0 18.0 -1 17.5 -2 17.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate Source: CBRE Research, Q1 2018.

MARKET FUNDAMENTALS RECALIBRATING CONSTRUCTION PIPELINE RISING

METROPLEX NEW JOBS RATE REMAIN STRONG ASKING RENTS EXPERIENCE SLIGHT DIP

Figure 2: Dallas/Fort Worth Office Market Statistics Average Net Total Total Under Q1 2018 2018 YTD Asking Deliveries Submarket Rentable Vacancy Availability Construction Net Net Rate FSG (SF) Area (%) (%) (SF) Absorption Absorption ($/SF/YR) Central Expressway 10,801,178 15.8 18.8 27.35 - - (174,249) (174,249) Class A 7,101,825 14.2 19.3 29.51 - - (163,538) (163,538) Class B 3,586,465 8.3 18.3 25.48 - - (11,123) (11,123) Dallas CBD 26,119,314 29.4 35.7 25.92 163,025 261,400 (50,236) (50,236) Class A 20,925,107 31.0 37.8 28.55 163,025 261,400 101,617 101,617 Class B 4,480,135 24.8 29.1 21.01 - - (157,137) (157,137) East Dallas 2,148,400 14.2 18.3 18.61 294,820 - (25,738) (25,738) Class A 110,000 - - - 294,820 - - - Class B 1,687,099 15.9 19.2 17.25 - - (57,100) (57,100) Far North Dallas 42,617,896 19.9 25.1 25.99 630,000 393,199 (492,964) (492,964) Class A 28,270,659 19.6 25.0 32.02 630,000 393,199 (331,687) (331,687) Class B 14,268,868 20.2 25.0 20.98 - - (153,868) (153,868) Las Colinas 30,639,497 16.9 24.0 25.20 1,839,500 250,000 303,409 303,409 Class A 17,190,703 13.6 23.2 29.39 1,725,000 250,000 584,179 584,179 Class B 12,893,439 21.7 25.2 21.95 114,500 - (280,770) (280,770) LBJ Freeway 19,192,796 21.7 27.3 21.12 - - 65,064 65,064 Class A 10,412,761 20.5 27.4 24.77 - - 114,776 114,776 Class B 8,679,473 23.3 14.9 19.13 - - (51,590) (51,590) Lewisville/Denton 3,360,379 15.7 12.6 21.43 - - (240,373) (240,373) Class A 189,124 2.7 - 29.50 - - - - Class B 3,105,503 16.9 13.6 20.71 - - (240,373) (240,373) Preston Center 4,187,132 13.9 17.0 39.77 119,000 - 32,377 32,377 Class A 3,506,506 14.3 18.0 43.18 119,000 - 35,146 35,146 Class B 612,948 12.7 12.5 32.16 - - (2,629) (2,629) Richardson/Plano 22,263,306 20.8 25.6 21.81 275,000 - 51,752 51,752 Class A 11,335,781 24.0 29.6 25.56 275,000 - 109,682 109,682 Class B 10,611,897 18.0 22.0 19.01 - - (69,909) (69,909) SW Dallas 1,503,736 11.4 11.8 19.52 - - 45,080 45,080 Class A 280,592 11.1 12.8 31.00 - - - - Class B 1,037,490 12.9 12.8 19.17 - - 45,080 45,080 Stemmons Freeway 9,028,469 27.2 31.2 16.38 - - (17,077) (17,077) Class A 4,213,870 19.5 25.8 19.00 - - 12,663 12,663 Class B 4,365,040 34.7 37.5 15.02 - - (36,231) (36,231) Uptown/Turtle Creek 11,427,406 13.3 19.5 43.26 1,273,530 - (114,508) (114,508) Class A 9,477,768 11.7 18.0 45.82 1,273,530 - (76,139) (76,139) Class B 1,811,754 22.7 28.6 36.45 - - (38,369) (38,369)

Figure 2: Dallas/Fort Worth Office Market Statistics (continued) Average Net Total Total Under Q1 2018 2018 YTD Asking Deliveries Submarket Rentable Vacancy Availability Construction Net Net Rate FSG (SF) Area (%) (%) (SF) Absorption Absorption ($/SF/YR) Fort Worth CBD 8,264,313 13.7 16.3 25.58 - 280,489 (13,454) (13,454) Class A 5,829,520 13.1 17.2 29.04 - 280,489 43,499 43,499 Class B 2,332,418 15.7 14.5 20.69 - - (56,953) (56,953) Mid Cities 13,534,021 23.1 25.3 18.91 - - 37,764 37,764 Class A 4,598,182 35.4 37.4 22.85 - - 84,604 84,604 Class B 8,024,352 17.2 19.5 17.92 - - (60,958) (60,958) North Fort Worth 1,704,175 15.3 33.6 26.30 288,000 - 64,482 64,482 Class A 725,711 24.8 25.2 23.73 200,000 - - - Class B 940,746 8.6 41.4 19.23 88,000 - 64,482 64,482 NE Fort Worth 2,719,303 58.1 59.1 17.81 - - 18,432 18,432 Class A 415,921 73.8 75.4 21.47 - - - - Class B 2,200,848 56.9 58.3 17.37 - - 18,432 18,432 South Fort Worth 6,158,613 12.2 15.2 23.01 - - 40,027 40,027 Class A 2,172,643 13.3 14.3 28.31 - - 64,645 64,645 Class B 3,508,625 11.4 14.7 22.29 - - (12,005) (12,005) Dallas Total 183,289,509 20.4 25.7 25.13 4,594,875 904,599 (617,463) (617,463) Class A 113,014,696 20.2 26.5 30.51 4,480,375 904,599 386,699 386,699 Class B 67,140,111 21.2 24.7 20.65 114,500 - (1,054,019) (1,054,019) Fort Worth Total 32,380,425 21.2 24.2 20.47 288,000 280,489 147,251 147,251 Class A 13,741,977 23.0 25.7 25.18 200,000 280,489 192,748 192,748 Class B 17,006,989 20.5 24.1 18.90 88,000 - (47,002) (47,002) DFW Total 215,669,934 20.5 25.5 24.25 4,882,875 1,185,088 (470,212) (470,212) Class A 126,756,673 20.5 26.5 29.59 4,680,375 1,185,088 579,447 579,447 Class B 84,147,100 21.0 24.6 20.27 202,500 - (1,101,021) (1,101,021) Source: CBRE Research, Q1 2018. *Although Class C is not shown, totals are inclusive of all classes of data. Figure 3: Significant Leases / Sales of the Quarter Figure 4: 2018 Signed Leases by Industry

Lease (Tenant) Building Name Address Total SF 16% Steward Health Care Galatyn Commons – B 2375 N Glenville Dr 165,300

New York Life Insurance Two Energy Square 4849 Greenville Ave 107,267 12% Guidestone Financial Pinnacle Tower 5005 LBJ Freeway 112,825 54% Resources 4% Sale (Buyer) Building Name Address Total SF 14% Cook Children’s Medical Wilcox at Green Oaks 7000 Calmont Ave 187,927 Center Financial Services Business Services Libitzky Property 1820 Preston Park Preston Park 120,507 Retailers/Wholesalers Information/Technology Companies Blvd Other Source: CBRE Research, Q1 2018. Source: CBRE Research, Q1 2018.

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Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas/Fort Worth Office, Q4 2017 Construction pipeline subsides; lowest since Q2 2013.

19.6% $24.48 PSF (FSG) 1,052,283 SF 1.1 MSF 4.4 MSF *Arrows indicate change from previous quarter. Figure 1: Under Construction vs. Vacancy (MSF) Under Construction (MSF) Vacancy Rate % 9 23 8 22 7 21 6 20 5 19 4 3 18 2 17 1 16

0 15

Q2 2014 Q2 2017 Q3 Q1 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q4 2017 Source: CBRE Research, Q4 2017. Under Construction Vacancy Rate

Figure 2: Dallas/Fort Worth Office Market Statistics Average Net Total Total Under Q4 2017 2017 YTD Asking Deliveries Submarket Rentable Vacancy Availability Construction Net Net Rate FSG (SF) Area (%) (%) (SF) Absorption Absorption ($/SF/YR) Central Expressway 11,004,604 13.4 17.9 27.32 - - (14,983) 20,628 Class A 7,247,788 12.9 17.5 30.30 - - (45,847) 95,247 Class B 3,643,928 14.4 19.1 24.61 - - 31,211 (71,940) Dallas CBD 25,838,939 28.6 34.2 26.02 322,110 185,071 299,705 471,523 Class A 20,644,732 30.8 36.8 28.72 322,110 185,071 298,269 542,552 Class B 4,480,135 21.3 25.0 21.10 - - 5,428 (28,403) East Dallas 2,155,335 10.7 16.5 18.01 294,820 - 45,636 53,845 Class A 110,000 0.0 0.0 48.80 294,820 - 6,067 - Class B 1,629,636 11.5 16.8 16.39 - - 39,569 26,426 Far North Dallas 41,366,773 17.0 23.1 26.52 1,289,335 632,957 152,844 931,549 Class A 26,933,656 16.3 21.8 32.58 1,289,335 552,957 107,024 613,085 Class B 14,354,748 18.0 25.2 21.44 - 80,000 45,820 327,720 Las Colinas 30,512,997 17.3 24.8 24.43 714,500 - (102,148) 468,411 Class A 16,940,860 15.6 22.6 28.82 600,000 - 54,228 294,756 Class B 13,016,782 20.0 27.8 21.54 114,500 - (156,507) 148,638 LBJ Freeway 19,230,504 21.3 27.7 20.92 - - 222,580 190,640 Class A 10,406,337 22.0 27.3 24.01 - - 104,911 135,651 Class B 8,667,855 20.7 28.5 18.88 - - 118,373 59,919 Lewisville/Denton 3,397,794 10.8 18.5 19.65 - - 14,360 11,734 Class A 324,964 0.0 0.0 29.50 - - 0 0 Class B 3,006,785 12.2 20.9 24.19 - - 14,360 11,734 Preston Center 4,184,884 10.6 18.3 40.18 119,000 171,583 21,975 (33,925) Class A 3,506,506 10.4 19.5 42.61 119,000 171,583 28,607 (53,871) Class B 610,700 12.3 12.8 33.30 - - (6,632) (587) Richardson/Plano 21,678,024 21.6 26.6 22.08 125,000 87,467 384,461 619,450 Class A 11,000,460 25.6 30.0 26.16 125,000 48,441 111,871 289,376 Class B 10,361,936 17.8 23.6 19.38 - 39,026 278,239 344,868 SW Dallas 1,503,736 14.4 14.9 17.03 - - (8,519) 32,496 Class A 280,592 11.1 11.1 31.00 - - (17,377) (15,541) Class B 1,037,490 17.2 17.4 16.70 - - 8,858 45,937 Stemmons Freeway 9,102,749 26.3 29.6 16.33 - - 100,471 120,308 Class A 4,213,870 19.8 23.6 19.13 - - 55,019 19,385 Class B 4,298,845 31.4 34.7 14.45 - - 47,363 53,434 Uptown/Turtle Creek 11,175,483 12.8 15.9 44.41 1,273,530 - (16,380) 48,463 Class A 9,431,810 11.3 13.9 46.77 1,273,530 - 9,673 204,675 Class B 1,605,789 23.2 28.9 36.62 - - (26,053) (156,212)

Figure 2: Dallas/Fort Worth Office Market Statistics (continued)

Net Total Total Average Under Q4 2017 2017 YTD Deliveries Submarket Rentable Vacancy Availability Asking Construction Net Net (SF) Area (%) (%) Rate FSG ($) (SF) Absorption Absorption Fort Worth CBD 8,408,884 12.9 15.7 25.62 280,489 - (9,636) 62,028 Class A 5,829,520 13.8 16.1 29.57 280,489 - 8,340 45,059 Class B 2,476,989 11.3 15.5 20.26 - - (17,976) 16,969 Mid Cities 13,567,516 22.8 24.7 18.95 - - 128,171 (110,321) Class A 4,464,182 36.3 37.7 23.68 - - 22,359 (322,184) Class B 8,191,847 16.4 18.4 18.00 - - 102,073 179,166 North Fort Worth 1,775,196 18.9 43.2 20.07 - - (181,429) (433,271) Class A 725,711 24.8 54.1 NA - - (161,000) (369,623) Class B 1,011,767 15.3 37.0 20.07 - - (21,026) (66,333) NE Fort Worth 2,745,352 56.8 42.9 18.13 - - (4,040) (19,950) Class A 415,921 73.8 74.2 21.47 - - - 396 Class B 2,226,897 55.3 38.4 17.76 - - (4,040) (33,713) South Fort Worth 6,203,357 12.8 17.0 23.23 - - 47,282 66,529 Class A 2,172,643 16.2 18.1 28.78 - - 79,601 66,950 Class B 3,548,473 11.0 15.9 22.79 - - (35,636) (16,695) Dallas Total 181,151,348 19.3 25.0 25.07 4,138,295 1,077,078 1,071,935 3,129,635 Class A 111,041,575 19.6 25.0 30.19 4,023,795 958,052 754,732 2,272,513 Class B 66,714,448 19.1 25.3 20.62 114,500 119,026 331,798 811,676 Fort Worth Total 32,700,305 21.0 23.5 19.02 280,489 0 (19,652) (434,985) Class A 13,607,977 24.0 27.3 25.60 280,489 0 (50,700) (579,402) Class B 17,455,973 19.5 21.1 19.25 0 0 23,395 79,394 DFW Total 213,851,653 19.6 24.7 24.48 4,418,784 1,077,078 1,052,283 2,694,650 Class A 124,649,552 20.1 25.2 29.64 4,304,284 958,052 704,032 1,693,111 Class B 84,170,421 19.2 24.4 20.61 114,500 119,026 355,193 891,070 Source: CBRE Research, Q4 2017. *Although Class C is not shown, totals are inclusive of all classes of data.

Figure 3: Significant Leases / Sales of the Quarter Figure 4: 2017 Signed Leases by Industry

Lease (Tenant) Building Name Address Total SF

Pacific Union Financial Browning Place II 1603 LBJ Freeway 132,000 25% 32% 2701 Highpoint Oaks Sonexus Health Highpoint Oaks 72,620 Dr Winston and Strawn PwC Tower 2121 Pearl Street 56,016 15% Sale (Buyer) Building Name Address Total SF 19% 9% 2777 N Stemmons Stanton Road Capital Trinity Towers 634,381 Fwy Financial Services Business Services CW Capital Asset 901 W Walnut Hill 901 W Walnut Hill Ln 416,556 Retailers/Wholesalers Information/Technology Management Other Source: CBRE Research, Q4 2017. Source: CBRE Research, Q4 2017.

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Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas/Fort Worth Office, Q3 2017 Construction cycle looks to have peaked a year ago

19.7% $24.24 PSF 976,431 SF 5.5 MSF *Arrows indicate change from previous quarter. Figure 1: Under Construction vs. Vacancy (MSF) Under Construction (MSF) Vacancy Rate % 9 25 8 24 7 23 6 22 5 21 4 20 3 19 2 18 1 17

0 16

Q4 2014 Q4 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Q32017

Under Construction Vacancy Rate Source: CBRE Research, Q3 2017.

Figure 2: Dallas/Fort Worth Office Market Statistics

Net Total Total Average Under Q3 2017 2017 YTD Deliveries Rentable Vacancy Availability Asking Construction Net Net Submarket (SF) Area (%) (%) Rate ($) (SF) Absorption Absorption Central Expressway 10,935,593 12.5 17.1 27.13 - - 24,674 35,612 Class A 7,216,704 12.3 17.1 30.16 - 18,574 141,094 Class B 3,606,001 13.0 17.4 24.39 - 4,898 (103,151) Dallas CBD 25,669,217 28.5 35.1 26.01 507,181 - (88,528) 171,818 Class A 20,459,661 30.8 38.0 28.75 507,181 - (151,402) 244,283 Class B 4,497,198 20.8 20.8 21.18 - - 74,803 (33,831) East Dallas 2,155,335 12.8 16.0 18.39 294,820 - 39,794 8,209 Class A 110,000 5.5 - 48.80 294,820 - (6,067) (6,067) Class B 1,629,636 13.9 18.1 16.71 - - 44,568 (13,143) Far North Dallas 41,219,473 16.2 22.9 25.84 1,922,292 - 62,394 778,705 Class A 26,833,636 15.1 21.6 32.01 1,842,292 - 64,461 506,061 Class B 14,307,468 17.9 25.2 20.80 80,000 - (2,067) 281,900 Las Colinas 30,217,151 17.3 25.4 24.91 689,500 141,219 333,692 570,559 Class A 16,834,259 16.5 25.4 29.03 575,000 141,219 307,320 240,528 Class B 12,827,537 18.9 25.8 21.40 114,500 - 38,502 305,145 LBJ Freeway 19,283,611 22.5 28.5 20.81 - - 222,580 190,640 Class A 10,410,777 23.2 28.9 23.93 - - 104,911 135,651 Class B 8,716,522 22.0 28.2 18.74 - - 118,373 59,919 Lewisville/Denton 3,397,794 10.8 18.5 19.65 - - 777 (2,626) Class A 324,964 - - 29.50 - - - - Class B 3,006,785 12.2 20.9 24.19 - - 777 (2,626) Preston Center 4,027,887 11.9 15.1 39.22 290,583 - (28,455) (55,900) Class A 3,349,509 12.2 15.6 42.60 290,583 - (34,702) (82,478) Class B 610,700 11.2 13.8 30.72 - - 6,247 6,045 Richardson/Plano 21,523,815 21.7 25.5 21.64 212,467 300,000 266,662 234,989 Class A 10,806,441 24.6 28.6 26.26 173,441 300,000 160,059 177,505 Class B 10,401,746 19.6 22.8 18.72 39,026 - 102,603 66,629 SW Dallas 1,503,736 13.8 14.6 17.07 55,000 - 56,608 41,015 Class A 280,592 4.9 6.7 25.00 - - - 1,836 Class B 1,037,490 18.1 18.3 16.74 55,000 - 56,608 37,079 Stemmons Freeway 9,075,842 27.4 30.5 16.17 - - 55,753 19,792 Class A 4,214,254 21.1 24.3 19.10 - - (19,925) (35,634) Class B 4,306,554 32.4 35.8 14.23 - - 49,632 6,071 Uptown/Turtle Creek 11,356,787 12.5 15.7 42.53 1,273,530 - 5,676 64,843 Class A 9,324,254 11.5 14.4 44.73 1,273,530 - (7,706) 195,002 Class B 1,894,649 18.3 23.5 36.80 - - 13,382 (130,159)

Although Class C is not shown, totals are inclusive of all classes of data.

Figure 2: Dallas/Fort Worth Office Market Statistics (continued)

Net Total Total Average Under Q3 2017 2017 YTD Submarket Rentable Vacancy Availability Asking Construction Deliveries Net Net Area (%) (%) Rate ($) (SF) (SF) Absorption Absorption Fort Worth CBD 8,273,594 13.0 16.7 25.81 280,489 - 50,352 71,664 Class A 5,889,851 13.8 17.1 29.65 280,489 - 55,840 36,719 Class B 2,281,368 11.5 16.6 20.94 - - (5,488) 34,945 Mid Cities 13,580,515 23.4 26.0 18.95 - 113,840 145,385 (238,492) Class A 4,469,216 38.6 38.1 23.68 - 113,840 155,547 (344,543) Class B 8,199,812 17.1 20.3 18.00 - - (4,007) 77,093 North Fort Worth 1,775,196 20.8 25.4 20.12 - - (218,161) (251,842) Class A 725,711 32.2 32.9 - - - (214,434) (208,623) Class B 1,011,767 13.3 21.0 20.12 - - (6,087) (45,307) NE Fort Worth 2,744,290 56.7 59.7 17.28 - - 11,996 (27,906) Class A 414,859 74.0 75.2 21.47 - - 396 396 Class B 2,200,848 55.1 58.6 16.83 - - (8,772) (31,066) South Fort Worth 6,169,326 13.7 16.6 23.26 - - 35,232 19,247 Class A 2,137,541 20.2 20.6 28.95 - - 51,705 (12,651) Class B 3,596,344 10.0 14.7 22.65 - - (10,018) 18,941 Dallas Total 180,366,241 19.3 25.1 24.74 5,190,373 496,219 951,627 2,057,656 Class A 110,165,051 19.5 25.5 29.78 4,956,847 441,219 435,523 1,517,781 Class B 66,842,579 19.3 24.9 20.36 233,526 55,000 508,326 479,878 Fort Worth Total 32,542,921 21.6 24.7 19.16 280,489 113,840 24,804 (415,333) Class A 13,637,178 25.2 27.1 25.69 280,489 113,840 49,054 (528,702) Class B 17,316,188 19.6 23.6 19.37 - - (24,207) 55,999 DFW Total 212,909,162 19.7 25.1 24.24 5,470,862 610,059 976,431 1,642,323 Class A 123,802,229 20.1 25.7 29.32 5,237,336 555,059 484,577 989,079 Class B 84,158,767 19.4 24.7 20.46 233,526 55,000 484,119 535,877

Source: CBRE Research, Q3 2017.

Figure 3: Significant Leases / Sales of the Quarter Figure 4: 2017 Signed Leases by Industry

Lease (Tenant) Address Total SF 21% NTT Data 6501 Legacy Dr 250,000

Gartner 6011 Connection Dr 150,000 42% 10% Alkami 5601 Granite Pky 90,000 9% Sale (Buyer) Address Total SF 18% KBS Strategic Opportunity 125 E John Carpenter Fwy 401,735 Financial Services Business Services Tanglewood Property Group 17950 Preston Rd 273,992 Retailers/Wholesalers Information/Technology Other Source: CBRE Research, Q3 2017. Source: CBRE Research, Q3 2017.

CONTACTS CBRE OFFICES

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas/Fort Worth Office, Q2 2017 Business as usual- fundamentals remain strong.

Vacancy Rate Avg. Asking Rate Net Absorption Under Construction 19.4% $24.01 PSF 121,696 SF 5.5 MSF *Arrows indicate change from previous quarter. Figure 1: Under Construction vs. Absorption (MSF) Under Construction Under Construction Vacancy Rate (MSF) Vacancy Rate % 8 24 7 23 6 22 5 21 4 20 3 19 2 18 1 17 0 16 Q1 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 Source: CBRE Research, Q2 2017.

It’s a bird… It’s a plane… No, it’s just one of the many Strong demand characterized leasing velocity during cranes spotted throughout the DFW Metroplex. The the first half of 2017 led by Far North Dallas and Dallas pipeline still remains sizeable with 30 projects totaling CBD. Enlink and Industrious occupied One Arts Plaza 5.5 million sq. ft., at 37.0% pre-leased. Of the 30 in Dallas CBD which was left vacant from 7-Eleven’s projects, over 21 are greater than 100,000 sq. ft. It is relocation to Las Colinas last year. While Industrious, important to note the 1.1 million sq. ft. Liberty Mutual a coworking center, helped fill 23,000 sq. ft., Enlink’s campus was removed from CBRE’s statistical set after 156,000 sq. ft. expansion and relocation from Uptown they purchased the building, classifying it owner was the largest moves this quarter. NTT Data occupied occupied. 126,700 sq. ft. in the recently delivered One Legacy West and is already considering an expansion. DFW speculative development continues to comprise the majority of the construction pipeline, with only two DFW’s unemployment rate of 3.8% remains well below build-to-suits (BTS) out of 30 total projects. The largest the U.S. average of 4.4%. Of the office using job building to start construction this quarter was The sectors, professional & business services added the Epic, a class A 294,820 sq. ft. multi-use development in most jobs by percentage, increasing by 4.2% over the unique Deep Ellum neighborhood in Dallas. February of last year.

Delivery of prime, new product in the Metroplex It is hard to compete with last year’s record setting contributed to year-over-year rent growth. Average statistics, but Dallas/Fort Worth’s office market has asking rents jumped 3.2%, closing the quarter at $24.01 continued its strong performance. With vacancy per sq. ft. While Fort Worth currently sits at $19.53 per varying just slightly over last quarter, large sq. ft. the Dallas average is slightly higher at $24.44 per construction levels beginning to taper, absorption still sq. ft. Class A rents continue to push up as prime class remains solid with the 29th consecutive quarter of A buildings are delivered, increasing 74 basis points positive absorption. Simply put, this is the longest from last quarter. running growth streak in DFW’s office market history.

