MARKET AT A GLANCE DALLAS/FT. WORTH OFFICE MARKET REPORT THIRD QUARTER 2018

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

ECONOMIC OVERVIEW

The North Texas region is home to one of the nation’s fastest growing economies in the post-Great Recession era and should continue to experience solid growth and outpace the nation at large. Its economic diversity has encouraged organic expansion and corporate relocations into the area, fueling significant population growth and supporting the lowest unemployment rates since 2000. As a result, more than one-in- three jobs created in Texas since the end of the Great Recession have occurred in the Dallas-Fort Worth metroplex.

The Dallas-Fort Worth metropolitan statistical area has added a net 114,900 new jobs over the prior 12 months (ending August 2018), representing a payroll increase of 3.2%. Every industry sector experienced job growth over the past year. The industry sectors benefitting from the largest annual gains in jobs are the Professional & Business Services (31,800 jobs or 5.3% growth), the Leisure & Hospitality (16,300 TABLE OF CONTENTS jobs or 4.3% growth), and the Mining, Logging & Construction (15,800 jobs or 7.3% Economic Overview...... 2 growth) sectors. As a result, the Dallas-Fort Worth unemployment rate has declined to 3.6%, a 20 basis point decline year-over-year, and continues to outperform the Texas Office Market Assessment...... 3 and US unemployment rates of 3.9% and 3.7%, respectively.

Net Absorption & Occupancy...... 4 The DFW economy can expect to continue its expansion through the end of 2018 and into 2019. Unless an unpredicted disruption occurs in the national or global Rental Rates & Leasing Activity...... 5 economy, the North Texas region should continue to capitalize on an organic source of highly educated workforce talent, pro-business economic policies in Texas, and DFW’s Construction...... 6 comparative national ease of access with close proximity to a major port city. According to Moody’s Analytics, job growth is forecasted to average 81,200 net jobs annually Submarket Statistics & Methodology...... 7 Updated 6/26/2017 through 2020. The PMRG Team...... 8 Employment Trends EMPLOYMENT TRENDS 125 5%

75 3%

25 1%

Thousands -25 -1%

-75 -3% FOR INFORMATION: -125 -5% KURT CHERRY 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18F19F20F21F Executive Vice President 972.421.3322 Jobs Added Annual % Change [email protected] Updated 9/26/18Source: U.S. Bureau of Labor Statistics, Moody's Analytics

EMPLOYMENTEmployment GROWTH Growth BYby SECTORSector WADE BOWLIN 12-MONTHS HEALTH President CURRENT PRIOR ANNUAL (Improving Central Division READING READING CHANGE or Declining) 713.209.5753 Mining, Logging & Construction 232.2 216.4 7.3% Up [email protected] Manufacturing 279.5 272.5 2.6% Up Trade, Transportation & Utilities 786.7 774.6 1.6% Up Information 83.8 83.6 0.2% Up ARIEL GUERRERO Financial Activities 300.6 297.3 1.1% Up Senior Vice President, Research Professional & Business Services 627.3 595.5 5.3% Up 713.209.5704 Education & Health Services 457.1 443.1 3.2% Up [email protected] Leisure & Hospitality 397.3 381 4.3% Up Other Services 128.3 123.3 4.1% Up Government 423.2 413.8 2.3% Up

Source:Source: U.S. U.S. Bureau Bureau of of Labor Labor Statistics, Statistics; Employment Employment DataData asas of of August August 2018 All Employees, in Thousands PAGE 2 PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

OFFICE MARKET ASSESSMENT

The DFW office market completed the third quarter with nearly 1.2 million SF of direct net absorption, its 28th consecutive quarter of positive absorption, increasing the year- to-date figure to 2.5 million SF of occupancy gains. Large lease commencements in Class B product drove the quarterly absorption growth figures, bucking the recent trend of new construction and renovation product dictating and leading the market.

Class A properties accounted for a net 586K SF of quarterly absorption growth, improving the year-to-date total to 2.5 million SF of direct space absorbed. Despite the healthy absorption figure, Class A direct occupancy rates slipped by 10 basis points to 80.8% during the quarter and declined by 160 basis points in 2018 as speculative construction deliveries have outpaced leasing demand. The Class B sector, which last enjoyed positive absorption a year ago, absorbed a net 641K SF of direct space during the quarter but have experienced a net 208K SF of move-outs during 2018. Class B DFW RANKS 2ND IN JOB GROWTH: occupancy rates improved by 50 basis points to 82.5% during the quarter, but have Among the metropolitan markets with a workforce fallen by 60 basis points over the prior 12 months. over 1 million, the DFW Metroplex ranks second in annual employment gains, behind New York-Newark- New Jersey. In addition to the steady leasing gains in competitive office product, DFW has experienced an abundance of corporate-owned office development and office users HOME TO 22 FORTUNE 500 COMPANIES: opting to purchase their own facilities in lieu of signing lease commitments. The DFW ranks third among metropolitan statistical largest corporate-owned construction projects underway belong to American Airlines areas in the number of Fortune 500 headquarters. (1.7 million SF), Charles Schwab (500K SF) and The Trade Group (200K SF), with The metro’s top employers are concentrated in several more on deck. During the quarter, Abbott Laboratories purchased the recently telecommunications, transportation, aerospace/ redeveloped 1915 Hurd in Las Colinas, a building they once owned and occupied. defense, health care, high technology, financial services and retail.

FORECAST DFW ECONOMIC OUTLOOK: The North Texas region’s historically strong • With a number of large high-quality availabilities diminishing and record-high rental employment and population growth, diversified economy and low costs of doing business will lead rates, lease negotiations will remain in favor of landlords within the most desirable to above-average performance. The employment submarkets during the oncoming quarters. outlook for Dallas-Fort Worth remains strong with job • Building owners focusing upon significant capital improvement programs to growth forecasted to average 2.0% per year through enhance their buildings and amenities will continue to outperform undercapitalized 2020, according to Moody’s Analytics. assets. • Corporate relocations and expansions will continue to strengthen the office market fundamentals, as the metro area’s business-friendly environment, lower cost of doing business, and well-educated labor force attract more companies to the Metroplex.

Updated 10/10/18

Office Market Trends OFFICE MARKET TRENDS MARKET TREND INDICATORS

Current Change from Previous 12-month 8,000 88% Quarter Quarter Year Forecast

6,000 86% Direct Occupancy 81.8%

Trailing 12 mos. Direct 3,795,334 4,000 84% Net Absorption

2,000 82% Under Construction 4,921,453

0 80% Direct Asking Rents $25.21 in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18F19F20F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PAGE 3 MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

NET ABSORPTION & OCCUPANCY

• Quorum/Bent Tree experienced its first quarterly absorption gain in a year and best quarter since the mid-2000s with a net 344K SF of direct space absorbed. Occidental Petroleum’s relocation into their new 120K SF space at Fourteen555 was the largest single occupancy gain. Despite the strong quarter, Quorum/Bent Tree has seen occupancy rates decline by 140 basis points to 78.9% in 2018. • Lewisville/Denton led all DFW submarkets in quarterly absorption growth with a net 393K SF of direct space gains. Nationstar Mortgage moved into a combined 244K SF of Class B space at Lake Vista Three & Four, accounting for the bulk of the quarterly gains. Occupancy rates have improved by 470 basis points to 87.9% in 2018. • Las Colinas experienced another very active quarter with a net 197K SF of move- ins, increasing its year-to-date total to 393K SF of occupancy gains. 7-Eleven took down 115K SF at Browning Place I and Maximus leased another 102K SF at Royal More than seven years into the current real Tech 14, while Green Tree Servicing moved out of 118K SF of Class B space at Las estate cycle, the DFW office market fundamentals Colinas Commons. remain strong as organic job growth and corporate • Upper Tollway/West Plano pushed its streak to 11 consecutive quarters of net relocations continue to fuel the leasing market. Even absorption gains with a modest 42K SF of direct space absorbed. Even though though year-to-date direct net absorption numbers Altice USA left behind 262K SF at the Tennyson Campus, small-to-medium sized have slowed since hitting its peak in 2015, leasing lease commencements in both Class A & B product brought the absorption total activity and demand continue to show a healthy back into positive territory. Occupancy rates have declined by 120 basis points to performance. 86.4% during 2018. • Allen/McKinney posted 155K SF of direct absorption gains, improving its year-to- date total to 331K SF. NetScout Systems’ relocation from another submarket into KURT CHERRY their 145K SF built-to-suit at One Bethany accounted for the bulk of the gains. Executive Vice President, Dallas Regional Office Central Division Occupancy rates in Allen/McKinney have improved by 210 basis points to 84.4% Updated 10/4/18since year-end 2017. Updated 10/12/18 SUBMARKET OCCUPANCY RANKING Submarket Occupancy Ranking DIRECT NET ABSORPTION VS. COMPLETIONS Occ. Y-O-Y % Direct Net Absorption vs. Completions Rank Submarket Rate Change 2,500 1 South Ft Worth 92.7% 4.2% 2,000 2 Preston Center 88.9% -0.8% 3 Arlington / Mansfield 88.3% 0.4% 1,500 4 Uptown/Turtle Creek 87.9% -1.5% 5 Lewisville / Denton 87.9% -2.8% 1,000

6 Upper Tollway / West Plano 86.4% -1.7% Thousands of SF In 500 7 Central Expy 86.2% -1.6% 8 East / South Dallas 85.4% -3.1% 0 9 Frisco / The Colony 84.8% -5.1% Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18 10 Las Colinas 84.7% 0.6%Updated 10/4/18 11 Allen / McKinney 84.4% -0.2% Direct Net Absorption Completions 12 Ft Worth CBD 83.7% -3.5% Direct Occupancy Rates 13 West LBJ 83.1% -2.9% DIRECT OCCUPANCY RATES 14 Richardson 83.0% 2.0% 86% 15 Quorum / Bent Tree 78.9% -4.9% 16 East LBJ 77.9% 0.4% 84% 17 Dallas CBD 75.4% 1.0% 18 Mid Cities 75.0% 1.1% 82% 19 Stemmons 72.4% -1.7% 20 North / Northeast Ft Worth 70.4% -0.6% 80% 21 Plano 63.0% -17.6% 78% Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18

Class A Class B

PAGE 4 PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rental rates climbed by $0.22 during the quarter to $29.55 per SF and have improved by $0.73 or 2.5% over the prior 12 months. Class A asking rents have risen each of the past seven quarters to reach a historic high, and have improved by 31.9% since their cyclical low in 3Q11. • Weighted average Class B asking rents, also at record levels, remained constant during the quarter at $21.31 per SF and have appreciated by $0.57 or 2.7% over the past year. Class B asking rents have increased by 25.0% since hitting their low in 3Q11. • During the prior 12 months, rent growth occurred in all but four DFW submarkets, as leasing velocity remains strong. Rent growth will continue as large vacancies diminish and developers finish construction on new office product. • Although rental rates are at an all-time high, attractive lease opportunities still exist for tenants seeking space in submarkets with elevated vacancy rates, such as Dallas CBD, the Stemmons and LBJ Freeways, Mid Cities and North/Northeast Although DFW has always been a boom-or-bust Ft Worth. market, the sound fundamentals indicate we still • Landlords have been able to retain their negotiating power and push Class A rents have some runway left in this cycle. Historically, higher in the most desirable submarkets such as Uptown/Turtle Creek, Preston speculative development has been the proverbial Center, Las Colinas, Arlington/Mansfield and Central Expressway. emergency brake on growth, but recent spec buildings • The trailing-12 month volume of Class A leasing activity declined to approximately constructed in the premier submarkets have leased 11.3 million SF, yet still outpaces the 10-year average by 8.1%. On the other hand, up quickly. Class B annual leasing velocity of 7.9 million SF, currently trails its 10-year average by 8.0%. • Since tenants demand modern and efficient space in amenitzed submarkets, the KURT CHERRY newer and higher-quality buildings will continue to be the preferred destination. Executive Vice President, Dallas Regional Office Central Division Updated 10/4/18The flight-to-quality trend will pressure building owners with inefficient product, especially located in non-premier submarkets, to offer concessions or invest Updated 10/12/18 capital into their assets. SUBMARKET RENTAL RATE RANKING Rental Rates Submarket Rental Rate Ranking RENTAL RATES ($/SF/Yr. Full Service) Rental Y-O-Y % $32 ($/SF/Yr. Full Service) Rank Submarket Rate Change $30 1 Uptown/Turtle Creek $39.83 4.2% $28 2 Preston Center $37.58 3.6% $26 3 Frisco / The Colony $33.27 4.2% $24 4 Upper Tollway / West Plano $32.27 -1.3% $22 5 Central Expy $29.81 5.1% $20 6 Ft Worth CBD $29.12 9.3% $18 7 Plano $26.71 14.0% $16 8 Allen / McKinney $26.40 5.3% Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18 9 Dallas CBD $26.24 0.9% Updated 10/4/18 10 Quorum / Bent Tree $26.17 8.5% Class A Class B 11 Las Colinas $26.03 0.5% 12 South Ft Worth $24.29 -3.5% Direct Leasing Activity DIRECT LEASING ACTIVITY 13 East LBJ $23.66 1.0% RollingRolling 12-Months 12-Months 14,000 14 Mid Cities $23.36 1.2% 15 Richardson $22.96 -3.3% 12,000 16 Lewisville / Denton $22.16 -0.7% 10,000 17 North / Northeast Ft Worth $21.47 4.7% 8,000 18 East / South Dallas $21.33 14.2% 6,000 19 Arlington / Mansfield $20.10 4.0%

In Thousands of of SF In Thousands 4,000 20 West LBJ $19.90 0.8% 2,000 21 Stemmons $16.82 1.1% 0 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PAGE 5 MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

CONSTRUCTION

• The DFW office development pipeline has contracted by 26.8% to 4.9 million SF of office space under construction (excluding corporate-owned projects) over the prior 12 months, as developers appear apprehensive of moving forward on new construction without significant preleasing in place. Competitive properties currently under construction are 59.5% pre-leased, but are only 29.5% pre-leased when excluding single-tenant leased buildings. • The largest concentration of office construction is found in Las Colinas (1.6M SF), Uptown/Turtle Creek (884K SF), and Upper Tollway/West Plano (546K SF), which account for 62.0% of DFW’s office development pipeline. • Developers completed construction on approximately 1.4 million SF of competitive RECENT ANNOUNCEMENTS office space during the quarter, highlighted by Trammell Crow’s PwC Tower in Uptown/Turtle Creek, which added 494K SF of Class A office space. Other notable • Heady Investments recently broke ground on the deliveries include The Sound at Cypress Waters (250K SF), Fourteen555-North first building of Headquarters II, a two-building (240K SF) and NetScout At One Bethany (145K SF). project that will deliver 14-story office buildings • Developers began construction on only 280K SF of competitive office product totaling 450K SF in the Upper Tollway/West during the quarter. The largest project to break ground was Heady Investments’ Plano submarket beginning in early 2020. Headquarters II, a speculative 220K SF Class A building in Upper Tollway/West • WeWork has committed to 52K SF at Victory Plano, scheduled to deliver during the first quarter of 2020. Plaza West in the Uptown/Turtle Creek • In addition to the 4.9 million SF of competitive office construction currently submarket, which will be open for business by underway, another 2.9 million SF of corporate-owned office projects is expected to mid-year 2019. Their space will feature an open deliver before the end of 2019. The most notable projects include the American floor plan, private suites, communal working Airlines Corporate Campus (1.7 million SF) and Charles Schwab Corporate Campus Updated 10/12/18 space, as well as the typical variety of amenities (500K SF) both in Mid Cities, The Trade Group Headquarters (200K SF) in Las offered in their locations. Colinas, and Independent Bank Headquarters (165K SF) in Allen/McKinney. • Baylor Scott & White Health is in the planning phase of a new office development on Elm Street CONSTRUCTIONConstruction PIPELINE Pipeline in the Deep Ellum district. Plans call for a 600K SF admin building south of their Dallas campus, 8,000 which will allow BS&W to consolidate their five 7,000 North Texas offices by late 2020. • Trammell Crow has entered a partnership to 6,000 build a 260K SF office building in Irving to be 5,000 leased for 20 years by the General Services 4,000 Administration for a US Citizenship and 3,000 Immigration Services center. The build-to-suit In Thousands of of SF In Thousands will allow USCIS to consolidate their three DFW 2,000 locations beginning in early 2020. 1,000 • CyrusOne has announced plans to move their 0 global headquarters to Dallas’ Harwood District. Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Q3 18 CyrusOne signed a lease for 50K SF in the Class A Harwood No. 10 in Uptown, which is scheduled Under Construction Delivered to deliver later this year. • Cognizant Technology Solutions plans to hire 1,100 high-skilled employees over the next five SIGNIFICANT PROJECTS UNDER CONSTRUCTION years for its 50K SF center in Irving—part of their SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATION broader corporate-wide US hiring initiative to % PRE- TARGET add 25K US workers over the next five years. PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY • Core-Mark, plans to relocate their corporate American Airlines * 1,700,000 Mid Cities American Airlines 100% Crescent Real Estate 4Q 2019 headquarters to Westlake in 2019, as California Pioneer ** 1,125,000 Las Colinas Pioneer 100% KDC 3Q 2019 operations costs have become burdensome Charles Schwab * 500,000 Mid Cities Charles Schwab 100% Hillwood Properties 2Q 2019 for a plethora of businesses relocating from The Union 418,132 Uptown/Turtle Creek Weaver and Tidwell 70% RED Development, LLC 4Q 2018 the Golden State. Core-Mark will be the 23rd AmerisourceBergen ** 300,000 Upper Tollway/W Plano Amerisource Bergen 100% Billingsley Co. 1Q 2019 Fortune 500 based in the DFW metroplex. The Epic Deep Ellum 294,820 East Dallas N/A 0% KDC & Westdale 1Q 2019 • VanTrust Real Estate is preparing for ground- 3201 Olympus Blvd ** 250,000 Las Colinas Nokia Siemens 100% Billingsley Co. 1Q 2019 breaking on Offices Two at Frisco Station, a The Realm at Castle Hills 248,387 Lewisville N/A 31% Bright Realty LLC 3Q 2019 Harwood No. 10 231,098 Uptown/Turtle Creek CyrusOne 26% Harwood International 4Q 2018 210K SF speculative office building in the 242- Headquarters II 220,000 Upper Tollway/W Plano N/A 0% Heady Investments 1Q 2020 acre mixed use project, which is expected to Brinker International ** 216,400 Las Colinas Brinker International 100% Billingsley Company 2Q 2019 deliver to during the second half of 2019. * Corporate-owned ** Build-to-suit † Under Renovation Note: Corporate-owned office buildings excluded from competitive statistics

PAGE 6 PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

SUBMARKETUpdated 10/12/18 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,619,481 7,589,672 988,807 75.4% 135,197 572,467 - 233,025 $27.17 $20.72 Uptown / Turtle Creek 12,148,341 2,215,120 401,670 87.9% 253,952 411,859 494,300 883,992 $41.97 $32.76 Preston Center 4,409,093 549,691 67,641 88.9% 56,319 90,207 - 119,000 $39.66 $28.32 Central Expy 11,590,204 1,995,143 159,391 86.2% (99,080) (101,000) - 38,848 $32.04 $26.04 Quorum / Bent Tree 20,594,394 5,195,517 443,614 78.9% 344,452 (91,562) 240,000 0 $30.54 $20.47 Upper Tollway / West Plano 20,616,051 2,985,894 1,231,169 86.4% 41,898 399,915 - 546,400 $34.82 $26.56 West LBJ 4,343,420 903,606 101,206 83.1% (6,249) 65,751 - 0 $21.23 $19.00 East LBJ 16,391,552 4,166,681 401,959 77.9% 15,185 (53,834) - 0 $26.95 $20.10 Las Colinas 32,486,459 6,750,078 1,589,922 84.7% 197,256 392,634 364,500 1,621,400 $30.73 $21.64 Stemmons 11,091,789 3,174,256 132,734 72.4% (155,272) (213,732) - 0 $19.13 $15.47 Richardson 17,322,007 3,488,808 178,157 83.0% (68,303) 18,558 - 90,000 $25.98 $19.77 Allen / McKinney 3,712,431 610,089 58,604 84.4% 154,596 331,244 145,000 0 $30.30 $23.93 Plano 4,748,599 1,520,241 35,207 63.0% (181,413) (198,087) - 0 $29.25 $21.31 Frisco / The Colony 5,998,232 1,232,637 76,088 84.8% 103,199 198,838 90,000 260,000 $34.24 $27.28 East / South Dallas 7,356,179 1,151,467 13,943 85.4% 31,546 (14,020) - 360,710 $30.22 $20.80 Arlington / Mansfield 6,686,625 813,171 41,750 88.3% (53,145) 6,861 - 0 $22.51 $18.49 Mid Cities 10,249,982 2,781,401 96,690 75.0% 43,672 169,982 - 189,470 $27.26 $20.69 Ft. Worth CBD 8,591,139 1,478,088 22,694 83.7% (155,877) (48,753) - 0 $31.28 $20.45 North / Northeast Ft Worth 4,516,281 1,521,570 11,664 70.4% 51,279 (4,966) 32,000 260,000 $21.61 $21.54 Lewisville / Denton 6,099,128 1,111,884 109,678 87.9% 393,358 341,994 44,090 270,688 $27.48 $22.08 South Ft Worth 8,383,407 771,600 127,700 92.7% 85,928 216,351 - 47,920 $29.58 $23.14 Totals 244,954,794 52,006,614 6,290,288 81.8% 1,188,498 2,490,707 1,409,890 4,921,453 $29.55 $21.31

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 134,216,643 29,864,041 4,526,293 80.8% 586,318 2,546,071 1,219,300 4,504,622 $29.55 2.5% Class B 102,329,879 20,852,501 1,757,762 82.5% 641,222 (207,536) 190,590 416,831 $21.31 2.7% Class C 8,408,272 1,290,072 6,233 89.1% (39,042) 152,172 - - $18.10 9.2% Totals 244,954,794 52,006,614 6,290,288 81.8% 1,188,498 2,490,707 1,409,890 4,921,453 $25.95 2.9%

METHODOLOGY

TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICESPROPERTY | SERVICES DEVELOPMENT | DEVELOPMENT | INVESTMENT | INVESTMENT MARKET AT A GLANCE Q3 | 2018 DFW OFFICE MARKET

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Marketing Manager President Vice President Leasing Director [email protected] Central Division [email protected] [email protected] [email protected] [email protected]

Ariel Guerrero James Decman Doug Berry Senior Vice President, Research Manager Vice President, Director of Research [email protected] Creative Director [email protected] [email protected]

ABOUT PMRG Madison Marquette merged operations with PMRG in June 2018 to create a new leader in commercial real estate. The firm offers PMRG’s leasing, property management, investment management and development services, combined with Madison Marquette’s specialized development, investment and marketing expertise. The company provides leasing and management services to a diverse portfolio of 330 assets in 24 states and manages an investment portfolio valued at over $6 billion. The combined company is headquartered in Washington, DC with a major presence in Houston, TX. With 600 professionals in 12 regional markets, the merged firm is a member of the Capital Guidance group of companies. For additional information, visit www. pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT.WORTH OFFICE MARKET REPORT FIRST QUARTER 2018

PROPERTY SERVICES DEVELOPMENT INVESTMENT DALLAS/ Q1 FT.WORTH MAR KET AT A GLANCE 2018 OFFICE MARKET ECONOMIC OVERVIEW

The North Texas region kicked off 2018 at the same high pace witnessed since 2011 and is on track for its eighth consecutive year of job growth. A tight labor pool and the shrinking of the housing market may limit the annual capacity of payroll expansion, but there is currently no end in sight to the expansion. The Dallas-Fort Worth metropolitan statistical area added a net 96,000 new jobs during the prior 12 months (ending February), representing an annual employment payroll increase of 2.7%. Every industry sector experienced job growth over the prior year. The largest annual job creation occurred in the Leisure & Hospitality (19,000 jobs or 5.3% growth), the Professional & Business Services (13,700 jobs or 2.3% growth), and the Trade, Transportation & Utilities (13,500 jobs or 1.8% growth) industry sectors. As a result, the unemployment rate in the DFW metroplex decreased by 60 basis points to 3.7% year-over-year, outperforming the state and national rates of 4.0% and 4.1%, respectively. TABLE OF CONTENTS Economic Overview...... 2 Being centrally located nationally, North Texas benefits from geographical ease of access unlike most major metropolitan areas. Additionally, the highly educated Office Market Assessment...... 3 workforce talent and Texas’ pro-business tax policies combine to form one of the most dynamic and attractive business environments that encourages companies to Net Absorption & Occupancy...... 4 relocate and expand within the area. The North Texas economy has not displayed any signs of a recession and can anticipate job growth of 70,000 net annual jobs Rental Rates & Leasing Activity...... 5 through 2020 (per Moody’s Analytics and PMRG projections). Companies with expansion plans in the Metroplex include Toyota Motor Corporation, JP Morgan Construction...... 6 Chase, Liberty Mutual, Pioneer Natural Resources, Fannie Mae, Verizon Corporation, Submarket Statistics & Methodology...... 7 Charles Schwab, GEICO, among others. Updated 6/26/2017 The PMRG Team...... 8 Employment Trends EMPLOYMENT TRENDS

125 5%

75 3%

FOR INFORMATION: 25 1%

KURT CHERRY Thousands -25 -1% Executive Vice President -75 -3% 972.421.3322 -125 -5% [email protected] 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18F19F20F

Jobs Added Annual % Change

WADE BOWLIN Source: U.S. Bureau of Labor Statistics, Moody's Analytics President Updated 4/1/18 Central Division 713.209.5753 EMPLOYMENTEmployment GROWTH Growth byBY Sector SECTOR [email protected] 12-MONTHS HEALTH CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 215.8 208.1 3.7% Up Manufacturing 276.4 267.7 3.2% Up Senior Vice President, Research Trade, Transportation & Utilities 768.9 755.4 1.8% Up 713.209.5704 Information 83.5 83.4 0.1% Up [email protected] Financial Activities 297.0 288.3 3.0% Up Professional & Business Services 599.3 585.6 2.3% Up Education & Health Services 450.7 438.9 2.7% Up Leisure & Hospitality 380.4 361.4 5.3% Up Other Services 123.9 118.9 4.2% Up Government 443.2 435.4 1.8% Up 2 Source: U.S. Bureau of Labor Statistics, Employment Data as of November 2017

PAGE Source: U.S. Bureau of Labor Statistics; Employment Data as of February 2018 All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/ MAR KET AT A GLANCE FT.WORTH Q1 OFFICE MARKET 2018

OFFICE MARKET ASSESSMENT

The DFW office market completed the first quarter of 2018 by adding a net 973,554 SF of direct absorption, its 27th consecutive quarter of net gains. Companies expanding throughout the market largely dictated the absorption figures during the quarter. Corporate expansions and relocations in the market have become a common theme during the current economic cycle, and will continue to dictate market fundamentals for the near future.

During the quarter, Class A properties accounted for a net 1.3 million SF of direct absorption growth, increasing their trailing-12 month total to 3.4 million SF. Despite the large amount of move-ins, Class A properties saw their direct occupancy rate decline by 90 basis points during the prior 12 months to 81.4% as construction deliveries have outpaced leasing demand. During the current economic expansionary period beginning in 2011, Class A properties have accounted for 76.8% of all direct DFW METROPLEX RANKS 2ND IN JOB GROWTH: absorption gains. Meanwhile, the Class B sector experienced a net 446,643 SF of Among the metropolitan markets with a workforce direct occupancy losses during the first quarter, and 714,383 occupancy losses over over 1 million, the DFW Metroplex ranks second the prior 12 months. Class B occupancy rates have declined by 60 basis points in annual employment gains, trailing New York- Newark-New Jersey for the top spot. during the quarter and by 100 basis points over the past year to 81.8%, as tenants have been seeking higher quality space. HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical The absorption gains during the quarter were about 6.5% higher than the quarterly areas in the number of Fortune 500 headquarters. average witnessed since the beginning of 2011, but will likely be slightly below this The metro’s top employers are concentrated in range for the remainder of 2018. In addition to tenants moving into competitive telecommunications, transportation, aerospace/ office space during the quarter, an additional 1.1 million SF of absorption occurred defense, health care, high technology, financial as Liberty Mutual’s corporate-owned campus in Legacy completed construction. services and retail. Among the largest companies who have plans to move into corporate-owned space in 2018 and 2019 are American Airlines (1.8 million SF) and Charles Schwab (500K DFW ECONOMIC OUTLOOK: The North Texas region’s historically strong SF). employment and population growth, diversified economy and low costs of doing business will lead to above-average performance. The employment FORECAST outlook for Dallas-Fort Worth remains strong with job growth forecasted to average 1.9% per year • With a number of large high-quality availabilities diminishing from the market through 2020, according to Moody’s Analytics. and record-high rental rates, lease negotiations will remain in favor of landlords within the most desirable submarkets during the oncoming quarters. • Building owners that continue to focus upon significant capital improvement programs to enhance their buildings and amenities will continue to outperform undercapitalized assets. • Corporate relocations and expansions will continue to strengthen the office Updated1/2/18market fundamentals, as the metro area’s business-friendly environment, lower cost of doing business, and well-educated labor force attract more companies to the Metroplex. Office Market Trends OFFICE MARKET TRENDS MARKET TREND INDICATORS

8,000 88% Current Change from Previous 12-month Quarter Quarter Year Forecast 6,000 86% Direct Occupancy 81.8% 4,000 84% Trailing 12 mos. Direct 2,696,296 2,000 82% Net Absorption Under Construction 7,004,961 0 80% in Thousands of SF in Thousands -2,000 78% Direct Asking Rents $25.48

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18F19F

Direct Net Absorption Completions Direct Occupancy

3 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/ Q1 FT.WORTH MAR KET AT A GLANCE 2018 OFFICE MARKET NET ABSORPTION & OCCUPANCY

• Las Colinas led all DFW submarkets with a net 501,613 SF of direct space occupied, increasing its trailing 12-month absorption total to 1.1 million SF. Signet Jewelers taking occupancy in 176K SF in their newly delivered Class A space in Cypress Waters Office Park highlighted quarterly movement. Occupancy rates in Las Colinas have improved by 50 basis points to 85.3% over the prior 12 months. • Dallas CBD posted 255,759 SF of direct occupancy gains during the quarter, increasing its absorption total to 338K SF over the past year. The largest move- ins involved Goldman Sachs occupying 115K SF at the Trammell Crow Center while Baker McKenzie & Steward Health Care System began occupancy on a combined 120K SF at 1900 Pearl. Dallas CBD completed the first quarter at 74.7% occupancy. • Upper Tollway/West Plano continued its consistent performance with 251,005 SF of direct absorption gains during the quarter, and 1.2 million SF of gains during The current real estate cycle in DFW is an the past year. Children’s Health Specialty Center occupied 125K SF in their newly unprecedented run. The DFW office market still delivered building in Plano, while WeWork & Boeing Global Services moved into looks strong and healthy. It feels like the 7th a combined 68K SF of Class A space in Legacy West. The submarket’s occupancy inning stretch of a double-header – Play Ball! rate has dropped by 60 basis points to 85.5% as construction deliveries have outpaced leasing demand. KURT CHERRY • Quorum/Bent Tree experienced a net 241,224 SF of direct move-outs during the Executive Vice President, Dallas Regional Office quarter as Fannie Mae moved out of a combined 196K SF of Class A & B space Central Division and relocated into their new space in Granite Park. Over the prior 12 months, occupancy rates in Quorum/Bent Tree have fallen by 520 basis points to 79.1%. • Arlington/Mansfield recorded 75,787 SF of absorption gains during the quarter, improving its trailing 12-month absorption count to 465K SF of space. Albertson’s move into 46K SF of Class A space at Centerpoint IV highlighted quarterly movement. The submarket’s occupancy rates have improved by 460 basis points Updated 4/4/18 Updated 4/4/18 over the past year to 89.4% as leasing demand has outpaced new construction. SUBMARKET OCCUPANCY RANKING Submarket Occupancy Ranking DIRECT NET ABSORPTION VS. COMPLETIONS Occ. Y-O-Y % Direct Net Absorption vs. Completions Rank Submarket Rate Change 2,500 1 South Ft Worth 90.4% 1.4% 2 Arlington / Mansfield 89.4% 4.6% 2,000 3 Uptown/Turtle Creek 89.0% 0.6% 1,500 4 Preston Center 87.6% -2.1% 5 East / South Dallas 86.8% 4.7% 1,000

6 Ft Worth CBD 86.4% -0.2% Thousands of SF In 7 Central Expy 86.1% -1.7% 500 8 Upper Tollway / West Plano 85.5% -0.6% 0 9 Las Colinas 85.3% 0.5% Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 Updated 4/4/18 10 Allen / McKinney 84.4% 1.8% 11 Richardson 83.3% 1.1% Direct Net Absorption Completions 12 Frisco / The Colony 83.2% -4.3% Direct Occupancy Rates 13 Lewisville / Denton 82.1% -9.5% DIRECT OCCUPANCY RATES 14 West LBJ 81.9% -1.4% 86% 15 Quorum / Bent Tree 79.1% -5.2% 16 East LBJ 78.4% 2.6% 84% 17 Plano 75.0% -10.1% 18 Dallas CBD 74.7% 0.5% 82% 19 Stemmons 73.5% -0.4% 20 Mid Cities 73.3% -7.0% 80% 21 North / Northeast Ft Worth 64.8% -8.6%

78% Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/ MAR KET AT A GLANCE FT.WORTH Q1 OFFICE MARKET 2018 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rental rates improved by $0.09 per SF to $28.96 during the quarter and moved up $0.96 per SF (or 3.2%) during the prior 12 months. Already at record levels, Class A rents have surpassed their pre- recession levels by an astounding 17.6% logged at mid-2008. • Weighted average Class B asking rents, also at record levels, improved by $0.13 per SF during the quarter to $21.29 and have climbed by 3.6% over the prior year. • During the prior 12 months, rent growth occurred in all DFW submarkets, with the exception of South Fort Worth and Mid Cities, as vacancies continue dwindling and construction projects deliver to the competitive market. However, attractive lease opportunities exist in submarkets with elevated vacancy rates, such as the Stemmons and LBJ Freeways, Dallas CBD, Mid Cities, and North/ Northeast Fort Worth. Although DFW has always been a boom-or- • Property owners in the submarkets with the lowest vacancy rates have been bust market, the sound fundamentals indicate able to push Class A asking rents upwards, which include Preston Center, we still have some runway left in this cycle. Uptown/Turtle Creek and Arlington/Mansfield. The largest annual Class A rent Historically, speculative development has been increases occurred in Plano (18.3% or $4.11), Preston Center ($3.06 or 8.2%), the proverbial emergency brake on growth, Stemmons Freeway ($2.37 or 14.7%) and Las Colinas ($2.02 or 7.1%). but recent spec buildings constructed in the • The trailing-12 month volume of Class A leasing volume declined for the third premier submarkets have leased up quickly. consecutive quarter to nearly 10.8 million SF, trailing its five-year annual average by 10.4%. Similarly, Class B annual leasing velocity of about 7.3 million SF trails its five-year average by 18.7%. KURT CHERRY • A large portion of the tenant move-ins during the current expansion period Executive Vice President, Dallas Regional Office have taken place within newer and the higher-quality buildings. The flight-to- Central Division quality trend will continue with tenants favoring more modern and efficient Updated 4/4/18 Updated 4/4/18floorplates, especially as the wave of newly built and renovated buildings become available for occupancy. Submarket Rental Rate Ranking SUBMARKET RENTAL RATE RANKING Rental Y-O-Y % RENTALRental RATESRates ($/SF/Yr.($/SF/Yr. FullFull Service) Service) Rank Submarket Rate Change $30 1 Preston Center $38.57 8.5% $28 2 Uptown/Turtle Creek $38.36 1.3% $26 3 Frisco / The Colony $34.23 2.0% $24 4 Upper Tollway / West Plano $31.93 2.6% 5 Central Expy $28.90 5.4% $22 6 Ft Worth CBD $26.64 3.0% $20 7 Dallas CBD $26.51 3.9% $18 8 Allen / McKinney $26.31 5.2% $16 9 Las Colinas $25.77 5.2% Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 10 Quorum / Bent Tree $24.39 2.8% 11 South Ft Worth $24.05 -2.5% Updated 4/4/18 Class A Class B 12 Plano $23.90 15.6% 13 Richardson $23.85 4.4% Direct Leasing Activity DIRECT LEASING ACTIVITY 14 East LBJ $23.63 1.2% RollingRolling 12-Months 12-Months 14,000 15 Mid Cities $22.84 -1.5% 12,000 16 Lewisville / Denton $22.40 1.8% 10,000 17 North / Northeast Ft Worth $20.86 2.5% 8,000 18 West LBJ $20.17 7.7% 6,000 19 Arlington / Mansfield $19.96 3.4% 20 East / South Dallas $19.16 8.2%

In Thousands of of SF In Thousands 4,000 21 Stemmons $16.92 8.3% 2,000 0 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18

Class A Class B 5 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/ Q1 FT.WORTH MAR KET AT A GLANCE 2018 OFFICE MARKET

CONSTRUCTION

• The DFW office development pipeline contracted by 13.6% to 7.0 million SF (excluding corporate-owned projects) over the past year. Despite the annual decline, office development remains 9.2% higher than its five-year average. Office buildings under construction are currently 48.6% pre-leased, indicating developers remain confident in future leasing demand. • During the quarter, construction and renovation completed on approximately 1.3 million SF of competitive office space. The largest of which was Craig Hall’s 100% speculative 300K SF Class A office building in Hall Office Park in Frisco/ The Colony. In addition, KDC completed construction on Liberty Mutual’s 1.1 million SF campus in Legacy. • Developers began construction on 699,621 SF of competitive office product RECENT ANNOUNCEMENTS during the quarter, highlighted by Billingsley’s 250K SF office building at 3201 Olympus Blvd in Las Colinas. Crescent broke ground on American Airlines’ 1.7 • Billingsley has announced development plans million SF corporate-owned project in the Trinity Complex in Mid Cities, which is for a 300-acre mixed-use project on Plano expected to deliver at the end of 2019. Parkway between Carrollton and Plano. Early • In addition to the 7.0 million SF of competitive office product under construction, plans include nearly a million SF of office developers are underway with 2.7 million SF of corporate-owned space, product between five buildings, and Phase I will highlighted by American Airlines’ campus. Other corporate-owned projects include a fitness center, conference room and with projected delivery dates in 2018 and 2019 include Charles Schwab (500K tenant lounge within the four-story speculative SF) in Mid Cities, Independent Bank (165K SF) in Allen/McKinney, and USAA building. Construction is expected to begin by (150K SF) in Upper Tollway/West Plano. mid-year with an August 2019 completion date.Updated 4/4/18 • KDC broke ground on Independent Bank’s 165K SF Class A headquarters within Craig Ranch early this quarter, which will be the tallest CONSTRUCTION PIPELINE building in McKinney upon completion at the Construction Pipeline end of 2018. • PMRG has begun construction on a built-to-suit 8,000 medical office building for Baylor Scott & White in Irving. The property, which is located next to 7,000 Baylor Scott & White’s hospital, is expected to 6,000 deliver this summer. 5,000 • Heady Investments is nearing groundbreaking on Headquarters II, an asset with two 14-story 4,000 Class AA office towers connected by an 3,000

amenity deck over a parking garage. The office of SF In Thousands 2,000 towers will be able to accommodate 425K SF of space, and will give tenants access to 1,000 an eatery, conference and meeting rooms, 0 fitness center and a modern deck with green Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 Q1 18 space. Construction is expected to begin on a speculative basis around mid-year. SIGNIFICANT PROJECTSUnder Construction UNDERDelivered CONSTRUCTION • Bell Nunnally has relocated into 43K SF of space at KPMG Plaza in the Art District downtown SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATION from its longtime Uptown office. Bell Nunnally % PRE- TARGET will be in the penthouse floors. A second phase PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY of the building, currently under construction, American Airlines * 1,700,000 Mid Cities American Airlines 100% Crescent Real Estate 4Q 2019 will feature Hall Arts Residences, as well as Pioneer ** 1,125,000 Las Colinas Pioneer Nat. Resources 100% KDC 2Q 2019 the HALL Arts Hotel. Completion of the $250 Charles Schwab * 500,000 Mid Cities Charles Schwab 100% Hillwood Properties 2Q 2019 million project is scheduled for late-2019. PwC Tower 494,300 Uptown / Turtle Creek PwC 51% Trammell Crow Co. 2Q 2018 The Union 418,132 Uptown / Turtle Creek Akin Gump 44% RED Development 3Q 2018 Legacy Central West † 310,000 Plano N/A 0% Regent Properties 2Q 2018 AmerisourceBergen ** 300,000 Upper Tollway/ W Plano AmerisourceBergen 100% Billingsley Co. 1Q 2019 The Epic Deep Ellum 294,820 East Dallas N/A 0% KDC & Westdale 3Q 2019 Frost Tower 280,489 Fort Worth CBD Frost Bank 51% Stream Realty 1Q 2018 Sound at Cypress Waters 250,000 Las Colinas N/A 16% Billingsley Co. 2Q 2018 3201 Olympus Blvd 250,000 Las Colinas N/A 0% Billingsley Co. 1Q 2019 6 * Corporate-owned ** Build-to-suit † Under Renovation Note: Corporate-owned office buildings excluded from competitive statistics PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/ MAR KET AT A GLANCE FT.WORTH Q1 OFFICE MARKET 2018

SUBMARKETUpdated 1/3/18 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Trailing-12 Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Months Current Qtr Construction Class A Class B Dallas CBD 27,599,270 8,343,229 911,945 74.7% 255,759 691,759 261,400 163,025 $27.56 $20.76 Uptown / Turtle Creek 11,651,750 1,700,877 379,430 89.0% 93,458 206,432 130,000 1,175,014 $40.24 $33.54 Preston Center 4,461,705 671,746 58,930 87.6% 25,860 48,045 - 119,000 $40.23 $28.97 Central Expy 11,523,597 1,937,105 362,022 86.4% (99,409) (107,332) - 0 $30.57 $25.59 Quorum / Bent Tree 20,353,768 5,177,114 489,983 79.1% (241,224) (407,065) - 240,000 $28.59 $20.82 Upper Tollway / West Plano 20,392,083 3,044,556 1,125,288 85.5% 251,005 1,000,009 341,191 326,400 $34.24 $26.87 West LBJ 4,373,538 913,624 100,179 81.9% 28,897 (75,433) - 0 $21.00 $19.64 East LBJ 15,996,364 4,053,852 379,864 78.4% 15,466 325,258 - 0 $26.94 $19.56 Las Colinas 31,972,079 6,370,759 1,578,294 85.3% 501,613 721,283 250,000 1,965,500 $30.33 $21.43 Stemmons 11,072,928 3,182,889 78,486 73.5% (86,702) (110,301) - 0 $18.49 $15.88 Richardson 17,113,938 3,572,863 157,109 83.3% 105,574 655,390 - 185,000 $27.43 $19.59 Allen / McKinney 3,586,720 648,699 13,680 84.4% 114,813 274,051 48,000 504,640 $30.22 $24.26 Plano 4,312,782 1,138,519 25,982 75.0% 2,089 (21,111) - 507,042 $26.55 $21.96 Frisco / The Colony 5,649,816 1,255,390 36,514 83.2% 43,646 210,580 300,000 406,136 $35.42 $26.57 East / South Dallas 7,372,661 1,097,938 17,083 86.8% 25,379 43,252 - 363,747 $30.35 $19.03 Arlington / Mansfield 6,703,238 869,082 55,537 89.4% 72,787 473,754 - 50,500 $22.10 $18.29 Mid Cities 10,244,578 2,877,775 116,468 73.3% 12,296 (535,163) - 168,000 $26.51 $20.37 Ft. Worth CBD 8,292,846 1,358,315 27,881 86.4% (51,326) (51,761) - 280,489 $29.08 $21.04 North / Northeast Ft Worth 4,484,281 1,893,153 39,637 64.8% (105,124) (225,636) - 320,000 $20.37 $21.23 Lewisville / Denton 6,054,840 1,244,280 2,337 82.1% (48,641) (546,008) - 44,051 $26.07 $22.48 South Ft Worth 8,275,593 836,118 193,476 90.4% 57,338 126,293 - 186,417 $28.52 $23.32 Totals 241,488,375 52,187,883 6,150,125 81.8% 973,554 2,696,296 1,330,591 7,004,961 $28.96 $21.29

Total Direct Current Trailing-12 Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Months Current Qtr Construction Rent Change Class A 130,138,968 28,829,282 4,388,043 81.4% 1,331,246 3,430,905 1,282,591 6,129,939 $28.96 3.2% Class B 102,435,985 21,990,864 1,758,315 81.8% (446,643) (714,383) 48,000 875,022 $21.29 3.6% Class C 8,913,422 1,367,737 3,767 87.6% 88,951 (20,226) - - $16.95 5.0% Totals 241,488,375 52,187,883 6,150,125 81.8% 973,554 2,696,296 1,330,591 7,004,961 $25.48 3.7%

METHODOLOGY TOTAL INVENTORY: THE TOTAL INVENTORY INCLUDES ALL SINGLE AND MULTI-TENANT LEASED OFFICE BUILDINGS WITH AT LEAST 20,000 SQUARE FEET OF GROSS RENTABLE SQUARE FOOTAGE. TOTAL SPACE AVAILABLE: AVAILABLE SPACE CURRENTLY BEING MARKETED WHICH IS EITHER PHYSICALLY VACANT OR OCCUPIED. DIRECT SPACE: SPACE THAT IS BEING OFFERED FOR LEASE DIRECTLY FROM THE LANDLORD OR OWNER OF A BUILDING. UNDER CONSTRUCTION SPACE IS NOT INCLUDED IN SPACE AVAILABLE FIGURES. SUBLEASE SPACE: SPACE THAT HAS BEEN LEASED BY A TENANT AND IS BEING OFFERED FOR LEASE BACK TO THE MARKET BY THE TENANT WITH THE LEASE OBLIGATION. DIRECT OCCUPANCY RATE: DIRECT SPACE PHYSICALLY OCCUPIED DIVIDED BY THE TOTAL RENTABLE INVENTORY. DIRECT NET ABSORPTION: THE NET CHANGE IN OCCUPIED DIRECT SPACE OVER A GIVEN PERIOD OF TIME. UNDER CONSTRUCTION: OFFICE BUILDINGS WHICH HAVE COMMENCED CONSTRUCTION AS EVIDENCED BY SITE EXCAVATION OR FOUNDATION WORK. DIRECT ASKING RENTS: THE QUOTED FULL-SERVICE ASKING RENT FOR AVAILABLE SPACE EXPRESSED IN DOLLARS PER SQ. FT.

PROPERTY SERVICESPROPERTY | SERVICES DEVELOPMENT | DEVELOPMENT | INVESTMENT | INVESTMENT DALLAS/ MAR KET AT A GLANCE FT.WORTH Q1 OFFICE MARKET 2018

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Marketing Manager President Vice President Leasing Director [email protected] Central Division [email protected] [email protected] [email protected] [email protected]

Ariel Guerrero James Decman Doug Berry Senior Vice President, Research Manager Vice President, Director of Research [email protected] Creative Director [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS/FT. WORTH OFFICE MARKET REPORT FOURTH QUARTER 2017

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q4 Office Market 2017 ECONOMIC OVERVIEW

The economic expansion in the North Texas region did not falter as the area completed 2017 with its fourth consecutive year of adding at least a net 100,000 new jobs. Due to a very tight labor market, payroll expansion is taking place at a slightly slower pace than prior years. Nevertheless, the outlook for 2018 job creation remains strong despite a shrinking labor pool and rising home prices.

The Dallas-Fort Worth metropolitan statistical area added a net 100,400 new jobs during the prior 12 months (ending November), representing an annual employment payroll increase of 2.8%. Each industry sector, with the exception of the Information sector (-2,200 jobs), experienced net job growth of at least 1.1% over the prior year. The industries with the largest annual job creation were the Professional & Business Services (31,100 jobs), Leisure & Hospitality (18,100 jobs), and Education & Health Services (11,200 jobs) sectors. TABLE OF CONTENTS As a result of the persistent growth, the DFW unemployment rate ended November at 3.2%, outperforming both the state and national rates of 3.8% and 4.1%, respectively. Economic Overview...... 2 Office Market Assessment...... 3 The North Texas economy, which leads the nation in annual employment gains, has Net Absorption & Occupancy...... 4 shown few signs of slowing down, and can expect to maintain job growth through 2020 Rental Rates & Leasing Activity...... 5 with an average of 73,000 annual job gains (per Moody’s and PMRG research). The North Texas region benefits from a geographical ease of access, a highly educated workforce, Construction...... 6 as well as Texas’ attractive pro-business tax policies, which combine to form a unique Submarket Statistics & Methodology...... 7 business environment encouraging expansion and relocation to the area. Companies Our Team...... 8 expanding in DFW include Toyota, JP Morgan Chase, Liberty Mutual, Pioneer Natural Resources,Updated Fannie6/26/2017 Mae, Verizon Corporation, Charles Schwab, GEICO, among others.

Employment Trends

FOR INFORMATION: 125 5%

75 3% KURT CHERRY 25 1% Executive Vice President Thousands -25 -1% 972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F 19F

WADE BOWLIN Jobs Added Annual % Change Updated 1/2/18 President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Central Division Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 212.3 209.9 1.1% Up Senior Vice President, Research Manufacturing 275.7 266.4 3.5% Up 713.209.5704 Trade, Transportation & Utilities 785.3 774.3 1.4% Up Information 80.8 83 -2.7% Down [email protected] Financial Activities 293.8 286.4 2.6% Up Professional & Business Services 628.0 596.9 5.2% Up Education & Health Services 447.5 436.3 2.6% Up Leisure & Hospitality 387.9 369.8 4.9% Up Other Services 128.5 123.3 4.2% Up Government 443.9 437.0 1.6% Up 2 Source: U.S.U.S. Bureau Bureau of of Labor Labor Statistics, Statistics, Employment Employment Data Data as of asNovember of November 2017 2017 PAGE All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q4 2017 OFFICE MARKET ASSESSMENT

The DFW office market wrapped up 2017 by adding a net 212,658 SF of absorption during the fourth quarter, the 26th consecutive quarter of net gains, increasing its annual count to approximately 2.8 million SF of direct space. Corporate relocations and expansions were largely the driving force behind absorption figures during 2017, and they will continue to dictate market fundamentals in 2018.

During the quarter, Class A properties accounted for a net 1.1 million SF of direct absorption growth, bringing their 2017 total to nearly 3.1 million SF. The Class A direct occupancy rate improved by 30 basis points to 82.4% during the quarter, but has declined by 40 basis points year-over-year due to construction deliveries outpacing leasing demand. DFW’s Class A sector has been leading the competitive leasing market in activity since 2012, accounting for 81.6% of absorption gains during that time. DFW METROPLEX RANKS 1ST IN JOB GROWTH: Meanwhile, the Class B sector experienced occupancy losses totaling 839,755 SF during Among the metropolitan markets with a workforce the quarter and 268,136 SF during 2017. Class B direct occupancy rates declined by 100 over 1 million, the DFW Metroplex tops the rankings in basis points during the quarter to 82.4% and by 60 basis points since the end of 2016 as annual employment gains, ahead of New York-Newark- a number of tenants have moved into higher quality space options. New Jersey.

