Office Deliveries Continue for Central Los Angeles

Research & Forecast Report

Central Los Angeles | OFFICE Accelerating success. Q2 2017

>> Office Deliveries Continue for Central Los Angeles

Key Takeaways Market Indicators | Relative to prior period > Delivery momentum continued in the second quarter with Q2 2017 Forecast J.H. Snyder's 1601 N. Vine St. delivering 115,600 square feet Vacancy   (SF) to the market. This leaves 152,500 SF of office product Net Absorption   under construction and 811,000 SF of expected proposed Construction   construction in the Hollywood submarket. Rental Rate   > The average rent for Class A buildings in Central Los Ange- les is $3.42 per square foot (PSF) Full Service Gross (FSG), a 0.7% decrease year-over-year. Summary Statistics | Central Los Angeles, Q2 2017 > Vacancy decreased 10 basis points from one quarter ago Class A Class B All Classes recording 18.0%. Vacancy Rate 12.2% 23.1% 18.0% Change from Q1 ‘17 > Leasing activity rose from last quarter's 122,100 SF total to -110 +80 -10 record 273,300 SF. (Basis Points) Net Absorption* 167.5 -53.4 112.2 > Investment activity consisted of Hudson Pacific acquiring Construction Completions* 115.6 0.0 115.6 Hollywood Center Studios for $200,000,000 ($542 PSF). Under Construction* 152.5 60.5 213.0 *SF, Thousands

Central Los Angeles Office Market Asking Rents | Central Los Angeles, Q2 2017 The Central Los Angeles market saw moderate demand activity during second quarter with vacancy decreasing by 10 basis Class A Class B All Classes points from last quarter, and absorption closing at 112,200 SF Average Asking Rent $3.42 $2.48 $2.75 Change from Q1 ‘17 for the quarter. There is currently 152,500 SF of office prod- +$0.08 +$0.11 +$0.07 uct under construction along with 811,000 SF of additional ($) proposed product. This additional inventory will be attractive Y.O.Y. Change (%) -0.7% 13.7% 5.5% to both office tenants seeking new product in a high-image location and creative content producers looking for integrated Labor Force | Los Angeles County, May 2017 office/production space in the creative center of Los Angeles. Demand from strong leasing activity in 2015 and 2016 has Total Prof. & Financial Nonfarm Business Activities finally started to manifest. After a period of stagnation, rents Services rebounded, registering an average increase of 2.0% in the last 12-mo Employment 1.3% 2.7% 0.4% 3 quarters. Class A rents, however, decreased by 0.7% from Growth (%) last year. 12-mo Actual 55,700 15,900 800 Employment Change Central Los Angeles | OFFICE Q2 2017

Vacancy Historical Vacancy v. Rents | Central Los Angeles Market > Vacancy in Central Los Angeles decreased by 10 basis Q2 ‘13-’17 points to 18.0% in second quarter. The 300 basis point de- RENTS VACANCY crease year-over-year indicates steady demand for the glut of new construction that has come to market. $3.00 24%

22% > Hollywood Class A properties saw the largest delta in va- ) cancy, dropping by 150 basis points to 15.2% from 16.7% last $2.50 20% quarter. > Mid-Wilshire experienced slightly negative demand, with 18% $2.00 Hollywood realizing the most vacancy gains. 16%

> Forecast: Central Los Angeles should tighten through %(TOTAL) VACANT $ PSF FSG PER ANNUM (WEIGHTED 14% early 2017 as strong leasing activity in the past year absorbs. $1.50 12%

$1.00 10% Absorption and Leasing Activity 2Q13 2Q14 2Q15 2Q16 2Q17 > Absorption for the quarter totaled 112,200 SF. > Among the move-ins that drove demand this quarter was Siren Productions occupying 21,600 SF at 1135 N. Mansfield Net Absorption by Submarket | Central Los Angeles Market Ave. in Hollywood. Q2 ’17 > Leasing activity totaled 273,300 SF for the quarter. We- Work's lease at the newly delivered 1601 N. Vine St. high- 160,000 lighted leasing activity. The location is WeWork's second in 140,000 133,900 Hollywood, after their inaugural Los Angeles location at 7083 120,000