Figure 2: Dallas/Fort Worth Office Market Statistics

Net Total Total Average Under Q2 2017 2017 YTD Deliveries Rentable Vacancy Availability Asking Construction Net Net (SF) Area (%) (%) Rate ($) (SF) Absorption Absorption Central Expressway 10,918,417 12.8 16.4 26.87 - - (10,247) 10,938 Class A 7,200,405 12.6 16.1 29.67 - (272) 122,520 Class B 3,605,124 13.2 17.4 24.48 - (5,090) (108,049) Dallas CBD 25,453,584 27.5 34.9 26.86 446,471 - 336,472 260,346 Class A 20,244,221 29.2 37.5 28.51 446,471 - 358,190 395,685 Class B 4,497,005 22.4 26.5 23.19 - - 10,515 (108,634) East Dallas 2,186,177 14.4 17.3 18.26 251,354 - (3,792) (31,585) Class A 110,000 - - 38.80 251,354 - - - Class B 1,629,636 16.7 20.4 16.96 - - (4,681) (57,711) Far North Dallas 41,301,990 16.1 22.6 25.54 1,628,192 - 314,271 716,311 Class A 26,901,752 15.0 21.0 31.20 1,548,192 - 311,165 441,600 Class B 14,321,869 17.9 25.4 21.03 80,000 - 5,559 283,967 Las Colinas 30,077,480 17.3 24.3 24,43 716,219 339,359 -17,424 236,867 Class A 16,693,040 17.5 23.6 28.35 716,219 339,359 -114,952 (66,792) Class B 12,829,085 17.7 25.8 21.28 - - 71,811 266,643 LBJ Freeway 19,284,290 23.5 28.3 20.59 - - 6,164 (31,940) Class A 10,410,777 23.9 28.7 23.53 - - 7,367 30,740 Class B 8,717,201 23.3 28.0 18.62 - - 1,023 (58,454) Lewisville/Denton 3,397,501 10.8 21.6 18.82 - - 15,914 (3,403) Class A 324,964 - 75.1 28.41 - - - - Class B 3,006,785 12.2 16.3 21.74 - - 15,914 (3,403) Preston Center 4,027,005 11.2 16.1 38.87 171,583 - (11,786) (27,445) Class A 3,348,627 11.1 16.6 42.11 171,583 - (18,928) (47,776) Class B 610,700 12.2 14.7 31.28 - - 2,208 (202) Richardson/Plano 20,953,403 20.1 23.3 22.00 512,467 - 82,779 (31,673) Class A 10,394,020 20.3 24.1 25.17 473,441 - 80,741 17,446 Class B 10,246,409 20.3 22.7 19.54 39,026 - 5,446 (35,974) SW Dallas 1,452,815 14.4 15.5 17.29 55,000 - (26,258) (15,593) Class A 280,592 4.9 6.7 25.00 - - 1,836 1,836 Class B 986,569 19.2 19.7 16.97 55,000 - (28,094) (19,529) Stemmons Freeway 9,044,800 28.1 31.6 15.99 - - (55,499) (35,961) Class A 4,214,254 20.7 25.2 18.82 - - (37,506) (15,709) Class B 4,275,512 33.8 36.7 14.61 - - (40,347) (43,561) Uptown/Turtle Creek 11,356,340 12.6 16.5 41.19 1,273,530 - 18,020 59,167 Class A 9,328,550 11.4 14.5 44.72 1,273,530 - 120,401 202,708 Class B 1,894,203 19.0 27.3 33.62 - - (102,381) (143,541)

Although Class C is not shown, totals are inclusive of all classes of data.

Figure 2: Dallas/Fort Worth Office Market Statistics (continued)

Net Total Total Average Under Q2 2017 2017 YTD Submarket Rentable Vacancy Availability Asking Construction Deliveries Net Net Area (%) (%) Rate ($) (SF) (SF) Absorption Absorption Fort Worth CBD 8,368,345 12.7 17.3 25.81 280,489 - (48,114) 21,312 Class A 5,984,611 13.5 17.3 29.65 280,489 - (43,677) (19,121) Class B 2,281,368 11.3 18.1 20.95 - - (4,437) 40,433 Mid Cities 13,469,459 24.2 26.9 19.07 113,840 - (385,113) (383,877) Class A 4,365,073 38.6 38.8 23.51 113,840 - (489,628) (500,090) Class B 8,192,899 17.7 21.7 18.10 - - 85,100 81,100 North Fort Worth 1,775,196 8.5 25.2 19.13 - - (8,601) (33,681) Class A 725,711 2.6 32.9 - - - 0 5,811 Class B 1,011,767 12.7 20.9 19.13 - - (8,601) (39,220) NE Fort Worth 2,744,290 56.4 60.2 16.79 - - (7,681) (27,906) Class A 414,859 61.3 62.5 21.34 - - - - Class B 2,200,848 56.7 60.9 16.35 - - (8,772) (31,066) South Fort Worth 6,124,346 12.9 18.4 23.95 - - (77,409) (15,985) Class A 2,132,446 17.2 22.5 29.88 - - (116,669) (64,356) Class B 3,558,284 10.5 16.5 22.12 - - 39,484 28,959 Dallas Total 179,453,802 19.1 24.7 24.44 5,054,816 339,359 648,614 1,106,029 Class A 109,451,202 18.9 24.7 29.11 4,880,790 - 708,042 973,897 Class B 66,620,098 19.7 25.1 20.51 174,026 339,359 (68,117) (28,448) Fort Worth Total 32,481,645 21.2 25.5 19.53 394,329 - (526,918) (440,137) Class A 13,627,196 23.8 27.5 25.89 394,329 - (649,974) (577,756) Class B 17,269,427 19.9 24.8 19.45 - - 102,774 80,206 DFW Total 211,935,447 19.4 24.9 24.01 5,449,145 339,359 121,696 665,892 Class A 123,078,398 19.5 25.0 28.81 5,275,119 - 58,068 396,141 Class B 83,889,525 19.8 25.0 20.53 174,026 339,359 34,657 51,758

Source: CBRE Research, Q2 2017.

Figure 3: Significant Leases / Sales of the Quarter Figure 4: 2017 Signed Leases by Industry

Lease (Tenant) Address Total SF 18% Comerica Bank 1717 Main St 222,970 29% Brinker International 3000 Olympus Blvd 216,400

Goldman Sachs 2001 Ross Ave 170,288 23%

Sale (Buyer) Address Total SF 15% 15% Lincoln Property Company 3500 Maple Ave 369,109 Financial Services Business Services JP Realty Partners 12770 Coit Rd 258,493 Retailers/Wholesalers Information/Technology Other Source: CBRE Research, Q2 2017. Source: CBRE Research, Q2 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller CBRE Houston Research Operations Manager 2800 Post Oak, Suite 2300 [email protected] Houston, TX 77056 To learn more about CBRE Research, or to access Lauren Paris additional research reports, please visit the Global Senior Research Analyst Research Gateway at www.cbre.com/researchgateway. +1 214 979 6587 [email protected] DEFINITIONS Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full Alex Stewart Service Gross, dependent upon Submarket. Availability All existing space being marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Research Coordinator Central Business District; consists of Dallas’ Central Business District only. +1 214 979 6530 SURVEY CRITERIA [email protected] CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas/Fort Worth Office, Q1 2017 Table set for another solid year for office leasing

19.1% $23.95 PSF 544,241 SF 6.1 MSF *Arrows indicate change from previous quarter. Figure 1: Under Construction vs. Absorption (MSF) Net Absorption (MSF) Vacancy Rate % 6 26 5 24 4 22 3 2 20 1 18 0 16 (1) (2) 14

(3) 12

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate Source: CBRE Research, Q1 2017.

Figure 2: Dallas/Fort Worth Office Market Statistics

Net Total Total Average Under Q1 2017 2017 YTD Deliveries Rentable Vacancy Availability Asking Construction Net Net (SF) Area (%) (%) Rate ($) (SF) Absorption Absorption Central Expressway 10,916,956 12.6 16.3 26.42 - - 21,185 21,185 Class A 7,198,698 12.4 16.7 29.59 - 122,792 122,792 Class B 3,605,370 13.0 15.9 23.34 - (102,959) (102,959) Dallas CBD 25,442,945 27.9 33.3 25.26 446,471 - (76,126) (76,126) Class A 20,244,221 29.8 35.5 27.57 446,471 - 37,495 37,495 Class B 4,486,366 22.7 26.7 20.27 - - (119,149) (119,149) East Dallas 2,637,665 27.5 29.0 14.91 - - (27,793) (27,793) Class A 110,000 ------Class B 2,081,124 32.7 34.4 15.27 - - (53,030) (53,030) Far North Dallas 41,011,293 16.9 22.0 26.82 2,449,825 566,265 402,040 402,040 Class A 26,610,785 16.2 21.5 31.22 2,369,825 566,265 130,435 130,435 Class B 14,322,139 18.0 22.8 18.88 80,000 - 278,408 278,408 Las Colinas 29,939,898 15.7 21.5 24.39 805,578 544,183 254,291 254,291 Class A 16,699,215 16.3 22.1 28.42 466,219 544,183 48,160 48,160 Class B 12,639,892 15.4 21.4 20.88 339,359 - 194,832 194,832 LBJ Freeway 19,280,537 22.8 26.8 18.78 - - (38,104) (38,104) Class A 10,408,036 22.6 27.5 21.49 - - 23,373 23,373 Class B 8,716,189 23.3 26.3 17.24 - - (59,477) (59,477) Lewisville/Denton 4,220,256 10.3 22.6 19.67 - - (19,317) (19,317) Class A 324,964 - 75.1 26.00 - - - - Class B 3,829,540 11.3 18.5 19.68 - - (19,317) (19,317) Preston Center 4,027,005 10.9 15.3 35.46 171,583 - (15,659) (15,659) Class A 3,348,627 10.6 15.1 38.39 171,583 - (28,848) (28,848) Class B 610,700 12.6 16.6 30.05 - - (2,410) (2,410) Richardson/Plano 20,933,772 19.5 24.4 21.60 508,152 - (114,452) (114,452) Class A 10,389,251 19.8 25.5 24.94 469,417 - (63,295) (63,295) Class B 10,243,435 19.6 23.5 19.58 38,735 - (41,420) (41,420) SW Dallas 1,449,898 12.7 14.3 16.56 - - 10,665 10,665 Class A 280,729 5.5 7.3 21.00 - - - - Class B 983,515 16.4 17.9 16.30 - - 8,565 8,565 Stemmons Freeway 9,035,190 28.5 33.1 14.69 - - 19,583 19,583 Class A 4,204,644 21.9 27.0 16.83 - - 21,797 21,797 Class B 4,275,512 32.9 37.4 13.68 - - (3,214) (3,214) Uptown/Turtle Creek 11,347,714 12.4 15.9 40.89 1,295,323 - 41,147 41,147 Class A 9,319,243 12.3 13.7 44.27 1,295,323 - 82,307 82,307 Class B 1,894,884 13.5 28.2 34.14 - - (41,160) (41,160)

Although Class C is not shown, totals are inclusive of all classes of data.

Figure 2: Dallas/Fort Worth Office Market Statistics (continued)

Net Total Total Average Under Q1 2017 2017 YTD Submarket Rentable Vacancy Availability Asking Construction Deliveries Net Net Area (%) (%) Rate ($) (SF) (SF) Absorption Absorption Fort Worth CBD 8,360,455 13.4 15.4 25.46 280,489 - 69,426 69,426 Class A 5,984,611 14.5 14.2 29.25 280,489 - 24,556 24,556 Class B 2,273,469 11.1 19.3 21.04 - - 44,870 44,870 Mid Cities 13,409,972 20.8 26.7 17.39 113,840 160,000 1,236 1,236 Class A 4,365,073 27.4 40.1 20.49 113,840 160,000 (10,462) (10,462) Class B 8,133,412 17.8 20.7 17.50 - - (4,000) (4,000) North Fort Worth 1,822,884 7.8 26.9 19.71 - - (25,080) (25,080) Class A 723,399 2.7 32.7 - - - 5,811 5,811 Class B 1,061,767 11.3 23.5 19.71 - - (30,619) (30,619) NE Fort Worth 2,718,241 56.7 58.8 17.19 - - (20,225) (20,225) Class A 414,859 61.3 62.5 21.34 - - - - Class B 2,200,848 57.0 59.2 16.64 - - (22,294) (22,294) South Fort Worth 6,121,638 12.9 18.4 23.95 - 160,182 61,424 61,424 Class A 2,132,446 17.2 22.5 29.88 - 160,182 52,313 52,313 Class B 3,558,284 10.5 16.5 22.12 - - (10,525) (10,525) Dallas Total 180,243,129 19.1 24.0 24.43 5,676,932 1,110,448 457,460 457,46 Class A 109,138,413 19.1 24.3 28.81 5,218,838 1,110,448 374,216 374,216 Class B 67,688,666 19.3 24.0 21.35 458,094 - 39,669 39,669 Fort Worth Total 32,433,190 19.7 24.9 20.01 394,329 320,182 86,781 86,781 Class A 13,620,388 19.9 26.2 25.02 394,329 320,182 72,218 72,218 Class B 17,227,780 20.0 24.7 19.05 - - (22,568) (22,568) DFW Total 212,676,319 19.1 24.2 23.95 6,071,261 1,430,630 544,241 544,241 Class A 122,758,801 19.2 24.5 28.60 5,613,167 1,430,630 446,434 446,434 Class B 84,916,446 19.5 24.2 21.02 458,094 - 17,101 17,101 Source: CBRE Research, Q1 2017.

Figure 3: Significant Leases / Sales of the Quarter Figure 4: 2017 Signed Leases by Industry

Lease (Tenant) Address Total SF 13% Brinker International 3000 Olympus Blvd 216,400 23% 11% NTT Data 7950 Legacy Dr. 126,715

Akin Gump 2300 N Field St 68,000 19% Sale (Buyer) Address Total SF 34% Lincoln Property Company 3500 Maple Ave 369,109 Financial Services Business Services JP Realty Partners 12770 Coit Rd 258,493 Retailers/Wholesalers Technology Other Source: CBRE Research, Q1 2017. Source: CBRE Research, Q1 2017.

CONTACTS CBRE OFFICES

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas / Fort Worth Office, Q4 2016 New construction tapers but still pushes up DFW asking rents

Vacancy Rate Avg. Asking Rate Net Absorption Completions 18.6% $23.86/SF 699,158 SF 353,901 SF *Arrows indicate change from previous quarter. Figure 1: Average Asking Lease Rate and Under Construction Average Asking Under Construction Lease Rate ($/SF) (MSF) Under Construction Average Asking Lease Rates 8 24 7 6 22 5 4 20 3 2 18 1 0 16 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Source: CBRE Research, Q4 2016.

Robust: in a word, growth in the DFW office market More than 6.7 million sq. ft. remained under during 2016. But the brisk pace of new development construction as of Q4 2016 with 44.6% pre-leased, does appear to be levelling as the year closes with less up 6.0% in the past 90 days with 24 of the 28 than 6.7 million sq. ft. underway and is now the buildings underway being speculative. This lowest since 2014. Another sign the new development construction activity is focused within Far North cycle is slowing down, fewer than five buildings Dallas (mainly the Upper Tollway and Frisco), delivered in the current quarter totaling just more Uptown, and Las Colinas. These three submarkets than 350,000 sq. ft., making it the lowest square accounted for 76.5% of the DFW market’s footage of deliveries in a full three years. Meanwhile, construction as of year-end. The largest of these the pre-leased rate remained strong at more than projects is the 1.1 million sq. ft. Liberty Mutual 80%. Campus in Legacy West.

The new jobs market is behind the active Larger leases signed in Q4 2016 indicate forward- construction pipeline. Year-to-date job growth in looking momentum for net absorption going into DFW remained strong this quarter at 2.7%, more than 2017. AmerisourceBergen, American Airlines, EPA a full percentage above the state’s rate and nearly and Occidental Petroleum each signed new leases double that of the U.S., although Fort Worth’s growth for 100,000 sq. ft. or larger. The most active continued to lag Dallas by more than half. industries included the Professional & Business Meanwhile, the Metroplex office asking rents rose Services sector, Education & Health Services and 1.0% quarter-to-quarter and were up 8.2% year-over- Technology, with particularly strong activity within year. the Dallas CBD and Far North Dallas.

Figure 2: Dallas Office Market Statistics

Submarket Net Total Total Average Q4 2016 Total YTD 2016 Total Rentable Area Vacancy Availability Asking Net Absorption Net Absorption (SF) (%) (%) Rate ($/SF/Yr) (SF) (SF) Central Expressway 11,781,333 10.8 15.8 25.96 44,372 511,520 Class A 7,775,991 11.1 15.6 29.30 69,299 474,429 Class B 3,892,454 10.5 16.3 22.29 (23,069) 27,544 Dallas CBD 25,397,715 27.9 34.6 25.97 (57,503) (540,631) Class A 20,233,741 29.9 36.6 27.82 (159,720) (676,511) Class B 4,641,616 21.3 27.5 18.54 117,168 128,050 East Dallas 3,236,552 12.8 14.6 16.45 9,859 21,271 Class A 583,651 11.1 11.1 - 8,318 (4,166) Class B 2,206,360 12.7 15.3 16.94 14,063 32,676 Far North Dallas 38,566,494 16.2 20.8 24.46 29,452 674,389 Class A 24,291,538 15.3 18.9 30.16 44,576 793,825 Class B 14,274,956 17.6 24.0 20.09 (15,124) (119,436) Las Colinas 29,180,281 14.7 21.2 24.48 189,592 1,020,118 Class A 16,074,832 13.4 21.4 28.19 348,216 824,996 Class B 12,504,658 16.6 21.4 20.67 (158,771) 189,202 LBJ Freeway 19,257,473 24.1 28.3 18.95 84,548 575,981 Class A 10,408,036 24.9 29.3 21.93 29,301 150,216 Class B 8,663,068 23.4 27.5 16.95 53,969 409,478 Lewisville / Denton 4,426,602 9.2 18.1 22.46 (3,811) 269,254 Class A 324,964 - 75.1 26.00 - 80,964 Class B 3,994,928 10.1 13.7 21,41 (16,435) 176,302 Preston Center 3,989,556 10.7 16.8 36.53 (47,267) (3,828) Class A 3,272,504 10.0 16.7 37.86 (44,520) 780 Class B 649,374 11.5 15.1 28.51 (4,102) 6,780 Richardson / Plano 21,352,657 18.9 23.8 22.63 393,067 1,787,495 Class A 10,007,730 16.4 21.5 24.65 189,721 1,246,54 Class B 11,013,129 21.7 26.3 21.46 189,721 483,915 Southwest Dallas 1,519,515 13.8 16.9 16.51 (5,806) (4,242) Class A 280,729 5.5 7.3 21.50 - 2,903 Class B 1,053,132 17.5 21.2 15.69 (18,931) (30,818) Stemmons Freeway 9,328,345 29.7 32.9 15.01 1,352 33,622 Class A 4,207,328 20.7 24.3 16.42 (20,121) (76,486) Class B 4,610,383 37.6 40.4 13.36 (11,163) 83,152 Uptown / Turtle Creek 11,259,935 12.6 16.3 40.38 88,431 574,019 Class A 9,137,221 12.7 14.8 44.16 71,491 571,644 Class B 1,989,127 12.7 24.6 33.45 16,940 2,375 Source: CBRE Research, Q4 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table.

Figure 3: Fort Worth and Total Office Market Statistics

Submarket Net Total Total Average Q4 2016 Total YTD 2016 Total Rentable Area Vacancy Availability Asking Net Absorption Net Absorption (SF) (%) (%) Rate ($) (SF) (SF) Fort Worth CBD 8,082,765 16.3 17.2 25.49 (11,422) (75,549) Class A 5,779,611 18.0 16.5 29.23 (3,159) (7,457) Class B 2,200,779 12.6 19.7 19.59 (8,263) (68,092) Mid Cities 14,088,975 20.0 25.7 17.83 42,374 128,627 Class A 4,243,969 26.0 38.0 20.53 (3,658) 53,091 Class B 8,890,869 17.4 20.4 17.49 34,842 24,636 North Fort Worth 1,646,762 12.8 14.7 18.06 21,199 194,041 Class A 511,277 5.9 5.9 N/A 46,234 108,799 Class B 1,097,767 16.3 19.1 18.06 (25,035) 87,927 Northeast Fort Worth 2,883,153 56.5 58.9 19.27 (23,719) (18,522) Class A 414,859 81.5 75.3 21.37 1,224 (7,407) Class B 2,365,760 53.1 56.9 15.51 (11,863) 1,965 South Fort Worth 6,606,274 13.0 15.0 23.46 (55,560) 30,041 Class A 1,966,453 14.9 13.3 28.19 (14,822) 87,442 Class B 4,146,644 11.5 15.5 22.41 (40,738) (46,999) Dallas Total 179,336,458 18.5 23.7 24.93 726,286 4,958,969 Class A 106,598,265 18.3 23.6 29.31 537,322 3,389,909 Class B 69,533,185 19.2 24.2 21.18 144,266 1,389,220 Fort Worth Total 33,307,929 19.2 23.8 20.40 (27,128) 258,638 Class A 12,916,169 19.8 24.6 25.27 25,819 234,468 Class B 18,701,819 17.1 23.8 18.80 (51,057) (563) Metro Total 212,644,387 18.6 23.7 23.86 699,158 5,280,575 Class A 119,514,434 18.4 23.7 29.59 563,141 3,632,322 Class B 88,235,004 19.1 24.2 20.14 93,209 1,483,680 Source: CBRE Research, Q4 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table. Figure 4: Top Leases / Top Sales of the Quarter Figure 5: 2016 Signed Office Leases by Industry Type

Lease (Tenant) Building Name/Address Total SF

AmerisourceBergen The Offices at Austin Ranch 300,000 21% Environmental Protection 31% Renaissance Tower 229,000 Agency Goldman Sachs Trammell Crow Center 150,000 17% Sale (Buyer) Building Name/Address Total SF 7% 15% Corporate Properties Trust State Farm Campus 2,262,902 9%

Haberman Group Campbell Centre Complex 873,400 Professional & Business Services Financial Activities Manufacturing Retailers/Wholesalers Parallel Capital Partners Urban Center 848,939 Education & Health Services All Others

Source: CBRE Research, Q4 2016. Source: CBRE Research, Q4 2016.

LEASE RATES Figure 6: Lease Rates Asking Rate Class A gross asking rents experienced palpable ($/SF) Class A Class B growth over the past year by logging an increase of $29.59 30 10.4% since Q4 2015 and now averages $29.59 per sq. ft. The Class B average asking rate remained above 25 the $20.00 per sq. ft. benchmark, rising by 4.8% over the same timeframe to $20.14 per sq. ft. Class C rents $20.14 20 did not experience the same robust growth and actually fell 13.9% since Q4 2015 to sit at $13.07 per 15 sq. ft. Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

NET ABSORPTION Source: CBRE Research, Q4 2016. For the 26th consecutive quarter, the DFW office Figure 7: Total Net Absorption Sq. Ft. market posted positive net absorption, totaling (000’s) 699,158 sq. ft. for Q4 2016 and about 5.2 million sq. 1,800 ft. year-to-date. Richardson/Plano outperformed all 1,600 1,400 other submarkets in terms of net absorption, 1,200 posting 393,067 sq. ft. for Q4 2016. Las Colinas was 1,000 800 second posting 189,592 sq. ft. in net absorption. 600 400 Although net absorption is slowing down, it has still 200 remained positive, which is a good sign for DFW. 0 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Source: CBRE Research, Q4 2016.