Despite recording its lowest annual absorption total since 2013, there is still an excess HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical areas of companies expanding into the market, as well as corporate users moving into non- in the number of Fortune 500 headquarters. The metro’s competitive product. When accounting for companies moving into newly delivered top employers are concentrated in telecommunications, corporate-owned product, more than four million SF of additional absorption occurred transportation, aerospace/defense, health care, high throughout 2017. Among the largest companies moving into newly delivered corporate- technology, financial services and retail. owned space this past year were Toyota Motor Corporation (2.1 million SF), JPMorgan Chase (1.0 million SF), TD Ameritrade (355K SF), and Capital One (205K SF). DFW ECONOMIC OUTLOOK: The North Texas region’s historically strong employment and population growth, diversified economy and low FORECAST costs of doing business will lead to above-average performance. The employment outlook for Dallas- • With a number of large high-quality availabilities diminishing from the market and Fort Worth remains strong with job growth forecasted record-high rental rates, lease negotiations will remain in favor of landlords within to average 2.4% per year through 2020, according to the most desirable submarkets during the oncoming quarters. Moody’s Analytics. • Building owners that continue to put money back into their office buildings and add amenities will continue to outperform undercapitalized assets. • Corporate relocations and expansions will continue to strengthen the office market fundamentals, as the metro area’s business-friendly environment, lower cost of doing business, and well-educated labor force attract companies to the Metroplex. Updated1/2/18

MARKET TREND INDICATORS Office Market Trends Current Change from Previous 12-month Quarter Quarter Year Forecast 8,000 88% Direct Occupancy 82.5% 6,000 86% Trailing 12 mos. Direct Net 2,772,394 Absorption 4,000 84% Under Construction 7,468,677 2,000 82% Direct Asking Rents $25.34 0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18F19F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q4 Office Market 2017 NET ABSORPTION & OCCUPANCY

• Richardson led all DFW submarkets with a net 344,463 SF of direct space occupied, increasing its 2017 absorption total to 548,027 SF. Various tenant move-ins accounting for the occupancy of 144K SF at The Tower Lakeside Campus highlighted Class A absorption, while GENPACT’s move into 64K SF at 3300 E Renner was the largest Class B move-in. The submarket’s occupancy climbed by 20 basis points to 82.6% during 2017. • Upper Tollway/West Plano posted 255,920 SF of direct occupancy gains during the quarter, increasing its 2017 total to nearly 1.24 million SF. Fannie Mae moving into their 324K SF Class A built-to-suit accounted for the bulk of the quarterly gains. Additionally, JPMorgan Chase and Toyota moved into corporate-owned facilities totaling more than 1.1 million SF. Occupancy rates in the submarket improved by 120 basis points to 87.6%. The current real estate cycle in DFW is experiencing an unprecedented • Dallas CBD continued its strong second-half of 2017 by absorbing a net 197,916 run. The DFW office market still looks strong and healthy. It feels like SF of direct space during the quarter, increasing its yearly total to about 280K SF. the 7th inning stretch of a double-header – Play Ball! Quarterly Class A move-ins by Vinson and Elkins (115K SF), Baker McKenzie (50K SF) and others helped drive Dallas CBD to its best year of absorption gains since 2015 KURT CHERRY as occupancy climbed by 140 basis points to 75.1%. Executive Vice President, Dallas Regional Office • Lewisville/Denton experienced a net 522,816 SF of direct move-outs during the Central Division quarter as Xerox Corp and JPMorgan Chase vacated a combined 552K SF of Class B space. Occupancy rates in the previously stable submarket have dropped by 950 basis points to 83.2% during 2017. • East LBJ recorded 146,441 SF of direct net absorption during the quarter, increasing its 2017 tally to 299K SF of leasing gains. Ansira Partners’ occupancy of 107K SF Updated 1/2/18 at Three Galleria Tower highlighted quarterly tenant movement. During 2017, the SUBMARKET OCCUPANCY RANKING Updated 1/2/18submarket’s occupancy rate grew by 240 basis points to 78.4%, a high mark since Submarket Occupancy Ranking the end of 2008. Occ. Y-O-Y % Rank Submarket Rate Change 1 South Ft Worth 89.7% -0.4% Direct Net Absorption vs. Completions 2 Uptown/Turtle Creek 89.1% 0.7% 2,500 3 Arlington / Mansfield 88.4% 3.5% 2,000 4 Ft Worth CBD 87.7% 1.5% 5 Upper Tollway / West Plano 87.6% 1.9% 1,500 6 Central Expy 87.2% -1.1% 7 Preston Center 87.0% -3.6% 1,000

8 Frisco / The Colony 87.0% 0.1% Thousands of SF In 500 9 East / South Dallas 86.8% 3.8% 10 Las Colinas 84.2% -1.9% 0 11 Quorum / Bent Tree 84.1% 0.8% Updated 1/2/18 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 12 Lewisville / Denton 83.2% -9.5% 13 Richardson 82.6% 0.2% Direct NetDirect Absorption Occupancy Rates Completions 14 Allen / McKinney 82.3% -2.3% 15 West LBJ 80.8% -1.7% 86% 16 Plano 80.8% 7.7% 17 East LBJ 78.4% 2.4% 84% 18 Dallas CBD 75.1% 1.4% 19 Stemmons 74.3% 0.0% 82% 20 Mid Cities 73.2% -9.4% 21 North / Northeast Ft Worth 68.4% -3.4% 80%

78% Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q4 2017 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rental rates improved by $0.05 per SF to $28.87 during the quarter and by $1.32 per SF (or 4.8%) during 2017. Already at record levels, Class A rents have surpassed their pre-recession levels by an astounding 17.2% logged at mid-2008. • Weighted average Class B asking rents, also at record levels, improved by $0.42 per SF during the quarter to $21.16 and have appreciated by 2.6% over the prior year. • During the prior 12 months, rent growth occurred across the DFW Metroplex with the exception of three submarkets as vacancies have dwindled and construction projects have delivered to the competitive market. However, appealing lease opportunities remain in submarkets with elevated vacancy rates, such as the Stemmons and LBJ Freeways, Dallas CBD, Mid Cities and North/Northeast Fort Worth. • Landlords in the submarkets with the lowest vacancy rates have been able to push Class A rents upwards, which include Upper Tollway, Central Expressway and Although DFW has always been a boom-or-bust market, the sound Uptown/Turtle Creek. The largest annual Class A rent increases occurred in Upper fundamentals indicate we still have some runway left in this cycle. Tollway/West Plano (10.5%), Plano (10.6%), West LBJ (11.7%), and Stemmons (13.3%). Historically, speculative development has been the proverbial emergency • The trailing 12-month volume of Class A leasing activity declined for the fifth brake on growth, but recent spec buildings constructed in the premier consecutive quarter to nearly 8.9 million SF, which trails its 10-year average by 10.1%. submarkets have leased up quickly. Similarly, Class B annual leasing velocity of 7.0 million SF trails its 10-year average by 12.1%. KURT CHERRY • A large portion of the tenant move-ins during the current expansion period have Executive Vice President, Dallas Regional Office taken place within newer and the higher-quality buildings. The flight-to-quality Central Division trend will continue with tenants favoring more modern and efficient floorplates, Updated 1/2/18 especially as the wave of newly built and renovated buildings become available for Updated 1/2/18 Submarket Rental Rate Ranking occupancy. SUBMARKET RENTAL RATE RANKING Rental Y-O-Y % Rank Submarket Rate Change Rental Rates 1 Uptown/Turtle Creek $38.60 1.5% ($/SF/Yr. Full Service) $30 2 Preston Center $38.19 9.8% $28 3 Frisco / The Colony $32.90 -3.3% $26 4 Upper Tollway / West Plano $31.95 10.3% $24 5 Central Expy $27.89 3.1% $22 6 Ft Worth CBD $27.10 4.4% $20 7 Dallas CBD $26.09 2.8% 8 Allen / McKinney $25.64 6.2% $18 9 Las Colinas $25.63 5.7% $16 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 10 Quorum / Bent Tree $24.31 2.2% Updated 1/3/18 11 South Ft Worth $23.98 2.8% Class A Class B 12 Richardson $23.91 7.0% 13 East LBJ $23.83 4.3% Direct Leasing Activity Rolling 12-Months 14 Plano $23.19 -8.5% 14,000 15 Mid Cities $23.11 2.0% 12,000 16 Lewisville / Denton $21.93 -1.2% 17 North / Northeast Ft Worth $21.70 0.6% 10,000 18 West LBJ $19.86 13.3% 8,000 19 Arlington / Mansfield $19.59 2.6% 6,000 20 East / South Dallas $19.36 5.2%

In Thousands of of SF In Thousands 4,000 21 Stemmons $16.64 6.7% 2,000 0 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17

5 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q4 Office Market 2017 CONSTRUCTION

• The DFW office development pipeline has expanded by 4.0% to 7.5 million SF of office space (excluding corporate-owned projects) over the prior 12 months, as developers continue riding the wave of new construction and renovation since late-2013. Approximately 46% of this space has secured pre-lease commitments, indicating developers are still confident in future leasing demand. • During the fourth quarter, developers completed construction and renovation of approximately 1.2 million SF of competitive office space, highlighted by Granite Properties’ 324K SF Class A build-to-suit for Fannie Mae in the Upper Tollway/West Plano submarket. Among other notable Class A construction deliveries were Frisco Station - The Offices One in Frisco/The Colony and The Terraces At Douglas Center in Preston Center. • Developers began construction on nearly 1.9 million SF of competitive office RECENT ANNOUNCEMENTS product during the quarter. The largest project to break ground was KDC’s 1.1 • Hoque Global and KDC have plans to develop million SF Class A build-to-suit for Pioneer Natural Resources in Las Colinas, which Dallas Smart District, a mixed-use property in is slated to deliver in mid-2019. downtown Dallas on 20-acres next to Dallas City • In addition to the 5.1 million SF of competitive office space that delivered during Hall. Phase I, set to begin late-2018, will feature 2017, developers have also completed construction on approximately 4.1 million a Class A office building up to one-million SF, a SF of office space owned and occupied by a corporate user. The most significant corporate-owned projects to deliver in 2017 were office campuses for Toyota grocery store, a hotel and residential space withUpdated 1/2/18 parks and green space. Motor Corporation (2.1 million SF) and JP Morgan Chase (1.4 million SF) in Upper • Direct Development is moving forward on a Tollway/West Plano. Corporate owned projects for TD Ameritrade (355K SF), Capital mixed-use project in Flower Mound, dubbed The UpdatedOne (205K7/6/2015 SF), Hillwood (200K SF), among others also completed in 2017. Point, which will feature a 215K SF office building, Construction Pipeline multifamily units, a Hilton Hotel, as well as retail and public space in a 35-acre property. Construction is 8,000 slated to begin late-2018. Construction Pipeline 7,000 • Seritage Growth Properties and KDC will be combining efforts for a mixed-use project 6,000 14,000 featuring up to one-million SF of office space. Early 5,000 plans include a hotel, apartments, entertainment 12,0004,000 and retail space, as well as two Class A office 3,000 towers near the Preston Road and LBJ Freeway 10,000 In Thousands of of SF In Thousands 2,000 intersection. 8,000 • Liberty Mutual’s 1.1 million SF Class A office 1,000 campus is nearing completion in the Legacy West 6,000 0 development in Plano, and 2,700 employees will Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17

begin moving in on January. The campus features Thousands of SF In 4,000 two towers and will be able to accommodate up 2,000 Under Construction Delivered to 5,000 workers. • Hub 121, a $120 million Shane Jordan development 0 in McKinney, was recently announced. Phase I of SIGNIFICANTQ2 PROJECTS 12 UNDER Q4 12 CONSTRUCTION/RENOVATION Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 the mixed-use project is set to begin in January % PRE- TARGET 2018 and will feature a 2,500 unit residential PROJECT NAME SIZE (SF) SUBMARKETUnder Construction MAJOR TENANT LEASEDDelivered DEVELOPER DELIVERY community, an entertainment pavilion, 20K Pioneer ** 1,125,000 Las Colinas Pioneer Natural Resource 100% KDC 2Q 2019 SF of retail space, and a 40K SF restaurant park Liberty Mutual * 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 1Q 2018 connecting to Independent Bank’s 400K SF Charles Schwab * 500,000 Mid Cities Charles Schwab 100% Hillwood Properties 2Q 2019 headquarters. Phase II will include a 200K SF office PwC Tower 494,300 Uptown / Turtle Creek PwC 51% Trammell Crow Co. 3Q 2018 building, additional retail and a hotel. The Union 418,132 Uptown / Turtle Creek Akin Gump 44% RED Development 3Q 2018 • T-Mobile US has secured a new lease to occupy Redbird Office † 315,000 East Dallas N/A 5% HBC Investments 2Q 2018 the entirety Duke Bridges I in Frisco. T-Mobile’s Legacy Central 2 † 308,496 Plano N/A 0% Regent Properties 1Q 2018 expansion into the 158K SF Class A building will provide additional space to accommodate an Hall Office Park - T2 300,000 Frisco/The Colony N/A 0% Craig Hall 1Q 2018 additional 350 employees in the facility. AmerisourceBergen ** 300,000 Upper Tollway/ W Plano AmerisourceBergen 100% Billingsley Co. 2019 The Epic Deep Ellum 294,820 East Dallas N/A 0% KDC & Westdale 3Q 2019 Frost Tower 280,489 Fort Worth CBD Frost Bank 51% Stream Realty 1Q 2018 6 * Corporate-owned ** Build-to-suit † Under Renovation Note: Corporate-owned office buildings excluded from competitive statistics PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q4 2017

SUBMARKETUpdated 1/3/18 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,453,765 8,033,467 994,631 75.1% 197,916 279,812 - 424,425 $26.93 $21.16 Uptown / Turtle Creek 11,290,061 1,490,566 386,625 89.1% (331) 102,457 - 1,305,014 $39.72 $34.66 Preston Center 4,459,457 618,627 136,581 87.0% 31,045 (16,058) 171,583 119,000 $39.61 $30.95 Central Expy 11,729,069 1,673,880 318,872 87.2% (11,704) (58,338) 53,623 0 $29.51 $25.26 Quorum / Bent Tree 20,289,611 4,190,545 601,061 84.1% (96,785) 125,615 - 240,000 $28.41 $20.93 Upper Tollway / West Plano 20,049,030 3,097,736 1,085,743 87.6% 255,920 1,237,453 80,000 641,191 $34.34 $26.79 West LBJ 4,361,920 941,299 118,438 80.8% (220,878) (41,741) - 0 $20.88 $19.18 East LBJ 16,045,793 4,006,263 439,041 78.4% 146,441 299,364 - 0 $27.46 $19.44 Las Colinas 31,795,005 6,365,059 1,346,362 84.2% 17,323 619,288 96,000 1,839,500 $30.06 $20.91 Stemmons 11,126,110 3,069,382 60,980 74.3% (18,281) (22,240) - 0 $18.70 $15.61 Richardson 17,040,559 3,689,463 140,670 82.6% 344,463 548,027 - 95,000 $27.48 $19.62 Allen / McKinney 3,538,165 640,827 32,804 82.3% 59,797 138,279 87,467 397,640 $29.19 $24.40 Plano 4,309,587 865,169 272,176 80.8% 7,094 (34,345) - 505,538 $25.82 $21.62 Frisco / The Colony 5,399,816 991,908 22,154 87.0% 51,022 201,444 270,963 656,136 $34.44 $27.02 East / South Dallas 7,379,596 1,093,501 36,376 86.8% (41,915) (61,524) - 678,747 $30.36 $19.12 Arlington / Mansfield 6,731,459 855,217 63,315 88.4% 30,583 422,851 - 50,500 $21.34 $18.85 Mid Cities 10,246,690 2,930,326 63,175 73.2% (19,555) (586,198) 66,369 85,000 $27.04 $20.36 Ft. Worth CBD 8,463,983 1,274,712 153,915 87.7% 30,899 31,017 - 280,489 $29.75 $21.19 North / Northeast Ft Worth 4,277,465 1,669,464 138,789 68.4% (117,858) (40,805) - 32,000 $21.76 $21.83 Lewisville / Denton 6,054,952 1,066,091 118,600 83.2% (522,816) (525,105) 22,039 20,000 $28.39 $21.98 South Ft Worth 8,272,363 1,006,573 170,621 89.7% 90,278 153,141 - 98,497 $29.12 $23.21 Totals 240,314,456 49,570,075 6,700,929 82.5% 212,658 2,772,394 848,044 7,468,677 $28.87 $21.16

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 128,199,826 26,519,179 4,630,475 82.4% 1,098,513 3,052,010 598,783 6,633,626 $28.87 4.8% Class B 102,982,565 21,542,156 2,053,174 82.4% (839,755) (268,136) 249,261 835,051 $21.16 2.6% Class C 9,132,065 1,508,740 17,280 86.7% (46,100) (11,480) - - $17.09 4.0% Totals 240,314,456 49,570,075 6,700,929 82.5% 212,658 2,772,394 848,044 7,468,677 $25.34 4.5% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE Q4 2017

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Vice President Marketing Manager President [email protected] Leasing Director [email protected] Central Division [email protected] [email protected] [email protected]

Ariel Guerrero Doug Berry James Decman Senior Vice President Vice President Research Manager Research Creative Director [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH OFFICE MARKET REPORT SECOND QUARTER 2017

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH Q2 Office Market 2017 ECONOMIC OVERVIEW

Through the mid-point of 2017, the North Texas regional economy continues to enjoy a remarkable economic expansion occurring over the past seven years. The Dallas-Fort Worth metropolitan statistical area added a net 115,800 jobs during the prior 12 months (ending May 2017), representing an annual employment payroll increase of 3.3%. The industry sectors with the largest amount of annual jobs created were Professional & Business Services (31,500 jobs or 5.5% growth); Trade, Transportation & Utilities (23,300 jobs or 3.2% growth); and Leisure & Hospitality (18,200 jobs or 4.9% growth). As a result of the steady and consistent job growth, DFW’s unemployment rate of 3.8% has been hovering around a cyclical low-point and outpaces the national and state unemployment rates of 4.3% and 4.8%, respectively. Since its Great Recession job trough, DFW has created roughly 750K net new jobs – nearly four new jobs for every job lost.

TABLE OF CONTENTS The diversified North Texas economy is expected to continue the high-paced expansion through the second-half of 2017 and, barring any national or global catastrophe, will Economic Overview...... 2 maintain job growth in the foreseeable future. The North Texas region benefits from a Office Market Assessment...... 3 national ease of access, an organic source of highly-educated workforce talent, as well Net Absorption & Occupancy...... 4 as Texas’ attractive pro-business tax policies, which combine to encourage businesses Rental Rates & Leasing Activity...... 5 to expand and relocate to the area. Among companies planning to expand in the Metroplex are Toyota Motor Corporation, JP Morgan Chase, Liberty Mutual, Fannie Mae, Construction...... 6 Verizon Corporation, Charles Schwab, GEICO, among others. Submarket Statistics & Methodology...... 7 Our Team...... 8 Updated 6/26/2017

Employment Trends

FOR INFORMATION: 125 5% 75 3%

KURT CHERRY 25 1%

Executive Vice President Thousands -25 -1%

972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F 19F

WADE BOWLIN Jobs Added Annual % Change Updated 6/28/17 President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Central Division Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 206.0 203.1 1.4% Up Senior Vice President, Research Manufacturing 267.2 264.2 1.1% Up 713.209.5704 Trade, Transportation & Utilities 762.7 739.4 3.2% Up Information 81.3 82.2 -1.1% Down [email protected] Financial Activities 291.3 281.3 3.6% Up Professional & Business Services 606.7 575.2 5.5% Up Education & Health Services 445.0 431.1 3.2% Up Leisure & Hospitality 389.7 371.5 4.9% Up Other Services 126.7 122.2 3.7% Up Government 439.5 430.1 2.2% Up 2 Source: U.S. U.S. Bureau Bureau of of Labor Labor Statistics, Statistics, Employment Employment Data Data as of as May of 2017May 2017 PAGE All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH Office Market Q2 2017 OFFICE MARKET ASSESSMENT

The DFW office market concluded the second quarter of 2017 adding a net 106,457 SF of direct absorption, its 24th consecutive quarter of net gains, increasing the year- to-date absorption count to 1,156,109 SF of space. Quarterly absorption growth was driven by lease commitments in new construction and renovation projects, which will also dictate a large portion of the occupancy gains during the remainder of 2017.

Class A properties suffered their first negative absorption reading in five years during the second quarter with a modest 4,278 SF of net move-outs, but have still recorded 948K SF of occupancy gains year-to-date. Direct occupancy rates in Class A buildings declined by 20 basis points during the quarter to 82.1%, due to the completion of new construction, and have dipped by 20 basis points year-over-year. On the other hand, Class B buildings absorbed a net 104,190 SF of direct office space during the quarter DFW METROPLEX RANKS 2ND IN JOB GROWTH: and about the same amount of space year-to-date. Occupancy rates in Class B buildings Among the metropolitan markets with a workforce declined by 10 basis points to 82.7% during the quarter and have subsided by 20 basis over 1 million, the DFW Metroplex ranks second in points since mid-2016. annual employment growth, following New York- Newark-New Jersey. Despite a modest quarter in terms of absorption growth compared with the market’s performance during the current expansion period, absorption levels will increase over HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical areas the upcoming quarters as built-to-suit construction projects deliver and executed in the number of Fortune 500 headquarters. The metro’s leases commence for a number of large tenants. Notable Class A tenants with leases top employers are concentrated in telecommunications, scheduled to commence during the second-half of 2017 include: Signet Jewelers (225K transportation, aerospace/defense, health care, high SF), Rolex (130K SF), Vinson & Elkins (115K SF), and Ethos Group, Inc. (100K SF) among technology, financial services and retail. others. DFW ECONOMIC OUTLOOK: The North Texas region’s historically strong employment and population growth, diversified economy and low FORECAST costs of doing business will lead to above-average performance. The employment outlook for Dallas- • With a number of large high-quality availabilities diminishing from the market and Fort Worth remains strong with job growth forecasted record-high rental rates, lease negotiations will remain in favor of landlords within to average 2.4% per year through 2020, according to the most desirable submarkets during the oncoming quarters. Moody’s Analytics. • Building owners that continue to put money back into their office buildings and add amenities will continue to outperform undercapitalized assets. • Corporate relocations and expansions will continue to strengthen the office market fundamentals, as the metro area’s business-friendly environment, lower cost of doing business, and well-educated labor force attract companies to the UpdatedMetroplex. 6/28/17

MARKET TREND INDICATORS Office Market Trends Current Change from Previous 12-month Quarter Quarter Year Forecast 8,000 88% Direct Occupancy 82.6% 6,000 86% Trailing 12 mos. Direct Net 4,324,216 Absorption 4,000 84% Under Construction 8,162,161 2,000 82% Direct Asking Rents $24.70 0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F18F19F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH Q2 Office Market 2017 NET ABSORPTION & OCCUPANCY

• The Mid Cities submarket experienced the largest movement during the quarter, with a net 608,034 SF of direct move-outs. After taking occupancy in their 327K SF built-to-suit in Las Colinas during the first quarter, CoreLogic moved out of a combined 716,212 SF of space in The Terrace at Solana. On a positive note, the entirety of the 125K SF Building 2 of the Solana campus was backfilled by Sabre. • Arlington/Mansfield led all DFW submarkets in quarterly direct net absorption gains with 332,466 SF. The largest gain took place as D.R. Horton moved into their 200K SF Class A built-to-suit. The largest Class B quarterly move-ins included Henry Schein (26K SF) at Park Springs Place and CapTel (23K SF) at Centerpoint IV. • Upper Tollway/West Plano witnessed another active quarter, absorbing a net 263,755 SF of direct space, increasing its year-to-date total to 752,204 SF of direct gains. NTT Data’s move into 127K SF at the recently constructed One Legacy West The current real estate cycle in DFW is experiencing an unprecedented highlighted quarterly occupancy gains. Other notable tenants to move into Class A run. The DFW office market still looks strong and healthy. It feels like Legacy buildings were Wipro Technologies (36K SF at Legacy Center), WeWork (31K the 7th inning stretch of a double-header – Play Ball! SF at Legacy West), and Creston Electronics (28K SF at Legacy Tower). • Uptown/Turtle Creek rebounded from an inactive first quarter by absorbing a KURT CHERRY net 117,329 SF of direct space. Class A leases commencing contributed to the Executive Vice President, Dallas Regional Office submarket’s movement, led by Leon Capital Group (22K SF) and Payne Mitchell Law Central Division Group (12K SF) moving into Parkside Tower, while CrossFirst Bank occupied 26K SF at McKinney & Olive. Class A absorption will continue climbing during the remainder of the year as built-to-suit construction completes and leases commence. • Dallas CBD completed the quarter absorbing a net 96,909 SF of space, but has still lost 59K SF during the year. Dallas Morning News moved into the repositioned 92K Updated 6/28/17 SF Statler Library, highlighting tenant movement. City Electric Supply also began SUBMARKET OCCUPANCY RANKING Updated 6/28/17occupancy of 30K SF at 400 Record. Many leases commencing during the second- Submarket Occupancy Ranking half of 2017 will bring Dallas CBD’s absorption count into positive territory. Occ. Y-O-Y % Rank Submarket Rate Change 1 Lewisville / Denton 90.8% 0.7% Direct Net Absorption vs. Completions 2 Preston Center 89.7% 0.4% 2,500 3 Uptown/Turtle Creek 89.4% -0.8% 2,000 4 Frisco / The Colony 89.0% 4.5% 5 South Ft Worth 88.1% -3.0% 1,500 6 Central Expy 87.9% 0.6% 7 Ft Worth CBD 87.7% -0.6% 1,000

8 East / South Dallas 87.7% 4.9% Thousands of SF In 500 9 Upper Tollway / West Plano 87.4% 2.6% 10 Arlington / Mansfield 87.3% 3.3% 0 11 Quorum / Bent Tree 84.0% -1.4% Updated 6/28/17 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 12 Las Colinas 83.8% -1.2% 13 Plano 83.7% 7.6% Direct NetDirect Absorption Occupancy Rates Completions 14 West LBJ 83.3% 7.5% 15 Richardson 81.8% 3.7% 86% 16 Allen / McKinney 81.6% -2.4% 17 East LBJ 76.4% 1.1% 84% 18 Mid Cities 73.9% -8.6% 19 Stemmons 73.8% 1.2% 82% 20 Dallas CBD 73.7% -1.5% 21 North / Northeast Ft Worth 73.7% -4.8% 80%

78% Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH Office Market Q2 2017 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates, which are currently at record levels, improved by $0.06 during the quarter to $28.11 per SF and have increased by $0.72 or 2.6% over the prior 12 months. Class A rent rates will continue their upwards trend through the remainder of 2017 as new construction delivers to the competitive market. • Weighted average Class B asking rents, also at a historical apex, climbed by $0.22 to $20.78 per SF during the quarter and have appreciated by 4.2% over the past year. • During the prior 12 months, all but three DFW submarkets experienced rent growth as vacancies across the Metroplex have dwindled, sparking a wave of speculative construction. However, attractive lease opportunities still exist for tenants seeking opportunity in submarkets with elevated vacancy rates, such as Dallas CBD, the Stemmons and LBJ Freeways, North/Northeast Ft Worth, Richardson and Mid Cities. • Landlords have been able to push Class A rents upwards in the submarkets with the highest occupancy rates, including Uptown/Turtle Creek, Las Colinas, Preston Although DFW has always been a boom-or-bust market, the sound Center and South Ft Worth. The largest annual Class A rent increases occurred in fundamentals indicate we still have some runway left in this cycle. Upper Tollway/West Plano (10.5%), West LBJ (9.2%) and South Ft Worth (9.1%). Historically, speculative development has been the proverbial emergency • The trailing 12 month volume of Class A leasing activity has seemingly tapered off brake on growth, but recent spec buildings constructed in the premier from the robust levels witnessed from 2013 through mid-2016. However, at 9.7 submarkets have leased up quickly. million SF, Class A leasing activity remains in line with its 10-year average. On the other hand, Class B annual leasing velocity has decreased to 7.5 million SF and trails KURT CHERRY its 10-year average by 11.8%. Executive Vice President, Dallas Regional Office • A large portion of the tenant move-ins during the current expansion period have Central Division taken place in the newer and higher-quality buildings. The flight-to-quality trend Updated 6/28/17 will likely continue with tenants favoring more modern and efficient floorplates, Updated 6/28/17 Submarket Rental Rate Ranking especially as waves of new construction and renovated buildings become available SUBMARKET RENTAL RATE RANKING for occupancy. Rental Y-O-Y % Rank Submarket Rate Change Rental Rates 1 Uptown/Turtle Creek $37.90 1.6% ($/SF/Yr. Full Service) $30 2 Preston Center $36.09 6.3% $28 3 Frisco / The Colony $32.19 -8.9% $26 4 Upper Tollway / West Plano $31.15 9.7% $24 5 Central Expy $27.33 1.8% 6 Ft Worth CBD $26.69 2.4% $22 7 Dallas CBD $26.13 4.4% $20 8 Allen / McKinney $25.16 4.7% $18 9 South Ft Worth $25.10 12.3% $16 10 Las Colinas $24.65 4.7% Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Updated 4/4/17 11 Quorum / Bent Tree $23.77 3.2%

Class A Class B 12 Mid Cities $23.21 0.3% 13 East LBJ $22.95 4.3% Direct Leasing Activity Rolling 12-Months 14 Richardson $22.69 7.1% 14,000 15 Lewisville / Denton $22.18 1.9% 12,000 16 Plano $21.75 -1.6% 17 North / Northeast Ft Worth $20.47 6.9% 10,000 18 West LBJ $19.36 8.8% 8,000 19 Arlington / Mansfield $19.03 1.7% 6,000 20 East / South Dallas $18.71 -1.6%

In Thousands of of SF In Thousands 4,000 21 Stemmons $16.53 5.9% 2,000 0 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17

5 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH Q2 Office Market 2017 CONSTRUCTION

• The DFW office development pipeline has increased by 16.2% within the past year to approximately 7.2 million SF (excluding corporate-owned projects), as developers continue riding the wave of new construction and renovation. Only about 35% of this space has secured pre-lease commitments, as developers seem confident in breaking ground on new product and spending on major renovations without securing an anchor-tenant. • During the quarter, developers completed construction and renovation of 869,036 SF of competitive office product, highlighted by Mariner Real Estate’s 339K SF conversion project at 1915 Hurd Drive in the Las Colinas submarket. Two renovations were completed in Dallas CBD, as work was finished on Factory Six03 and Statler Library. Greenway Investment Company completed a 200K SF Class A built-to-suit for D.R. Horton in Arlington/Mansfield during the quarter as well. RECENT ANNOUNCEMENTS • Developers broke ground on 812,062 SF of competitive office product during the quarter. The largest project to break ground involved Billingsley’s The Sound • Hines has announced plans to develop The Strand at Cypress Waters at 3100 Olympus, a 250K SF speculative Class A office in the in Allen, a 135-acre mixed-use development Cypress Waters mixed-use development, scheduled to deliver in late-2018. which will introduce 200K SF of office space and • In addition to the 7.2 million SF of competitive office construction underway, 80K SF of retail in initial phases, with future phases developers are currently in motion on 5.0 million SF of office product that will featuring 1.5 million SF of office space and 300K be owned and occupied by corporate users. KDC Real Estate Development is on SF of retail. schedule to complete construction by year-end on office campuses for Toyota • Dallas-based Hillwood Properties is preparing Motor Corporation (2.1 million SF), JP Morgan Chase (1.4 million SF), and Liberty Updated 6/28/17 for ground-breaking in July of Charles Schwab’s Mutual (1.1 million SF), all of which are located in the Upper Tollway/West Plano campus in Westlake. During the first construction submarket. phase, four buildings encompassing 555K SF Updated 7/6/2015 will be constructed which will house up to Construction Pipeline 2,000 employees. Upon full-completion of their regional hub, Charles Schwab plans to employ up 8,000 to 5,000 workers. Construction Pipeline • In anticipation of the U.S. EPA’s pending move-out 7,000 of Fountain Place in 2019, Goddard Investment 6,000 has committed to spend $70 million to upgrade 14,0005,000 the Class AA tower to attract big tenants seeking high-quality office space in Dallas CBD. 12,0004,000 • During the quarter, Billingsley Co. began 10,0003,000 construction of AmerisourceBergen Specialty of SF In Thousands 2,000 8,000 Group’s 32-acre campus Austin Ranch in 1,000 Carrollton. The initial phase totals $113 million and includes a 300K SF of Class A office space. Upon 6,000 0 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 completion in 2019, Amerisource Bergen plans to

In Thousands of SF In 4,000 relocate roughly 1,200 existing employees with plans to hire up to 3,000 employees in the next 2,000 Under Construction Delivered decade. SIGNIFICANT0 PROJECTS UNDER CONSTRUCTION • Frank Recruitment Group Plans to open their next Q2 12 Q4 12 Q2 13 Q4 13 Q2% 14 PRE- Q4 14 Q2TARGET 15 U.S. office in Ross Tower, as they lease 12K SF on PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY the 24th floor for an initial 150 workers. They plan Toyota Motor Co. HQ * 2,100,000 UpperUnder Tollway/ ConstructionW Plano Toyota North AmericaDelivered 100% KDC 4Q 2017 to expand and add another 150 employees in the JP Morgan Chase * 1,400,000 Upper Tollway/ W Plano JP Morgan Chase 100% KDC 4Q 2017 oncoming years. Liberty Mutual Campus * 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 4Q 2017 Park District Tower 494,300 Uptown / Turtle Creek PwC 45% Trammell Crow 3Q 2018 The Union 418,132 Uptown / Turtle Creek Weaver and Tidwell 44% RED Development 2Q 2018 TD Ameritrade HQ * 355,000 Mid Cities TD Ameritrade 100% Adolphson & Peterson 4Q 2017 Legacy Central 2 † 308,496 Plano N/A 0% Regent Properties 1Q 2018 Hall Office Park 300,000 Frisco / The Colony N/A 0% Craig Hall 4Q 2017 3400 CityLine 300,000 Richardson N/A 0% Malouf Interests, Inc. 3Q 2017 Granite Park Seven ** 300,000 Upper Tollway/ W Plano Fannie Mae 100% Granite Properties 1Q 2018 6 The Epic Deep Ellum 291,457 East/South Dallas N/A 0% KDC & Westdale 3Q 2019 PAGE * Corporate-owned ** Build-to-suit † Under Renovation Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH Office Market Q2 2017

SUBMARKETUpdated 6/30/17 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,430,971 8,296,923 884,751 73.7% 96,909 (59,279) 307,677 261,400 $26.74 $22.87 Uptown / Turtle Creek 11,617,039 1,535,753 289,322 89.4% 117,329 106,812 - 1,273,530 $39.70 $32.21 Preston Center 4,301,578 544,719 125,996 89.7% (16,030) (54,273) - 171,583 $37.68 $31.09 Central Expy 11,737,667 1,649,849 137,806 87.9% 9,492 (40,923) - 0 $28.61 $24.90 Quorum / Bent Tree 20,655,149 4,092,485 587,764 84.0% (90,679) 200,777 - 240,000 $28.43 $20.43 Upper Tollway / West Plano 19,657,831 3,319,308 650,129 87.4% 263,755 752,204 - 853,596 $33.37 $26.14 West LBJ 4,369,502 1,023,483 136,583 83.3% 1,848 64,437 - 0 $19.91 $19.04 East LBJ 16,053,115 4,147,129 424,411 76.4% 35,686 25,258 - 0 $26.60 $18.70 Las Colinas 31,436,911 6,366,397 1,438,571 83.8% (41,868) 357,750 339,359 832,219 $28.46 $20.97 Stemmons 11,097,851 3,129,219 106,144 73.8% (45,907) (44,548) - 0 $18.52 $15.47 Richardson 17,057,221 3,583,064 181,153 81.8% 82,646 80,857 22,000 300,000 $26.18 $19.53 Allen / McKinney 3,228,644 565,601 14,250 81.6% 27,674 6,715 - 281,083 $28.46 $23.77 Plano 4,224,880 712,838 30,781 83.7% (61,920) (73,065) - 912,474 $22.39 $21.58 Frisco / The Colony 5,156,182 859,104 38,292 89.0% 55,530 90,040 - 948,066 $34.50 $26.64 East / South Dallas 7,324,605 1,095,806 26,092 86.9% 587 (78,810) - 330,384 $29.98 $18.70 Arlington / Mansfield 6,707,904 980,154 56,787 87.3% 332,466 354,350 200,000 50,500 $20.75 $18.81 Mid Cities 9,972,036 2,869,467 82,854 73.9% (608,034) (646,773) - 215,340 $27.21 $19.84 Ft. Worth CBD 8,469,602 1,297,452 187,632 87.7% 2,057 33,509 - 280,489 $29.79 $20.15 North / Northeast Ft Worth 4,266,263 1,259,363 153,774 73.7% 9,774 89,481 - 32,000 $21.74 $20.24 Lewisville / Denton 6,006,092 872,213 119,355 90.8% (5,821) (33,559) - 26,000 $25.49 $21.18 South Ft Worth 8,234,171 1,176,024 117,697 88.1% (59,037) 25,149 - 153,497 $30.33 $23.19 Totals 239,005,214 49,376,351 5,790,144 82.6% 106,457 1,156,109 869,036 7,162,161 $28.11 $20.78

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 127,237,141 26,351,605 3,920,852 82.1% (4,278) 948,073 292,237 6,693,495 $28.11 2.6% Class B 102,618,319 21,417,433 1,856,311 82.7% 104,190 103,794 576,799 468,666 $20.78 4.2% Class C 9,149,754 1,607,313 12,981 86.7% 6,545 104,242 - - $16.36 1.0% Totals 239,005,214 49,376,351 5,790,144 82.6% 106,457 1,156,109 869,036 7,162,161 $24.70 3.9% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2017

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Vice President Marketing Manager President [email protected] Leasing Director [email protected] Central Division [email protected] [email protected] [email protected]

Ariel Guerrero Doug Berry James Decman Senior Vice President Vice President Senior Research Analyst Research Creative Director [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

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Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS/FT. WORTH OFFICE MARKET REPORT FIRST QUARTER 2017

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q1 Office Market 2017 ECONOMIC OVERVIEW

The North Texas regional economy’s robust growth continued through the first quarter following its third consecutive year of adding more than 100,000 new jobs. Dallas-Fort Worth’s diverse employment composition and business-friendly atmosphere continues to depict the metroplex as an attractive destination. The Dallas-Fort Worth Metropolitan Statistical Area added a net 119,300 new jobs during the prior 12 months (ending February 2017), representing an annual employment payroll increase of 3.5%, and ranking among the nation’s top performing economies. Every industry sector experienced job growth over the prior year, with Trade, Transportation & Utilities (26,100 jobs or 3.6% growth) leading the way. Professional & Business Services (24,100 jobs or 4.2% growth); Leisure & Hospitality (21,600 jobs or 6.1% growth); and Education & Health Services (12,900 jobs or 3.0% growth) also significantly contributed to annual employment gains. Despite consistent job growth across the board, the DFW metroplex unemployment rate climbed TABLE OF CONTENTS by 20 basis points to 4.0% but is still outshining the state and national rates of 4.8% each.

Economic Overview...... 2 The North Texas economy can expect to continue its current expansion phase, especially Office Market Assessment...... 3 with the brunt of the oil downturn in the rearview mirror. Early indications of the Trump Net Absorption & Occupancy...... 4 Administration’s emphasis on pro-business tax policies have boosted the stock market Rental Rates & Leasing Activity...... 5 and may encourage local companies to expand and relocate in the region. Barring an unforeseen interruption or catastrophe shaking up the national or global economy, North Construction...... 6 Texas is poised to continue growing at its brisk pace. Numerous companies planning to Submarket Statistics & Methodology...... 7 expand corporate or regional headquarters in the DFW market include: Toyota Motor Our Team...... 8 Corporation, JP Morgan Chase, Liberty Mutual, Fannie Mae, Verizon Corporation, Charles Schwab,Updated and 6/27/2016 GEICO among others.

Employment Trends

FOR INFORMATION: 125 5%

75 3% KURT CHERRY 25 1%

Executive Vice President Thousands -25 -1% 972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F

WADE BOWLIN Jobs Added Annual % Change Updated 3/24/17 President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Central Division Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 208.3 200 4.2% Up Senior Vice President, Research Manufacturing 265.5 264.1 0.5% Up 713.209.5704 Trade, Transportation & Utilities 759.3 733.2 3.6% Up [email protected] Information 82.5 81.3 1.5% Up Financial Activities 288.2 277.8 3.7% Up Professional & Business Services 593.3 569.2 4.2% Up Education & Health Services 439.2 426.3 3.0% Up Leisure & Hospitality 373.2 351.6 6.1% Up Other Services 123.8 118.0 4.9% Up Government 433.9 426.4 1.8% Up 2 Source: U.S. Bureau of Labor Statistics, Employment Data as of February 2017

PAGE Source: U.S. Bureau of Labor Statistics, Employment Data as of Febuary 2017 All Employees, in Thousands

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q1 2017 OFFICE MARKET ASSESSMENT

The DFW office market kicked off 2017 with a swift start recording 1,049,652 SF of direct absorption, increasing its trailing-12 month total to nearly 4.6 million SF of net occupancy gains. Construction deliveries, tenant relocations, and organic expansion all played a role in the office sector’s 23rd consecutive quarter of absorption growth.

Class A properties reaped the most benefit from the quarterly occupancy gains with a net 952,351 SF of direct move-ins, bringing their trailing-12 month sum to more than 4.5 million SF of space. Despite the large absorption gain, the Class A direct occupancy rate declined by 50 basis points to 82.3%, as quarterly construction deliveries outpaced leasing demand. Over the prior 12 months, however, Class A buildings have added 10 basis points to their occupancy rate. Meanwhile, the Class B sector was lackluster, with a quarterly net absorption loss of 396 SF and a trailing-12 month absorption loss of 198K DFW METROPLEX RANKS 2ND IN JOB GROWTH: SF of direct space. Class B properties ended the first quarter at 82.8% occupied, a 20 Among the metropolitan markets with a workforce basis point decrease from the prior quarter and prior year. over 1 million, the DFW Metroplex ranks second in annual employment growth, following New York- DFW’s Class A sector has absorbed more than 7.9 million SF of space since the beginning Newark-New Jersey. of 2015, accounting for 83.4% of the total space absorbed in the metroplex. During that time, more than 10 million SF of new Class A product delivered to the market and HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical areas a cyclical occupancy peak occurred. Flight-to-quality will remain a significant trend to in the number of Fortune 500 headquarters. The metro’s acknowledge when assessing leasing and marketing strategies. Notable Class A tenants top employers are concentrated in telecommunications, with leases scheduled to commence during 2017 include: Liberty Mutual (1.1 million transportation, aerospace/defense, health care, high SF), AmerisourceBergen Specialty Group (300K SF), Signet Jewelers (225K SF), Rolex technology, financial services and retail. (130K SF) and NTT Data International (127K SF). DFW ECONOMIC OUTLOOK: The North Texas region’s historically strong employment FORECAST and population growth, diversified economy and low costs of doing business will lead to above-average • With a number of large high-quality availabilities diminishing from the market and performance. The employment outlook for Dallas- record-high rental rates, lease negotiations will remain in favor of landlords within Fort Worth remains strong with job growth forecasted the most desirable submarkets during the oncoming quarters. to average 2.8% per year through 2019, according to • Building owners that continue to put money back into their office buildings and Moody’s Analytics. add amenities will continue to outperform undercapitalized assets. • Corporate relocations and expansions will continue to strengthen the office market fundamentals, as the metro area’s business-friendly environment, lower cost of doing business, and well-educated labor force attract companies to the Metroplex.

Updated 12/28/16

MARKET TREND INDICATORS Office Market Trends Current Change from Previous 12-month Quarter Quarter Year Forecast 8,000 88% Direct Occupancy 82.7% 6,000 86% Trailing 12 mos. Direct Net 4,557,789 Absorption 4,000 84% Under Construction 8,103,780 2,000 82% Direct Asking Rents $24.57 0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q1 Office Market 2017 NET ABSORPTION & OCCUPANCY

• Upper Tollway/West Plano led all DFW submarkets in quarterly absorption gains with 488,449 SF of direct space. The largest gains took place as tenants moved into 162K SF at the newly delivered Legacy West and Securus Technologies occupied 154K SF at 4000 International Pky. Capital One also moved into 205K SF of corporate- owned space on Dominion Pky. • Las Colinas witnessed 399,618 SF of quarterly absorption gains, increasing its trailing 12-month absorption count to 910,261 SF. CoreLogic moved into their 327K SF built-to-suit, while American Airlines moved into 124K SF at Royal Ridge 3. Several companies moved into corporate-owned space, including McKesson (527K SF) and Kubota Tractor Corp (135K SF). • Quorum/Bent Tree kicked off 2017 with a combined 291,456 SF of direct space absorbed. Shelton School’s occupancy of 317K SF space at 17301 Preston Rd The current real estate cycle in DFW is experiencing an unprecedented highlighted tenant movement. The Lone Star Building, formerly occupied by Qorvo run. The DFW office market still looks strong and healthy. It feels like became available during the quarter, adding 136K SF of Class A competitive space. the 7th inning stretch of a double-header – Play Ball! Stream Energy and Behringer also occupied a combined 89K SF of at Tollway Center. • The flight from Dallas CBD continued through the first quarter with a net absorption KURT CHERRY loss of 156,188 SF of space. Occupancy losses at Pacific Place, Thanksgiving Tower Executive Vice President, Dallas Regional Office and Fountain Place negated move-ins by Allegro Development (23K SF) and Jacobs Central Division Engineering (17K SF). Large move-ins by The Dallas Morning News (92K SF), WeWork (84K SF) and Civitas (25K SF) will boost absorption later in 2017. • East LBJ Freeway experienced a very active quarter, despite a modest net absorption loss of 10,428 SF of direct space. Large occupancy losses occurred as The Republic Group vacated 111K SF of Class B space at 5525 LBJ and a net 49K Updated 4/4/17 SF of tenants vacated Class A space at Executive Center. Small-to-medium sized SUBMARKET OCCUPANCY RANKING Updated 4/4/17tenants accounted for the bulk of move-ins, highlighted by LALA U.S. taking 21K SF Submarket Occupancy Ranking of Class A space at Churchill Tower. Occ. Y-O-Y % Rank Submarket Rate Change 1 Lewisville / Denton 91.6% 3.4% Direct Net Absorption vs. Completions 2 Preston Center 89.7% 0.1% 2,500 3 South Ft Worth 89.0% -1.7% 2,000 4 Uptown/Turtle Creek 88.4% -1.7% 5 Central Expy 87.8% 1.2% 1,500 6 Frisco / The Colony 87.5% -1.1% 7 Ft Worth CBD 86.6% -1.1% 1,000

8 Upper Tollway / West Plano 86.1% 2.4% Thousands of SF In 500 9 Plano 85.1% 8.7% 10 Arlington / Mansfield 84.8% 1.0% 0 11 Las Colinas 84.8% -0.2% Updated 4/4/17 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 12 Quorum / Bent Tree 84.3% -1.1% 13 West LBJ 83.2% 7.5% Direct NetDirect Absorption Occupancy Rates Completions 14 Allen / McKinney 82.6% -2.9% 15 Richardson 82.2% 4.0% 86% 16 East / South Dallas 82.1% -5.8% 17 Mid Cities 80.3% -0.1% 84% 18 East LBJ 75.9% 1.2% 19 Dallas CBD 74.2% -2.6% 82% 20 Stemmons 73.8% 1.0% 21 North / Northeast Ft Worth 73.5% -4.1% 80%

78% Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q1 2017 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates improved by $0.50 to $28.05 per SF during the quarter and have grown by 4.4% or $1.19 over the prior 12 months. Class A rents, which are at record highs, are currently 13.9% higher than their previous peak at mid-2008. • Average Class B asking rents declined by $0.07 from record levels to $20.56 per SF, as large blocks of space hit the competitive market. Rents in Class B buildings have still risen 3.7% or $0.74 over the past year. • Nearly all DFW submarkets experienced appreciation in asking rental rates over the prior 12 months as market-wide occupancy rates have been steadily improving since 2010. However, opportunity exists for tenants to capitalize on attractive lease prospects in submarkets with higher vacancy rates: Stemmons and LBJ Freeways, Dallas CBD, Richardson and North/Northeast Fort Worth. • Landlords with Class A assets in submarkets with the lowest vacancy rates and higher amounts of new construction have been able to aggressively raise asking Although DFW has always been a boom-or-bust market, the sound rents. The largest annual Class A rent growth occurred in Frisco/The Colony (16.1%), fundamentals indicate we still have some runway left in this cycle. South Fort Worth (11.0%), Allen/McKinney (6.9%), Upper Tollway/West Plano (6.7%) Historically, speculative development has been the proverbial emergency and Uptown/Turtle Creek (6.2%). brake on growth, but recent spec buildings constructed in the premier • The trailing 12-month volume of Class A leasing activity decreased to 9.5 million SF, submarkets have leased up quickly. lagging its 10-year average by 2.6% and its five-year average by 18.7%. Class B annual leasing volume of 7.6 million SF, is trailing its five-year average by 14.4%. KURT CHERRY • The flight-to-quality trend, which has dictated much of the market fundamentals Executive Vice President, Dallas Regional Office coming out of the Great Recession, still remains relevant. However, many large-space Central Division users moved into newly acquired or developed owner-user office space during the Updated 4/4/17 quarter, such as McKesson (527K SF at The Apex at Las Colinas Crossing), Kubota Updated 3/31/17 Submarket Rental Rate Ranking Tractor (135K SF in Las Colinas), Hillwood (200K SF on Turtle Creek Blvd) and Capital SUBMARKET RENTAL RATE RANKING One (205K SF in West Plano). Rental Y-O-Y % Rank Submarket Rate Change Rental Rates 1 Uptown/Turtle Creek $37.86 4.0% ($/SF/Yr. Full Service) $30 2 Preston Center $35.54 5.0% $28 3 Frisco / The Colony $33.55 11.9% $26 4 Upper Tollway / West Plano $31.11 8.1% $24 5 Central Expy $27.41 3.7% 6 Ft Worth CBD $25.86 -1.7% $22 7 Dallas CBD $25.51 4.3% $20 8 Allen / McKinney $25.00 6.8% $18 9 South Ft Worth $24.67 12.7% $16 10 Las Colinas $24.49 3.2% Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Updated 4/4/17 11 Quorum / Bent Tree $23.72 1.4%

Class A Class B 12 East LBJ $23.35 5.9% 13 Mid Cities $23.19 -0.6% Direct Leasing Activity Rolling 12-Months 14 Richardson $22.85 8.2% 14,000 15 Lewisville / Denton $22.00 0.8% 12,000 16 Plano $20.68 -7.3% 17 North / Northeast Ft Worth $20.36 8.9% 10,000 18 Arlington / Mansfield $19.31 4.7% 8,000 19 West LBJ $18.72 4.8% 6,000 20 East / South Dallas $17.70 -6.1%

In Thousands of of SF In Thousands 4,000 21 Stemmons $15.62 1.0% 2,000 0 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17

5 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q1 Office Market 2017 CONSTRUCTION

• The DFW office development pipeline decreased for the first time in the past 18 months during the quarter to 8.1 million SF (excluding owner-occupied projects). Developers have remained confident on breaking ground on new construction and renovating sub-premium office product as the pre-lease rate currently sits at 41.7%. • During the first quarter, developers completed construction or renovation of 1.8 million SF of competitive office product with 33.9% currently pre-leased. The largest construction deliveries involved Karahan and Columbus Realty Partners’ 377K SF Legacy West project and Billingsley’s 327K SF built-to-suit for CoreLogic. Matthews Southwest completed renovation of the Historic Dallas HS Building in Dallas CBD. • Developers commenced construction on approximately 1.6 million SF of new RECENT ANNOUNCEMENTS construction and renovation product (excluding owner-occupied projects). • Amazon.com will nearly double its regional Regent Properties kicked off renovation of 912,474 SF in four office buildings at supply chain headquarters at the Galleria Towers Legacy Central in Plano, with expected delivery dates between summer-2017 and by approximately 90K SF as the online retailer early-2018. KDC and Westdale began construction of a 291K SF Class A tower in continues its growing presence in the North East/South Dallas called The Epic Deep Ellum. Texas region. Build-out is already underway of the • The construction boom has been largely concentrated in the Upper Tollway/West former FedEx space for a 4Q 2017 move-in. Plano, Las Colinas and Uptown/Turtle Creek submarkets, which combine to host • NTT Data International inked a deal during the 49.5% of the new space in the construction pipeline. However, new construction and renovation has spread to other submarkets where there has been a scarcity of quarter with Gaedeke Group to lease 127K SFUpdated at 4/4/17 One Legacy West for its American headquarters. high-quality availabilities, such as Frisco/The Colony and Plano. The Japanese company will initially house 600 • During the remainder of 2017, developers are slated to deliver 4.9 million SF of new office space at 44.2% pre-leased, accounting for 62.5% of the buildings under employees, new hires and relocations, in their Updated 7/6/2015 new office later in 2017. construction and renovation (excluding owner-occupied projects). Construction Pipeline • Westdale and KDC have begun construction on a mixed-use project called The Epic Deep Ellum, a 291K SF Class A office tower in East Dallas at Good 9,000 Construction Pipeline Latimer and Elm St. The office tower is part of a 8,000 mixed-use project that will include a residential 7,000 tower and a boutique hotel. Perkins + Will is 14,0006,000 the architect of the office building which will lie 12,0005,000 adjacent to the DART Deep Ellum rail station. 4,000 • Construction on Texas Live! recently kicked off, 10,0003,000

with an anticipated delivery date before the of SF In Thousands 2,000 Texas Rangers’ 2018 baseball season. Texas Live! 8,000 1,000 is a 200K SF venue adjacent to Globe Life Park 6,000 0 which will feature a luxury 300-room hotel, 35K Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 SF of convention space, as well as restaurant and

In Thousands of SF In 4,000 entertainment space. Officials predict Texas Live! will generate 3,000 jobs and upwards of 3 million 2,000 Under Construction Delivered visitors to Arlington. SIGNIFICANT0 PROJECTS UNDER CONSTRUCTION • Garfield Public/Private LLC recently broke Q2 12 Q4 12 Q2 13 Q4 13 Q2% PRE-14 Q4 14 Q2TARGET 15 ground on the highly-anticipated Westin Irving PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY Convention Center at Las Colinas, a piece of a Toyota Motor Co. HQ * 2,100,000 UpperUnder Tollway/ WConstruction Plano Toyota North AmericaDelivered 100% KDC 2Q 2017 three-part destination in Irving. The 350-room JP Morgan Chase * 1,400,000 Upper Tollway/ W Plano JP Morgan Chase 100% KDC 4Q 2017 hotel, which is scheduled for a 2018 completion, Liberty Mutual Campus ** 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 4Q 2017 will host visitors to the Irving Convention Center Park District Tower 516,093 Uptown / Turtle Creek PwC 37% Trammell Crow 3Q 2018 and the Irving Music Factory, which will open by The Union 418,132 Uptown / Turtle Creek Weaver and Tidwell 58% RED Development 2Q 2018 September. TD Ameritrade HQ * 355,000 Mid Cities TD Ameritrade 100% Adolphson & Peterson 4Q 2017 1915 Hurd 339,359 Las Colinas N/A 5% Mariner RE Mgmt. 2Q 2017 Interceramic HQ * 330,000 Upper Tollway/ W Plano Interceramic 100% Billingsley Co. 2Q 2017 Legacy Central 2 † 308,496 Plano N/A 0% Regent Properties 1Q 2018 Hall Office Park 300,000 Frisco / The Colony N/A 0% Craig Hall 4Q 2017 6 Granite Park Seven ** 300,000 Upper Tollway/ W Plano Fannie Mae 100% Granite Properties 1Q 2018 PAGE * Corporate-owned ** Build-to-suit † Under Renovation Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q1 2017

SUBMARKETUpdated 4/4/17 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Trailing-12 Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Months Current Qtr Construction Class A Class B Dallas CBD 27,123,294 8,269,513 541,571 74.2% (156,188) (242,678) 92,834 569,077 $26.38 $19.98 Uptown / Turtle Creek 11,604,116 1,551,747 285,762 88.4% (10,517) 339,585 - 1,295,323 $39.74 $32.24 Preston Center 4,301,578 557,177 111,124 89.7% (38,243) (13,039) - 171,583 $37.17 $29.52 Central Expy 11,737,913 1,692,804 155,167 87.8% (50,415) 35,046 - 0 $28.78 $24.70 Quorum / Bent Tree 20,457,808 3,963,822 585,847 84.3% 291,456 (50,026) - 0 $28.18 $20.09 Upper Tollway / West Plano 19,667,092 3,446,055 661,714 86.1% 488,449 925,556 812,397 1,605,604 $33.17 $26.22 West LBJ 4,360,538 981,663 187,400 83.2% 62,589 213,154 - 0 $19.23 $18.47 East LBJ 16,061,659 4,053,806 334,647 75.9% (10,428) 160,582 - 0 $26.83 $18.98 Las Colinas 31,278,166 5,791,070 1,022,049 84.8% 399,618 910,261 544,183 980,578 $28.31 $21.01 Stemmons 10,949,549 3,074,972 105,477 73.8% 1,359 168,842 - 0 $16.12 $15.72 Richardson 17,015,859 3,676,628 270,931 82.2% (1,789) 1,089,338 - 322,000 $26.44 $19.63 Allen / McKinney 3,582,536 570,954 20,188 82.6% (20,959) 44,633 22,670 280,792 $28.41 $23.66 Plano 4,224,611 682,190 38,250 85.1% (11,145) 263,232 - 912,474 $22.44 $20.38 Frisco / The Colony 5,156,182 606,704 39,953 87.5% 34,510 303,426 - 914,136 $35.95 $27.31 East / South Dallas 7,776,807 1,463,511 34,685 82.1% (79,397) (494,198) - 330,384 $28.70 $17.54 Arlington / Mansfield 6,507,784 1,030,074 54,266 84.8% 21,884 75,601 - 200,000 $21.06 $19.07 Mid Cities 9,984,206 2,914,299 154,152 80.3% (38,739) 203,725 167,922 215,340 $26.92 $19.92 Ft. Worth CBD 8,461,703 1,109,944 227,832 86.6% 31,452 55,289 - 280,489 $29.32 $19.92 North / Northeast Ft Worth 4,266,263 1,209,738 175,900 73.5% 79,707 189,063 23,940 0 $21.41 $20.19 Lewisville / Denton 6,005,091 1,018,108 117,980 91.6% (27,738) 158,372 - 26,000 $25.43 $20.92 South Ft Worth 8,231,463 1,181,063 157,186 89.0% 84,186 222,025 181,182 0 $30.26 $22.57 Totals 238,754,218 48,845,842 5,282,081 82.7% 1,049,652 4,557,789 1,845,128 8,103,780 $28.05 $20.56

Total Direct Current Trailing-12 Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Months Current Qtr Construction Rent Change Class A 127,080,111 26,724,624 3,575,101 82.3% 952,351 4,530,297 1,650,329 6,929,179 $28.05 4.4% Class B 102,520,141 20,555,415 1,692,355 82.8% (396) (197,754) 194,799 1,174,601 $20.56 3.7% Class C 9,153,966 1,565,803 14,625 86.5% 97,697 225,246 - - $16.15 -1.6% Totals 238,754,218 48,845,842 5,282,081 82.7% 1,049,652 4,557,789 1,845,128 8,103,780 $24.57 4.6% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE Q1 2017

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Vice President Marketing Manager President [email protected] Leasing Director [email protected] Central Division [email protected] [email protected] [email protected]

Ariel Guerrero Doug Berry James Decman Senior Vice President Vice President Senior Research Analyst Research Creative Director [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS/FT. WORTH OFFICE MARKET REPORT FOURTH QUARTER 2016

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q4 Office Market 2016 ECONOMIC OVERVIEW

The North Texas regional economy finished the year at full throttle the way it began 2016. The diverse region continues attracting the relocation of new companies while encouraging expansions within the metro area. The booming economy has added more than 100,000 jobs for the third consecutive year, and looks to kick off 2017 in the same energetic fashion. If there is any drawback to be found from the economic expansion, it would be increased highway congestion or tight housing inventories, which could curtail future growth.