Hollywood Blvd. 100,000

> Forecast: With continued demand in Central Los Angeles SF 80,000 and several of Hollywood's larger projects having been deliv- 60,000 ered or about to deliver, absorption in 2017 has the potential to 40,000 match 2016. 20,000

(20,000) Rental Rates (21,700) > The average asking rental rate for the market rose $0.07 (40,000) MID WILSHIRE HOLLYWOOD from the previous quarter. > After a period of flattening rents, the previous 3 quarters saw an average increase of 2.0% due to new vacant inventory carrying a higher entry point for asking rents. Historical Leasing Activity | Central Los Angeles Market Q2 ‘13 - ‘17 > The difference in rates between Mid-Wilshire and Holly- wood continues to be stark as the Hollywood pipeline contin- 600,000 ues to push rates higher, while Mid-Wilshire remains a steady 500,000 alternative for price-averse tenants. > Forecast: Rents currently stand 25.5% higher than their 400,000 pre-recession peak. That, combined with fewer projects in 300,000 the pipeline, could lead to limited room for rental growth going SF forward. 200,000

100,000

0 2Q13 2Q14 2Q15 2Q16 2Q17

2 Central Los Angeles | OFFICE Q2 2017

Construction Historical Net Absorption & Construction Completions > J.H. Snyder's 1601 N. Vine property delivered 115,600 SF to Central Los Angeles Office Market Q2 ‘13-’17 the Hollywood submarket. The property was partially leased at time of delivery, with WeWork taking close to half of the NET ABSORPTION CONSTRUCTION COMPLETIONS building for their second Hollywood location. 500,000

> Central Los Angeles accounts for 7% of all under construc- 400,000 tion properties in Los Angeles County. The two remaining projects currently under construction are 7007 Romaine St. 300,000 SF (60,500 SF) and CUE at Sunset Bronson (92,000 SF). 200,000 > Hudson Pacific continues to be a player in the Hollywood 100,000 development market. Following CUE's expected delivery in the latter half of 2017, construction will begin on EPIC, located 0 at 5901 W. Sunset Blvd. (274,000 SF), in early 2018. (100,000) > Forecast: Construction deliveries through 2017 will be lower in volume compared to the previous year, but Central LA (200,000) 2Q13 2Q14 2Q15 2Q16 2Q17 continues to be a major development center in the Greater Los Angeles Basin. Several proposed projects in the Hollywood submarket will break ground in late 2017 and early 2018. Investment Trends Chart Central Los Angeles Office Market ‘11-’17

Investment Trends Average Price PSF Cap Rate > Investment activity for properties over 25,000 SF regis- $600.00 7 tered 1 property trading for a total of $200.0 million dollars. 6 $500.00 > Hudson Pacific followed the footprint laid by their Sunset Gower and Sunset Bronson acquisitions with the purchase 5 of Hollywood Center Studios. Plans include construction of $400.00 more office space on the campus in addition to the existing 4 $300.00 $/PSF

production space. Rate Cap 3

> Forecast: Investors remain bullish in the Central Los $200.00 Angeles market, targeting not only Class A trophy buildings, 2 but also value-add and redevelopment opportunities. $100.00 1

$- 0 Outlook 2011 2012 2013 2014 2015 2016 2017 The Hollywood submarket will continue to see strong demand for space from entertainment, media and technology firms as Unemployment Rate | U.S., CA & Los Angeles County | pre-leased properties are delivered to the market. With the May 2016 surrounding submarkets mostly built-out and creative tenants passing on the burgeoning, but not fully-realized Downtown 4.8% 4.7% Los Angeles creative market, Hollywood has the opportunity 4.7% to attract tenants desiring quality space at a lower price-point 4.6% than the Silicon Beach cluster. That window, however, is 4.5% 4.4% closing due to the ascent of Hollywood rents, concurrent with 4.4% a robust pre-leasing environment. With fewer large block op- 4.3% tions currently available and a current focus on medium sized 4.2% opportunities, the market will look to its proposed construction 4.1% 4.1% pipeline in 2017 and beyond to continue fulfilling demand for 4.0% high quality creative and headquarter spaces. 3.9% 3.8% United States California Los Angeles County

