First Quarter 2011 • • Office Report SAN FRANCISCO OFFICE Lic #00832933 One Bush Street, Suite 400 • San Francisco, CA 94104 Tel: 415.445.8888 • Fax: 415.445.8886 www.ccareynkf.com

SAN FRANCISCO • OFFICE • FIRST QUARTER

TABLE OF CONTENTS

Coverage Map 1

Office Update and Q1 2011 in Review 2

Office Market Highlights - Leasing 3

Office Market Highlights - Sales 5

San Francisco Class “A” Focus 6

North Financial District Market Summary 8

South Financial District Market Summary 10

North Waterfront / Jackson Square Market Summary 12

Van Ness / Civic Center Market Summary 13

Union Square Market Summary 14

SoMa Market Summary 15

Agent Roster 19

SAN FRANCISCO • OFFICE • FIRST QUARTER

COVERAGE MAP

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SAN FRANCISCO • OFFICE • FIRST QUARTER

OFFICE UPDATE AND Q1 2011 IN REVIEW

Driven by the organic expansion of re-emerge; with Sedgwick, Detert, We expect to see continued technology based industries, San Moran, & Arnold leasing nearly improvement in office market Francisco’s economy appears to be 90,000 square feet at 333 Bush fundamentals moving forward, aided in recovery mode. In a matter of 12 Street and Mellon Bank committing by future employment gains and a months the local unemployment rate to 32,000 square feet atSAN 100 FRANCISCOPine bullish OFICEtechnology •FIRST sector. QUARTER Re - has dropped from 10.1 percent to Street. emerging professional services firms 9.5% (according to January figures). benefiting from the overall increase Furthermore, corporate confidence Due to this increase in leasing in business activity will be in a better has led to increased spending on activity many landlords have begun position to review future occupancy information technology, which has in- to pull back on concession packages needs. Look for landlords to turn positively affected the majority of and increase average asking rates continue to push asking rents and local business sectors. The financial citywide which currently average limit lease concessions as space service and professional service $38.21/rsf (all building classes). This options for tenants diminish. sectors have also begun to thaw, trend is especially true in the SOMA filling holes leftover from the submarket, where a handful of economic downturn. creative, brick and timber buildings are commanding starting rents in the VACANCY ▼ The San Francisco office market as mid-$40’s fully serviced. Strong Q1'11 13.54% a whole has benefited from local demand from new and expanding economic stabilization, recording tech tenants, coupled with Q4'10 14.25% 327,701 square feet of positive net diminishing “creative” inventory has absorption through Q1-‘11. The placed a premium on creative space, CLASS A ASKING RENTS ▲ overall office vacancy rate fell from further bifurcating the market Q1'11 $38.21 14.2% to 13.6% quarter-over- between creative and traditional quarter. This increase in occupancy office use. Q4'10 $35.69 has in turn begun to push CBD Class A asking rents up to $38.21/rsf fully In an attempt to revitalize the NET ABSORPTION ▲ serviced (compared to $37.49/rsf Central-Market area, the city of San fully serviced in Q4-’10). Francisco recently approved a Mid Q1'11 ±327,701 Market Tax Break designed to TOP LEASES Leasing activity in the first quarter alleviate increases to payroll tax for was once again led by technology the first six years for companies Sephora companies. Salesforce.com locating within a specified zone in expanded by 55,977 square feet at proximity to the 960-1455 blocks of 525 Market Street ±110,588 , Idle Games Market Street. Twitter is reportedly in Keker & Van Nest LLP leased 33,252 square feet at 875 lease negotiations for over 210,000 Howard Street, InqMobile leased square feet at Shorenstein’s 1355 633 Battery Street ±90,000 10,925 square feet at 139 Townsend Market Street, located within the tax Sedgwick, Detert, Moran & Street and Aptimus renewed and break zone. This could turn the Arnold LLP expanded its sublease from AON at Central-Market area into the next ±89,076

199 Fremont Street for a total of submarket to welcome the 51,429 square feet. As mentioned, expanding technology sector. leasing velocity from San Francisco

financial and legal firms has begun to

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SAN FRANCISCO • OFFICE • FIRST QUARTER