The Dallas-Fort Worth Metropolitan statistical area added a net 114,800 new jobs during the 12 months (ending November 2016), representing an annual employment payroll increase of 3.3%. Every industry sector, with the exception of the Manufacturing sector (-1,000 jobs), experienced net job growth of at least 1.0% over the prior year. The industry sectors with the largest annual job growth were Trade, Transportation & Utilities (34,000 jobs or TABLE OF CONTENTS 4.5% growth), Professional & Business Services (25,000 jobs or 4.4%), and the Financial Activities sector (13,600 jobs or 4.8%). As a result of the consistent job growth, the DFW Economic Overview...... 2 Metroplex unemployment rate has dropped by 40 basis points over the past year to 3.5%, Office Market Assessment...... 3 outperforming the state and national rates of 4.6% each. Net Absorption & Occupancy...... 4 Rental Rates & Leasing Activity...... 5 The North Texas economy has shown little signs of slowing down, even in the face of an oil downturn. Barring an unforeseen catastrophe that interrupts the national or global Construction...... 6 economy, the North Texas economy will keep its foot on the pedal through 2017 and 2018. Submarket Statistics & Methodology...... 7 Numerous companies planning to expand corporate or regional headquarters in the DFW Our Team...... 8 market include: Toyota Motor Corporation, JP Morgan Chase, Liberty Mutual, Fannie Mae, VerizonUpdated Corporation, 12/28/2016 Charles Schwab, and GEICO among others.

Employment Trends

FOR INFORMATION: 125 5%

75 3% KURT CHERRY 25 1%

Executive Vice President Thousands -25 -1% 972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F 18F

WADE BOWLIN Jobs Added Annual % Change Updated 12/22/16 Executive Vice President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Managing Director Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 205.4 201.7 1.8% Up Senior Vice President, Research Manufacturing 261.3 262.3 -0.4% Down 713.209.5704 Trade, Transportation & Utilities 783.7 749.7 4.5% Up [email protected] Information 81.7 80.9 1.0% Up Financial Activities 295.0 281.4 4.8% Up Professional & Business Services 598.4 573.4 4.4% Up Education & Health Services 441.4 428.1 3.1% Up Leisure & Hospitality 370.7 360.5 2.8% Up Other Services 121.5 117.8 3.1% Up Government 431.0 419.5 2.7% Up 2 Source:Source: U.S. U.S. Bureau Bureau of of Labor Labor Statistics, Employment Employment Data Data as as of ofNovember November 2016 2016 PAGE All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q4 2016 OFFICE MARKET ASSESSMENT

The DFW office market completed the fourth quarter with 1,353,085 sq. ft. of direct net absorption – its 22nd consecutive quarterly gain – increasing its 2016 annual count to nearly 4.25 million sq. ft. Corporate relocations and expansions within the market boosted yearly absorption gains, and will continue to boost absorption numbers throughout 2017.

During the quarter, Class A properties absorbed a net 948,298 sq. ft. of direct space, bringing the 2016 total to 3.97 million sq. ft., its largest yearly absorption gain since 1999. The Class A direct occupancy rate improved by 30 basis points to 82.8% during the quarter, but has declined by 40 basis points since the year-end 2015 due to new supply outpacing leasing demand. Meanwhile, the Class B sector experienced its best quarter of 2016 with a net absorption gain totaling 446,962 sq. ft. of direct space, bringing its yearly total back into positive territory at 171,674 sq. ft. of growth. Despite the annual absorption gain, Class DFW METROPLEX RANKS 2ND IN JOB GROWTH: B properties experienced an occupancy loss of 20 basis points during the fourth quarter Among the metropolitan markets with a workforce to 82.1% and subsided 10 basis points during 2016 as several owner-occupied office over 1 million, the DFW Metroplex ranks second in buildings entered the competitive market in recent months. annual employment growth, following New York- Newark-New Jersey. DFW’s Class A sector has been carrying the whole market on its back, as it accounted for 94.0% of the 2016 direct absorption gains. As new construction delivers to the competitive HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical areas market, and as the flight-to-quality trend witnessed during the current expansion period in the number of Fortune 500 headquarters. The metro’s remains relevant, the Class A sector will continue to drive market-wide absorption. Among top employers are concentrated in telecommunications, the notable tenants with leases commencing during 2017 include: Liberty Mutual (1.1 transportation, aerospace/defense, health care, high million SF), CoreLogic (327,183 SF), AmerisourceBergen Specialty Group (300,000 SF), technology, financial services and retail. Signet Jewelers (225,000 SF) and Rolex (130,000 SF). DFW ECONOMIC OUTLOOK: FORECAST The North Texas region’s historically strong employment • With a number of large high-quality availabilities diminishing from the market and and population growth, diversified economy and low record-high rental rates, lease negotiations will remain in favor of landlords within the costs of doing business will lead to above-average most desirable submarkets during the oncoming quarters. performance. The employment outlook for Dallas- • Due to the recent completion of the Panama Canal expansion, the likely possibility Fort Worth remains strong with job growth forecasted of a high-speed rail line connecting Dallas to Houston, and the comparative superior to average 2.8% per year through 2019, according to accessibility, DFW is poised to become a major distribution hub, which will attract Moody’s Analytics. additional corporate relocations and expansions. • Pending corporate relocations and expansions will continue to strengthen the office market fundamentals, as the metro area’s business-friendly environment, lower cost of doing business, and well-educated labor force attract companies to the Metroplex. MARKETMarket TREND Trend Indicators INDICATORS

Updated 12/28/16 Current Change from Previous 12-month Quarter Quarter Year Forecast Office Market Trends Direct Occupancy 82.6% Trailing 12 mos. Direct Net Absorption 4,225,556 8,000 88%

6,000 86% Under Construction 8,321,969

4,000 84% Direct Asking Rents $24.24 2,000 82%

0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q4 Office Market 2016 NET ABSORPTION & OCCUPANCY

• Las Colinas led all DFW submarkets with 335,783 sq. ft. of direct space absorbed, increasing its 2016 total to 983,198 sq. ft. of growth. The largest quarterly gain involved OneSource Virtual Inc. moving into their newly delivered 215,000 sq. ft. built-to-suit. The submarket’s occupancy rate has improved by 200 basis points during the year to 86.1%. • Uptown/Turtle Creek witnessed 202,191 sq. ft. of direct net absorption during the quarter, increasing its annual total to 492,285 sq. ft. The largest move-ins took place at McKinney & Olive, as Gardere Wynne Sewell (115K SF), Cushman & Wakefield (41K SF) among others began occupancy after its 3Q16 delivery. Despite the significant absorption gains, the submarket’s occupancy rate has only improved 10 basis points as leasing demand has narrowly outpaced new construction in 2016. • Richardson posted 138,184 sq. ft. of direct absorption gains during the quarter, DFW’s office market has strong momentum going into the second- increasing its 2016 total to 1.1 million sq. ft. Qorvo (114K SF) accounted for most of half of 2016 and is currently on pace to record its best year of direct the quarterly gains with their move-in at Campbell Commons. Move-ins by State absorption growth since 1999. Strong office-using employment Farm and Real Page earlier in the year helped boost Richardson’s absorption tally. growth continues to spur leasing demand but there are early signs • Upper Tollway/West Plano underwent an active quarter with a net 120,600 sq. ft. that construction deliveries could slightly outpace demand due to a of direct space absorbed. Medium-sized Class A move-ins by QBE North America recent surge in construction activity. (40K SF), Main Event Entertainment (29K SF) and Coca-Cola (27K SF) helped offset move-outs in the Class B sector. The submarket has a combined 2.4 million sq. ft. KURT CHERRY of competitive office space under construction with 66.7% of this space pre-leased, Executive Vice President, Dallas Regional Office so occupancy rates could decline as new product delivers. Central Division • Dallas CBD suffered the largest quarterly absorption loss with a net 77,792 sq. ft. of Updated 10/5/16 move-outs. Although a large tenant moved into 126K SF at Renaissance Tower, the positive absorption was negated by move-outs of Gardere Wynne Sewell (215K SF) SUBMARKETSubmarket OCCUPANCY Occupancy RANKING Ranking Updated 12/28/16and others in the submarket. Dallas CBD has seen 411,324 sq. ft. of tenants vacate during 2016, causing occupancy rates to plunge 480 basis points to 73.7%. Occ. Y-O-Y % Rank Submarket Rate Change Direct Net Absorption vs. Completions 1 Lewisville / Denton 92.7% 7.0% 2,500 2 Preston Center 90.6% -0.3% 3 South Ft Worth 90.1% -1.4% 2,000 4 Uptown/Turtle Creek 88.5% 0.1% 5 Central Expy 88.4% 3.9% 1,500 6 Frisco / The Colony 86.9% -1.4% 1,000 7 Ft Worth CBD 86.2% -2.3% In Thousands of SF In 8 Las Colinas 86.1% 2.0% 500 9 Upper Tollway / West Plano 85.7% 0.5% 10 Arlington / Mansfield 84.9% 1.8% 0 Updated 12/28/16 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 11 Allen / McKinney 84.6% -5.5% 12 Quorum / Bent Tree 83.3% -2.0% Direct Net Absorption Completions 13 East / South Dallas 83.0% -4.9% Direct Occupancy Rates 14 Mid Cities 82.7% -1.0% 15 West LBJ 82.5% 8.2% 86% 16 Richardson 82.4% -2.6% 17 East LBJ 76.0% 2.2% 84% 18 Stemmons 74.2% 1.2% 19 Dallas CBD 73.7% -4.8% 82% 20 Plano 73.0% -4.1% 21 North / Northeast Ft Worth 71.8% -6.8% 80%

78% Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q4 2016 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates, which have improved each of the prior 17 quarters, subsided by $0.02 to close out 2016 at $27.55, yet have still appreciated $1.06 or 4.0% over the past year. Class A rents are currently 11.9% higher than their prior cyclical peak recorded in 2008. • Class B asking rents, currently sitting at record levels, improved by $0.27 during the quarter to $20.63 per sq. ft. (gross), and have grown by $0.90 or 4.6% during 2016. • Nearly all DFW submarkets experienced rent growth during 2016, while market- wide vacancies have been hovering around 15-year lows. However, opportunity to capitalize on attractive lease opportunities still exists in submarkets with high vacancy, such as Stemmons and LBJ Freeways, Dallas CBD, Richardson and Plano. • Landlords have been able to aggressively raise Class A asking rental rates in the submarkets with the lowest vacancy rates or the highest concentration of new development. The largest annual Class A rent increases have taken place in Uptown/ “A steady influx of new product coming online will provide tenants Turtle Creek (8.1% or $3.00), Las Colinas (6.0% or $1.60), Frisco/The Colony (21.0% or numerous opportunities to upgrade their space or expand, however, $6.41) and South Fort Worth (6.4% or $1.73). many of these companies could experience sticker shock as rents have hit • The trailing 12-month volume of Class A leasing activity has contracted in recent record levels within the past year. months to 7.9 million sq. ft., lagging 16.5% behind its 10-year average of 9.5 million sq. ft. and 30.2% behind its five-year average. On the other hand, Class B annual KURT CHERRY leasing velocity at 7.0 million sq. ft. trails its 10-year average by 13.2%. Executive Vice President, Dallas Regional Office • The flight-to-quality trend witnessed during the current expansion period has Central Division been relevant during 2016. However in recent months, a flurry of large leases have taken place in second-generation Class B space, such as Shelton School (317K sf at Updated 12/22/16 17301 Preston), Caliber Home Loans (183K sf at Point West I) and Qorvo (114K sf at Updated 12/22/16 Submarket Rental Rate Ranking Campbell Commons). SUBMARKET RENTAL RATE RANKING Rental Y-O-Y % Rental Rates Rank Submarket Rate Change ($/SF/Yr. Full Service) $28 1 Uptown/Turtle Creek $38.03 7.8% 2 Preston Center $34.78 2.3% $26 3 Frisco / The Colony $34.02 14.9% $24 4 Upper Tollway / West Plano $28.96 1.8% $22 5 Central Expy $27.06 4.7% 6 Ft Worth CBD $25.96 -1.1% $20 7 Dallas CBD $25.39 5.4% $18 8 Plano $25.35 10.8% $16 9 Las Colinas $24.24 1.6% Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 10 Allen / McKinney $24.14 0.7% Updated 12/22/16 11 Quorum / Bent Tree $23.78 6.1% Class A Class B 12 South Ft Worth $23.33 7.2% Direct Leasing Activity 13 East LBJ $22.85 5.4% Rolling 12-Months 14 Mid Cities $22.66 -2.2% 14,000 15 Richardson $22.34 6.7% 12,000 16 Lewisville / Denton $22.19 1.5% 10,000 17 North / Northeast Ft Worth $21.56 18.3% 8,000 18 Arlington / Mansfield $19.09 5.8% 19 East / South Dallas $18.40 -7.4% 6,000 20 West LBJ $17.53 -0.8%

In Thousands of of SF In Thousands 4,000 21 Stemmons $15.60 2.3% 2,000 0 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16

5 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q4 Office Market 2016 CONSTRUCTION

• The office construction pipeline has inflated by 32.1% during 2016 to 8.3 million sq. ft. (excluding corporate-owned projects) and is sitting at its highest level since mid- 1999. At 43.5% pre-leased, developers remain confident in future leasing demand to move forward on speculative construction. • During the fourth quarter, developers completed construction on only 291,000 sq. ft. of competitive office product at 82.8% pre-leased. Billingsley Company’s 215,000 sq. ft. built-to-suit for OneSource Virtual Inc. in Las Colinas highlighted the quarter’s deliveries. Corporate-owned buildings for Baylor Health also delivered during the fourth quarter in East Dallas and Allen/McKinney. • Developers broke ground on 655,310 sq. ft. of new office product during the quarter. Van Trust Real Estate began construction on The Offices One, a 228,000 sq. ft. Class A speculative building in Frisco/The Colony, and Billingsley Company began RECENT ANNOUNCEMENTS construction on a 225,000 sq. ft. built-to-suit for Signet Jewelers in Las Colinas. • Pioneer Natural Resources is moving forward on • The construction boom has been largely concentrated in the Upper Tollway/West designs for their new $100 million headquarters in Plano, Las Colinas and Uptown/Turtle Creek submarkets, which combine to host Las Colinas totaling approximately 900K SF within 61.5% of the new space in the construction pipeline. However, office development two office towers in the proposed $1.5 billion has spread to other submarkets where there has been a lack of high-quality Hidden Ridge mixed-use campus. Pioneer’s design availabilities, such as Frisco/The Colony, Richardson and Fort Worth CBD. phase should complete in early-2017, with ground • During the first half of 2017, developers are slated to deliver 1.95 million sq. ft. of new breaking occurring mid-2017. office space, which accounts for 23.6% of the office buildings under construction (excluding corporate-owned buildings), with only 34.4% of that space having pre- • WatchGuard Video, “the world’s largestUpdated 12/22/16 manufacturer of law enforcement video systems,” lease commitments. All of these scheduled deliveries will take place in the Upper is planning to build a $46 million, 200K SF office Tollway/West Plano, Las Colinas and Uptown/Turtle Creek submarkets. building in Allen/McKinney to relocate their Updated 7/6/2015 headquarters. Plans are broken out in two phases Construction Pipeline which will deliver in 2017 and 2022. The project will include a showroom, training room, racquetball court, a gym, collaboration areas, a health clinic 9,000 Construction Pipeline and recreational spaces. 8,000 • AmerisourceBergen Specialty Group has signed 7,000 a 300K SF lease to consolidate its North Texas 14,0006,000 workforce in Billingsley Company’s Offices of 12,0005,000 Austin Ranch in the Upper Tollway/West Plano 4,000 submarket. This $113 million built-to-suit will be 10,0003,000

the largest building in the development and will of SF In Thousands 2,000 break ground during 2017 for a 2019 delivery. 8,000 1,000 • Goldman Sachs is rumored to be in final 6,000 0 negotiations for a 150K SF lease within Trammell Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Crow Center in Dallas CBD. Goldman Sachs, which

In Thousands of SF In 4,000 would be relocating from Irving, would move about 1,200 back-office employees in 2017 to 2,000 Under Construction Delivered TCC, which was able to offer the company a high SIGNIFICANT0 PROJECTS UNDER CONSTRUCTION parking ratio and competitive lease rate. Q2 12 Q4 12 Q2 13 Q4 13 Q2% PRE-14 Q4 14 Q2TARGET 15 • Occidental Petroleum Corp. signed a 120K SF lease PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY at Cawley Management’s proposed Fourteen 555 Toyota Motor Co. HQ * 2,100,000 UpperUnder Tollway/ WConstruction Plano Toyota North AmericaDelivered 100% KDC 2Q 2017 in Quorum/Bent Tree. Fourteen 555 will feature Liberty Mutual Campus ** 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 4Q 2017 two six-story office buildings totaling a combined Park District Tower 516,093 Uptown / Turtle Creek PwC 37% Trammell Crow 3Q 2018 480K SF, a three-story amenity building, fitness and The Union 418,132 Uptown / Turtle Creek Weaver and Tidwell 41% RED Development 2Q 2018 conference centers, a full-service restaurant among Legacy West 377,441 Upper Tollway/ W Plano Toyota (20k SF) 11% Karahan Companies 2Q 2017 other amenities. Construction on the first building is expected to begin in the coming months for a TD Ameritrade HQ * 355,000 Mid Cities TD Ameritrade 100% Adolphson & Peterson 4Q 2017 mid-2018 completion. 1915 Hurd 339,359 Las Colinas N/A 0% Mariner RE Mgmt. 1Q 2017 Interceramic HQ * 330,000 Upper Tollway/ W Plano Interceramic 100% Billingsley Co. 1Q 2017 CoreLogic HQ ** 327,183 Las Colinas CoreLogic 100% Billingsley Co. 1Q 2017 One Legacy West 307,767 Upper Tollway/ W Plano N/A 9% Gaedeke Group 1Q 2017 6 Hall Office Park 300,000 Frisco / The Colony N/A 0% Craig Hall 4Q 2017 PAGE * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q4 2016

SUBMARKETUpdated 12/28/16 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,099,738 8,535,404 579,290 73.7% (77,792) (411,324) - 651,153 $26.22 $19.96 Uptown / Turtle Creek 11,561,855 1,542,367 302,072 88.5% 202,191 492,285 - 1,300,471 $39.88 $32.92 Preston Center 4,348,145 555,034 97,021 90.6% 5,434 (27,610) - 171,583 $36.55 $29.55 Central Expy 11,736,603 1,613,333 147,767 88.4% 43,070 391,198 - 0 $28.73 $23.70 Quorum / Bent Tree 20,448,940 3,882,678 637,525 83.3% (55,146) (428,578) - 0 $28.83 $20.00 Upper Tollway / West Plano 17,013,242 2,493,059 556,752 85.7% 120,600 404,172 40,000 2,370,001 $31.08 $25.03 West LBJ 4,360,538 1,009,595 147,135 82.5% 79,128 162,034 - 0 $18.70 $17.06 East LBJ 15,947,668 4,105,269 296,709 76.0% 61,020 302,335 - 0 $26.43 $18.05 Las Colinas 30,759,763 5,557,518 804,668 86.1% 335,783 983,198 215,000 1,504,761 $28.17 $20.82 Stemmons 10,986,344 3,079,481 105,897 74.2% 212,233 242,636 - 0 $16.51 $15.40 Richardson 17,007,669 3,578,320 237,422 82.4% 138,184 1,092,246 - 322,000 $25.73 $19.87 Allen / McKinney 3,559,842 626,804 63,411 84.6% 42,666 100,688 36,000 134,486 $27.34 $23.07 Plano 4,946,110 1,406,777 40,711 73.0% 129,176 286,937 - 0 $23.34 $25.73 Frisco / The Colony 5,156,142 572,862 78,657 86.9% 68,522 424,866 - 914,136 $36.89 $27.08 East / South Dallas 7,807,721 1,397,570 21,717 83.0% (8,916) (471,191) - 38,927 $28.83 $18.14 Arlington / Mansfield 6,539,414 1,137,557 35,896 84.9% 8,427 87,498 - 150,000 $20.87 $18.71 Mid Cities 9,700,169 2,618,291 178,282 82.7% 6,940 149,719 - 273,840 $25.92 $19.83 Ft. Worth CBD 8,461,703 1,253,260 219,954 86.2% (27,029) (35,000) - 280,489 $29.21 $19.84 North / Northeast Ft Worth 4,216,274 1,218,432 182,153 71.8% 49,871 95,831 - 23,940 $21.41 $21.88 Lewisville / Denton 6,000,372 807,266 138,564 92.7% 19,499 297,851 - 26,000 $25.39 $20.97 South Ft Worth 8,139,169 915,608 167,662 90.1% (776) 85,765 - 160,182 $28.71 $22.06 Totals 235,797,421 47,906,485 5,039,265 82.6% 1,353,085 4,225,556 291,000 8,321,969 $27.55 $20.63

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 123,229,162 25,029,296 3,479,314 82.8% 948,298 3,973,168 215,000 7,500,428 $27.55 4.0% Class B 103,457,538 21,232,933 1,543,420 82.1% 446,962 171,674 76,000 821,541 $20.63 4.6% Class C 9,110,721 1,644,256 16,531 86.0% (42,175) 80,714 - - $16.43 1.2% Totals 235,797,421 47,906,485 5,039,265 82.6% 1,353,085 4,225,556 291,000 8,321,969 $24.24 4.0% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE Q4 2016

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Vice President Marketing Manager Executive Vice President [email protected] Leasing Director [email protected] Managing Director [email protected] [email protected] [email protected]

Ariel Guerrero Doug Berry James Decman Senior Vice President Vice President Senior Research Analyst Research Creative Director [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS/FT. WORTH OFFICE MARKET REPORT THIRD QUARTER 2016

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q3 Office Market 2016 ECONOMIC OVERVIEW

The North Texas regional economy, which has kept its foot on the accelerator through the past number of years, continued to perform at a high level as it moved into the second half of 2016. The diversity of the region continues to attract companies to the area and encourage expansions among local companies, despite sustained low oil prices hanging over the core energy-related industries across the state. Along with corporate expansions and relocations to the market come residential, retail, industrial and office construction to support population growth, which in turn leads to job creation.

The Dallas-Fort Worth metropolitan statistical area added a net 117,300 jobs during the prior 12 months (ending August 2016), representing an annual employment payroll increase of 3.4%. Virtually every industry sector experienced net job growth over the prior year except the Manufacturing and Other Services sectors. The sectors with the TABLE OF CONTENTS largest annual employment gains were Trade, Transportation & Utilities, Professional & Business Services, and Leisure & Hospitality. As a result of the steady growth, the DFW Economic Overview...... 2 Metroplex unemployment rate ended August at 4.1%, outperforming the state and Office Market Assessment...... 3 national unemployment rates of 4.7% and 4.9%, respectively. Net Absorption & Occupancy...... 4 Rental Rates & Leasing Activity...... 5 Unless a catastrophe interrupts the national or global economy, the North Texas economy can expect job growth to continue into 2017 and 2018, led by the Leisure & Hospitality Construction...... 6 and Professional & Business Services industry sectors. Companies planning to expand Submarket Statistics & Methodology...... 7 corporate or regional headquarters include: Toyota Motor Corporation, JP Morgan Chase, Our Team...... 8 LibertyUpdated Mutual, 6/27/2016 Fannie Mae, Verizon Corp., Charles Schwab, and GEICO among others.

Employment Trends

125 5% FOR INFORMATION: 75 3%

25 1% KURT CHERRY

Executive Vice President Thousands -25 -1% 972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F 18F

Jobs Added Annual % Change WADE BOWLIN Updated 9/28/16 Executive Vice President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Managing Director Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 203.9 201.7 1.1% Up Senior Vice President, Research Manufacturing 262.8 264 -0.5% Down 713.209.5704 Trade, Transportation & Utilities 760.4 729.1 4.3% Up [email protected] Information 81.6 81.3 0.4% Up Financial Activities 295.5 278.0 6.3% Up Professional & Business Services 590.8 567.5 4.1% Up Education & Health Services 434.9 419.9 3.6% Up Leisure & Hospitality 376.1 358.3 5.0% Up Other Services 120.4 121.0 -0.5% Down Government 406.0 394.3 3.0% Up 2 Source:Source: U.S. U.S. Bureau Bureau of of Labor Labor Statistics, Employment Employment Data Data as as of ofAugust August 2016 2016 PAGE All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q3 2016 OFFICE MARKET ASSESSMENT

The DFW office market completed the third quarter with 1,815,022 sq. ft. of direct net absorption, increasing its year-to-date count to nearly 2.87 million sq. ft. – the 21st consecutive quarter of net absorption gains. Companies moving into newly delivered office product was the driving force behind the quarterly absorption gains, and will account for a large amount of the fourth quarter absorption gains.

During the third quarter, Class A properties absorbed a net 2.03 million sq. ft. of direct space, increasing their 2016 total to 3.02 million sq. ft., which is currently on pace to record its best year of absorption gains since 1999. Despite the healthy absorption gains, Class A direct occupancy rates have fallen by 70 basis points to 82.8% during 2016 due to new supply outpacing leasing demand. Meanwhile, Class B properties suffered a net absorption loss of 275,370 sq. ft. of direct space, decreasing their year-to-date DFW METROPLEX RANKS 2ND IN JOB GROWTH: absorption total into the negative territory at 275,288 sq. ft. lost. Class B occupancy rates Among the metropolitan markets with a workforce have decreased by 30 basis points during the year to 82.3%, as a wave of tenants are over 1 million, the DFW Metroplex ranks second in leaving behind lower quality product and upgrading into newer Class A buildings. annual employment growth, following New York- Newark-New Jersey. DFW followed a comparatively moderate first-half of 2016, in terms of direct net absorption, by recording the largest quarterly absorption gain in 16 years in the third HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical areas quarter. With the metropolitan economy continuing its healthy expansion, the Class A in the number of Fortune 500 headquarters. The metro’s property sector is expected to continue directly benefitting from tenants upgrading top employers are concentrated in telecommunications, and expanding their footprint in the market. Among the notable move-ins taking place transportation, aerospace/defense, health care, high in upcoming months across the Class A market are Liberty Mutual (1.1 million sq. ft.), technology, financial services and retail. CoreLogic (327k sq. ft.), OneSource Virtual (215k sq. ft.) and Vinson & Elkins (85k sq. ft.). DFW ECONOMIC OUTLOOK: FORECAST The North Texas region’s historically strong employment • With a number of large high-quality availabilities diminishing from the market and and population growth, diversified economy and low record-high occupancy and rental rates, lease negotiations will remain in favor of costs of doing business will lead to above-average landlords within the most desirable submarkets during the oncoming quarters. performance. The employment outlook for Dallas- • With the recent completion of the Panama Canal expansion, the increasingly Fort Worth remains strong with job growth forecasted likely possibility of a high-speed rail line connecting Dallas to Houston, and the to average 2.8% per year through 2019, according to comparative superior accessibility of the DFW Metroplex, DFW is poised to become Moody’s Analytics. a major distribution hub, which will attract additional corporate relocations and expansions. • Pending corporate relocations and expansions will continue to strengthen the office market fundamentals, as the metro area’s business-friendly environment, lower cost MARKETMarket TREND Trend Indicators INDICATORS to do business, and educated labor force attract companies to the Metroplex. Updated 7/5/16 Current Change from Previous 12-month Quarter Quarter Year Forecast Office Market Trends Direct Occupancy 82.6%

Trailing 12 mos. Direct Net Absorption 4,125,042 8,000 88%

6,000 86% Under Construction 7,384,327

4,000 84% Direct Asking Rents $24.15 2,000 82%

0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F 18F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q3 Office Market 2016 NET ABSORPTION & OCCUPANCY

• Richardson led in absorption gains with a net 939,861 SF of direct space, increasing its year-to-date total to 954,062 SF. Virtually all of the quarterly absorption gains were attributed to State Farm’s 500K SF move into Building D of their new campus and RealPage, Inc.’s 400k SF occupancy of 2201 Lakeside Blvd. Over the prior 12 months, Richardson’s occupancy rate has improved 2.0% to 84.1%. • Las Colinas posted 173,520 SF of direct net absorption, increasing its year-to-date total to 647,415 SF. Molina Healthcare and Pacific Union Financial LLC highlighted tenant move-ins as they occupied 101k SF and 54k SF, respectively, of Class B space. JP Morgan Chase Bank vacated 125k SF of Class B space at 121 Corporate Center. • Plano experienced its best quarter of absorption in recent history with a net 156,556 SF gain. Alcatel-Lucent moved into their 250k SF built-to-suit, while PennyMac Financial Services, Inc. occupied 76k SF of Class A space. However Texas Instruments DFW’s office market has strong momentum going into the second- vacating 197k SF of Class B space at Lakeside offset a large portion of the gains. half of 2016 and is currently on pace to record its best year of direct • Uptown/Turtle Creek witnessed a net 155,660 SF of direct move-ins, increasing its absorption growth since 1999. Strong office-using employment year-to-date count to 290k SF. McKinney & Olive’s delivery accounted for most of growth continues to spur leasing demand but there are early signs the gains as Sidley Austin LLP, Saatchi & Saatchi, and others began occupancy. that construction deliveries could slightly outpace demand due to a • Quorum/Bent Tree experienced the largest quarterly direct absorption loss as recent surge in construction activity. tenant departures totaled a net 271,395 SF. State Farm vacated 317k SF as they relocated to Richardson, and National Default Exchange left behind 47k SF. Maxim KURT CHERRY Integrated occupied 87k SF of Class A space at the newly delivered Tollway Center. Executive Vice President, Dallas Regional Office • Upper Tollway/West Plano underwent a very active quarter as it absorbed a net Central Division 79,470 SF. CompuCom Systems began occupancy of 95k SF at Dominion Legacy Updated 10/5/16 Office Center and Crestron Electronics (and others) occupied a combined 67k SF at Legacy Tower. RealPage moved out of a combined 217k SF of Class A & B space to SUBMARKET OCCUPANCY RANKING Updated 9/30/16relocate to Richardson. Upper Tollway/West Plano is scheduled to deliver 963k SF of Submarket Occupancy Ranking space during the fourth quarter at a mere 8.9% pre-leased. Occ. Y-O-Y % Rank Submarket Rate Change 1 Lewisville / Denton 92.3% 7.5% Direct Net Absorption vs. Completions 2 Preston Center 90.7% -1.0% 2,500 3 South Ft Worth 90.1% -0.8% 2,000 4 Central Expy 88.2% 5.5% 5 Ft Worth CBD 86.5% -0.9% 1,500 6 Uptown/Turtle Creek 86.1% -3.0% 7 Las Colinas 85.7% 1.8% 1,000

8 Frisco / The Colony 85.7% -3.3% Thousands of SF In 500 9 Upper Tollway / West Plano 84.8% -0.3% 10 Arlington / Mansfield 84.7% -0.3% 0 11 Richardson 84.1% 2.0% Updated 9/30/16 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 12 Quorum / Bent Tree 83.7% -1.5% 13 Allen / McKinney 83.6% -4.8% Direct NetDirect Absorption Occupancy Rates Completions 14 East / South Dallas 83.3% -4.6% 15 Mid Cities 82.6% -0.9% 86% 16 North / Northeast Ft Worth 79.3% -6.7% 17 West LBJ 78.8% 5.5% 84% 18 Plano 76.4% -3.8% 19 East LBJ 75.4% 0.9% 82% 20 Dallas CBD 74.4% -3.6% 21 Stemmons 72.2% -2.9% 80%

78% Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q3 2016 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates improved by $0.18 per sq. ft. during the quarter to $27.57, and have appreciated $1.47 or 5.6% over the prior 12 months. Class A rents have increased each of the past 17 quarters to record levels, and are 11.9% higher than their previous all-time high at mid-2008. • Average Class B asking rents, also at record levels, improved by $0.42 per sq. ft. to $20.36 (gross) during the quarter and have escalated $1.09 or 5.7% over the past year. Quoted Class B rents have topped the $20-mark for the first time. • Nearly all DFW submarkets experienced annual rent growth as market-wide vacancies are tailing off near 14-year lows. However, appealing lease opportunities remain in submarkets with elevated vacancy rates, such as the Stemmons and LBJ Freeways, Dallas CBD, Plano and North/Northeast Fort Worth. • Landlords with Class A assets in the submarkets with the lowest vacancy have been able to raise asking rental rates, including Uptown/Turtle Creek, Quorum/Bent Tree “A steady influx of new product coming online will provide tenants and Richardson. The largest annual Class A rent increases occurred in Frisco/The numerous opportunities to upgrade their space or expand, however, Colony (30.8% or $9.31), Uptown/Turtle Creek (10.4% or $3.78) and Quorum Bent many of these companies could experience sticker shock as rents have hit Tree (7.9% or $2.12). record levels within the past year. • The trailing 12-month volume of Class A leasing activity has dipped below its five- year average of 11.5 million sq. ft. However, at 10.0 million sq. ft., it remains half a million sq. ft. higher than its 10-year average. On the other hand, Class B annual KURT CHERRY leasing velocity at 7.2 million sq. ft. is trailing its 10-year average by 10.4%. Executive Vice President, Dallas Regional Office Central Division • The flight-to-quality trend witnessed during the current expansion period will continue to play a major role in the office leasing market, as tenants prefer Updated 10/5/16 Updated 9/30/16committing to leases in buildings offering more modern and efficient layouts than lower cost alternatives. Submarket Rental Rate Ranking SUBMARKET RENTAL RATERental RANKING Y-O-Y % Rank Submarket Rate Change Rental Rates ($/SF/Yr. Full Service) 1 Uptown/Turtle Creek $38.62 11.4% $28 2 Frisco / The Colony $36.47 25.8% $26 3 Preston Center $33.72 -0.2%

$24 4 Upper Tollway / West Plano $28.25 2.5% 5 Central Expy $26.70 6.0% $22 6 Ft Worth CBD $25.84 -3.0% $20 7 Dallas CBD $25.12 6.7% $18 8 Allen / McKinney $24.28 -1.5% 9 Las Colinas $23.79 -0.2% $16 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 10 Quorum / Bent Tree $23.59 9.9% Updated 9/30/16 11 Plano $23.59 11.6% Class A Class B 12 South Ft Worth $23.21 6.8% 13 East LBJ $23.01 10.3% Direct Leasing Activity Rolling 12-Months 14 Mid Cities $22.98 6.1% 14,000 15 Lewisville / Denton $22.41 0.3% 12,000 16 Richardson $21.92 7.8% 17 Arlington / Mansfield $19.21 7.8% 10,000 18 North / Northeast Ft Worth $19.17 9.3% 8,000 19 East / South Dallas $18.68 -3.0% 6,000 20 West LBJ $17.52 2.2%

In Thousands of of SF In Thousands 4,000 21 Stemmons $15.65 3.9% 2,000 0 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16

5 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q3 Office Market 2016 CONSTRUCTION

• The office construction pipeline has expanded by 16.5% to 7.4 million sq. ft. over the past year (excluding corporate-owned projects), but the construction boom experienced since late-2013 is showing little signs of fizzling out. Only 45.4% of the space under construction has secured pre-lease commitments, indicating developers are still confident in future leasing demand. • During the quarter, developers completed construction on 1.4 million sq. ft. of competitive office product, highlighted by Crescent’s 530k sq. ft. McKinney & Olive in Uptown/Turtle Creek anchored by Gardere Wynne Sewell, Sidley Austin and Saatchi & Saatchi. Cawley Management’s 250k sq. ft. built-to-suit for Alcatel-Lucent in Plano and the 200k sq. ft. multi-tenant Tollway Center in Quorum/Bent Tree also delivered to the market during the quarter. • Developers broke ground on approximately 1.6 million sq. ft. of new office product RECENT ANNOUNCEMENTS during the quarter. The most notable projects include Granite Properties’ 300k • Medici Development Partners has broken ground sq. ft. built-to-suit for Fannie Mae in Upper Tollway/West Plano and Harwood on Kimball Park in Southlake, next to the planned International’s speculative 236k sq. ft. project dubbed No. 10 at 2850 N Harwood Cambria Hotel and Conference Center. Medici St in Uptown/Turtle Creek. TD Ameritrade also broke ground on their 300k sq. ft. kicked off construction after signing lead tenant headquarters in Mid Cities. Keller Williams to a 32k sq. ft. lease. • The construction boom has been largely concentrated in the Upper Tollway/ • 2000 Ross Avenue LP, a fund managed by JP West Plano, Las Colinas and Uptown submarkets, which combine to host 69.2% Morgan Asset Management, has plans to begin of the square footage in the construction pipeline. However, it has spread to other submarkets where there is a lack of high-quality availabilities, such as Richardson, the development of the city block adjacentUpdated to 9/30/16 Trammell Crow Center into a mixed-use project. Fort Worth CBD, Preston Center and South Fort Worth. The development will include 32k sq. ft. of retail • Through the remainder of 2016, 1.7 million sq. ft. of new office construction projects are scheduled to deliver with only 20.4% of that space having prelease space, an upscale boutique hotel, a 350-unit Updated 7/6/2015 apartment tower and parking garage. This project commitments. Upper Tollway/West Plano will host 923k sq. ft. of that new space, Construction Pipeline is scheduled to begin during early-2017. highlighted by The Karahan Companies’ 377k sq. ft. Legacy West. • Charles Schwab has unveiled plans on their $100 million, 500k sq. ft. campus on 70 acres in Westlake, 8,000 Construction Pipeline which will be developed by Hillwood and The 7,000 Howard Hughes Corp. Charles Schwab currently 6,000 occupies 130k sq. ft. in the area and will move 1,200 14,000 5,000 new jobs in phases into the new development 12,000 upon completion in late-2018 to early-2019. 4,000 • W.A. Peavy and Mariner Real Estate Management 10,0003,000

have jointly purchased a vacant flex building in of SF In Thousands 2,000 8,000 Las Colinas from Abbott Laboratories. The joint 1,000 venture is in the process of redeveloping into a 6,000 0 340k sq. ft. building for office users. Plans include a Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 redesigned entry, exterior upgrades, a mezzanine

In Thousands of SF In 4,000 office addition, modernizing mechanical systems, and a parking lot expansion. 2,000 Under Construction Delivered • Pizza Hut is in the midst of adding to its corporate SIGNIFICANT0 PROJECTS UNDER CONSTRUCTION campus in Plano, which will include a new meeting Q2 12 Q4 12 Q2 13 Q4 13 Q2% PRE-14 Q4 14 Q2TARGET 15 hall, a larger daycare, and a restaurant concept PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY store for R&D. The current 180k sq. ft. campus will Toyota Motor Co. HQ * 2,100,000 UpperUnder Tollway/ WConstruction Plano Toyota North AmericaDelivered 100% KDC 2Q 2017 expand to 300k sq. ft. with the addition of two Liberty Mutual Campus ** 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 4Q 2017 sections of offices. Park District Tower 516,093 Uptown / Turtle Creek PwC 37% Trammell Crow 3Q 2018 • Thomas Land & Development has expanded on The Union 418,132 Uptown / Turtle Creek Weaver and Tidwell 41% RED Development 2Q 2018 their Wade Park plans in Frisco by 65 acres, which Legacy West 377,441 Upper Tollway/ W Plano Toyota (20k SF) 11% Karahan Companies 4Q 2016 will add more office space to the now 175-acre 1915 Hurd 339,359 Las Colinas N/A 0% Mariner RE Mgmt. 4Q 2016 mixed-use design. Plans for the development include 2 million sq. ft. of office, a Whole Foods Interceramic HQ * 330,000 Upper Tollway/ W Plano Interceramic 100% Billingsley Co. 1Q 2017 Market, 1,300 apartments, 50 condos, and 127 CoreLogic HQ ** 327,183 Las Colinas CoreLogic 100% Billingsley Co. 1Q 2017 single-family homes. One Legacy West 307,767 Upper Tollway/ W Plano N/A 9% Gaedeke Group 4Q 2016 TD Ameritrade HQ * 300,000 Mid Cities TD Ameritrade 100% Adolphson & Peterson 4Q 2017 6 3400 CityLine 300,000 Richardson N/A 0% Transwestern 2Q 2017 PAGE * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q3 2016

SUBMARKETUpdated 10/5/16 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,038,512 8,535,296 553,657 74.4% 63,952 (333,532) - 401,937 $25.97 $19.98 Uptown / Turtle Creek 11,519,526 1,566,948 360,563 86.1% 155,660 290,094 672,158 1,300,471 $40.06 $33.07 Preston Center 4,294,488 570,021 76,279 90.7% 37,993 (33,044) - 171,583 $34.73 $30.24 Central Expy 11,791,301 1,574,676 125,975 88.2% 25,825 348,128 - 0 $28.46 $23.31 Quorum / Bent Tree 20,417,659 4,283,396 671,728 83.7% (271,395) (373,432) 197,740 0 $28.84 $19.83 Upper Tollway / West Plano 17,098,822 2,496,425 544,905 84.8% 79,470 283,572 53,200 2,480,812 $30.08 $24.60 West LBJ 4,363,279 1,121,710 146,877 78.8% 70,265 82,906 - 0 $18.42 $17.07 East LBJ 16,075,426 4,241,260 262,902 75.4% 32,366 241,315 - 0 $26.04 $18.35 Las Colinas 30,537,939 5,581,159 816,345 85.7% 173,520 647,415 - 1,339,761 $27.64 $20.78 Stemmons 10,730,042 3,101,159 143,812 72.2% (6,634) 30,403 - 0 $16.72 $15.95 Richardson 17,002,520 3,647,282 221,586 84.1% 939,861 954,062 - 322,000 $25.57 $18.51 Allen / McKinney 3,531,087 634,078 92,030 83.6% (15,726) 58,022 - 123,176 $27.15 $22.86 Plano 4,637,604 1,101,000 38,046 76.4% 156,556 157,761 250,000 0 $22.66 $24.29 Frisco / The Colony 5,156,142 538,531 66,303 85.7% 78,343 356,344 23,000 356,136 $39.54 $27.33 East / South Dallas 7,861,504 1,389,360 20,089 83.3% 16,866 (462,275) - 0 $28.96 $18.18 Arlington / Mansfield 6,528,345 1,178,120 35,896 84.7% 21,747 79,071 - 150,000 $20.77 $19.01 Mid Cities 9,703,213 2,658,716 187,598 82.6% 36,466 142,779 38,000 273,840 $25.82 $20.34 Ft. Worth CBD 8,446,338 1,166,104 255,767 86.5% (22,519) (7,971) - 280,489 $29.12 $19.96 North / Northeast Ft Worth 3,784,695 786,920 201,303 79.3% 29,476 45,960 - 23,940 $21.41 $17.26 Lewisville / Denton 6,019,777 807,119 141,115 92.3% 133,837 278,352 - 0 $26.11 $21.18 South Ft Worth 8,128,846 1,029,676 175,142 90.1% 79,093 86,541 170,982 160,182 $28.63 $22.04 Totals 234,667,065 48,008,956 5,137,918 82.6% 1,815,022 2,872,471 1,405,080 7,384,327 $27.57 $20.36

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 122,384,955 25,206,742 3,528,683 82.5% 2,033,331 3,024,870 1,328,880 6,893,652 $27.57 5.6% Class B 103,015,794 21,282,029 1,597,798 82.3% (275,370) (275,288) 76,200 490,675 $20.36 5.7% Class C 9,266,316 1,520,185 11,437 88.0% 57,061 122,889 - - $16.11 5.2% Totals 234,667,065 48,008,956 5,137,918 82.6% 1,815,022 2,872,471 1,405,080 7,384,327 $24.15 6.0% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE Q3 2016

Kurt Cherry Shea Byers Pamela Perkins Kelsey Oldham Wade Bowlin Executive Vice President Vice President Vice President Marketing Manager Executive Vice President [email protected] Leasing Director [email protected] Managing Director [email protected] [email protected] [email protected]

Ariel Guerrero Doug Berry James Decman Senior Vice President Vice President Senior Research Analyst Research Creative Director [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

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PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS/FT. WORTH OFFICE MARKET REPORT SECOND QUARTER 2016

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q2 Office Market 2016 ECONOMIC OVERVIEW

The thriving North Texas regional economy has shifted into overdrive through the mid- point of 2016. Despite the lingering effects of low oil prices and decreased drilling activity causing job losses in the core energy-related industries across the state, the diverse regional economy continues to significantly outperform both the state and national levels in job growth and unemployment rates. Corporate expansions and relocations to the market, residential, retail and office construction, plus the robust business climate have collectively been the leading factors of the consistent job creation in the DFW Metroplex.

The Dallas-Fort Worth metropolitan statistical area added a net 125,300 jobs during the prior 12 months (ending May 2016), representing an annual employment payroll increase of 3.7%. The industry sectors with the largest annual jobs created were Trade, Transportation & Utilities (37,200 jobs or 5.2% growth); Professional & Business Services (22,300 jobs or 4.0% TABLE OF CONTENTS growth); and Leisure & Hospitality (20,400 jobs or 5.8% growth). As a result of the consistent job growth, DFW’s unemployment rate has declined 30 basis points to 3.5% over the past Economic Overview...... 2 year—a low mark since the end of 2000. Office Market Assessment...... 3 Net Absorption & Occupancy...... 4 Unless a catastrophe rocks the global or national economy, the North Texas economy can Rental Rates & Leasing Activity...... 5 expect job growth to continue into 2017 and 2018, led by the Leisure & Hospitality and Professional & Business Services industry sectors. Among companies planning to expand Construction...... 6 corporate or regional headquarters to the DFW market are: Toyota Motor Corporation, JP Submarket Statistics & Methodology...... 7 Morgan Chase, Liberty Mutual, Fannie Mae, Verizon Corporation, Charles Schwab, GEICO Our Team...... 8 andUpdated others. 6/27/2016

Employment Trends

125 5% FOR INFORMATION: 75 3%

25 1% KURT CHERRY

Executive Vice President Thousands -25 -1% 972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F 18F

Jobs Added Annual % Change WADE BOWLIN Updated 6/27/16 Executive Vice President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Managing Director Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 200.0 198.1 1.0% Up Senior Vice President, Research Manufacturing 261.8 263.1 -0.5% Down 713.209.5704 Trade, Transportation & Utilities 751.9 714.7 5.2% Up [email protected] Information 80.8 80 1.0% Up Financial Activities 289.9 274.5 5.6% Up Professional & Business Services 578.8 556.5 4.0% Up Education & Health Services 431.7 416.5 3.6% Up Leisure & Hospitality 373.6 353.2 5.8% Up Other Services 120.1 119.2 0.8% Up Government 426.5 414.0 3.0% Up 2 Source:Source: U.S. U.S. Bureau Bureau of of Labor Labor Statistics, Employment Employment Data Data as as of ofMay May 2016 2016 PAGE All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q2 2016 OFFICE MARKET ASSESSMENT

The DFW office market ended the second quarter adding a net 340,030 sq. ft. of direct absorption, increasing its year-to-date absorption count to 1,067,449 sq. ft. with its 20th consecutive quarter of net gains. Local expansions within the market have been the driving force behind the majority of the absorption gains thus far in 2016, but tenant demand during the remainder of the year will be largely focused on construction deliveries and relocations into the market.