3 Central Los Angeles | OFFICE Q2 2017

Market Description Submarket Map Central Los Angeles is an office market comprised of 14.1 million SF, representing 6% of the total office space 25,000 SF and greater in the Los Angeles Basin. Mid-Wilshire is attractive to small, entrepreneurial, and often Pacific Rim- owned businesses while Hollywood has a mix of firms from the professional services, high-tech and entertainment/ media sectors.

RECENT TRANSACTIONS & MAJOR DEVELOPMENTS Central Los Angeles Office Market Q2 2017

SALES ACTIVITY PROPERTY ADDRESS SIZE SF SALE PRICE PRICE PSF BUYER SELLER 1040 N. Las Palmas Ave., Hollywood 369,000 SF $200,000,000 $542 PSF Hudson Pacific Properties, Inc. Studio Management Services

LEASING ACTIVITY

PROPERTY ADDRESS LEASED SF LEASE TYPE BLDG CLASS LESSEE LESSOR 1601 N. Vine St., Hollywood 64,800 SF Direct-New A WeWork J.H. Snyder Company 501 Shatto Pl., Los Angeles 14,800 SF Direct-New A Los Angeles County Health Services American Realty Advisors

MAJOR DEVELOPMENTS

PROJECT DEVELOPER SIZE SF SUBMARKET STATUS ESTIMATED COMPLETION CUE at Sunset Bronson Studios, Hollywood Hudson Pacific 92,000 SF Hollywood Under Construction Q3 2017 7007 Romaine St., Hollywood 1001 N Orange La Llc 60,500 SF Hollywood Under Construction Q4 2017 5901 W. Sunset Blvd., Hollywood Hudson Pacific 300,000 SF Hollywood Proposed TBD Crossroads (2 bldgs), Hollywood Harridge 138,500 SF Hollywood Proposed TBD 1311 N Cahuenga Blvd., Hollywood Cal Coast 352,000 SF Hollywood Proposed TBD

4 Central Los Angeles | OFFICE Q2 2017

oFFICE OVERVIEW Central Los Angeles Office Market Q2 2017

EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS

Leasing Net Net Total Total Leasing Completions Weighted Submarket Direct Sublease Total Activity Absorption Absorption Under Bldgs Inventory Vacancy Activity YTD Current Qtr Avg Asking /Class Vacancy Vacancy Vacancy Current Qtr Current Qtr YTD Construction SF Prior Qtr SF SF Lease Rate SF SF SF

MARKET TOTAL A 35 6,451,400 12.2% 0.1% 12.2% 13.3% 195,900 262,000 167,500 541,300 115,600 92,000 $3.42 B 59 6,909,200 23.0% 0.0% 23.1% 22.3% 68,700 124,000 (53,400) (28,000) 0 60,500 $2.48 C 22 1,218,000 19.4% 0.0% 19.4% 19.3% 8,700 9,400 (1,900) 7,400 0 0 $2.40 Total 116 14,578,600 17.9% 0.1% 18.0% 18.1% 273,300 395,400 112,200 520,700 115,600 152,500 $2.75

MID-WILSHIRE A 16 3,691,900 10.1% 0.0% 10.1% 10.8% 86,200 102,700 29,300 32,500 0 0 $2.33 B 39 5,811,800 24.8% 0.0% 24.8% 24.1% 55,600 90,500 (41,100) (25,900) 0 0 $2.24 C 9 693,400 29.3% 0.0% 29.3% 27.9% 1,200 1,900 (9,900) (9,000) 0 0 $2.27 Subtotal 64 10,197,100 19.7% 0.0% 19.7% 19.5% 143,000 195,100 (21,700) (2,400) 0 0 $2.26

