2018 Mid-Year | Office Research & Forecast Report EASTERN SOUTHERN NEW JERSEY DELAWARE

MARKET INDICATORS PA/NJ/DE PA/NJ/DE Regional Office Market | Overview Relative to prior period Q4 2017 Q4 2018* >> The regional office market vacancy increased to 12.1% at the end VACANCY of the second quarter of 2018. NET ABSORPTION

>> Year-to-date absorption was essentially flat. There was slightly CONSTRUCTION/RENOVATION positive absorption for the second quarter, but a slight occupancy loss for the year. RENTAL RATE *Projected Arrows compare current period to the previous period and >> Asking rents increased by 4.2% after leveling off at the end of forecast the next period. 2017. Class B rents increased by 3.0%, while the average Class A 3.0 20% rent dipped slightly. NEW SUPPLY, VACANCY AND ABSORPTION >> Office sales volume increased due to multiple trades in CBD and Liberty Property Trust’s continued disposition of 2.0 15% suburban assets. Occupancy gains in some suburban submarkets were offset by a loss in others, and CBD Philadelphia’s occupancy continues to dip. There 1.0 10% was an increase in sublease space in both the CBD and suburban markets. While densification and consolidation were major factors, some of the subleases resulted from relocations well in advance of 0.0 5% existing lease expirations, and from corporate mergers. 13 14 15 16 17 18 Class B rents increased as buildings were upgraded, and Class A Absorption Construction Vacancy Rate space tightened in many submarkets. The average Class A asking -1.0 0% rent decreased due to the absorption of upper-tier space, and from MSF an increase in sublease space at below-market rents. 20% MAJOR OFFICE MARKET VACANCY With 3.5 million square feet of new and full retrofit development set to be completed by the end of the fourth quarter, 2018 will have the highest level of construction deliveries in a decade. Many of these 15% projects, notably the Comcast Technology Center, will have a positive CBD Philadelphia impact on absorption. Additionally, leasing activity has increased following a sluggish first quarter, so a stronger second half of 2018 PA Suburbs is likely. Southern NJ 10% Wilmington / Additional build-to-suits and preleased projects were set to New Castle commence or are underway in Camden, Malvern and Allentown for 2019 completion. The SORA West project in Conshohocken, which Lehigh Valley

is proposed to house AmeriSourceBergen, may face a lengthy 5% development process. Suburban parks in Southern New Jersey and 13 14 15 16 17 18 Q2 the Lehigh Valley will continue to lose tenants to urban buildings with tax incentives. Regional Overview (continued) The larger leases during the first two quarters of 2018 were a mix CBD office investment sales have buoyed overall regional dollar of companies expanding and others reducing their footprints. Crown volume. With additional buildings under agreement, CBD investment Holdings and Cardone Industries are both making moves from larger volume should easily surpass 2017’s total. user-owned facilities to leased office buildings. As Liberty Property Trust sells most of its remaining suburban Turnkey tenant improvements packages are becoming rare as rising holdings, there will be few large portfolio sales. construction costs are forcing tenants to contribute to or trade free rent periods for improvements. Recent Transactions Q1 and Q2 2018 NOTABLE LEASES

PROPERTY ADDRESS LOCATION TENANT SIZE SF TYPE 3 Fayette Street King of Prussia/Wayne AmeriSourceBergen 427,333 New-BTS 740 Hamilton-5 City Center Urban Lehigh Valley ADP 221,200 New 1 River Place Downtown Wilmington AAA 160,000 Renewal 500 N. Gulph Road King of Prussia/Wayne CSL Behring 100,820 New 240 Radnor Chester Road Main Line/Radnor Main Line Health 100,462 Renewal Phila CBD Market West Department of Labor 98,150 New 1735 Market Street Phila CBD Market West Willis Towers Watson 95,500 New 1000 Voorhees Drive Southern New Jersey Kingsway Learning Center 73,044 New 3025 Chemical Road Plymouth Meeting/Blue Bell National Comprehensive Cancer Network 65,244 New 55 Haddonfield Road Southern New Jersey NJ Dept. of Children and Families 61,694 New 1818 Market Street Phila CBD Market West McCormick & Taylor 59,218 New 15 Kings Grant Bala Cynwyd Cardone Industries 56,641 New 770 Township Line Road Central/Lower Bucks County Crown Holdings 50,140 New