VACANCY & AVAILABILITY Figure 8: Vacancy & Availability Market-wide availability increased by 100 basis points Total Vacancy % Availability % (bps) to 23.7% in Q4 2016. The total vacancy rate for % the Metroplex rose slightly to 18.6%, showing an 25 23.7% increase of 90 bps. Class A vacancy increased by 70 bps, totaling 18.4%. Class B vacancy increased 160 23

bps to 19.1%. Of the total amount of vacant space, 21 5.2% is attributed to sublease space, an increase of 30 bps quarter-over-quarter. Sublease availability 19 18.6% represents 11% of all available space on the market, 17 or 5.5 million sq. ft., a level that is considered normal Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 for North Texas. Source: CBRE Research, Q4 2016. Figure 9: Construction Completions CONSTRUCTION COMPLETIONS Sq. Ft. (000’s) This is the first quarter in 2016 where less than five 5,500 buildings delivered. There were four deliveries 5,000 4,500 totaling 353,901 sq. ft. with a strong combined pre- 4,000 3,500 leased rate of 80.6%. The largest of these deliveries 3,000 was the OneSource Virtual headquarters within the 2,500 2,000 Cypress Waters Office Park in Las Colinas. The 1,500 1,000 other three deliveries were Class B buildings 500 totaling 138,901 sq. ft. Two are located in Far North 0 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Dallas, while one is in Richardson/Plano. All 28 Source: CBRE Research, Q4 2016. buildings currently under construction are Class A.

Q4 2016 CBRE Research © 2017 CBRE, Inc. | 4 MARKETVIEW INSERT Dallas/Fort Worth Office, Q4 2016 Figure 1: Market Overview By Submarket and Class Net Direct Direct Sublease Total Total Average Building Submarket Class Rentable Vacant Vacancy Available Available Availability Asking Gross Count (SF) (SF) Rate (%) (SF) (SF) Rate (%) Rate ($/SF/Yr) Central Expressway Class A 26 7,775,991 847,754 10.9 127,502 1,212,920 15.6 29.30 Class B 40 3,892,454 383,247 9.8 62,638 635,727 16.3 22.29 Class C 1 112,888 5,547 4.9 1,601 7,148 6.3 22.50 Dallas CBD Class A 21 20,233,741 5,767,819 28.5 482,668 7,412,694 36.6 27.82 Class B 26 4,641,616 983,922 21.2 92,941 1,278,154 27.5 18.54 Class C 8 522,358 42,384 8.1 8,788 84,793 16.2 15.63 East Dallas Class A 4 583,651 64,624 11.1 - 64,624 11.1 N/A Class B 40 2,206,360 269,826 12.2 20,528 336,970 15.3 16.94 Class C 11 446,541 70,541 15.8 - 70,541 15.8 13.29 Far North Dallas Class A 125 24,291,538 3,314,071 13.6 1,049,774 4,603,066 18.9 30.16 Class B 189 14,274,956 2,433,572 17.0 396,764 3,426,947 24.0 20.09 Class C ------N/A Las Colinas Class A 66 16,074,832 1,779,551 11.1 763,408 3,444,093 21.4 28.19 Class B 121 12,504,658 2,051,405 16.4 97,963 2,670,015 21.4 20.67 Class C 6 600,791 55,527 9.2 5,000 70,422 11.7 16.02 LBJ Freeway Class A 33 10,408,036 2,499,354 24.0 332,662 3,048,794 29.3 21.93 Class B 90 8,663,068 1,963,481 22.7 167,839 2,384,563 27.5 16.95 Class C 5 186,369 14,441 7.7 7,758 25,634 13.8 12.58 Lewisville/Denton Class A 3 324,964 - - - 244,000 75.1 26.00 Class B 44 3,994,928 317,159 7.9 146,050 548,286 13.7 17.71 Class C 3 106,710 3,144 2.9 - 7,950 7.5 16.00 Preston Center Class A 20 3,272,504 305,056 9.3 105,237 547,598 16.7 37.86 Class B 10 649,374 71,610 11.0 2,984 98,297 15.1 28.51 Class C 2 67,678 23,381 34.5 - 23,381 34.8 25.00 Richardson/Plano Class A 47 10,007,730 1,575,339 15.7 275,770 2,153,702 21.5 24.65 Class B 136 11,053,129 2,374,709 21.5 102,157 2,906,672 26.3 21.46 Class C 8 331,798 2,834 0.9 - 38,198 11.5 15.35 SW Dallas Class A 2 280,729 15,500 5.5 5,000 20,500 7.3 21.50 Class B 16 1,053,132 184,788 17.5 - 222,946 21.2 15.69 Class C 3 185,654 9,000 4.8 - 13,420 7.2 N/A Stemmons Freeway Class A 10 4,207,328 866,869 20.6 15,555 1,021,057 24.3 16.42 Class B 40 4,610,383 1,672,187 36.3 108,028 1,864,203 40.4 13.36 Class C 11 510,634 167,717 32.8 - 186,874 36.6 12.06 Uptown/Turtle Creek Class A 39 9,137,221 1,087,700 11.9 194,220 1,351,475 14.8 44.16 Class B 26 1,989,127 248,085 12.5 145,672 488,507 24.6 33.45 Class C 2 133,587 - - - - - N/A

Fort Worth CBD Class A 16 5,779,611 846,333 14.6 194,162 955,512 16.5 29.23 Class B 15 2,200,779 237,800 10.8 39,878 432,610 19.7 19.59 Class C 3 102,375 - - - - - N/A Mid Cities Class A 31 4,243,969 961,285 22.7 142,170 1,614,303 38.0 20.53 Class B 114 8,890,869 1,460,497 16.4 88,261 1,816,538 20.4 17.49 Class C 19 954,137 162,104 17.0 - 184,732 19.4 13.16 North Fort Worth Class A 2 511,277 25,026 4.9 5,000 30,026 5.9 N/A Class B 12 1,097,767 66,476 6.1 112,091 209,163 19.1 18.06 Class C 1 37,718 2,685 - - 2,685 7.1 N/A NE Fort Worth Class A 2 414,859 338,017 81.5 5,000 312,531 75.3 21.37 Class B 21 2,365,760 1,237,849 52.3 71,856 1,344,985 56.9 15.51 Class C 2 102,534 34,499 33.6 - 34,499 38.5 N/A South Fort Worth Class A 13 1,966,453 227,711 11.6 65,685 261,693 13.3 28.19 Class B 51 4,146,644 388,385 9.4 89,237 644,643 15.5 22.41 Class C 10 493,177 85,050 17.2 - 85,050 17.2 16.37 Dallas Total Class A 396 106,598,265 18,123,637 17.0 3,351,796 25,124,523 23.6 29.31 Class B 778 69,533,185 12,953,991 18.6 1,343,564 16,861,287 24.2 21.18 Class C 60 3,205,008 394,516 12.3 23,147 528,361 16.5 13.43 Fort Worth Total Class A 64 12,916,169 2,398,372 18.6 412,017 3,174,065 24.6 25.27 Class B 213 18,701,819 3,391,007 18.1 401,323 4,447,939 23.8 19.52 Class C 34 1,689,941 284,338 16.8 - 311,966 18.5 13.23 DFW Total Class A 460 119,514,434 20,522,009 17.2 3,763,813 28,298,588 23.7 29.59 Class B 991 88,235,004 16,344,998 18.5 1,744,887 21,309,226 24.2 20.14 Class C 94 4,894,949 678,854 13.9 23,147 840,327 17.2 13.07

Source: CBRE Research, Q4 2016.

Figure 2: Absorption and Construction

Qtr YTD 2016 Under Under Delivered Qtr Delivered Submarket Total Net Total Net Construction Construction Construction Construction Absorption (SF) Absorption (SF) Building Count (SF) Building Count (SF) Central Expressway Class A 69,299 474,429 - - - - Class B (23,069) 27,544 - - - - Class C (1,858) 9,547 - - - - Dallas CBD Class A (159,720) (676,511) 2 342,879 - - Class B 117,168 128,050 - - - - Class C (14,951) 7,830 - - - - East Dallas Class A 8,318 (4,166) - - - - Class B 14,063 32,676 - - - - Class C (12,522) (7,239) - - - - Far North Dallas Class A 44,576 793,825 10 2,969,401 - - Class B (15,124) (119,436) - - 2 80,000 Class C ------Las Colinas Class A 348,216 824,996 4 785,402 1 215,000 Class B (158,771) 189,202 - - - - Class C 147 5,920 - - - - LBJ Freeway Class A 29,301 150,216 - - - - Class B 53,969 409,478 - - - - Class C 1,278 16,287 - - - - Lewisville/Denton Class A - 80,964 - - - - Class B (16,435) 176,302 - - - - Class C 12,624 11,988 - - - - Preston Center Class A (44,520) 780 1 171,583 - - Class B (4,102) 6,780 - - - - Class C 1,355 (11,388) - - - - Richardson/Plano Class A 190,482 1,247,315 2 348,441 - - Class B 189,721 483,915 - - 1 58,901 Class C 12,864 56,266 - - - - SW Dallas Class A - 2,903 - - - - Class B (18,931) (30,818) - - - - Class C 13,125 23,673 - - - - Stemmons Freeway Class A (20,121) (76,486) - - - - Class B (11,163) 83,152 - - - - Class C 32,636 26,956 - - - - Uptown/Turtle Creek Class A 71,491 571,644 5 1,500,471 - - Class B 16,940 2,375 - - - - Class C ------Fort Worth CBD Class A (3,159) (7,457) 1 280,489 - - Class B (8,263) (68,092) - - - - Class C ------Mid Cities Class A (3,658) 53,091 1 160,000 - - Class B 34,842 24,636 - - - - Class C 11,190 50,900 - - - - North Fort Worth Class A 46,234 108,799 - - - - Class B (25,035) 87,927 - - - - Class C - (2,685) - - - - NE Fort Worth Class A 1,224 (7,407) - - - - Class B (11,863) 1,965 - - - - Class C (13,080) (13,080) - - - - South Fort Worth Class A (14,822) 87,442 2 160,182 - - Class B (40,738) (46,999) - - - - Class C - (10,402) - - - - Dallas Total Class A 537,322 3,397,854 24 6,118,177 1 215,000 Class B 144,266 1,484,243 - - 3 138,901 Class C 44,698 139,840 - - - - Fort Worth Total Class A 25,819 234,468 4 600,671 - - Class B (51,057) (563) - - - - Class C (1,890) 24,733 - - - - DFW Total Class A 317,651 3,378,887 28 6,718,848 1 215,000 Class B 93,209 1,388,657 - - 3 138,901 Class C 42,808 164,573 - - - -

Source: CBRE Research, Q4 2016.

Figure 3: Average Asking Rates Figure 4: Net Absorption and Vacancy

Asking Rate Sq. Ft. Vacancy (%) ($/SF) Class A Class B Class C (000’s) Net Absorption Vacancy $29.59 30 2,000 21 1.7M 20 25 1,500

$20.14 18.6% 19 20 1,000 699K 18 $13.07 15 500 17

10 0 16

Q1 2014 Q1 2015 Q4 Q2 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2016Q1 2016Q2 2016Q3 2016Q4

Q1 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 Source: CBRE Research, Q4 2016. Source: CBRE Research, Q4 2016.

Figure 5: Significant Lease Transactions of the Quarter

Tenant Property Name/Address Total SF Class Lease Type Submarket

AmerisourceBergen The Offices at Austin Ranch 300,000 A New Lease Far North Dallas

Environmental Protection Agency Renaissance Tower 229,000 A New Lease Dallas CBD

Goldman Sachs Trammell Crow Center 150,000 A New Lease Dallas CBD Occidental Petroleum Fourteen555 120,000 A New Lease LBJ Freeway

Gardere Wynne Sewell LLP McKinney & Olive 115,000 A New Lease Uptown/Turtle Creek

Source: CBRE Research, Q4 2016.

Figure 6: Significant Sale Transactions of the Quarter

Buyer Property Name/Address Total SF $/PSF Class Submarket

Transwestern/Mirae Asset Financial State Farm Headquarters 2,262,902 $363 A Richardson/Plano

Parallel Capital Partners Urban Towers 844,239 - A Las Colinas

Intercontinental RE Legacy Tower 342,000 - A Far North Dallas

Intercontinental RE/JV Foundry 8080 NCX 283,707 - A Central Expressway Commercial Source: Real Capital Analytics, CBRE Research, Q4 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas / Fort Worth Office, Q3 2016 Still on the rise; office construction at a five year high

Vacancy Rate Avg. Asking Rate Net Absorption Completions 17.5% $23.20/SF 1,711,110 SF 1,290,880 SF *Arrows indicate change from previous quarter. Figure 1: Average Asking Lease Rate and Under Construction Sq. Ft. Under Construction Average Asking Lease Rate ($/SF) (Millions) Under Construction Average Asking Lease Rates 8 24 7 6 22 5 4 20 3 2 18 1 0 16 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 Source: CBRE Research, Q3 2016.

Growth in the Dallas/Fort Worth office market Of the 8,081,805 sf. ft. under construction, 36.5% is shows no signs of slowing down with the pre-leased. The majority of the 30 buildings under construction pipeline at a five year high. This construction are speculative developments, with growth is boosted by an employment creation rate only five being build-to-suit. This construction that continues to outperform the state as a whole activity is focused within Far North Dallas according to The Federal Reserve Bank of Dallas. (particularly the Upper Tollway and Frisco), Uptown Job growth in Dallas was an impressive 5.3% year- and Las Colinas; these three submarkets account for over-year in August while Fort Worth trailed at 1.1% almost 70% of the DFW market’s construction in the same month. Although Fort Worth continues underway. The largest of these projects with 552,883 to lag in growth compared to Dallas, the overall sq. ft. is Wade Park, which is scheduled to deliver by Metroplex commercial real estate market remains the end of the year. on an upward path. The average metro-wide quoted lease rate fell 0.8% from last quarter, but is still up Dallas has proven to be a key market in the U.S. with 9.4% year-over-year. an influx corporate relocations to Dallas within the past few years such as Toyota and State Farm. The Construction volume in DFW has been on a sustained market improvements continue to attract continuous rise for the past year. This quarter national and global companies. All market proved to be no different with more than eight indications show that DFW’s momentum will not million sq. ft. of construction in the pipeline. slow down anytime soon.

Figure 2: Dallas Office Market Statistics

Submarket Net Total Total Average Q3 2016 Total YTD 2016 Total Rentable Area Vacancy Availability Asking Net Absorption Net Absorption (SF) (%) (%) Rate ($/SF/Yr) (SF) (SF) Central Expressway 11,660,204 11.3 14.9 26.20 130,064 467,148 Class A 7,617,634 12.1 15.4 29.02 132,205 405,130 Class B 3,929,682 9.9 14.3 23.16 (2,865) 50,613 Dallas CBD 25,511,315 26.5 35.3 25.43 (244,190) (503,128) Class A 20,233,604 27.8 37.7 27.07 (228,425) (516,791) Class B 4,641,616 23.8 28.2 18.51 (9,744) 10,882 East Dallas 3,725,595 12.5 14.7 16.77 12,253 11,412 Class A 583,651 12.5 14.1 34.00 - (12,484) Class B 2,633,403 12.7 15.2 16.29 14,054 18,613 Far North Dallas 40,833,607 12.5 14.7 24.23 116,292 644,937 Class A 26,077,135 12.5 14.1 30.02 414,577 749,249 Class B 14,756,472 12.7 15.2 19.96 (298,285) (104,312) Las Colinas 29,938,141 14.4 20.0 24.11 356,518 830,526 Class A 16,179,606 14.4 20.0 27.40 233,039 476,780 Class B 13,006,670 14.7 20.6 20.98 121,292 347,973 LBJ Freeway 19,511,576 23.9 28.0 18.87 347,151 433,178 Class A 10,410,777 24.6 29.0 21.49 110,667 191,454 Class B 8,914,430 23.4 27.1 17.24 235,079 241,597 Lewisville / Denton 4,671,318 12.4 18.2 20.15 58,255 170,136 Class A 324,964 - 75.1 26.00 (70,539) 10,425 Class B 4,159,008 12.9 13.6 19.49 113,912 144,829 Preston Center 3,979,643 9.5 16.5 34.73 62,546 43,439 Class A 3,262,591 8.7 16.5 37.03 64,777 45,300 Class B 649,374 10.9 14.3 28.70 (2,231) 10,882 Richardson / Plano 23,907,868 16.4 21.9 22.59 429,445 1,394,429 Class A 11,087,229 12.4 19.7 24.70 367,062 1,056,833 Class B 12,520,841 20.2 23.7 21.56 56,632 294,194 Southwest Dallas 1,706,268 11.9 13.6 16.11 (1,995) 1,564 Class A 280,729 5.5 7.3 21.50 - 2,903 Class B 1,184,627 14.0 16.0 15.25 (1,995) (11,887) Stemmons Freeway 9,707,375 27.7 31.7 15.22 18,862 135,238 Class A 3,907,347 21.7 26.5 16.62 (57,153) (48,420) Class B 5,114,105 31.6 35.1 13.54 78,015 189,338 Uptown / Turtle Creek 11,263,794 13.1 17.8 40.50 364,213 456,922 Class A 9,094,731 13.3 16.2 44.16 429,613 500,153 Class B 2,035,476 13.2 25.8 33.36 (65,400) (14,565) Source: CBRE Research, Q3 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table.

Figure 3: Fort Worth and Total Office Market Statistics

Submarket Net Total Total Average Q3 2016 Total YTD 2016 Total Rentable Area Vacancy Availability Asking Net Absorption Net Absorption (SF) (%) (%) Rate ($) (SF) (SF) Fort Worth CBD 9,365,503 11.5 15.0 25.38 50,316 (64,127) Class A 5,914,246 13.4 16.7 29.11 79,349 (4,298) Class B 3,184,582 7.8 11.9 19.58 (29,033) (59,829) Mid Cities 15,268,833 17.5 24.1 17.98 46,626 86,253 Class A 4,628,874 22.9 36.5 20.49 46,437 56,749 Class B 9,143,342 15.5 19.5 17.50 (32,510) (10,206) North Fort Worth 1,646,762 8.7 13.5 18.11 38,739 172,842 Class A 511,277 13.9 5.7 N/A 48,283 62,565 Class B 1,097,767 6.4 17.3 18.11 (9,544) 112,962 Northeast Fort Worth 2,517,953 46.6 52.6 19.39 19 5,197 Class A 403,938 84.0 85.2 21.37 - (8,631) Class B 1,979,027 41.1 48.2 16.14 19 13,828 South Fort Worth 7,124,870 10.2 15.8 23.41 91,963 85,601 Class A 2,003,253 11.8 17.1 28.30 53,090 102,264 Class B 4,463,917 9.0 15.6 22.13 34,225 (6,261) Dallas Total 186,416,704 17.7 22.9 23.41 1,649,414 4,461,618 Class A 109,059,998 17.5 23.1 28.30 1,395,823 2,971,199 Class B 73,545,704 18.2 22.8 22.13 238,464 1,413,236 Fort Worth Total 35,923,921 16.1 21.6 20.42 227,663 58,103 Class A 13,461,588 18.6 25.3 24.69 227,159 (18,510) Class B 19,868,635 14.9 20.2 18.63 (36,843) 50,494 Metro Total 222,340,625 17.5 22.7 23.20 1,711,110 4,581,417 Class A 122,521,586 17.7 23.3 29.43 1,512,315 3,069,181 Class B 93,414,339 17.5 22.3 20.18 128,362 1,390,471 Source: CBRE Research, Q3 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table. Figure 4: Top Leases / Top Sales of the Quarter Figure 5: 2016 Signed Office Leases by Industry Type

Lease (Tenant) Building Name/Address Total SF

Caliber Home Loans Point West I 182,700 15% 30% Texas Health Resources 500 East Border St 123,770 15% The Charter School Fund 6361 Grapevine Hwy 102,000

Sale (Buyer) Building Name/Address Total SF 9% 20% Fortis Property Group 2200 Ross Ave 1,248,230 11%

Mesirow Financial Verizon Campus 1,150,000 Professional & Business Services Financial Activities Manufacturing Retailers/Wholesalers Metzler 2000 McKinney 447,595 Education & Health Services All Others

Source: CBRE Research, Q3 2016. Source: CBRE Research, Q3 2016.

LEASE RATES Figure 6: Lease Rates Class A gross asking rents experienced palpable Asking Rate ($/SF) Class A Class B growth over the past year by logging an increase of $29.43 11.29% since Q3 2015 and now averages $29.43 per 30 sq. ft. The Class B average asking rate broke the $20.00 per sq. ft. ceiling, rising by 8.2% over the 25 same timeframe to $20.18 per sq. ft. Class C rents $20.18 experienced a 4.2% growth as well ending the quarter 20 at $14.04 per sq. ft.

15 NET ABSORPTION Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 For the 25th consecutive quarter, the DFW office Source: CBRE Research, Q3 2016. market posted positive net absorption, totaling 1.7 Figure 7: Total Net Absorption million sq. ft. for Q3 2016 and about 4.5 million sq. Sq. Ft. ft. year-to-date. Richardson/Plano outperformed all (000’s) other submarkets in terms of net absorption, 1,800 1,600 posting 429,445 sq. ft. for the quarter, while 1,400 1,200 Uptown/Turtle Creek and Las Colinas logged a 1,000 significant amount of net move-ins as well, proving 800 600 that growth in the DFW metro is not centralized in 400 one specific area. 200 0 VACANCY & AVAILABILITY Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Source: CBRE Research, Q3 2016. Market-wide availability continued to decrease by 60 basis points (bps) to 22.7% in Q3 2016, a forward- looking indication that considerable net absorption Figure 8: Vacancy & Availability Total Vacancy % Availability % is expected to commence in the coming quarters. The % total vacancy rate for the Metroplex remained 17.5%, 25 showing no change from last quarter. The Class A 22.7% vacancy increased by 20 bps, while Class B decreased 23 by 30 since Q2 2016. Of the total amount of vacant 21 space in the market, less than 5% is attributed to sublease space, an increase of 90 bps quarter-over- 19 quarter. Sublease availability represents 10.6% of all 17.5% 17 available space on the market, or 5.35 million sq. ft., Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 a level that is considered normal for North Texas. Source: CBRE Research, Q3 2016. Figure 9: Construction Completions Sq. Ft. CONSTRUCTION COMPLETIONS (000’s) Similar to last quarter, there were five office projects 5,500 5,000 that delivered in Q3 2016, all of which were Class A, 4,500 4,000 totaling just under 1.3 million sq. ft. of new 3,500 inventory and a strong combined pre-leased rate of 3,000 2,500 75%. The largest of these deliveries included the 2,000 1,500 530,000-sq. ft. McKinney & Olive in Uptown, the 1,000 250,000-sq.ft. Alcatel-Lucent Regional Headquarters 500 0 in Plano, and the 197,740-sq. ft. Tollway Center in 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Far North Dallas. Source: CBRE Research, Q3 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas / Fort Worth Office, Q2 2016 Going up: rents and construction continue upward trajectory

Vacancy Rate Avg. Asking Rate Net Absorption Completions 17.5% $23.40/SF 1,285,487 SF 694,382 SF *Arrows indicate change from previous quarter. Figure 1: Average Asking Lease Rate and Under Construction Sq. Ft. Under Construction Average Asking (Millions) Under Construction Average Asking Lease Rates Lease Rate ($/SF) 8 24 7 6 22 5 4 20 3 2 18 1 0 16 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016

Source: CBRE Research, Q2 2016.

While other parts of the region are contracting, 90% pre-leased, Park District, which broke ground Dallas/Fort Worth is still exhibiting signs of last quarter after PricewaterhouseCoopers signed a expansion, given the 3.6% year-over-year 200,000-sq. ft. lease, and Liberty Mutual’s twin- employment growth (120,000 jobs added), rising tower build-to-suit (BTS) complex in Legacy West. rents and new groundbreakings. While the metro- Removing all BTS projects from the pipeline, the wide quoted lease rate average has broken the remaining speculative developments under $23.00 per sq. ft. mark, Dallas remains more construction at mid-year were 37% pre-leased. affordable than many other major office markets in the country and even within the state. Although owner-occupied projects are excluded

from the CBRE Research tracked set, it is important The construction pipeline continues to expand to note that there are currently seven such projects even with the continued roll-out of deliveries. More comprised of 2.7 million sq. ft. under construction than 900,000 sq. ft. between six projects broke throughout the Metroplex, making the total office ground over the quarter, bringing the active owned and leased pipeline 10.2 million sq. ft. and construction total to 7.5 million sq. ft. with comparable to current activity in Manhattan, which approximately 51.8% already pre-committed. This had 11.4 million sq. ft. of major projects underway activity is focused within Far North Dallas at mid-year. Clearly, the rise in building material (particularly the Upper Tollway and Frisco), Uptown costs and shortage of construction labor are not and Richardson; these three submarkets account translating into a lull in projects underway. for 70% of the DFW market’s construction Dallas/Fort Worth labor rates are more cost-efficient underway. The largest of these projects is McKinney than the national counterpart, at 68% of the U.S. & Olive, which will deliver in Q3 2016 and is about average according to RSMeans.

