CBD OFFICE SUBMARKET

SECOND QUARTER 2013

Vacancy Trends Market Intelligence

36.0% The Dallas CBD office submarket posted 139,856 square feet of positive net absorption in the second quarter. Most of the positive net absorption occurred in the Class A sector, 31.0% which registered 83,981 square feet of occupancy gains, including HKS’ move to 142,228 square feet at and Jacobs Engineering Group’s move to 81,333 square feet at Harwood Center. The Class B sector followed with 57,389 square feet of positive 26.0% net absorption since the prior quarter.

21.0% The overall vacancy rate in the Dallas CBD submarket dipped 30 basis points from the 4Q 10 2Q 11 4Q 11 2Q 12 4Q 12 2Q 13 prior quarter to 26.5 percent. Tenant move ins to Class A buildings pushed the sector’s vacancy rate down 40 basis points to 26 percent. The vacancy rate in Class B buildings fell Class A Class B 70 basis points since the prior quarter to 31.9 percent, the sector’s lowest vacancy rate since 2009.

Average asking rental rates increased in the last year by $0.68 to $20.33 per square foot, a 3.5 percent annual growth rate. Class A asking rental rates grew $0.63 during the last year Average Asking Rental Rates to $21.35 per square foot, a 3.0 percent growth rate. However, Class B rents improved $0.75 since the prior year to $16.88 per square foot, up 4.7 percent. $22.00 No new office buildings have been delivered in the Dallas CBD submarket since 2007. However, the construction landscape will soon change when Hall Financial Group breaks $19.00 ground in September on Hall Arts Building, a 450,000-square-foot office tower at 2323 Ross Avenue that is 33.5 percent preleased to KPMG LLP (145,000 SF) and UMB Bank $16.00 (5,887 SF). Additional proposed office projects in the Arts District include Two Arts Plaza, a 283,513-square-foot project to be developed by Billingsley Co., and The Spire, a master-

$13.00 planned development by Spire Realty Group, LP that will include 1.25 million square feet of 4Q 10 2Q 11 4Q 11 2Q 12 4Q 12 2Q 13 office space upon build out.

Class A Class B North has experienced more than three years of strong job growth and, as of June 2013, the metro recovered over 1.8 times the jobs lost during the recession and reached an all-time high level of total employment exceeding 3.1 million jobs. According to the Bureau of Labor Statistics, the unemployment rate in the Dallas-Fort Worth-Arlington MSA was 6.7 percent as of June 2013.

Completions vs. Absorption Employment Growth Dallas-Fort Worth-Arlington 200,000 7.0%

3.5% 0 0%

-3.5%

-200,000 Year-Over-Year Change -7.0%

-400,000 Jan-11 Jan-12 Jan-13 Jan-10 Jan-07 Jan-03 Jan-05 Jan-06 Jan-09 Jan-08 4Q 10 2Q 11 4Q 11 2Q 12 4Q 12 2Q 13 Jan-04 Office-Using Total Non-Farm

Completions Absorption Source: Bureau of Labor Statistics, Younger Partners

Select Leasing Transactions Building Address Tenant Size Lease Type Employment Growth One Dallas Center 350 N Saint Paul St HKS 142,228Dallas-Fort Worth-ArlingtonNew 7.0% Harwood Center 1999 Bryan St Jacobs Engineering Group Inc. 81,333 New Continental Park 160 Continental Ave Pegasus Link Constructors,3.5% LLC 32,473 New Bank of America Plaza 901 Main St Invitation Homes 28,208 New 0% Dorbet Bldg 2201 Main St Law Offices of John R Salazar PC 15,000 New -3.5% Year-Over-Year Change

Younger Partners -7.0% 12700 Park Central Drive, Suite 820 - Dallas, TX 75251 Jan-11 Jan-12 Jan-13 Jan-10 Jan-07 Jan-03 Jan-05 Jan-06 Jan-09 Jan-08 Phone: 214-294-4400 Jan-04 Office-Using Total Non-Farm Dallas-Fort Worth Office Inventory: Based on the CoStar office building database. Inventory includes office buildings containing at least 15,000 rentable square feet; single tenant, multi tenant and owner occupied; class A, B and C; existing, under construction or under renovation; excludes medical office buildings.Source: Bureau of Labor Statistics, Younger Partners