NOTABLE SALES TRANSACTIONS PROPERTY ADDRESS LOCATION BUYER SIZE SF SALES PRICE / SF TYPE 1600 Market Street Phila CBD Market West American Real Estate Partners Mgmt 825,968 $193.71 Investor Phila CBD Market West Nahla Capital-Goldman Sachs jv 665,649 $189.89 Investor Liberty Suburban Portfolio Multiple Equus Capital Partners 593,703 $154.96 Investor 1650 Arch Street Phila CBD Market West ASI Management 553,349 $141.86 Investor County Line Commerce Center Central/Lower Bucks County Corvest Balashine jv 427,421 $26.20 Investor Somerset NJ Portfolio Southern New Jersey Nessel Development 304,732 $101.40 Investor 901-907 Market Street Phila CBD Market East Thor Equities 214,024 $195.30 Investor 5 Crescent Drive Navy Yard Korea Investment Management Co. 207,779 $628.07 Investor 9, 15-25 Great Valley Parkway Malvern-Exton-West Cheter Exeter Property Group 158,900 $69.97 Investor 1800, 1810, 1820 Chapel Avenue Southern New Jersey The Center at Cherry Hill 144,069 $153.65 Investor 1760 Market Street Phila CBD Market West Chelsea & Village Associates 126,309 $260.00 Investor 1120, 1140, 1180 Welsh Road* Fort Washington/Route 309 Black Diamond Capital Management 122,812 $44.79 Investor West Chester Plaza Malvern-Exton-West Chester Maguire Hayden Real Estate Company 118,828 $105.19 Investor 9000-10000 Lincoln Drive East Southern New Jersey Veritas Real Estate Services LLC 112,072 $108.14 Investor 2 Executive Campus* Southern New Jersey 2 Executive Holdings LLC 102,591 $49.96 Investor 1220 N. Market Street* Downtown Wilmington Lynk-Market St, LLC 100,000 $22.10 Investor 2250 Hickory Road Plymouth Meeting/Blue Bell Spaulding & Slye Investments 83,055 $180.60 Investor 101 West Avenue* Horsham/Jenkintown Tri-Out Properties 82,735 $82.79 Investor 610, 620, 630, 670 Sentry Plymouth Meeting/Blue Bell Avir Realty 74,354 $84.59 Investor 1000 Voorhees Drive Southern New Jersey Needleman Management 73,044 $57.23 Investor 1709 Ben Franklin Parkway Phila CBD Market West Pearl Properties 68,000 $160.29 Investor * Lender sales

2 Research & Forecast Report | 2018 Mid-Year | Pennsylvania, New Jersey, Delaware | Colliers International Market Comparison Update

OFFICE MARKET

NET AVG. DIRECT SUBLET TOTAL VACANCY ABSORPTION COMPLETIONS UNDER ASKING SUBMARKET INVENTORY VACANT VACANT VACANT RATE ANNUAL YTD CONSTRUCTION RENT CBD Philadelphia A 31,152,445 3,117,488 487,551 3,605,039 11.6% (430,099) 0 2,165,415 $31.62 B 14,756,135 1,334,980 41,565 1,376,545 9.3% 77,236 0 0 $28.31 Total 45,908,580 4,452,468 529,116 4,981,584 10.9% (352,863) 0 2,165,415 $30.71 Pennsylvania Suburbs A 25,351,622 2,106,062 231,638 2,337,700 9.2% 8,817 40,000 240,000 $29.65 B 33,275,677 4,779,547 310,117 5,089,664 15.3% 232,104 0 0 $24.47 Total 58,627,299 6,885,609 541,755 7,427,364 12.7% 240,921 40,000 240,000 $26.10 Southern New Jersey A 7,432,416 595,151 134,217 729,368 9.8% 209,130 250,000 597,376 $23.64 B 9,622,013 1,270,541 12,855 1,283,396 13.3% (31,262) 0 0 $19.44 Total 17,054,429 1,865,692 147,072 2,012,764 11.8% 177,868 250,000 597,376 $20.96 Wilmington-New Castle, DE A 13,414,892 1,338,676 61,382 1,400,058 10.4% 75,356 63,000 701,198 $27.22 B 5,007,970 1,007,133 1,952 1,009,085 20.1% (100,844) 0 0 $22.17 Total 18,422,862 2,345,809 63,334 2,409,143 13.1% (25,488) 63,000 701,198 $25.10 Lehigh Valley, PA A 6,397,412 738,873 27,500 766,373 12.0% 37,254 269,832 0 $22.28 B 3,593,508 548,040 17,879 565,919 15.7% (92,040) 0 0 $17.27 Total 9,990,920 1,286,913 45,379 1,332,292 13.3% (54,786) 269,832 0 $20.15 MARKET TOTAL A 83,748,787 7,896,250 942,288 8,838,538 10.6% (99,542) 622,832 3,703,989 $28.94 B 66,255,303 8,940,241 384,368 9,324,609 14.1% 85,194 0 0 $23.64 Total 150,004,090 16,836,491 1,326,656 18,163,147 12.1% (14,348) 622,832 3,703,989 $26.22

SUBMARKET VACANCY RATES

Conshohocken 4.8% Malvern/Exton/West Chester 8.1% DEFINITIONS Bala Cynwyd 8.2% Absorption (Net): The net change in occupied space over a Delaware County 8.8% given period of time. University City 9.3% Vacancy Rate: A percentage of the total amount of physically Market West 10.0% vacant space divided by the total amount of existing inventory. Wilmington-Suburban 10.3% Burlington County 10.9% Vacant Space: Space that is not currently occupied by a Main Line/Radnor 11.1% tenant, regardless of any lease obligation on the space. King of Prussia/Wayne 4Q 2017 12.1% Sublease Space: Space that has been leased by a tenant Camden County 13.1% 2Q 2018 and is being offered for lease back to the market by Market East/Independence Mall 13.2% the tenant with the lease obligation. Lehigh Valley 13.3% Under Construction: Counted when steel is up, Ft. Washington 14.5% not at the commencement of site work. Wilmington-Downtown 16.3% Build-to-Suit: A term describing property that was developed Horsham/Jenkintown 17.6% specifically for a certain tenant to occupy. Can be either Plymouth Meeting/Blue Bell 18.6% leased or owned by the tenant. Central/Lower Bucks 19.7% 0% 10% 20% 30%