During the quarter, Class A properties absorbed a net 596,317 sq. ft. of direct space, increasing their 2016 total to 991,539 sq. ft. of space. Class A direct occupancy rates declined by 90 basis points to 82.3% during 2016, due to the completion of new construction, but are expected to improve during the second-half of the year as tenants move into newly delivered space. On the other hand, the Class B sector observed a net DFW METROPLEX RANKS 2ND IN JOB GROWTH: loss of 368,950 sq. ft. of direct space during the quarter, decreasing its 2016 total to a mere Among the metropolitan markets with a workforce 82 sq. ft. of absorption. Class B occupancy rates have declined 60 basis points to 82.1% over 1 million, the DFW Metroplex ranks second in during the year as tenants left behind Class B space to move into new Class A space. annual employment growth, following New York- Northern New Jersey-Long Island, NY. Although tenant movement during the quarter was less-than-stellar in comparison to how DFW has performed over the past five years, the absorption levels will ramp up HOME TO 21 FORTUNE 500 COMPANIES: DFW ranks fourth among metropolitan statistical areas during the oncoming quarters as build-to-suit projects are completed and leases in the number of Fortune 500 headquarters. The metro’s commence for several larges tenants. For example, State Farm will occupy 500,000 sq. top employers are concentrated in telecommunications, ft. in Building D of their campus in Richardson by year-end, RealPage is awaiting their transportation, aerospace/defense, health care, high 332,653 sq. ft. move into Lakeside Campus, build-to-suit projects for Alcatel-Lucent technology, financial services and retail. (250,000 sf) and OneSource Virtual (215,000 sf) are expected to deliver during the third quarter, and Crescent’s 530,000 sq. ft. McKinney & Olive office tower is expected to deliver DFW ECONOMIC OUTLOOK: in Uptown with 86% of its space already leased up. The North Texas region’s historically strong employment and population growth, diversified economy and low FORECAST costs of doing business will lead to above-average performance. The employment outlook for Dallas- • With a number of large high-quality availabilities diminishing from the market and Fort Worth remains strong with job growth forecasted record-high occupancy and rental rates, lease negotiations will remain in favor of to average 2.8% per year through 2019, according to landlords within the most desirable submarkets during the oncoming quarters. Moody’s Analytics. • With the recent completion of the Panama Canal expansion, the increasingly likely possibility of a high-speed rail line connecting Dallas to Houston, and the comparative superior accessibility of the DFW Metroplex, DFW is poised to become a major distribution hub, which will attract additional corporate relocations and expansions. • Pending corporate relocations and expansions will continue to strengthen the office MARKETMarket TREND Trend Indicators INDICATORS Updatedmarket 7/5/16 fundamentals, as the metro area’s business-friendly environment, lower cost to do business, and educated labor force attract companies to the Metroplex. Current Change from Previous 12-month Quarter Quarter Year Forecast Office Market Trends Direct Occupancy 82.4%

Trailing 12 mos. Direct Net Absorption 3,317,461 8,000 88%

6,000 86% Under Construction 7,263,983

4,000 84% Direct Asking Rents $23.77 2,000 82%

0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F 18F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q2 Office Market 2016 NET ABSORPTION & OCCUPANCY

• Upper Tollway/West Plano led the DFW submarkets in quarterly gains with a net 237,037 sq. ft. of direct space absorbed, increasing its year-to-date total to 204,102 sq. ft. The largest quarterly absorption gain occurred in Granite Park V when various tenants, including Greatbatch Inc. moved into a combined 66,431 sq. ft. of new space. Move-ins by Hilti (28K sf at Legacy Tower) and Toyota Motor Credit Corporation (27K sf at Legacy Town Center III) also contributed to the quarterly gains. • Mid Cities posted 199,058 sq. ft. of direct net absorption during the quarter, with virtually all gains occurring in the Class A sector. Charles Schwab moving into 130,199 sq. ft. at Rolling Hills Office Centre and Sabre taking 71,313 sq. ft. at The Terrace at Solana highlighted quarterly gains. Class A occupancy improved by an impressive 810 basis points to 72.5%. • Frisco/The Colony witnessed a net 122,051 sq. ft. of direct absorption during the DFW’s office market has strong momentum going into 2016 coming quarter, increasing its year-to-date total to 278,001 sq. ft. The Dallas Cowboys’ move off its best year of direct absorption growth since 2000. Strong office- into their newly delivered office, The Star, highlighted the quarterly tenant movement. using employment growth has continued to spur leasing demand The Class A occupancy rate declined 710 basis points during the quarter as The Star but there are early signs that construction deliveries could slightly delivered at 22.9% leased. However, Class A average asking rental rates spiked $6.27 outpace demand due to a surge in construction activity within the to $37.23 per sq. ft. (gross) – also due to The Star being delivered. past year. • Las Colinas experienced a mix bag with tenants in Class A product moving out of 100,460 sq. ft., and Class B space recording 98,109 sq. ft. of positive absorption. Haggar KURT CHERRY moved out of 115K sf of Class A space at Two Colinas Crossing, while Class B move-ins Executive Vice President, Dallas Regional Office consisted of Carlisle & Gallagher (48K sf at Browning Place I) and U. T. System Board of Central Division Regents (28K sf at Airport Corporate Center). Despite the modest absorption gain, Las Updated 6/27/16 Colinas completed the first-half of 2016 with a net 473,895 sq. ft. of absorption gains. SUBMARKET OCCUPANCY RANKING Updated 6/27/16 Submarket Occupancy Ranking Occ. Y-O-Y % Rank Submarket Rate Change 1 South Ft Worth 91.1% -0.1% Direct Net Absorption vs. Completions 2 Uptown/Turtle Creek 90.2% 2.2% 2,500 3 Lewisville / Denton 90.1% 4.4% 2,000 4 Preston Center 89.3% -2.8% 5 Ft Worth CBD 88.3% 2.4% 1,500 6 Central Expy 87.3% 5.6% 7 Quorum / Bent Tree 85.5% 0.7% 1,000

8 Las Colinas 84.9% 1.9% Thousands of SF In 500 9 Upper Tollway / West Plano 84.9% -2.3% 10 Frisco / The Colony 84.4% -3.0% 0 11 Arlington / Mansfield 84.0% -1.2% Updated 6/27/16 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 12 Allen / McKinney 84.0% -6.1% 13 East / South Dallas 82.8% -5.7% Direct NetDirect Absorption Occupancy Rates Completions 14 Mid Cities 82.5% -1.1% 15 North / Northeast Ft Worth 78.4% -5.0% 86% 16 Richardson 78.2% -11.3% 17 Plano 76.1% -3.3% 84% 18 West LBJ 75.8% 3.2% 19 East LBJ 75.3% 1.1% 82% 20 Dallas CBD 75.2% -3.4% 21 Stemmons 72.7% -1.2% 80%

78% Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q2 2016 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates appreciated $0.53 during the quarter to $27.39 per sq. ft. and have increased by $1.83 or 7.2% during the prior 12 months. Class A rent rates have grown 16 consecutive quarters to record highs, and will continue growing as new office construction delivers to the market. • Weighted average Class B asking rents, also at a historical apex, climbed $0.12 to $19.94 per sq. ft. during the quarter and have escalated 5.1% over the past year. • During the prior 12 months virtually every DFW submarket experienced rent growth as vacancies across the Metroplex are dwindling. Even though market-wide vacancy is hovering around 14-year lows, attractive lease opportunities still exist for tenants in submarkets with loftier vacancy rates, such as the Stemmons and LBJ Freeways, Dallas CBD, Plano and Richardson. • Landlords have been able to push Class A rents upwards in submarkets with the highest occupancy rates, including Uptown/Turtle Creek, Las Colinas, Central A steady influx of new product coming online will provide tenants Expressway and Preston Center. The largest annual Class A rent increases occurred numerous opportunities to upgrade their space or expand, however, in Frisco/The Colony (23.0% or $6.95), Richardson (14.6% or $3.21), Dallas CBD many of these companies could experience sticker shock as rents have hit (11.6% or $2.69) and East LBJ Freeway (11.1% or $2.56). record levels within the past year. • The trailing 12-month volume of Class A leasing activity seems to be tapering off from the robust levels seen from 2013 through 2015. However, at 10.3 million sq. ft., Class A leasing activity remains well above its 10-year average. On the other hand, KURT CHERRY Class B leasing velocity has decreased to 7.1 million sq. ft., about one million sq. ft. Executive Vice President, Dallas Regional Office Central Division below its 10-year average. • As new construction is being developed, the flight to quality trend will likely Updated 6/27/16 Updated 6/27/16continue with tenants favoring more modern and efficient floorplates in lieu of buildings with greater operating costs and less-economical layouts. Submarket Rental Rate Ranking SUBMARKET RENTAL RATERental RANKING Y-O-Y % Rank Submarket Rate Change Rental Rates ($/SF/Yr. Full Service) 1 Uptown/Turtle Creek $37.32 7.8% $28 2 Frisco / The Colony $35.34 23.7% $26 3 Preston Center $33.96 -0.5%

$24 4 Upper Tollway / West Plano $28.40 2.8% 5 Central Expy $26.85 9.3% $22 6 Ft Worth CBD $26.06 -2.6% $20 7 Dallas CBD $25.03 10.7% $18 8 Allen / McKinney $24.04 -2.0% 9 Las Colinas $23.55 0.7% $16 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 10 Mid Cities $23.13 6.7% Updated 6/27/16 11 Quorum / Bent Tree $23.03 8.7% Class A Class B 12 South Ft Worth $22.35 3.7% 13 Plano $22.11 5.3% Direct Leasing Activity Rolling 12-Months 14 East LBJ $22.01 8.8% 14,000 15 Lewisville / Denton $21.76 -1.4% 12,000 16 Richardson $21.19 15.7% 10,000 17 North / Northeast Ft Worth $19.15 9.2% 8,000 18 East / South Dallas $19.01 2.4% 6,000 19 Arlington / Mansfield $18.71 4.4% 20 West LBJ $17.80 5.1%

In Thousands of of SF In Thousands 4,000 2,000 21 Stemmons $15.61 5.5% 0 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16

Class A Class B 5 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q2 Office Market 2016 CONSTRUCTION

• The office construction pipeline inflated 6.6% within the past year to nearly 7.3 million sq. ft. (excluding corporate-owned projects), resuming its wave of new development experienced since late-2013. Only about 50% of this space has secured pre-lease commitments, as developers have been confident in breaking ground on new product without obtaining an anchor-tenant. • During the quarter, developers delivered 617,764 sq. ft. of new office product to the competitive market, highlighted by Lincoln Property Company’s 400,000 sq. ft. The Star, anchored by the Dallas Cowboys, in Frisco/The Colony. Corporate-owned projects for the City of North Richland Hills and Pizza Hut were also completed during the quarter. • Developers broke ground on approximately 1.3 million sq. ft. of new office space during the quarter. The largest project involved The Union in Uptown – RED RECENT ANNOUNCEMENTS Development’s 418,132 sq. ft. Class A tower anchored by Vinson & Elkins and • Hillwood Companies has announced plans to Weaver projected to deliver by mid-2017. move forward on 3001 Turtle Creek. The 350k sq. • The building boom has been largely focused in West Plano, Las Colinas and ft. 16-story Class A tower will sit across the street Uptown, but has also spread to other submarkets where high-quality office space from the Hillwood headquarters (currently under is becoming scarce. For example, developers have broken ground within the past construction) and will feature views of Turtle year on new product in Fort Worth CBD, Quorum/Bent Tree, South Fort Worth and Creek and the Dallas skyline. Ground-breaking is Allen/McKinney – all of which have above-average Class A occupancy rates. expected after pre-leasing commitments. • Many significant office construction projects will deliver to the competitive leasing market throughout the remainder of 2016. For instance, Crescent’s McKinney & • Heady Investments has released plans Updatedof 6/27/16 Stonebrook Park, their mixed-use development Olive and KDC;s 1920 McKinney Ave will add some much needed space to the in Frisco. The project will include two hotels, retail, highly coveted Uptown/Turtle Creek submarket during the third quarter. Similarly, Karahan Companies’ 5905 Legacy Drive and Gaedeke Group’s One Legacy West will restaurants, and 480k sq. ft. of office. They will build Updated 7/6/2015 the project in four phases, beginning with a 90k sq. add a combined 685,208 sq. ft. of speculative office space to the Upper Tollway/ Construction Pipeline ft. office tower, which is expected to deliver in the West Plano submarket by year-end. second-half of 2017. • VanTrust Real Estate will be kicking off additional 8,000 Construction Pipeline construction in the Frisco Station development. 7,000 They plan to break ground during the third quarter 6,000 on a 225k sq. ft. Class A mid-rise office building 14,000 5,000 with structured parking and fitness & conference 12,000 centers. Construction is expected to complete in 4,000 August 2017. 10,0003,000

• Dreyer Capital Management has purchased 1401 of SF In Thousands 2,000 8,000 Elm Street, the 52-story long-term redevelopment 1,000 play in Dallas CBD. Dreyer has hit the ground 6,000 0 running on the project, which will include a 225- Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 room luxury hotel and spa, 335 apartments, retail

In Thousands of SF In 4,000 and restaurant space, and rooftop entertainment. • RED Development broke ground during the 2,000 Under Construction Delivered quarter on The Union in Uptown/Turtle Creek. The SIGNIFICANT0 PROJECTS UNDER CONSTRUCTION Union is an 800k sq. ft. mixed-use that will feature Q2 12 Q4 12 Q2 13 Q4 13 Q2% PRE- 14 Q4 14 Q2TARGET 15 a 22-story 418k sq. ft. Class A office, 90k sq. ft. of PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY retail space, including a restaurant and grocery Toyota Motor Co. HQ * 2,100,000 UpperUnder Tollway/ W Construction Plano Toyota North AmericaDelivered 100% KDC 2Q 2017 store. The mixed-use project is expected to deliver Liberty Mutual Campus ** 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 4Q 2017 in 2018. McKinney & Olive 530,000 Uptown / Turtle Creek Gardere Wynne Sewell 86% Crescent 3Q 2016 • Granite Properties is preparing for ground- Park District Tower 516,093 Uptown / Turtle Creek PwC 37% Trammell Crow Co. 4Q 2017 breaking in the oncoming weeks on Fannie Mae’s The Union 418,132 Uptown / Turtle Creek Vinson & Elkins 41% RED Development 2Q 2018 330k sq. ft. build-to-suit in West Plano. Fannie Mae Wade Park 1 400,000 Frisco/The Colony N/A 0% Thomas Land & Dev. 1Q 2017 will be consolidating approximately 450k sq. ft. Legacy West 377,441 Upper Tollway/ W Plano N/A 0% The Karahan Cos. 4Q 2016 from three office buildings in North Dallas into the Interceramic HQ * 330,000 Upper Tollway/ W Plano N/A 100% Billingsley Co. 1Q 2017 new development. Construction is scheduled for a CoreLogic HQ ** 327,183 Las Colinas CoreLogic 100% Billingsley Co. 1Q 2017 2017 completion. One Legacy West 307,767 Upper Tollway/ W Plano N/A 0% Gaedeke Group 4Q 2016 3400 CityLine 300,000 Richardson N/A 0% UBS Asset Management 2Q 2017 6

PAGE * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q2 2016

SUBMARKETUpdated 6/27/16 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,034,868 8,920,016 449,556 75.2% (72,650) (397,484) - 342,879 $25.89 $19.70 Uptown / Turtle Creek 10,850,682 1,551,941 369,396 90.2% (7,749) 134,434 - 1,736,383 $38.41 $33.93 Preston Center 4,290,542 578,140 79,208 89.3% (18,223) (71,037) - 186,257 $35.46 $28.26 Central Expy 11,859,241 1,902,376 134,009 87.3% 16,566 322,303 - - $28.57 $23.27 Quorum / Bent Tree 19,885,319 3,655,690 578,520 85.5% (14,941) (102,037) - 197,740 $28.85 $19.50 Upper Tollway / West Plano 17,160,556 2,676,897 504,343 84.9% 237,037 204,102 42,054 2,076,408 $30.19 $25.36 West LBJ 4,363,279 1,162,619 136,641 75.8% 1,172 12,641 - - $18.23 $17.58 East LBJ 16,068,182 4,380,959 234,282 75.3% 77,624 208,949 - - $25.60 $17.72 Las Colinas 30,594,550 5,947,164 756,468 84.9% 1,340 473,895 - 783,402 $27.24 $20.79 Stemmons 10,836,805 3,236,060 137,326 72.7% (38,116) 37,037 - - $19.09 $14.69 Richardson 16,368,908 3,335,735 213,870 78.2% 13,082 14,201 - 300,000 $25.22 $18.64 Allen / McKinney 3,532,431 671,057 102,299 84.0% 38,652 73,748 102,357 112,000 $26.63 $22.65 Plano 4,828,080 1,173,845 23,012 76.1% (11,355) 1,205 - 308,901 $21.89 $22.56 Frisco / The Colony 5,133,142 757,224 71,717 84.4% 122,051 278,001 418,505 400,000 $37.23 $26.93 East / South Dallas 7,964,141 1,479,794 21,605 82.8% (422,751) (479,141) - - $29.53 $18.76 Arlington / Mansfield 6,629,614 1,213,208 38,498 84.0% 23,543 57,324 - - $20.75 $18.53 Mid Cities 9,664,084 2,643,348 188,805 82.5% 199,058 106,313 - 198,000 $25.94 $20.56 Ft. Worth CBD 8,446,338 1,156,764 253,374 88.3% 73,385 14,548 - 280,489 $29.20 $19.90 North / Northeast Ft Worth 3,771,497 822,414 215,703 78.4% 30,009 16,484 - 23,940 $21.41 $17.23 Lewisville / Denton 6,059,557 872,073 108,572 90.1% 32,774 144,515 - - $24.11 $20.88 South Ft Worth 7,981,387 1,050,838 192,940 91.1% 59,522 7,448 54,848 317,584 $27.79 $21.80 Totals 233,323,203 49,188,162 4,810,144 82.4% 340,030 1,057,449 617,764 7,263,983 $27.39 $19.94

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 120,080,628 25,578,460 3,213,304 82.3% 596,317 991,539 575,710 6,903,942 $27.39 7.2% Class B 103,610,439 21,859,753 1,568,870 82.1% (368,950) 82 42,054 360,041 $19.94 5.1% Class C 9,632,136 1,749,949 27,970 86.3% 112,663 65,828 - - $16.20 7.9% Totals 233,323,203 49,188,162 4,810,144 82.4% 340,030 1,057,449 617,764 7,263,983 $23.77 6.5% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE Q2 2016

Kurt Cherry Shea Byers Brittany Ricketts Kelsey Oldham Ariel Guerrero Executive Vice President Vice President Leasing Manager Marketing Manager Senior Vice President 972.421.3322 Leasing 972.421.3308 972.421.3307 Research [email protected] 972.421.3306 [email protected] [email protected] 713.209.5704 [email protected] [email protected]

Wade Bowlin Doug Berry James Decman Executive Vice President Vice President Senior Research Analyst Managing Director Creative Director 713.209.5971 713.209.5753 713.209.5897 [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

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PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS/FT. WORTH OFFICE MARKET REPORT FIRST QUARTER 2016

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q1 Office Market 2016 ECONOMIC OVERVIEW

The North Texas regional economy flourished through the first quarter after boasting its largest annual job growth rate in 15 years during 2015. Not only has the Dallas-Fort Worth metroplex outperformed both the state and national levels in job growth, but the increasingly diverse economy has seemed to shrug off the disintegration of oil prices by welcoming a plethora of expansions and relocations into the market. Additionally, the pending completion of the Panama Canal and talks of a proposed high-speed rail line that would connect Dallas and Houston would significantly increase commerce capabilities.

The Dallas-Fort Worth metroplex added a net 116,800 jobs during the 12 months ending February 2016, representing an annual employment increase of 3.5%. The industry sectors with the largest annual jobs created were Trade, Transportation & Utilities (38,500 jobs or 5.5% growth); Leisure & Hospitality (24,900 jobs or 7.5% growth); and Education & Health TABLE OF CONTENTS Services (17,000 jobs or 4.2% growth). As a result of the robust job growth, the area unemployment rate has declined 60 basis points to 3.8% over the prior 12 months (ending Economic Overview...... 2 February) and is approaching its lowest level in the past 15 years. Office Market Assessment...... 3 Net Absorption & Occupancy...... 4 The North Texas regional economy can expect to maintain momentum through 2017 and Rental Rates & Leasing Activity...... 5 beyond, with the Professional & Business Services, Leisure & Hospitality, and Education & Health Services employment sectors driving job growth via corporate relocation and Construction...... 6 organic expansion. Build-to-suit and corporate-owned development projects for JP Morgan Submarket Statistics & Methodology...... 7 Chase, Liberty Mutual, Fannie Mae, Verizon Corp, among many others will fuel economic Our Team...... 8 growthUpdated during 2/9/2016 that time.

Employment Trends

125 5% FOR INFORMATION: 75 3%

25 1% KURT CHERRY Executive Vice President Thousands -25 -1% 972.421.3322 -75 -3% [email protected] -125 -5% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F

Jobs Added Annual % Change WADE BOWLIN Updated 3/31/16 Executive Vice President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Managing Director Employment Growth by Sector 713.209.5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) ARIEL GUERRERO Mining, Logging & Construction 197.5 197.7 -0.1% Down Senior Vice President, Research Manufacturing 259.2 263.6 -1.7% Down 713.209.5704 Trade, Transportation & Utilities 740.7 702.2 5.5% Up [email protected] Information 80.7 79.3 1.8% Up Financial Activities 283.3 271.1 4.5% Up Professional & Business Services 565.1 548.7 3.0% Up Education & Health Services 424.7 407.7 4.2% Up Leisure & Hospitality 358.4 333.5 7.5% Up Other Services 117.3 116.8 0.4% Up Government 420.9 410.4 2.6% Up 2 Source:Source: U.S. U.S. Bureau Bureau of of Labor Labor Statistics, Employment Employment Data Data as as of ofAugust February 2015 2016 PAGE All Employees, in Thousands PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q1 2016 OFFICE MARKET ASSESSMENT

The DFW office market ended the quarter with a net 717,419 sq. ft. of direct absorption, bringing its trailing 12-month total to nearly 4.5 million sq. ft. of space. Corporate expansions within the market were the driving force behind the demand witnessed during the quarter. Occupancy rates in DFW have been approaching their highest levels since 2002, which has given developers confidence in breaking ground on new product, while encouraging tenants to secure long-term leases as large space options dwindle.

During the quarter, Class A properties absorbed a net 395,222 sq. ft. of direct space, compared to 269,032 sq. ft. in the Class B sector. Despite positive quarterly absorption, Class A occupancy rates declined 100 basis points to 82.2% – largely due to State Farm’s pending move into Building D (500K sq. ft.) of their new campus developed by KDC. Meanwhile, Class B occupancy rates appreciated 20 basis points to 82.4% and have DFW METROPLEX RANKS 2ND IN JOB GROWTH: grown 80 basis points over the prior 12 months. Class B occupancy is higher than Class Among the metropolitan markets with a workforce A rates for the first time since mid-2000, however this trend will likely be short-lived as over 1 million, the DFW Metroplex ranks second in tenants move into their newly delivered Class A space. annual employment growth, following New York- Northern New Jersey-Long Island, NY. The DFW office market is showing no signs of slowdown from its growth mode, as large HOME TO 21 FORTUNE 500 COMPANIES: expansion and relocation announcements become more common. Verizon Corp. and DFW ranks fourth among metropolitan statistical areas KDC are planning a mixed-use development that would include three million sq. ft. of in the number of Fortune 500 headquarters. The metro’s office space in Las Colinas, JP Morgan Chase plans to begin construction on 1.4 million sq. top employers are concentrated in telecommunications, ft. at Legacy West, Charles Schwab is awaiting ground-breaking on their 1.2 million sq. ft. transportation, aerospace/defense, health care, high campus at Circle T Ranch, and build-to-suits are in planning stages for Fannie Mae (330K technology, financial services and retail. sq. ft. at Granite Park) and Interceramic USA (330K sq. ft. at Austin Ranch) among others. DFW ECONOMIC OUTLOOK: FORECAST The North Texas region’s historically strong employment and population growth, diversified economy and low • With large vacancies depleting from the market and occupancy rates reaching record costs of doing business will lead to above-average highs, the leasing market will remain favorable to landlords in the most desirable performance. The employment outlook for Dallas- submarkets. Speculative construction across the DFW metro area will help alleviate Fort Worth remains strong with job growth forecasted the scarcity of new, high-quality space options. to average 2.8% per year through 2019, according to • With the pending completion of the Panama Canal, proposed high-speed rail Moody’s Analytics. line connecting Dallas to Houston, and the comparative superior thoroughfare accessibility, the metro area is poised to become a major national distribution hub, which will attract additional corporate relocations and expansions. • Office market fundamentals willemain r strong resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly MARKET TREND INDICATORS Updatedenvironment, 4/6/16 relatively lower business costs, and a well-educated labor force. Current Change from Previous 12-month Quarter Quarter Year Forecast Office Market Trends Direct Occupancy 82.5% Trailing 12 mos. Direct Net Absorption 4,457,953 8,000 88%

6,000 86% Under Construction 6,747,635

4,000 84% Direct Asking Rents $23.50 2,000 82%

0 80% in Thousands of SF in Thousands -2,000 78%

-4,000 76% 03 04 05 06 07 08 09 10 11 12 13 14 15 16F 17F

3

Direct Net Absorption Completions Direct Occupancy PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q1 Office Market 2016 NET ABSORPTION & OCCUPANCY

• Las Colinas led the DFW submarkets in quarterly absorption gains with a net 472,555 sq. ft. of move-ins into direct space, increasing its trailing 12-month total to more than 1.3 million sq. ft. of growth. 7-Eleven moving into their new headquarters developed by Billingsley Company accounted for the bulk of the absorption gains during the quarter. • Central Expressway posted 305,737 sq. ft. of direct net absorption during the quarter, led by the Class A property sector with 284,362 sq. ft. of absorption growth. Sunoco LP highlighted the quarterly move-ins by taking 119,060 sq. ft. at The Offices at Park Lane. Central Expressway has absorbed a net 688,674 sq. ft. over the prior 12 months. • Uptown/Turtle Creek witnessed a net 142,183 sq. ft. of direct move-ins during the quarter. Among the notable tenants beginning occupancy were Regus (66K sq. ft. at 1919 McKinney Ave), rewardStyle (33K sq. ft. at The Centrum) and Spirit Realty Capital DFW’s office market has strong momentum going into 2016 coming (31K sq. ft. at International Center). Uptown/Turtle Creek ended the first quarter with off its best year of direct absorption growth since 2000. Strong office- an occupancy rate of 90.2%. using employment growth has continued to spur leasing demand • Frisco/The Colony added 155,950 sq. ft. to the quarterly absorption total. Straussburger but there are early signs that construction deliveries could slightly & Price Law Firm’s move into 41,000 sq. ft. at Frisco Bridges Place was the largest direct outpace demand due to a surge in construction activity within the space move-in during the quarter, but moves by UNT (37K sq. ft. at Hall Office Park) past year. and others contributed to quarterly movement. Goodman Networks also moved into 55,347 sq. ft. of sublease space at Hall Office Park C-2. KURT CHERRY • East LBJ recorded 131,325 sq. ft. of direct absorption during the quarter, bringing its Executive Vice President, Dallas Regional Office 12-month absorption count to a net 74,601 sq. ft. of gains. East LBJ has benefitted Central Division from the recent completion of the LBJ Express project, easing navigation within Updated 3/31/16 the submarket. Class A product gained from move-ins by MetLife and Golin Harris Communications (61K combined sq. ft. at Two Galleria Tower), Matador Natural SUBMARKET OCCUPANCY RANKING Updated 3/31/16Resources (48K sq. ft. at One Lincoln Centre) and Ryan, LLC (45K sq. ft. at Three Galleria Submarket Occupancy Ranking Tower). Occ. Y-O-Y % Rank Submarket Rate Change 1 South Ft Worth 90.8% -1.1% Direct Net Absorption vs. Completions 2 Uptown/Turtle Creek 90.2% 1.4% 2,500 3 Preston Center 89.6% -1.6% 2,000 4 Frisco / The Colony 88.6% 1.1% 5 Lewisville / Denton 88.1% 4.1% 1,500 6 East / South Dallas 87.9% 0.0% 7 Ft Worth CBD 87.7% 2.4% 1,000

8 Central Expy 86.6% 5.0% Thousands of SF In 500 9 Allen / McKinney 85.5% -3.6% 10 Quorum / Bent Tree 85.5% 1.1% 0 11 Las Colinas 85.0% 2.9% Updated 3/31/16 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 12 Arlington / Mansfield 83.8% -1.6% 13 Upper Tollway / West Plano 83.7% -4.1% Direct NetDirect Absorption Occupancy Rates Completions 14 Mid Cities 80.4% -1.9% 15 Richardson 78.2% -8.0% 86% 16 North / Northeast Ft Worth 77.6% -4.4% 17 Dallas CBD 76.7% 1.3% 84% 18 Plano 76.4% -6.7% 19 West LBJ 75.7% 2.7% 82% 20 East LBJ 74.6% 0.3% 21 Stemmons 72.9% -0.6% 80%

78% Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16

4 Class A Class B PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q1 2016 RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates improved by $0.37 to $26.86 per sq. ft. during the quarter and have increased by 6.9% (or $1.74) over the prior 12 months. Class A rents have increased 15 consecutive quarters past historic highs, and they are expected to keep growing as new, high-quality supply is delivered to the market. • Class B asking rents, which are also sitting at a historical high mark, only increased by $0.09 to $19.82 per sq. ft. during the first quarter. However, they have increased by 5.3% over the prior 12 months. • During the prior 12 months, nearly every DFW submarket experienced rent growth. Despite the market-wide rent appreciation, opportunities for tenants to take advantage of attractive lease terms exist in submarkets with higher vacancy rates, such as the Stemmons & LBJ Freeways and Plano. • Higher occupancy rates have allowed landlords to push Class A rents upwards in some of the most desirable submarkets, including Uptown/Turtle Creek, Las Colinas A steady influx of new product coming online will provide tenants and Central Expressway. The three largest annual Class A rate increases occurred numerous opportunities to upgrade their space or expand, however, in Central Expressway (13.8% or $3.46); Uptown/Turtle Creek (9.3% or $3.19); and many of these companies could experience sticker shock as rents have hit Richardson (12.4% or $2.73). record levels within the past year. • The trailing 12-month volume of Class A leasing activity has declined 0.1% to approximately 10.9 million sq. ft. within the past year as large space options in the most desirable submarkets are becoming limited. On the other hand, the trailing KURT CHERRY 12-month Class B leasing velocity has increased to approximately 8.1 million sq. ft. Executive Vice President, Dallas Regional Office Central Division • As new construction is being developed within the competitive market, the flight to quality and efficiency trend will likely continue with tenants favoring modern Updated 3/31/16 Updated 3/31/16floorplates capable of handling increased densities in lieu of buildings with higher operating costs and less-effective layouts. Submarket Rental Rate Ranking SUBMARKET RENTAL RATERental RANKING Y-O-Y % Rank Submarket Rate Change Rental Rates ($/SF/Yr. Full Service) 1 Uptown/Turtle Creek $36.41 9.9% $28 2 Preston Center $33.85 -1.1% $26 3 Frisco / The Colony $29.99 5.4%

$24 4 Upper Tollway / West Plano $28.78 4.8% 5 Central Expy $26.42 11.5% $22 6 Ft Worth CBD $26.31 -0.9% $20 7 Dallas CBD $24.45 10.3% $18 8 Las Colinas $23.73 3.1% 9 Allen / McKinney $23.40 -5.5% $16 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 10 Quorum / Bent Tree $23.40 10.7% Updated 3/31/16 11 Mid Cities $23.34 8.4% Class A Class B 12 Plano $22.32 7.7% 13 East LBJ $22.05 9.5% Direct Leasing Activity Rolling 12-Months 14 South Ft Worth $21.89 3.2% 14,000 15 Lewisville / Denton $21.83 6.5% 12,000 16 Richardson $21.12 15.7% 10,000 17 East / South Dallas $18.84 1.9% 8,000 18 North / Northeast Ft Worth $18.69 7.0% 6,000 19 Arlington / Mansfield $18.44 3.5% 20 West LBJ $17.87 5.1%

In Thousands of of SF In Thousands 4,000 2,000 21 Stemmons $15.47 5.2% 0 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16

Class A Class B 5 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS/FT. WORTH MAR KET AT A GLANCE Q1 Office Market 2016 CONSTRUCTION

• The office construction pipeline has climbed 17.8% within the past year to more than 7.0 million sq. ft. (excluding corporate-owned projects), continuing its surge experienced since late-2013. Only about 44.9% of this space has pre-lease commitments as developers are increasingly confident in breaking ground prior to securing a lead-tenant. • During the quarter, developers delivered 1.4 million sq. ft. of new product to the market. The largest construction delivery during the quarter was Building D of KDC’s build-to-suit for State Farm’s campus in Richardson. State Farm has plans to move into the 500,000 sq. ft. building during the third quarter of this year. Billingsley completed their 325,000 sq. ft. build-to-suit for 7-Eleven in Las Colinas during the quarter as Heady Investment finished construction on Frisco Bridges Place (170K sq. ft. in Frisco/The Colony), which is 27% leased to Strasburger & Price. • During the quarter, developers broke ground on approximately 2.3 million sq. ft. of RECENT ANNOUNCEMENTS new office space. The largest projects involved buildings 1 & 2 of Liberty Mutual’s 1.1 million sq. ft. campus at Legacy being developed by KDC and Trammell Crow’s • JP Morgan Chase is purchasing nearly 50 acres in Park District Tower (516K sq. ft. in Uptown/Turtle Creek). the Legacy West development to develop a $300 • The building boom has been largely concentrated in the northern suburban million, six-building office campus with more than Dallas submarkets and urban core but has scattered to other areas where a lack 1.4 million sq. ft. Chase plans to relocate about of available high-quality office space exists. For example, Granite Properties began 6,000 North Texas employees to the new project construction on Granite Place I at Southlake Town Square. The 100% speculative which is projected to open in 2018. 160K sq. ft. mid-rise in Mid Cities is scheduled to deliver within a year. • JC Penney is also expressing interest in expanding Updated 3/31/16• Many office construction ojectspr will break ground in the oncoming months. For around the Legacy West development. They are instance, Hillwood Properties’ corporate campus for Charles Schwab (1.2 million sq. pursuing zoning approval that would allow for a ft.) in Mid Cities, JP Morgan Chase’s (1.4 million sq. ft.) campus at Legacy West, and campus to be built on their vacant land in Plano UpdatedGranite’s 7/6/2015 (330K sq. ft.) build-to-suit for Fannie Mae in Upper Tollway/West Plano. (across the street from Toyota’s new HQ) that could accommodate more than one million sq. ft. of Construction Pipeline office and retail space. • Across the tollway, Fannie Mae has committed 8,000 Construction Pipeline to 330K sq. ft. in the 90-acre Granite Park. Granite Properties will begin construction on the 10-story 7,000 building in the oncoming months, and are also in 14,0006,000 the planning stages of two additional office high- 12,0005,000 rises. 4,000 • Verizon Corporation and developer KDC are ready 10,000 to move forward on their $1.5 billion mixed- 3,000

use development in Las Colinas, which will add 8,000 of SF In Thousands 2,000 upwards of three million sq. ft. of office space, 85K 6,0001,000 sq. ft. of retail, a hotel and new apartments. Verizon 0 hopes to break ground later this year, but are In Thousands of SF In 4,000 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 awaiting changes in zoning by the City of Irving. • Billingsley has filedpermits to build another 2,000 Under Construction Delivered upscale office project at its Cypress Waters 0 development. The speculative four-story building SIGNIFICANT PROJECTSQ2 12 UNDER Q4 CONSTRUCTION 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 will host 225K sq. ft. of office space and will be % PRE- TARGET situated between an existing office mid-rise and PROJECT NAME SIZE (SF)Under SUBMARKET ConstructionMAJOR TENANT LEASEDDelivered DEVELOPER DELIVERY apartment building. Toyota Motor Co. HQ * 2,100,000 Upper Tollway/ W Plano Toyota North America 100% KDC 2Q 2017 • Healthcare company, McKesson, recently Liberty Mutual Campus ** 1,100,000 Upper Tollway/ W Plano Liberty Mutual 100% KDC 4Q 2017 announced plans to invest $157 million in an McKinney & Olive 530,000 Uptown / Turtle Creek Gardere Wynne Sewell 64% Crescent 3Q 2016 expansion in Irving. McKesson is under contract Park District Tower 516,093 Uptown / Turtle Creek PwC 37% Trammell Crow 4Q 2017 to purchase two office buildings totaling more Wade Park 1 400,000 Frisco/The Colony N/A 0% Thomas Land & Dev. 1Q 2017 than 500K sq. ft. near Las Colinas for a regional hub, The Star 398,769 Frisco/The Colony Dallas Cowboys 20% Lincoln Property Co. 2Q 2016 which will add nearly 1,000 additional jobs to the CoreLogic HQ ** 327,183 Las Colinas CoreLogic 100% Billingsley Co. 1Q 2017 market. One Legacy West 307,767 Upper Tollway/ W Plano N/A 0% Gaedeke Group 4Q 2016 Renner at CityLine 300,000 Richardson N/A 0% Transwestern 2Q 2017 Frost Tower 280,489 Fort Worth CBD Frost Bank 51% Stream Realty 4Q 2017 6 1900 Pearl 261,400 Dallas CBD N/A 0% Lincoln Property Company 2Q 2017

PAGE * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE DALLAS/FT. WORTH Office Market Q1 2016

SUBMARKETUpdated 3/31/16 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Trailing Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. 12-Month Current Qtr Construction Class A Class B Dallas CBD 27,043,605 8,681,861 437,112 76.7% (324,834) (69,051) - 261,400 $25.22 $19.72 Uptown / Turtle Creek 10,895,244 1,587,200 308,555 90.2% 142,183 227,955 - 1,317,423 $37.41 $33.63 Preston Center 4,290,542 663,405 85,951 89.6% (52,814) 101,044 - 186,257 $35.18 $28.66 Central Expy 11,790,039 1,928,919 155,170 86.6% 305,737 688,674 - - $28.53 $22.37 Quorum / Bent Tree 19,885,253 3,622,315 510,842 85.5% (87,096) 141,560 - 197,740 $28.57 $19.56 Upper Tollway / West Plano 17,113,983 2,844,876 436,964 83.7% (32,935) 605,377 267,713 1,934,859 $31.10 $24.96 West LBJ 4,367,949 1,356,921 98,579 75.7% 11,469 63,251 - - $18.55 $17.45 East LBJ 16,067,872 4,446,784 239,705 74.6% 131,325 74,601 - - $25.56 $17.68 Las Colinas 31,092,013 6,340,865 670,716 85.0% 472,555 1,337,092 466,219 642,183 $27.04 $20.54 Stemmons 10,787,743 3,239,833 150,226 72.9% 75,153 341,662 - - $18.85 $14.66 Richardson 16,367,249 3,404,151 247,516 78.2% 1,119 238,894 499,992 330,160 $24.69 $18.86 Allen / McKinney 3,461,180 612,326 137,676 85.5% 35,096 66,620 - 178,357 $26.57 $22.24 Plano 4,822,311 1,129,819 28,836 76.4% 12,560 (43,611) - 250,000 $23.02 $22.52 Frisco / The Colony 4,732,132 561,829 107,692 88.6% 155,950 310,753 170,000 846,769 $30.96 $27.05 East / South Dallas 8,046,746 1,593,680 24,291 87.9% (56,390) (47,042) - - $29.67 $18.51 Arlington / Mansfield 6,628,762 1,286,722 54,995 83.8% 33,781 (107,418) - - $20.42 $18.29 Mid Cities 10,364,203 2,793,950 734,015 80.4% (92,745) 66,207 - 198,000 $25.95 $20.72 Ft. Worth CBD 8,544,047 1,231,977 231,140 87.7% (58,837) 75,754 - 280,489 $29.23 $19.49 North / Northeast Ft Worth 3,768,652 891,102 219,108 77.6% (13,525) 100,347 - 23,940 $21.54 $16.17 Lewisville / Denton 6,060,143 904,817 107,575 88.1% 111,741 274,020 - - $24.11 $21.16 South Ft Worth 7,926,539 1,070,899 139,350 90.8% (52,074) 11,264 - 372,432 $27.25 $21.45 Totals 234,056,207 50,194,251 5,126,014 82.5% 717,419 4,457,953 1,403,924 7,020,009 $26.86 $19.82

Total Direct Current Trailing Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. 12-Month Current Qtr Construction Rent Change Class A 120,025,587 26,398,763 2,930,539 82.2% 395,222 2,954,819 1,403,924 6,671,655 $26.86 6.9% Class B 104,346,925 22,102,610 2,178,745 82.4% 369,032 1,383,706 - 348,354 $19.82 5.3% Class C 9,683,695 1,692,878 16,730 86.9% (46,835) 119,428 - - $16.42 8.7% Totals 234,056,207 50,194,251 5,126,014 82.5% 717,419 4,457,953 1,403,924 7,020,009 $23.50 7.0% METHODOLOGY TOTAL INVENTORY: The total inventory includes all single and multi-tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. TOTAL SPACE AVAILABLE: Available space currently being marketed which is either physically vacant or occupied. DIRECT SPACE: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures. SUBLEASE SPACE: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. DIRECT OCCUPANCY RATE: Direct space physically occupied divided by the total rentable inventory. DIRECT NET ABSORPTION: The net change in occupied direct space over a given period of time. UNDER CONSTRUCTION: Office buildings which have commenced construction as evidenced by site excavation or foundation work. DIRECT ASKING RENTS: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

7 PAGE

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE Q1 2016

Kurt Cherry Shea Byers Brittany Ricketts Kelsey Oldham Ariel Guerrero Executive Vice President Vice President Leasing Manager Marketing Manager Senior Vice President 972.421.3322 Leasing 972.421.3308 972.421.3307 Research [email protected] 972.421.3306 [email protected] [email protected] 713.209.5704 [email protected] [email protected]

Wade Bowlin Doug Berry James Decman Executive Vice President Vice President Senior Research Analyst Managing Director Creative Director 713.209.5971 713.209.5753 713.209.5897 [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PMRG is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT MAR KET AT A GLANCE

DALLAS OFFICE MARKET REPORT FOURTH QUARTER 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 FOR INFORMATION: Our Team...... 8 Methodology...... 7 & Statistics Submarket Construction...... 6 LeasingActivity...... 5& Rates Rental &Occupancy...... 4Net Absorption Assessment...... 3 Market Office 2 Economic Overview...... TABLE OF CONTENTS [email protected] (713) 209.5704 Senior Vice President, Research [email protected] (713) 209.5753 Managing Director ExecutivePresident Vice [email protected] (972) 421.3322 ExecutivePresident Vice ARIEL GUERRERO WADE BOWLIN KURT CHERRY PAGE 2015 2 PROPERTY SERVICES |DEVELOPMENT |INVESTMENT PROPERTY All Employees, in Thousands Source: U.S. Bureau ofLaborStatistics, Employment Data asofNovember 2015 their DFWfootprint. months, withadditionalcompaniesexpressing interest inexpandingorconsolidating and 7-Eleven have orwillbreak alleitherbegunconstruction ground intheoncoming Dallas Cowboys, Alcatel-Lucent, CoreLogic, Mutual, Facebook, Schwab Charles Liberty projectsfor State Farmsuit andcorporate-owned Insurance, Toyota Co, Motor FedEx, drivenby expansionandrelocations. sectors leisure corporate &hospitality Build-to- growth anticipated intheprofessional technology, business services, healthcare and The region’s to economicexpansionisexpected continueinto 2016and2017withsolid energy companiesexpandandrelocate to themetropolitan area in2016. the DFWeconomy to isexpected prevent alocaleconomicrecession asmany non- Althoughjobgrowthearly-2001. isnotasrobustof 2014,thediversity asitwasduring basis pointsto 4.0%over 12months, theprior hovering around itslowest pointsince As aresult ofthestrong jobgrowth, thearea’s unemployment rate hasdropped 150 ending November 2015,whichrepresents anannualincrease of3.0%inemployment. The Dallas-Fort metropolitanWorth area hasaddedasolid101,500jobsinthe12months boththestate andthenationincreating jobs. new continues to outperform throughout thestate, oilactivity the DFWMetroplex thathaveof oilprices curtailed amongthenation’s2015, ranking economies. Despitethedisintegration top performing The North Texas regional of economy the finalquarter continuedto expandduring ECONOMIC OVERVIEW Source: U.S.Bureau ofLaborStatistics,EmploymentData asofAugust2015 iig ogn osrcin 9. 9. -1.4% 196.7 193.9 Manufacturing Mining, Logging&Construction rfsinl&Bsns evcs5625294.2% 552.9 3.4% Other Services 576.2 704.8 Leisure &Hospitality Education &HealthServices 729.1 Professional &BusinessServices Financial Activities Information Trade, Transportation&Utilities Government Updated 12/30/2015 Updated 12/28/15 Thousands -125 -100 100 125 -75 -50 -25 25 50 75 0 30 50 70 91 11 31 5 6 7 18F 17F 16F 15F 14 13 12 11 10 09 08 07 06 05 04 03 Source: U.S.BureauofLaborStatistics,Moody'sAnalytics Jobs Added Employment GrowthbySector Employment Trends MAR KET GLANCE CURRENT READING 5. 6 -1.9% 263 257.9 1. 1 2.7% 7.4% 5.0% 116 333.3 2.2% 411.2 119.1 358.0 271.7 431.8 277.8 1. 1. 1.6% 410.2 416.8 258. 0.9% 81.8 82.5 12-MONTHS READING PRIOR ATA Annual % Change % Annual ANNUAL CHANGE or Declining) (Improving HEALTH

-6% -4% -2% 0% 2% 4% 6% Down Down Up Up Up Up Up Up Up Up • • • FORECAST and Vinson &Elkins Weaver & to 173,000sq.at ft. Tidwell) pre-committing The Union. Centre); tenants(including andvarious Office Schwab Hills (130,199sq.atRolling ft. growth, Business Park); (154,298 sq. at International includingSecurus Charles ft. Many large dealswere signed thequarter, during whichwillhelpfuelfuture absorption asurge inspeculative rates development. sparked the early-2000s, whenlow vacancy rates. rates down Strong to thelevels ClassAdemandhaspushedvacancy lastseenin down decline anyin Class A occupancy time soon, even with the recent quarterly modeandisnotexpected toslow remains inexpansionary The DFWofficemarket rates grewMeanwhile, 2015to ClassBoccupancy 82.7%. 90basispointsduring demand, but still remain 10 basis points higher than its level recorded 12 months ago. dueto supplyoutpacing new thequarter declined 40basispointsto 83.2%during gains, compared to 492,173sq.of growth rates ft. inClassBproduct.Aoccupancy anet780,715sq.ofdirectabsorption ft. thequarter,During observed ClassAproperties basis pointsto 83.1%sincetheendof2014. vigorous theyear, demandwitnessedduring rates by 50 expandingdirectoccupancy have force construction existing tenantsbeenthedriving andbuild-to-suit behindthe annual gainsince2000.Large expansionsfrom relocations corporate into themarket, quarter,fourth increasing 5.3millionsq.–thelargest tallyto nearly its2015absorption ft. the recorded The during DFWofficemarket 1,252,571ft.ofdirect netabsorption sq. ASSESSMENT OFFICE MARKET

Updated 12/31/2015 in Thousands of SF -4,000 -2,000 environment withrelatively lower laborforce. businesscosts and awell-educated and expansionsascompaniesare to attracted themetro area’s business-friendly fundamentalswillr market Office As overall occupanc landlord fa willremain space,With a theleasingmarket thecontinuedhighdemandofquality options for tenants asthelocaleconomy continuesto expand. the DFWMetroplex. This willprovide space anabundanceofnew, high-quality projectshaveconstruction commencedorhave plansto across begin construction space.finding superior in to helpalleviate thedifficulty willdeliver intheoncomingquarters construction 2,000 4,000 6,000 0 PROPERTY SERVICES |DEVELOPMENT |INVESTMENT PROPERTY 30 50 70 91 11 31 51F1F18F 17F 16F 15 14 13 12 11 10 09 08 07 06 05 04 03 vorable However, setting in the most desirable submarkets. a wave of new Direct Net Absorption y rates are hovering around 13-year highs, numerous speculative Office Market Trends Office MAR KET GLANCE emain strong resulting from relocations corporate Completions ATA Direct Occupancy

77% 78% 79% 80% 81% 82% 83% 84% Direct Occupancy T Direct AskingRents Under Construction Moody’s Analytics. to average 2.9%peryear through 2018,according to Fort Worth remains strong withjobgrowth forecasted performance. The employment outlookfor Dallas- costs ofdoingbusinesswillleadto above-average and populationgrowth, diversified economy andlow The North Texas region’s strong historically employment technology, and retail. financialservices aerospace/defense,transportation, healthcare, high top employers are concentrated intelecommunications, in the number of Fortune 500 headquarters. The metro’s amongmetropolitanDFW ranksfourth statisticalareas Jersey-Long New Island, NY.Northern annual employment growth, following New York- over 1million,theDFWMetroplex rankssecondin withaworkforceAmong themetropolitan markets DFW ECONOMIC OUTLOOK: HOME TO 21FORTUNE 500COMPANIES: DFW METROPLEX RANKS 2ND IN JOB GROWTH: aln 2ms ietNtAsrto 5,331,282 railing 12mos.DirectNetAbsorption MARKETINDICATORS TREND Market TrendIndicators 6,222,896 Quarter Current $23.31 83.1% Change fromPrevious ure Year Quarter Q4 2015 12-month 3 Forecast

PAGE Q4 SUBMARKET OCCUPANCY RANKING Central Division Executive Vice President, DallasRegionalOffice new supplycoming online. year through 2018,translating into strong leasingdemandfor the Job growth intheDFWMetroplex isforecasted to average 2.9%per forward onnumerous speculative developments. andbuild-to-suit Strong hasenticed economic developers performance to move KURT CHERRY 2015 akSubmarket Rank PAGE Updated 12/28/15 1Stemmons 21 EastLBJ 20 WestLBJ 19 Plano 18 DallasCBD 17 North/NortheastFtWorth 16 Arlington/Mansfield 15 MidCities 14 LasColinas 13 CentralExpy 12 Richardson 11 UpperTollway/WestPlano 10 Quorum/BentTree Lewisville/Denton 9 East/SouthDallas 8 Frisco/TheColony 7 Uptown/TurtleCreek 6 FtWorthCBD 5 Allen/McKinney 4 PrestonCenter 3 SouthFtWorth 2 1 4 Submarket OccupancyRanking 54 1.4% -2.0% 85.4% -0.5% 85.7% -0.4% 87.9% -0.7% 88.3% 4.0% 88.4% 0.6% 88.5% -0.5% 90.2% 0.0% 90.9% 91.5% 30 1.3% -0.2% 73.0% 3.4% 73.9% -4.6% 74.3% 2.5% 77.1% -3.8% 78.5% -2.3% 78.7% 0.8% 83.0% 1.7% 83.7% 2.1% 84.1% -3.5% 84.5% -1.5% 85.0% 85.2% Rate Occ. PROPERTY SERVICES |DEVELOPMENT |INVESTMENT PROPERTY Y-O-Y % Change Updated 12/30/15 Updated 12/30/15 NET ABSORPTION&OCCUPANCYNET • • • • •

(24,663 sq. Covance ft.), CRU(37,299sq.and ft.) Westlake Financial (21,427sq. ft.). tenants occupying spacein2015were CulinAire (60,262sq.Metrocare ft.), Service the year without a “signature” Among the largest tenant moving into the market. leaseswithmedium-sized advantage ofsecuring tenantsable to throughout take ended theyear with335,254sq.ofdirectnetabsorption. ft. was The submarket Tower by andafuture DallasISDwillalsoaidthesubmarket’s move-in performance. sq. at ft. The PyramidsatParkVarious Lane-North. tenants moving into Cityplace Shackelford, took &McKinley, Melton asthey 51,400 LLPwasthelargest move-in all of which took place in Class A product. net 171,354 sq. of gains – virtually ft. Central Expresswa 101,619 sq.ofClassAspace, ft. respectively. thequarter,largest spaceduring tenants new to take occupying 119,611sq.and ft. and ofAmerica a net726,806sq.NECCorporation ft. WageWorks, were Inc. the gains, with 281,409sq.ofdirectabsorption increasing ft. total itsyearly quarter to Las Colinas, oneofDFW’ intheyear.more spaceearlier than1.5millionsq. ofbuild-to-suit ft. tenant movement, whileState highlighted Farm the quarterly CityLine moved into at gains. movingabsorption into Raytheon their498,020sq.headquarters ft. increasing479,067 sq. ofmove-ins, its2015total ft. to 1.35millionsq.ofdirect ft. Richardson rebounded fr occupying Mutual 160,000sq.ofClassBspaceat ft. Liberty Tollway Center II. Office featured FedEx atLegacy moving into their265,000sq.headquarters ft. West and direct spaceabsor Upper Tollway/West with a net 515,134 sq. of Plano ft. led the DFW submarkets In Thousands of SF The Stemmons Fr 1,000 1,500 2,000 2,500 78% 80% 82% 84% 86% 500 0 41 21 41 21 41 21 Q415 Q2 15 Q414 Q214 Q4 13 Q2 13 Q4 12 41 21 41 21 41 21 Q415 Q215 Q414 Q214 Q413 Q213 Q4 12 bed during the final quarter of 2015. Quarterly tenant movement of2015.Quarterly thefinalquarter bed during eeway submarket, also a more consistent performer in2015, alsoamore consistenteeway performer submarket, y also benefited from positive quarterly absorption witha absorption y also benefited from positive quarterly Direct NetAbsorption Direct Net Absorption vs. Completions vs. Absorption Direct Net s most consistently active submarkets, ended the fourth endedthefourth s mostconsistently submarkets, active om a third quarter absorption lossby addinganet absorption om athird quarter MAR KET GLANCE Class A Direct Occupancy Rates Direct Occupancy ATA Class B Completions

Updated 12/30/15 Updated 12/30/15 RENTAL RATES &LEASING ACTIVITY • • • • • •

quarter quarter rates improved asking by the $0.39 to $26.49persq.during ft. Class A full-service increased densities in lieu of buildings with less-efficient layouts.increased densitiesinlieuofbuildingswithless-efficient continuewithtenants capableofhandling floorplates favoringwill likely modern As supplyisdeliver new hasdeclinedforvelocity to 6.1millionsq. theseventh consecutive ft. quarter are becomingincreasinglysubmarkets limited. The trailing12-monthClassBleasing 8.3 millionsq.withinthepastyear aslarge ft. spaceoptionsinthe mostdesirable The trailing12-monthvolume ofClassAleasingactivit LBJ ($2.84or12.7%). Uptown/Turtle Creek ($3.37 or 10.1%),Central Expressway ($3.14or12.8%)andEast Quorum/Bent Tree. However, thelargest annualClassA rental increases occurred in most desired whichincludeUptown/Turtle submarkets, Preston Creek, Center and occupancy Higher rates, andinsecondgenerationspace.vacancy withhigher withincentiveslease terms andconcessionsstillexistinsubmarkets However,& Allen/McKinney). for tenants to opportunities capitalize on attractive DFWsubmar 2015,allbuttwo During highest level onrecord. 6.0% (or rents $1.11) over 12 months. have the prior Class B asking also reached their rents increasedClass Basking b delivered to themarket. continue growing andrenovated speculative asnew inventory buildingsare rents by have highs, historic and will increased hurtling 14 consecutive quarters, $16 $18 $20 $22 $24 $26 $28 In Thousands of SF 10,000 12,000 14,000 41 21 41 21 41 21 Q415 Q2 15 Q414 Q214 Q413 Q213 Q4 12 2,000 4,000 6,000 8,000 and have increased by 6.0% (or $1.49) over 12 months. the prior Class A PROPERTY SERVICES |DEVELOPMENT |INVESTMENT PROPERTY 0 41 21 41 21 41 21 Q4 15 Q2 15 Q4 14 Q2 14 Q4 13 Q2 13 Q4 12 rates have allowed landlords to push Class A rents upwards in the ed to the market, the flight to quality and efficiency trend andefficiency theflight to quality ed to themarket, Class A MAR KET GLANCE ($/SF/Yr.Service Full Direct Leasing Activity Leasing Direct Class A y $0.46to $19.73persq.andhave ft., increased by Rolling 12-Months Rolling Rental Rates kets experienced rent experienced growthkets (Ft. Worth CBD ATA ) Class B Class B y hasdeclined27.1%to

offered, and rental rates trending upwards. space inthe mostdesirable submarkets withfewer concessions being landlords willmaintain theupperhandinleasenegotiations for quality rates economic thelocal As expansion pushesoccupancy higher, Central Division Executive Vice President, DallasRegionalOffice KURT CHERRY akSubmarket Rank Updated 12/28/15 1Stemmons 21 WestLBJ 20 Arlington/Mansfield 19 North/NortheastFtWorth 18 East/SouthDallas 17 Richardson 16 EastLBJ 15 South FtWorth 14 Lewisville/Denton 13 Quorum /BentTree 12 Plano 11 Mid Cities 10 LasColinas Allen/McKinney 9 DallasCBD 8 CentralExpy 7 FtWorthCBD 6 UpperTollway/WestPlano 5 Frisco/TheColony 4 PrestonCenter 3 Uptown/TurtleCreek 2 1 SUBMARKET RENTAL RATE RANKING Submarket RentalRateRanking Rental 1.53.5% 5.6% $15.25 $17.67 14.9% 9.1% $20.93 $21.68 10.0% 8.1% $22.87 4.9% $23.18 -4.2% $23.87 7.6% $23.98 11.8% $24.10 -1.4% $25.85 0.5% $26.26 4.4% $28.45 1.3% $29.60 8.3% $34.00 $35.29 1.41.6% 9.2% $18.04 8.8% $18.22 $19.86 5.2% 8.8% $21.77 7.3% $21.86 $22.42 Rate Q4 2015 Y-O-Y % Change 5

PAGE • • • • • RECENT ANNOUNCEMENTS Q4 • RECENT ANNOUNCEMENTS 2015 PAGE 6 completion in2017. insize andwilltriple upon building by late-2016 the 110-acre projectwillfeature a250,000sq. ft. the Alliance Texas development. Phase oneof Fort datacenter inNorth billion-dollar Worth in Facebook hasplansto break g ofboutiqueofficespace.ft. 12,000 sq.ofgreen ft. roof and11,000 sq. terraces Turtle Creek submarket. The buildingwillinclude intheUptown/ Harwood tower at2850North 228,000sq. ClassAoffice ft. ahigh-end construct Int Harwood 2016. buildings couldoccurduring acre plotofland. Ground-breaking onthefirst12 hotelsq. of retail on the 157- ft. and a 150-key plansincludeacommuter railstation,85,000 Early campusinLasColinas.million sq. corporate ft. development ofa3.5 firm for theconstruction Verizon OneSource V complete inlate-2016. onGraniteConstruction Place to isexpected building at Southlake Town Cities. Square in Mid a 100%speculative 158,000sq.ClassAoffice ft. Granite Proper available in theLegacy West development. of the 80acres of office spaceon allor a portion ft. with JPMorgan Chaseto beover onemillionsq. Mutual. Rumors anticipate the deal and Liberty a leaseatKDC’s L JP Morgan Chaseisrumored to have agreed to will complete during the third quarter of2016. thethirdwill complete during quarter Construction (1,300byby early-2019). early-2017 move atleast900employees to building thenew Colinas. thegrant isapproved, If OneSource must at9001Cypressconstruction Waters Blvd. inLas expand ataspeculative buildingcurrently under economic development grant to relocate and Wireless isplanningwiththeKDC irtual hasrequested an$800,000 irtual ernational announcedplansto ernational ties brokeground onGranite Place, egacy egacy West campus nearFedEx round ontheirone- PROPERTY SERVICES |DEVELOPMENT |INVESTMENT PROPERTY Updated 12/30/15 Updated 7/6/2015 CONSTRUCTION lae-uetRgoa Q* 250,000 * Corporate-owned**Build-to-suit Note:Corporate-ownedofficebuildingsexcluded fromcompetitivestatistics Alcatel-Lucent RegionalHQ ** 1900 Pearl h odCne tTeSa 9,6 rsoTeCln alsCwos2%LnonPoet opn 2Q2016 LincolnPropertyCompany 20% LasColinas Dallas Cowboys 325,000 Frisco/TheColony One LegacyWest 398,769 7-Eleven Headquarters** CoreLogic HQ** The FordCenterAtStar tt amCmu *4992Rcado tt amIsrne100% StateFarm Insurance Richardson 499,992 Wade Park1 The Union State FarmCampus-D** PROJECT NAME ooaMtrCr.H ,0,0 pe ola/WPaoTyt ot mrc 100% ToyotaNorthAmerica UpperTollway/WPlano 2,100,000 McKinney &Olive Toyota MotorCorp.Hq* SIGNIFICANT PROJECTSUNDERCONSTRUCTION