Figure 2: Dallas Office Market Statistics

Submarket Net Total Total Average Q2 2016 YTD 2016 Total Rentable Area Vacancy Availability Asking Net Net Absorption (SF) (%) (%) Rate ($/SF/Yr) Absorption (SF) Central Expressway 11,728,144 12.9 17.6 25.09 165,283 337,084 Class A 7,617,574 13.9 17.4 27.94 105,797 272,925 Class B 3,997,682 11.3 18.3 22.15 48,105 53,478 Dallas CBD 25,507,671 25.6 35.5 25.28 (144,664) (258,938) Class A 20,229,960 26.7 37.9 26.93 (147,854) (288,366) Class B 4,584,016 23.9 27.5 18.60 (15,303) 20,626 East Dallas 3,725,595 12.8 14.6 17.25 4,922 (841) Class A 583,651 12.5 14.1 34.00 (15,903) (12,484) Class B 2,633,403 13.2 15.2 17.09 16,155 4,559 Far North Dallas 40,494,143 14.8 19.3 24.67 459,724 528,645 Class A 24,996,767 14.6 18.7 30.68 200,871 334,672 Class B 15,247,376 15.4 20.7 19.92 258,853 193,973 Las Colinas 30,047,878 15.5 21.3 24.00 50,119 474,008 Class A 16,267,139 15.8 20.6 27.35 (143,169) 243,741 Class B 13,028,874 15.6 22.7 20.90 189,597 226,681 LBJ Freeway 19,733,104 24.0 28.9 18.60 347,151 433,178 Class A 10,404,414 24.0 30.1 21.11 110,667 191,454 Class B 9,142,321 24.3 28.0 16.97 235,079 241,597 Lewisville / Denton 4,671,318 12.4 18.2 20.15 95,678 111,881 Class A 324,964 - 75.1 26.00 80,964 80,964 Class B 4,159,008 12.9 13.6 19.49 14,714 30,917 Preston Center 3,979,643 11.1 15.7 32.90 (12,921) (19,107) Class A 3,262,591 10.7 15.5 36.99 (26,695) (19,477) Class B 649,374 10.5 14.2 28.21 15,129 13,113 Richardson / Plano 23,890,938 16.9 21.5 22.38 (6,366) 964,984 Class A 11,338,210 13.2 18.1 24.42 (904) 689,771 Class B 12,252,930 20.5 24.5 21.53 (9,026) 237,562 Southwest Dallas 1,706,268 11.8 13.5 16.27 27,969 3,559 Class A 280,729 5.5 7.3 21.50 - 2,903 Class B 1,184,627 13.8 15.9 15.51 17,421 (9,892) Stemmons Freeway 10,114,432 28.2 34.5 14.88 102,969 116,376 Class A 3,458,586 18.3 22.1 16.00 7,945 8,733 Class B 5,888,728 33.9 40.8 14.66 95,023 111,323 Uptown / Turtle Creek 10,639,883 10.3 18.5 40.60 28,666 121,375 Class A 8,424,890 10.4 17.1 43.04 40,386 70,540 Class B 2,081,406 10.2 25.1 34.43 (11,720) 50,835 Source: CBRE Research, Q2 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table.

Figure 3: Fort Worth and Total Office Market Statistics

Submarket Net Total Total Average Q2 2016 YTD 2016 Total Rentable Area Vacancy Availability Asking Net Net Absorption (SF) (%) (%) Rate ($) Absorption (SF) Fort Worth CBD 9,365,503 11.8 15.5 25.46 (40,558) (114,443) Class A 5,914,246 14.5 17.9 29.38 (37,914) (83,647) Class B 3,184,582 6.7 11.3 19.16 (2,644) (30,796) Mid Cities 15,227,919 17.6 24.2 17.12 58,027 39,627 Class A 4,590,874 23.3 36.3 20.20 23,546 10,312 Class B 9,140,428 15.2 19.5 17.20 33,269 22,304 North Fort Worth 1,686,762 10.8 17.4 19.18 58,446 134,103 Class A 511,277 23.4 17.5 N/A 14,282 14,282 Class B 1,137,767 5.3 17.8 19.18 46,849 122,506 Northeast Fort Worth 2,520,075 46.6 53.0 19.39 8,874 5,178 Class A 403,938 84.0 85.2 21.38 (8,631) (8,631) Class B 1,981,149 41.0 48.7 16.11 17,505 13,809 South Fort Worth 6,977,408 9.2 16.3 22.31 82,168 (6,362) Class A 1,832,271 6.5 12.0 27.18 73,615 49,174 Class B 4,487,437 9.7 18.4 21.74 (8,207) (40,486) Dallas Total 186,239,017 17.8 23.6 23.61 1,118,530 2,812,204 Class A 107,189,475 17.4 23.6 28.81 212,105 1,575,376 Class B 74,849,745 18.7 23.8 20.01 854,027 1,174,772 Fort Worth Total 35,777,667 16.2 22.1 20.47 166,957 58,103 Class A 13,252,606 18.9 25.5 24.45 64,898 (18,510) Class B 19,931,363 14.6 20.7 18.77 86,772 87,337 Metro Total 222,016,684 17.5 23.3 23.40 1,285,487 2,870,307 Class A 120,442,081 17.5 23.8 29.33 277,003 1,556,866 Class B 94,781,108 17.8 23.2 19.39 940,799 1,262,109 Source: CBRE Research, Q2 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table. Figure 3: Top Leases / Top Sales of the Quarter Figure 4: 2016 Signed Office Leases by Industry Type

Lease (Tenant) Building Name Total SF Zale Corp. Cypress Waters 256,000 21% 28% Flagship Mortgage 4600 Regent Blvd 100,000 Atos SE Connection Park I 100,000 11% Sale (Buyer) Building Name Total SF 11% 16% Hanwha Life KPMG Plaza 474,000 13%

Fine Line Diversified Development Overton Centre 447,917 Professional & Business Services Financial Activities Manufacturing Retailers/Wholesalers DISD 9400 NCX 387,617 Education & Health Services All Others Source: CBRE Research, Q2 2016. Source: CBRE Research, Q2 2016.

LEASE RATES Figure 5: Lease Rates Asking Rate Class A gross asking rents continued to experience ($/SF) Class A Class B growth in Q2 2016, logging a 1.1% increase since Q2 $29.33 30 2015 and now sits at $29.33 per sq. ft. Class B average asking rents experienced more pronounced rent 25 growth this quarter, rising by 4.5% over the same timeframe to $19.39 per sq. ft., albeit slightly down $19.39 20 from the previous quarter.

NET ABSORPTION 15 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 For the 24th consecutive quarter, DFW posted positive net absorption, totaling 1,285,487 sq. ft. for Source: CBRE Research, Q2 2016. Q2 2016 and about 2.9 million sq. ft. year-to-date. Figure 6: Net Absorption Far North Dallas continued to outperform all other Sq. Ft. (000’s) submarkets in terms of net absorption, posting 1,800 460,000 sq. ft. over the quarter, while the LBJ 1,600 1,400 Freeway and Central Expressway corridors logged a 1,200 significant amount of net move-ins as well, an 1,000 800 indication that demand from Uptown and the 600 Tollway, respectively, may be bleeding into adjacent 400 200 areas as availability dwindles and/or some users are 0 being priced out of higher-rent submarkets. Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Source: CBRE Research, Q2 2016. VACANCY & AVAILABILITY

Market-wide availability decreased by 40 basis points Figure 7: Vacancy & Availability (bps) to 23.3% year-over-year in Q2 2016, a forward- Total Vacancy % Availability % looking indication that considerable net absorption % is expected to commence in the coming quarters. The 25 total vacancy rate decreased year-over-year by 60 bps 23.3% 23 to 17.5%, dipping back down after a slight increase during Q1 2016. Of the total amount of vacant space 21 in the market, only 4.0% is attributed to sublease 19 17.5% space, a noteworthy decrease of 70 bps quarter-over-

quarter. Sublease availability represents 10.2% of all 17 available space on the market, or 5.3 million sq. ft., a Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 level that is considered to be within the market norm Source: CBRE Research, Q2 2016. for North Texas. Figure 8: Construction Completions Sq. Ft. CONSTRUCTION COMPLETIONS (000’s) 5,500 Similar to last quarter, there were five office projects 5,000 that delivered in Q2 2016, all of which were Class A, 4,500 4,000 totaling just under 700,000 sq. ft. of new inventory 3,500 3,000 and a combined preleased rate of 22%. The largest 2,500 of these deliveries included the 400,000-sq. ft. The 2,000 1,500 Star in Frisco, Allen Place I with 102,357 sq. ft. in 1,000 500 Allen, and the 101,608-sq. ft. Parkside on Legacy in 0 Plano. Two smaller projects, one speculative and 2009 2010 2011 2012 2013 2014 2015 YTD 2016 one BTS, delivered in South Fort Worth. Source: CBRE Research, Q2 2016.

MARKETVIEW INSERT Dallas/Fort Worth Office, Q2 2016 Figure 1: Market Overview By Submarket and Class Net Direct Direct Sublease Total Total Average Building Submarket Class Rentable Vacant Vacancy Available Available Availability Asking Gross Count (SF) (SF) Rate (%) (SF) (SF) Rate (%) Rate ($/SF/Yr) Central Expressway Class A 26 7,617,574 1,057,465 13.9 91,551 1,323,135 17.4 27.94 Class B 42 3,997,682 452,610 11.3 78,513 731,575 18.3 22.15 Class C 1 112,888 6,014 5.3 1,601 9,425 8.3 22.50 Dallas CBD Class A 21 20,229,960 5,188,289 25.6 396,245 7,666,308 37.9 26.93 Class B 25 4,584,016 1,087,752 23.7 27,442 1,260,232 27.5 18.60 Class C 10 693,695 34,754 5.0 40,430 120,578 17.4 15.86 East Dallas Class A 4 583,651 72,942 12.5 - 82,202 14.1 N/A Class B 46 2,633,403 330,605 12.6 30,575 400,197 15.2 17.09 Class C 13 508,541 56,218 11.1 - 62,509 12.3 13.29 Far North Dallas Class A 124 24,996,767 3,478,778 13.9 852,986 4,668,813 18.7 30.68 Class B 202 15,247,376 2,338,824 15.3 305,891 3,153,461 20.7 19.92 Class C 1 250,000 - - - - - N/A Las Colinas Class A 67 16,267,139 2,160,477 13.3 715,660 3,352,218 20.6 27.35 Class B 126 13,028,874 2,019,314 15.5 71,435 2,954,261 22.7 20.90 Class C 7 751,865 62,861 8.4 6,325 6,325 10.5 15.72 LBJ Freeway Class A 33 10,404,414 2,432,806 23.4 290,161 3,129,084 30.1 21.11 Class B 93 9,142,321 2,174,060 23.8 118,463 2,559,957 28.0 16.97 Class C 5 186,369 30,601 16.4 7,758 23,109 12.4 11.60 Lewisville/Denton Class A 3 324,964 - N/A - 244,000 75.1 26.00 Class B 46 4,159,008 451,737 10.9 84,885 564,821 13.6 19.49 Class C 5 187,346 42,853 22.9 - 42,853 22.9 16.00 Preston Center Class A 20 3,262,591 331,278 10.2 90,408 506,000 15.5 36.99 Class B 10 649,374 68,261 10.5 - 92,105 14.2 28.21 Class C 2 67,678 24,736 36.5 - 24,886 36.8 25.00 Richardson/Plano Class A 50 11,338,210 1,451,243 12.8 244,183 2,508,804 18.1 24.42 Class B 138 12,252,930 2,480,127 20.2 146,908 3,003,794 24.5 21.53 Class C 7 299,798 21,449 7.2 - 83,706 27.9 13.99 SW Dallas Class A 2 280,729 15,500 5.5 5,000 20,500 7.3 21.50 Class B 19 1,184,627 163,862 13.8 - 187,822 15.9 15.51 Class C 4 240,912 22,125 9.2 - 22,125 9.2 15.00 Stemmons Freeway Class A 9 3,458,586 631,743 18.3 5,290 763,225 22.1 16.00 Class B 49 5,888,728 1,937,467 32.9 283,984 2,399,728 40.8 14.66 Class C 15 767,118 299,748 39.1 - 321,955 42.0 12.20 Uptown/Turtle Creek Class A 37 8,424,890 842,694 10.0 241,002 1,443,829 17.1 43.04 Class B 28 2,081,406 210,271 10.1 169,531 522,714 25.1 34.43 Class C 2 133,587 - - - - - N/A

Fort Worth CBD Class A 17 5,914,246 825,901 14.0 216,971 1,058,380 17.9 29.38 Class B 18 3,184,582 213,183 6.7 47,703 358,648 11.3 19.16 Class C 5 266,675 38,000 14.2 - 38,000 14.2 N/A Mid Cities Class A 31 4,590,874 956,872 20.8 148,987 1,668,126 36.3 20.20 Class B 118 9,140,428 1,341,798 14.7 85,547 1,780,984 19.5 17.20 Class C 24 1,496,617 218,780 14.6 - 241,540 16.1 12.74 North Fort Worth Class A 2 511,277 119,543 23.4 5,000 89,365 17.5 N/A Class B 13 1,137,767 35,331 3.1 114,400 202,227 17.8 19.18 Class C 1 37,718 2,685 7.1 - 2,684 7.1 N/A NE Fort Worth Class A 2 403,938 339,241 84.0 5,000 344,241 85.2 21.38 Class B 21 1,981,149 794,426 41.0 138,344 963,881 48.7 16.11 Class C 2 134,988 21,419 15.9 - 26,419 19.6 N/A South Fort Worth Class A 13 1,832,271 113,208 6.2 57,932 219,565 12.0 27.18 Class B 56 4,487,437 411,278 9.2 145,794 824,929 18.4 21.74 Class C 14 657,700 89,698 13.6 - 93,733 14.3 16.42 Dallas Total Class A 396 107,189,475 17,647,140 16.5 2,932,486 25,255,783 23.6 28.39 Class B 824 74,849,745 13,701,737 18.3 1,348,327 17,830,667 23.8 20.81 Class C 72 4,199,797 599,758 14.3 56,114 790,227 18.8 15.58 Fort Worth Total Class A 65 13,252,606 2,354,765 17.8 433,890 3,379,677 25.5 20.89 Class B 226 19,931,363 2,796,016 14.0 531,788 4,130,669 20.7 18.50 Class C 46 2,593,698 370,582 14.3 - 402,377 15.5 10.35 DFW Total Class A 461 120,442,081 20,001,905 16.6 3,366,376 28,635,460 23.8 29.33 Class B 1,050 94,781,108 16,497,753 17.4 1,880,115 21,961,336 23.2 19.39 Class C 118 6,793,495 970,340 14.3 56,114 1,192,604 17.6 13.96

Source: CBRE Research, Q2 2016.

Figure 2: Absorption and Construction

Qtr YTD 2016 Under Under Delivered Delivered Submarket Total Net Total Net Construction Construction Construction Construction Absorption (SF) Absorption (SF) Building Count (SF) Building Count (SF) Central Expressway Class A 105,797 272,925 - - - - Class B 48,105 53,478 - - - - Class C 11,381 10,681 - - - - Dallas CBD Class A (147,854) (288,366) 2 342,879 - - Class B (15,303) 20,626 - - - - Class C 18,493 8,802 - - - - East Dallas Class A (15,903) (12,484) - - - - Class B 16,155 4,559 - - - - Class C 4,670 7,084 - - - - Far North Dallas Class A 200,871 334,672 8 2,693,848 2 500,377 Class B 258,853 193,973 2 80,000 - - Class C ------Las Colinas Class A (143,169) 243,741 4 900,402 - - Class B 189,597 226,681 1 100,000 - - Class C 3,691 3,586 - - - - LBJ Freeway Class A 110,667 191,454 - - - - Class B 235,079 241,597 - - - - Class C 1,405 127 - - - - Lewisville/Denton Class A 80,964 80,964 - - - - Class B 14,714 30,917 - - - - Class C ------Preston Center Class A (26,695) (19,477) 1 186,257 - - Class B 15,129 13,113 - - - - Class C (1,355) (12,743) - - - - Richardson/Plano Class A (904) 689,771 2 550,000 1 102,357 Class B (9,026) 237,562 - - - - Class C 3,564 37,651 - - - - SW Dallas Class A - 2,903 - - - - Class B 17,421 (9,892) - - - - Class C 10,548 10,548 - - - - Stemmons Freeway Class A 7,945 8,733 - - - - Class B 95,023 111,323 - - - - Class C 1 (3,680) - - - - Uptown/Turtle Creek Class A 40,386 70,540 5 1,736,383 - - Class B (11,720) 50,835 - - - - Class C ------Fort Worth CBD Class A (37,914) (83,647) 1 280,489 - - Class B (2,644) (30,796) - - - - Class C ------Mid Cities Class A 23,546 10,312 1 158,000 - - Class B 33,269 22,304 1 150,000 - - Class C 1,212 7,011 - - - - North Fort Worth Class A 14,282 14,282 - - - - Class B 46,849 122,506 - - - Class C (2,685) (2,685) - - - - NE Fort Worth Class A (8,631) (8,631) - - - - Class B 17,505 13,809 - - - - Class C ------South Fort Worth Class A 73,615 49,174 3 317,584 2 91,648 Class B (8,207) (40,486) - - - - Class C 16,760 (15,050) - - - - Dallas Total Class A 212,105 1,575,376 22 6,409,769 3 602,734 Class B 854,027 1,174,772 3 180,000 - - Class C 52,398 62,056 - - - - Fort Worth Total Class A 64,898 (18,510) 5 756,073 2 91,648 Class B 86,772 87,337 1 150,000 - - Class C 15,287 (10,724) - - - - DFW Total Class A 277,003 1,556,866 27 7,165,842 5 694,382 Class B 940,799 1,262,109 4 330,000 - - Class C 67,685 51,332 - - - -

Source: CBRE Research, Q2 2016.

Figure 3: Average Asking Rates Figure 4: Net Absorption and Vacancy

Asking Rate Sq. Ft. Vacancy (%) ($/SF) Class A Class B Class C (000’s) Net Absorption Vacancy $29.33 30 2,000 20

1.3 M 19 25 1,500

$19.39 18 20 1,000 17.5% 17 $13.93 15 500 16

10 0 15 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Source: CBRE Research, Q2 2016. Source: CBRE Research, Q2 2016.

Figure 5: Significant Lease Transactions of the Quarter

Tenant Property Name/Address Total SF Class Lease Type Submarket

Zale Corp. Cypress Waters 256,000 A New Lease Las Colinas

Flagship Mortgage 4600 Regent Blvd 100,000 B Renewal Las Colinas

Atos SE Connection Park I 100,000 A New Lease Las Colinas

CompuCom Dominion Legacy Office Center 92,250 A New Lease Far North Dallas

Undisclosed Bryan Tower 80,832 A Renewal Dallas CBD

Source: CBRE Research, Q2 2016.

Figure 6: Significant Sale Transactions of the Quarter

Buyer Property Name/Address Total SF $/PSF Class Submarket

Hanwha Life KPMG Plaza 474,000 - A Dallas CBD

Fine Line Diversified Development Overton Centre 447,917 - A Southwest Fort Worth

DISD 9400 NCX 387,617 - A Central Expressway

Ascent RE Advisors / EY Ventures Rambler Park 310,771 - A Central Expressway

Source: Real Capital Analytics, CBRE Research, Q2 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Michelle Miller CBRE Houston Research Operations Manager 2800 Post Oak, Suite 2300 [email protected] Houston, TX 77056

To learn more about CBRE Research, or to access Lauren Paris additional research reports, please visit the Global Senior Research Analyst Research Gateway at www.cbre.com/researchgateway. +1 214 979 6587 [email protected] DEFINITIONS Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full

Service Gross, dependent upon Submarket. Availability All existing space being Alex Stewart marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Research Coordinator Central Business District; consists of Dallas’ Central Business District only.

+1 214 979 6530 SURVEY CRITERIA [email protected] CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas / Fort Worth Office, Q1 2016 Rent growth accelerates as construction pipeline widens

Vacancy Rate Avg. Asking Rate Net Absorption Completions 18.1% $22.89/SF 1,584,820 SF 1.3 MSF Figure 1: Average Asking Lease Rate and Under Construction *Arrows indicate change from previous quarter. Sq. Ft. Under Construction Average Asking (Millions) Under Construction Average Asking Lease Rates Lease Rate ($/SF) 24 7 6 22 5 4 20 3 2 18 1 0 16 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 Source: CBRE Research, Q1 2016. Average asking rents in the Dallas/Fort Worth Liberty Mutual’s one-million-sq.-ft. build-to-suit Office market are setting all-time highs, as the campus in Legacy West along with six other market averages surged by 4.5% year-over-year to speculative construction projects including The $22.89 per sq. ft. Rental rate improvement for Star, a 400,000 sq. ft. development along Frisco’s “$5 prime office space is best exemplified in the Billion Mile.” Financial activities and professional & submarkets where walkability and amenities have business services dominate the activity in the created an 18-hour live-work-play market. The Uptown/Turtle Creek office market, as a 200,000 sq. benefits of a bustling urban core is best seen in ft. lease by PricewaterhouseCoopers jumpstarted Uptown/Turtle Creek, where average Class A gross the high-profile 517,000 sq. ft. mixed-use Park asking rents are a commanding $41.43 per sq. ft., District development adjacent to Klyde Warren Park. an astounding 16.1% escalation from Q1 2015. In total, the Uptown/Turtle Creek submarket added Similarly, the Preston Center Class A asking rates an unprecedented 930,000 sq. ft. of new have climbed 7.3% to $36.58 per sq. ft. over the construction in Q1 2016. same time frame.