OFFICE MARKET HIGHLIGHTS – LEASING

Average Asking Rate ¹ 2011 2011 Submarket Net Rentable Area * Vacancy Total Vacancy ³ Total Availability Class A Class B Class C Q1 Net Absorption ² Y-T-D North Financial District 28,530,271 4,027,374 14.12% 18.28%SAN FRANCISCO$39.23 $31.04 OFICE$24.85 •FIRST4,394 QUARTER4,394 South Financial District 24,705,411 2,512,589 10.17% 13.17% $38.46 $32.40 $25.76 155,136 155,136 North Waterfront/Jackson Sq. 6,559,001 735,109 11.21% 13.43% $33.00 $29.75 $24.25 (6,839) (6,839) Van Ness/Civic Center 6,437,028 1,195,522 18.57% 18.68% $27.95 $24.50 $23.65 63,739 63,739 Union Square 5,628,225 484,786 8.61% 13.42% $32.00 $28.65 $25.00 39,692 39,692 SoMa** 10,432,871 2,190,407 21.00% 21.00% $40.21 $35.70 $27.45 71,579 71,579 San Francisco Office Market 82,292,807 11,145,787 13.54% 16.40% $38.21 $31.43 $26.06 327,701 327,701 ** SoMa Inventory includes the following markets: South of the Market; Yerba Buena; Multimedia Gulch; Mission Bay; South Beach; Inner Mission & Potrero Hill

Class A Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates ¹ 2007/Q1 46,668,376 3,422,734 441,075 8.3% 91,954 $42.02 Q2 46,663,509 3,286,066 487,191 8.1% 92,522 $43.32 Q3 46,663,509 3,083,395 355,421 7.4% 240,597 $46.82 Q4 46,663,509 2,976,387 352,776 7.1% 154,149 $46.82 2008/Q1 47,322,203 2,754,242 365,733 6.6% 209,188 $46.91 Q2 47,595,475 3,243,799 393,792 7.6% (517,616) $46.94 Q3 47,595,475 3,448,110 744,607 8.8% (555,126) $44.07 Q4 48,151,794 4,587,686 841,335 11.3% (1,236,304) $41.26 2009/Q1 48,219,559 4,968,642 1,122,238 12.6% (661,859) $37.02 Q2 48,219,559 5,009,042 1,273,766 13.0% (190,864) $35.49 Q3 48,219,559 4,995,774 1,178,876 12.8% 108,158 $34.64 Q4 48,337,119 5,439,820 962,606 13.3% (227,776) $34.64 2010/Q1 48,337,137 5,809,095 812,902 13.7% (87,475) $34.78 Q2 48,337,137 5,841,640 876,466 13.9% (96,109) $35.02 Q3 48,337,137 5,908,685 836,353 14.0% (26,932) $35.64 Q4 48,363,449 6,106,107 588,634 13.8% 50,297 $36.69 2011/Q1 48,362,494 5,900,447 514,103 13.3% 206,666 $38.21

CLASS “A” HISTORICAL VACANCY VS. LEASE RATES

1 Rates are quoted as Full service ³ Vacancy is based on vacant square footage 2 Absorption is based on vacant square footage * Includes all classes of office space

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SAN FRANCISCO • OFFICE • FIRST QUARTER

OFFICE MARKET HIGHLIGHTS – LEASING (CONT.)

525 Market Street BY THE NUMBERS

SephoraSAN FRANCISCO renewed OFICEand exp •FIRSTanded QUARTER at 525 Market Street for ±110,588 square feet making it the largest lease transaction of the first quarter.