In Thousands of 10,000SF 12,000 14,000 • • • • •

2,000 4,000 6,000 8,000 sq. in Fort ft.) Worth CBD are to expected break ground the first-half during of 2016. Operating’s CitiesandJetta Schwab (1.2millionsq.inMid ft.) Frost Tower (280,489 million combinedsq. inPlano, ft.) Properties’ Hillwood campusfor corporate Charles (1.1 instance, Mutual KDC’s ofBuildings1&2for construction Liberty build-to-suit 1900 Pearl, a100%speculative 261,400sq.ClassAbuildinginDallasCBD. ft. officespaceexists.quality Forexample, Lincoln on Co. beganconstruction Property coreand urban buthasscattered to otherareas where alackofavailable high- The buildingboomhas Throughout the that is24%leasedto (15,258sq. Greatbatch, (53,284sq.andQualtrics ft.). ft.) Inc delivered Granite Park V, a306,200sq.ClassAtower ft. inUpper Tollway/West Plano forsq. build-to-suit Raytheon’s ft. Granite atCityLine. Properties also headquarters wasKDC’s thequarter market. during 489,000 The delivery largest construction thequarter During alead-tenant. to securing prior commitmentsasdevelopers are increasinglypre-lease ground confidentbreaking Onlyabout37.3%ofthisspacehas continues itssurge sincelate-2013. experienced approximat pipelinehasshrunk3.8%withinthepastThe year officeconstruction to Many office construction pr Many officeconstruction In Thousands of SF well Co. asaBillingsley for developed build-to-suit CoreLogic inLasColinas. Toyota Corp. Motor Properties (2.1 million sq. (200,000 and sq.Hillwood as ft.) ft.), projectsfor and others. ground Recent alsoincludedcorporate-owned breakings Class Atower inUptown/Turtle by currently 41%pre-leased Creek, Vinson &Elkins million sq. ofofficespace. ft. Thelargest involvedprojects TheUnion,a417,467ft. sq. 1,000 2,000 3,000 4,000 5,000 6,000 7,000 0 21 41 21 41 21 41 Q215 Q414 Q2 14 Q413 Q2 13 Q412 Q2 12 0 41 21 41 21 41 21 Q4 15 Q2 15 Q4 14 Q2 14 Q4 13 Q2 13 Q4 12 ely 6.3 million sq. ft. (excluding corporate-owned projects),but ely 6.3millionsq.(excluding ft. corporate-owned IE(F SUBMARKET SIZE (SF) 6,0 Dallas CBD 261,400 0,6 UpperTollway/WPlano LasColinas 307,767 327,183 1,6 pon/Trl re isn&Ekn 1 E eeomn,LC2Q2017 RED Development, LLC 41% Vinson&Elkins Frisco/TheColony Uptown/TurtleCreek 400,000 417,467 3,0 pon/Trl re adr yn eel41% GardereWynneSewell Uptown/TurtleCreek 530,000 fourth quarter,fourth developers broke ground on approximately 1.2 , developers delivered to product 1,495,327sq.ofnew the ft. been largely concentrated in the northern Dallas submarkets Dallas submarkets been largely concentrated in the northern Under Construction Plano MAR KET GLANCE ojects willbreakojects ground intheoncomingmonths. For Under Construction Construction Pipeline Construction Pipeline Pipeline Construction MAJOR TENANT lae-uet10 alyMngmn,LC2Q2016 Cawley Management,LLC 100% Alcatel-Lucent oeoi 0%BliglyC.1Q2017 BillingsleyCo. 100% CoreLogic -lvn 0%BliglyC.1Q2016 BillingsleyCo. 100% 7-Eleven N/A N/A N/A ATA Delivered ESDDEVELOPER LEASED % PRE- Delivered %GeeeGop4Q2016 GaedekeGroup 0% %LnonPoet opn 2Q2017 LincolnPropertyCompany 0% %Toa ad&Dv 1Q 2017 ThomasLand&Dev. 0% Crescent KDC KDC

DELIVERY 3Q 2016 1Q 2016 2Q 2017 T ARGET SUBMARKET STATISTICSSUBMARKET Totals Class C Class B Class A East /SouthDallas Frisco /TheColony Plano Allen /McKinney Richardson Stemmons Las Colinas pe ola etPao1,1,5 ,2,2 2,2 52 1,3 3,1 7,0 7,8 3.0$24.83 $30.80 $32.04 977,481 $36.88 1,218,797 571,200 833,417 - 515,134 85.2% 45,415 825,424 East LBJ (85,261) 2,722,826 West LBJ 16,511,653 88.4% Upper Tollway/WestPlano 313,132 Quorum /BentTree 1,678,953 10,769,434 Central Expy Preston Center Uptown /TurtleCreek Dallas CBD Ft. WorthCBD Mid Cities Arlington /Mansfield ot otes tWrh35841722318327.%(2,7)1136- 141,336 (326,479) Property Types 78.7% 168,322 Totals 792,233 South FtWorth 3,578,451 Lewisville /Denton North /NortheastFtWorth Submarkets METHODOLOGY DIRECT ASKING RENTS:DIRECT UNDER CONSTRUCTION: NET ABSORPTION:DIRECT OCCUPANCYDIRECT RATE: SUBLEASESPACE: Space that hasbeenleasedby atenant andisbeingoffered for leasebackto themarket by thetenant withtheleaseobligation. SPACE:DIRECT TOTAL SPACE AVAILABLE: TOTAL INVENTORY: PROPERTY SERVICES |DEVELOPMENT |INVESTMENT PROPERTY Space that isbeingoffered for from leasedirectly thelandlord orowner ofabuilding. space Under construction isnotincludedinspace available figures. The total inventory includesallsingleandmulti-tenant leasedoffice buildingswithat least20,000square feet ofgross rentable square footage. The asking rent quoted full-service for available space expressed indollarspersq. ft. Office buildingswhichhaveOffice commenced asevidenced construction by site excavation orfoundation work. Available space currently beingmarketed whichiseitherphysically vacant oroccupied. The netchangeinoccupied space direct over agiven periodof time. Direct space physicallyDirect occupied dividedby thetotal rentable inventory. netr FDrc Sublease Direct Inventory SF netr FDrc Sublease Direct Inventory SF 2,5,2 68927531228.%12251529001453762188$33 6.7% $23.31 6,271,808 6.0% 1,495,327 $26.49 5,269,050 6,093,154 1,252,571 83.1% 1,454,372 5,331,282 3,949,131 46,809,277 780,715 223,352,926 83.2% 3,084,349 25,619,044 116,805,507 2,5,2 68927531228.%12251529001453762188$64 $19.73 $26.49 6,271,808 1,495,327 5,269,050 1,252,571 83.1% 5,331,282 46,809,277 223,352,926 763221,6,2 ,3,0 27 9,7 ,4,1 0951864$97 6.0% $19.73 178,654 40,955 1,147,317 492,173 82.7% 2,230,903 19,667,325 97,663,242 469102552723548.%49071309249004992$43 $19.16 $24.32 $20.54 499,992 $26.57 - 489,000 867,183 1,350,912 141,219 335,254 479,067 98,922 726,806 85.0% 281,409 73.0% 253,564 84.1% 2,585,237 148,031 14,609,160 3,081,777 677,474 10,327,202 5,913,041 29,096,545 893343529144818.%3,2 1,5 9,4 2.0$19.11 $27.80 - 197,740 (32,941) - (95,239) - 73.9% $18.87 $24.64 411,958 269,986 261,400 33,526 333,334 4,578,881 15,736,184 174,901 85.4% 86,648 84.5% 454,891 393,769 3,592,971 176,575 18,993,324 44,424 1,849,895 11,580,068 78.5% 391,538 7,893,097 25,961,385 ,8,7 ,2,0 6008.%(037 172,602 (20,317) 87.3% 16,030 1,522,908 8,884,177 ,2,6 1,7 2978.%1205161816359179$04 $27.52 $23.03 $30.48 $23.09 $22.62 - 991,769 250,000 $26.34 163,957 166,305 (21,736) - 116,198 (4,327) 20,000 122,085 87.9% (17,958) 11,936 88.3% (137,335) 13,898 67,272 82,937 77.1% 1,043,514 90.2% 515,671 7,216,448 25,630 134,448 4,422,763 1,139,842 420,112 4,680,315 3,062,629 ,6,4 ,6,8 7877.%3,0 1,8 - $27.50 $35.60 186,257 112,784 38,900 - 74.3% 77,847 151,415 1,365,788 (32,521) 4,165,743 90.9% 79,794 554,650 4,319,513 ,5,2 ,9,6 7,0 37 3151511-1600$58 $19.80 $25.89 196,000 $17.79 $20.41 - - 30,000 205,972 20,955 175,121 26,492 (123,128) 73,185 88.5% (96,369) 83.7% 181,757 83.0% 1,235,340 771,006 8,523,676 2,696,969 63,769 9,953,928 1,211,512 6,566,404 ,6,9 2,2 1,1 15 0371762-4922$69 $21.49 $26.98 $21.19 409,232 $24.03 22,000 - - 147,642 30,307 (28,456) 91.5% 44,478 117,713 85.7% 926,328 103,546 7,768,699 1,010,640 5,509,402 MAR KET GLANCE Total Total TOTAL SPACEAVAILABLE ATA Occupancy Occupancy Direct Direct DIRECT NETABSORPTION Current Current

Qtr. Qtr. Year-to- Year-to- Date Date Completions Completions Current Qtr Current Qtr CONSTRUCTION Construction Construction Under Under 1.36.6% $16.23 - 1.8$14.41 $18.48 $17.63 - $25.24 - 3.4$18.67 $31.44 - 2.6$18.01 $20.96 - 2.1$20.66 $27.61 - 1.6$17.13 $18.36 - 2.5$19.28 $28.85 - Asking ls ClassB Class A Rent ASKING RENT Q4 2015 Change Y-O-Y 7

PAGE MAR KET AT A GLANCE Q4 2015

Kurt Cherry Shea Byers Brittany Ricketts Kelsey Oldham Ariel Guerrero Executive Vice President Vice President Leasing Manager Marketing Manager Senior Vice President (972) 421-3322 Leasing (972) 421-3308 (972) 421-3307 Research [email protected] (972) 421-3306 [email protected] [email protected] (713) 209-5704 [email protected] [email protected]

Wade Bowlin Kristen Burney Doug Berry James Decman Executive Vice President Vice President Vice President Senior Research Analyst Managing Director Director of Marketing Creative Director (713) 209-5971 (713) 209-5753 (713) 209-5910 (713) 209-5897 [email protected] [email protected] [email protected] [email protected]

ABOUT PMRG Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance THIRD QUARTER 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2015 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas regional economy continues humming at a steady pace ranking among the nation’s top performing economies, despite the collapse in oil prices that have curtailed oil patch activity throughout the state. Business-friendly benefits of operating in Texas, diversification of companies within the market, reasonable lower cost of living, comparative ease of commuting, not to mention multi-million dollar incentive packages offered at the state and local level have fueled economic growth since the Great Recession.

The Dallas-Fort Worth metropolitan area has added a solid 103,500 jobs in the 12 months ending August 2015, which represents an annual increase of 3.1% in employment. The industry sectors with the most jobs created in the prior 12 months were Professional & Business Services (26,400 or 4.9% growth); Trade, Transportation & Utilities (22,500 or 3.3% growth); Education & Health Services (22,500 or 5.6% growth); and Leisure & Hospitality TABLE OF CONTENTS (21,200 or 6.3% growth). As a result of the strong job growth, the area’s unemployment rate has dropped 150 basis points to 3.9% over the prior 12 months, hovering around its lowest point since early-2001.

Economic Overview...... 2 The region’s economic expansion is expected to continue into 2016 and 2017 with solid Office Market Assessment...... 3 growth anticipated in the professional business services, technology, healthcare and Net Absorption & Occupancy...... 4 leisure & hospitality sectors driven by corporate expansion and relocations. Build-to-suit projects for State Farm Insurance, Toyota Motor Co, Raytheon, FedEx, Dallas Cowboys, Rental Rates & Leasing Activity...... 5 Alcatel-Lucent, CoreLogic, Liberty Mutual and 7-Eleven have all either begun construction Construction...... 6 or break ground in the oncoming months, with additional companies expressing interest Submarket Statistics & Methodology...... 7 in expanding or consolidating their DFW footprint. Our Team...... 8 Employment Trends

125 6% 100 75 4%

FOR INFORMATION: Thousands 50 2% 25 Kurt Cherry 0 0% Executive Vice President -25 -50 -2% (972) 421-3322 -75 -4% [email protected] -100 -125 -6% 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F Wade Bowlin Executive Vice President Updated 9/23/15 Jobs Added Annual % Change Managing Director, Central Division (713) 209-5753 Employment Growth by Sector [email protected] 12-MONTHS HEALTH CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) Ariel Guerrero Mining, Logging & Construction 196.0 197.8 -0.9% Senior Vice President, Research Manufacturing 257.2 263.5 -2.4% (713) 209-5704 Trade, Transportation & Utilities 709.5 687 3.3% [email protected] Information 82.2 82.5 -0.4% Financial Activities 276.1 268.0 3.0% Professional & Business Services 570.5 544.1 4.9% 2 Education & Health Services 424.7 402.2 5.6% PAGE Leisure & Hospitality 360.3 339.1 6.3% Other Services 121.7 117.8 3.3% Government 394.3 387.0 1.9% Source:Source: U.S. U.S. Bureau Bureau of Labor Statistics, Statistics, Employment Employment Data Data as of as August of August 2015 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2015

OFFICE MARKET ASSESSMENT

The DFW office market recorded 827,441 sq. ft. of direct net absorption during the third quarter, increasing its year-to-date absorption count to more than 4.0 million sq. ft. – which puts 2015 on pace to record its highest absorption level since 2000. Build-to-suit construction, corporate relocations to the market and company expansions have been the driving force behind the healthy demand witnessed during the year, increasing oc- cupancy rates by 60 basis points to 83.2% since the end of 2014.

During the quarter, Class A properties observed a net 599,800 sq. ft. of direct absorp- tion gains, compared to 150,714 sq. ft. of growth in Class B product. Class A occupancy rates declined 50 basis points to 83.6% during the quarter due to new supply outpacing demand, but rates are still 30 basis points higher than the recording 12 months ago. New supply also caused Class B occupancy rates to slightly dip by 10 basis points to 82.0% DFW Metroplex Ranks 2nd in Job Growth: Among despite the quarterly absorption gain. the metropolitan markets with a workforce over 1 million, the DFW Metroplex ranks second in annual The DFW office market growth is not expected to slow down any time soon, even with employment growth, following New York-Northern the decline in occupancy rates during the quarter. Strong Class A demand has pushed New Jersey-Long Island, NY. vacancy rates down to the levels last seen in 2001 and 2002 when vacancy rates last sparked a surge in speculative development. Although the velocity of large new deals inked during the quarter was slightly lower than previous quarters, many large renewals Home to 21 Fortune 500 Companies: DFW ranks were signed, including Verizon Building Access (388,600 sq. ft. at Galatyn Park); Ryan, LLC fourth among metropolitan statistical areas in the (176,130 sq. ft. renewal/expansion at Three Galleria Tower); and U.S. Department of Educa- number of Fortune 500 headquarters. The metro’s top tion (66,451 sq. ft. at Harwood Center). employers are concentrated in telecommunications, transportation, aerospace/defense, health care, high technology, financial services and retail. FORECAST

DFW Economic Outlook: The North Texas region’s • With the continued high demand of quality space, the leasing market will remain historically strong employment and population growth, a landlord favorable setting in the most desirable submarkets. However, a wave diversified economy and low costs of doing business will of new construction will deliver in the oncoming quarters to help alleviate the lead to above-average performance. The employment difficulty in finding superior space. outlook for Dallas-Fort Worth remains strong with a • As overall occupancy rates are hovering around 13-year highs, numerous speculative job growth forecast of 3.7% in 2015 and 3.9% in 2016, construction projects have commenced or have plans to begin construction across according to Moody’s Analytics. the DFW Metroplex. This will provide an abundance of new, high-quality space options for tenants as the local economy continues to expand at a healthy pace. • Office market fundamentals willemain r healthy resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly Updated 9/30/15 Updated 9/30/2015 environment with relatively lower business costs and a well-educated labor force. Market Trend Indicators

Current Change from Previous 12-month Office Market Trends Quarter Quarter Year Forecast Direct Occupancy 83.0% Down Up Up 6,000 84% Trailing 12 mos. Direct Net Absorption 4,953,119 Down Up Sideways? 83% 4,000 82% Under Construction 6,424,194 Down Up Up 2,000 81% Direct Asking Rents $22.78 Up Up Up 0 80%

in Thousands of SF in Thousands 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2015 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Richardson took a step back this quarter with a net direct occupancy loss of 692,748 sq. ft. but still leads the DFW submarkets with 871,845 sq. ft. absorbed during 2015. State Farm vacated 291,000 sq. ft. at 1011 Galatyn Pky, Bank of America’s combined 312,000 sq. ft. of sublease space expired at the 2375 N Glennville buildings, and Cisco Systems left 178,000 sq. ft. at Turnpike Commons East Office Center. • North/Northeast Fort Worth, a relatively inactive submarket historically, absorbed a net 390,942 sq. ft. of direct space during the quarter. The large spike in absorption gains was directly attributable to FAA GSA’s move into their new 357,000 sq. ft. headquarters at 10101 Hillwood Pky. • Las Colinas posted 205,718 sq. ft. of direct net absorption during the quarter, led once “Strong economic performance has made the Dallas- again by the Class A property sector with 145,315 sq. ft. of growth. AMN Healthcare’s move Ft. Worth metroplex attractive for large speculative and into 109,000 sq. ft. at 8840 Cypress Waters and GE Capital’s lease commencement at 5000 build-to-suit developments. The current pace of job Riverside highlighted the Class A move-ins. growth is forecasted to remain above the 3.0% annual • Preston Center rebounded from a lackluster first-half of 2015 with a net 158,813 sq. ft. of growth rate for the balance of 2015, translating into direct space absorbed as occupancy ended the quarter at 91.6%. Energy Transfer Partners strong leasing demand for the numerous construction and Chief Oil & Gas each moved into a combined 190,000 sq. ft. at the newly delivered projects coming online” – said Kurt Cherry, Executive 8111 Westchester. ViceUpdated President, 9/30/15 Dallas Regional Office. • Dallas CBD added 110,899 sq. ft. to the quarterly absorption total. In addition to KPMG and Jackson Walker moving into KPMG Plaza at Hall Arts, City Electric Supply Co. took 70,000 Submarket Occupancy Ranking sq. ft. at 400 Record. KPMG’s 95,000 sq. ft. vacancy at 717 Harwood, and Regency Energy Occ. Y-O-Y % leaving 84,000 sq. ft. at Bryan Tower were the largest move-outs during the quarter. Rank Submarket Rate Change • Stemmons Freeway, which has witnessed an uptick in leasing activity in recent quarters 1 Preston Center 91.6% -0.7% experienced 124,727 sq. ft. of direct net absorption during the quarter. Covance CRU 2 South Ft Worth 91.0% 0.3% Updated 9/30/15moving into 37,000 sq. ft. at Mockingbird Towers and The Family Place taking 20,000 sq. 3 Uptown/Turtle Creek 89.2% -0.2% ft. at One Mockingbird Plaza were among the most notable move-ins during the quarter. 4 Frisco / The Colony 89.0% 0.2% 5 Allen / McKinney 88.4% -1.0% Direct Net Absorption vs. Completions 6 East / South Dallas 87.9% -0.2% 2,500 7 Ft Worth CBD 87.4% 4.0% 8 North / Northeast Ft Worth 85.9% -0.5% 2,000 9 Quorum / Bent Tree 85.2% 1.4% 1,500 10 Arlington / Mansfield 85.1% -1.1% 11 Upper Tollway / West Plano 85.1% -3.2% 1,000 In Thousands of SF In 12 Lewisville / Denton 84.9% -2.3% 500 13 Richardson 84.3% -3.5% 0 14 Las Colinas 84.0% 1.5% Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 15 Mid Cities 83.5% 1.1% 16 Central Expy 82.6% 0.2% Updated 9/30/15 Direct Net Absorption Completions 17 Plano 80.2% 0.9% 18 Dallas CBD 78.0% 3.1% Direct Occupancy Rates 19 Stemmons 75.0% 2.8% 20 East LBJ 74.5% 0.1% 86% 21 West LBJ 73.3% 1.8% 84%

82%

80% 4 PAGE 78% Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2015

RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rates improved by $0.54 to $26.10 per sq. ft. during the quarter and have increased by 6.1% (or $1.50) over the prior 12 months. Class A rents have increased 13 consecutive quarters, speeding ahead of historic highs, and will continue growing as new inventory quoting higher rental rates are delivered to the market. • Class B asking rents increased by $0.30 to $19.27 per sq. ft., and have increased by 3.5% (or $0.65) over the prior 12 months. Class B asking rents are at their highest level since this time in 1998. • During the quarter, all except for three of the DFW submarkets experienced rent growth. However, opportunities for tenants to capitalize on attractive lease terms with incentives and concessions still exist in submarkets with higher vacancy rates, such as Dallas CBD and the LBJ and Stemmons Freeway. • Higher occupancy rates have allowed landlords to push Class A rents upwards in the “Sustained demand for quality space should result in most desired submarkets, which include Uptown/Turtle Creek, Preston Center, Frisco/The moderate rental rate growth in the top performing Colony, Fort Worth CBD, and Quorum/Bent Tree. submarkets in 2015 as quality space options become • Class A trailing 12-month leasing velocity has declined 20.9% to approximately 8.8 million limited,” said Kurt Cherry, Executive Vice President, sq. ft. within the past year as large space options in the most desirable submarkets are Dallas Regional Office. becoming increasingly limited. The Class B trailing 12-month leasing velocity has declined Updated 9/30/15 for the seventh consecutive quarter to approximately 5.9 million sq. ft. • As new construction is delivered to the competitive market, the flight to quality and efficiency trend will likely continue with tenants favoring modern floorplates capable of Submarket Rental Rate Ranking handling increased densities in lieu of buildings with less-efficient layouts. Rental Y-O-Y % Rank Submarket Rate Change 1 Uptown/Turtle Creek $34.67 7.8% Updated 9/30/15 2 Preston Center $33.79 2.6% 3 Frisco / The Colony $29.00 2.4% 4 Upper Tollway / West Plano $27.57 -2.0% Rental Rates ($/SF/Yr. Full Service) 5 Ft Worth CBD $26.63 1.0% $28 6 Central Expy $25.18 10.7% $26 7 Allen / McKinney $24.64 -1.3% $24 8 Las Colinas $23.84 6.1% $22 9 Dallas CBD $23.54 9.2%

$20 10 Lewisville / Denton $22.35 9.3% 11 South Ft Worth $21.73 3.7% $18 12 Mid Cities $21.66 1.4% $16 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 13 Quorum / Bent Tree $21.47 2.6% 14 Plano $21.13 3.0% Updated 9/30/15 Class A Class B 15 East LBJ $20.87 6.4% 16 Richardson $20.34 11.7% Direct Leasing Activity 17 East / South Dallas $19.25 4.6% Rolling 12-Months 18 Arlington / Mansfield $17.82 0.1% 14,000 19 North / Northeast Ft Worth $17.54 -2.6% 12,000 20 West LBJ $17.15 2.3% 10,000 21 Stemmons $15.06 0.9% 8,000 6,000

In Thousands of of SF In Thousands 4,000 2,000 5 PAGE 0 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2015 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has increased 20.3% within the past year to approximately 6.4 million sq. ft. (excluding corporate-owned projects), continuing its surge experienced since late-2013. Only about 42% of this space has pre-lease commitments as developers are increasingly comfortable breaking ground prior to securing a lead-tenant. • During the quarter, developers delivered 1,635,694 sq. ft. of new product to the market. The largest construction delivery during the quarter was KPMG Plaza at Hall Arts, a 459,383 sq. ft. multi-tenant office building in the Dallas CBD anchored by KPMG and Jackson Walker. Also, FAA Southwest’s 357,214 sq. ft. regional headquarters developed by Manhattan Construction Company completed during the quarter. • Throughout the third quarter, developers broke ground on approximately 1.5 million RECENT ANNOUNCEMENTS sq. ft. of new office space. The largest project involved the 100% speculative One Legacy West, a Class A 307,767 sq. ft. tower in the Upper Tollway/West Plano submarket. Cawley Management’s 250,000 sq. ft. build-to-suit in Plano for Alcatel-Lucent also • Fort Worth CBD will soon have its first new office began construction during the quarter. construction project since 2008. 640 Taylor, being • The building boom has been largely concentrated in the northern suburban Dallas developed by Stream, will break ground during submarkets and urban core but has scattered to other areas where a lack of available the fourth quarter and will feature 313,000 sq. ft. high-quality office space exists. For example, Billingsley recently broke ground on 9001 on 25 floors. Jetta Operating Company has already Cypress Waters, a 215,000 sq. ft. speculative office tower in Las Colinas. The Terraces At committed to 70,000 sq. ft. within the Class AA Douglas Center, a 171,583 sq. ft. speculative development by Lionstone Investments, project expected to deliver late-2017. also broke ground in Preston Center during the quarter. • Lionstone Investments and PegasusAblon are • Many build-to-suit projects as well as speculative projects have either recently begun combining efforts to develop the Terraces at Updated 9/30/15construction or will break ground in the oncoming months. For instance, KDC is Douglas Center, a 12-story Class A office tower in nearing ground-breaking on build-to-suit projects for both Toyota Motor Corporation Preston Center. The 171,583 sq. ft. office tower, which Updated 9/30/15 and Liberty Mutual, Gaedeke Group broke ground on the speculative 308,000 sq. ft. broke ground during the third quarter, will feature One Legacy West, and Hines has plans to begin construction during the fourth quarter contemporary designs and high-end finishes and is on the speculative 448,000 sq. ft. Victory Center in Uptown/Turtle Creek. expected to deliver early-2017. Construction Pipeline • KDC will soon break ground on the Liberty Mutual Construction Pipeline Insurance project in the Legacy West development. 7,000 The project will include two 20-story towers totaling 6,000 more than one-million sq. ft. and are expected 7,000 to deliver in under two years, bringing 4,000 5,000 6,000 employees to the project. 4,000 • Granite Properties is preparing to begin construction 5,000 on Granite Place I at Southlake Town Square. Granite 3,000 4,000 Place I will be a 160,000 sq. ft. Class A office building

In Thousands of of SF In Thousands 2,000 next to the Hilton and will begin construction 3,000 during the beginning of the fourth quarter. 1,000

In Thousands of of SF In Thousands 2,000 • Harwood International broke ground during the 0 quarter on the New Rolex Building in Uptown/ 1,000 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Turtle Creek during the third quarter. The 136,857 sq. 0 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 ft. mid-rise office building will be next door to the Under Construction Delivered original Rolex Building and will feature a “Japanese- inspired tiered garden.” Construction is expected to SIGNIFICANT PROJECTS UNDER CONSTRUCTION Under Construction Delivered complete by 4Q 2016. % PRE- TARGET PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER DELIVERY • Cawley Partners with Pacific Coast Capital Partners McKinney & Olive 530,000 Uptown / Turtle Creek Gardere Wynne Sewell 41% Crescent 3Q 2016 has broken ground on Alcatel-Lucent’s new regional Future State Farm Campus** 499,992 Richardson State Farm Insurance 100% KDC 1Q 2016 headquarters in Plano. Alcatel-Lucent is expected to Raytheon HQ** 490,000 Richardson Raytheon 100% KDC 4Q 2015 consolidate their operations into the 250,000 sq. ft. Wade Park 1 400,000 Frisco/The Colony N/A 0% Thomas Land & Development 1Q 2017 office building in Plano upon delivery in 2016. The Ford Center At The Star 398,769 Frisco/The Colony Dallas Cowboys 20% Lincoln Property Company 2Q 2016 7-Eleven Headquarters 325,000 Las Colinas 7-Eleven 100% Billingsley Co. 1Q 2016 One Legacy West 307,767 Upper Tollway/ W Plano N/A 0% Gaedeke Group 4Q 2016 6 Granite Park V 306,200 Upper Tollway/ W Plano 19% Granite Properties 4Q 2015 PAGE FedEx HQ - Legacy Business Park** 265,000 Upper Tollway/ W Plano FedEx Office 100% KDC Real Estate 4Q 2015 Alcatel-Lucent Regional HQ* 250,000 Plano Alcatel-Lucent 100% Cawley Management, LLC 2Q 2016 Legacy West 225,000 Upper Tollway/ W Plano N/A 0% Karahan & Columbus Realty 4Q 2016 * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2015

SUBMARKET STATISTICSTOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 26,175,138 7,899,453 376,202 78.0% 110,899 349,345 459,383 0 $24.17 $19.37 Uptown / Turtle Creek 10,753,629 1,723,669 285,320 89.2% 123,473 130,676 - 801,330 $36.28 $30.87 Preston Center 4,319,513 540,134 41,724 91.6% 158,813 183,936 190,000 171,583 $35.32 $28.16 Central Expy 11,643,302 2,149,064 163,692 82.6% 97,412 158,433 - 0 $26.99 $19.71 Quorum / Bent Tree 18,996,467 3,323,750 454,784 85.2% 72,231 378,432 - 197,740 $26.72 $18.49 Upper Tollway / West Plano 15,954,825 2,832,033 758,831 85.1% 121,120 318,283 487,094 1,548,681 $29.49 $24.94 West LBJ 4,164,441 1,344,373 45,652 73.3% 34,885 73,884 - 0 $17.77 $16.87 East LBJ 15,731,446 4,403,182 341,816 74.5% 43,141 62,298 - 0 $24.25 $17.13 Las Colinas 28,848,849 6,181,414 906,067 84.0% 205,718 445,397 - 681,219 $26.56 $20.40 Stemmons 10,510,500 2,919,064 124,727 75.0% 124,727 236,332 - 0 $18.67 $14.22 Richardson 14,123,190 2,566,179 242,203 84.3% (692,748) 871,845 - 989,992 $24.13 $18.82 Allen / McKinney 3,050,543 382,025 125,543 88.4% (55,790) (55,336) - 143,684 $26.23 $23.57 Plano 4,678,560 1,143,947 37,382 80.2% 40,624 119,377 - 250,000 $22.82 $20.43 Frisco / The Colony 4,256,458 521,995 120,913 89.0% 9,177 (5,887) - 1,141,778 $30.23 $26.58 East / South Dallas 7,219,471 1,049,280 8,685 87.9% (23,539) (17,409) 20,773 0 $31.45 $18.23 Arlington / Mansfield 6,544,730 1,269,327 87,104 85.1% (32,841) (26,759) - 50,955 $20.18 $17.65 Mid Cities 10,002,916 2,573,842 783,436 83.5% (3,760) 101,936 - 38,000 $25.65 $19.35 Ft. Worth CBD 8,545,714 1,225,279 123,582 87.4% 57,640 179,480 - 0 $28.68 $19.68 North / Northeast Ft Worth 3,653,489 851,703 178,821 85.9% 390,942 467,815 357,214 0 $22.56 $17.40 Lewisville / Denton 5,482,773 1,092,651 105,942 84.9% 35,065 (72,934) 80,964 0 $26.43 $21.25 South Ft Worth 7,766,687 961,539 104,249 91.0% 10,252 117,335 40,266 409,232 $26.63 $21.54 Totals 222,422,641 46,953,903 5,416,675 83.2% 827,441 4,016,479 1,635,694 6,424,194 $26.10 $19.27

Total Direct Current Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 115,301,498 25,113,306 3,141,098 83.7% 599,800 3,168,416 1,262,561 6,266,576 $26.10 6.1% Class B 98,170,060 20,397,775 2,269,577 82.1% 150,714 655,144 373,133 157,618 $19.27 3.5% Class C 8,951,083 1,442,822 6,000 87.3% 76,927 192,919 - - $15.32 2.8% Totals 222,422,641 46,953,903 5,416,675 83.2% 827,441 4,016,479 1,635,694 6,424,194 $22.78 5.7% METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2015

Kurt Cherry Ryan Dale Shea Byers Brittany Ricketts Executive Vice President Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3308 [email protected] (972) 421-3310 (972) 421-3306 [email protected] [email protected] [email protected]

Kelsey Oldham Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance SECOND QUARTER 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2015 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas region continues to rank among the nation’s top performing economies as companies are expanding and relocating into the Dallas-Fort Worth metropolitan area. The business-friendly benefits of operating in Texas, the diversification of the companies in the market, the lower cost of living and the comparative ease of commuting have fueled this massive growth witnessed – even when energy-related industries remain under pressure from the significant slide in crude oil prices experienced since last year.

The Dallas-Fort Worth metropolitan area has added an astonishing 110,500 jobs in the 12 months ending May 2015, which represents an annual increase of 3.4% in employment. The industry sectors with the most jobs created in the prior 12 months were Trade, Transportation & Utilities (29,200 or 4.3% growth); Professional & Business Services (24,800 or 4.7% growth); and Leisure & Hospitality (17,600 or 5.2% growth). As a result of the job TABLE OF CONTENTS growth, the area’s unemployment rate has dropped 120 basis points to 3.8% over the prior 12 months, its lowest point since 2001 and well below the national average of 5.5%.

The region’s economic expansion is expected to continue for the remainder of this year Economic Overview...... 2 and into 2016 and 2017, with solid growth anticipated in the professional business services, Office Market Assessment...... 3 technology, healthcare and leisure & hospitality sectors, are driven by corporate expansion Net Absorption & Occupancy...... 4 and relocations. Build-to-suit projects for State Farm Insurance, Toyota Motor Co, Federal Aviation Administration, FedEx, Dallas Cowboys, CoreLogic, Liberty Mutual and 7-Eleven Rental Rates & Leasing Activity...... 5 have all either begun construction or have plans to begin construction in the oncoming Construction...... 6 months,Updated with 4/6/2015 additional companies expressing interest in expanding or consolidating their Submarket Statistics & Methodology...... 7 DFW footprint. Employment Trends Our Team...... 8 125 6% 100 75 4%

Thousands 50 2% 25 FOR INFORMATION: 0 0% -25 -2% Kurt Cherry -50 Executive Vice President -75 -4% -100 (972) 421-3322 -125 -6% [email protected] 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F

Jobs Added Annual % Change Wade Bowlin Updated 6/23/15 Executive Vice President Source: U.S. Bureau of Labor Statistics, Moody's Analytics Managing Director, Central Division Employment Growth by Sector (713) 209-5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) Ariel Guerrero Mining, Logging & Construction 196.2 192.5 1.9% Senior Vice President, Research Manufacturing 260.2 261.9 -0.6% Trade, Transportation & Utilities 702.8 673.6 4.3% (713) 209-5704 Information 81.1 82.4 -1.6% [email protected] Financial Activities 276.4 263.8 4.8% Professional & Business Services 557.5 532.7 4.7% Education & Health Services 415.9 398.8 4.3% 2 Leisure & Hospitality 354.6 337 5.2% PAGE Other Services 116.9 117 -0.1% Government 414.3 405.7 2.1% Source: U.S. Bureau of Labor Statistics, Employment Data as of February 2015 Source: U.S. Bureau of Labor Statistics, Employment Data as of May 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2015

OFFICE MARKET ASSESSMENT

The DFW office market recorded 1,660,522 sq. ft. of direct net absorption during the second quarter, increasing its year-to-date absorption count to nearly 3.2 million sq. ft. – which remains on pace to achieve its best year since 1999. Driven by build-to-suit construction and corporate relocations into the market, DFW’s overall direct occupancy rates have increased 70 basis points to 83.3 since the beginning of the year. Additionally, recently delivered office product has lease commitments in place which will commence throughout the remainder of 2015 and into 2016.

During the quarter, Class A product experienced 1,179,082 sq. ft. of direct absorption gains, compared to 371,787 sq. ft. of gains in Class B product. Class A occupancy rates improved 90 basis points during the quarter to 84.1% and have grown 130 basis points since mid-2014. Class B direct occupancy rates increased 50 basis points to 82.1% and DFW Metroplex Ranks 2nd in Job Growth: Among have improved 110 basis points over the prior 12 months. the metropolitan markets with a workforce over 1 million, the DFW Metroplex ranks second in annual The metropolitan economy is continuing its rapid growth while businesses are relocating employment growth, following New York-Northern to the area and expanding within the market. Class A product has been the largest New Jersey-Long Island, NY. benefactor of the healthy economy as tenants have trended towards moving to higher quality and more efficient space while minimizing their overall footprint. The second quarter witnessed a plethora of significant transactions. The most significant of which Home to 19 Fortune 500 Companies: DFW ranks included: RealPage, Inc. committing to nearly 400,000 sq. ft. in the Lakeside Campus, fourth among metropolitan statistical areas in the CoreLogic’s 327,180 sq. ft. build-to-suit lease at the Offices of Cypress Waters, and Liberty number of Fortune 500 headquarters. The metro’s top Mutual signing a deal to lease the 160,000 sq. ft. Tollway Office Center II. employers are concentrated in telecommunications, transportation, aerospace/defense, health care, high technology, financial services and retail. FORECAST

DFW Economic Outlook: The North Texas region’s • With the continued high demand of quality space, the leasing market will remain historically strong employment and population growth, a landlord favorable setting in the most desirable submarkets. However, a wave diversified economy and low costs of doing business will of new construction will deliver in the oncoming quarters to help alleviate the lead to above-average performance. The employment difficulty in finding superior space. outlook for Dallas-Fort Worth remains strong with a • As overall occupancy rates are hovering around 13-year highs, numerous speculative job growth forecast of 3.7% in 2015 and 3.9% in 2016, construction projects have commenced or have plans to begin construction across according to Moody’s Analytics. the DFW Metroplex. This will provide an abundance of new, high-quality space options for tenants as the local economy continues to expand at a brilliant pace. • Office market fundamentals will remain healthy resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly Updated 6/30/15 Updated 6/30/2015 environment with relatively lower business costs and a well-educated labor force. Market Trend Indicators

Current Change from Previous 12-month Office Market Trends Quarter Quarter Year Forecast Direct Occupancy 83.3% up Up Up 6,000 84% Trailing 12 mos. Direct Net Absorption 5,996,562 Up Up Sideways? 83% 4,000 82% Under Construction 6,812,031 up Up Up 2,000 81% Direct Asking Rents $22.32 Up Up Up 0 80%

in Thousands of SF in Thousands 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2015 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Richardson once again led the DFW submarkets with the largest direct net absorption gain totaling 451,456 sq. ft. – virtually all taking place in Class A product – as State Farm moved into the remaining 431,137 sq. ft. of their campus in Plano. • Las Colinas posted 377,410 sq. ft. of direct net absorption during the quarter. The Class A sector absorbed 299,620 sq. ft. of space, highlighted by Monitronics moving into their brand new 165,000 sq. ft. building at Mercer Business Park. Class B buildings also added 64,703 sq. ft. to the quarterly absorption total. • Quorum/Bent Tree recorded 122,899 sq. ft. of occupancy gains during the quarter, increasing its mid-year total to 306,201 sq. ft., largely attributed to SoftLayer Technologies taking 124,459 sq. ft. at Stanford Corporate Centre. Life of Southwest also added to the “Strong economic performance has made the Dallas- quarterly gains taking 27,000 sq. ft. at Millennium Tower. Ft. Worth metroplex attractive for large speculative • Central Expressway rebounded from an unimpressive first quarter by absorbing 110,624 and build-to-suit developments. The current pace of sq. ft. of direct space, with the largest gain resulting from TopGolf’s move into 36,221 sq. job growth is forecasted to improve significantly for ft. at Northpark Central and a flurry of activity between the 10,000 to 20,000 sq. ft. range. 2015, translating into strong leasing demand for the • Dallas CBD added 100,460 sq. ft. to the quarterly absorption total. Comerica Bank Tower numerous construction projects coming online” – said featured the largest tenant movement with Bickel & Brewer renewing and downsizing Kurt Cherry, Executive Vice President, Dallas Regional into 35,581 sq. ft. from their 48,183 sq. ft. space and Comerica Incorporated expanding by Office.Updated 6/30/15 25,135 sq. ft. within the building. • Upper Tollway/West Plano witnessed a negligible, but misleading gain of 2,058 sq. ft. Submarket Occupancy Ranking during the quarter. Hilti, Inc. moved into 55,584 sq. ft. at Legacy Tower, RamQuest and Occ. Y-O-Y % Sigma Technology Solutions took a combined 44,205 sq. ft. at International Business Park Rank Submarket Rate Change XVI, while Wellness International seized 20,000 sq. ft. at Legacy Place II. These move-ins 1 Preston Center 92.0% -0.2% were countered by Legacy Texas Financial Group vacating 36,583 sq. ft. at 5000 Legacy, 2 South Ft Worth 91.3% 0.6% Heartland Payment Systems leaving 26,988 sq. ft. at Lincoln Legacy One, and Kaye 3 Allen / McKinney 90.1% 3.1% Updated 6/30/15Bassman relinquishing 25,702 sq. ft. at Interchange Office Center. 4 Richardson 89.5% 1.1% 5 East / South Dallas 88.5% 1.1% Direct Net Absorption vs. Completions 6 Uptown/Turtle Creek 88.0% -2.2%

7 Frisco / The Colony 87.4% -2.9% 2,500 8 Upper Tollway / West Plano 87.1% -0.5% 9 Ft Worth CBD 86.0% 2.9% 2,000 10 Lewisville / Denton 85.7% -1.5% 1,500 11 Arlington / Mansfield 85.3% -0.9% 12 Quorum / Bent Tree 84.8% 1.9% 1,000 In Thousands of SF In 13 Mid Cities 83.6% 3.0% 500 14 North / Northeast Ft Worth 83.4% -2.7% 0 15 Las Colinas 83.1% 0.5% Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 16 Central Expy 81.7% 0.8% Updated 6/30/15 Updated 6/30/15 17 Plano 79.4% -0.8% Direct Net Absorption Completions 18 Dallas CBD 78.7% 6.0% Direct Occupancy Rates Direct Leasing Activity 19 East LBJ 74.2% -0.4% Rolling 12-Months 20 Stemmons 73.8% 2.2% 86% 14,000 21 West LBJ 72.6% 3.5% 12,000 84% 10,000 8,000 82% 6,000

In Thousands of of SF In Thousands 4,000 80% 4 2,000 PAGE 0 78% Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2015

RENTAL RATES & LEASING ACTIVITY

• Class A full-service rates improved by $0.44 to $25.56 per sq. ft. during the quarter and have increased 5.1% (or $1.24) over the prior 12 months. Class A rents have reached record highs and are likely to continue growing as speculative new construction delivers to the competitive market. • Class B asking rents increased by $0.14 to $18.97 per sq. ft., and have increased by 3.3% (or $0.60) over the prior 12 months. Class B asking rents are at their highest level since late-2001. • During the quarter, 86% of the DFW submarkets experienced rent growth. However, opportunities for tenants to capitalize on attractive lease terms with incentives and concessions still exist in submarkets with higher vacancy rates, such as Dallas CBD and the LBJ and Stemmons Freeways. • Higher occupancy rates have allowed landlords to raise Class A rents in the most desired “Sustained demand for quality space should result in submarkets, which include Uptown/Turtle Creek, Preston Center, Frisco/The Colony, Allen/ moderate rental rate growth in the top performing McKinney, Quorum/Bent Tree and Upper Tollway/West Plano. submarkets in 2015 as quality space options become • Class A trailing 12-month leasing velocity has declined 11.3% to approximately 9.5 million limited,” said Kurt Cherry, Executive Vice President, sq. ft. within the past year as large space options in the most desirable submarkets are Dallas Regional Office. becoming increasingly limited. The Class B trailing 12-month leasing velocity has declined Updated 6/30/15 for the seventh consecutive quarter to approximately 6.3 million sq. ft. • As new construction is delivered to the competitive market, the flight to quality trend will likely continue encouraging tenants in Class B and lower-tier Class A space to take Submarket Rental Rate Ranking advantage of attractive deals in higher quality buildings. Rental Y-O-Y % Rank Submarket Rate Change 1 Uptown/Turtle Creek $34.62 12.0% Updated 6/30/15 2 Preston Center $34.13 3.7% 3 Frisco / The Colony $28.56 -3.0% Rental Rates 4 Upper Tollway / West Plano $27.62 -2.4% ($/SF/Yr. Full Service) 5 Ft Worth CBD $26.75 2.3% $26 6 Central Expy $24.56 9.3%

$24 7 Allen / McKinney $24.54 -1.6% 8 Las Colinas $23.38 6.1% $22 9 Dallas CBD $22.62 5.8% $20 10 Lewisville / Denton $22.07 11.7% 11 Mid Cities $21.67 1.4% $18 12 South Ft Worth $21.56 0.8% $16 13 Quorum / Bent Tree $21.18 3.4% Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 14 Plano $20.99 4.4% 15 East LBJ $20.23 4.4% Updated 6/30/15 Class A Class B 16 East / South Dallas $18.57 -0.5% Direct Leasing Activity 17 Richardson $18.32 -5.1% Rolling 12-Months 18 Arlington / Mansfield $17.92 0.7% 14,000 19 North / Northeast Ft Worth $17.53 10.5% 12,000 20 West LBJ $16.93 1.9% 10,000 21 Stemmons $14.79 -1.3% 8,000 6,000

In Thousands of of SF In Thousands 4,000 2,000 5 0 PAGE Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2015 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has increased 26% within the past year to more than 6.8 million sq. ft. (excluding corporate-owned projects), continuing its surge experienced since late-2013. Only about 47% of this space has been pre-leased as developers have felt increasingly comfortable breaking ground before securing a lead-tenant. • During the quarter, developers delivered 622,675 sq. ft. of new product to the market. The largest construction delivery during the quarter was Frost Tower, a 167,735 sq. ft. office tower in the Uptown/Turtle Creek submarket, developed by Harwood International. Although Frost Tower delivered vacant, lead tenants Polsinelli and Frost Bank will both move into their new spaces during July 2015. • The second quarter witnessed developers break ground on approximately 650,000 sq. ft. of new office space. The largest project featured Legacy West, a speculative 360,000 sq. ft. office tower in the Upper Tollway/West Plano submarket, being developed by RECENT ANNOUNCEMENTS Karahan Companies and Invesco Realty Advisors. Cawley Management’s 197,740 sq. ft. Tollway Center project in Quorum/Bent Tree, also broke ground during the quarter. • The building boom has largely been concentrated in the northern Dallas suburbs but • Lincoln Property Co. acquired a tract of land near has scattered to the urban core. Office towers underway in the Uptown/Turtle Creek Klyde Warren Park to develop a 23-story office and Dallas CBD submarkets, include Crescent’s McKinney & Olive, a 530,000 sq. ft. Class tower in the Dallas CBD. The 250,000 sq. ft. office A office tower; Hall Financial Group’s 450,000 sq. ft. KPMG Plaza and KDC’s 150,000 sq. ft. building has plans to include a restaurant, fitness 1920 McKinney, will help ease the shortage of quality Class A urban space. center, conference space, and an amenity deck • Many build-to-suit projects are expected to begin construction during the upcoming overlooking the park. months, as well as speculative Class A office product. For instance, KDC Real Estate • Kubota Tractor Corp. announced plans Updatedto relocate 6/30/15Development is approaching ground breaking on Toyota Motor Corporation from Southern California to Grapevine, which would headquarters, a 2.1 million sq. ft. development in Upper Tollway/West Plano. Also, create 344 new jobs and $51 millionUpdated in capital 6/30/15 Hines plans to begin construction on Victory Center, a speculative 473,760 sq. ft. Class investments in Texas. Construction on the new A office property in the Uptown/Turtle Creek submarket in late-2015. facility will begin this year with delivery scheduled Construction Pipeline for early-2017. • Toyota Motor Co has increased the size of its Construction Pipeline West Plano corporate campus in the Legacy West 7,000 development to 2.1 million sq. ft. – bringing more 6,000 jobs to the region than the 4,000 jobs originally 7,000 planned. Construction is scheduled to break ground 5,000 6,000 in the oncoming months and complete mid-2017. 4,000 • Gaedeke Group LLC, which recently purchased 11 5,000 3,000 acres east of the Toyota and FedEx headquarters 4,000 in West Plano, is nearing groundbreaking on One In Thousands of of SF In Thousands 2,000 Legacy West. The 327,856 sq. ft. tower will be the 3,000 1,000 first of two luxury office buildings within the Legacy

In Thousands of of SF In Thousands 2,000 West mixed-use development. Construction is 0 1,000 scheduled to complete by the end of 2017. Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 • Liberty Mutual is the third major corporate 0 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 tenant preparing to move to the Legacy West Under Construction Delivered development, with plans to occupy over one million sq. ft. within two 20-story office towers and SIGNIFICANT PROJECTS UNDER CONSTRUCTIONUnder Construction Delivered adding 5,000 people to the community. % PRE- TARGET • British Telecom Group plans to move its American PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER COMPLETION McKinney & Olive 530,000 Uptown / Turtle Creek Gardere Wynne Sewell 41% Crescent 3Q 2016 headquarters and 250 jobs to Cypress Waters, Future State Farm Campus** 500,000 Richardson State Farm Insurance 100% KDC 1Q 2016 joining Nationstar, 7-Eleven, and Cheddars Casual Raytheon HQ** 490,000 Richardson Raytheon 100% KDC 4Q 2015 Restaurants at the Cypress Waters mixed-use KPMG Plaza at Hall Arts 450,000 Dallas CBD KPMG, Jackson Walker 66% Hall Financial Group 3Q 2015 Wade Park 1 400,000 Frisco/The Colony N/A 0% Greenstone Properties 4Q 2016 development. The Star 398,769 Frisco/The Colony Dallas Cowboys 20% Hines 4Q 2016 Legacy West 360,000 Upper Tollway/ W Plano N/A 0% Karahan Cos & Invesco Realty 4Q 2016 FAA Southwest Regional HQ** 357,214 N-NE Ft. Worth FAA Southwest 100% Manhattan Construction Co 3Q 2015 6 7-Eleven Headquarters** 325,000 Las Colinas 7-Eleven 100% Billingsley Co. 2Q 2016

PAGE Granite Park V 306,200 Upper Tollway/ W Plano N/A 19% Granite Properties 3Q 2015 FedEx HQ - Legacy Business Park** 265,000 Upper Tollway/ W Plano FedEx Office & Print 100% KDC Real Estate 4Q 2015 * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2015

SUBMARKETUpdated 6/30/15 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Year-to- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Current Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 25,593,267 7,434,246 408,893 78.7% 100,460 238,446 - 450,000 $23.20 $19.13 Uptown / Turtle Creek 10,690,809 1,731,168 332,546 88.0% 47,560 7,203 167,735 680,000 $36.12 $31.08 Preston Center 4,129,513 535,244 71,245 92.0% 27,566 25,123 - 190,000 $35.75 $27.71 Central Expy 11,687,810 2,389,716 141,765 81.7% 110,624 61,021 149,510 0 $26.16 $19.52 Quorum / Bent Tree 19,027,091 3,471,217 422,657 84.8% 122,899 306,201 - 197,740 $26.42 $18.16 Upper Tollway / West Plano 15,482,389 2,545,916 815,177 87.1% 2,058 197,163 59,280 1,584,399 $29.28 $25.14 West LBJ 4,164,441 1,376,064 51,601 72.6% (22,003) 38,999 - 0 $17.57 $16.61 East LBJ 15,799,075 4,537,201 329,194 74.2% (4,626) 19,157 - 0 $23.04 $17.26 Las Colinas 28,577,157 6,286,730 781,010 83.1% 542,110 404,379 165,000 466,219 $25.99 $19.96 Stemmons 10,510,504 3,079,973 174,571 73.8% 42,860 111,605 - 0 $18.51 $13.96 Richardson 14,192,088 2,031,121 851,067 89.5% 451,456 1,564,593 - 990,000 $22.01 $17.74 Allen / McKinney 3,054,409 436,408 157,228 90.1% 20,042 454 - 122,084 $26.27 $23.36 Plano 4,678,560 1,201,356 58,886 79.4% 40,540 78,753 - 0 $22.87 $20.19 Frisco / The Colony 4,301,573 674,082 151,852 87.4% 23,541 (15,064) - 1,339,769 $30.28 $25.68 East / South Dallas 7,198,698 1,026,908 9,967 88.5% 37,214 6,130 - 20,773 $29.64 $17.66 Arlington / Mansfield 6,544,730 1,157,680 109,255 85.3% (11,989) 6,082 - 50,955 $20.10 $17.78 Mid Cities 10,018,797 1,922,583 789,141 83.6% 89,527 105,696 - 0 $25.97 $19.05 Ft. Worth CBD 8,543,992 1,249,365 85,763 86.0% 50,459 121,840 - 0 $28.77 $19.68 North / Northeast Ft Worth 3,296,275 861,412 132,331 83.4% 49,409 76,873 - 357,214 $23.05 $17.31 Lewisville / Denton 5,401,815 1,018,833 101,494 85.7% 82,736 (107,999) - 230,964 $26.43 $20.84 South Ft Worth 7,720,355 827,019 119,627 91.3% 22,779 107,083 81,150 131,914 $25.83 $21.80 Totals 220,613,348 45,794,242 6,095,270 83.3% 1,825,222 3,353,738 622,675 6,812,031 $25.56 $18.97

Total Direct Year-to- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Current Qtr. Date Current Qtr Construction Rent Change Class A 113,737,609 24,117,179 3,592,162 84.1% 1,179,082 2,568,616 482,245 6,021,943 $25.56 5.1% Class B 97,877,165 20,219,675 2,497,108 82.1% 536,487 669,130 140,430 790,088 $18.97 3.3% Class C 8,998,574 1,457,388 6,000 86.0% 109,653 115,992 - - $15.01 3.4% Totals 220,613,348 45,794,242 6,095,270 83.3% 1,825,222 3,353,738 622,675 6,812,031 $22.32 4.9%

METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2015

Kurt Cherry Ryan Dale Shea Byers Brittany Ricketts Executive Vice President Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3308 [email protected] (972) 421-3310 (972) 421-3306 [email protected] [email protected] [email protected]

Kelsey Oldham Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT FIRST QUAR TER 2015

DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance Q1 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q1 2015 Mar ket AT A Glance

ECONOMIC OVERVIEW

The diversification of the North Texas region has propelled the market to continue performing as one of the nation’s best achieving economies – even while downward pressure is being placed on oil prices. Companies continue expanding their payrolls while an increasing number of corporate users are relocating to the area from other markets. The Dallas-Fort Worth metropolitan area has added an astonishing 132,400 jobs in the 12 months ending February 2015, which represents an annual increase of 4.1% in employment. The industry sectors with the most jobs created in the prior 12 months were Trade, Transportation & Utilities (31,100 or 4.7% growth); Professional & Business Services (27,200 or 5.2% growth); and Leisure & Hospitality (18,100 or 5.7% growth). As a result of the job growth, the area’s unemployment rate has dropped 120 basis points to 4.4% over the prior 12 months and remains below the national average of 5.5%.