A multinational financial institution purchased 7- The construction pipeline is also amplifying acres of land in the Legacy West development this demand as six new projects broke ground this quarter, where it plans to break ground on a 1.4 quarter, bringing 1.5 million sq. ft. of new million sq. ft. regional campus next quarter that construction to the DFW Metroplex. This influx will serve more than 6,000 employees. Although brings the current count of projects under owner-occupied projects are uncounted within the construction to 30, totaling 7.2 million sq. ft. with CBRE Research tracked set, it is important to note approximately 46.2% already preleased. The bulk that there are currently six such projects comprised of this activity is located in the Far North Dallas of 2.8 million sq. ft. under construction throughout and Uptown/Turtle Creek submarkets, with 2.9 the Metroplex. The bulk of this construction can be million and 1.7 million sq. ft. under construction, attributed to Toyota’s 2.1 million sq. ft. North respectively. The development in Far North Dallas is American Headquarter in Far North Dallas. centralized along the Platinum Corridor, with

Figure 2: Dallas Office Market Statistics

Submarket Net Total Total Average Q1 YTD 2016 Total Rentable Vacancy Availability Asking Net Net Area (%) (%) Rate ($) Absorption Absorption Central Expressway 11,678,556 14.8 18.7 24.63 171,801 171,801 Class A 7,523,988 15.5 18.1 28.15 167,128 167,128 Class B 4,041,680 13.7 20.1 20.93 5,373 5,373 Dallas CBD 25,522,188 25.1 35.1 23.80 (114,274) (114,274) Class A 20,213,338 26.0 37.7 25.28 (140,512) (140,512) Class B 4,615,155 23.4 26.4 18.69 35,929 35,929 East Dallas 3,719,522 13.2 16.3 16.12 (5,763) (5,763) Class A 583,651 9.8 15.6 N/A 3,419 3,419 Class B 2,590,305 13.6 15.4 16.62 (11,596) (11,596) Far North Dallas 39,880,750 14.9 19.6 23.68 68,921 68,921 Class A 24,241,907 13.1 17.7 29.52 133,801 133,801 Class B 15,388,843 18.0 22.9 19.84 (64,880) (64,880) Las Colinas 30,574,928 16.5 21.4 23.49 423,889 423,889 Class A 16,829,019 17.1 23.9 26.95 386,910 386,910 Class B 12,994,047 16.2 18.9 20.11 37,084 37,084 LBJ Freeway 19,580,094 25.9 30.3 18.24 86,027 86,027 Class A 10,395,731 25.1 30.1 20.70 80,787 80,787 Class B 8,997,994 27.0 30.9 16.86 6,518 6,518 Lewisville / Denton 4,671,910 14.5 18.9 18.63 16,203 16,203 Class A 324,964 24.9 - 26.00 - - Class B 4,159,600 13.3 13.4 18.25 16,203 16,203 Preston Center 4,008,614 10.7 17.2 33.07 (6,186) (6,186) Class A 3,260,842 9.9 18.2 36.58 7,218 7,218 Class B 649,374 12.8 11.2 26.84 (2,016) (2,016) Richardson / Plano 23,662,789 16.4 22.1 19.64 971,350 971,350 Class A 11,231,238 12.4 19.3 23.61 690,675 690,675 Class B 12,131,753 20.4 24.6 18.12 246,588 246,588 Southwest Dallas 1,647,842 9.2 16.0 15.68 (24,410) (24,410) Class A 280,729 5.8 7.3 21.50 2,903 2,903 Class B 1,185,599 9.6 17.4 15.42 (27,313) (27,313) Stemmons Freeway 9,804,850 27.8 31.6 14.60 13,407 13,407 Class A 3,458,586 18.5 20.3 15.38 788 788 Class B 5,660,341 33.1 38.2 14.83 16,300 16,300 Uptown / Turtle Creek 10,684,445 10.5 17.6 39.04 92,709 92,709 Class A 8,340,657 10.2 16.3 41.43 30,154 30,154 Class B 2,210,201 12.3 23.7 34.77 62,555 62,555 Source: CBRE Research, Q1 2016. *Class C Statistics are included in the submarket totals, even though they are not broken out in table

Figure 3: Fort Worth and Total Office Market Statistics

Submarket Net Total Total Average Q1 YTD 2016 Total Rentable Vacancy Availability Asking Net Net Area (%) (%) Rate ($) Absorption Absorption Fort Worth CBD 9,365,503 11.4 14.6 24.26 (73,885) (73,885) Class A 5,914,246 13.9 17.0 29.31 (45,733) (45,733) Class B 3,184,582 6.6 10.0 19.21 (28,152) (28,152) Mid Cities 15,804,104 21.3 27.1 16.82 (18,400) (18,400) Class A 4,590,028 23.8 36.9 19.78 (13,234) (13,234) Class B 9,783,509 21.4 24.4 17.27 (10,965) (10,965) North Fort Worth 1,644,044 12.5 18.5 18.90 75,657 75,657 Class A 511,277 26.2 23.4 N/A - - Class B 1,097,767 6.6 16.9 18.90 75,657 75,657 Northeast Fort Worth 2,511,010 47.1 52.8 16.79 (3,696) (3,696) Class A 395,307 83.6 84.9 19.88 - - Class B 1,980,715 41.9 48.6 15.79 (3,696) (3,696) South Fort Worth 6,885,760 9.2 17.2 21.74 (88,530) (88,530) Class A 1,740,623 5.8 18.2 27.8 (24,441) (24,441) Class B 4,487,437 9.6 11.2 21.94 (32,279) (32,279) Dallas Total 183,505,932 17.70 23.8 22.90 1,693,674 1,693,674 Class A 105,254,063 16.3 24.0 28.39 1,363,271 1,363,271 Class B 74,016,717 19.0 23.7 20.81 320,745 320,745 Fort Worth Total 36,210,457 17.9 23.0 19.56 (108,854) (108,854) Class A 13,151,481 18.8 25.3 20.89 (83,408) (83,408) Class B 20,534,010 17.7 22.4 18.50 565 565 Dallas / Fort Worth Total 221,646,945 18.1 23.7 22.89 1,584,820 1,584,820 Class A 119,836,128 17.5 24.2 28.18 1,279,863 1,279,863 Class B 95,158,902 19.3 23.4 19.44 321,310 321,310 Source: CBRE Research, Q1 2016.

Figure 3: Top Leases / Top Sales of the Quarter Figure 4: 2016 Signed Office Leases by Industry Type

Lease (Tenant) Address Total SF

Maxim Integrated, Inc. Tollway Center 193,725 24% 20% Mortgage Contracting Services LLC The Ridge at 121 120,000 MultiView One Panorama Center 110,000 7% 20% Sale (Buyer) Building Name Total SF 13% Quadrant Investment Properties Saint Paul Place 273,080 16%

Individual Meadow Park Tower 251,755 Manufacturing Professional & Business Services Trade/Transportation/Utilities Financial Activities West Walnut Hill, LLC Las Colinas Commons 239,000 Education & Health Services Other Source: CBRE Research, Q1 2016. Source: CBRE Research, Q1 2016.

LEASE RATES Figure 5: Lease Rates Class A gross asking rents continued to experience Asking Rate growth, increasing by approximately 4.4% year-over- ($/SF) year to $28.18 per sq. ft. in Q1 2016. Class B average $28.18 30 asking rents experienced a marginally higher rate of Class A growth, raising by 4.9% over the same timeframe to Class B 25 $19.44 per sq. ft. $19.44 NET ABSORPTION 20 DFW experienced its 23rd consecutive quarter of positive net absorption, totaling 1,584,820 sq. ft. for 15 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q1 2016. This amount of total net absorption Source: CBRE Research, Q1 2016. represents a year-over-year increase of a striking 30.4%. This quarter experienced an influx of large Figure 6: Net Absorption tenant move-ins as State Farm moved into the fourth Sq. Ft. (000’s) and final building in their 2.1 million sq. ft. Cityline 1,800 campus in Richardson, and 7-Eleven moved into 1,600 1,400 their 325,000 sq. ft. build-to-suit corporate 1,200 headquarters in Las Colinas. Geico also moved into 1,000 800 the entire 232,710 sq. ft. Campbell Creek Business 600 Park in Richardson, formerly occupied by Fossil. 400 200 VACANCY & AVAILABILITY 0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Market-wide availability decreased by 10 basis points Source: CBRE Research, Q1 2016. (bps) to 23.7% year-over-year in Q1 2016, which indicates the ample amount of leasing activity Figure 7: Vacancy & Availability expected to commence in the coming quarters. The % total vacancy rate decreased year-over-year by 10 bps 25 Total Availability Rate 23.7% to 18.1%; however, this represents a 40 bps increase Total Vacancy Rate in vacancy from Q4 2015. that can be primarily 23 contributed to the vacant 3-building Galatyn 21 Commons Business Park that came back online after 18.1% a completion in its renovations. Of the total amount 19 of vacant space in the market, only 4.7% is attributed to sublease space, a noteworthy decrease of 50 bps 17 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 quarter-over-quarter. Source: CBRE Research, Q1 2016. CONSTRUCTION COMPLETIONS Figure 8: Construction Completions There were five office projects that delivered in Q1 Sq. Ft. 2016, all of which were Class A, totaling 1.3 million (000’s) 5,500 sq. ft. with approximately 67.0% preleased. These 5,000 4,500 deliveries include the new 325,000 sq. ft. 7-Eleven 4,000 headquarters in Cypress Waters, as well as the 3,500 3,000 500,000 sq. ft. State Farm Campus Building D in 2,500 2,000 Cityline. Three speculative developments delivered 1,500 this quarter: the 170,000 sq. ft. Frisco Bridges Place 1,000 500 and 166,000 sq. ft. Platinum Park I in Far North 0 Dallas, as well as the 141,000 sq. ft. Connection 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Source: CBRE Research, Q1 2016. Park I in Las Colinas.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller CBRE Houston Research Operations Manager 2800 Post Oak, Suite 2300 [email protected] Houston, TX 77056 To learn more about CBRE Research, or to access Lauren Paris additional research reports, please visit the Global Senior Research Analyst Research Gateway at www.cbre.com/researchgateway. +1 214 979 6587 [email protected] DEFINITIONS Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full Julia Burman Service Gross, dependent upon Submarket. Availability All existing space being marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Research Coordinator Central Business District; consists of Dallas’ Central Business District only. +1 214 979 6530 SURVEY CRITERIA [email protected] CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas / Fort Worth Office, Q4 2015 Record-Setting 2015 Previews Robust 2016

Vacancy Rate Avg. Asking Rate Net Absorption Completions 17.7% $21.90/SF 605,714 SF 1.3 MSF Figure 1: Total Vacancy vs. Net Absorption *Arrows indicate change from previous quarter. Sq. Ft. Vacancy Rate (000’s) Net Absorption Vacancy Rate (%) 2,000 22

1,500 20 1,000 18 500

0 16 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 Source: CBRE Research, Q4 2015. The Dallas/Fort Worth office market experienced The North Texas economy continues to expand as its 22nd consecutive quarter of favorable leasing annual non-farm employment growth remained fundamentals in Q4 2015 and is poised for a strong through November 2015. The Bureau of strong 2016. Q4 2015 amassed 605,714 sq. ft. of Labor Statistics reports 3.0% new jobs growth positive net absorption, bringing year-end 2015 to year-over-year with 101,000 payroll gains in the a record breaking 5.2 million sq. ft., a remarkable DFW Metroplex, pushing unemployment down by 59.2% increase over the 3.3 million sq. ft. of net 40 basis points to 4.0% year-over-year, far below absorption amassed in 2014. Average asking rents the U.S. average of 4.8% and the state at 4.5%. for all classes experienced an accelerated rate of With corporate consolidation and relocation growth, increasing by 5.9% year-over-year to projects by Liberty Mutual, Toyota Motors, State $21.90 per sq. ft. Farm, and Alcatel-Lucent currently under

construction, buoyant projected North Texas Vigorous office demand kept vacancy down at employment growth will keep the state in the 17.7%, a 70 basis point decrease from year-end black in 2016 and out of recession amidst the 2014, and the first year vacancy has closed below downturn in the oil sector. 18% since 2008. Not only does this vacancy level signify a return to pre-recessionary ones, it is Moody’s Analytics predicts annualized among the lowest Dallas/Fort Worth has employment growth of no less than 2.58% for experienced since the late-1980’s. Market wide each quarter of 2016, which is well within the availability decreased by 20 basis points to 23.5% healthy range of job expansion for DFW. The key to close out 2015, which signifies the abundance office-using sectors are expected to outpace the of new tenant move-ins and expansions already overall metro once again, with forecasted slated for 2016. DFW’s highly educated workforce annualized growth of at least 3.45% for the next and central location continues to attract four quarters, lifted predominantly by the corporations in finance and tech as San Francisco- professional and business services sector. based Charles Schwab and Omaha-based TD Ameritrade announced plans to build new campuses in the Metroplex this quarter.

Figure 2: Dallas Office Market Statistics

Submarket Net Total Total Average Q4 2015 Total Rentable Vacancy Availability Asking Net Net Area (%) (%) Rate ($) Absorption Absorption Central Expressway 11,741,971 16.5 18.6 24.20 86,385 488,839 Class A 7,524,169 17.7 18.5 27.22 95,588 389,184 Class B 4,104,914 14.3 18.8 20.00 (2,869) 110,950 Dallas CBD 25,560,149 23.7 33.4 21.89 29,956 454,132 Class A 20,827,997 25.5 36.7 22.50 37,843 333,066 Class B 4,038,457 16.9 18.8 18.69 (20,833) 158,523 East Dallas 3,773,643 12.9 15.9 17.05 10,888 51,178 Class A 583,651 10.4 13.1 N/A - 7,145 Class B 2,587,885 13.1 15.6 13.29 10,022 8,158 Far North Dallas 39,550,472 12.9 19.9 22.89 719,289 1,604,239 Class A 23,897,173 12.5 13.1 27.98 511,811 1,118,854 Class B 15,393,299 17.2 23.1 19.84 207,478 485,385 Las Colinas 30,097,259 16.8 21.9 23.56 (302,541) (23,387) Class A 16,448,779 17.3 25.0 26.72 (271,433) (49,819) Class B 12,896,615 16.6 18.6 20.11 (28,604) (33,423) LBJ Freeway 19,583,129 26.5 32.0 18.82 (172,422) (30,204) Class A 10,041,691 25.8 31.7 21.82 (158,247) (180,115) Class B 9,355,069 27.5 32.5 16.84 755 164,060 Lewisville / Denton 4,672,567 14.8 21.9 19.09 17,712 124,080 Class A 324,964 24.9 - 26.00 - - Class B 4,160,257 13.6 16.7 17.71 9,145 122,016 Preston Center 4,080,337 10.3 15.9 35.28 (53,180) 124,521 Class A 3,260,842 10.1 17.0 36.86 (33,343) 156,719 Class B 679,435 12.0 12.2 27.79 (18,370) (32,273) Richardson / Plano 22,363,849 14.0 15.9 19.44 398,794 1,180,433 Class A 10,294,111 7.5 17.0 23.01 371,245 1,385,607 Class B 11,769,940 19.6 12.2 18.12 26,045 (46,861) SW Dallas 1,647,551 12.4 14.3 15.89 (13,563) (38,535) Class A 280,729 6.6 8.3 21.50 - - Class B 1,185,308 13.0 14.8 15.11 (13,563) (38,762) Stemmons Freeway 9,824,746 25.4 29.4 14.87 65,183 266,916 Class A 3,458,481 18.5 20.7 15.83 30,771 222,758 Class B 5,680,342 28.9 34.1 14.76 40,265 42,835 Uptown / Turtle Creek 10,610,259 11.4 17.5 37.59 15,062 310,112 Class A 8,311,476 10.6 14.9 38.80 19,828 304,654 Class B 2,165,196 15.1 28.4 33.94 (4,766) 5,458 Source: CBRE Research, Q4 2015.

Figure 3: Fort Worth and Total Office Market Statistics

Submarket Net Total Total Average Q4 2015 Total Rentable Vacancy Availability Asking Net Net Area (%) (%) Rate ($) Absorption Absorption Fort Worth CBD 9,365,503 10.6 14.6 25.45 59,979 394,535 Class A 5,914,246 13.1 17.4 28.96 84,531 248,698 Class B 3,184,582 5.7 9.5 18.28 (24,552) 26,599 Mid Cities 15,861,475 21.4 28.3 16.76 (210,814) (68,691) Class A 4,535,739 24.6 41.4 19.43 (17,637) 102,085 Class B 9,895,133 21.1 24.5 16.88 (183,074) (184,090) North Fort Worth 1,644,044 17.1 19.3 18.87 (63,461) 277,723 Class A 511,277 26.2 26.2 N/A 9,596 356,168 Class B 1,097,767 13.5 16.8 18.87 (73,057) (78,445) Northeast Fort Worth 2,511,418 46.9 51.1 16.66 (23,135) 54,704 Class A 395,307 83.6 84.9 20.48 (19,742) (17,615) Class B 1,981,123 41.7 46.5 15.03 (3,393) 72,369 South Fort Worth 6,934,244 7.9 13.9 21.49 50,149 58,786 Class A 1,727,623 4.4 7.6 27.07 7,539 (6,922) Class B 4,548,921 8.7 16.6 21.56 40,175 47,620 Dallas Total 183,505,932 17.7 23.5 22.43 792,996 4,503,752 Class A 105,254,063 16.3 23.9 30.72 604,063 1,558,013 Class B 74,016,717 19.0 23.2 20.57 204,705 493,203 Fort Worth Total 36,316,684 17.6 23.3 19.62 (187,282) 717,107 Class A 13,084,192 18.6 26.8 23.91 64,287 2,810,977 Class B 20,707,526 17.6 22.2 18.05 (243,901) 420,166 Dallas / Fort Worth Total 219,822,616 17.7 23.5 21.90 605,714 5,220,859 Class A 118,338,255 17.2 24.2 26.50 668,350 4,368,990 Class B 94,724,243 18.7 23.0 19.17 (23,440) 929,125

Source: CBRE Research, Q4 2015. Figure 3: Top Leases / Top Sales of the Quarter Figure 4: 2015 Signed Office Leases by Industry Type

Lease (Tenant) Address Total SF One Source Virtual 9001 Cypress Waters Blvd 217,170 19% 31% Securus Technologies 4000 International 150,000 Charles Schwab 2050 Roanoke Rd 130,000 10% Sale (Buyer) Building Name Total SF 13% 15% TriGate Capital Comerica Bank Tower 1,530,957 12% Apollo Global Real Towers at Williams Square 1,395,980 Estate/Vanderbilt Partners Financial Activities Information Greenfield Partners TriWest Pllaza 369,052 Education & Health Services Professional & Business Services Trade/Transportation/Utilities Other Source: CBRE Research, Q4 2015. Source: CBRE Research, Q4 2015.

LEASE RATES Gross asking rents continued to experience growth, Figure 5: Lease Rates Asking Rate as average office rents in the Metroplex increased by ($/SF) approximately 5.9% year-over-year to $21.90 per sq. 30 ft. in Q4 2015. Class A asking rates in Preston Center Class A $26.50 have climbed to $36.86 per sq. ft., while Class A Class B 25 space in Uptown/Turtle Creek is commanding an average rate of $38.80 per sq. ft. $19.17 20 NET ABSORPTION

DFW experienced its 22nd consecutive quarter of 15 positive net absorption, totaling 605,714 sq. ft. for Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q4 2015. This brings 2015 year-end net absorption to Source: CBRE Research, Q4 2015. a record breaking 5.2 million sq. ft., an astounding Figure 6: Net Absorption 59.2% year-over-year increase. This quarter saw a Sq. Ft. handful of large tenant move-ins as Raytheon moved (000’s) 1,800 into their 490,000 sq. ft. build-to-suit in Richardson 1,600 and Gearbox Software expanded into 97,000 sq. ft. at 1,400 1,200 the recently delivered Tower at Frisco Square. On the 1,000 contrary, Fed Ex decreased their overall footprint in 800 600 the Metroplex by 12% as they consolidated into their 400 new 265,000 sq. ft. build-to-suit in Plano. 200 0 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 VACANCY & AVAILABILITY Source: CBRE Research, Q4 2015. Market-wide availability decreased by 20 basis points to 23.5% to close out 2015, which signifies the ample Figure 7: Vacancy & Availability amount of tenant move-ins already slated for 2016. % The total vacancy rate remained static quarter-over- 25 quarter at 17.7%; however, this represents a 70 basis Total Availability Rate 23.5% Total Vacancy Rate point decrease in vacancy from year-end 2014. Of the 23 total amount of vacant space in the market, only 5.2% is attributed to sublease space. 21

UNDER CONSTRUCTION & COMPLETIONS 19 There were five office projects that delivered in Q4 17.7% 2015, totaling 1.3 million sq. ft. with approximately 17 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 73.5% preleased. These deliveries include the new Source: CBRE Research, Q4 2015. 490,000 sq. ft. Raytheon headquarters in Richardson as well as the new 265,000 sq. ft. Fed Ex Figure 8: Construction Completions Sq. Ft. headquarters in Plano. The under construction (000’s) pipeline continues to amplify as seven new projects 5,500 5,000 broke ground this quarter, bringing 1.3 million sq. 4,500 ft. of new construction to the DFW Metroplex. This 4,000 3,500 brings the current count of projects under 3,000 2,500 construction to 29, totaling 6.8 million sq. ft. with 2,000 approximately 46.5% already preleased. The bulk of 1,500 1,000 this under construction activity is located in Far 500 North Dallas, with 3 million sq. ft. under 0 2009 2010 2011 2012 2013 2014 2015 construction, including Liberty Mutual’s one- Source: CBRE Research, Q4 2015. million sq. ft. build-to-suit campus in West Plano.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller CBRE Houston Research Operations Manager 2800 Post Oak, Suite 2300 [email protected] Houston, TX 77056 To learn more about CBRE Research, or to access Lauren Paris additional research reports, please visit the Global Senior Research Analyst Research Gateway at www.cbre.com/researchgateway. +1 214 979 6587 [email protected] DEFINITIONS Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full Julia Burman Service Gross, dependent upon Submarket. Availability All existing space being marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Research Coordinator Central Business District; consists of Dallas’ Central Business District only. +1 214 979 6530 SURVEY CRITERIA [email protected] CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW Dallas / Fort Worth Office, Q3 2015 Office absorption outpaces prior year’s entire record; 4.6 million sq. ft. year-to-date

Vacancy Rate Avg. Asking Rate Net Absorption Completions 17.7% $21.22/SF 1,712,292 SF 2.0 MSF *Arrows indicate change from previous quarter. Figure 1: Total Vacancy vs. Net Absorption Sq. Ft. Vacancy Rate (000’s) Net Absorption Vacancy Rate (%) 2,000 22

1,500 20 1,000 18 500

0 16 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 Source: CBRE Research, Q3 2015. The Dallas/Fort Worth office market experienced The North Texas economy continues to grow its 21st consecutive quarter of favorable leasing despite low crude oil prices, as annual non-farm fundamentals in Q3 2015 and appears poised for a employment growth remained strong through strong second half of 2015. Q3 2015 yielded the August 2015. The Bureau of Labor Statistics most net absorption in a single quarter so far in reports a 3.2% job growth year-over-year with 2015, increasing to approximately 1.7 million sq. 104,100 new jobs in the DFW Metroplex, which ft. Year-to-date, market net absorption totals a brought the unemployment rate down by 120 record breaking 4.6 million sq. ft., surpassing the basis points to 3.9% year-over-year, far below the entire year-end 2014 total absorption of 3.3 U.S. average unemployment rate of 5.2% and the million sq. ft. by 41.0%. Average asking rental Texas unemployment rate of 4.4%. With corporate rates for all class types have experienced an consolidation and relocation projects by Liberty accelerated rate of growth, increasing by 4.0% Mutual, Toyota Motors, State Farm, Alcatel- year-over-year to $21.22 per sq. ft. Lucent, and Raytheon currently under

construction, employment growth is projected to Resilient office demand drove average vacancy remain positive in the coming months. down from Q2 2015 by 20 points to 17.7%—the third time vacancy has dipped below 18% since The DFW population of 6.9 million residents is 2008. Not only does this vacancy rate signify a expected to increase by 7.1% over the next five return to pre-recessionary levels, it is one of the years to 7.4 million, according to Nielson. This lowest Dallas/Fort Worth has experienced since strong growth equates to an average of 360 people the late 1980’s. Pre-leasing among delivered arriving to North Texas per day, equivalent to a full construction is currently 66.5%, a contributing passenger load of a Boeing 747 jumbo jet. DFW’s factor behind this decrease in market vacancy. population has an average age of 35 years old, with half of its residents in the 20-54 demographic.

Figure 2: Dallas Office Market Statistics

Submarket Net Total Total Average Q3 YTD Rentable Vacancy Availability Asking Net Net Area (%) (%) Rate ($) Absorption Absorption Central Expressway 11,741,971 17.2 20.3 23.26 147,806 402,454 Class A 7,524,169 19.0 21.4 26.25 70,861 293,596 Class B 4,104,914 14.3 18.4 18.93 76,945 113,819 Dallas CBD 25,363,638 24.1 32.6 21.88 141,447 424,176 Class A 20,106,486 24.6 34.4 22.87 83,225 295,223 Class B 4,563,457 24.4 27.1 18.30 50,901 179,356 East Dallas 3,846,984 12.9 16.3 16.53 -7,689 40,290 Class A 583,651 10.4 14.0 N/A 1,699 7,145 Class B 2,661,226 13.1 16.9 16.41 -9,388 -1,864 Far North Dallas 38,897,655 14.5 20.2 22.44 310,750 884,950 Class A 23,180,948 12.0 17.2 27.53 194,311 607,043 Class B 15,456,707 18.6 25.1 19.24 116,439 277,907 Las Colinas 30,073,922 15.9 22.9 23.27 225,624 279,154 Class A 16,429,572 15.7 25.4 26.40 230,296 221,614 Class B 12,892,485 16.7 20.4 19.79 -4,672 -4,819 LBJ Freeway 19,602,428 25.3 30.9 18.46 157,515 142,218 Class A 10,061,278 23.6 29.9 21.31 41,139 -21,868 Class B 9,354,781 27.5 32.2 16.33 115,372 163,305 Lewisville / Denton 4,599,947 15.2 22.8 19.82 17,712 106,368 Class A 324,964 24.9 - 26.00 - Class B 4,087,637 14.1 16.7 18.33 27,699 112,871 Preston Center 4,080,337 9.0 14.5 35.19 178,765 177,701 Class A 3,260,842 9.1 15.4 33.82 201,134 190,062 Class B 679,435 9.3 11.8 28.85 -23,516 -13,903 Richardson / Plano 22,504,242 16.3 22.6 19.22 -181,335 781,639 Class A 10,261,081 10.8 21.1 22.87 -66,038 1,014,362 Class B 11,943,363 20.9 23.5 18.06 -114,447 -72,906 SW Dallas 1,647,551 11.6 13.8 15.71 2,372 -24,972 Class A 280,729 6.6 8.3 21.50 - Class B 1,185,308 11.8 14.0 14.80 2,372 -25,199 Stemmons Freeway 10,008,534 27.2 30.7 13.61 8,393 201,733 Class A 3,458,481 19.4 20.4 15.68 31,377 191,987 Class B 5,825,122 31.5 36.7 13.13 -22,556 2,570 Uptown / Turtle Creek 10,607,830 11.3 19.0 36.73 95,848 295,050 Class A 8,309,047 10.6 16.9 38.07 103,187 284,826 Class B 2,165,196 14.9 28.3 32.42 -7,339 10,224 Source: CBRE Research, Q3 2015.