Significant Leases (By Square Footage) Largest Leases Tenant Lessor (Sublessor) Address Sq. Ft. Sephora ( E ) ( R ) NY State Teachers Retirement System 525 Market Street 110,588 Keker & Van Nest, LLP ( R ) Brannan Street Investors 633 Battery Stret 90,000 Sedgwick, Detert, Moran & Arnold LLP Brookfield Properties 333 Bush Street 89,076 Goodby, Silverstein & Partners ( R ) Prime Holdings Inc. 720 California Street 81,065 Williams Sonoma Smith Lucille H Trust 100 North Point Street 60,000 Wells Fargo Insurance Services Shorenstein Company LLC 57,081 Salesforce.com ( C ) ( E ) Sumitomo Corporation of America 123 Mission Street 55,977 Catholic Healthcare West ( R ) McCarthy Cook & Company 185 Berry Street 55,000 Aptimus ( E ) ( S ) ( R ) AON 51,429 CA Department of General Services ( R ) Manulife Financial 575 Market Street 36,324 Idle Games Hudson Pacific Properties 875 Howard Street 33,252 WSP Flack + Kurtz ( C ) ( R ) Ashforth Pacific/GE Pension 405 Howard Street 33,155 Largest Pending Leases Tenant Lessor (Sublessor) Address Sq. Ft. Twitter Shorenstein Company LLC 1355 Market Street 210,000 Hellman Freedman, Farallon Capital, Pisces, Offit Morgan Stanley 175,000 Capital ( R ) Farella, Braun + Martel, LLP ( R ) Shorenstein Company LLC 235 Montgomery Street 122,000 Zynga ( E ) TMG Partners 650 Townsend Street 80,000 Moss Adams Hines 101 2nd Street 30,000 Q1 2011 Top Contiguous Spaces (vacant/ available in the next 12 months) Address Lessor (Sublessor) Sq. Ft. National Electric Benefits Foundation 597,443 1355 Market Street Shorenstein Company LLC 518,232 888 Brannan Street Wells Fargo 400,254 680 Folsom Street TMG/ Rockwood Capital 400,000 370 Third Street Lincoln/Lane Partners 367,027 500 Terry Francois Blvd. Sobrato Development 278,512

50 Fremont Street TIAA-CREF 257,696

( S ) = Sublease ( R ) = Renewal ( E ) = Expansion ( C ) = Cornish & Carey Commercial Newmark Knight Frank Involvement 4

SAN FRANCISCO • OFFICE • FIRST QUARTER

OFFICE MARKET HIGHLIGHTS- SALES (CONT.)

BY THE NUMBERS 1355 Market Street

SAN FRANCISCO OFICE •FIRST QUARTER Shorenstein Company LLC purchased 1355 Market Street & 875 Stevenson Street (±1,105,000 square feet total) from the ADCO Group, the largest purchase of the first quarter.

Significant Sale Statistics (By Square Footage) Largest Buildings Sales (By Square Footage) Building Seller Buyer Sq. Ft. 1355 Market Street & 875 Stevenson Street ADCO Group Shorenstein Company LLC 1,105,000 Waterfront Plaza (1700-1800 Montgomery Street) Lincoln Property Co LaSalle Investment Management 297,260 500 Terry Francois Blvd. Lionstone Sobrato Development 278,512 550 Kearny Street * Lender Highridge Partners 196,630 530 Bush Street STG Group HCV Pacific Partners 104,000 250 Brannan Street Broe Cos Kilroy Realty 90,348 200 California Street ( C ) Trophy Properties LLC Manchester Capital Management LLC 23,588 Largest Buildings for Sale (Over 50,000 Square Feet) Building Seller Buyer Sq. Ft. 409 & 499 Illinois Street Shorenstein Company LLC N/A 453,256 888 Brannan Street (Pending) Wells Fargo SKS Investments (Rumored) 400,254 301 Howard Street* Lender Embarcadero Capital Partners 306,603 1155 Market Street (Pending) Metcalf Family Trust Unidentified 140,781 350 Rhode Island (Pending) Paladin Realty w/ CalSTRS Tishman Speyer (Rumored) 135,000 250 Montgomery Street (Pending) Argonaut Private Equity Unidentified 116,078 600 Townsend (East) Street LBA Realty N/A 82,792 543 Howard Street Gordon Development N/A 75,000 10 United Nations Plaza Hill Companies LLC N/A 72,031 Metrovation & Terranomics 670 5th Street ( C ) N/A 72,000 Development, LLP 642 Harrison Street 642 Harrison/Hawthorne LLC N/A 59,169