TABLE OF CONTENTS The region’s economic expansion is expected to continue throughout 2015 and into 2016 & 2017 as anticipated growth in the professional business services, technology, healthcare and leisure & hospitality sectors are coupled with corporate expansion and relocations. Build-to-suit projects for State Farm Insurance, Toyota Motor Co, Raytheon, Federal Aviation Economic Overview...... 2 Administration, FedEx, Monitronics Inc., Dallas Cowboys and 7-Eleven have all either begun Office Market Assessment...... 3 construction or have plans to begin construction later in 2015, with additional companies expressing interest in expanding or consolidating their DFW footprint. Net Absorption & Occupancy...... 4 Updated 4/6/2015 Rental Rates & Leasing Activity...... 5 Construction...... 6 Employment Trends Submarket Statistics & Methodology...... 7 125 6% Our Team...... 8 100 75 4%

Thousands 50 2% 25 0 0% -25 -2% FOR INFORMATION: -50 -75 -4% -100 Kurt Cherry -125 -6% Executive Vice President 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F (972) 421-3322 [email protected] Jobs Added Annual % Change

Source: U.S. Bureau of Labor Statistics, Moody's Analytics Wade Bowlin Executive Vice President Updated 4/2/15 Managing Director, Central Division Employment Growth by Sector (713) 209-5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) Ariel Guerrero Mining, Logging & Construction 201.5 184.9 9.0% Senior Vice President, Research Manufacturing 262.7 260.4 0.9% Trade, Transportation & Utilities 695.2 664.1 4.7% (713) 209-5704 Information 81.7 81.9 -0.2% [email protected] Financial Activities 271.4 261.4 3.8% Professional & Business Services 545.6 518.4 5.2% Education & Health Services 410.7 394.6 4.1% 2 Leisure & Hospitality 335.8 317.7 5.7% PAGE Other Services 115.5 114 1.3% Government 412.1 402.4 2.4%

Source: U.S. Bureau of Labor Statistics, Employment Data as of February 2015 Source: U.S. Bureau of Labor Statistics, Employment Data as of February 2015

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2015

OFFICE MARKET ASSESSMENT

Driven by build-to-suit construction deliveries, the DFW office market recorded 1,528,516 sq. ft. of direct net absorption during the first quarter, increasing its trailing 12-month absorption count to nearly 4.7 million sq. ft. – the largest 12-month gain since this time in 2001. Even with the remarkable direct absorption growth over the past year, DFW’s overall direct occupancy rates among all classes have improved only by 50 basis points to 82.5%, as construction deliveries narrowly outpaced demand. However, much of the recently delivered space has lease commitments which will commence later in 2015. During the quarter, Class A product experienced 1,389,534 sq. ft. of direct absorption gains, compared to 132,643 sq. ft. of gains in Class B product. Class A occupancy rates improved 10 basis points during the quarter to 83.2% but have declined 20 basis points since this time last year. Class B direct occupancy declined 30 basis points to 81.6% but have grown 170 basis points over the prior 12 months. DFW Metroplex Ranks 2nd in Job Growth: Among the metropolitan markets with a workforce over 1 The metropolitan economy is continuing its rapid growth while businesses are expanding million, the DFW Metroplex ranks second in annual and relocating within the market. Class A product has been the largest benefactor of the employment growth, following New York-Northern healthy economy as tenants have trended towards moving to higher quality and more New Jersey-Long Island, NY. efficient space while minimizing their overall footprint. Among the largest transactions signed during the quarter were: NEC Corporation of America signing a lease for nearly 120,000 sq. ft. at Royal Ridge V, GE Capital committing to 148,000 sq. ft. in buildings 5 & 6 Home to 19 Fortune 500 Companies: DFW ranks at 5000 Riverside, and CenseoHealth renewing 66,000 sq. ft. at Granite Tower. fourth among metropolitan statistical areas in the number of Fortune 500 headquarters. The metro’s top employers are concentrated in telecommunications, FORECAST transportation, aerospace/defense, health care, high technology, financial services and retail. • The leasing market will remain a landlord favorable setting in the most desirable submarkets. However, a wave of new construction will deliver in the coming DFW Economic Outlook: The North Texas region’s quarters to help alleviate the difficulty in finding quality space. historically strong employment and population growth, • As overall occupancy rates are hovering around 13-year highs, numerous speculative diversified economy and low costs of doing business will construction projects have kicked off across the DFW Metroplex, which will provide lead to above-average performance. The employment an abundance of new, high-quality space options for tenants as the local economy outlook for Dallas-Fort Worth remains strong with a continues to expand at a healthy pace. job growth forecast of 3.7% in 2015 and 3.9% in 2016, • Office market fundamentals will steadily improve resulting from corporate according to Moody’s Analytics. relocations and expansions as companies are attracted to the metro area’s business- friendly environment with relatively lower business costs and a well-educated labor force. Updated 4/2/15 Updated 4/6/2015 Market Trend Indicators

Current Change from Previous 12-month Office Market Trends Quarter Quarter Year Forecast Direct Occupancy 82.5% sideways Up Up 6,000 84% Trailing 12 mos. Direct Net Absorption 4,683,300 Up Up Up 83% 4,000 82% Under Construction 5,960,285 down Up Up 2,000 81% Direct Asking Rents $21.97 Up Up Up 0 80%

in Thousands of SF of Thousands in 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q1 2015 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Richardson led with the highest direct net absorption total of 1,113,137 sq. ft. – virtually all taking place in Class A product – while State Farm moved into 1.1 million sq. ft. of new space. Ana G Mendez University moving into 38,302 sq. ft. at 2998-3010 N Stemmons Fwy highlighted the Class B movement during the quarter. • Upper Tollway/West Plano posted 195,105 sq. ft. of direct absorption during the quarter. The Class A sector absorbed 123,076 sq. ft. highlighted by Heartland Payment Systems moving into 79,255 sq. ft. at Granite Park Four. Class B product absorbed 72,029 sq. ft., with the majority of the gains taking place at Legacy Commons and 4025 Midway Rd. • Quorum/Bent Tree recorded 183,302 sq. ft. of direct absorption during the quarter. Class A buildings added 208,068 sq. ft. of direct absorption as Sundown Energy, Providence “Strong economic performance has made the Dallas- Energy, Allegiance Capital and Cawley Partners combined to take 104,112 sq. ft. at Knoll Ft. Worth metroplex attractive for large speculative Trail Plaza. and build-to-suit developments. The current pace of • Dallas CBD added to the quarterly gains with 137,986 sq. ft. absorbed. Tenet Healthcare job growth is forecasted to improve significantly for Corp renewed and expanded by 57,846 sq. ft. at Fountain Place. Grant Thornton and 2015, translating into strong leasing demand for the Southcross Energy moved into 52,330 and 39,125 sq. ft. at Comerica Bank Tower, numerous construction projects coming online” – said respectively. Dallas CBD has absorbed 835,775 sq. ft. over the prior 12 months, increasing Kurt Cherry, Executive Vice President, Dallas Regional occupancy by 510 basis points to 75.4%. Office.Updated 4/2/15 • Las Colinas recorded 137,731 sq. ft. of direct occupancy losses but had a very active quarter. Nationstar Mortgage relocated from Lewisville/Denton into 175,585 sq. ft. at 8950 Cypress Submarket Occupancy Ranking Waters. JPMorgan Chase vacated 119,611 sq. ft. at Royal Ridge V to consolidate into other Occ. Y-O-Y % space leased, but space will be backfilled by NEC Corporation of America later in 2015. In Rank Submarket Rate Change addition, recent deals by GE Capital, CEC Entertainment, and Great Hearts of America will 1 South Ft Worth 91.9% 0.9% likely boost the absorption figures into positive territory over the course of 2015. 2 Preston Center 91.2% -1.3% Updated 4/2/15 3 Allen / McKinney 89.1% -1.1% 4 Uptown/Turtle Creek 88.7% -0.1% 5 East / South Dallas 87.9% 0.9% Direct Net Absorption vs. Completions 6 Upper Tollway / West Plano 87.7% -1.9% 7 Frisco / The Colony 87.5% -7.3% 2,500 8 Richardson 86.2% -1.6% 2,000 9 Arlington / Mansfield 85.4% -0.6% 10 Ft Worth CBD 85.3% 2.0% 1,500 11 Quorum / Bent Tree 84.4% 2.3% 1,000

12 Lewisville / Denton 84.1% -1.3% Thousands In of SF 13 Plano 83.1% 2.8% 500 14 Mid Cities 82.4% 1.6% 0 15 Las Colinas 82.1% -0.8% Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Updated 4/2/15 16 North / Northeast Ft Worth 82.0% -4.0% Direct Net Absorption Completions Updated 4/2/15 17 Central Expy 81.6% 1.6% 18 Dallas CBD 75.4% 5.1% Direct Occupancy Rates Direct Leasing Activity 19 East LBJ 74.3% -1.1% 84% Rolling 12-Months 20 Stemmons 73.4% -5.1% 14,000 21 West LBJ 73.0% 3.6% 82% 12,000 10,000 80% 8,000 6,000 78% In Thousands of SF 4,000 4 2,000 PAGE 76% 0 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2015

RENTAL RATES & LEASING ACTIVITY

• Class A full-service rates improved by $0.12 to $25.12 per sq. ft. during the first quarter and have increased 4.6% (or $1.10) over the prior 12 months. Class A rents continue to sit at a record highs and are likely to continue growing as new inventory is delivered to the competitive market. • Class B asking rents increased by $0.21 to $18.83 per sq. ft., and have increased by 3.2% (or $0.59) over the prior 12 months. Class B asking rents are at their highest level since late-2001. • Over the prior 12 months, 81% of the DFW submarkets experienced rent growth. However, opportunities for tenants to capitalize on attractive lease terms with incentives and concessions still exist in submarkets with higher vacancy rates, such as Dallas CBD and the LBJ and Stemmons Freeways. • Higher occupancy rates have allowed landlords to raise Class A rents in the most desired “Sustained demand for quality space should result in submarkets, which include Preston Center, Uptown/Turtle Creek, Frisco/The Colony, Allen/ moderate rental rate growth in the top performing McKinney, Quorum/Bent Tree and Upper Tollway/West Plano. submarkets in 2015 as quality space options become • Class A trailing 12-month leasing velocity has declined 15.6% to approximately 9.5 million limited,” said Kurt Cherry, Executive Vice President, sq. ft. during the quarter as large space options in the most desirable submarkets have Dallas Regional Office. become limited. The Class B trailing 12-month leasing velocity has declined for the sixth Updated 4/2/15 consecutive quarter to approximately 6.8 million sq. ft. • As new construction is delivered to the competitive market, the flight to quality trend will likely continue encouraging tenants in Class B and lower-tier Class A space to take Submarket Rental Rate Ranking advantage of attractive deals in higher quality buildings. Rental Y-O-Y % Rank Submarket Rate Change 1 Preston Center $34.21 6.6% Updated 4/2/15 2 Uptown/Turtle Creek $33.14 8.9% 3 Frisco / The Colony $28.46 7.1% Rental Rates 4 Upper Tollway / West Plano $27.45 2.3% ($/SF/Yr. Full Service) 5 Ft Worth CBD $26.56 0.9% $26 6 Allen / McKinney $24.76 2.0% 7 Central Expy $23.70 6.2% $24 8 Las Colinas $23.02 5.3% $22 9 Dallas CBD $22.17 4.4% 10 Mid Cities $21.53 1.6% $20 11 South Ft Worth $21.21 -0.3% $18 12 Quorum / Bent Tree $21.13 3.0% 13 Plano $20.72 5.1% $16 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 14 Lewisville / Denton $20.49 4.3%

Updated 4/2/15 15 East LBJ $20.13 5.9% Class A Class B 16 East / South Dallas $18.49 0.8% Direct Leasing Activity 17 Richardson $18.25 -4.2% Rolling 12-Months 18 Arlington / Mansfield $17.82 -0.6% 14,000 19 North / Northeast Ft Worth $17.47 9.2% 12,000 20 West LBJ $17.00 3.7% 10,000 21 Stemmons $14.71 -1.9% 8,000 6,000

In Thousands of SF of Thousands In 4,000 2,000 5 0 PAGE Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q1 2015 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has increased 8.5% within the past year to nearly 6.0 million sq. ft. (excluding corporate-owned projects) to continue its surge experienced since 2013. Only about 48% of this space has been pre-leased as developers have felt increasingly comfortable breaking ground before securing a lead-tenant. • During the quarter, developers delivered roughly 2.0 million sq. ft. of new product to the market. The largest construction delivery was KDC’s completion of buildings A, B, & C within State Farm’s campus. These buildings totaled nearly 1.6 million sq. ft., and State Farm has already moved into two of the buildings. • During the first quarter, developers broke ground on more than 700,000 sq. ft. of new office space. KDC began construction on Building D of the State Farm campus with plans for an early-2016 delivery. Platinum Park, a 166,105 sq. ft. Class A office building in the Upper Tollway/West Plano submarket also began construction during the quarter RECENT ANNOUNCEMENTS on a 100% speculative basis. • The building boom has largely been concentrated in the northern Dallas suburbs but • Toyota Motor Co is considering increasing the size has begun to spread to the urban core. Office towers underway in the Uptown/Turtle of its West Plano corporate campus in the Legacy Creek submarket, including Crescent’s McKinney & Olive, a 530,000 sq. ft. Class A office West development to two million sq. ft. – bringing tower, Harwood International’s 168,000 sq. ft. Frost Tower and KDC’s 150,000 sq. ft. 1920 more jobs to the North Dallas submarket. Original McKinney, will help ease the shortage of quality Class A space. plans anticipated Toyota bringing 4,000 additional • Many build-to-suit projects are expected to break ground during the upcoming jobs to the region. Construction is scheduled to be months, as well as additional speculative Class A office product. For instance, Hines completed in 2016 to 2017. plans to begin construction on Victory Park, a 473,760 sq. ft. Class A office property in • Gaedeke Group LLC purchased 11 acres east of the Updated 4/2/15the Uptown/Turtle Creek submarket. Toyota campus in the Legacy West development in West Plano, with plans to build a Class A multi- tenant office totaling 300,000 sq. ft. by end of 2016. • CoreLogic is scouting the market for spaces up to 350,000 sq. ft. The California-based company is Construction Pipeline considering consolidating operations in the DFW area. CoreLogic currently has a large office in the 7,000 Solana business park and is rumored to be eyeing Billingsley’s Cypress Waters development. 6,000 • The Wade Park mixed-use project being developed 5,000 by Thomas Land & Development has been approved for $122 million in grants and incentives. 4,000 The planned $1.6 billion development lies along 3,000 the Dallas North Tollway in Frisco.

In Thousands of SF of Thousands In 2,000 • BC Station Partners announced plans for a $500 million mixed-use project near KDC’s CityLine 1,000 project. BC Station Partners recently closed on 54 0 acres at Central Expy and the President George Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Bush Turnpike next to DART’s rail station. Plans include 1.35 million sq. ft. of office space, 100,000 sq. ft. of retail, a hotel and 1,250 multi-family units. Under Construction Delivered • JP Morgan Chase & Co has been scouting the SIGNIFICANT PROJECTS UNDER CONSTRUCTION market for up to 75 acres of land to build a campus % PRE- TARGET to support 6,000 of its employees currently in the PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER COMPLETION area. Within the next six months, Chase is expected McKinney & Olive 530,000 Uptown / Turtle Creek Gardere Wynne Sewell 41% Crescent 3Q 2016 Future State Farm Campus** - D 500,000 Richardson State Farm 100% KDC 1Q 2016 to make a decision on constructing a 1 million sq. ft. Raytheon HQ** 490,000 Richardson Raytheon 100% KDC 4Q 2015 build-to-suit or moving into existing product. KPMG Plaza at Hall Arts 450,000 Dallas CBD KPMG, Jackson Walker 66% Hall Financial Group 2Q 2015 • Granite Properties recently announced plans to add Wade Park 1 400,000 Frisco/The Colony N/A 0% Thomas Enterprises 2Q 2016 three more office buildings to Granite Park, which Dallas Cowboys HQ - The Star 360,000 Frisco/The Colony Dallas Cowboys 17% Hines 4Q 2016 could break ground on a speculative basis. FAA Southwest Regional HQ** 357,214 North Ft. Worth FAA Southwest 100% Manhattan Construction Co 4Q 2015 Granite Park V 306,200 Upper Tollway/W Plano N/A 19% Granite Properties 4Q 2015 6 FedEx HQ** 265,000 Upper Tollway/W Plano FedEx Office & Print 100% KDC Real Estate 4Q 2015 PAGE Old Parkland* 200,000 Uptown / Turtle Creek Crow Family Holdings 100% Crow Family Holdings 3Q 2015 Lebanon Rd (Wade Park) 200,000 Frisco/The Colony N/A 0% Greenstone Properties 2Q 2016 * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2015

SUBMARKETUpdated 4/2/15 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Trailing 12- Completions Under Submarkets Inventory SF Direct Sublease Occupancy Current Qtr. months Current Qtr Construction Class A Class B Dallas CBD 27,234,493 8,376,156 373,632 75.4% 137,986 835,775 - 450,000 $22.85 $19.33 Uptown / Turtle Creek 10,516,897 1,660,605 401,658 88.7% (40,357) 9,694 - 847,735 $34.22 $31.11 Preston Center 4,129,513 549,022 67,458 91.2% (2,443) (45,846) - 190,000 $35.78 $27.78 Central Expy 11,553,748 2,261,201 160,056 81.6% (49,603) 146,060 86,383 149,510 $25.07 $19.55 Quorum / Bent Tree 19,050,238 3,366,389 389,047 84.4% 183,302 574,485 - 0 $26.39 $18.10 Upper Tollway / West Plano 15,321,715 2,565,623 892,562 87.7% 195,105 675,547 49,964 1,228,239 $28.93 $24.95 West LBJ 4,153,738 1,348,112 16,417 73.0% 61,002 130,212 - 0 $17.25 $16.89 East LBJ 15,813,226 4,641,886 246,576 74.3% 23,783 (136,119) - 0 $22.87 $17.23 Las Colinas 28,239,660 6,661,091 671,486 82.1% (137,731) 135,114 175,585 0 $25.53 $19.88 Stemmons 10,510,391 3,091,035 160,911 73.4% 68,745 204,891 - 0 $18.53 $13.81 Richardson 14,173,043 2,587,728 860,603 86.2% 1,113,137 1,151,180 1,557,638 990,000 $21.96 $17.63 Allen / McKinney 3,063,820 352,315 152,836 89.1% (19,588) 74,813 - 102,084 $26.05 $23.79 Plano 4,669,686 994,804 61,003 83.1% 38,213 137,326 - 0 $23.15 $19.65 Frisco / The Colony 4,596,508 683,606 237,115 87.5% (38,605) 57,553 - 1,301,000 $30.43 $25.55 East / South Dallas 7,160,149 1,027,483 6,138 87.9% (31,084) 188,897 - 20,773 $30.80 $17.48 Arlington / Mansfield 6,534,488 1,138,586 165,099 85.4% 18,071 (6,767) - 30,000 $20.10 $17.83 Mid Cities 9,900,591 1,965,624 795,696 82.4% 16,169 57,773 23,000 0 $26.06 $18.77 Ft. Worth CBD 8,506,075 1,262,601 60,979 85.3% 71,381 233,270 - 0 $28.56 $21.06 North / Northeast Ft Worth 3,309,356 872,493 89,400 82.0% 27,464 106,860 50,000 357,214 $23.53 $17.21 Lewisville / Denton 5,480,284 860,937 159,587 84.1% (190,735) (26,510) - 253,464 $30.58 $20.22 South Ft Worth 7,668,037 785,602 65,593 91.9% 84,304 179,092 74,806 40,266 $26.27 $21.27 Totals 221,585,656 47,052,899 6,033,852 82.5% 1,528,516 4,683,300 2,017,376 5,960,285 $25.12 $18.83

Total Direct Trailing 12- Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Current Qtr. months Current Qtr Construction Rent Change Class A 113,587,601 24,304,609 3,592,260 83.2% 1,389,534 3,329,285 1,819,606 5,414,046 $25.12 4.6% Class B 99,013,082 21,211,581 2,433,918 81.6% 132,643 1,356,243 197,770 546,239 $18.83 3.2% Class C 8,984,973 1,536,709 7,674 84.1% 6,339 (2,228) - - $15.11 6.3% Totals 221,585,656 47,052,899 6,033,852 82.5% 1,528,516 4,683,300 2,017,376 5,960,285 $21.97 4.4%

METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2015

Kurt Cherry Ryan Dale Shea Byers Brittany Ricketts Executive Vice President Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3308 [email protected] (972) 421-3310 (972) 421-3306 [email protected] [email protected] [email protected]

Kelsey Oldham Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance FOURTH QUARTER 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 2014 Mar ket AT A Glance

ECONOMIC OVERVIEW

Even with the oil prices edging downwards, the North Texas region continues to present one of the top performing economies in the nation. Companies have been expanding their payrolls, and an increasing number of corporate users are relocating to the area from other markets. The Dallas-Fort Worth metropolitan area has remarkably added 111,500 jobs through the 12 months ending November 2014, which represents a 3.5% annual increase in employment. The industry sectors with the most jobs created on a year-over-year basis were professional and business services (35,100 or 7.1% growth); trade, transportation and utilities (26,000 or 3.9% growth); and mining, logging & construction (14,300 or 8.0% growth). As a result of the solid job growth, the area’s unemployment rate has dropped by 110 basis points to 4.6% within the past 12 months and remains well below the national average of 5.8%.

TABLE OF CONTENTS The region’s economic expansion is expected to continue throughout 2015, resulting from anticipated growth in the professional business services, technology and healthcare sectors coupled with its success in attracting new investment and high-paying jobs through corporate relocations. Recent corporate expansion and relocation announcements by State Economic Overview...... 2 Farm Insurance, Toyota Motor Co., Omnitracs, Santander Consumer USA, Tenet Healthcare Office Market Assessment...... 3 Corp., Kohl’s, 7-Eleven and USAA, provides clear evidence of the area’s attractiveness among Net Absorption & Occupancy...... 4 users. The North Texas economy is forecasted to experience sustained growth fueled by a steady influx of businesses from outside the area seeking to capitalize on the region’s well- Rental Rates & Leasing Activity...... 5 educated labor force, diverse industry base, strong population growth and lower cost of Construction...... 6 doingUpdated business. 1/9/2015 Submarket Statistics & Methodology...... 7 Our Team...... 8 Employment Trends 125 6% 100 75 4%

Thousands 50 2% 25 0 0% FOR INFORMATION: -25 -50 -2% Kurt Cherry -75 -4% Executive Vice President -100 -125 -6% (972) 421-3322 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F [email protected] Jobs Added Annual % Change Wade Bowlin Updated Source:1/6/15 U.S. Bureau of Labor Statistics, Moody's Analytics Executive Vice President Managing Director, Central Division Employment Growth by Sector (713) 209-5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) Ariel Guerrero Mining, Logging & Construction 192.5 178.2 8.0% Senior Vice President, Research Manufacturing 256.5 257.8 -0.5% Trade, Transportation & Utilities 685.3 659.3 3.9% (713) 209-5704 Information 79.9 79.8 0.1% [email protected] Financial Activities 260.7 251.0 3.9% Professional & Business Services 531.5 496.4 7.1% Education & Health Services 400.3 389.2 2.9% 2 Leisure & Hospitality 327.5 322.6 1.5% PAGE Other Services 114.7 112.8 1.7% Government 411.7 402.0 2.4% Source: U.S. Bureau of Labor Statistics, Employment Data as of August 2014 Source: U.S. Bureau of Labor Statistics, Employment Data as of November 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2014

OFFICE MARKET ASSESSMENT

The DFW office market recorded 832,281 sq. ft. of direct net absorption during the fourth quarter, increasing the 2014 absorption total to just over 4.3 million sq. ft. – its largest annual gain since 2006. As a result of the solid occupancy gains, DFW’s overall direct occupancy rate has increased by 110 basis points to 82.6% since year-end 2013, reaching its highest level since 2001. During the fourth quarter, Class B product led the way with 481,314 sq. ft. of gains compared to 370,510 sq. ft. within the Class A sector. However, the DFW direct occupancy rate only increased 10 basis points to 82.6% during the quarter as new supply kept pace with demand. Class A occupancy rates declined 20 basis points to 83.1% during the quarter, but are up 30 basis points over the recorded figure 12 months prior. Class B occupancy rates climbed 20 basis points during the quarter to 81.9%, and have improved an impressive 260 basis points over the prior 12 months. DFW Metroplex Ranks 2nd in Job Growth: Among With the local economy continuing to expand, businesses are increasingly confident in the metropolitan markets with a workforce over 1 making longer term decisions, weighing the possibilities of relocation or renewal in order million, the DFW Metroplex ranks second in annual to capitalize on favorable lease terms. During 2014 many large leases have been signed. employment growth, following Houston-Baytown- Among the largest transactions were: State Farm’s commitment to an additional 500,000 Sugar Land. sq. ft. at CityLine, Santander Consumer USA’s leasing of 354,000 sq. ft. at Thanksgiving Tower, and Tenet Healthcare Corp expanding their footprint to 274,000 sq. ft. at Fountain Place. The most significant lease transaction during the fourth quarter involved Crosstex Home to 18 Fortune 500 Companies: DFW ranks Energy, Inc. signing a 157,658 sq. ft. lease at One Arts Plaza in Dallas CBD, which will fifth among metropolitan statistical areas in the number commence during the second-half of 2016. of Fortune 500 headquarters. The metro’s top employ- ers are concentrated in telecommunications, transpor- tation, aerospace/defense, health care, high technology, FORECAST financial services and retail.

• The leasing market will remain a landlord favorable setting in the most desirable DFW Economic Outlook: The North Texas region’s submarkets. However, a wave of new construction will deliver in the coming historically strong employment and population growth, quarters to help alleviate the difficulty in finding quality space. diversified economy and low costs of doing business will • As overall occupancy rates have reached a 13-year high, numerous speculative lead to above-average performance. The employment construction projects have kicked off across the DFW Metroplex, which will provide outlook for Dallas-Fort Worth remains strong with a an abundance of new, high-quality space options for tenants as the local economy job growth forecast of 3.7% in 2015 and 3.9% in 2016, continues to expand at a healthy pace. according to Moody’s Analytics. • Office market fundamentals will steadily improve resulting from corporate relocations and expansions as companies are attracted to the metro area’s business- friendly environment with relatively lower business costs and a well-educated labor force. Updated 1/6/15 Updated 1/6/2015 Market Trend Indicators

Current Change from Previous 12-month Office Market Trends Quarter Quarter Year Forecast Direct Occupancy 82.6% Up Up Up 6,000 84% Annual Direct Net Absorption 4,413,068 Up Up down; confirm w/ ariel 83% 4,000 Under Construction 6,522,317 Up Up Sideways 82% 2,000 81% Direct Asking Rents $21.84 Up Up Up

0 80%

in Thousands of SF of Thousands in 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 2014 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Las Colinas led with the highest direct net absorption total at 159,207 sq. ft. Class B product guided the way with 121,456 sq. ft. absorbed. The largest quarterly gain occurred when Mitchell International moved into 30,752 sq. ft. at Coppell Commerce Center II. • Quorum/Bent Tree recorded a total of 140,511 sq. ft. of direct net absorption to finish the year with 612,800 sq. ft. absorbed. The Class A sector experienced 125,123 sq. ft. of move-ins. The largest gains involved Bottle Rocket and Noble Royalties moving into The Aberdeen and Addison Circle One, respectively. • Ft. Worth CBD added to quarterly gains with 102,776 sq. ft. of direct net absorption, virtually all of which occurred in Class B product. US Health moving into 67,596 sq. ft. at 300 Burnett highlighted the quarterly movement. “Strong economic performance has made the Dallas- • Upper Tollway/West Plano posted 34,808 sq. ft. of direct net absorption during the quarter. Ft. Worth metroplex attractive for large speculative The Class A sector saw a net 119,141 sq. ft. of move-ins, while the Class B sector lost a net and build-to-suit developments. The current pace of 84,333 sq. ft. Heartland Payment Systems and Mitel Technologies moving into a combined job growth is expected to continue for the balance of 132,089 sq. ft. of direct space at Granite Park Four highlighted the Class A move-ins, while 2014 and forecasted to improve significantly for 2015, Capital One vacated 120,000 sq. ft. of Class B space at Tollway Office Center I. translating into strong leasing demand for the numerous • Richardson rebounded from an unimpressive quarter to absorb 79,160 sq. ft. of direct construction projects coming online – said Kurt Cherry, space during the fourth quarter. Caremark PCS’s move-in of 48,312 sq. ft. at Cardinal Park 8 ExecutiveUpdated Vice 1/6/15 President, Dallas Regional Office. was the largest tenant movement during the quarter. • Dallas CBD followed its most successful quarter since the late 1980s by absorbing 139,891 Submarket Occupancy Ranking sq. ft. of direct space. Class A product absorbed a net of 94,556 sq. ft. of direct space, and Occ. Y-O-Y % Class B properties added 72,068 sq. ft. to the absorption count. Dallas CBD also signed the Rank Submarket Rate Change largest lease during the quarter with Crosstex Energy, Inc. inking a deal for 157,658 sq. ft. 1 South Ft Worth 91.5% -0.1% of direct space at One Arts Plaza, which will commence during the second-half of 2016. 2 Preston Center 91.4% -1.7% Updated 1/6/15 3 Allen / McKinney 89.6% 0.8% 4 Uptown/Turtle Creek 89.1% 0.1% Direct Net Absorption vs. Completions 5 Frisco / The Colony 88.7% -7.3% 6 Richardson 88.5% 3.0% 2,000 7 East / South Dallas 88.4% 1.8%

8 Lewisville / Denton 87.7% 3.3% 1,500 9 Upper Tollway / West Plano 86.7% -2.8% 10 Arlington / Mansfield 85.4% 0.9% 1,000 11 Ft Worth CBD 84.5% -0.8%

12 Quorum / Bent Tree 84.0% 2.8% Thousands In of SF 500 13 Mid Cities 82.9% 0.8% 14 North / Northeast Ft Worth 82.5% -2.2% 0 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 15 Central Expy 82.4% 2.8% Updated 1/6/15 16 Las Colinas 82.4% -0.2% Direct Net Absorption Completions Updated 1/6/15 17 Plano 81.7% 0.5% 18 Dallas CBD 76.0% 6.1% Direct Occupancy Rates Direct Leasing Activity 19 East LBJ 74.1% -0.9% 84% Rolling 12-Months 20 Stemmons 71.7% -6.5% 14,000 21 West LBJ 70.9% 1.1% 82% 12,000 10,000 80% 8,000 6,000 78% In Thousands of SF of Thousands In 4,000 4 2,000 PAGE 76% 0 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2014

RENTAL RATES & LEASING ACTIVITY

• Class A full-service asking rents improved by $0.40 to an even $25.00 per square foot during the fourth quarter and have increased 6.5% (or $1.52) over the prior 12 months. Class A rents have reached a record high , surpassing the prior cyclical peak in mid-2008 by 1.5%. • Class B asking rents remained constant during the quarter at $18.62 per square foot, but have increased 3.1% (or $0.56) over the prior 12 months. Despite the lack of increases, Class B rents are at their highest level since late-2001. • During 2014, all but five of the 21 DFW submarkets experienced rent growth, however there are still opportunities for tenants to capitalize on attractive lease terms with incentives and concessions being offered by landlords in submarkets with high vacancy, such as the Dallas CBD, Plano, and the LBJ and the Stemmons Freeways. • Higher occupancy rates have allowed landlords to raise Class A rents in the most desired “Sustained demand for quality space should result in submarkets, which include Preston Center, Uptown/Turtle Creek, Frisco/The Colony, Allen/ moderate rental rate growth in the top performing McKinney and Upper Tollway/West Plano. submarkets into 2015 as quality space options become • Class A leasing velocity has declined from the swift pace experienced in 2013, as large limited,” said Kurt Cherry, Executive Vice President, Dallas space options in the most desirable submarkets have become limited. At the end of the Regional Office. fourth quarter, the trailing four-quarter volume of Class A direct space leased totaled 8.81 Updated 1/6/15 million square feet, while the Class B volume fell to about six million square feet. • Flight to quality will remain an on-going trend as the competitive leasing environment has encouraged tenants in Class B and lower-tier Class A properties to take advantage of Submarket Rental Rate Ranking attractive deals in discounted, higher quality buildings. Rental Y-O-Y % Rank Submarket Rate Change 1 Preston Center $33.55 7.1% Updated 1/6/15 2 Uptown/Turtle Creek $32.60 8.7% 3 Frisco / The Colony $28.36 12.2% Rental Rates 4 Upper Tollway / West Plano $28.32 6.4% ($/SF/Yr. Full Service) 5 Ft Worth CBD $26.64 4.0% $25 6 Allen / McKinney $25.03 6.5%

$23 7 Central Expy $23.13 4.9% 8 Las Colinas $22.76 7.4% $21 9 Dallas CBD $22.39 7.1% $19 10 Mid Cities $21.45 2.1% 11 Quorum / Bent Tree $20.89 5.1% $17 12 Plano $20.80 5.9% $15 13 South Ft Worth $20.70 -1.7% Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 14 Lewisville / Denton $20.09 2.7% 15 East LBJ $19.87 9.4% Updated 1/6/15 Class A Class B 16 East / South Dallas $18.26 0.7% Direct Leasing Activity 17 Richardson $18.22 -3.2% Rolling 12-Months 18 Arlington / Mansfield $17.75 -2.5% 14,000 19 West LBJ $16.74 6.0% 12,000 20 North / Northeast Ft Worth $16.69 -2.7% 10,000 21 Stemmons $14.74 -0.3% 8,000 6,000

In Thousands of SF of Thousands In 4,000 2,000 5 0 PAGE Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 2014 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has increased by 28% within the past year to more than 6.5 million sq. ft. (excluding corporate-owned projects), continuing its rapid increase experienced since the second-half of 2013. Roughly 60% of this space has already been committed by users. • Developers delivered 859,733 sq. ft. of new product during the quarter. The largest construction delivery was Legacy Tower, a 342,066 sq. ft. Class A office building in Upper Tollway/West Plano developed by Trammell Crow and One Liberty Properties. The property is 32.2% leased with lead tenants Hilti, Inc., UBS, and Murchison Oil & Gas. • Since job growth is expected to continue at a healthy pace and Class A occupancy rates have reached their highest level in over a decade, developers have broken ground on several large Class A office buildings in recent months—some of which have begun construction on a speculative basis. Hall Financial Group began construction on Frisco RECENT ANNOUNCEMENTS Bridges Place, a 170,000 sq. ft. property in Frisco, which is 33% leased to Strasburger & Price LLP. Also, Myers & Crow broke ground on Lakeside II, an 80,964 sq. ft. speculative Class A office building in Lewisville. • Pinnacle Bank has agreed with Ft. Worth’s Local • Office build-to-suit construction has also been thriving in recent quarters. During Development Corp. on plans to develop a 160,000 the fourth quarter, Hines broke ground on the future Dallas Cowboys Headquarters sq. ft. mixed-use building near the Ft. Worth dubbed The Star in Frisco, a 200,000 sq. ft. Class A office building that is 100% leased to Omni Hotel. Plans include 130 apartments on the the Cowboys. This project is scheduled for a late-2016 completion. upper floors, ground-level retail, and offices on • The building boom has largely been concentrated in the northern Dallas suburbs the remaining floors. Delivery of this $19.7 million but is beginning to spread to the urban core with a few new office towers underway project is expected to be complete in early 2016. Updated 1/6/15 in Uptown and the Arts District, which include Hall Financial Group’s 450,000 sq. ft. • Hines and Cousins Properties Inc. joined together KPMG Plaza at Hall Arts, Crescent’s 530,000 sq. ft. office tower at McKinney & Olive, and to develop Victory Center, a 23-story tower in Harwood International’s 168,000 sq. ft. Frost Tower. Uptown/Turtle Creek. This 466,000 sq. ft. building will include both office and retail space and is scheduled to break ground near mid-2015. Construction Pipeline • Rosewood Property Co. plans to move forward on Heritage Creekside, a 156-acre mixed-use 6,000 development in Plano near North Central Expy and the President George Bush Turnpike. Plans include 5,000 up to 1,300 multi and single-family units, retail 4,000 space, and up to 2.5 million sq. ft. of office space. • Parliament Group Inc. is planning the development 3,000 of a mixed-use project between KDC’s CityLine and US 75. Preliminary plans include 1.35 million sq. ft. 2,000 In Thousands of SF of Thousands In of officespace, a 150-room hotel, 60,000 sq. ft. of 1,000 retail, as well as 1,250 urban-style apartment units. • Invesco Real Estate and KDC began construction 0 on an office tower in Uptown—a much-debated Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 12-story, 150,000 sq. ft. office building at 1920 McKinney. Delivery is scheduled by spring 2016. Under Construction Delivered • Invest Group Overseas has announced plans for a $700-million luxury mixed-use project in Frisco. SIGNIFICANT PROJECTS UNDER CONSTRUCTION Early plans include 2.3 million sq. ft. worth of lavish % PRE- TARGET residencies, a boutique hotel, destination retail and PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER COMPLETION dining, and Class A office space. Future State Farm Campus** 1,557,638 Richardson State Farm 100% KDC 1Q 2015 • State Farm’s 1.5 million sq. ft. build-to-suit is near Raytheon HQ** 490,000 Richardson Raytheon 100% KDC 4Q 2015 KPMG Plaza at Hall Arts 450,000 Dallas CBD KPMG, Jackson Walker 66% Hall Financial Group 2Q 2015 completion in KDC’s CityLine in Richardson. The Wade Park 1 400,000 Frisco/The Colony N/A 0% Thomas Enterprises 2Q 2016 insurance giant plans to expand their campus by FAA Southwest Regional HQ** 357,214 North Fort Worth FAA Southwest 100% Manhattan Construction 4Q 2015 500,000 sq. ft., with its fourth building scheduled to Granite Park V 306,000 Upper Tollway/ W Plano N/A 0% Granite Properties 3Q 2015 deliver late in 2015. FedEx HQ** 265,000 Upper Tollway/ W Plano FedEx 100% KDC Real Estate 1Q 2016 The Richards Group HQ* 250,000 Uptown / Turtle Creek The Richards Group 100% Perkins + Will 1Q 2015 6

PAGE Old Parkland* 200,000 Uptown / Turtle Creek Parkland Hospital System 100% Crow Family Holdings 3Q 2015 Frisco Station 200,000 Frisco/The Colony Dallas Cowboys 100% Hines 4Q 2016 Lebanon Rd (Wade Park) 200,000 Frisco/The Colony N/A 0% Thomas Enterprises 2Q 2016 * Corporate-owned ** Build-to-suit Note: Corporate-owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2014

SUBMARKETUpdated 1/6/15 STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Completions Under Submarkets Inventory SF Direct Sublease Occupancy Current Qtr. Year To Date Current Qtr Construction Class A Class B Dallas CBD 27,289,247 8,225,921 393,394 76.0% 139,891 807,747 - 450,000 $23.19 $19.13 Uptown / Turtle Creek 10,514,902 1,520,362 251,689 89.1% 30,046 49,969 - 167,735 $33.51 $30.85 Preston Center 4,129,513 447,143 50,396 91.4% (37,459) (59,542) - 190,000 $35.34 $27.21 Central Expy 11,442,655 2,323,317 156,105 82.4% 36,996 265,458 - 235,893 $24.47 $19.23 Quorum / Bent Tree 19,049,872 3,426,194 390,655 84.0% 140,511 612,800 123,167 0 $25.56 $17.90 Upper Tollway / West Plano 15,297,033 2,093,432 804,356 86.7% 34,808 237,321 342,066 1,111,898 $29.87 $24.83 West LBJ 4,168,208 1,392,549 16,417 70.9% (15,800) 55,690 - 0 $16.66 $16.84 East LBJ 15,815,500 4,558,255 238,723 74.1% (40,404) (135,572) - 0 $22.40 $17.16 Las Colinas 28,130,672 6,609,496 629,583 82.4% 159,207 480,867 164,784 340,585 $25.19 $19.73 Stemmons 10,494,817 3,106,870 158,486 71.7% 58,658 120,845 - 0 $18.49 $13.82 Richardson 12,545,055 2,359,646 948,675 88.5% 79,160 321,932 - 2,047,638 $22.14 $17.61 Allen / McKinney 3,032,714 341,287 153,096 89.6% 9,430 135,986 - 102,084 $25.73 $24.39 Plano 4,610,788 1,037,113 92,085 81.7% 53,584 87,159 - 0 $23.14 $19.75 Frisco / The Colony 4,571,855 564,079 195,134 88.7% 18,595 239,432 24,653 1,140,000 $31.55 $25.33 East / South Dallas 7,158,540 996,127 13,095 88.4% 49,205 252,523 - 0 $30.65 $17.13 Arlington / Mansfield 6,534,488 1,138,288 150,934 85.4% (28,297) 90,167 - 30,000 $20.11 $17.78 Mid Cities 9,929,568 1,930,822 804,661 82.9% 32,758 167,704 - 23,000 $26.29 $18.50 Ft. Worth CBD 8,506,075 1,347,765 34,424 84.5% 102,766 260,146 - 0 $28.82 $20.84 North / Northeast Ft Worth 3,259,356 879,435 76,768 82.5% (242) 114,612 154,063 407,214 $23.53 $16.61 Lewisville / Denton 5,480,284 956,337 81,174 87.7% 39,465 213,282 - 252,464 $30.58 $19.78 South Ft Worth 7,716,219 748,647 62,367 91.5% 73,762 94,542 51,000 23,806 $25.44 $20.87 Totals 219,677,361 46,003,085 5,702,217 82.6% 936,640 4,413,068 859,733 6,522,317 $25.00 $18.62

Total Direct Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Current Qtr. Year To Date Current Qtr Construction Rent Change Class A 111,506,554 23,594,646 3,462,293 83.1% 474,869 2,423,025 784,080 6,082,347 $25.00 6.9% Class B 99,217,901 20,822,235 2,232,250 81.9% 481,314 2,070,256 75,653 439,970 $18.62 3.1% Class C 8,952,906 1,586,204 7,674 84.4% (19,543) (80,213) - - $15.23 10.2% Totals 219,677,361 46,003,085 5,702,217 82.6% 936,640 4,413,068 859,733 6,522,317 $21.84 6.1%

METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2014

Kurt Cherry Ryan Dale Shea Byers Brittany Ricketts Executive Vice President Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3308 [email protected] (972) 421-3310 (972) 421-3306 [email protected] [email protected] [email protected]

Kelsey Oldham Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT THIRD QUARTER 2014

DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance THIRD QUARTER 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2014 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas regional economic expansion continues to deliver one of the top performing economies as companies are expanding their payrolls, and an increasing number of corporate users are relocating to the area from other markets. The Dallas-Fort Worth metropolitan area has remarkably added 101,500 jobs through the 12 months ending August 2014, which represents a 3.3% annual increase in employment. The industry sectors with the most jobs created on a year-over-year basis were professional and business services (39,800 or 8.1% growth); trade, transportation and utilities (22,000 or 3.4% growth); and mining, logging & construction (12,500 or 6.9% growth). As a result of the solid job growth, the area’s unemployment rate has dropped by 70 basis points to 5.5% within the past 12 months and remains well below the national average of 5.9%.

The region’s economic expansion is expected to continue for the remainder of 2014 and TABLE OF CONTENTS into 2015, resulting from the area’s booming energy and healthcare industries along with a growing presence of technology companies. Recent corporate expansion and relocation announcements include State Farm Insurance, Toyota Motor Co., Omnitracs, Santander Consumer USA, Tenet Healthcare Corp., Kohl’s and USAA, and provides clear Economic Overview...... 2 evidence of the area’s attractiveness among users. The North Texas economy is forecasted Office Market Assessment...... 3 to experience sustained growth fueled by a steady influx of businesses from outside the Net Absorption & Occupancy...... 4 area seeking to capitalize on the region’s well-educated labor force, diverse industry base, strong population growth and lower cost of doing business. Rental Rates & Leasing Activity...... 5 Construction...... 6 Updated 10/1/2014 Submarket Statistics & Methodology...... 7 Employment Trends Our Team...... 8 120 6% 80 4%

Thousands 40 2% 0 0% FOR INFORMATION: -40 -2% Kurt Cherry -80 -4% Executive Vice President -120 -6% (972) 421-3322 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F [email protected] Jobs Added Annual % Change

Wade Bowlin Updated 10/1/14Source: U.S. Bureau of Labor Statistics, Moody's Analytics Executive Vice President Managing Director, Central Division Employment Growth by Sector (713) 209-5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) Ariel Guerrero Mining, Logging & Construction 193.0 180.5 6.9% Senior Vice President, Research Manufacturing 258.7 258.6 0.0% Trade, Transportation & Utilities 665.2 643.2 3.4% (713) 209-5704 Information 80.2 80.2 0.0% [email protected] Financial Activities 257.5 256.4 0.4% Professional & Business Services 529.5 489.7 8.1% Education & Health Services 390.7 384.2 1.7% 2 Leisure & Hospitality 333.2 323.1 3.1% PAGE Other Services 114.4 112.6 1.6% Government 386.6 379.0 2.0% Source: U.S. Bureau of Labor Statistics, Employment Data as of August 2014 Source: U.S. Bureau of Labor Statistics, Employment Data as of August 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2014

OFFICE MARKET ASSESSMENT

DFW’s office market recorded an astounding 1,708,046 sq. ft. of direct net absorption during the third quarter of 2014, its largest absorption gain since the beginning of 2001, bringing the year-to-date total to nearly 3.2 million sq. ft. The Class A sector was the largest contributor with 1,276,465 sq. ft. of direct absorption growth vs. 422,097 sq. ft. of absorption across the Class B sector. The DFW direct occupancy rate increased 60 basis points to 82.5% as demand outpaced deliveries. Class A direct occupancy rates increased 50 basis points during the quarter, and have moved up 80 basis points to 83.3% within the past 12 months. Meanwhile, Class B rates increased by 70 basis points to 81.7% during the quarter and have moved up 230 basis points within the past year.

With the local economy expanding at a brisk pace, area businesses are increasingly confident in making longer term decisions, weighing the possibilities of relocation DFW Metroplex Ranks 3rd in Job Growth: Among or renewal in order to capitalize on favorable lease terms. The most significant lease the metropolitan markets with a workforce over 1 transaction during the quarter involved Locke Lord signing a 143,000 sq. ft. lease to million, the DFW Metroplex ranks third in annual remain in Chase Tower in Dallas CBD. In addition, Sidley Austin preleased 76,000 sq. employment growth, followed by Houston-Baytown- ft. at Crescent’s McKinney & Olive—a 530,000 sq. ft. Uptown office tower delivering in Sugar Land,TX and Orlando, FL. fall 2016. Earlier this year, KDC agreed on plans with Toyota on the construction of a 1-million build-to-suit office campus at Legacy West. Toyota plans to relocate roughly 4,000 employees from California, New York, and Kentucky, to the corporate campus, with Home to 18 Fortune 500 Companies: DFW ranks the majority of employees relocating in phases between 2016 and 2017. fifth among metropolitan statistical areas in the number of Fortune 500 headquarters. The metro’s top employ- ers are concentrated in telecommunications, transpor- FORECAST tation, aerospace/defense, health care, high technology, financial services and retail. • The leasing market will remain a landlord favorable setting in the most desirable submarkets. However, a wave of new construction will deliver in the coming DFW Economic Outlook: The North Texas region’s quarters to help alleviate the difficulty in finding quality space. historically strong employment and population growth, • As overall occupancy rates have reached a 12-year high, numerous speculative diversified economy and low costs of doing business will construction projects have kicked off across the DFW Metroplex, which will provide lead to above-average performance. The employment an abundance of new, high-quality space options for tenants as the local economy outlook for Dallas-Fort Worth remains strong with a continues to expand at a healthy pace. job growth forecast of 3.0% in 2014 and 3.4% in 2015, • Office market fundamentals will steadily improve resulting from corporate according to Moody’s Analytics. relocations and expansions as companies are attracted to the metro area’s business- friendly environment with relatively lower business costs and a well-educated labor force. Updated 10/6/2014 Updated 10/6/2014 Market Trend Indicators

Current 12-month Office Market Trends Change from Previous Quarter Quarter Year Forecast Direct Occupancy 82.5% Up Up Up 6,000 84% 83% Direct Net Absorption 1,708,046 Up Up Up 4,000 82% Under Construction 5,338,247 Sideways Up Sideways 2,000 81%

0 80% Direct Asking Rents $21.55 Up Up Up

in Thousands of SF of Thousands in 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2014 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Dallas CBD rebounded from an unimpressive first-half of 2014 by absorbing 718,052 sq. ft. of direct space during the third quarter, increasing its year-to-date total to 667,856 sq. ft. The majority of the space absorbed (685,811 sq. ft.) occurred in Class A product. The largest occupancy gains occurred at KPMG Centre, which involved move-ins by Omnitracs (123,314 sq. ft.), Active Networks (99,740 sq. ft.), and Lanyon (61,039 sq. ft.). • Upper Tollway/West Plano also saw its momentum change for the better by recording 360,562 sq. ft. of direct net absorption during the quarter, which increased its year-to- date figure to 202,513 sq. ft. The Class A sector was responsible for virtually all of the positive gains, compliments of Toyota taking 122,248 sq. ft. at The Campus At Legacy and ReachLocal, Inc. moving into 100,000 sq. ft. of new space at International Business Park XVI. “Strong economic performance has made the Dallas- • Stemmons Freeway posted 128,574 sq. ft. of direct net absorption during the third quarter. Ft. Worth metroplex attractive for large speculative Class B properties accounted for most of the quarterly gains with 114,338 sq. ft., directly and build-to-suit developments. The current pace of attributable to Aegis Global’s move-in of 150,272 sq. ft. at 9999 Technology Blvd W. job growth is expected to continue for the balance of • Quorum/Bent Tree recorded 120,632 sq. ft. of direct net absorption during the quarter 2014 and forecasted to improve significantly for 2015, with a near even split between Class A and Class B properties. Notable Class A move-ins translating into strong leasing demand for the numerous included Time Warner Cable and Fischer & Company taking 50,254 sq. ft. and 25,127 sq. ft., construction projects coming online – said Kurt Cherry, respectively, at Galleria North Tower II. Nerium International taking down 43,465 sq. ft. at ExecutiveUpdated Vice 10/1/14 President, Dallas Regional Office. Forum III highlighted the Class B movement. • Las Colinas’ Class A sector posted 68,397 sq. ft. of direct absorption, but that gain was Submarket Occupancy Ranking negated by the Class B sector’s 71,013 sq. ft. occupancy loss as Medco Health Services Occ. Y-O-Y % vacated 62,950 sq. ft. at 8111 Royal Ridge Pky Notable Class A move-ins included VMware Rank Submarket Rate Change occupying 38,939 sq. ft. at Park West I and Franklin American Mortgage taking 25,736 sq. 1 Preston Center 92.4% 0.1% ft. at Williams Square East Tower.. 2 South Ft Worth 90.6% -0.8% Updated 10/1/14 3 Uptown/Turtle Creek 89.4% 0.3% 4 Allen / McKinney 89.3% 0.9% 5 Frisco / The Colony 88.8% -7.2% Direct Net Absorption vs. Completions 6 Upper Tollway / West Plano 88.2% -0.4% 7 East / South Dallas 88.1% 2.1% 2,000 8 Richardson 87.8% 3.0% 1,500 9 Lewisville / Denton 87.1% 3.1% 10 North / Northeast Ft Worth 86.4% 0.0% 1,000 11 Arlington / Mansfield 86.2% 1.3%

12 Quorum / Bent Tree 83.8% 3.0% Thousands In of SF 500 13 Ft Worth CBD 83.5% -4.8% 14 Central Expy 82.5% 3.2% 0 15 Las Colinas 82.5% 0.5% Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Updated 10/1/14 16 Mid Cities 82.4% 0.4% Direct Net Absorption Completions Updated 10/1/14 17 Plano 79.3% -1.2% 18 Dallas CBD 75.0% 5.7% Direct Occupancy Rates Direct Leasing Activity 19 East LBJ 74.4% 0.1% Rolling 12-Months 84% 20 Stemmons 72.2% -6.1% 14,000 21 West LBJ 71.6% 1.5% 12,000 82% 10,000

80% 8,000 6,000

78% SF of Thousands In 4,000 4 2,000 PAGE 76% 0 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2014

RENTAL RATES & LEASING ACTIVITY

• Class A full-service gross asking rents rose by $0.30 to $24.60 per square foot during the quarter and have increased by 5.5% or $1.29 within the past 12 months. Class A asking rents currently remain 0.5% or $0.13 per square foot below their cyclical peak recorded in spring 2008. • Class B rents rose by $0.25 to $18.62 per square foot during the quarter and have increased by 3.7% or $0.67 per square foot within the past 12 months. Class B rents are currently at their highest level since the third quarter of 2001. • Within the past 12 months, all except for three DFW submarkets have experienced rent growth. However, there are still opportunities for tenants to capitalize on attractive lease terms with incentives and concessions being offered by landlords in submarkets with high vacancy, such as the Dallas CBD, Plano, and the LBJ and Stemmons Freeways. • Higher occupancy rates have allowed landlords to raise Class A rents in the most desired “Sustained demand for quality space should result in submarkets, which include Frisco, Preston Center, Uptown/Turtle Creek, Upper Tollway/W. moderate rental rate growth in the top performing Plano, Las Colinas, and Quorum/Bent Tree given their supply of quality space with desirable submarkets into 2015 as quality space options become amenities. limited,” said Kurt Cherry, Executive Vice President, Dallas • Class A leasing velocity has declined from the swift pace experienced in 2013, as large Regional Office. space options in the most desirable submarkets have become limited. At the end of the Updated 10/1/14 third quarter, the trailing four-quarter volume of Class A direct space leased totaled just under 8.2 million square feet, while Class B’s trailing volume stood at 7.2 million square feet. • Flight to quality will remain an on-going trend as the competitive leasing environment Submarket Rental Rate Ranking has encouraged tenants in Class B and lower-tier Class A properties to take advantage of Rental Y-O-Y % attractive deals in discounted, higher quality buildings. Rank Submarket Rate Change 1 Preston Center $32.93 4.9% Updated 10/1/14 2 Uptown/Turtle Creek $32.17 9.9% 3 Frisco / The Colony $28.33 11.7% Rental Rates 4 Upper Tollway / West Plano $28.13 7.8% ($/SF/Yr. Full Service) 5 Ft Worth CBD $26.36 4.6% $25 6 Allen / McKinney $24.97 6.4% 7 Central Expy $22.74 3.8% $23 8 Las Colinas $22.47 7.3% $21 9 Dallas CBD $21.56 3.5%

$19 10 Mid Cities $21.37 4.7% 11 South Ft Worth $20.95 0.0% $17 12 Quorum / Bent Tree $20.93 6.0%

$15 13 Plano $20.52 7.2% Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 14 Lewisville / Denton $20.44 4.1% 15 East LBJ $19.61 10.0% Updated 10/1/14 Class A Class B 16 East / South Dallas $18.41 0.2%

Direct Leasing Activity 17 Richardson $18.21 -3.8% Rolling 12-Months 18 North / Northeast Ft Worth $18.00 2.5% 14,000 19 Arlington / Mansfield $17.80 -2.5% 12,000 20 West LBJ $16.76 7.4% 10,000 21 Stemmons $14.92 0.7% 8,000 6,000

In Thousands of SF of Thousands In 4,000 2,000 5 0 PAGE Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2014 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has skyrocketed by 41% within the past year to just over 5.3 million sq. ft. under construction (excluding owner-occupied projects), with roughly 58% of the new space already pre-leased. • Developers delivered a strong 972,949 sq. ft. during the quarter. The largest project delivery was 8951 Cypress Waters Blvd, a 188,440 sq. ft. speculative Class A office tower in Las Colinas. International Business Park XVI, a 180,500 sq. ft. Class A building in the Upper Tollway/W Plano submarket also delivered, currently 56% leased to ReachLocal. • Since job growth is expected to continue at a healthy pace and Class A occupancy rates have reached a 12-year high, developers have broken ground on several large Class A office buildings in recent months—many of which have begun construction on a speculative basis. Granite Properties, Inc. recently broke ground on Granite Park V, a 306,000 sq. ft. speculative Class A building in the Upper Tollway/W Plano submarket. • Office build-to-suit development is booming. Billingsley Co. recently broke ground RECENT ANNOUNCEMENTS on Monitronics’ 165,000 sq. ft. headquarters at Mercer Business Park. KDC plans to break ground on two large additions to The Campus at Legacy later in the year, which • In addition to State Farm’s 1.5 million sq. ft. build-to- includes Toyota’s 1,000,000 sq. ft. North American headquarters (mid-2017 delivery) suit underway in KDC’s CityLine in Richardson, the and FedEx Office’s 265,000 sq. ft. headquarters at Legacy Business Park. insurance giant plans to expand their campus by • The building boom has largely been concentrated in the northern Dallas suburbs 500,000 sq. ft. This building is scheduled to break but is beginning to spread to the urban core with a few new office towers underway ground in 4Q 2014, with delivery slated in 2015. Updated 10/1/14in Uptown and the Arts District, which include Hall Financial Group’s 450,000 sq. ft. • KDC will also be breaking ground later this year KPMG Plaza at Hall Arts, Crescent’s 530,000 sq. ft. office tower at McKinney & Olive, and on a build-to-suit headquarters for Raytheon Harwood International’s 168,000 sq. ft. Frost Tower. Intelligence in CityLine. Ground-breaking for the Construction Pipeline 489,000 sq. ft. building is slated for October 2014 with a 4Q 2015 completion date. • Hines plans to develop Frisco Station, a 317-acre 6,000 mixed-use development off the Dallas North 5,000 Tollway, The Dallas Cowboys’ 200,000 sq. ft. office 4,000 headquarters and practice facility will serve as an anchor to the large development. 3,000 • Parliament Group Inc. is planning the development 2,000 In Thousands of SF of Thousands In of a mixed-use project between KDC’s CityLine and 1,000 US 75. Preliminary plans include 1.35 million sq. ft. 0 of office space, a 150-room hotel, 60,000 sq. ft. of Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 retail, as well as 1,250 urban-style apartment units.