Figure 3: Fort Worth and Total Office Market Statistics

Submarket Net Total Total Average Q3 YTD Rentable Vacancy Availability Asking Net Net Area (%) (%) Rate ($) Absorption Absorption Fort Worth CBD 9,365,503 11.3 13.2 26.01 125,540 334,556 Class A 5,914,246 14.5 16.4 28.87 109,980 164,167 Class B 3,184,582 5.0 7.4 18.23 15,560 51,151 Mid Cities 15,889,539 20.0 25.3 17.46 74,857 142,123 Class A 4,563,803 24.0 28.9 21.62 109,100 119,722 Class B 9,895,133 19.2 25.0 16.94 -39,369 -1,016 North Fort Worth 1,644,044 13.3 19.9 18.94 345,672 341,184 Class A 511,277 28.1 26.2 N/A 346,572 346,572 Class B 1,097,767 6.8 17.6 18.94 -900 -5,388 Northeast Fort Worth 2,586,456 36.0 51.7 15.90 56,117 77,839 Class A 395,307 3.1 78.1 21.54 4,923 2,127 Class B 2,056,161 43.7 48.7 15.00 51,194 75,762 South Fort Worth 6,886,709 8.5 14.2 21.15 12,898 8,637 Class A 1,687,357 2.6 5.8 26.63 -16,906 -14,461 Class B 4,541,652 9.6 17.2 21.17 31,868 7,445 Dallas Total 182,975,039 18.0 24.1 21.79 1,097,208 3,710,756 Class A 103,781,248 16.6 24.0 30.53 889,492 953,950 Class B 74,919,631 20.1 24.6 19.78 218,897 288,498 Fort Worth Total 36,372,251 16.4 21.7 19.58 615,084 904,389 Class A 13,071,990 16.5 21.6 24.61 553,669 2,746,690 Class B 20,775,295 16.7 22.5 18.01 58,353 664,067 Dallas / Fort Worth Total 219,347,290 17.7 23.7 21.22 1,712,292 4,615,145 Class A 116,853,238 16.6 23.7 26.44 1,443,161 3,700,640 Class B 95,694,926 19.4 24.2 18.65 277,250 952,565 Source: CBRE Research, Q3 2015. Figure 3: Top Leases / Top Sales of the Quarter Figure 4: 2015 YTD Signed Office Leases by Industry Type

Lease (Tenant) Address Total SF Geico Insurance 2280 N Greenville Ave 232,000 20% 30% Ryan* 13155 Noel Rd 176,130 9% D. R. Horton 1361 Wet N Wild Way 150,000 Sale (Buyer) Address Total SF 9% 21% CBRE Global Investors Galleria Towers 1,431,770 11% GlenStar/USAA Energy Square 958,445 Financial Activities Information Woods Capital Enterprises 2100 Ross Ave 843,728 Education & Health Services Professional & Business Services *Renewal/Expansion Trade/Transportation/Utilities Other Source: CBRE Research, Q3 2015. Source: CBRE Research, Q3 2015.

LEASE RATES Gross asking rents continued to experience growth, Figure 5: Lease Rates Asking Rate as average office rents in the Metroplex increased by ($/SF) approximately 4.0% year-over-year to $21.22 per sq. 30 ft. in Q3 2015. Class A asking rates in Preston Center Class A $26.44 have surpassed $33 per sq. ft., while Class A space in Class B 25 Uptown/Turtle Creek is commanding an average rate of $38 per sq. ft. $18.65 20 NET ABSORPTION

DFW experienced its 21st consecutive quarter of 15 positive net absorption, totaling 1.7 million sq. ft. Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 While the majority of this absorption is attributed to Source: CBRE Research, Q3 2015. tenants in the mid-size range of 10,000-20,000 sq. ft., Figure 6: Net Absorption this quarter also saw a handful of large tenant move- Sq. Ft. ins such as FAA into 357,000 sq. ft. at their recently (000’s) 1,800 completed build-to-suit project in North Fort Worth, 1,600 Frontier Communications into 192,000 sq. ft. at 1,400 1,200 Lakeside Campus, AMN Healthcare into 108,000 sq. 1,000 ft. at Cypress Waters, and Energy Transfer Partners 800 600 moving into 134,000 sq. ft. at the newly delivered 400 8111 Westchester in Preston Center. 200 0 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 VACANCY & AVAILABILITY Source: CBRE Research, Q3 2015. The total avability rate remained static at 23.7%, while market wide vacancy decreased by 20 basis Figure 7: Vacancy & Availability points in Q3 2015, closing with a 17.7% vacancy rate % as a number of large tenants took occupancy 25 23.7% throughout the DFW market. Of the total amount of Total Availability Rate Total Vacancy Rate vacant space in the market, only 6.3% is attributed to 23 sublease space. 21 UNDER CONSTRUCTION & COMPLETIONS 19 There were 13 office projects that delivered in Q3 17.7% 2015, totaling two million sq. ft. with approximately 17 66.5% preleased. KPMG Plaza at Hall Arts, the Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 second multitenant office building built in the Source: CBRE Research, Q3 2015. Dallas CBD since 1987, delivered with a preleased rate of 65%. An increase in construction Figure 8: Construction Completions Sq. Ft. completions did not slow the pace of construction (000’s) starts, as eleven new projects broke ground, 4,000 bringing 2.4 million sq. ft. of new construction to 3,500 3,000 the suburban markets. There are currently 29 2,500 projects under construction in the DFW Metroplex, 2,000 totaling 6.8 million sq. ft., with approximately 1,500 54.3% already preleased. The bulk of this under 1,000 construction activity is located in Far North Dallas, 500 0 with 3.7 million sq. ft. under construction, 2009 2010 2011 2012 2013 2014 2015 YTD including Liberty Mutual’s one-million sq. ft. build- Source: CBRE Research, Q3 2015. to-suit campus in West Plano.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Michelle Miller CBRE Houston Research Operations Manager 2800 Post Oak, Suite 2300 [email protected] Houston, TX 77056 To learn more about CBRE Research, or to access Lauren Paris additional research reports, please visit the Global Senior Research Analyst Research Gateway at www.cbre.com/researchgateway. +1 214 979 6587 [email protected] DEFINITIONS Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full Julia Burman Service Gross, dependent upon Submarket. Availability All existing space being marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Research Coordinator Central Business District; consists of Dallas’ Central Business District only. +1 214 979 6530 SURVEY CRITERIA [email protected] CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

Dallas / Fort Worth Office, Q2 2015 Voracious Tenant Demand by Mid-Year; 2.9 Million Sq. Ft.

Vacancy Rate Avg. Asking Rate Net Absorption Completions 17.9% 20.75 $/SF 1,686,455 SF 392,995 SF

*Arrows indicate change from previous quarter. Figure 1: Net Absorption and Vacancy

Net Absorption (MSF) Vacancy Rate (%) 3.6 22 3.2 2.8 21 2.4 2.0 1.6 20 1.2 0.8 19 0.4 0.0 18 (0.4) (0.8) (1.2) 17 2008 2009 2010 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate Source: CBRE Research, Q2 2015.

RELENTLESS NET ABSORPTION REACHES YET DFW VACANCY MARCHES TOWARDS PRE- ANOTHER HISTORIC HIGH RECESSIONARY LEVELS Market wide vacancy decreased by 40 basis points in Net absorption throughout the DFW office market Q2 2015, closing with a 17.9% vacancy rate—only the continued to trend positively for the 20th consecutive second time the vacancy rate has dipped below 18% quarter dating back to Q3 2010. The Q2 2015 total net since 2008. absorption of 1,686,455 sq. ft. is the largest quarter of positive net absorption since Q1 2009. THE DFW METROPLEX RANKS THIRD IN U.S. FOR JOB GAINS SO FAR THIS YEAR All together, the first half of 2015 recorded 2,902,853 sq. According to the U.S. Bureau of Labor Statistics, annual ft. of positive net absorption, the highest accumulation of year-over-year non-farm employment growth throughout net absorption for two back-to-back quarters on record. Dallas/Fort Worth remained strong through May 2015 with a recorded 3.7 % growth, representing 112,200 new payrolls.

ECONOMIC CONDITIONS / DEMOGRAPHICS MARKET ACTIVITY

In May 2015, year-over-year seasonally adjusted Dallas/ Fort Worth experienced twice the amount unemployment dropped once again across the of net leasing activity in the first half of 2015 than board for DFW, Texas, and the U.S. The it did in 2014, as expanding and relocating unemployment rate in DFW fell 120 basis points businesses continue to commit to the Metroplex. (bps) from the May 2014 level and now stands at 4.0%. Texas as a whole ended the second quarter Richardson’s Telecom Corridor saw a surge of with a 4.3% unemployment rate. Additionally, activity as State Farm completed their headquarter both are well below the U.S. 5.5% unemployment relocation and conslidation into their 1,092,084 sq. rate. ft. CityLine campus this quarter. State Farm’s former Richardson 812,503 sq. ft. Lakeside Seasonally adjusted, annual employment growth in Campus saw plenty of activity as Carrolton-based the DFW metro area was 3.7% for the 12 months software provider RealPage, and New-England ending May 2015, equating to a total of 112,200 based Frontier Communications, both signed jobs. The industries that had the strongest job leases to occupy the majority of the two building growth rates during this 12-month time period campus in late-2016. were Financial Activities (+4.6%), with12,200 new jobs added, and Professional & Business Services Another large office lease that was signed this (+4.5%), with 23,900 new jobs added. quarter was by Boston-based Liberty Mutual, which confirmed its plans to relocate 5,000 of its DFW is currently the fourth largest MSA in the employees into a two-tower, 900,000+ sq. ft. country and is well-known for being one of the campus that is to be built in Plano’s Legacy West fastest growing metro areas. DFW currently has an by the end of 2017. Similarly, California-based estimated population of 6.9 million, which is housing research firm CoreLogic confirmed its 33.6% higher than in 2000. Furthermore, Claritas plans to relocate 500 of its North Texas workers projects a population of 7.4 million in DFW by into an approximately 330,000 sq. ft. that will be 2020, which equates to a growth rate of 7.1% over built in Las Colinas’ Cypress Waters. the next five years. DFW’s population currently averages an age of 35 with half of the population in their prime earning years of 20-54.

Figure 2: Unemployment Rate and Non-Agricultural Jobs Unemployment Job Count (M) Rate (%) 4 9 8 7 3 6 5 4 3 2 2 1 0 1 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

USA Texas DFW DFW Jobs Source: Bureau of Labor Statistics, May 2015. Seasonally Adjusted Non-Farm Employment.

Source: CBRE Research, Q2 2015.

Figure 3: Market Overview by Submarket

Annual Qtr. Qtr. 2015 Net Rentable Direct Direct Total Average Asking Direct Net Total Net Total Net Area Vacancy Vacancy Vacancy Lease Rate Absorption Absorption Absorption Market (SF) (SF) Rate (%) Rate (%) ($/SF) (SF) (SF) (SF) Central Expressway 11,786,506 2,165,637 18.4 18.3 22.45 153,868 180,971 254,648

Dallas CBD 25,082,000 5,985,100 23.9 23.7 22.14 186,846 210,319 282,729

East Dallas 3,846,984 485,141 12.6 12.7 16.07 59,715 59,715 47,979

Far North Dallas 38,247,208 4,984,340 13.0 14.2 22.46 72,725 82,309 574,200

Las Colinas 30,180,713 4,692,981 15.5 16.8 22.97 266,509 213,998 53,530

LBJ Freeway 19,647,681 5,070,358 25.8 26.0 18.72 (6,877) (20,204) (15,297)

Lewisville / Denton 4,641,364 646,354 13.9 14.2 19.29 137,864 125,352 88,656

Preston Center 3,890,337 342,750 8.8 9.3 32.23 10,841 6,504 (1,064)

Richardson / Plano 22,729,897 3,256,034 14.3 15.5 19.26 423,570 493,187 962,974

SW Dallas 1,647,551 193,855 11.8 11.8 15.31 (14,299) (14,299) (-27,344)

Stemmons Freeway 10,007,835 2,634,854 26.3 27.3 13.51 57,850 44,305 193,340

Uptown / Turtle Creek 10,389,265 1,051,386 10.1 10.9 35.76 122,837 151,581 199,202

Fort Worth CBD 9,365,503 1,167,972 12.0 12.5 26.27 190,662 166,067 209,016

Mid Cities 15,795,067 2,486,343 15.7 20.5 17.61 48,187 32,794 67,266

North Fort Worth 1,286,830 181,263 14.0 14.9 19.08 0 0 (4,488)

Northeast Fort Worth 2,586,456 973,077 37.6 38.2 17.67 18,166 3,035 21,722

South Fort Worth 6,771,657 528,889 7.8 8.0 20.98 (48,564) (49,179) (4,261)

Dallas Total 182,678,564 31,508,790 16.2 16.7 21.68 1,471,449 1,533,738 2,613,548

Fort Worth Total 35,805,513 5,337,544 17.4 18.8 20.32 208,451 152,717 289,305

Dallas / Fort Worth Total 218,211,396 36,805,050 16.9 17.9 20.75 1,679,900 1,686,455 2,902,853

Source: CBRE Research, Q2 2015.

ABSORPTION AND VACANCY Figure 4: Net Absorption and Vacancy Rate MSF Vacancy Rate (%) Market wide vacancy decreased by 40 basis points 3 25 in Q2 2015, closing with a 17.9% vacancy rate— 2 23 only the second time the vacancy rate has dipped 2 below 18% since 2008. Not only does this signify a 1 21 return to pre-recessionary levels, this is one of the 1 0 19 lowest vacancy rates that Dallas/Fort worth has (1) experienced since the late 1980’s. 17 (1) DFW experienced its 20th consecutive quarter of (2) 15 positive net absorption, which totaled 1,686,455 sq. ft. for the quarter. All together, the first half of 2015 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 recorded 2,902,853 sq. ft. of positive net Direct Absorption Total Absorption absorption, the highest accumulation of net tenant Direct Vacancy Rate Total Vacancy Rate demand for two back-to-back quarters on record in Source: CBRE Research, Q2 2015. the Metroplex. The majority of these move-ins are Figure 5: Asking Rates, Gross Avg. Annual in the mid-size range of 10,000-20,000 sq. ft., providing a real balance to what has been a market ($/SF) dominated by large tenant demand. 30 28 LEASE RATES 26 24 Gross asking rents continued to experience growth, 22 as average office rents in the metroplex are up 20 approximately 5% year-over-year. The overall 18 market average rose moderately to $20.75 per sq. ft. 16 in Q2 2015 from $20.70 per sq. ft. in Q1 2015;

However, Class A rates increased at an especially Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 strong pace, rising to $29.00 per sq. ft. from $27.00 Class A Class B Overall per sq. ft. for the same timeframe. Source: CBRE Research, Q2 2015.

CONSTRUCTION Figure 6: Construction MSF In Q2 2015, the total office square footage under 8 construction registered 7.3 million sq. ft., which is 7 a one million sq. ft. increase from Q1 2015. The 6 bulk of under construction activity is concentrated 5 in West Plano, Richardson’s Telecom Corridor, and 4 Far North Dallas, with approximately 49.8% of the 3 total pipeline square footage already pre-leased. 2 This quarter, Toyota Motor Corp. revealed its final 1 building plans for their North American 0 headquarters relocation from California to West Plano. The $300 million 100-acre west Plano Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Campus is expected to be completed in Q1 2017. Under Construction Delivered Construction

Source: CBRE Research, Q2 2015.

CAPITAL MARKETS OVERVIEW Dallas-based real estate company, Cawley Partners, teamed up with Chicago-based real estate According to data tracked by Real Capital Analytics, investment company GEM Realty Capital to investment sales activity remains strong across the purchase the 812,000 sq. ft. Lakeside Campus Dallas/Fort Worth office market. Sales volume over located in the Richardson submarket. The two- the first half of 2015 totaled $1.42 billion, up 7% building Class A office park consists of a 16-story, over sales volume of $1.33 billion during the first 414,543 sq. ft. building at 2221 Lakeside Blvd, and six months of 2014. a four-story, 399,788 sq. ft. building at 2201 Lakeside Blvd. The campus was sold by a joint During the second quarter of 2015 alone, sales venture between Pillar Commercial and Eland volume totaled $488.5 million with pending sales Resources. totaling another $368.0 million at the end of June. Investors continue to capitalize on the significant The Las Colinas submarket saw two large buildings occupancy gains resulting from record setting change hands this quarter. The first sale was absorption in 2014 and the continued expansion Waterway Tower, a 13-story, 221,941 sq. ft. Class A among office-using employers over the first six office tower purchased by Sun Life Assurance months of 2015. Moreover, competition among Company of Canada. The second sale was of 4000 lenders has resulted in robust liquidity within the Horizon Way, a 292,988 sq. ft. office building debt markets and has contributed to the favorable purchased by Dallas-based Champion Partners. capital markets environment. The single-tenant fully leased building was sold by First Horizon National Corp. The DFW market continues to see new investors— both domestic and international—who seek to Maryland-based Artemis Real Estate Partners, in a capture yield not otherwise available in coastal joint venture with Dallas-Based Frontier Equity, has markets and to take advantage of the ever- acquired The Addison, an 11-story, 260,000 sq. ft. improving fundamentals of our local and state Class A office tower located in the Far North Dallas economy. Notably, Dallas/Fort Worth was recently submarket along the Dallas North Tollway near named by a recent CBRE report as the #2 market Belt Line Road. for investment in 2015, and both investors and lenders remain focused on placing significant amounts of capital in the DFW market.

Figure 7: Top Sales Transactions

Buyer Seller Date Bldg. SF Property Name Class

GEM/Cawley Partners Pillar Commercial/Eland Resources June 2015 812,503 Lakeside Campus A

Undisclosed Metzler June 2015 306,244 Galleria North Tower II A Westdale Five Mile Capital/Capstar June 2015 296,358 Ten Thousand North Central A

Champion Partners First Horizon National Corp June 2015 292,988 4000 Horizon Way B

Sun Life Assurance Co. Codina Partners May 2015 221,941 Waterway Tower A

Frontier Equity GE Capital June 2015 205,512 The Addison A

Source: CBRE Research, Q2 2015.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Houston Director, Research & Analysis 2800 Post Oak, Suite 2300 [email protected] Houston, TX 77056

Michelle Miller CBRE Dallas Research Operations Manager 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Lauren Paris Senior Research Analyst +1 214 979 6587 [email protected]

Julia Burman To learn more about CBRE Research, Research Coordinator or to access additional research reports, +1 214 979 6530 please visit the Global Research Gateway at [email protected] www.cbre.com/researchgateway.

Dallas / Fort Worth Office, Q1 2015 Q1 2015 is highest quarter for DFW office deliveries in a decade, over 1.5 million sq. ft.

18.3% 20.70 $/SF 1,216,398 SF 1,533,210 SF

*Arrows indicate change from previous quarter. Figure 1: Net Absorption and Vacancy

Net Absorption (MSF) Vacancy Rate (%)

3.6 22 3.2 2.8 21 2.4 2.0 1.6 20 1.2 0.8 19 0.4 0.0 18 (0.4) (0.8) (1.2) 17 2008 2009 2010 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate

Source: CBRE Research, Q1 2015.

• Annual year-over-year employment growth throughout • Q1 2015 saw a rise in new completions and an Dallas/Fort Worth (DFW) remained strong through increased pace of new construction starts. Despite October 2014 with 4.4% growth, representing this uptick in activity, the total under construction 136,300 new jobs. pipeline registered 6.3 million sq. ft. over the quarter, • The largest office sale that transacted over the quarter due to State Farm’s 1.5 million sq. ft. delivery. was the purchase of Canal Centre in Addison, sold by • Market wide vacancy decreased by 10 basis points in LaSalle Investment Management. Q1 2015, closing with an18.3% vacancy rate, twelve • Moody's Analytics forecasts gross metro product to months after vacancy dipped below 18% for the first grow 4.5% in 2015 and 5.8% in 2016 for the DFW time since 2008. metro. • Net absorption throughout the DFW office market continued to trend positively for the 19th consecutive quarter dating to Q3 2010.

ECONOMIC CONDITIONS / DEMOGRAPHICS

Figure 2: Unemployment Rate and Non-Agricultural Jobs Unemployment Rate (%) Job Count 3,300 10 3,250 9 3,200 8 3,150 7 3,100 6 3,050 5 4 3,000 3 2,950 2 2,900 1 2,850 0 2,800 Q4 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Source:Source: CBRE Bureau Research, of Q4Labor 2014. Statistics, December 2014. Seasonally Adjusted Non-Farm Employment. USA Texas DFW DFW Jobs

Figure 3: Market Overview by Submarket

Annual Qtr. Qtr. 2015 Net Rentable Direct Direct Total Average Asking Direct Net Total Net Total Net Area Vacancy Vacancy Vacancy Lease Rate Absorption Absorption Absorption Market (SF) (SF) Rate (%) Rate (%) ($/SF) (SF) (SF) (SF) Central Expressway 11,442,714 2,126,158 18.6 19.0 21.91 44,102 73,677 73,677

Dallas CBD 25,663,223 6,340,844 24.7 25.4 21.57 91,317 72,410 72,410

East Dallas 3,818,057 544,856 14.3 14.4 15.85 (11,736) (11,736) (11,736)

Far North Dallas 38,594,895 5,151,324 13.3 14.4 22.13 378,438 491,891 491,891

Las Colinas 30,043,676 4,808,615 17.1 17.1 22.96 (167,222) (160,468) (160,468)

LBJ Freeway 19,744,870 5,065,435 25.7 25.8 18.69 (9,168) 4,907 4,907

Lewisville / Denton 4,696,447 799,854 17.0 17.1 18.77 (41,420) (36,696) (36,696)

Preston Center 3,890,337 353,591 9.1 9.5 32.53 1,897 (7,568) (7,568)

Richardson / Plano 22,630,154 3,727,109 16.5 17.7 18.95 746,047 469,787 469,787

SW Dallas 1,665,033 179,556 10.8 10.8 15.22 (13,050) (13,050) (13,050)

Stemmons Freeway 10,007,722 2,692,704 26.9 27.7 13.49 149,035 149,035 149,035

Uptown / Turtle Creek 10,394,060 1,174,223 11.3 11.9 34.81 22,193 47,621 47,621

Fort Worth CBD 9,438,193 1,345,685 14.3 14.6 26.25 51,433 42,949 42,949

Mid Cities 15,689,555 2,534,530 16.2 20.9 17.39 (11,155) 34,472 34,472

North Fort Worth 1,286,830 48,484 3.8 3.8 19.08 (7,232) (4,488) (4,488)

Northeast Fort Worth 2,506,456 991,244 39.5 12.9 16.98 18,737 18,737 18,737

South Fort Worth 6,756,657 474,315 7.0 7.2 20.55 46,521 44,918 44,918

Dallas Total 182,591,188 32,964,269 18.1 17.7 21.29 1,190,433 1,079,810 1,079,810

Fort Worth Total 35,677,691 5,394,258 15.1 15.4 19.42 98,304 136,588 136,588

Dallas / Fort Worth Total 218,268,879 38,358,527 17.6 18.3 20.7 1,288,737 1,216,398 1,216,398

Source: CBRE Research, Q1 2015.