Projects Planned (By Square Footage) Building Owner Location Status Sq. Ft. Tishman Speyer SFD Planning 700,000 350 Bush Street & 500 Pine Street Lincoln Properties NFD Entitled/ On Hold 400,000 680 Folsom Street TMG/ Rockwood Capital SFD Planning 400,000 Beacon Capital Partners SFD Entitled 307,000 ( C ) GLL Real Estate Partners SFD Entitled / Marketing Space 300,000 Piers 27-31 Shorenstein Company LLC North Waterfront Planning 300,000 Foundry Square III Wilson Meany Sullivan SFD Entitled 278,710 * = Note Sale ( C ) = Cornish & Carey Commercial Newmark Knight Frank Involvement 888 Brannan Street’s RBA is based on entitlements acquired in 2010 to rezone the property.

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SAN FRANCISCO • OFFICE • FIRST QUARTER

SAN FRANCISCO CLASS “A” FOCUS – TIER 1, 2 & 3

SAN FRANCISCO OFICE •FIRST QUARTER

Energy Star LEED – Certified LEED - Pending

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SAN FRANCISCO • OFFICE • FIRST QUARTER

SAN FRANCISCO CLASS “A” FOCUS – TIER 1, 2 & 3

SAN FRANCISCO OFICE •FIRST QUARTER

Energy Star LEED – Certified LEED - Pending

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SAN FRANCISCO • OFFICE • FIRST QUARTER

NORTH FINANCIAL DISTRICT MARKET SUMMARY

1st Quarter, 2011 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '10 Rental Rates¹ A 21,484,328 14.0% 12.6% 1.5% 3,018,341 2,698,792SAN FRANCISCO319,549 64,319OFICE •FIRST111,598 QUARTER$39.23 B 6,272,073 15.3% 14.9% 0.4% 960,940 937,351 23,589 (62,991) 28,672 $31.04 C 773,870 6.2% 5.7% 0.5% 48,093 44,093 4,000 3,066 16,289 $24.85 28,530,271 14.12% 12.90% 1.22% 4,027,374 3,680,236 347,138 4,394 156,559

Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 2007/Q1 20,968,597 1,703,435 202,698 9.0% (3,396) $37.60 Q2 20,968,597 1,654,847 268,598 9.1% (121,277) $43.24 Q3 20,968,597 1,381,444 181,956 9.2% (17,312) $45.15 Q4 20,968,597 1,252,588 177,665 7.5% 83,823 $48.30 2008/Q1 21,482,945 1,294,006 131,722 6.6% 55,817 $48.30 Q2 21,482,945 1,430,829 153,364 7.4% (134,611) $48.30 Q3 21,482,945 1,525,829 477,404 9.3% (286,019) $45.30 Q4 21,482,945 2,075,292 563,406 12.3% (480,054) $42.20 2009/Q1 21,546,720 2,189,346 733,855 13.6% (254,346) $37.98 Q2 21,546,720 2,215,344 844,216 14.2% (136,359) $36.30 Q3 21,546,720 2,320,104 787,246 14.4% (47,790) $35.40 Q4 21,546,720 2,437,999 677,910 14.5% (8,559) $35.40 2010/Q1 21,484,328 2,460,520 594,145 14.2% 61,244 $35.68 Q2 21,484,328 2,496,782 592,519 14.4% (34,636) $35.89 Q3 21,484,328 2,623,061 571,197 14.9% (104,957) $36.01 Q4 21,484,328 2,701,790 380,870 14.3% 111,598 $37.45 2011/Q1 21,484,328 2,698,792 319,549 14.0% 64,319 $39.23

CLASS “A” HISTORICAL VACANCY VS. LEASE RATES

1 Rates are quoted as full service

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SAN FRANCISCO • OFFICE • FIRST QUARTER

NORTH FINANCIAL DISTRICT MARKET SUMMARY

BY THE NUMBERS

Sedgwick, Detert, Moran & Arnold LLP SAN FRANCISCO OFICE •FIRST QUARTER leased ±89,076 square feet deal at 333 Bush Street.