HOLLYWOOD A 19 2,759,500 15.0% 0.2% 15.2% 16.7% 109,700 159,300 138,200 508,800 115,600 92,000 $4.39 B 20 1,097,400 13.8% 0.2% 14.0% 12.9% 13,100 33,500 (12,300) (2,100) 0 60,500 $4.75 C 13 524,600 6.4% 0.0% 6.4% 7.9% 7,500 7,500 8,000 16,400 0 0 $3.18 Subtotal 52 4,381,500 13.6% 0.2% 13.8% 14.6% 130,300 200,300 133,900 523,100 115,600 152,500 $4.41

Note: revisions to the inventory base were made effective Q2 2017, historical data reported here reflect these revisions and may not match data reported inrevious p quarters.

5 Central Los Angeles | OFFICE Q2 2017

Definitions of key terms in this report Space Added (Net): Total square feet added during the quarter via construction Total Rentable Square Feet: completions, including renovated space returned to market, Office space in buildings with 25,000 square feet or more less total square feet taken off-market due to demolitions or of speculative office space. Includes competitive space in conversions. Class A, B and C single-tenant and multi-tenant buildings. Under Construction: Excludes non-competitive owner-occupied buildings, Includes buildings that are in some phase of construction, buildings that include 30 percent or greater of medical or beginning with foundation work and ending with the retail space, and space that is under-construction, under- issuance of a Certificate of Occupancy renovation or off-market.

Class A Space: Technical Note: Space that an image-conscious company would lease for its Colliers International is continuously refining its database. The data shown in headquarters. Typically, this space has a very high level of the historical tables and graphics in this report have been adjusted to take into finish and an excellent location, and commands the highest account these changes in the database. rents in the market. This report has been prepared by Colliers International for general information Class B Space: only. Information contained herein has been obtained from sources deemed Highly functional, attractive space, but less prestigious than reliable and no representation is made as to the accuracy thereof. Colliers Class A Space, and commanding lower rental rates. International does not guarantee, warrant or represent that the information Class C Space: contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International Functional, competitive space, but with a lower level of finish excludes unequivocally all inferred or implied terms, conditions and warranties and/or a less desirable location than with Class B Space, and arising out of this document and excludes all liability for loss and damages commanding lower rental rates. arising there from. This report and other research materials may be found on Low-Rise: our website at www.colliers.com/greaterlosangeles. Buildings with a total of 4 floors or less. Mid-Rise: Buildings with a total of 5 to 13 floors. 396 offices in68 countries High-Rise: Buildings with 14 or more floors. on 6 continents Direct Vacancy: United States: 153 > $2.6 billion in annual revenue Space in existing buildings that is vacant and immediately Canada: 29 > 2.0 billion square feet under available during the quarter for direct lease, plus space that management is vacant but not available for direct lease or sublease (for Latin America: 24 example, that is being held for a future commitment). Asia Pacific: 79 > Over 15,000 professionals Total Vacancy: EMEA: 111 Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease. UNITED STATES: Net Absorption: Downtown LA Office TEL: +1 213 627 1214 Net change in occupied square feet from one period to the License No. 01908231 next (includes the impact of change in vacant space available 865 S. Figueroa St., Ste. 3500 FAX: +1 213 327 3200 for sublease). Los Angeles, CA 90017 Leasing Activity: Square feet leased from all known transactions completed during the quarter. Excludes lease renewals. Weighted Average Asking Rental Rates: HANS MUMPER CAITLIN MATTESON Weighted by the total square feet available for direct lease. Executive Managing Director Research Director Data is based on Full Service Gross rents, and includes all Greater Los Angeles Research Services costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. CHRIS WONG Reported on a monthly, per SF basis. Regional Research Analyst Research Services