ABSORPTION AND VACANCY Figure 4: Net Absorption and Vacancy Rate

MSF Vacancy Rate (%) 3 23 22 2 21 20 1 19 18 (1) 17 16 (2) 15 Q2 2008 Q2 2009 Q1 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4 2013 Q3 2014 Q2 2015 Q1 Direct Absorption Total Absorption Direct Vacancy Rate Total Vacancy Rate Source: CBRE Research, Q1 2015.

LEASE RATES Figure 5: Asking Rates, Gross Avg. Annual $/SF 28

16 Q2 2008 Q2 2009 Q1 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4 2013 Q3 2014 Q2 2015 Q1

Class A Class B Overall CONSTRUCTION Source: CBRE Research, Q1 2015.

Figure 6: Construction MSF 8 7 6 5 4 3 2 1 0 Q2 Q2 2008 Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 2012 Q4 Q3 2013 Q2 2014 Q4 2015 Under Construction Delivered Construction

Source: CBRE Research, Q1 2015.

CAPITAL MARKETS OVERVIEW

Figure 7: Top Sales Transactions

Buyer Seller Date Bldg. SF Property Name Class

Libitzky Property Companies LaSalle Investment Management Feb-2015 238,051 Canal Centre A

Bradford Companies Hines Feb-2015 218,943 Citymark A

The Aztec Fund American Realty Jan-2015 206,000 AT&T Pinnacle Park A

HighBrook Investment Folsom Companies Jan-2015 192,912 Greenway Tower B

Piedmont Office Realty Trust Dividend Capital Jan-2015 177,169 Park Place On Turtle Creek A

Source: CBRE Research, Q1 2015.

CONTACTS CBRE OFFICES

Dallas / Fort Worth Office, Q4 2014 2014 is highest year for DFW office net absorption since 2006. Rent growth accelerates

18.4% 20.68 $/SF 343,496 SF 1,035,636 SF

*Arrows indicate change from previous quarter. Figure 1: Net Absorption and Vacancy

Net Absorption (MSF) Vacancy Rate (%)

3.6 22 3.2 2.8 21 2.4 2.0 1.6 20 1.2 0.8 19 0.4 0.0 18 (0.4) (0.8) (1.2) 17 2007 2008 2009 2010 2011 2012 2013 2014 Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate

Source: CBRE Research, Q4 2014.

• Annual year-over-year employment growth • Q4 2014 saw an increase in new completions and a throughout Dallas/Fort Worth (DFW) remained strong slightly slowed pace of new construction starts. The through October 2014 with 3.7% growth, under construction pipeline remained above 7.1 million representing 115,800 new jobs. sq. ft. over the quarter, driven by activity in suburban • The largest office sale that transacted over the quarter markets. was the purchase of Quorum Office Portfolio that • Market wide vacancy rose in Q4 2014 with an 18.4 % included 5000 Quorum, Quorum North and Quorum vacancy rate, nine months after vacancy dipped below Place by DRA. 18% for the first time since 2008. • Moody's Analytics forecasts gross metro product to • Net absorption throughout the DFW office market grow 5.7% in 2015 and 6.4% in 2016 for the DFW continued to trend positively for the 18th consecutive metro. quarter dating to Q3 2010.

ECONOMIC CONDITIONS / DEMOGRAPHICS

Figure 2: Unemployment Rate and Non-Agricultural Jobs Unemployment Rate (%) Job Count 000’s 10 3,200 9 8 7 3,100 6 5 3,000 4 3 2,900 2 1 0 2,800 Q3 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 2009 Q1 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 2012 Q2 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Source:Source: CBRE Bureau Research, of Q4 Labor 2014. Statistics, October 2014. USA Texas Seasonally Adjusted Non-Farm Employment. DFW DFW Jobs

Figure 3: Market Overview by Submarket

Annual Net Total Average Qtr. Qtr. 2014 Rentable Direct Direct Vacancy Asking Direct Net Total Net Total Net Area Vacancy Vacancy Rate Lease Rate Absorption Absorption Absorption Market (SF) (SF) Rate (%) (%) ($/SF) (SF) (SF) (SF) Central Expressway 11,442,714 2,170,260 19.0 19.7 21.53 22,032 41,586 114,377

Dallas CBD 28,945,394 6,889,964 23.8 24.3 21.42 (216,524) (230,074) 311,237

East Dallas 3,817,856 533,120 14.0 14.0 15.51 62,763 62,763 185,506

Far North Dallas 38,360,653 5,408,405 14.1 15.8 21.70 437,545 377,152 1,042,563

Las Colinas 30,027,716 4,693,501 17.1 17.3 22.36 476,037 253,855 668,753

LBJ Freeway 19,696,437 5,056,267 25.7 25.9 18.38 77,523 64,018 217,609

Lewisville / Denton 4,633,447 758,434 16.4 16.6 18.64 (161,262) (161,262) (24,172)

Preston Center 3,860,276 355,488 9.2 9.4 32.08 (46,254) (46,254) (63,188)

Richardson / Plano 20,671,623 2,946,536 14.3 15.0 19.19 (51,962) (53,911) 358,018

SW Dallas 1,665,033 166,506 10.0 10.0 15.52 22,208 22,208 70,590

Stemmons Freeway 10,007,113 2,841,739 28.4 29.2 13.56 (124,488) (75,712) (65,606)

Uptown / Turtle Creek 10,371,340 1,196,416 11.5 12.4 33.75 54,322 23,635 (16,069)

Fort Worth CBD 9,438,193 1,397,118 14.8 15.0 26.27 38,481 35,568 181,797

Mid Cities 15,739,212 2,523,375 16.0 21.0 17.56 (15,535) (16,909) 268,976

North Fort Worth 1,286,830 41,252 3.2 3.4 18.58 3,728 3,728 (4,612)

Northeast Fort Worth 1,838,438 341,963 18.6 18.6 16.81 4,725 9,763 20,633

South Fort Worth 6,789,325 520,836 7.7 7.8 19.88 39,107 33,342 13,589

Dallas Total 183,499,602 33,016,636 18.0 18.9 21.07 551,940 278,004 2,799,618

Fort Worth Total 35,091,998 4,824,544 13.7 16.1 19.36 70,506 65,492 480,383

Dallas / Fort Worth Total 218,591,600 37,841,180 17.3 18.4 20.68 622,446 343,496 3,280,001

Source: CBRE Research, Q4 2014.

ABSORPTION AND VACANCY Figure 4: Net Absorption and Vacancy Rate

MSF Vacancy Rate (%) 3 23 22 2 21 20 1 19 18 (1) 17 16 (2) 15 Q1 2008 Q1 2008 Q3 2009 Q1 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 Direct Absorption Total Absorption Direct Vacancy Rate Total Vacancy Rate LEASE RATES Source: CBRE Research, Q4 2014. Figure 5: Asking Rates, Gross Avg. Annual $/SF 27 26 25 24 23 22 21 20 19 18 17 CONSTRUCTION 16 Q1 2010 Q1 2010 Q3 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 Class A Class B Overall Source: CBRE Research, Q4 2014.

Figure 6: Construction

MSF 8 7 6 5 4 3 2 1 0 Q1 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 2011 Q3 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Under Construction Delivered Construction

Source: CBRE Research, Q4 2014.

CAPITAL MARKETS OVERVIEW

Figure 7: Top Sales Transactions

Buyer Seller Date Bldg. SF Property Name Class 14901, 5000 Quorum Dr. & DRA Advisors Harbert Management Corporation Nov-2014 465,703 B 15301 Spectrum Dr. KBS Realty MetLife, Inc. Oct-2014 295,809 Turtle Creek Center A Pillar Commercial StreamCo. Nov-2014 228,400 Collins Square B Thomas Hartland-Mackie Gannett Co., Inc. Oct-2014 224,824 Belo Building A Regent Properties, Inc. Boxer Property Oct-2014 208,450 One Panorama Center A

Source: CBRE Research, Q4 2014.

CONTACTS CBRE OFFICES

Q3 2014 CBRE Global Research and Consulting

VACANCY RATE CONSTRUCTION DELIVERIES TRADE VOLUME UNEMPLOYMENT JOB GROWTH 18.2% 7,555,676 Sq. Ft. 519,186 Sq. Ft. 32% Y-o-Y 5.1% 120,800 Y-o-Y Directional arrows based on change from the previous quarter except where noted

OFFICE CONSTRUCTION IN DFW TOPS SEVEN MILLION SQ. FT. IN Q3 2014. RENT GROWTH ACCELERATES.

Figure 1: Quick Stats Figure 2: Net Absorption and Vacancy Rate

Q3 2014 Q-o-Q Y-o-Y Absorption Sq. Ft. Vacancy Rate Total Vacancy 18.2% $ 1 3,200 22%

000's 2,800 Lease Rates $20.41 per SF # # 2,400 21% Net Absorption 1,392,033 SF # $ 2,000 Under Construction 7,555,676 SF # # 1,600 20% Delivered Construction 519,186 SF # $ 1,200 800 19% Hot Topics 400

• Annual year-over-year employment growth 0 throughout Dallas/Fort Worth remained strong (400) 18% through July 2014 with 3.9% growth, repre- (800) senting 120,800 new jobs. (1,200) 17% 2007 2008 2009 2010 2011 2012 2013 2014 • Moody’s Analytics forecasts 3.6% growth in Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate 2015 and 4.0% growth in 2016 for the Dallas Source:Source: CBRE CBRE Research, Research, Q3 Q3 2014. 2014. metro division and 3.9% and 3.7% for the Fort Worth metro division. The Dallas/Fort Worth office market of their temporary space while their build-to- experienced its 17th consecutive quarter of suit headquarters gets underway. Mid-Cities • Net absorption throughout the DFW office favorable leasing fundamentals in Q3 2014 high absorption was mostly contributed to the market continued to trend positively for the and appears poised for a strong second aggregate amount of smaller move-ins. 17th consecutive quarter dating to Q3 2010. half of 2014. Q3 2014 yielded the most net absorption in a single quarter this far in 2014, DFW employment continued to show a • Marketwide vacancy declined in Q3 2014 with an 18.2 % vacancy rate, six months after increasing to approximately 1.4 million sq. ft. healthy rate of expansion for the 12 months vacancy dipped below 18% for the first time Year-to-date, market net absorption totals just ending July 2014, at 3.9% or 120,800 new since 2008. under three million sq. ft. Q3 2014 had nearly jobs. The Professional & Business Services half the deliveries of Q2 2014. Pre-leasing sector led all other industries in year-over-year • The largest office sale that transacted over the among delivered construction is currently employment change with 44,510 jobs added, quarter was the purchase of Solana by The 14%, contributing to overall market vacancy. followed by Wholesale Trade with 14,420 Blackstone Group. The Westlake business park Average asking rental rates have experienced annual jobs added. As DFW’s two leading is a 14-building campus style property. an accelerated rate of growth from Q3 2013 industries, both sectors experienced industry to Q3 2014. growth at nearly double the pace of the overall An increase in new completions did not slow • market. Professional & Business Services and the pace of new construction starts, as the Demand was strong among several Wholesale Trade both grew by more than under construction pipeline broke over 7.5 million sq. ft. over the quarter, driven by activity submarkets in Q3 2014 especially CBD, Far 8.5% year-over-year. All but two industries in suburban markets. North Dallas and Mid-Cities. Santander’s (Manufacturing and Financial Activities) posted large move to Thanksgiving Tower contributed job gains for this same time period. to the decrease in vacancy in CBD. The much anticipated move for Toyota has begun. Toyota has taken occupancy within Far North Dallas

© 2014, CBRE, Inc. - - 10,870 12,650 72,791 72,791 48,382 (8,340) 411,929 541,311 665,411 665,411 137,090 Sq. Ft. Sq. 414,898 122,743 122,743 153,591 (19,753) 146,229 146,229 285,885 414,891 (16,934) (39,704) Total Net Total 2014 YTD 2,524,158 2,939,049 © 2014, CBRE, Inc. Absorption 3,019 3,490 1,888 1,888 2,378 4,056 14,676 11,378 Qtr 28,109 77,290 77,290 20,429 42,386 56,360 379,614 529,030 529,030 229,854 229,854 103,826 Sq. Ft. Sq. 280,637 280,637 (115,750) 1,111,396 Total Net Total 1,392,033 Absorption 3,136 3,490 1,888 1,888 4,056 2,333 2,333 Qtr 69,299 60,457 26,797 38,751 89,888 89,888 12,300 22,980 22,980 215,955 215,955 462,671 284,123 533,325 Sq. Ft. Sq. (112,145) (136,465) 1,014,593 1,298,716 Direct Net Absorption $21.13 $18.17 $17.66 $17.27 $21.45 $19.86 $15.59 $13.65 $16.35 $21.66 $18.51 $31.37 $21.54 $18.80 $26.35 $32.49 $20.43 $19.34 $20.41 $20.62 Rate Per Sq.Per Ft. Annual Avg Asking Lease nual employment growth in the DFW metro area was 3.9% equating monthsfor to a total the ending 12 July 2014, of 120,800 jobs. The industries that had the strongest job growth rates time during period this 12-month were Professional & Business Services Wholesale (9.2%), Trade (8.6%), and Natural Resources & Mining (7.4%). DFW is currently the fourth largest MSA in the country and is notorious for being one of the fastest growing metro areas as well. Dallas/Fort Worth currently has an estimated population of 6.8 which million, is 33% higher than in 2000. Furthermore, Claritas projects a population which equates to a growth million in DFW by 2019, of 7.4 rate of 8.6% over the next four years. Comparatively, the national five-year projected population growth rate is only 3.5%. DFW’s population currently averages an age of 39 with half of the population in their prime earning years of 20-54. DFW residents tend to earn more income than the national average, as evidenced by an estimated median household compared income of $56,065 as of Q3 2014, in the U.S. to $51,352 ECONOMIC CONDITIONS/DEMOGRAPHICS ECONOMIC year-over-year seasonallyIn adjusted July 2014, unem ployment dropped once again across the board for DFW, andTexas the United States. The unemployment rate in DFW basis points fell 120 level (bps) from the July 2013 whichand is the now stands same rate at as 5.1%, Texas and well below the atU.S., 6.2%. Seasonally adjusted, an

000's 7.9% 8.3% 4.2% 11.4% 17.3% 13.4% 10.4% 14.6% 14.5% 14.8% 20.4% 18.8% 15.2% 26.6% 23.7% 20.2% 28.2% 18.6% 16.0% 18.2% Rate Total

3,200 3,150 3,100 3,050 3,000 2,950 2,900 2,850 2,800 Job Count Vacancy

Q3 2014 2014 Q3

Q2 2014 2014 Q2

Q1 2014 2014 Q1

Q4 2013 2013 Q4 Q3 2013 2013 Q3 8.1% 7.8% 4.0%

17.1%

23.1% 19.3% 11.0% 14.4% 10.4% 15.6% 13.9% 13.9% 18.6% 14.7% 26.4% 13.2% 26.9% 17.9% 2013 Q2 17.3% 13.6%

Rate

Direct

Vacancy 2013 Q1 Q4 2012 2012 Q4

DFW Jobs Q3 2012 2012 Q3

Q2 2012 2012 Q2

Q1 2012 2012 Q1 Q4 2011 2011 Q4

44,980

615,165 173,955 299,810 554,436 2011 Q3 570,772 DFW Direct 346,688 Sq. Ft. Sq.

1,140,150 5,059,414 2,463,476 6,797,841 1,375,851 2,213,977

2,867,297 Vacancy 5,227,682 5,262,596 2,702,621 4,785,431

37,716,711 2011 Q2 32,931,280

Q1 2011 2011 Q1

Q4 2010 2010 Q4

Q3 2010 2010 Q3

Texas Texas

Q2 2010 2010 Q2 Net 2010 Q1 Area

Sq. Ft. Sq.

1,132,767 4,665,127 4,665,127 2009 Q4 3,970,812 3,970,812 9,388,949 1,665,033 1,868,438 3,860,096 6,843,285 Rentable

11,484,694 29,415,642 2014. 29,637,037 37,968,533

10,046,431 15,840,795 19,800,000 19,800,000 10,353,638 20,668,850 35,074,234

218,610,127 2009 Q3

183,535,893 USA USA Q2 2009 2009 Q2

August

Q1 2009 2009 Q1

Q4 2008 2008 Q4

Q3 2008 2008 Q3

Q2 2008 2008 Q2

Q1 2008 2008 Q1 Q4 2007 2007 Q4

Q3 2007 2007 Q3

3% 5% 4% 6% 8% 7% 9% Figure 3: Dallas Office Market Figure 3: Dallas Total Fort Worth Total Dallas / Fort Worth Total South Fort Worth Northeast Fort Worth 10% Central ExpresswayCentral Dallas CBD North Fort Worth Figure 4: UnemploymentFigure 4: Rate and Non-Agricultural Jobs East Dallas Uptown Creek Turtle / Fort Worth CBD Mid Cities Las Colinas LBJ Freeway Lewisville / Denton SW Dallas Stemmons Freeway Far North Dallas Preston Center Richardson / Plano Market (See Map on back) Source: Bureau of Labor Statistics, Adjusted Non-Farm Employment. Seasonally Rate Unemployment

Source: CBRE Research, Q3 2014.

OFFICE THIRD QUARTER THIRD OFFICE MARKETVIEW Source: Bureau of Labor Statistics, August 2014. Seasonally Adjusted Non-Farm Employment.

Q3 2014 Dallas/Fort Worth Office | MarketView 2 Q3 2014 Dallas/Fort Worth Office | MarketView 3 - -

ABSORPTION AND VACANCY LEASE RATES CONSTRUCTION tle Creek, and East Dallas have risen by the largest margin, ranging growth. from Inversely, 4.2% to 21.0% quoted rates have fallen throughout South Fort Worth with declines posted and an at -0.21% unchanged percentage for the Stemmons Freeway submarket. the total officeIn Q3square 2014, footage under construction exceeded a seven million sq. the ft., highest peak 1999, since Q1 high for14-year DFW office under construction. The bulk of this activity is concentrated in the suburban submarkets of Richardson/ Plano and North Far Dallas, with approximately 63.4% of the total pipeline square footage already pre-leased. Significant new proj ects that Cityline E. broke ground Drive, this quarter include 1717 Raytheon’s future headquarters, Granite Park V and State Farm’s additional 500,000 sq. ft. build-to-suit for their corporate campus. Construction starts for the quarter totaled 2,366,500 sq. while ft., nine buildings were totaling completed 519,186 during Q3 2014, sq. ft. These deliveries includedDominion Legacy, Cascades at Cheddar’s 30,000the Colony Buildings sq. ft. 7-10, build-to-suit in Cypress Waters, a Cypress Waters 188,400 sq. ft.spec building Cypress(8951 Waters) and Coppell Commerce Center II A and B. All projects that delivered are Class B properties except Dominion Legacy Cypress and Waters, 8951 which are both Class A. market average rising per moderately sq. ft. in Q3 2014 to $20.41 on a gross per basis. sq.from ft. Class $20.07 in Q2 2014 A rates increased at an especially per sq. strong pace, rising from $24.15 ft. per to $26.39 sq. ft. for the same timeframe. All officeclasses recorded an increase in lease rates for the months last leading 12 to an overall market asking growth rate Year-over-year, of 10.9%. lease rates in the submarkets of Northeast Fort Worth, Uptown/Tur During Q3 2014, market-wideDuring vacancyQ3 decreased 2014, 50 bps as large tenants took occupancy throughout was the DFW 2014 market. Q1 the first time the market vacancyhad seen since sub-18% 2008, when vacancy reached itspre-recession there After 2014, low. Q1 have been substantial deliveries in the DFW office market that were not pre-leased prior to completion, thus contributing to the increase DFW experiencedin vacancy consecutive 2014. since Q1 its 17th quarter of positive net absorption, which totaled sq. 1,392,033 ft. for the quarter. Net absorption was higher this quarter than in and has not reached and this Q2 2014, level since Q3 2014 Q1 sq. ft. was attributed Of this 1,298,716 total, to direct2013. net absorption, while sublet absorption sq. resulting ft., added 93,317 in million nearly sq. ft. of positive 1.4 net absorption for the quarter. A significant amount of move-ins occurred in Dallas CBD and the suburban submarkets North of Far Dallas and Mid-Cities. Several moderately sized move-ins created a positive, aggregate impact in the LBJ Freeway submarket, while 2900 in Las Ranch Colinas Trail delivered 100% preleased over the quarter, attributing 30,000 sq. ft. of absorption. Asking rents continued to experience growth, with the overall

Q3 2014 2014 Q3 Q3 2014 2014 Q3

23% 22% 21% 20% 19% 18% 17% 16% 15%

Q2 2014 2014 Q2 Q2 2014 2014 Q2 Q3 2014 2014 Q3

Q1 2014 2014 Q1 Q1 2014 2014 Q1 Q2 2014 2014 Q2

Vacancy Rate Vacancy

Q1 2014 2014 Q1 Q4 2013 2013 Q4 Q4 2013 2013 Q4

Q4 2013 2013 Q4 Q3 2013 2013 Q3 Q3 2013 2013 Q3

Q3 2013 2013 Q3 Rate Vacancy Total Q2 2013 2013 Q2 Q2 2013 2013 Q2

Q2 2013 2013 Q2

Q1 2013 2013 Q1 Q1 2013 2013 Q1

Q1 2013 2013 Q1

Q4 2012 2012 Q4 Q4 2012 2012 Q4

Q4 2012 2012 Q4

Q3 2012 2012 Q3 Q3 2012 2012 Q3

Q3 2012 2012 Q3

Q2 2012 2012 Q2

Q2 2012 2012 Q2 Overall

Q2 2012 2012 Q2

Q1 2012 2012 Q1

Q4 2011 2011 Q4 Q4 2011 2011 Q4

Q4 2011 2011 Q4

Direct Vacancy Rate Direct Vacancy

Q3 2011 2011 Q3 Q3 2011 2011 Q3

Q3 2011 2011 Q3

Q2 2011 2011 Q2 Q2 2011 2011 Q2 Q2 2011 2011 Q2 Delivered Construction Sq. Ft.

Class B

Q1 2011 2011 Q1 Q1 2011 2011 Q1 Q1 2011 2011 Q1

Q4 2010 2010 Q4 Q4 2010 2010 Q4 Q4 2010 2010 Q4

Q3 2010 2010 Q3 Q3 2010 2010 Q3 Q3 2010 2010 Q3

Q2 2010 2010 Q2

Q2 2010 2010 Q2 Q2 2010 2010 Q2

Q1 2010 2010 Q1

Class A Class A 2010 Q1 Q1 2010 2010 Q1

Q4 2009 2009 Q4

Total Absorption Sq. Ft. Total 2009 Q4

Q3 2009 2009 Q3

Q2 2009 2009 Q2

Q1 2009 2009 Q1

Q4 2008 2008 Q4

Q4 2008 2008 Q4 Under Construction Sq. Ft. Q4 2008 2008 Q4

Q3 2008 2008 Q3

Q2 2008 2008 Q2

Q2 2008 2008 Q2 Q1 2008 2008 Q1

Q1 2008 2008 Q1 Q1 2008 2008 Q1

0 Direct Absorption Sq. Ft. Direct 500 0 (500) 2,000 1,500 1,000

(1,000) (1,500)

$17 $16 $21 $20 $19 $18 $23 $22 $24 3,000 2,000 1,000 6,000 5,000 4,000 8,000 7,000

000's 000's 000's 000's Annual per Sq. Ft. Figure 6: Asking Lease Rates, Figure 7: Construction Figure 5: Net Absorption and Vacancy Rate Rate and Vacancy Net Absorption Figure 5: Net Absorption Sq. Ft. Absorption Net Source: CBRE Research, Q3 2014. Source: CBRE Research, Q3 2014.

Source: CBRE Research, Q3 2014.