• Crescent Real Estate Holdings kicked off Under Construction Delivered construction on a 20-story, 530,000 sq. ft. office SIGNIFICANT PROJECTS UNDER CONSTRUCTION tower in Uptown Dallas. The ground breaking SIGNIFICANT PROJECTS UNDER CONSTRUCTION % PRE- TARGET comes after two law firms – Gardere Wynn Sewell PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED% PRE- DEVELOPER COMPLETIONTARGET and Sidney Austin signed pre-lease commitments. PROJECTFuture State NAME Farm Campus * 1,500,042SIZE (SF) SUBMARKET Richardson State FarmMAJOR Insurance TENANT CompanyLEASED 100% DEVELOPERKDC COMPLETION1Q 2015 The project is expected to deliver by summer 2016. KPMGFuture Plaza State atFarm Hall Campus Arts * 1,500,042450,000 RichardsonDallas CBD StateKPMG, Farm InsuranceJackson Walker Company 100% 66% Hall FinancialKDC Group 2Q1Q 2015 • Invesco Real Estate and KDC began construction WadeKPMG ParkPlaza 1 at Hall Arts 450,000400,000 Frisco/The Dallas CBD Colony KPMG, JacksonN/A Walker 66%0% Wade Hall Frisco Financial Land Group Partners 2Q 20152016 on an office tower in Uptown—a much-debated FAAWade Southwest Park 1 Regional HQ * 357,214400,000 Frisco/The North Fort ColonyWorth FAA SouthwestN/A (Regional HQ) 100%0% Manhattan Wade Frisco Construction Land Partners Co 4Q2Q 20152016 12-story, 150,000 sq. ft. office building at 1920 LegacyFAA Southwest Tower Regional HQ * 357,214342,066 Upper North Tollway/ Fort Worth W Plano FAA UBS Southwest & Murchison (Regional O&G HQ) 100% 16% ManhattanTrammell Construction Crow Co 4Q 20152014 McKinney. Delivery is scheduled for spring 2016. GraniteLegacy TowerPark V 306,000342,066 Upper Tollway/ W Plano UBS & MurchisonN/A O&G 16%0% GraniteTrammell Properties Crow 4Q 3Q 20142015 • Invest Group Overseas has announced plans for GraniteThe Richards Park VGroup HQ ** 250,000306,000 Upper Uptown Tollway/ / Turtle W Creek Plano The RichardsN/A Group 100%0% GranitePerkins Properties + Will 1Q 3Q 2015 a $700-million luxury mixed-use project in Frisco OldThe ParklandRichards Group(OO) ** HQ ** 200,000250,000 Uptown / Turtle Creek The RichardsMedical Group 100% CrowPerkins Family + Holdings Will 1Q 3Q 2015 on the corner of the Dallas North Tollway and the OldLebanon Parkland Rd (Wade (OO) ** Park) 200,000 Uptown Frisco/The / Turtle Colony Creek MedicalN/A 100%0% Wade Crow Frisco Family Land Holdings Partners 3Q2Q 20152016 future John Hickman Parkway. Early plans include ChiefLebanon Oil andRd (Wade Gas * Park) 190,000200,000 Frisco/The Preston Center Colony Chief N/AOil & Gas 100%0% Wade Banderas Frisco Land Ventures Partners 2Q 20152016 2.3 million sq. ft. worth of lavish residencies, a NationstarChief Oil and Mortgage Gas * 175,585190,000 Preston Las Colinas Center NationstarChief Oil Mortgage & Gas 100% BanderasBillingsley Ventures Co. 4Q 2Q 20142015 boutique hotel, destination retail and dining, and FrostNationstar Tower Mortgage 175,585167,735 Uptown Las / Colinas Turtle Creek NationstarFrost BankMortgage 100%46% HarwoodBillingsley International Co. 4Q 2Q 20142015 Class A office space. FrostMonitronics Tower Inc (BTS) * 165,000167,735 Uptown Las / Colinas Turtle Creek Monitronics,Frost Bank Inc. 100%46% HarwoodBillingsley International Co. 2Q 2015 6 Monitronics Inc (BTS) * 165,000 Las Colinas Monitronics, Inc. 100% Billingsley Co. 2Q 2015

PAGE Cypress Waters Office Park 164,784 Las Colinas N/A 0% Billingsley Co. 1Q 2015 2201Cypress Lou Waters Menk OfficeDr Park 164,000164,784 North Las FortColinas Worth Burlington NorthernN/A Railroad 100%0% BurlingtonBillingsley Northern Co. Railroad 4Q1Q 2015 Hillwood2201 Lou CommonsMenk Dr 1 154,063164,000 North Fort Worth Burlington NorthernN/A Railroad 100%0% Burlington Hillwood Northern Properties Railroad 4Q 20152014 TheHillwood Tower Commons At Frisco Square1 150,000154,063 Frisco/The North Fort ColonyWorth Gearbox SoftwareN/A (61,000 SF) 47%0% Hillwood Wolverine Properties Interests 3Q4Q 20152014 *The Build-to-suit Tower At Frisco ** Corporate-owned Square Note: Corporate-owned150,000 Frisco/The office buildings Colony excluded Gearbox from competitive Software (61,000 statistics SF) 47% Wolverine Interests 3Q 2015 * Build-to-suit ** Corporate-owned Note: Corporate-owned office buildings excluded from competitive statistics PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2014

SUBMARKET STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Completions Under Submarkets Inventory SF Direct Sublease Occupancy Current Qtr. Year To Date Current Qtr Construction Class A Class B Dallas CBD 27,647,468 8,651,606 361,470 75.0% 718,052 667,856 - 450,000 $22.39 $18.62 Uptown / Turtle Creek 10,494,177 1,445,217 246,177 89.4% (74,692) 19,923 - 167,735 $33.57 $29.12 Preston Center 4,129,333 425,082 43,588 92.4% 8,023 (22,083) - 190,000 $34.61 $27.72 Central Expy 11,446,785 2,490,919 205,994 82.5% 116,065 228,462 - 235,893 $24.10 $19.19 Quorum / Bent Tree 18,929,116 3,425,885 449,539 83.8% 120,632 472,289 - 123,167 $25.56 $17.60 Upper Tollway / West Plano 14,844,276 1,967,840 826,157 88.2% 360,562 202,513 272,250 772,264 $29.70 $24.87 West LBJ 4,189,507 1,328,191 17,220 71.6% 99,357 71,490 - 0 $16.69 $16.84 East LBJ 15,816,770 4,532,048 287,637 74.4% 14,256 (71,438) - 0 $22.11 $17.01 Las Colinas 27,883,538 6,391,913 600,160 82.5% (1,322) 268,118 276,640 505,369 $24.78 $19.78 Stemmons 10,539,435 3,181,159 156,458 72.2% 128,574 162,349 - 0 $15.53 $13.92 Richardson 12,544,911 2,406,762 891,976 87.8% (84,300) 242,772 - 1,500,042 $21.65 $17.56 Allen / McKinney 3,032,714 338,975 135,529 89.3% 73,860 126,556 - 0 $25.67 $24.38 Plano 4,610,788 1,086,316 52,689 79.3% 3,442 (19,539) 71,708 0 $22.51 $19.69 Frisco / The Colony 4,543,731 565,127 212,647 88.8% 39,701 175,651 176,380 750,000 $31.35 $25.46 East / South Dallas 7,226,323 992,538 13,626 88.1% 56,188 203,318 - 0 $30.65 $17.79 Arlington / Mansfield 6,530,901 1,135,533 138,796 86.2% 203 118,464 - 0 $20.00 $17.84 Mid Cities 9,923,400 1,922,042 789,737 82.4% 53,024 (50,054) 80,000 0 $26.49 $18.56 Ft. Worth CBD 8,498,592 1,439,250 34,424 83.5% 70,852 157,380 75,971 0 $28.85 $20.83 North / Northeast Ft Worth 3,105,293 439,226 77,744 86.4% 10,038 39,659 20,000 571,277 $22.98 $16.86 Lewisville / Denton 5,418,620 909,600 91,478 87.1% (5,481) 173,817 - 21,500 $30.58 $20.19 South Ft Worth 7,716,219 776,278 31,685 90.6% 1,012 20,780 - 51,000 $25.03 $21.09 Totals 219,071,897 45,851,507 5,664,731 82.5% 1,708,046 3,188,283 972,949 5,338,247 $24.60 $18.62

Total Direct Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Current Qtr. Year To Date Current Qtr Construction Rent Change Class A 110,534,602 23,223,939 3,598,725 83.3% 1,276,465 1,938,117 608,369 5,155,783 $24.60 5.2% Class B 99,024,754 20,637,798 2,058,332 81.7% 422,097 1,310,836 364,580 182,464 $18.62 3.8% Class C 9,512,541 1,989,770 7,674 81.5% 9,484 (60,670) - - $14.90 8.1% Totals 219,071,897 45,851,507 5,664,731 82.5% 1,708,046 3,188,283 972,949 5,338,247 $21.55 4.8%

METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2014

Kurt Cherry Ryan Dale Shea Byers Brittany Ricketts Executive Vice President Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3308 [email protected] (972) 421-3310 (972) 421-3306 [email protected] [email protected] [email protected]

Kelsey Oldham Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance SECOND QUARTER 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2014 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas regional economic expansion continues to outperform the national economy as local companies are expanding their payrolls and an increasing number of corporate users are relocating to the area from other markets. The Dallas-Fort Worth metropolitan area has remarkably added 113,100 jobs for the 12 months ending May 2014, which represents a 3.7% annual increase in employment. The industry sectors with the most jobs created on a year-over-year basis were professional and business services (31,200 or 6.5% growth); trade, transportation and utilities (28,600 or 4.5% growth); and leisure and hospitality (17,600 or 5.5% growth). As a result of the solid job growth, the area’s unemployment rate has dropped by 150 basis points to 4.7% within the past 12 months and remains well below the national average of 6.3%.

The region’s economic expansion is expected to continue throughout 2014, resulting TABLE OF CONTENTS from the area’s booming energy and healthcare industries along with a growing presence of technology companies. Recent corporate expansion and relocation announcements include State Farm Insurance, Toyota Motor Co., Omnitracs, Santander Consumer USA, Tenet Healthcare Corp., Kohl’s and USAA, which provides clear evidence of the area’s Economic Overview...... 2 attractiveness among users. The North Texas economy is forecasted to experience sustained Office Market Assessment...... 3 growth fueled by a steady influx of businesses from outside the area seeking to capitalize Net Absorption & Occupancy...... 4 on the region’s well-educated labor force, diverse industry base, strong population growth and lower cost of doing business. Rental Rates & Leasing Activity...... 5 Construction...... 6 Updated 7/1/2014 Submarket Statistics & Methodology...... 7 Employment Trends Our Team...... 8 120 6% 80 4%

Thousands 40 2% 0 0% FOR INFORMATION: -40 -2% Kurt Cherry -80 -4% Executive Vice President -120 -6% (972) 421-3322 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F [email protected] Jobs Added Annual % Change

Wade Bowlin Source: U.S. Bureau of Labor Statistics, Moody's Analytics Executive Vice President Managing Director, Central Division Employment Growth by Sector (713) 209-5753 12-MONTHS HEALTH [email protected] CURRENT PRIOR ANNUAL (Improving READING READING CHANGE or Declining) Ariel Guerrero Mining, Logging & Construction 187.3 173.8 7.8% Senior Vice President, Research Manufacturing 256.6 257.5 -0.3% Trade, Transportation & Utilities 658.3 629.7 4.5% (713) 209-5704 Information 81.0 79.1 2.4% [email protected] Financial Activities 252.1 252.1 0.0% Professional & Business Services 510.7 479.5 6.5% Education & Health Services 391.4 383.6 2.0% 2 Leisure & Hospitality 338.8 321.2 5.5% PAGE Other Services 115.9 111.3 4.1% Government 404.4 395.6 2.2% Source: U.S. Bureau of Labor Statistics, Employment Data as of May 2014 Source: U.S. Bureau of Labor Statistics, Employment Data as of May 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2014

OFFICE MARKET ASSESSMENT

DFW’s office market recorded 460,495 sq. ft. of direct net absorption during the second quarter of 2014, bringing the trailing 12-month total to 3.2 million sq. ft. The quarterly absorption demand favored Class B properties with 280,625 sq. ft. of direct absorption growth vs. 178,378 sq. ft. of absorption across Class A properties. The delivery of new product caused direct occupancy to decline 10 basis points to 81.9% as deliveries slightly outpaced quarterly demand. Class A direct occupancy rates declined by 60 basis points during the quarter, but have moved up 140 basis points to 82.8% within the past 12 months. Meanwhile, Class B direct occupancy rates increased by 110 basis points to 81.0% during the quarter and have moved up 150 basis points within the past year.

With the local economy expanding at a brisk pace, area businesses are increasingly confident in making longer term decisions, weighing the possibilities of relocation DFW Metroplex Ranks 1st in Job Growth: Among or renewal in order to capitalize on favorable lease terms. The most significant lease the metropolitan markets with a workforce over transaction during the quarter involved Toyota’s decision to build a 1 million sq. ft. build- 1 million, the DFW Metroplex ranks first in annual to-suit at Legacy West. The automaker also signed a short-term lease for 122,248 sq. ft. of employment growth, with Orlando, FL and Houston- space at The Campus at Legacy, while awaiting KDC’s delivery of their new US headquarters Baytown-Sugar Land rounding out the top three. in 2017. Toyota plans to relocate roughly 4,000 employees from California, New York, and Kentucky, to the corporate campus, with the majority of employees relocated in phases between 2016 and 2017. In addition, law firm Gardere Wynne Sewell preleased 109,000 sq. Home to 18 Fortune 500 Companies: DFW ranks ft. at Crescent’s McKinney & Olive—a 530,000 sq. ft. Uptown office tower delivering in fall fifth among metropolitan statistical areas in the number 2016. Tenet Healthcare Group also signed a renewal and lease expansion totaling 242,600 of Fortune 500 headquarters. The metro’s top employ- sq. ft. at Fountain Place, which expands their space by approximately 30 percent. ers are concentrated in telecommunications, transpor- tation, aerospace/defense, health care, high technology, financial services and retail. FORECAST

DFW Economic Outlook: The North Texas region’s • The leasing market will remain a landlord favorable setting in the most desirable historically strong employment and population growth, submarkets. However, a wave of new construction will deliver in the coming quarters diversified economy and low costs of doing business will to help alleviate the difficulty in finding quality space. lead to above-average performance. The employment • As overall occupancy rates have reached an 11-year high, numerous speculative outlook for Dallas-Fort Worth remains strong with a construction projects have kicked off across the DFW Metroplex, which will provide job growth forecast of 3.0% in 2014 and 3.4% in 2015, an abundance of new, high-quality space options for tenants as the local economy according to Moody’s Analytics. continues to expand at a healthy pace. • Office market fundamentals will steadily improve resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly environment with relatively lower business costs and a well-educated labor force. Updated 7/2/2014 Updated 7/1/2014 Market Trend Indicators

Current 12-month Office Market Trends Change from Previous Quarter Quarter Year Forecast Direct Occupancy 81.9% sideways Up Up 6,000 84% 83% 4,000 Direct Net Absorption 460,495 down Up Up 82% Under Construction 5,404,959 Sideways Up Up 2,000 81%

0 80% Direct Asking Rents $21.27 Up Up up

in Thousands of SF of Thousands in 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2014 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Quorum/Bent Tree led with 130,040 sq. ft. of direct absorption growth during the second quarter. Among the 85,378 sq. ft. of Class A absorption, Galleria North Tower II lead with move-ins by Robert Half’s Office Team (25,127 sf) and Equity Matrix (15,072 sf), while DealerTrack Technologies took 24,907 sq. ft. at Galleria North Tower I. Forney Corporation also absorbed 20,762 sq. ft. of Class B space at Bent Tree Towers II. • Uptown/Turtle Creek came back from a lackluster first quarter, with 78,393 sq. ft. of Class A direct absorption recorded during the second quarter. The submarket saw the relocation of law firm Wick Phillips (12,736 sf) from Dallas CBD to 3131 McKinney and Estes, Okon, Thorne & Carr to Turtle Creek Centre (15,715 sf). Park Seventeen witnessed 22,295 sq. ft. of direct absorption from recent leases and expansions by several tenants. “Strong economic performance has made the Dallas- • The Las Colinas submarket underwent 114,960 sq. ft. of direct absorption during the Ft. Worth metroplex attractive for large speculative and quarter, with the majority of the gains in the Class B sector. Northrop Grumman Information build-to-suit developments. The current pace of job Systems absorbed 41,419 sq. ft. at Freeport Business Center II and CAR Financial Services growth is expected to continue throughout 2014 and took 40,190 sq. ft. at Freeport Office Center II. forecasted to improve significantly for 2015, translating • The Upper Tollway/W. Plano market saw 85,702 sq. ft. in occupancy gains, staving off losses into strong leasing demand for the numerous from the first quarter. Behringer Harvard took 20,878 sq. ft. of Class A space at Granite Park construction projects coming online” – said Kurt Cherry, One while Conversant took 27,121 sq. ft. at Granite Park Three. At 6500 International Pky, ExecutiveUpdated Vice 7/1/14 President, Dallas Regional Office. Great Lakes Educational Loan Services occupied 26,847 sq. ft. of Class B space, and For Rent Media Solutions backfilled 20,258 sq. ft. of space vacated by VRM. Submarket Occupancy Ranking • Dallas CBD posted over 160,000 sq. ft. of Class A occupancy losses. However, this is mostly Occ. Y-O-Y % due to Belo Corporation vacating 223,824 sq. ft. at 400 S Record St. HUB International Rank Submarket Rate Change absorbed 39,368 sq. ft. at Plaza of the Americas. Perkins Cole relocated from 20,000 sq. ft. at 1 Frisco / The Colony 90.3% -4.1% Trammell Crow Center to 28,611 sq. ft. at Ross Tower, and must take an additional 10,000 2 Upper Tollway / West Plano 87.6% -4.5% sq. ft. within 12 months. Bryan Tower saw a move-in by Regency Energy Partners (22,254 3 Preston Center 92.2% 0.2%Updated 7/1/14 sf) and the relocation of Callison Global from Fountain Place (22,000 sf). 4 South Ft Worth 90.6% -0.1% 5 Uptown/Turtle Creek 90.1% 3.0% Direct Net Absorption vs. Completions 6 Allen / McKinney 87.0% 0.3% 7 Ft Worth CBD 83.1% -3.0% 2,000 8 East / South Dallas 87.4% 1.5% 9 North / Northeast Ft Worth 86.1% 0.7% 1,500 10 Lewisville / Denton 87.2% 2.3% 1,000 11 Arlington / Mansfield 86.2% 1.7%

12 Mid Cities 80.6% -1.8% Thousands In of SF 500 13 Las Colinas 82.7% 0.8% 14 Quorum / Bent Tree 82.9% 2.1% 0 15 Central Expy 80.9% 1.1% Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Updated 7/1/14 16 Plano 80.2% 0.8% Direct Net Absorption Completions 17 Richardson 88.4% 11.1% Updated 7/1/14 18 East LBJ 74.6% 0.4% Direct Occupancy Rates 19 Dallas CBD 72.6% -0.3% Direct Leasing Activity 84% Rolling 12-Months 20 Stemmons 71.6% 0.2% 14,000 21 West LBJ 69.0% -1.0% 82% 12,000 10,000 80% 8,000 6,000

78% SF of Thousands In 4,000 4 2,000 PAGE 76% 0 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2014

RENTAL RATES & LEASING ACTIVITY

• Class A full-service gross asking rents rose by $0.30 to $24.32 per square foot during the quarter and have increased by 4.5% or $1.04 within the past 12 months. Class A asking rents currently remain 1.7% or $0.41 per square foot below their cyclical peak recorded in spring 2008. • Class B rents rose by $0.13 to $18.37 per square foot during the quarter and have increased by 2.7% or $0.49 per square foot within the past 12 months. Class B rents are currently 1.0% or $0.19 per square foot below their peak recorded in spring 2008. • Within the past 12 months, 14 of the 21 submarkets have experienced rent growth, but there are still ample opportunities for tenants to capitalize on attractive lease terms with incentives and concessions being offered by landlords in submarkets with high vacancy, such as the Dallas CBD, and the LBJ and Stemmons Freeways. • Higher occupancy rates have allowed landlords to raise Class A rents in the most desired “Sustained demand for quality space should result in submarkets, which include Frisco, Preston Center, Uptown/Turtle Creek, Las Colinas, Upper moderate rental rate growth in the top performing Tollway/W. Plano, and Fort Worth CBD, given their supply of quality space with desirable submarkets throughout 2014 as quality space options amenities. become limited,” said Kurt Cherry, Executive Vice • Class A leasing velocity has declined from the swift pace experienced in 2013, as large President, Dallas Regional Office. space options in the most desirable submarkets have become limited in recent months. Updated 7/1/14 At the end of the second quarter, the trailing four-quarter volume of Class A direct space leased totaled just under 9.3 million square feet, while Class B’s trailing volume stood at 7.8 million square feet. Submarket Rental Rate Ranking • Flight to quality will remain an on-going trend as the competitive leasing environment Rental Y-O-Y % has encouraged tenants in Class B and lower-tier Class A properties to take advantage of Rank Submarket Rate Change Updated 7/1/14 attractive deals in discounted, higher quality buildings. 1 Preston Center $32.90 7.1% 2 Uptown/Turtle Creek $30.92 4.4% 3 Frisco / The Colony $29.44 5.5% Rental Rates ($/SF/Yr. Full Service) 4 Upper Tollway / West Plano $28.29 4.6% 5 Ft Worth CBD $26.14 -0.6% $25 6 Allen / McKinney $24.95 7.2% $23 7 Central Expy $22.46 3.9% 8 South Ft Worth $21.38 1.6% $21 9 Las Colinas $22.03 6.1% $19 10 Dallas CBD $21.39 3.2% 11 Lewisville / Denton $19.76 -3.0% $17 12 Mid Cities $21.37 5.2% $15 13 Quorum / Bent Tree $20.48 3.0% Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 14 Richardson $19.31 -0.8% 15 Plano $20.11 7.3% Class A Class B Updated 7/1/14 16 East / South Dallas $18.67 1.9% 17 Arlington / Mansfield $17.80 -1.6% Direct Leasing Activity Rolling 12-Months 18 East LBJ $19.38 9.1% 14,000 19 North / Northeast Ft Worth $15.87 -8.9% 12,000 20 West LBJ $16.62 10.6% 10,000 21 Stemmons $14.98 0.6% 8,000 6,000

In Thousands of SF of Thousands In 4,000 2,000 5 0 PAGE Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q2 2014 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has skyrocketed by 309% within the past year to over 5.4 million sq. ft. under construction (excluding owner-occupied projects), with roughly 70% of the new space already pre-leased. • Developers delivered a staggering 1,025,512 sq. ft. during the quarter, the largest of which Granite Park IV, a 306,292 sq. ft. Class A office tower in Upper Tollway, which is currently 58% leased to Heartland Payment Systems, Mitel Technologies and Guardian Insurance. Also delivering in north Dallas was Hall Office Park, 200,000 sq. ft. of Class A space in Frisco. In early July, Lincoln Legacy Two will deliver an additional 132,000 sq. ft. of Class A space to the Upper Tollway area. • Since job growth is expected to continue at a healthy pace and Class A occupancy rates have reached a 7-year high, developers have broken ground on several large Class A office buildings in recent months. • Billingsley Co. broke ground on Monitronics 165,000 sq. ft. headquarters at Mercer RECENT ANNOUNCEMENTS Business Park during the quarter. KDC plans to break ground on two large additions to The Campus at Legacy later in the year, which includes Toyota’s 1,000,000 sq. ft. • 7-Eleven has announced plans to move its North American headquarters (mid-2017 delivery) and FedEx Office’s 265,000 sq. ft. headquarters from downtown Dallas into a 300,000 headquarters at Legacy Business Park. sq. ft. office building in Billingsley Co.’s Cypress • The building boom has largely been concentrated in the northern Dallas suburbs but Waters development, just north of LBJ Freeway. is beginning to spread to the urban core with a few new office towers underway in The project will break ground this summer. Updated 7/1/14Uptown and the Arts District, including Hall Financial Group’s 450,000 sq. ft. KPMG • Crescent Real Estate Holdings kicked off Plaza at Hall Arts, Crescent’s 530,000 sq. ft. office tower at McKinney & Olive, and construction on a 530,000 sq. ft. office tower in Harwood International’s 168,000 sq. ft. Frost Tower. Uptown Dallas. The ground breaking comes after two law firms – Gardere Wynn Sewell and Sidney Construction Pipeline Austin signed pre-lease commitments. The project is expected to deliver by summer of 2016. 6,000 • Granite Properties’ success with preleasing Granite 5,000 Park IV have prompted them to announce Granite 4,000 V, a 250,000 sq. ft. office tower which will break ground on a speculative basis in the third quarter. 3,000 • Hines recently announced plans for a new 23-story 2,000 office tower located at 2371 Victory Avenue north SF of Thousands In 1,000 of their One Victory Park development in Uptown/ Turtle Creek. The 470,000 sq. ft. tower is scheduled 0 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 to commence construction by year-end with an anticipated delivery date of 1Q 2017. Under Construction Delivered • In addition to State Farm’s 1.5 million sq. ft. build-to- SIGNIFICANT PROJECTS UNDER CONSTRUCTION suit underway in KDC’s CityLine in Richardson, the SIGNIFICANT PROJECTS UNDER CONSTRUCTION % PRE- TARGET insurance giant plans to expand their campus by PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED% PRE- DEVELOPER COMPLETIONTARGET 500,000 sq. ft. This building is scheduled to break PROJECTState Farm NAME Campus* 1,500,000SIZE (SF) SUBMARKET Richardson StateMAJOR Farm Insurance TENANT Co.LEASED 100% DEVELOPERKDC COMPLETION1Q 2015 ground in 3Q 2014, with delivery slated in 2015. KPMGState Farm Plaza Campus* at Hall Arts 1,500,000450,000 RichardsonDallas CBD StateKPMG, Farm Jackson Insurance Walker Co. 100% 66% Hall FinancialKDC Group 2Q1Q 2015 • KDC will also be breaking ground later this summer McKinneyKPMG Plaza & atOlive Hall Arts 530,000450,000 Uptown/Turtle Dallas CBD Creek GardereKPMG, Jackson Wynne Walker Sewell 25%66% Crescent Hall FinancialReal Estate Group Holdings 3Q2Q 20162015 on a build-to-suit headquarters for Raytheon FAAMcKinney Southwest & Olive Regional Headquarters* 357,214530,000 Uptown/Turtle North Fort Worth Creek FAA Gardere General Wynne Services Sewell Admin. 100% 25% Crescent Trammell Real Estate Crow HoldingsCo 4Q3Q 20152016 Intelligence in CityLine. Ground-breaking for the LegacyFAA Southwest Tower Regional Headquarters* 357,214342,066 Upper North Tollway/ Fort Worth W Plano FAA General N/AServices Admin. 100%8% Trammell Crow Co 4Q3Q 20152014 489,000 sq. ft. building is slated for Summer 2014 ChiefLegacy Oil Tower and Gas* 190,000342,066 Upper Preston Tollway/ Center W Plano Chief OilN/A and Gas 100%8% TrammellBanderas VenturesCrow Co 2Q3Q 20152014 with a 4Q 2015 completion date. CypressChief Oil Waters and Gas* - 8951 Cypress Waters 188,440190,000 Preston Las Colinas Center Chief OilN/A and Gas 100%0% Billingsley Banderas CompanyVentures 3Q2Q 20142015 • Hines plans to develop Frisco Station, a 317-acre CypressInternational Waters Business - 8951 CypressPark XVI Waters 188,440180,500 Upper LasTollway/ Colinas W Plano ReachLocal,N/A Inc. 56%0% Billingsley Company 3Q 2014 mixed-use development off the Dallas North CypressInternational Waters Business - 8950 CypressPark XVI Waters* 175,585180,500 Upper LasTollway/ Colinas W PlanoNationstar ReachLocal, Mortgage Inc. 100%56% Billingsley Company 3Q 2014 Tollway, The Dallas Cowboys’ 200,000 sq. ft. office FrostCypress Tower Waters - 2950 - 8950 N Harwood Cypress Waters*St 175,585167,735 Uptown/Turtle Las Colinas Creek NationstarFrost BankMortgage 100%41% Harwood Billingsley International Company 3Q2Q 20142015 headquarters and practice facility will serve as an FrostMonitronics Tower -Inc 2950 - NWC N Harwood LBJ Fwy St& I-35 E* 165,000167,735 Uptown/Turtle Las Colinas Creek MonitronicsFrost Bank 100%41% Harwood Billingsley International Company 2Q 2015 anchor to the large development. CypressMonitronics Waters Inc - 8840NWC CypressLBJ Fwy Waters& I-35 E* 165,000164,784 Las Colinas MonitronicsN/A 100%0% Billingsley Company 2Q4Q 20152014 HillwoodCypress Waters Commons - 8840 1 Cypress Waters 164,784157,908 North Las FortColinas Worth N/A 0% BillingsleyHillwood Company 4Q3Q 2014 6 TheHillwood Offices Commons at Park Lane 1 - 8020 Park Ln 149,510157,908 Central North FortExpressway Worth N/A 0% NorthwoodHillwood Investors 3Q 2014 PAGE TheLincoln Offices Legacy at Park Two Lane - 8020 Park Ln 149,510132,000 Upper Central Tollway/ Expressway W Plano N/A 0% Lincoln Northwood Property Investors Company 3Q 2014 KnollLincoln Trail Legacy Plaza Two 120,000132,000 Upper Quorum Tollway/ / Bent W Tree Plano SundownN/A Energy, Inc. 73%0% Lincoln Cawley Property Partners Company 3Q4Q 2014 DominionKnoll Trail PlazaLegacy Office Center - 8383 Domin120,000 92,250 Upper Quorum Tollway/ / Bent W Tree Plano SundownN/A Energy, Inc. 73%0% Myers Cawley & CrowPartners co. 3Q4Q 2014 *Dominion Build-to-suit Legacy Note: Office Corporate Center - owned8383 Domin office buildings 92,250 excluded Upper Tollway/ from competitive W Plano statistics N/A 0% Myers & Crow co. 3Q 2014 * Build-to-suit Note: Corporate owned office buildings excluded from competitive statistics PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2014

SUBMARKET STATISTICS

TOTAL SPACE DIRECT NET AVAILABLE ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year To Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 27,430,142 8,731,406 333,369 72.6% (160,154) (50,196) - 450,000 $22.49 $17.77 Uptown / Turtle Creek 10,469,406 1,320,296 245,673 90.1% 94,697 94,615 - 697,735 $32.37 $27.62 Preston Center 4,129,237 444,608 28,923 92.2% (13,967) (30,106) - 190,000 $34.58 $27.32 Central Expy 11,467,136 2,683,069 200,980 80.9% 42,602 112,397 - 149,510 $23.77 $18.96 Quorum / Bent Tree 18,944,792 3,643,738 471,896 82.9% 130,040 351,657 - 120,000 $24.82 $17.51 Upper Tollway / West Plano 14,667,318 1,870,518 674,034 87.6% 85,072 (158,049) 436,663 746,816 $30.26 $24.36 West LBJ 4,202,855 1,322,864 23,688 69.0% (14,347) (27,867) - 0 $16.71 $16.59 East LBJ 15,812,405 4,598,874 564,287 74.6% (110,024) (85,694) - 0 $21.69 $17.05 Las Colinas 27,873,400 5,904,699 335,605 82.6% 114,960 269,440 153,630 782,009 $24.70 $19.43 Stemmons 10,547,421 3,225,629 146,180 71.6% 49,076 33,775 - 0 $18.15 $14.10 Richardson 12,551,989 2,407,346 272,167 88.4% 43,183 327,072 - 1,500,000 $21.68 $17.49 Allen / McKinney 3,032,714 349,771 114,979 87.0% 11,111 52,696 124,419 0 $25.73 $24.15 Plano 4,537,780 1,068,235 44,432 80.2% (11,027) (22,981) - 0 $22.31 $19.24 Frisco / The Colony 4,367,351 467,035 80,226 90.3% (7,324) 135,950 200,000 120,296 $31.38 $26.44 East / South Dallas 7,200,178 996,036 11,038 87.4% 114,588 147,130 110,000 0 $30.84 $18.23 Arlington / Mansfield 6,536,624 1,103,929 125,782 86.2% 3,256 118,261 - 0 $20.04 $17.93 Mid Cities 9,847,493 1,974,105 797,182 80.6% (44,178) (103,078) - 0 $26.86 $18.62 Ft. Worth CBD 8,456,831 1,444,293 29,577 83.1% (11,729) 86,528 - 75,971 $28.79 $20.66 North / Northeast Ft Worth 3,009,293 460,727 7,782 86.1% (5,595) 29,621 - 551,122 $22.98 $15.77 Lewisville / Denton 5,445,189 970,113 92,371 87.2% 130,241 179,298 24,500 21,500 $30.75 $19.23 South Ft Worth 7,766,242 856,802 76,293 90.6% 20,014 19,768 - 0 $24.56 $21.40 Totals 218,295,796 45,844,093 4,676,464 81.9% 460,495 1,480,237 1,049,212 5,404,959 $24.32 $18.37

Total Direct Current Year To Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 109,790,106 22,756,442 2,951,802 82.8% 178,378 661,652 895,582 5,138,963 $24.32 3.8% Class B 98,931,050 21,094,103 1,722,988 81.0% 280,625 888,739 153,630 265,996 $18.37 2.6% Class C 9,574,640 1,993,548 1,674 81.6% 1,492 (70,154) - - $14.52 5.6% Totals 218,295,796 45,844,093 4,676,464 81.9% 460,495 1,480,237 1,049,212 5,404,959 $21.27 3.6%

METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q2 2014

Kurt Cherry Ryan Dale Shea Byers Brittany Ricketts Executive Vice President Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3308 [email protected] (972) 421-3310 (972) 421-3306 [email protected] [email protected] [email protected]

Kelsey Oldham Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance FIRST QUARTER 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q1 2014 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas regional economy continues to outperform the nation-at-large as local companies are expanding their payrolls and an increasing number of corporate users are relocating to the area from other markets. The Dallas-Fort Worth metropolitan area has added 82,800 jobs for the 12 months ending February 2014, which represents a 2.7% annual increase in employment. Even with the flattening of the metro economy at the end of 2013 due to reduced Federal spending, most industry sectors continued to show strong expansion. The industry sectors with the most jobs created on a year-over- year basis were trade transportation & utilities (19,800), leisure and hospitality (19,000), and professional & business services (17,900 jobs). As a result of the strong job growth, the area’s unemployment rate has declined by 70 basis points to 5.8% within the past 12 months and remains well below the national average of 6.7%.

TABLE OF CONTENTS The DFW Metroplex continues to attract relocation and expansion activity, with particularly strong growth in healthcare, technology, financial services, and professional business services. The most notable expansion involves the decision by State Farm Insurance to build a 2 million-sq. ft. complex in Richardson. Other financial firms expanding include USAA, Economic Overview...... 2 UMB Bank, MoneyGram International, BB&T, Frost Bank, and CapitalOne. A major driver is Office Market Assessment...... 3 anticipated growth in housing that will lift demand for mortgages as well as homeowners Net Absorption & Occupancy...... 4 insurance. The regional economy is forecasted to experience sustained growth fueled by a steady influx of businesses seeking to capitalize on the region’s well-educated labor force, Rental Rates & Leasing Activity...... 5 diverse industry base, strong population growth and lower cost of doing business. Construction...... 6 Updated 4/4/2014 Submarket Statistics & Methodology...... 7 Employment Trends Our Team...... 8 120 6% 80 4%

Thousands 40 2% 0 0% FOR INFORMATION: -40 -2% Kurt Cherry -80 -4% Executive Vice President -120 -6% (972) 421-3322 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F [email protected] Jobs Added Annual % Change

Source: U.S. Bureau of Labor Statistics, Moody's Analytics Wade Bowlin Updated 4/4/13 Executive Vice President Managing Director, Central Division Employment Growth by Sector (713) 209-5753 HEALTH [email protected] Current 12-Months Annual (Improving Reading Prior Reading Change or Declining) Ariel Guerrero Mining, Logging & Construction 176.1 168.9 4.3% Up Manufacturing 251.0 257.3 -2.4% Down Senior Vice President, Research Trade, Transportation & Utilities 642.0 622.2 3.2% Up (713) 209-5704 Information 80.0 78.3 2.2% Up [email protected] Financial Activities 251.5 249.4 0.8% Up Professional & Business Services 491.8 473.9 3.8% Up Education & Health Services 387.8 379.4 2.2% Up 2 Leisure & Hospitality 321.1 302.1 6.3% Up PAGE Other Services 113.9 109 4.5% Up Government 401.3 393.2 2.1% Up Source: U.S. Bureau of Labor Statistics, Employment Data as of February 2014 Source: U.S. Bureau of Labor Statistics, Employment Data as of February 2014

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2014

OFFICE MARKET ASSESSMENT

DFW’s office market recorded nearly 1.2 million sq. ft. of direct net absorption during the first quarter of 2014, which far outpaces the 2013 quarterly average of 649,000 sq. ft. The quarterly absorption demand was almost evenly split between Class A and Class B properties with 587,994 sq. ft. and 608,114 sq. ft. of direct absorption growth, respectively. During the first quarter, the Class A direct occupancy rate increased by 60 basis points to 83.4% as demand kept pace with space deliveries. Within the past 12 months, Class A direct occupancy rates have moved up 170 basis points to their highest level since late 2006. Meanwhile, Class B direct occupancy rates increased by 60 basis points to 79.9% during the quarter and have moved up 90 basis points within the past year.

With the local economy expanding at a brisk pace, area businesses are increasingly confident in making longer term decisions, weighing the possibilities of relocation DFW Metroplex Ranks 3rd in Job Growth: Among or renewal in order to capitalize on favorable lease terms. The largest lease transaction the metropolitan markets with a workforce over 1 during the quarter involved State Farm securing an additional 500,000 sq. ft. of Class A million, the DFW Metroplex ranks third in annual space to be built for early 2015 occupancy, in addition to the 1.5 million sq. ft. build-to-suit employment growth, only trailing Los Angeles-Long underway at CityLine in Richardson. Raytheon also plans to build a 489,000 sq. ft. office Beach-Santa Ana and New York-Northern New Jersey- complex within the development. Santander Consumer USA also signed a lease totaling Long Island. 354,359 sq. ft. at Thanksgiving Tower, which will be occupied in phases throughout 2014. Other noteworthy leases signed during the quarter involved Terremark (185,000 sq. ft.), Nationstar Mortgage (175,585 sq. ft.), Monitronics Inc. (165,000 sq. ft. build-to-suit) and Home to 18 Fortune 500 Companies: DFW ranks Gardere Wynne Sewell (109,000 sq. ft.). fifth among metropolitan statistical areas in the number of Fortune 500 headquarters. The metro’s top employ- ers are concentrated in telecommunications, transpor- FORECAST tation, aerospace/defense, health care, high technology, financial services and retail. • The leasing market will remain a landlord favorable setting in the most desirable submarkets, such as Uptown/Turtle Creek, Las Colinas, Quorum/Bent Tree and DFW Economic Outlook: The North Texas region’s Fort Worth CBD, as rents increase, occupancies improve, and quality space options historically strong employment and population growth, diminish. diversified economy and low costs of doing business will • As occupancy rates have reached a 10-year high, numerous speculative construction lead to above-average performance. The employment projects have kicked off across the DFW Metroplex, which will provide an abundance outlook for Dallas-Fort Worth remains strong with a of new, high-quality space options for tenants as the local economy continues to job growth forecast of 2.9% in 2014 and 3.6% in 2015, expand at a healthy pace. according to Moody’s Analytics. • Office market fundamentals will steadily improve resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly environment with relatively lower business costs and a well-educated labor force. Updated 4/6/2014 Updated 4/4/2014 Market Trend Indicators

Current Change from Previous 12-month Office Market Trends Quarter Quarter Year Forecast Direct Occupancy 81.9% Up Up Up 6,000 84% 83% Direct Net Absorption 1,167,105 Up Up Up 4,000 82% Under Construction 5,494,781 Up Up Up 2,000 81%

0 80% Direct Asking Rents $21.04 Up Up up

in Thousands of SF of Thousands in 79% -2,000 78% 3 -4,000 77% PAGE 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q1 2014 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Richardson followed up a strong 2013 performance with nearly 284,000 sq. ft. of direct net absorption during the quarter. The Class B sector featured the largest gains with 241,701 sq. ft. highlighted by Kohl’s Corp. occupying a combined 230,061 sq. ft. at the Waterview 190 North & South buildings, and Associa, Inc. moving into 62,000 sq. ft. at Collins Center. • Quorum/Bent Tree experienced 221,617 sq. ft. of direct absorption during the quarter with a virtual even split between Class A and Class B buildings. The most noteworthy move-in occurred at Trinity Centre-West as Title Max took more than 50,000 sq. ft. of Class B space. CRC Insurance Services and Real Foundations each moved into Galleria North Tower I, taking 24,942 sq. ft. and 17,342 sq. ft., respectively. • Las Colinas continued its recent success with 154,480 sq. ft. of direct absorption. Both Class “The strong economic performance of the Dallas-Ft. A and Class B buildings absorbed nearly 78,000 sq. ft. Class A move-ins were highlighted Worth Metroplex has pushed Class A direct occupancy by JDA Software Group, Inc. taking 62,077 sq. ft. at 500 E John Carpenter Fwy and Laredo levels to their highest levels since 2006. The current Oil & Gas seizing 50,800 sq. ft. at Park West II. pace of job growth is expected to continue throughout • Frisco/The Colony recorded 143,274 sq. ft. of direct absorption during the quarter, largely 2014 and forecasted to improve significantly for 2015, due to Conifer Health Solutions’ relocation into their 200,000 sq. ft. Class A build-to-suit at meaning strong leasing demand for the numerous Duke Bridges VII, which left behind 80,140 sq. ft. at Office Tech Center G1. construction projects coming online” – said Kurt Cherry, • Arlington/Mansfield contributed to the quarterly gains with 115,005 sq. ft. of direct space ExecutiveUpdated Vice 4/4/14 President, Dallas Regional Office. absorbed. Class B properties led the way with 131,971 sq. ft. of absorption, compliments of Triumph Aerostructures occupying 111,406 sq. ft. at 1401 Nolan Ryan Expy. Submarket Occupancy Ranking • Dallas CBD posted 109,958 sq. ft. of absorption, with 81,859 sq. ft. occurring in the Class Occ. Y-O-Y % A sector. Thanksgiving Tower featured the largest gain as Santander Consumer USA, Inc. Rank Submarket Rate Change moved into 125,000 sq. ft., with an additional 229,000 sq. ft. to be occupied later in 2014. 1 Frisco / The Colony 94.9% 0.6% • Upper Tollway/West Plano was the only submarket with significant negative absorption 2 Preston Center 92.6% 0.9% totaling 138,401 sq. ft. during the quarter. Capital One’s departure of 160,000 sq. ft. at 3 South Ft Worth 90.9% 0.5%Updated 4/4/14 Tollway Office Center II accounted for the majority of the occupancy losses. 4 Allen / McKinney 90.1% 4.7% 5 Upper Tollway / West Plano 88.9% -2.0% Direct Net Absorption vs. Completions 6 Uptown/Turtle Creek 88.8% 1.3% 7 Richardson 87.8% 7.2% 2,000 8 East / South Dallas 87.0% 1.1% 9 North / Northeast Ft Worth 86.1% 1.7% 1,500 10 Arlington / Mansfield 86.0% 2.4% 1,000 11 Lewisville / Denton 85.3% 0.6%

12 Ft Worth CBD 83.2% -3.3% Thousands In of SF 500 13 Las Colinas 82.9% 1.7% 14 Quorum / Bent Tree 82.1% 2.0% 0 15 Mid Cities 80.7% -0.9% Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Updated 4/4/14 16 Plano 80.3% 1.3% Direct Net Absorption Completions 17 Central Expy 80.0% -0.4% Updated 4/4/14 18 Stemmons 78.5% 0.5% Direct Occupancy Rates 19 East LBJ 75.4% 1.6% Direct Leasing Activity 84% Rolling 12-Months 20 Dallas CBD 70.7% 1.5% 12,000 21 West LBJ 69.4% -0.3% 82% 10,000

8,000 80% 6,000

4,000

78% SF of Thousands In 2,000 4 PAGE 76% 0 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2014

RENTAL RATES & LEASING ACTIVITY

• Class A full-service gross asking rents rose by $0.54 to $24.02 per square foot during the first quarter and have increased by 4.1% or $0.95 within the past 12 months. Class A asking rents currently remain 2.9% or $0.71 per square foot below their cyclical peak recorded in spring 2008. • Class B rents rose by $0.18 to $18.24 per square foot during the quarter and have increased by 4.9% or $0.85 per square foot within the past 12 months. Class B rents are currently 1.7% or $0.32 per square foot below their peak recorded in spring 2008. • Within the past 12 months, 18 of the 21 submarkets have experienced rent growth, but there are still ample opportunities for tenants to capitalize on attractive lease terms with incentives and concessions being offered by landlords in submarkets with high vacancy, such as the Dallas CBD, LBJ and Stemmons Freeway. • Higher occupancy rates have allowed landlords to raise Class A rents in the most desired “Sustained demand for quality space should result in submarkets, which include Frisco, Preston Center, Uptown/Turtle Creek, Las Colinas, Upper moderate rental rate growth in the top performing Tollway/W. Plano, and Fort Worth CBD, given their supply of quality space with desirable submarkets throughout 2014 as quality space options amenities. become limited,” said Ben Appleby, Senior Vice President • Class A leasing activity has slightly declined in recent months as large space options sitting of Leasing within PMRG’s Dallas office. empty have become limited in the most desired submarkets. At the end of the first quarter, Updated 4/4/14 the trailing four-quarter volume of Class A direct space leased totaled just over 8.3 million square feet, while Class B’s trailing volume stood at 6.9 million square feet. • Flight to quality will remain an on-going trend as the competitive leasing environment Submarket Rental Rate Ranking has encouraged tenants in Class B and lower-tier Class A properties to take advantage of Rental Y-O-Y % attractive deals in discounted, higher quality buildings. Rank Submarket Rate Change Updated 4/4/14 1 Preston Center $32.09 10.3% 2 Uptown/Turtle Creek $30.43 6.0% 3 Upper Tollway / West Plano $26.84 5.7% Rental Rates ($/SF/Yr. Full Service) 4 Frisco / The Colony $26.57 10.7% 5 Ft Worth CBD $26.33 0.7% $25 6 Allen / McKinney $24.27 6.4% $23 7 Central Expy $22.31 4.7% 8 Las Colinas $21.87 8.6% $21 9 South Ft Worth $21.27 2.5% $19 10 Dallas CBD $21.23 3.5% 11 Mid Cities $21.20 6.7% $17 12 Quorum / Bent Tree $20.52 3.7% $15 13 Plano $19.71 13.5% Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 14 Lewisville / Denton $19.64 -1.4% 15 Richardson $19.05 -0.6% Class A Class B Updated 4/4/14 16 East LBJ $19.00 6.2% 17 East / South Dallas $18.35 3.6% Direct Leasing Activity Rolling 12-Months 18 Arlington / Mansfield $17.92 0.1% 12,000 19 West LBJ $16.39 11.3% 10,000 20 North / Northeast Ft Worth $16.00 -8.3% 8,000 21 Stemmons $15.00 0.8%

6,000

4,000 In Thousands of SF of Thousands In 2,000 5 0 PAGE Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q1 2014 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has skyrocketed by 375% within the past year to nearly 5.5 million sq. ft. under construction (excluding owner-occupied projects), with 55% of this new space already pre-leased. • Developers delivered nearly 276,000 sq. ft. during the quarter, with an additional 2.4 million sq. ft. of new space slated to come online in 2014. The largest construction delivery during the quarter was Duke Bridges VII, a 199,800 sq. ft. Class A office build- to-suit for Conifer Health Solutions in Frisco. • Since job growth is expected to continue at a healthy pace and Class A occupancy rates have reached a 7-year high, developers have broken ground on several large Class A office buildings in recent months. • Office build-to-suit development has picked up steam with several tenants signing pre-lease commitments, which include State Farm (500,000 sq. ft. in CityLine – fourth building), Raytheon (500,000 sq. ft. in CityLine), Nationstar Mortgage (175,585 sq. ft. in RECENT ANNOUNCEMENTS Cypress Waters) and Monitronics Inc. (165,000 sq. ft. in Mercer Business Park). • The building boom has largely been concentrated in the northern Dallas suburbs • Hines recently announced plans for a new 23-story but is beginning to spread to the urban core with a few new office towers starting office tower located at 2371 Victory Avenue north in Uptown and the Arts District, which include Hall Financial Group’s 450,000 sq. ft. of their One Victory Park development in Uptown/Updated 4/4/14KPMG Plaza at Hall Arts, Hines’ 23-story 470,000 sq. ft. office tower in Victory Park and Turtle Creek. The 470,000 sq. ft. tower is scheduled Crescent’s recently announced 20-story 530,000 sq. ft. office tower in Uptown. to commence construction by year-end with an anticipated delivery date of 1Q 2017. Construction Pipeline • In addition to State Farm’s 1.5 million sq. ft. build- to-suit underway in KDC’s CityLine, the insurance 6,000 giant plans to expand their campus by 500,000 sq. 5,000 ft. The fourth building is scheduled to break ground in May 2014, with delivery slated in 2015. 4,000 • KDC will also be breaking ground this summer 3,000 on a build-to-suit headquarters for Raytheon 2,000

Intelligence in CityLine. Ground-breaking for the SF of Thousands In 489,000 sq. ft. building is slated for Summer 2014 1,000 with a 4Q 2015 completion date. Updated 4/3/20140 • Hines plans to develop Frisco Station, a 317-acre Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 1Q 14 mixed-use development off the Dallas North Tollway. The Dallas Cowboys’ 200,000 sq. ft. office Under Construction Delivered headquarters and practice facility will serve as an anchor to the large development. SIGNIFICANT PROJECTS UNDER CONSTRUCTION • Billingsley Company plans to build a 165,000 sq. ft. % PRE- TARGET office build-to-suit for Monitronics Inc. This project PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER COMPLETION is the first phase of a 225-acre Mercer Business Park State Farm Campus* 1,500,000 Richardson State Farm Insurance Co. 100% KDC 1Q 2015 at LBJ Expy and Stemmons Freeway. Construction KPMG Plaza at Hall Arts 450,000 Dallas CBD KPMG, Jackson Walker 66% Hall Financial Group 2Q 2015 is scheduled to be finished next summer. Billingsley FAA Southwest Regional Headquarters* 357,214 North Fort Worth FAA General Services Admin. 100% Trammell Crow Co 4Q 2015 Company plans to build several more buildings in Legacy Tower 342,066 Upper Tollway/ W Plano N/A 8% Trammell Crow / One Liberty 3Q 2014 the development once tenants are secured. Granite Park IV 306,292 Upper Tollway/ W Plano N/A 12% Granite Properties 3Q 2014 • Nationstar Mortgage plans to move 1,300 Hall Office Park - 3001 N Dallas Pky 200,000 Frisco/The Colony N/A 0% Hall Financial Group 2Q 2014 employees to a new 175,585 sq. ft. corporate Chief Oil and Gas* - 8111 Westchester 190,000 Preston Center Chief Oil and Gas 100% Banderas Ventures 1Q 2015 campus at Cypress Waters, which is scheduled to International Business Park XVI 180,500 Upper Tollway/ W Plano ReachLocal, Inc. 56% Billingsley Company 2Q 2014 deliver by year-end 2014. • Energy Transfer has leased 131,000 sq. ft. of space Cypress Waters - 8951 Cypress Waters 188,440 Las Colinas N/A 0% Billingsley Company 3Q 2014 currently under construction in Preston Center. Cypress Waters* - 8950 Cypress Waters 175,585 Las Colinas Nationstar Mortgage 100% Billingsley Company 3Q 2014 The energy firm will join Chief Oil & Gas as the lead Frost Tower - 2950 N Harwood St 167,735 Uptown/Turtle Creek Frost Bank 41% Barbier-Mueller J. Gabriel 2Q 2015 tenants at Bandera Ventures’ project. Cypress Waters - 8840 Cypress Waters 164,784 Las Colinas N/A 0% Billingsley Company 1Q 2015 Hillwood Commons 1 157,909 North Fort Worth N/A 0% Hillwood 2Q 2014 6 Freeport 9 Office Center 153,630 Las Colinas N/A 0% Myers & Crow co. 2Q 2014 PAGE Lincoln Legacy Two 132,000 Upper Tollway/ W Plano N/A 0% Lincoln Property Company 2Q 2014 McKinney Corporate Center I 124,419 Allen/McKinney N/A 0% Van Trust Real Estate 2Q 2014 Knoll Trail Plaza 120,000 Quorum / Bent Tree Sundown Energy, Inc. 50% Cawley Partners 1Q 2015 * Build-to-suit Note: Corporate owned office buildings excluded from competitive statistics

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2014

SUBMARKET STATISTICS

TOTAL SPACE DIRECT NET AVAILABLE ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year To Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 28,691,530 9,695,542 389,260 70.3% 109,958 109,958 - 450,000 $22.38 $17.53 Uptown / Turtle Creek 10,524,813 1,425,059 225,451 88.8% (82) (82) - 167,735 $32.28 $25.56 Preston Center 4,129,255 466,020 29,344 92.6% (16,139) (16,139) - 190,000 $33.88 $25.54 Central Expy 11,577,156 2,766,074 149,361 80.0% 69,795 69,795 23,984 0 $23.67 $18.68 Quorum / Bent Tree 18,942,462 3,744,098 305,486 82.1% 221,617 221,617 - 120,000 $24.57 $17.47 Upper Tollway / West Plano 14,487,316 1,801,843 645,378 88.9% (138,401) (138,401) - 1,053,108 $28.44 $24.45 West LBJ 4,202,438 1,363,148 61,881 69.4% (13,520) (13,520) - 0 $16.27 $16.49 East LBJ 15,788,375 4,700,855 572,641 75.4% 24,330 24,330 - 0 $21.34 $16.67 Las Colinas 27,859,384 5,673,473 449,739 82.9% 154,480 154,480 - 723,039 $24.30 $19.23 Stemmons 14,027,206 3,263,530 147,580 78.5% 27,342 27,342 - 0 $18.63 $14.06 Richardson 12,622,582 2,501,014 267,728 87.8% 283,889 283,889 - 1,500,000 $21.64 $17.23 Allen / McKinney 2,910,725 290,957 92,139 90.1% 41,585 41,585 - 124,419 $25.62 $23.63 Plano 4,498,780 1,076,822 52,476 80.3% (11,954) (11,954) - 0 $21.69 $18.98 Frisco / The Colony 4,190,226 285,575 47,444 94.9% 143,274 143,274 199,800 355,296 $26.47 $26.62 East / South Dallas 7,115,961 1,024,855 19,969 87.0% 32,542 32,542 - 110,000 $30.92 $17.84 Arlington / Mansfield 6,532,286 1,122,474 125,782 86.0% 115,005 115,005 - 0 $20.05 $18.03 Mid Cities 9,891,493 2,033,929 813,756 80.7% (58,900) (58,900) 51,896 0 $26.80 $18.81 Ft Worth CBD 8,431,726 1,564,090 44,922 83.2% 98,257 98,257 - 75,971 $28.82 $20.60 North / Northeast Ft Worth 2,961,647 460,608 11,025 86.1% 35,216 35,216 - 551,123 $23.92 $15.70 Lewisville / Denton 5,480,544 983,897 74,835 85.3% 49,057 49,057 - 46,000 $30.27 $19.42 South Ft Worth 7,779,461 862,218 77,123 90.9% (246) (246) - 28,090 $25.38 $21.36 Totals 222,645,366 47,106,081 4,603,320 81.9% 1,167,105 1,167,105 275,680 5,494,781 $24.02 $18.24

Total Direct Current Year To Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 109,195,457 22,393,577 2,845,409 83.3% 587,994 587,994 199,800 5,213,295 $24.02 4.6% Class B 100,248,101 22,621,967 1,751,034 79.9% 608,114 608,114 75,880 281,486 $18.24 4.7% Class C 13,201,808 2,090,537 6,877 86.1% (29,003) (29,003) - - $14.22 4.4% Totals 222,645,366 47,106,081 4,603,320 81.9% 1,167,105 1,167,105 275,680 5,494,781 $21.04 5.5%

METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q1 2014

Kurt Cherry Ben Appleby Ryan Dale Brittany Ricketts Executive Vice President Senior Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3300 [email protected] (972) 421-3306 (972) 421-3310 [email protected] [email protected] [email protected]

Caleigh Brown Ariel Guerrero Wade Bowlin Kristen Burney Marketing Manager Senior Vice President Executive Vice President Vice President (972) 421-3307 Research Managing Director Director of Marketing [email protected] (713) 209-5704 (713) 209-5753 (713) 209-5910 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office Doug Berry buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, Vice President high-rise multifamily buildings and re-appropriated military facilities. Creative Director Our goal is to generate exceptional returns for our clients and investors by focusing on real (713) 209-5897 estate fundamentals. For additional information, visit www.pmrg.com. [email protected]

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance FOURTH QUARTER 2013

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 2013 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas regional economy continues to grow at a faster pace than most parts of the country as local companies are expanding their payrolls and an increasing number of corporate users are relocating to the area. For the 12 months ending November 2013, the Dallas-Fort Worth metropolitan area added 83,700 jobs, which represents a 2.7% annual increase in employment. The Metroplex has seen annual job growth across all industry sectors with the strongest gains in professional & business services (25,100 jobs), trade transportation & utilities (23,300 jobs), and leisure and hospitality (10,600 jobs). The labor force has grown at an above average pace as increasing job opportunities have attracted new residents. As a result, the unemployment rate has stagnated at 5.9%—up 10 basis points within the past 12 months—but remains well below the national rate of 7.0%.