14.12% overall vacancy in Q1’11, compared to 14.11% in Q4’10.

±4,394 square feet of absorption in Q1’11, compared to ±156,559 square feet of positive absorption in Q4’10.

CLASS “A” HISTORICAL DIRECT VS. SUBLEASE AVAILABLE SPACE

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SAN FRANCISCO • OFFICE • FIRST QUARTER

SOUTH FINANCIAL DISTRICT MARKET SUMMARY

Quarter, 2011 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall SANDirect FRANCISCOSublet Current OFICE Quarter •FIRSTQ4 '10 QUARTERRental Rates¹ A 20,239,092 10.4% 9.4% 1.0% 2,097,330 1,902,776 194,554 173,634 531 $38.46 B 3,244,087 7.3% 7.2% 0.1% 237,683 234,404 3,279 (5,476) (12,596) $32.40 C 1,222,232 14.5% 14.2% 0.3% 177,576 173,544 4,032 (13,022) (9,041) $25.76 24,705,411 10.17% 9.35% 0.82% 2,512,589 2,310,724 201,865 155,136 (21,106)

Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 2007/Q1 19,128,276 991,788 160,721 6.0% 252,536 $37.10 Q2 19,128,276 998,881 142,012 6.0% 13,586 $42.67 Q3 19,128,276 1,157,348 92,021 6.5% 114,922 $43.40 Q4 19,128,276 1,294,077 83,682 7.2% (128,390) $47.60 2008/Q1 19,612,763 1,064,770 149,049 6.2% (32,660) $47.60 Q2 19,612,763 1,153,898 158,734 6.7% 37,426 $47.60 Q3 19,612,763 1,357,040 187,752 7.9% (73,457) $47.60 Q4 20,169,082 1,977,938 203,342 10.8% (410,583) $44.20 2009/Q1 20,181,060 2,089,038 284,973 11.8% (237,133) $41.50 Q2 20,181,060 2,086,629 297,292 11.8% (9,910) $37.35 Q3 20,181,060 1,990,618 248,285 11.1% 145,018 $36.20 Q4 20,181,060 1,966,796 191,732 10.7% 80,375 $35.30 2010/Q1 20,239,092 2,099,081 166,408 11.2% (106,961) $35.30 Q2 20,239,092 2,103,286 240,025 11.6% (77,822) $35.30 Q3 20,239,092 2,022,986 248,509 11.2% 71,816 $35.78 Q4 20,239,092 2,064,200 206,764 11.2% 531 $37.53 2011/Q1 20,239,092 1,902,776 194,554 10.4% 173,634 $38.46

CLASS “A” HISTORICAL VACANCY VS. LEASE RATES

1 Rates are quoted as full service 10

SAN FRANCISCO • OFFICE • FIRST QUARTER

SOUTH FINANCIAL DISTRICT MARKET SUMMARY

BY THE NUMBERS

SAN FRANCISCO OFICE •FIRST QUARTER Salesforce.com leased ±55,977 square feet of expansion space at 123 Mission Street.

10.17% overall vacancy in Q1’11, compared to 10.80% in Q4’10.

±155,136 square feet of positive absorption in Q1’11, compared to (±21,106) square feet of negative absorption in Q4’10.

CLASS “A” HISTORICAL DIRECT VS. SUBLEASE AVAILABLE SPACE

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SAN FRANCISCO • OFFICE • FIRST QUARTER

NORTH WATERFRONT/JACKSON SQUARE MARKET SUMMARY

BY THE NUMBERS

SAN FRANCISCO OFICE •FIRST QUARTER Keker & Van Nest, LLP renewed at 633 Battery Street for ±90,000 square feet.

11.21% overall vacancy in Q1’11, compared to 11.10% in Q4’10.

(±6,839) square feet of negative absorption in Q1’11, compared to (±68,994) square feet of negative absorption in Q4’10.