3 Research & Forecast Report | 2018 Mid-Year | Pennsylvania, New Jersey, Delaware | Colliers International Submarket Reviews Colliers Global Stats

CBD Philadelphia New Castle County, DE As large tenants reduced their footprints, CBD New Castle County’s vacancy Revenue: $2.7 billion US* occupancy continued to slide. The vacancy rate increased during the second quarter to increased from 10.1 to 10.9 percent. Occupancy is 13.1%. Downtown Wilmington Countries: 69 expected to improve in the third quarter when the continued to have an erosion of Professionals: 15,400 Comcast Technology Center opens. This will be partially occupancy. Vacancy increased from Square feet managed: 2 billion offset by the delivery of vacant space at One Franklin 14.4 to 16.3%. The suburban Class A Lease and sale transactions: 68,000 and 2400 Market Street. Comcast will also eventually market had a vacancy decrease, but the move out of leased space in buildings such as Two Class B vacancy ticked up year-to-date. Total transaction value: >$116 billion* Logan Square. *All statistics are for 2017, are in U.S. New construction and redevelopment dollars and include affiliates.​ Investor interest has remained strong, and there were activity in the suburban market has multiple buildings on the market. MRP is selling 325 increased. The 60,600-square-foot Chestnut and 400 Market Street. The western portion building on Centerville Road that Bank of of the Public Ledger Building recently settled. America partially preleased was completed. The office building at the Linden Suburban Pennsylvania Hill mixed-use development and the Tower UNITED STATES: The suburban market had a robust second quarter with at the STAR are scheduled to be completed Colliers International | Philadelphia over 240,000 square feet of absorption. The King of within the next two quarters. DelleDonne & Prussia/Wayne submarket had a full percentage-point Associates is renovating two of the former Philadelphia, PA (headquarters) drop in vacancy due to incoming tenants and the AstraZeneca buildings at 1800 Concord Pike TEL +1 215 925 4600 expansion of resident companies such as CSL Behring. for multi-tenancy, and Pettinaro is renovating Allentown, PA As the Gulph Road and Swedesford Road corridors in two buildings at Barley Mill Plaza, totaling TEL +1 610 770 3600 King of Prussia and Wayne continue to tighten, activity 50,000 square feet. Conshohocken, PA is beginning to spread to secondary locations such as Lehigh Valley, PA TEL +1 610 684 1850 Valley Forge Business Center. Main Line/Radnor, one of The Lehigh Valley’s vacancy rate increased the few submarkets with larger blocks of Class A space, Harrisburg, PA during first two quarters from 10.4 to 13.3%. has seen an uptick in activity, which should reverse the TEL +1 717 730 3752 Class A vacancy increased from 8.7 to 12.0%. occupancy loss that began in 2017. Malvern-Exton-West Class B vacancy increased from the end of Wilmington, DE Chester should also begin to benefit from the diminishing 2017, but decreased from the first quarter to TEL +1 302 425 4000 supply of Class A space in other submarkets. 15.7%. Mount Laurel, NJ Southern New Jersey Both substantially pre-leased urban projects, The TEL +1 856 234 9300 The vacancy rate decreased during the second quarter Gateway at Greenway and Six City Center were to 11.8% after increasing at the beginning of the year. completed, but the City Center completion resulted The completion of the new Subaru headquarters in in a large vacancy at the Plaza at 835 Hamilton as Camden boosted occupancy overall, but also resulted in Talen moved and contracted. ADP announced the vacancy of the company’s former locations in plans to move from Iron Run Corporate Center to Cherry Hill. The main building on Route 70, is on the anchor the next City Center building. Aetna will be FOUNDING GLOBAL PARTNER market for sale and will potentially be redeveloped as a moving its call center from Pond Road to office non-office location. space in a shopping center in Bethlehem that had Burlington County’s vacancy continues to hover just been vacated by Wells Fargo. WORLD GREEN BUILDING COUNCIL below 11.0% as tenants make lateral moves or renew. While the suburban market continues to experience Camden County’s vacancy has trended downward from tenant erosion, there are tenants expanding, and

14.0 at the end of 2017 to 13.1%. The vacancy of the d additional large requirements in the market, indicating ce us u in d g o r p former Subaru headquarters was partially offset by a decrease in vacancy during the second half of 2018. larger deals in Class B buildings in Cherry Hill and p r e e co w po Voorhees. wind

Colliers International Ten Penn Center 1801 Market Street, Suite 500 Philadelphia, Pennsylvania, 19103 Copyright © 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. +1 215 925 4600 While every reasonable effort has been made to ensure its accuracy, we cannot colliers.com/philadelphia guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material 4containedNorth in this report.American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International