The DFW Metroplex continues to attract relocation and expansion activity, with particularly TABLE OF CONTENTS strong growth in healthcare, financial services, and professional business services. The most noteworthy expansion involves the decision by State Farm Insurance to build a 1.5 million-sq. ft. complex in Richardson. Other financial firms expanding locally include USAA, UMB Bank, MoneyGram International, BB&T, Frost Bank, and CapitalOne. A major driver is Economic Overview...... 2 anticipated growth in housing that will lift demand for mortgages as well as homeowners Office Market Assessment...... 3 insurance. Although national uncertainty has the potential to affect performance to some Net Absorption & Occupancy...... 4 extent, the regional economy will experience sustained growth fueled by a steady influx of businesses from outside the area seeking to capitalize on the region’s well-educated labor Rental Rates & Leasing Activity...... 5 force, diverse industry base, strong population growth and lower cost of doing business. Construction...... 6 Updated 1/4/2014 Submarket Statistics & Methodology...... 7 Employment Trends Our Team...... 8 120 6% 80 4%

Thousands 40 2%

FOR INFORMATION: 0 0% -40 -2% Kurt Cherry -80 -4% Executive Vice President -120 -6% (972) 421-3322 03 04 05 06 07 08 09 10 11 12 13F 14F 15F [email protected] Jobs Added Annual % Change Wade Bowlin Updated 12/31/2013Source: U.S. Bureau of Labor Statistics, Moody's Analytics Executive Vice President Managing Director, Central Division Employment Growth by Sector (713) 209-5753 HEALTH [email protected] Current 12-Months Annual (Improving Reading Prior Reading Change or Declining) Ariel Guerrero Mining, Logging & Construction 181.2 177.4 2.1% ▲ Senior Vice President, Research Manufacturing 260.5 257.1 1.3% ▲ Trade, Transportation & Utilities 659.5 636.2 3.7% ▲ (713) 209-5704 Information 78.5 77.7 1.0% ▲ [email protected] Financial Activities 255.2 246.5 3.5% ▲ Professional & Business Services 510.4 485.3 5.2% ▲ Education & Health Services 393.3 389.9 0.9% ▲ 2 Leisure & Hospitality 317.3 306.7 3.5% ▲ PAGE Other Services 109.4 108.6 0.7% ▲ Government 397.6 393.8 1.0% ▲

Source: U.S. Bureau of Labor Statistics, Employment Data as of November 2013 Source: U.S. Bureau of Labor Statistics, Employment Data as of November 2013

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2013

OFFICE MARKET ASSESSMENT

Solid employment growth fueled office leasing demand with 488,442 sq. ft. of direct net absorption recorded during the fourth quarter, to finish out the year with just over 3 million sq. ft. in 2013. Class A product accounted for virtually all quarterly demand with 554,570 sq. ft. of direct absorption growth, bringing the year-end total to nearly 2.6 million sq. ft., which surpasses last year’s annual gain of 2.1 million sq. ft. The Class B sector witnessed 34,357 sq. ft. of negative direct absorption as tenants looked for better quality spaces, while the Class C sector experienced a net loss of 31,771 sq. ft. The Class B market ended the year with a total of 449,303 sq. ft. of direct absorption, down from 1 million sq. ft. experienced in 2012. Strengthening market dynamics caused Class A direct occupancy rates to increase by 20 basis points to 83.1% during the quarter as demand continued to outpace space deliveries. Within the past 12 months, Class A direct occupancy rates have impressively moved up 180 basis points to their highest level since late 2006. Meanwhile, Class B direct occupancy rates DFW Metroplex Ranks 4th in Job Growth: inched up by 20 basis points to 79.6%. Among the metropolitan markets with a workforce over 1 million, the metro area ranks fourth in annual With the local economy expanding at a vigorous pace, area tenants are increasingly confident employment growth. in making longer term decisions, weighing the possibilities of relocation or renewal in order to capitalize on favorable lease terms. The largest lease transaction during the quarter involved Concentra—a division of Humana—renewing a total of 115,000 sq. ft. of Class A Home to 18 Fortune 500 Companies: DFW ranks space at Spectrum Center in the Quorum/Bent Tree submarket. Triumph Aerostructures fifth among metropolitan statistical areas in the number signed a new lease for 111,406 sq. ft. of Class B space at 1401 Nolan Ryan Expy in the of Fortune 500 headquarters. The metro’s top employ- Arlington submarket. Other noteworthy largest transactions signed during the quarter ers are concentrated in telecommunications, transpor- included JPMorgan Chase (102,200 sf), Associa, Inc. (62,000), DeGoyler & MacNaughton tation, aerospace/defense, health care, high technology, (61,000 sf) and Buckner International (46,309 sf). financial services and retail.

FORECAST DFW Economic Outlook: The North Texas region’s historically strong employment and population growth, diversified economy and low costs of doing business will • The leasing market will remain a landlord favorable setting in the most desirable lead to above-average performance. The employment submarkets, such as Las Colinas, Uptown/Turtle Creek, Quorum/Bent Tree and Fort outlook for Dallas-Fort Worth remains strong with a Worth CBD, as rents increase, occupancies improve, and quality space options diminish. job growth forecast of 2.8% in 2014 and 3.3% in 2015, • As vacancy rates have approached a 10-year low, numerous construction projects according to Moody’s Analytics. have kicked off across the DFW Metroplex, which will provide an abundance of new, high-quality space options for tenants as the local economy continues to expand at a healthy pace. • Office market fundamentals will steadily improve resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly Updated 1/6/2014 Updated 1/6/2014environment with relatively lower business costs and a well-educated labor force. Market Trend Indicators

Office Market Trends Current Change from Previous 12-month Quarter Quarter Year Forecast 6,000 84% Direct Occupancy 81.7% Up Up Up

4,000 82% Direct Net Absorption 488,442 Down Down Up

2,000 80% Under Construction 4,901,402 Up Up Up

0 78% Direct Asking Rents $20.58 Up Up up in Thousands of SF of Thousands in -2,000 76%

-4,000 74% 3 03 04 05 06 07 08 09 10 11 12 13 14F 15F PAGE

Direct Net Absorption Completions Direct Occupancy

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 2013 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• Las Colinas was the most active submarket, with the Class A sector recording solid absorption gains totaling 181,290 sq. ft. The largest Class A occupancy gains involved VHA’s new offices at 290 E John Carpenter Fwy (267,975 Sq. ft.), Neovia (45,583 sq. ft), and Texas Industries (43,897 sq. ft.). VHA subsidiary Novation LLC vacated 126,543 sq. ft. of Class A space at 125 E John Carpenter Fwy and took 44,136 sq. ft. of Class B space at 250 E John Carpenter Fwy. A 104,518 sq. ft. vacancy by Lehigh Hanson at 8505 Freeport Pkwy left the Class B market with a net loss of 47,000 sq. ft. • The Richardson submarket finished the year strong with 62,163 sq. ft. of direct net absorption, bringing the year-end total to 964,987 sq. ft., with three-fourths of the space absorbed being Class A space. Move-ins by Texas Capital Bank (51,917 sq. ft.) and Samsung (19,453 sq. ft.) “The strong economic performance of the Dallas-Ft. brought the Class A quarterly absorption totals to 78,443 sq. ft. Worth metroplex has pushed Class A direct occupancy • Uptown/Turtle Creek recorded modest occupancy gains totaling12,658 sq. ft. during the levels to their highest levels since 2006. The current quarter as Baron and Budd contracted by roughly 80,000 sq. ft. at The Centrum. The Class level of job growth is expected to continue throughout A sector finished the year with 283,006 sq. ft. of direct space absorbed while the Class B 2014 and forecasted to improve significantly for 2015, countered with 86,711 sq. ft. of occupancy losses. meaning strong leasing demand for the numerous • Upper Tollway/West Plano recorded 88,030 sq. ft. of direct net absorption, bringing the year- construction projects coming online” – said Kurt Cherry, end total to 28,582 sq. ft. Class A properties recorded 72,639 sq. ft. of absorption due to ExecutiveUpdated Vice 12/31/2013 President, Dallas Regional Office. various small occupancies, including Tech Mahindra (20.739 sq. ft.) and Brierly (31,742 sq. ft.) • Quorum/Bent Tree posted 45,431 sq. ft. of direct absorption, bringing the year-end total for Submarket Occupancy Ranking Class A to 252,924 sq. ft. and 138,330 sq. ft. for Class B. The largest quarterly gains involved Occ. Y-O-Y % National Bankruptcy Services (67,909 sq. ft.) and RMG Networks (24,342 sq. ft.). Rank Submarket Rate Change • The Dallas CBD saw light activity during 2013, but ended its five-year streak of occupancy 1 Frisco / The Colony 96.0% 1.2% Updated 12/31/2013losses with 28,721 sq. ft. absorbed in 2013. The most recent significant activity involved 2 Preston Center 93.1% 1.4% Lockton Companies taking 118,800 sq. ft. of Class A space at 2100 Ross Ave. 3 South Ft Worth 91.6% 1.7% 4 Upper Tollway / West Plano 89.5% 0.5% Direct Net Absorption vs. Completions 5 Uptown/Turtle Creek 89.0% 1.4% 6 Allen / McKinney 88.8% 6.9% 2,000 7 East / South Dallas 86.6% 1.3% 8 Richardson 85.5% 9.4% 1,500 9 Ft Worth CBD 85.3% -6.1% 10 North / Northeast Ft Worth 84.7% -3.3% 1,000 11 Arlington / Mansfield 84.5% -1.8% In Thousands In of SF 500 12 Lewisville / Denton 84.4% -0.6%

13 Las Colinas 82.6% 1.8% 0 14 Mid Cities 82.1% -0.5% Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 15 Quorum / Bent Tree 81.2% 1.4% Updated 12/31/2013 16 Plano 81.2% 2.4% Direct Net Absorption Completions 17 Central Expy 79.6% -2.5% Updated 12/31/2013 Direct Occupancy Rates 18 Stemmons 78.2% -1.5% 19 East LBJ 75.0% 1.8% Direct Leasing Activity 84% Rolling 12-Months 20 Dallas CBD 69.9% 0.0% 12,000 21 West LBJ 69.8% -1.2% 82% 10,000

8,000 80% 6,000

78% 4,000 In Thousands of SF of Thousands In 2,000 4 PAGE 76% 0 Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2013

RENTAL RATES & LEASING ACTIVITY

• Class A full-service gross asking rents rose by $0.16 to $23.39 per square foot during the quarter and have increased by 2.1% or $0.48 within the past 12 months. Class A asking rents currently remain 5.4% or $1.34 per square foot below their cyclical peak recorded in spring 2008. • Class B rents rose by $0.08 to $18.06 per square foot during the quarter and have increased by 3.1% or $0.55 per square foot within the past 12 months. Class B rents are currently 2.7% or $0.50 per square foot below their peak recorded in spring 2008. • Within the past 12 months, 18 of the 21 submarkets have experienced rent growth, but there are still ample opportunities for tenants to capitalize on attractive lease terms with incentives and concessions being offered by landlords in submarkets with high vacancy, such as the Dallas CBD, LBJ and Stemmons Freeway. • While the leasing market has steadily improved, landlords have responded by raising Class “Sustained demand for quality space should result in A rents in the most pursued submarkets, which include Preston Center, Uptown/Turtle moderate rental rate growth in the top performing Creek, Las Colinas, Upper Tollway/W. Plano, Frisco, and Fort Worth CBD, given their supply of submarkets throughout 2014,” said Ben Appleby, Senior quality space with desirable amenities. Vice President of Leasing within PMRG’s Dallas office. • Class A leasing activity has remained strong due to sustained job growth and a flight to quality. At the end of the fourth quarter, the trailing four-quarter volume of Class A direct Updated 12/31/2013 space leased totaled nearly 9.6 million square feet, while Class B’s four-quarter trailing volume stood at just over 7.4 million square feet. • Flight to quality will remain an on-going trend as the competitive leasing environment Submarket Rental Rate Ranking has encouraged tenants in Class B and lower-tier Class A properties to take advantage of Rental Y-O-Y % attractive deals in discounted, higher quality buildings. Rank Submarket Rate Change Updated 12/31/2013 1 Preston Center $31.33 7.3% 2 Uptown/Turtle Creek $29.98 3.3% 3 Upper Tollway / West Plano $26.62 7.6% Rental Rates 4 Frisco / The Colony $25.70 5.9% ($/SF/Yr. Full Service) 5 Ft Worth CBD $25.61 7.4% $24 6 Allen / McKinney $23.50 4.3% $22 7 Central Expy $22.06 6.6% 8 Las Colinas $21.19 7.3% $20 9 South Ft Worth $21.05 1.2% 10 Mid Cities $21.00 6.0% $18 11 Dallas CBD $20.91 1.1% 12 Quorum / Bent Tree $19.87 1.2% $16 13 Plano $19.64 16.8% Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 14 Lewisville / Denton $19.57 2.9% 15 Richardson $18.82 -0.6% Class A Class B Updated 12/31/2013 16 East / South Dallas $18.43 2.8% 17 Arlington / Mansfield $18.21 2.4% Direct Leasing Activity Rolling 12-Months 18 East LBJ $18.17 3.1% 12,000 19 North / Northeast Ft Worth $17.16 -1.2% 10,000 20 West LBJ $15.79 6.3%

8,000 21 Stemmons $14.79 -3.6%

6,000

4,000 In Thousands of SF of Thousands In 2,000 5 0 PAGE Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q4 2013 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has skyrocketed by 446% within the past year to 5,075,385 sq. ft. under construction (excluding owner-occupied projects), with 56% of this new space already pre-leased.. • Developers delivered nearly 1.2 million sq. ft. in 2013, a 46% increase from the prior year, but equivalent to only a 0.5% increase in existing inventory. The metro office market is projected to deliver nearly 2.6 million square feet in 2014. • Fort Worth CBD recently saw the delivery of The Commerce Building and The Westbrook as part of Ed Bass’s Sundance Square development. The two buildings totaled approximately 144,000 sq. ft. of Class A office space. The fall 2014 delivery of the 76,000 sq. ft. The Cassidy Building will complete this development. • With job growth expected to continue at a healthy pace and Class A occupancy rates at a 7-year high, several large Class A office buildings broke ground during the quarter. • The Upper Tollway/West Plano submarket boasts 954,566 sq. ft. of speculative Class A RECENT ANNOUNCEMENTS construction along with 150,000 sq. ft. of owner-occupied space under development. Updated 12/31/2013The largest project underway is Trammel Crow’s 342,000 sq. ft. Legacy Tower. • Myers & Crow Co. is developing Freeport 9 Office • In Plano, Billingsley Co began construction on a 180,500 sq. ft. building at 6111 W. Center, a 153,000 sq. ft. Class A complex in the Las Plano Pkwy, slated to deliver in summer 2014. ReachLocal Inc. has pre-leased 100,000 Colinas and plans to develop a 92,250 sq. ft. office sq. ft. for its headquarters. The developer has also started an 189,000 sq. ft. speculative building named the Dominion Legacy Office building at 8951 Cypress Waters Blvd in Las Colinas, expected to open by mid-2014. Center in the Legacy area of Plano. • Cawley Partners broke ground on Knoll Trail Construction Pipeline Plaza, a 120,000 sq. ft. office building along 6,000 northbound Dallas Pkwy. Sundown Energy has already preleased 40% of the property. 5,000 • Duke Realty is developing a 200,000 sq. ft. build-to- 4,000 suit for Conifer Health Solutions in the Duke Bridges Office Park in Frisco. Conifer plans to double its 3,000 workforce to more than 1,100 employees with 2,000

plans to occupy the space in spring 2014. SF of Thousands In • In Preston Center, Banderas Ventures is constructing 1,000 a 190,000 sq. ft. build-to-suit for Chief Oil and Gas, Updated 1/6/2014 expected to deliver in the first quarter of 2015. 0 Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 • Hillwood Properties broke ground on Hillwood Commons I, a 157,908 sq. ft. Class A building in Under Construction Delivered North Fort Worth, slated for a May 2014 delivery. SIGNIFICANT PROJECTS UNDER CONSTRUCTION • Harwood International plans to develop Frost % PRE- TARGET Tower, a 160,288 sq. ft. Class A building in Uptown. The building will be named after the anchor tenant PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER COMPLETION Frost Bank, which preleased 38% of the building. State Farm Campus** 1,500,000 Richardson State Farm Insurance Co. 100% KDC 1Q 2015 • Lincoln Property is developing the 132,000 sq. KPMG Plaza at Hall Arts 450,000 Dallas CBD KPMG, Jackson Walker 66% Hall Financial Group 2Q 2015 ft. Lincoln Legacy Two, and Granite Properties is Legacy Tower 342,066 Upper Tollway/ W Plano N/A 0% Trammell Crow / One Liberty 3Q 2014 building the 300,000 sq. ft. Granite Park IV. Granite Park IV 300,000 Upper Tollway/ W Plano N/A 0% Granite Properties 3Q 2014 • A JV between Trammell Crow Co and USAA Real Hall Office Park 200,000 Frisco/The Colony N/A 0% Hall Financial Group 1Q 2014 Estate Co landed a 20-year build-to-suit lease for Duke Bridges VII** 199,800 Frisco/The Colony Conifer Health Solutions 100% Duke Realty 1Q 2014 the FAA’s southwest region HQ in Alliance Park in Fort Worth. The 357,000 sq. ft. building is targeted Chief Oil and Gas** 190,000 Preston Center Chief Oil and Gas 100% Banderas Ventures 1Q 2015 to be completed in October 2015. International Business Park XVI 180,500 Upper Tollway/ W Plano ReachLocal, Inc. 56% Billingsley Company 2Q 2014 • Hines plan to develop Frisco Station, a 317-acre Frost Tower - 2950 N Harwood St 167,735 Uptown/Turtle Creek Frost Bank 41% Barbier-Mueller J. Gabriel 2Q 2015 mixed-use development off the Dallas North Hillwood Commons 1 157,909 North Fort Worth N/A 0% Hillwood 2Q 2014 Tollway, The Dallas Cowboys’ 200,000 sq. ft. office Cypress Waters 189,000 Las Colinas N/A 0% Billingsley Company 3Q 2014 headquarters and practice facility will serve as an Freeport 9 Office Center 153,630 Las Colinas N/A 0% Myers & Crow co. 2Q 2014 anchor to the large development. Ericsson Village Phase II* 150,000 Upper Tollway/ W Plano Ericsson 100% Trammell Crow Co. 2Q 2014 6 PAGE Lincoln Legacy Two 132,000 Upper Tollway/ W Plano N/A 0% Lincoln Property Company 2Q 2014 McKinney Corporate Center I 124,419 Allen/McKinney N/A 0% Van Trust Real Estate 1Q 2014 Knoll Trail Plaza 120,000 Quorum / Bent Tree Sundown Energy, Inc. 50% Cawley Partners 4Q 2014 ** Build-to-suit * Owner-occupied (excluded from competitive statistics)

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2013

SUBMARKET STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year To Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 28,563,534 10,155,845 460,779 69.9% 59,005 28,721 - 450,000 $21.72 $17.90 Uptown / Turtle Creek 10,581,104 1,499,564 181,084 89.0% 12,658 196,545 - 167,735 $31.74 $24.96 Preston Center 4,190,811 402,573 22,227 93.1% 13,733 151,083 - 190,000 $33.03 $24.13 Central Expy 11,772,196 2,690,673 151,815 79.6% 52,463 (188,138) - 0 $23.32 $18.63 Quorum / Bent Tree 19,023,383 4,202,576 286,277 81.2% 45,431 392,928 - 120,000 $23.92 $16.89 Upper Tollway / West Plano 14,488,312 1,849,318 602,576 89.5% 88,030 28,583 - 954,566 $28.18 $24.18 West LBJ 4,250,744 1,333,302 78,686 69.8% (19,398) 22,244 - 0 $16.09 $15.66 East LBJ 15,790,352 4,558,540 466,886 75.0% 85,418 332,019 - 0 $20.30 $16.17 Las Colinas 27,963,062 5,388,967 468,536 82.6% 131,220 586,366 - 365,669 $23.23 $19.37 Stemmons 14,027,991 3,346,221 172,688 78.2% (54,461) (23,174) - 0 $18.15 $13.85 Richardson 12,647,574 2,583,342 210,759 85.5% 62,163 964,987 - 1,500,000 $21.69 $16.65 Allen / McKinney 2,910,725 351,851 80,064 88.8% 15,247 249,173 - 191,933 $24.78 $22.86 Plano 4,499,276 1,069,195 32,681 81.2% 27,661 146,103 - 0 $21.77 $18.84 Frisco / The Colony 3,990,426 267,274 18,419 96.0% (1,295) 41,960 - 434,800 $26.94 $24.79 East / South Dallas 7,146,134 1,081,416 19,028 86.6% 33,535 61,456 - 110,000 $31.34 $17.73 Arlington / Mansfield 6,532,508 1,121,585 144,503 84.5% (25,118) 79,740 - 0 $20.28 $18.40 Mid Cities 9,913,793 2,099,261 722,867 82.1% 32,816 (15,020) - 72,729 $26.96 $18.57 Ft Worth CBD 8,114,182 1,191,147 24,356 85.3% (123,325) (277,623) - 75,971 $28.84 $20.46 North / Northeast Ft Worth 2,963,451 481,203 11,025 84.7% 13,463 (2,953) 132,246 193,908 $23.77 $17.10 Lewisville / Denton 5,528,323 822,247 66,581 84.4% 12,510 (9,056) - 46,000 $30.27 $19.40 South Ft Worth 8,218,445 852,497 34,941 91.6% 26,686 250,528 - 28,090 $25.41 $21.17 Totals 223,116,326 47,348,597 4,256,778 81.7% 488,442 3,016,472 132,246 4,901,401 $23.39 $18.06

Total Direct Current Year To Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 108,276,683 22,065,294 2,637,541 83.1% 554,570 2,597,714 132,246 4,617,530 $23.39 2.1% Class B 101,570,378 23,182,757 1,607,239 79.6% (34,357) 449,303 - 283,872 $18.06 3.1% Class C 13,269,265 2,100,546 11,998 86.2% (31,771) (30,545) - - $13.82 1.4% Totals 223,116,326 47,348,597 4,256,778 81.7% 488,442 3,016,472 132,246 4,901,402 $20.58 3.4% METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q4 2013

Kurt Cherry Ben Appleby Ryan Dale Brittany Ricketts Executive Vice President Senior Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3300 [email protected] (972) 421-3306 (972) 421-3310 [email protected] [email protected] [email protected]

Caleigh Brown Ariel Guerrero Wade Bowlin Marketing Manager Senior Vice President Executive Vice President (972) 421-3307 Research Managing Director [email protected] (713) 209-5704 (713) 209-5753 [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT DALLAS-FORT WORTH OFFICE MARKET REPORT Mar ket AT AGlance THIRD QUARTER 2013

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2013 Mar ket AT A Glance

ECONOMIC OVERVIEW

The North Texas regional economy continues to outperform the nation-at-large as local companies are expanding their payrolls and an increasing number of corporate users are relocating to the area from other markets. For the 12 months ending August 2013, the Dallas-Fort Worth metropolitan area remarkably added 111,000 jobs, which represents a 3.7% annual increase in employment. The industry sectors with the most jobs created on a year-over-year basis were professional & business services (30,900 jobs), trade transportation & utilities (19,800), financial activities (14,500 jobs), education & health services (12,300 jobs), and leisure and hospitality (11,700 jobs). As a result of the healthy gain in employment, the local unemployment rate has dropped by 80 basis points to 6.4% within the past 12 months, which is well below the recent national unemployment rate of 7.3%.

While the region’s economic expansion is expected to continue for the balance of 2013, TABLE OF CONTENTS the economic volatility in the national and global markets, ongoing uncertainty about the Federal Reserve tapering its bond-buying program, rising interest rates, and other regulatory issues could temper future growth from reaching its full potential. Although recent increases in federal taxes will be a drag on consumer spending in North Texas, strong job and housing Economic Overview...... 2 growth is expected to counter this decline. The North Texas economy is forecasted to Office Market Assessment...... 3 experience sustained growth fueled by a steady influx of businesses from outside the area Net Absorption & Occupancy...... 4 seeking to capitalize on the region’s well-educated labor force, diverse industry base, strong population growth and lower cost of doing business. Rental Rates & Leasing Activity...... 5 Updated 10/1/2013 Construction...... 6 Submarket Statistics & Methodology...... 7 Employment Trends Our Team...... 8 120 6% 80 4%

Thousands 40 2% 0 0% FOR INFORMATION: -40 -2% Kurt Cherry -80 -4% Executive Vice President -120 -6% (972) 421-3322 03 04 05 06 07 08 09 10 11 12 13F 14F 15F [email protected] Jobs Added Annual % Change

Source: U.S. Bureau of Labor Statistics, Moody's Analytics Wade Bowlin Updated 10/1/2013 Executive Vice President Managing Director, Central Division Employment Growth by Sector (713) 209-5753 HEALTH [email protected] Current 12-Months Annual (Improving Reading Prior Reading Change or Declining) Ariel Guerrero Mining, Logging & Construction 183.0 173.5 5.5% ▲ Vice President, Research Manufacturing 261.1 259.3 0.7% ▲ Trade, Transportation & Utilities 644.5 624.7 3.2% ▲ (713) 209-5704 Information 78.8 77.4 1.8% ▲ [email protected] Financial Activities 259.5 245 5.9% ▲ Professional & Business Services 508.9 478 6.5% ▲ Education & Health Services 392.6 380.3 3.2% ▲ 2 Leisure & Hospitality 319.3 307.6 3.8% ▲ PAGE Other Services 109.9 108.5 1.3% ▲ Government 377.4 369.7 2.1% ▲

Source: U.S. Bureau of Labor Statistics, Employment Data as of August 2013 Source: U.S. Bureau of Labor Statistics, Employment Data as of August 2013

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2013

OFFICE MARKET ASSESSMENT

The Dallas-Fort Worth office market recorded strong occupancy gains totaling 810,826 sq. ft. during the third quarter, bringing the year-to-date direct absorption total to just over 2.5 million sq. ft. This impressive total puts the market on pace to absorb 3.1 million square feet for the year, rivaling the 3.23 million square feet absorbed in 2012. Class A product accounted for virtually all quarterly demand with 812,591 sq. ft. of direct absorption growth, pushing the year-to-date total to 2.04 million sq. ft., which far outpaces last year’s annual gain. Meanwhile, the Class B sector saw an anemic 1,301 sq. ft. of direct absorption, while the Class C sector experienced a net loss of 3,066 sq. ft. during the third quarter.

With just over 3.2 million sq. ft. of direct space absorbed since the third quarter of 2012, the citywide occupancy rate has climbed an impressive 70 basis points to 81.4% within the past 12 months. As a result of the strong demand, Class A direct occupancy rates have moved up DFW Metroplex Ranks 1st in Job Growth: Among 170 basis points to 82.9% within the past 12 months, reaching their highest level since 2007. the metropolitan markets with a workforce over 1 Over the same period, Class B occupancy rates have moved up 20 basis points to 79.4%. million, the metro area ranks first in annual employment growth. With the local economy expanding at a vigorous pace, area businesses are increasingly confident in making longer term decisions, weighing the possibilities of relocation or renewal in order to capitalize on favorable lease terms. The largest lease transaction during Home to 18 Fortune 500 Companies: DFW ranks the quarter involved Allstate Insurance renewing a total of 412,000 sq. ft. of Class B space fifth among metropolitan statistical areas in the number at 8701 and 8675 Freeport Pkwy in Las Colinas. Epsilon also leased a total of 251,407 sq. ft. of Fortune 500 headquarters. The metro’s top employ- of Class A space at The Commons of Las Colinas; set to move in within a year. The other ers are concentrated in telecommunications, transpor- largest transactions signed included USAA (254,482 sf), Jackson Walker (104,064 sf), Green tation, aerospace/defense, health care, high technology, Tree Servicing (119,116 sf) and ReachLocal (100,000 sf). financial services and retail.

FORECAST DFW Economic Outlook: The North Texas region’s historically strong employment and population growth, diversified economy and low costs of doing business will • The leasing market will remain landlord favorable in the most desirable submarkets, lead to above-average performance. The employment such as Las Colinas, Uptown/Turtle Creek, Quorum/Bent Tree and Fort Worth CBD, as outlook for Dallas-Fort Worth remains strong with a rents increase, occupancies improve, and quality space options diminish. job growth forecast of 3.2% in 2013 and 2.9% in 2014, • With normalizing occupancy rates, numerous construction projects have kicked off according to Moody’s Analytics. across the Metroplex, which will provide an abundance of new, high-quality space options for tenants as the local economy continues to expand at a healthy pace. • Office market fundamentals will steadily improve resulting from corporate relocations and expansions as companies are attracted to the metro area’s business-friendly environment with relatively lower business costs and a well-educated labor force. Updated 10/3/2013 Market Trend Indicators

Office Market Trends Current Change from Previous 12-month Quarter Quarter Year Forecast 6,000 84% Direct Occupancy 81.4% Up Up Up

4,000 82% Direct Net Absorption 810,826 Down Down Up

2,000 80% Under Construction 4,060,153 Up Up Up

0 78% Direct Asking Rents $20.56 Up Up up in Thousands of SF of Thousands in -2,000 76%

-4,000 74% 3 PAGE 03 04 05 06 07 08 09 10 11 12 13F 14F 15F Current Change from Previous 12-month Quarter Quarter Year Forecast Direct Net Absorption Completions Direct Occupancy Direct Occupancy 81.4% 0.12% 0.87% Up Up Sideways

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Direct Net Absorption 810,826 -19.91% -52.37% Down Down Sideways

Under Construction 4,060,153 1.87% 2.29% Up Up Sideways

Direct Asking Rents $20.56 0.39% 2.25% Up Up Sideways

-0.5237299 Q3 2013 Mar ket AT A Glance

NET ABSORPTION & OCCUPANCY

• The Richardson submarket was most active during the third quarter with 382,120 sq. ft. of direct absorption, pushing the year-to-date total to 902,824 sq. ft. The Class A market accounted for 257,542 sq. ft. of absorption during the quarter. The largest quarterly occupancy gain involved State Farm backfilling 812,503 sq. ft. of space left behind by Ericsson as they relocated to their new corporate-owned building. • The Uptown/Turtle Creek area recorded a total of 183,887 sq. ft. of direct net absorption during the third quarter. The Class B market posted 104,126 sq. ft. of occupancy losses, but large occupancies by Regions Bank (70,806 sq. ft.), Community Trust Bank (31,835 sq. ft.), HFF (28,992 sq. ft.) and many others accumulated up to 288,013 sq. ft. of direct absorption for the Class A market. “Over the past year, booming growth in office • Las Colinas was once again a dynamic market with the Class A sector recording solid employment has allowed Class A direct occupancy absorption gains totaling 294,855 sq. ft. The largest Class A occupancy gains involved levels to reach their highest levels since 2007. This job Humana Right Source (115,026 sq. ft.), Trend Micro (51,533 sq. ft.) and FleetPride (46,764 sq. growth is projected to continue through 2015, and ft.). Recent large downsizings by Celanese Corporation and RAPP USA left the Class B market should fuel leasing demand in the top performing with an occupancy loss of 317,497 sq. ft. as both upgraded to Class A space. submarkets”, said Kurt Cherry, Executive Vice President, • Quorum/Bent Tree posted 154,060 sq. ft. of direct absorption during the quarter, with DallasUpdated Regional 10/3/2013 Office. roughly 69,000 sq. ft. of Class A absorption and 85,000 sq. ft. of Class B absorption. The Class A market witnessed a flurry of new leases involving Sundown Energy (38,000 sq. ft.), RMG Submarket Occupancy Ranking Networks (32,032 sq. ft.) and CRC Insurance Services (24,942 sq. ft.). Occ. Y-O-Y % • The Allen/McKinney submarket posted 155,325 sq. ft. of direct net absorption during the Rank Submarket Rate Change quarter. Class A properties accounted for most of the gains, which came from Emerson 1 Frisco / The Colony 96.0% 2.3% Process Management moving into their new 128,297 sq. ft. build-to-suit. 2 Preston Center 92.3% 0.4%Updated 10/3/2013 3 South Ft Worth 91.4% 0.4% 4 Uptown/Turtle Creek 89.0% 3.2% 5 Upper Tollway / West Plano 88.7% -1.3% Direct Net Absorption vs. Completions 6 Allen / McKinney 88.4% 4.7% 2,000 7 Ft Worth CBD 88.3% -2.0% 8 North / Northeast Ft Worth 86.5% -1.2% 1,500 9 East / South Dallas 86.0% 0.9% 10 Arlington / Mansfield 84.9% -0.9% 1,000 11 Richardson 84.8% 10.5%

12 Lewisville / Denton 84.0% 0.0% Thousands In of SF 500 13 Mid Cities 82.0% 0.0% 0 14 Las Colinas 82.0% 2.0% Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 15 Quorum / Bent Tree 80.8% 1.0% 16 Plano 80.5% 0.7%Updated 10/3/2013 Direct Net Absorption Completions

17 Central Expy 79.3% -3.7% Updated 10/3/2013 18 Stemmons 78.3% -1.6% Direct Occupancy Rates

19 East LBJ 74.3% 1.4% Direct Leasing Activity 20 West LBJ 70.1% -3.8% 84% Rolling 12-Months 21 Dallas CBD 69.3% -0.3% 12,000 82% 10,000

8,000 80% 6,000

78% 4,000 In Thousands of SF of Thousands In 2,000 4 PAGE 76% 0 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13

Class A Class B Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2013

RENTAL RATES & LEASING ACTIVITY

• Class A full-service gross asking rents rose by $0.44 to $23.51 per square foot during the quarter and have increased by 3.1% or $0.71 within the past 12 months. Class A asking rents currently remain 4.9% or $1.22 per square foot below their cyclical peak recorded in spring 2008. • Class B rents rose by $0.38 to $17.94 per square foot during the quarter and have increased by 1.9% or $0.33 per square foot within the past 12 months. Class B rents are currently 3.3% or $0.62 per square foot below its peak recorded in spring 2008. • Within the past 12 months, three-fourths of the submarkets have experienced rent growth, but there are still ample opportunities for tenants to capitalize on attractive lease terms with incentives and concessions being offered by landlords in submarkets with high vacancy, such as the Dallas CBD, LBJ and Stemmons Freeway. • Higher occupancy rates have allowed landlords to raise Class A rents in the most pursued “Sustained demand for quality space should result in submarkets, which include Preston Center, Uptown/Turtle Creek, Las Colinas, Upper moderate rental rate growth in the top performing Tollway/W. Plano and Fort Worth CBD, given their supply of quality space with desirable submarkets for the balance of 2013,” said Ben Appleby, amenities. Senior Vice President of Leasing within PMRG’s Dallas • Class A leasing activity has remained strong due to sustained job growth and a flight to office. quality. At the end of the third quarter, the trailing four-quarter volume of Class A direct Updated 10/3/2013 space leased totaled just over 10 million square feet, while Class B’s trailing volume stood at nearly 7.5 million square feet. Submarket Rental Rate Ranking • Flight to quality will remain an on-going trend as the competitive leasing environment Rental Y-O-Y % has encouraged tenants in Class B and lower-tier Class A properties to take advantage of Rank Submarket Rate Change attractive deals in discounted, higher quality buildings. 1 Preston Center $31.38 7.8% Updated 10/3/2013 2 Uptown/Turtle Creek $29.28 2.1% 3 Upper Tollway / West Plano $26.09 3.2% Rental Rates 4 Frisco / The Colony $25.36 1.0% ($/SF/Yr. Full Service) 5 Ft Worth CBD $25.20 5.3% $24 6 Allen / McKinney $23.47 6.8% 7 Central Expy $21.91 5.6% $22 8 South Ft Worth $20.95 1.0% 9 Las Colinas $20.95 4.2% $20 10 Dallas CBD $20.84 3.2% 11 Mid Cities $20.42 3.5% $18 12 Quorum / Bent Tree $19.75 1.6% 13 Lewisville / Denton $19.63 1.0% $16 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 14 Plano $19.14 5.5% 15 Richardson $18.93 0.5% Updated 10/3/2013 Class A Class B 16 East / South Dallas $18.37 6.7% 17 Arlington / Mansfield $18.25 2.6% Direct Leasing Activity 18 East LBJ $17.82 0.2% Rolling 12-Months 19 North / Northeast Ft Worth $17.56 1.3% 12,000 20 West LBJ $15.61 6.3% 10,000 21 Stemmons $14.82 -0.4% 8,000

6,000

4,000 In Thousands of SF of Thousands In 2,000 5 0 PAGE Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13

Class A Class B

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Q3 2013 Mar ket AT A Glance

CONSTRUCTION

• The office construction pipeline has skyrocketed 254% within the past year to just over 4 million sq. ft. under construction (excluding owner-occupied projects), putting it 27% above its 20-year historical average. • With job growth expected to continue at a healthy pace and Class A occupancy rates at a 7-year high, several large Class A office buildings broke ground during the third quarter. Arguably the most significant of these was Hall Financial Group’s 450,000 sq. ft. KPMG Plaza in the Dallas CBD, slated for completion in 2015. Hall Financial Group is also developing the 200,000 sq. ft. Hall Office Park in Frisco, slated for a mid-2014 delivery. • Trammel Crow is spearheading the construction efforts in Upper Tollway/West Plano, with the 342,000 sq. ft. Legacy Tower, Capital One’s offices expansion at 5040 & 5050 Headquarters Dr for a total of 350,000 sq. ft., and Phase II of Ericsson’s new North American headquarters—a 150,000 sq. ft. campus expansion. RECENT ANNOUNCEMENTS • Lincoln Property Company is developing the 132,000 sq. ft. Lincoln Legacy Two, and Updated 10/3/2013Granite Properties is building the 300,000 sq. ft. Granite Park IV. • Billingsley Co. has begun work on an 186,000 sq. • Fort Worth’s CBD has also seen a major uptick in construction activity. Local developer ft. building at 6111 W. Plano Pkwy, scheduled to Ed Bass, in conjunction with Sundance Square, is developing a total of 220,000 sq. ft. break ground in October and deliver in summer of Class A office space. The Commerce Building and The Westbrook are expected to 2014. ReachLocal Inc. has pre-leased 100,000 sq. deliver by year end, while The Cassidy Building is slated for a fall 2014 delivery. ft. for its headquarters. The developer also started an 189,000 sq. ft. speculative building in their Construction Pipeline 1,000-acre Cypress Waters development, which is 4,500 expected to open by mid-2014. 4,000 • Myers & Crow Co. is developing Freeport 9 Office 3,500 Center, a 153,000 sq. ft. Class A complex in the Las 3,000 Colinas submarket and recently acquired nearly 8 2,500 acres of land in the Legacy area of Plano, with plans 2,000 to develop a 92,250 sq. ft. office building named 1,500

the Dominion Legacy Office Center. SF of Thousands In 1,000 • Harwood International plans to develop Frost 500 Tower, a 160,288 sq. ft. Class A building in the Updated 10/3/2013 0 Uptown / Turtle Creek submarket. The building Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 will be named after the anchor tenant Frost Bank, Only include projects under construction in report which has preleased 38% of the building. Under Construction Delivered • Cawley Partners plans to soon break ground on SIGNIFICANT PROJECTS UNDER CONSTRUCTION Knoll Trail Plaza, a 120,000 sq. ft. office building in % PRE- TARGET Quorum/Bent Tree. Sundown Energy has already PROJECT NAME SIZE (SF) SUBMARKET MAJOR TENANT LEASED DEVELOPER COMPLETION preleased 40% of the property. • Capital Commercial Investments Inc. has State Farm Campus** 1,500,000 Richardson State Farm Insurance Company 100% KDC 1Q 2015 announced plans to develop a speculative office KPMG Plaza 450,000 Dallas CBD KPMG, Jackson Walker 53% Hall Financial Group 2Q 2015 building just north of the DFW International Legacy Tower 342,066 Upper Tollway/ W Plano N/A 0% Trammell Crow / One Liberty 2Q 2014 Airport. The four-story, 300,285 sq. ft. Freeport Granite Park IV 300,000 Upper Tollway/ W Plano N/A 0% Granite Properties 2Q 2014 Commons will be on Freeport Pkwy. Hall Office Park 200,000 Frisco/The Colony N/A 0% Hall Financial Group 1Q 2014 • Hines, in partnership with the Frisco Economic Capital One Bulding 6* 200,000 Upper Tollway/ W Plano Capital One 100% Trammell Crow Co. 4Q 2013 Development Corp., Univest and the Rudman Duke Bridges VII** 199,800 Frisco/The Colony Conifer Health Solutions 100% Duke 1Q 2014 Partnership, plan to develop Frisco Station, a 317-acre mixed-use development off the Dallas Freeport 9 Office Center 153,630 Las Colinas N/A 0% Myers & Crow co. 2Q 2014 North Tollway. The Dallas Cowboys’ 200,000 sq. ft. Ericsson Village Phase II* 150,000 Upper Tollway/ W Plano Ericsson 100% Trammell Crow Co. 2Q 2014 office headquarters and practice facility will serve Capital One Bulding 7* 150,000 Upper Tollway/ W Plano Capital One 100% Trammell Crow Co. 4Q 2013 as an anchor to the large development, which Lincoln Legacy Two 132,000 Upper Tollway/ W Plano N/A 0% Lincoln Property Company 2Q 2014 will eventually contain 1.2 million sq. ft. of office, McKinney Corporate Center I 124,419 Allen/McKinney N/A 0% 1Q 2014 400,000 sq. ft. of retail, 51,000 sq. ft. of restaurants Trend Tower** 110,000 East Dallas Trend HR 97% Capstar Realty/Sterling One 1Q 2014 6and a luxury hotel.

PAGE Sundance Square - The Cassidy 75,971 Fort Worth CBD N/A 0% Sundance Square / Ed Bass 3Q 2014 Sundance Square - The Westbrook 70,476 Fort Worth CBD N/A 3% Sundance Square / Ed Bass 4Q 2013 Sundance Square - The Commerce 61,770 Fort Worth CBD Shannon, Gracey, Ratliff & Miller 86% Sundance Square / Ed Bass 4Q 2013 ** Build-to-suit * Owner-occupied (excluded from competitive statistics)

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2013

SUBMARKET STATISTICS

TOTAL SPACE AVAILABLE DIRECT NET ABSORPTION CONSTRUCTION ASKING RENT Total Direct Current Year To Completions Under Submarkets Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Class A Class B Dallas CBD 28,806,480 10,496,523 519,969 69.3% (33,823) (30,284) - 450,000 $21.67 $17.83 Uptown / Turtle Creek 10,575,459 1,528,637 227,934 89.0% 206,008 183,887 - 0 $30.77 $24.97 Preston Center 4,188,379 405,085 27,372 92.3% 11,118 137,350 - 0 $31.59 $24.03 Central Expy 11,779,959 2,845,540 140,454 79.3% (10,110) (240,601) - 23,984 $22.57 $18.41 Quorum / Bent Tree 19,123,844 3,947,599 300,342 80.8% 154,060 347,497 80,000 0 $23.75 $16.81 Upper Tollway / West Plano 14,491,614 1,851,851 343,477 88.7% (237,272) (59,447) - 774,066 $28.27 $23.95 West LBJ 4,228,030 1,331,230 58,681 70.1% 7,917 41,642 - 0 $15.68 $15.61 East LBJ 15,905,572 4,675,893 458,655 74.3% 16,448 246,601 - 0 $20.05 $15.85 Las Colinas 27,956,800 5,808,889 690,350 82.0% (22,642) 455,146 - 176,669 $23.33 $19.09 Stemmons 14,024,361 3,433,069 172,688 78.3% 59,717 31,287 - 0 $18.69 $13.92 Richardson 12,650,438 2,549,815 168,858 84.8% 382,120 902,824 - 1,500,000 $21.61 $16.80 Allen / McKinney 2,940,721 379,633 80,064 88.4% 155,325 233,926 128,297 191,933 $24.74 $22.73 Plano 4,498,696 939,698 59,237 80.5% 59,627 118,442 - 0 $20.20 $19.05 Frisco / The Colony 4,007,004 271,460 55,408 96.0% 60,437 43,255 - 434,800 $27.28 $24.70 East / South Dallas 7,218,031 1,152,304 18,676 86.0% 15,547 27,921 - 110,000 $30.66 $17.54 Arlington / Mansfield 6,524,264 1,302,811 152,845 84.9% 28,541 104,858 - 0 $20.00 $18.45 Mid Cities 10,009,409 2,081,261 745,606 82.0% (51,084) (47,836) - 51,896 $26.21 $18.33 Ft Worth CBD 8,029,941 1,225,652 12,356 88.3% (94,401) (154,298) - 208,217 $28.45 $20.38 North / Northeast Ft Worth 2,963,451 527,112 11,025 86.5% (32,163) (16,416) - 85,998 $24.05 $17.60 Lewisville / Denton 5,561,937 965,607 5,070 84.0% (42,146) (21,566) - 24,500 $30.27 $19.41 South Ft Worth 8,218,445 851,276 49,351 91.4% 177,602 223,842 182,781 28,090 $25.36 $20.83 Totals 223,702,835 48,570,945 4,298,418 81.4% 810,826 2,528,030 391,078 4,060,153 $23.51 $17.94

Total Direct Current Year To Completions Under Asking Y-O-Y Property Types Inventory SF Direct Sublease Occupancy Qtr. Date Current Qtr Construction Rent Change Class A 106,109,998 22,002,080 2,591,402 82.9% 812,591 2,043,144 268,297 3,744,632 $23.51 3.2% Class B 104,136,942 24,327,351 1,696,080 79.4% 1,301 483,660 122,781 315,521 $17.94 2.0% Class C 13,455,895 2,241,514 10,936 85.4% (3,066) 1,226 - - $13.78 2.1% Totals 223,702,835 48,570,945 4,298,418 81.4% 810,826 2,528,030 391,078 4,060,153 $20.56 3.6% METHODOLOGY

Total Inventory: The total inventory includes all multi-tenant and single tenant leased office buildings with at least 20,000 square feet of gross rentable square footage. Total Space Available: Available space currently being marketed which is either physically vacant or occupied. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building. Under construction space is not included in space available figures.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Direct Occupancy Rate: Direct space physically occupied divided by the total rentable inventory. Direct Net Absorption: The net change in occupied direct space over a given period of time. 7 Under Construction: Office buildings which have commenced construction as evidenced by site excavation or foundation work. PAGE

Direct Asking Rents: The quoted full-service asking rent for available space expressed in dollars per sq. ft.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT Mar ket AT A Glance Q3 2013

Kurt Cherry Ben Appleby Ryan Dale Brittany Ricketts Executive Vice President Senior Vice President Vice President Leasing Manager (972) 421-3322 Leasing Leasing (972) 421-3300 [email protected] (972) 421-3306 (972) 421-3310 [email protected] [email protected] [email protected]

Caleigh Brown Ariel Guerrero Sommer Bukowski Wade Bowlin Marketing Manager Vice President Senior Vice President Executive Vice President (972) 421-3307 Research Director of Marketing Managing Director [email protected] (713) 209-5704 (713) 209-5810 (713) 209-5753 [email protected] [email protected] [email protected]

ABOUT PMRG

Headquartered in Houston, Texas, PM Realty Group (PMRG) is one of the nation’s leading real estate companies focusing on comprehensive property services, development and acquisitions. With a strategic presence in 30 markets, PMRG provides the highest quality services to its clients and investors. PMRG’s clients and investors include large financial institutions, advisors and high net worth individuals. By capitalizing on the team’s experience and expertise, PMRG has the ability to undertake large and challenging management, leasing, development and acquisition projects.

PMRG’s portfolio, including projects managed for third parties, includes commercial office buildings, mixed-use centers, corporate headquarters, industrial buildings, medical facilities, high-rise multifamily buildings and re-appropriated military facilities.

Our goal is to generate exceptional returns for our clients and investors by focusing on real estate fundamentals. For additional information, visit www.pmrg.com.

PROPERTY SERVICES | DEVELOPMENT | INVESTMENT