1st Quarter, 2011 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '10 Rental Rates¹ A 1,680,253 17.8% 17.8% 0.0% 298,875 298,875 0 755 (90,194) $33.00 B 3,458,047 10.6% 9.0% 1.6% 366,468 310,193 56,275 7,322 (8,896) $29.75 C 1,420,701 4.9% 4.1% 0.8% 69,766 57,866 11,900 (14,916) 30,096 $24.25 6,559,001 11.21% 10.17% 1.04% 735,109 666,934 68,175 (6,839) (68,994)

CLASS “A” HISTORICAL VACANCY VS. LEASE RATES

1 Rates are Quoted as Full Service 12

SAN FRANCISCO • OFFICE • FIRST QUARTER

VAN NESS/CIVIC CENTER MARKET SUMMARY

BY THE NUMBERS

SAN FRANCISCO OFICE •FIRST QUARTER 18.57% overall vacancy in Q1’11, compared to 19.56% in Q4’10.

±63,739 square feet of positive absorption in Q1’11, compared to ±5,045 square feet of positive absorption in Q4’10.

Quarter, 2011 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '10 Rental Rates¹ A 2,105,547 22.2% 22.2% 0.0% 467,146 467,146 0 5,688 2,586 $27.95 B 2,682,719 25.2% 22.3% 2.9% 675,675 597,559 78,116 44,642 (1,383) $24.50 C 1,648,762 3.2% 3.2% 0.0% 52,701 52,701 0 13,409 3,842 $23.65 6,437,028 18.57% 17.36% 1.21% 1,195,522 1,117,406 78,116 63,739 5,045

CLASS “A” HISTORICAL VACANCY VS. LEASE RATES

1 Rates are quoted as full service

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SAN FRANCISCO • OFFICE • FIRST QUARTER

UNION SQUARE MARKET SUMMARY

BY THE NUMBERS

SAN FRANCISCO OFICE •FIRST QUARTER Inkling leased ±10,343 square feet at 153 Kearny Street.

8.61% overall vacancy in Q1’11, compared to 10.62% in Q4’10.

±39,682 square feet of absorption in Q1’11, compared to ±62,069 square feet of absorption in Q4’10.

Quarter, 2011 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '10 Rental Rates¹ A 294,125 31.6% 31.6% 0.0% 92,824 92,824 0 0 9,664 $32.00 B 2,948,792 6.4% 6.3% 0.1% 188,387 185,031 3,356 18,222 13,770 $28.65 C 2,385,308 8.5% 8.5% 0.0% 203,575 203,050 525 21,470 38,635 $25.00 5,628,225 8.61% 8.54% 0.07% 484,786 480,905 3,881 39,692 62,069