OFFICE THIRD QUARTER THIRD OFFICE MARKETVIEW © 2014, CBRE, Inc. A A A A A Class © 2014, CBRE, Inc. Plaza at Legacy Galatyn Park Solana Business Park Pacific Ave. 1700 Park Central 7-9 Property Name purchaser, Spearpurchaser, Street Capital, is a domestic real estate investment company with offices in San Francisco andNew York. Plaza at Legacy was purchased by MetLife Core Property Holdings. The 7-story office tower was bought from Hines, who build the property in 2001. THE DRAMATIC SHIFT IN LENDER APPETITES CORRELATED AND INCOMPRESSION MORTGAGE INTEREST BEENRATES HAVE BENEFICIAL TO VERY REALCOMMERCIAL ESTATE. Source: BizJournals.com, September 2014 DallasNews, September 2014 845,919 215,499 801,923 1,783,419 Bldg Sq. Ft. 1,340,481 Date Jul-2014 Jul-2014 Sep-2014 Sep-2014 Aug-2014 In Q3 2014, notable officeIn Q3transactions 2014, include two properties along LBJ Freeway, a Mid-Cities asset and properties in the NorthFar Dallas and South FortWorth submarkets. Solana Business In August 2014, Park in Westlake was purchased by New York-based Blackstone Group. The group purchased the campus-style 14-building property out million. of foreclosure for $180 The Blackstone Group plans to spend about million in renovations on the business $110 park. This transaction is one of many that identifies the lucrative opportunities within the DFW Pacific49-story Avenue, a market. 1700 tower located in Dallas CBD, was purchased by a Canadian the investor, Montreal-based Olymbec Group, who acquired the property from sellers Berkeley Investments out of Boston, Massachusetts. is a three-building,Park Central 7-9 845,919 sq. ft. complex in the East LBJ Freeway micro- market that was purchased by institutional investment firmParmenter RealtyPartners, based in Miami. Galatyn Park is a four building complex totaling over 800,000 square feet and resides among an eighty acre mixed- use development in Richardson, TX. The Seller Hines CWCapital Asset Management CWCapital Berkeley Investments Parmenter Realty Partners "Champion Partners & Long Wharf Real Estate Partners”

Figure 8: Top Transactions Figure 8: Top Buyer MetLife Core Property Holdings

The Blackstone Group Olymbec Group PIMCO Spear Street Capital

OFFICE THIRD QUARTER THIRD OFFICE MARKETVIEW Source: CBRE Research, Q3 2014. The real estate debt capital markets are also quite active throughout the DFW area and the state Capital of Texas. is plentiful for all property types and for loan terms from two to thirty years. The commercial banks remain very aggressive and many provide nonrecourse financing. Life companies and CMBS are also activeand many have targeted specifically Texas for increased loan volume. In addition to a full spectrum of lenders actively competing in the marketplace, the historically low price of debt capital is helping to fuel strong gains in pricing across allproperty types. With an avalancheof capital raised globally for real estate investments, sales activity has been strong across the entire risk spectrum, from core to value-add andopportunistic. Furthermore, the buyer pool has deepened with the appearance of new domestic and internationalinvestors who are being out-priced in coastal markets and are attracted by the national reporting on the growth opportunities supported by a strong state and local economy. Investment activity in DFW has remained at high levels with healthy sales volume across all asset classes. It is the continuation of “the perfect storm”-- investor demand and attractive financing meet asset pricing supported by strongmarket fundamentals.

Q3 2014 Dallas/Fort Worth Office | MarketView 4 Q3 2014 Dallas/Fort Worth Office | MarketView 5 [email protected] Casey Rendon Casey ResearchCoordinator CBRE Dallas Research McKinney2100 SuiteAve, 700 Dallas, TX 75201 6530 979 214 t: +1 e: [email protected] Lauren Paris Senior Research Analyst CBRE Dallas Research McKinney2100 SuiteAve, 700 Dallas, TX 75201 6587 979 214 t: +1 e:

DISCLAIMER sources believed to be reliable. While we Information contained herein, including projections, has been obtained from make no guarantee, warranty or representation about it. It is your we have not verified it and do not doubt its accuracy, information is presented exclusively for use by responsibility to confirm independently its accuracy and completeness. This cannot be reproduced without prior written CBRE clients and professionals and all rights to the material are reserved and permission of CBRE.

AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around CONTACTS FOLLOW CBRE FOLLOW TEXAS RESEARCH Lynn Cirillo Research Operations Manager CBRE Americas Research 2800 Post Oak, Suite 2300 Houston, TX 77056 e: [email protected] For more information about this Dallas/Fort Worth MarketView, please contact: MarketView, Worth For more information about this Dallas/Fort © 2014, CBRE, Inc. Dallas/Fort Worth Ofﬁ ce MarketView

Q2 2014 CBRE Global Research and Consulting

VACANCY CONSTRUCTION DELIVERIES TRADE VOLUME UNEMPLOYMENT JOB GROWTH 18.7% 4,993,837 Sq. Ft. 927,163 Sq. Ft. -36% Y-o-Y 5.2% 106,800 Y-o-Y Directional arrows based on change from the previous quarter except where noted

OFFICE CONSTRUCTION IN DFW TOPS 4.9 MILLION SQ. FT. IN Q2 2014. VACANCY AND RENTAL RATES SHOW MIXED SIGNALS.

Figure 1: Quick Stats Figure 2: Net Absorption and Vacancy Rate Q2 2014 Q-o-Q Y-o-Y Absorption Sq. Ft. Vacancy Rate 3,200 22% Total Vacancy 18.7% # $

000's 2,800 Lease Rates $20.07 per sq. ft. 1 # 2,400 21% Net Absorption 410,163 sq. ft. $ # 2,000 1,600 Under Construction 5 million sq. ft. $ # 20% 1,200 Delivered Construction 927,163 sq. ft. ## 800 19% Hot Topics 400 Annual year-over-year employment growth through- 0 out Dallas/Fort Worth remained strong through April (400) 18% 2014 with 3.5% growth, representing 106,800 new (800) jobs. (1,200) 17% 2007 2008 2009 2010 2011 2012 2013 2014 The two-year employment outlook for the Dallas Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate and Fort Worth metro divisions is 3% growth per Source: CBRE Research, Q2 2014. year, as forecasted by Moody’s Analytics.

Net absorption throughout the DFW offi ce market continued to trend positively for the 16th consecutive The Dallas/Fort Worth offi ce market experi- 106,800 new jobs. The Professional & Busi- quarter dating to Q3 2010. enced its 16th consecutive quarter of favor- ness Services sector led all other industries able leasing fundamentals in Q2 2014 and in year-over-year employment change with Marketwide vacancy edged back up to 2013 levels appears poised for another year of solid 28,720 jobs added, followed by the Leisure after Q1 2014 dipped below 18% for the fi rst time growth. Q2 2014 yielded less net absorption & Hospitality with 18,870 annual jobs added. since 2008. than Q1 2014, but demand was still solid at As DFW’s two leading industries, both sectors approximately 400,000 sq. ft. Q2 2014 nearly experienced industry growth at nearly double The largest offi ce sale that transacted over the quarter was the purchase of Fountain Place by Goddard doubled in deliveries over Q1 2014, however the pace of the overall market. Professional Investment Group. The Dallas offi ce tower is located pre-leasing within buildings new to market was & Business Services and Leisure & Hospitality in the Dallas CBD. relatively low, contributing to the increase in both grew 6.0% year-over-year and added a overall market vacancy. Average asking rental combined 47,490 jobs. All but two industries An increase in new completions did not slow the rates increased by 2.5% from Q2 2013 to Q2 (manufacturing and mining) posted job gains pace of new construction starts, as the under 2014. for this same time period. construction pipeline hovered around 5 million sq. ft. over the quarter, driven by activity in suburban Although the pace of job growth slowed from markets. October 2013, DFW employment continued to show a healthy rate of expansion for the 12 months ending April 2014, at 3.5% or

© 2014, CBRE, Inc. 7,380 58,115 49,765 12,281 56,031 94,634 94,634 44,326 (1,272) 116,661 Sq. Ft. Sq. (19,312) 337,608 355,569 285,797 103,843 134,254 (22,772) Total Net Total 2014 YTD 1,410,218 1,544,472 © 2014, CBRE, Inc. Absorption 1,917 5,820 24,160 65,142 65,142 Qtr 20,406 170,109 105,769 76,046 410,163 (13,015) (15,456) (38,374) Sq. Ft. Sq. (23,445) (26,664) 432,531 (22,646) (22,368) Total Net Total Absorption 9,510 2,577 6,508 Qtr 68,132 93,631 20,027 75,250 75,858 35,303 35,303 68,464 68,464 22,346 22,346 22,346 214,335 528,118 (26,160) Sq. Ft. Sq. 510,325 (10,228) (10,228) (10,228) (34,983) (22,296) (36,700) (17,793) Direct Net Absorption $17.63 $19.90 $15.69 $18.45 $21.24 $13.65 $15.57 $18.59 24,609 $14.27 $25.95 $20.97 $18.53 $20.19 $30.69 $19.34 $20.60 $30.78 $20.07 Rate Per Sq.Per Ft. Annual Avg Asking Lease ECONOMIC CONDITIONS/DEMOGRAPHICS ECONOMIC year-over-year seasonallyIn April adjusted 2014, unemployment dropped once again across the board for DFW, and theTexas United States. The unemployment rate in DFW fell basis 100 points level (bps) from April’s 2013 and now stands at 5.2%, which is same rate and as Texas well below the at U.S., 6.3%. Seasonally adjusted, annual employment growth in the DFW metro area was 3.5% for months equatingthe ending 12 to a total April of 2014, 106,800 jobs. The industries that had the strongest job growth rates during time period this 12-month were Lei- sure & Hospitality (6.0%), Professional & Business Services (6.0%), Construction (5.7%) and Transportation, Ware- housing & Utilities (4.8%). DFW is currently the fourth largest MSA in the country and is notorious for being one of the fastest growing metro areas as well. Dallas/Fort Worth currently has an estimated population of 6.8 which million, is 33% higher than in 2000. Furthermore, Claritas projects a population which equates to a growth million in DFW by 2019, of 7.4 rate of 8.6% over the next four years. Comparatively, the ve-year projected populationnational growth fi rate is only 3.5%. DFW’s population currently averages an age of 39 with half of the population in their prime earning years of 20-54. DFW residents tend to earn more income than the national average, as evidenced by an estimated median household compared income of $56,065 as of Q2 2014, in the U.S. to $51,352

000's 2.9% 8.7% 8.2% 28.1% 21.9% 27.2% $17.89 14.7% 15.8% 16.7% $21.18 10.5% 25.8% 19.0% 16.8% 18.7% Rate Total

3,200 3,150 3,100 3,050 3,000 2,950 2,900 2,850 2,800

Vacancy Job Count

Q2 2014 2014 Q2

Q1 2014 2014 Q1

Q4 2013 2013 Q4

Q3 2013 2013 Q3 Q2 2013 2013 Q2 8.6% 2.6% 8.0%

14.1%

10.1% 19.3% 19.9% 13.4% 13.5% 16.9% 16.5% 15.3% 15.4% 10.7% 10.7% 16.0% 16.0% 18.2% 18.5% 26.8% 25.8% 25.0% 17.6% 14.5% 2013 Q1 18.2% Rate

Direct

Vacancy Q4 2012 2012 Q4

Q3 2012 2012 Q3

Q2 2012 2012 Q2 DFW Jobs

Q1 2012 2012 Q1

Q4 2011 2011 Q4 28,868 2011 Q3 178,011 331,146 350,178 597,569

556,769 618,638 Direct Sq. Ft. Sq.

DFW 5,119,150 2011 Q2 5,091,217 4,877,537 5,514,857 14.5% Vacancy 1,048,490 2,936,596 1,503,904 2,252,728 2,708,579

38,427,820 33,308,670 Q1 2011 2011 Q1

Q4 2010 2010 Q4

Q3 2010 2010 Q3

Q2 2010 2010 Q2 Texas Q1 2010 2010 Q1

Net

Area Sq. Ft. Sq. 2009 Q4 3,914,818 1,096,767 1,096,767 4,626,163 9,388,949

1,665,033 6,972,387 6,972,387 3,860,000 3,860,000 Rentable

11,683,510 19,753,628 19,753,628 37,948,792 37,948,792 29,492,886 29,492,886 20,821,770 28,637,303 28,637,303 7,153,302 15,832,231 2,679,431 10,346,569 10,346,569 10,092,068 2009 Q3 35,212,713

218,055,253 182,842,540

Q2 2009 2009 Q2 USA

Q1 2009 2009 Q1

Q4 2008 2008 Q4

Q3 2008 2008 Q3

Q2 2008 2008 Q2

Q1 2008 2008 Q1

Q4 2007 2007 Q4 Q3 2007 2007 Q3

Figure 3: Market Statistics Figure 3: 3% 4% 5% 6% 7% 8% 9% Central ExpresswayCentral Dallas / Fort Worth Total Dallas CBD Far North Dallas Las Colinas CreekUptown Turtle / Figure 4: UnemploymentFigure 4: Rate and Non-Agricultural Jobs Stemmons Freeway Mid Cities East Dallas Richardson / Plano SW Dallas Fort Worth CBD Dallas Total Fort Worth Total Preston Center Northeast Fort Worth 1,922,379 LBJ Freeway Lewisville / Denton North Fort Worth South Fort Worth Market (See Map on back) Unemployment Rate

10%

OFFICE SECOND QUARTER SECOND OFFICE MARKETVIEW Source: CBRE Research, Q2 2014. Seasonally Adjusted Non-Farm Employment. Source: CBRE Research, Q2 2014.

Q2 2014 Dallas/Fort Worth Ofﬁ ce | MarketView 2 Q2 2014 Dallas/Fort Worth Ofﬁ ce | MarketView 3

ABSORPTION AND VACANCY LEASE RATES CONSTRUCTION During Q2 2014, market-wideDuring vacancyQ2 increased 2014, 80 bps as large deliveries with high speculative availabilitycame to market. Q1 rst time the market vacancyhad seen since sub-18% was the fi 2014 2008, when vacancy reached its pre-recession After 2014, low. Q1 there were substantial ce market deliveries that were in theDFW offi not pre-leased prior to completion, thus contributing to the increase in vacancy. The vacancy increase did not undermine the positive sq. ft. for the quarter.net absorption, Even which totaled 410,163 though net absorption it was lower this quarter 2014, than in Q1 remains in line with previous quarters. sq. ft.Of this 510,325 total, was attributed to direct net absorption, while sublet absorption was negative sq. resulting ft., at (100,062) in positive net absorption cant amount of move-ins for the quarterfor the quarter. A signifi occurred inthe suburban submarkets of Uptown/Turtle Creek and East Dallas. Several moderately sized move-ins created a positive, aggregate impact in Uptown/Turtle Creek submarket, while Trend in EastTower Dallas delivered in Q2 attributing to 90,857 sq. ft. of absorption. Growth in overall asking rents continued to increase, the market average from rose per marginally sq. ft. to $20.07 in Q2 2014 on a gross basis. Class per 2014 $20.06 A rates sq. ft. in Q1 increased at an especially strong pace of 3.0%, rising from $23.98 classesce recorded per sq. an ft. All offi per sq. ft. to $24.15 increase in lease rates for the months last leading 12 to an overall market growth rate of 2.5%. Over the months, last asking 12 lease rates in the submarkets of LBJ Dallas Freeway, CBD, Central Expressway and Uptown/Turtle Creek have risen by the largest margin, ranging from 4.2%-to-8.1% growth. Inversely, quoted rates have fallen throughout Las Colinas and North Fort Worth, with declines posted at 3.7% and 0.2%, respectively. ce square footage under construction the total offi In Q2 2014, exceeded million sq. ft. and 4.9 maintained its 4th consecutive quarter million above sq. 4.4 bulk ft.The of this activity is concentrated in the suburban submarkets of Richardson/Plano and Las Colinas, with approximately of the 62.5% total pipeline square foot- cant new ageprojects already pre-leased. that broke ground Signifi this quarter include two additional buildings at Cypress Waters in Las Colinas, Crescent’s new development at McKinney & Olive, and Mercer Business Park’s build-to-suit for Monitronics. Construction startsve forbuildings the quarter totaled 850,585 sq. while ft., fi sq. ft. These were totalingcompleted 927,163 during Q2 2014, deliveries included Granite International Park IV, Business Park IV, in East Tower Dallas,Trend Lincoln Legacy and 3001 Dallas Two Parkway. The latter two projects delivered entirely spec and are both located North in Far Dallas.

Q2 2014 2014 Q2 Q2 2014 2014 Q2

23% 22% 21% 20% 19% 18% 17% 16% 15% Q1 2014 2014 Q1 Q1 2014 2014 Q1

Q2 2014 2014 Q2

Q4 2013 2013 Q4 Q4 2013 2013 Q4

Q1 2014 2014 Q1

Q3 2013 2013 Q3 Q3 2013 2013 Q3

Vacancy Rate 2013 Q4

Q2 2013 2013 Q2

Q2 2013 2013 Q2 Q3 2013 2013 Q3

Q1 2013 2013 Q1

Q1 2013 2013 Q1 Q2 2013 2013 Q2

per Sq. Ft. 2012 Q4 Q1 2013 2013 Q1 Q4 2012 2012 Q4

Q3 2012 2012 Q3

Q4 2012 2012 Q4 Q3 2012 2012 Q3

Q2 2012 2012 Q2 Q3 2012 2012 Q3

Q2 2012 2012 Q2

Q2 2012 2012 Q2 Q1 2012 2012 Q1

Q1 2012 2012 Q1 Overall Avg. Asking Rate

Total Absorption Sq. Ft. Total Rate Vacancy Total

Q1 2012 2012 Q1 Q4 2011 2011 Q4

Q4 2011 2011 Q4

Q4 2011 2011 Q4 Q3 2011 2011 Q3

Q3 2011 2011 Q3

Q2 2011 2011 Q2

sking Rates, 2011 Q2 Q2 2011 2011 Q2

Q1 2011 2011 Q1

Delivered Construction Sq. Ft.

Q1 2011 2011 Q1 Q1 2011 2011 Q1

Class B 2010 Q4

Q4 2010 2010 Q4 Q4 2010 2010 Q4

Q3 2010 2010 Q3

Q2 2010 2010 Q2

Q1 2010 2010 Q1

Q1 2010 2010 Q1 Q4 2009 2009 Q4

Q4 2009 2009 Q4 Class A

Q4 2009 2009 Q4 Q3 2009 2009 Q3

Q3 2009 2009 Q3

Q2 2009 2009 Q2 Q3 2009 2009 Q3

Q2 2009 2009 Q2

Q1 2009 2009 Q1 Q2 2009 2009 Q2 Q1 2009 2009 Q1

Q4 2008 2008 Q4 Q4 2008 2008 Q4 Q1 2009 2009 Q1

Q3 2008 2008 Q3 Q3 2008 2008 Q3 Q4 2008 2008 Q4 Under Construction Sq. Ft.

Ft.

Direct Absorption Sq. Ft. Direct Rate Direct Vacancy

Q2 2008 2008 Q2 Q2 2008 2008 Q2

Q3 2008 2008 Q3

Q1 2008 2008 Q1 Q1 2008 2008 Q1

Q2 2008 2008 Q2

Q1 2008 2008 Q1 0 0 500

(500)

2,000 1,500 1,000

6,000 5,000 4,000 3,000 2,000 1,000 000's 000's (1,000) (1,500) 000's Figure 7: Construction Figure 6: Gross Avg. Annual A and Vacancy Rate Net Absorption Figure 5: $24 $23 $22 $21 $20 $19 $18 $17 $16 Net Absorption Sq. Net Absorption Sq. Source: CBRE Research, Q2 2014. Source: CBRE Research, Q2 2014.

Source: CBRE Research, Q2 2014.

OFFICE SECOND QUARTER SECOND OFFICE MARKETVIEW © 2014, CBRE, Inc. - B A A A A Class © 2014, CBRE, Inc. Crestview OfficeTower Prestonwood Place 3500 Maple Avenue Galleria North I Tower Fountain Place Property Name ing beneath the building. Galleria North I, a 16-story Tower Class A sq.asset ft. North in Far Dallas, has 379,518 of rentable space by and sold in June 2014 Franklin Street Properties to Germany-based Deutsche Asset & Wealth. The property is occupied and includes executive87.2% park INCREASINGAN BUYERS OF NUMBER ARE SUBMITTING OFF- MARKET OFFERS IN HOPES OF PRE-EMPTING COMPETITION FOR ASSETS. ATTRACTIVE 97, 313 - 379,518 376,710 262,962 Bldg Sq. Ft. 1,200,266 - Date Jun-2014 Jun-2014 Jun-2014 Jun-2014 May-2014 chased by a Atlanta-based Goddard Invest ment Group from LLC JPMorgan Chase & GoddardCo. plans to renovate the 1980’s office tower. matic shift in lender appetites and correlated compression in mortgage interest rates have been verybeneficial to commercial real estate in the past couple years. notable officeIn Q2transactions 2014, include two North Far Dallas, a Dallas CBD asset and properties in the Las Colinas, and Uptown/Turtle Creek submarkets. In June, Crestview OfficeTower in Las Colinas was purchased by Austin-based Capridge Partners for $34.5 which million, is anticipated to be the beginning of several acquisitions within DFW. The Codina seller, Partners, sold the property replacement at 75% value. This transaction is one of many that identifies the lucrative opportunities within the DFW market. 3500 Maple an 18-story Ave, tower located in Uptown, was purchased out of foreclosure by a New England-based investor who teamed up with Champion Partners to acquire the asset. Fountain Place, a major Dallas landmark in the Dallas CBD submarket, is a 60-story, sq. ft.1,200,266 property that was pur - - - Orda CorporationOrda Foreclosure Codina Partners Franklin Street Properties Seller JPMorgan Chase & Co

Figure 8: Top Transactions Figure 8: Top Trish McGilveryTrish ChampionPartners CapRidge Partners CapRidge Buyer Goddard Investment Group

Deutsche Asset & Wealth

OFFICE SECOND QUARTER SECOND OFFICE MARKETVIEW Source: CBRE Research, Q2 2014. In the debt market, most life companies allocationsexpect that to 15% are 2014 10% production.above Debt 2013 capital is avail An increasing number of buyers are submitting off-market offers in hopes of pre-empting competition for attractive assets. The goal is not to secure favorable pricing as much as the desire to be successful in placing capital. Pricing is not moving to an unsupportable butlevel, the trend is reflective of a competi A positive trend in office is the ability to make a deeper market for suburban office.For the last few years, bid depth and quality has been a persistent problem for stabilized suburban office. Over the last few months, this has begun to shift with more bids per asset and an increase in bidder quality. There has been a strong increase in the flow of capital to commercial real estate generally, and to high-quality assets with upside in particular. The effects of modestly higher interest rates are more likely to be felt in commodity, net-lease and secondary-market trades, while core assets of all types are seeing minimal pullback. tive landscape. able and plentiful, but the best priced money is selective and focused on quality. The dra

Q2 2014 Dallas/Fort Worth Office | MarketView 4 Q2 2014 Dallas/Fort Worth Ofﬁ ce | MarketView 5 . [email protected] Casey Rendon Casey Coordinator Reseach CBRE Dallas Research McKinney2100 SuiteAve, 700 Dallas, TX 75201 6530 979 214 t: +1 e: [email protected] Lauren Paris Senior Research Analyst CBRE Dallas Research McKinney2100 SuiteAve, 700 Dallas, TX 75201 6587 979 214 t: +1 e:

nformation contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, DISCLAIMER I ed it and make no guarantee,we have not warranty verifi or representation about it. It is your rm responsibilityindependently to confi its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. Additional U.S. research produced Global by Research and Consulting can be found at www.cbre.us/research GLOBAL RESEARCH AND CONSULTING RESEARCH GLOBAL This report was prepared the by CBRE U.S. which forms Research part Team CBRE of Global Research and Consulting – a network preeminent of researchers and consultants who collaborate provide to real estate market research, econometric forecasting and consulting solutions real to estate investors and occupiers around the globe.

[email protected] CONTACTS FOLLOW CBRE FOLLOW TEXAS RESEARCH Lynn Cirillo Research Operations Manager CBRE Americas Research 2800 Post Oak, Suite 2300 Houston, TX 77056 e: For more information about this Dallas/Fort Worth MarketView, please contact: MarketView, Worth For more information about this Dallas/Fort © 2014, CBRE, Inc.