CLASS “A” HISTORICAL VACANCY VS. LEASE RATES

1 Rates are quoted as full service

14 SECOND QUARTER

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SOMA OFFICE UPDATE Q1 2011 SAN FRANCISCO OFFICE • FIRST QUARTER

By: Riccardo Gale

Over the course of the past four quarters, asking rents there have pushed well into the the SOMA market has seen steadily $40’s per rentable square foot, fully serviced. VACANCY ▼ increasing rates and decreasing vacancy. This trend continued with increased vigor But it’s not just the coveted “brick and timber” Q1'11 21.00% this past quarter. Average asking rents space that is driving strong rates anymore. Well across all classes soared to $37.64/rsf up located, high-ceiling buildings such as 303 2nd Q4'10 23.62% from $30.90/rsf in the previous quarter. Street, which have some creative appeal and CLASS A ASKING RENTS ▲ This represents a noteworthy 22% increase can deliver larger blocks of space for current in average asking rents. Vacancy fell from occupancy or future expansion, are leasing with Q1'11 $37.64 23.62% to 21.00%, with tenants absorbing continued rent increases. Similarly, tenants who 71,579 rentable square feet of office space. have traditionally been located in the heart of Q4'10 $30.90 Although the market is much tighter for SOMA are showing more willingness to stretch TOP LEASES creative space, this the huge increase in their geographic parameters. Twitter’s average asking rents. commitment to the Central-Market is evidence of Catholic Healthcare West this trend. Primarily driving the demand is, of course, 185 Berry Street ±55,000 the technology sector. There is a great deal Not surprisingly, the pace of investment activity Idle Games of appetite for creative, collaborative space has also increased from previous quarters. in those submarkets which provide good Following the sale of 250 Brannan Street for 875 Howard Street ±33,252 access to Caltrain and/or BART, including ±$365/rsf to Kilroy Realty, Tishman Speyer is ABM Industries the ball park area, the Mission/Howard rumored to be in contract to purchase 350 street corridor, and the always attractive 2nd Rhode Island for ±$310/rsf, and Mission Bay’s 600 Harrison Street ±31,179 Street corridor. 500 Terry Francois has been sold by Lionstone to Sobrato Development at an undisclosed price. SUBLEASE SPACE AVAILABLE ▼ Driving the largest percentage of absorption In addition, LBA Realty recently brought 600 Q1'11 ±69,966 this quarter were early stage start-ups and Townsend (East) to the market. small users. In fact, only three transactions Q4'10 ±159,706 of over 20,000 rentable square feet were In conclusion, the first quarter of 2011 saw rapid completed, and of those only Idle Games is increases in rents, particularly for small creative a technology company. Demand for small, suites in prime locations. Many tenants are creative suites in the most coveted accordingly compelled to consider slightly more submarkets has so outstripped supply that traditional buildings and fringe locations.

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SAN FRANCISCO • OFFICE • FIRST QUARTER

SOMA MARKET SUMMARY

1st Quarter, 2011 Average Asking Submarket # of Buildings Total Sq. Ft. Vacant Sq.SAN Ft. FRANCISCOVacancy Rate OFICE •FIRSTAbsorption QUARTER Sq. Ft. Rent South Beach 17 2,102,980 183,472 8.72% $40.00 19,363 Multimedia Gulch 42 4,038,181 582,929 14.44% $28.25 39,248 Yerba Buena/South of Market 19 2,628,347 975,673 37.12% $24.05 (22,226) Potrero Hill / Inner Mission 14 1,099,626 169,821 15.44% $24.90 32,742 Mission Bay 2 563,737 278,512 49.40% $44.00 2,452 Totals: 94 10,432,871 2,190,407 21.00% $36.61 71,579

*Rates are based on a weighted average for available space only.

SOMA Top Buildings Q1 2011 Building ¹Rates Direct Sublease Total Avail. Building Stories Total Percent Avail. Sq. Ft. Total Direct Avg. Sq. Ft. Sq. Ft. Sq. Ft. 185 Berry Street 6 939,549 $40.00 208,089 11,189 219,278 23.3% 475 Brannan Street 4 255,000 $42.00 0 0 0 0.0% 444 DeHaro Street 2 152,000 $38.00 110,666 0 110,666 72.8% 303 2nd Street 10 700,945 $36.00 33,878 0 33,878 4.8% 501 2nd Street 7 207,809 $36.00 5,776 0 5,776 2.8% 625 2nd Street 4 134,447 $38.00 0 33,000 33,000 24.5% 123 Townsend Street 6 138,735 $42.00 0 0 0 0.0% 139 Townsend Street 5 57,782 $45.00 10,925 7,105 18,030 31.2% 410 Townsend Street 4 73,755 $35.00 0 0 0 0.0%

1 Rates are Quoted as Full Service

Top Contiguous Spaces Available (vacant/available space in the next 12 months) Address Sq. Ft. 680 Folsom Street ±400,000 370 Third Street ±367,027 500 Terry Francois ±278,512 888 Brannan Street ±260,000 499 Illinois - Bldg. 2 ±210,275

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SAN FRANCISCO • OFFICE • FIRST QUARTER

SOMA MARKET SUMMARY (CONT.)

Top Leases Q1 2011

Tenant Address Lessor Square Feet Catholic Healthcare West ( R ) 185 Berry Street McCarthySAN Cook FRANCISCO & Company OFICE±55,000 •FIRST QUARTER Idle Games 875 Howard Street Hudson Pacific Properties ±33.252 ABM Industries 600 Harrison Street Pell Development ±31,179 Airbnb.com ( S ) 99 Rhode Island Street Aliph ±20,000 BitTorrent ( C ) 303 2nd Street Kilroy ±17,522

Top Pending Leases Q1 2011 Tenant Address Lessor Square Feet Zynga ( E ) 650 Townsend Street TMG Partners ±80,000

Top Buildings for Sale Q1 2011 Building Seller Buyer Square Feet 409 & 499 Illinois Street Shorenstein Company LLC N/A ±453,256 888 Brannan Street (Pending) Wells Fargo SKS Investments (Rumored) ±400,254 350 Rhode Island Street (Pending) Paladin Realty w/ CalSTRS Tishman Speyer (Rumored) ±135,000 600 Townsend (East) Street LBA Realty N/A ±82,792 543 Howard Street Gordon Development N/A ±75,000 Metrovation & Terranomics 670 5th Street ( C ) N/A ±72,000 Development, LLP 642 Harrison Street 642 Harrison/Hawthorne LLC N/A ±59,169

( * ) = Note Sale ( S ) = Sublease ( R ) = Renewal ( E ) = Expansion ( C ) = Cornish & Carey Commercial Newmark Knight Frank Involvement

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SAN FRANCISCO • OFFICE • FIRST QUARTER

AGENT ROSTER

INVESTMENTS MARKETING/SALES ASST. OFFICE LEASING John Norton Roman Adler 415.445.5137 Russ Sherman Lauren Collette 415.274.4434 415.445.5104 415. 274.4436 [email protected] [email protected] [email protected] FRANCISCO [email protected] •FIRST QUARTER

Jonathan Allen Bart O’Connor Natelle Fitzgerald

415.445.5138 415.445.5102 CAPITAL GROUP 415.274.4415 [email protected] [email protected] [email protected]

Karl Baldauf Will Scovill Ben Bullock 415.445.5139 Kathryn Jackson 415.445.5117 415.445.5134 [email protected] 415.445.5161 [email protected] [email protected] [email protected] Bill Benton Nick Slonek Erik Doyle 415.445.5111 Madeline Kieselhorst 415.274.4434 415.445.5100 [email protected] 415.445.5114 [email protected] [email protected] [email protected] Sean Fulp Mike Brown Cassidy Zerrer 415.445.5123 Raquel Ledesma 415.274.4423 415.274.4432 [email protected] 415.445.5136 [email protected] [email protected] [email protected] Allison Gorelick John Cashin 415.445.5131 Melinda Miyagishima 415.445.5112 RETAIL LEASING [email protected] 415.445.5108 [email protected] [email protected] Tracy Chiao Mike Hegseth Donnette Clarens 415.445.5140 415.445.5113 Cynthia Morales 415.445.5120 [email protected] [email protected] 415.445.5149 [email protected] [email protected] Erika Elliott Kyle Ladewig Bryan Courson 415.445.5124 415.445.5103 Rachel Pagan 415.445.5155 [email protected] [email protected] 415.445.5121 [email protected] [email protected] Tom Neuburger Brad Zampa Nathan Crawford 415.445.5129 415.445.5115 OFFICE ADMIN. 415.274.4439 [email protected] [email protected] [email protected] Julie Taylor Ali Siddiqui Nicole Costello Kevin Delehanty 415.445.5128 415.445.5170 415.274.4436 415.445.5132 [email protected] [email protected] [email protected] [email protected]

Shannon Dolan BK Masterson 415.445.5105 415.445.8888 [email protected] [email protected] Riccardo Gale

415.445.5119 [email protected] Liz Hart 415.513.2170 [email protected] Jim Lucas 415.445.5106 [email protected]

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SAN FRANCISCO • OFFICE • FIRST QUARTER

SAN FRANCISCO OFICE •FIRST QUARTER

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