1Q16 NEW YORK CITY OFFICE MARKET OVERVIEW 1Q16 Office Market Overview Table of Contents 3 Executive Summary 4 Manhattan Office Market Analysis 23 Manhattan Development Overview 5 Leasing Activity by Market 24 Commercial Development Pipeline 6 Top Transactions 1Q16 25 Commercial Development Horizon Map 7 Industries Driving Leasing 26 World Trade Center Development Overview 8 TAMI Taking Rent Comparison 27 Far West Side Development Overview 9 TAMI Deals by Submarket 28 Midtown East Development Overview 10 Manhattan Submarket Matrix 29 Boutique Development Overview 11 Asking Rent Trends 12 Taking Rent Trends Brooklyn and Long Island City 13 Taking Rent Corridor and Submarket Comparisons 30 Office Market Analysis 14 Net Effective Rent Trends 31 Brooklyn Office Developments in the Pipeline Map 15 Concessions for Select Submarkets 32 Brooklyn Office Development in the Pipeline Overview 16 Midtown Deal Composition 33 Brooklyn Inventory Pipeline 17 Midtown South Deal Composition 34 Dumbo and Downtown Brooklyn Trends 18 Downtown Deal Composition 35 Asking Rent Comparison 19 Triple-Digit Taking Assets 36 Long Island City Trends 20 Manhattan Top-Tier Trends 37 Long Island City Submarket Snapshot 21 Midtown South Top-Tier Trends 38 Long Island City Transformation Statistics 22 Midtown and Downtown Height Analysis | 2 1Q16 Office Market Overview Executive Summary Prime assets and new construction continued to attract high-profile tenants during the first quarter of 2016. Increased renewal activity made up for a drop in relocations causing overall Manhattan leasing to be stable year-over-year and with the ten-year quarterly average. Midtown and Downtown outperformed below-average leasing in Midtown South. Despite subdued overall leasing figures, activity remained strong for high-end space under 10,000 square feet. The spread in asking and taking rents between Midtown and Midtown South has closed considerably from the prior peak of 2008. Midtown South submarkets are now priced competitively with Midtown. Downtown asking and taking rents reached a new historic high during first quarter 2016 as FIRE and TAMI sectors solidified their presence in the market. Over 15 million square feet of development projects in Manhattan are scheduled for completion by 2020. Another 15 million square feet is in the pipeline. In Brooklyn, new and newly repositioned assets in Dumbo and Williamsburg have pushed submarket average asking rents close to Downtown Manhattan. | 3 1Q16 MANHATTAN OFFICE MARKET ANALYSIS Leasing Activity by Market First Quarter Leasing (MSF) Key Manhattan leasing activity was stable as an increase in renewal activity propped up a Takeaway drop in relocations in 1Q16. Manhattan Midtown 14 7 12 6 5.3 10 9.2 5 9.2 MSF 4.9 MSF 8 4 6 3 4 2 2 1 0 0 2013 2005 2006 2007 2008 2009 2010 2011 2012 2014 2015 2016 2010 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 First Quarter Average Quarterly Velocity First Quarter Average Quarterly Velocity Midtown South Downtown 4 2.5 2.3 2.0 3 2.7 MSF 1.7 MSF 1.5 2 1.6 1.0 1 0.5 0 0.0 2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 2012 2005 2006 2007 2008 2009 2010 2011 2013 2014 2015 2016 First Quarter Average Quarterly Velocity First Quarter Average Quarterly Velocity Source: Newmark Grubb Knight Frank Research | 5 Top Transactions 1Q16 Manhattan The quarter’s top deals consisted of Company Address Market SF Lease Type Industry more renewals and expansions than McGraw Hill Financial 55 Water Street Downtown 900,027 Renewal FIRE recent quarters. All of the top deals were tenants in Salesforce.com 1095 Avenue of the Americas Midtown 202,678 Sublease TAMI either the TAMI or FIRE sectors, with Citadel Investment Group 425 Park Avenue Midtown 200,000 New FIRE a 50/50 split between the two. The McGraw Hill Financial deal Facebook 225 Park Avenue South Midtown South 198,000 New TAMI marked the largest lease signed in Manhattan since Time Warner’s GroupM 3 World Trade Center Downtown 173,436 Expansion TAMI sale-leaseback at 60 Columbus Omnicom 220 East 42nd Street Midtown 167,000 Renewal TAMI Circle in early 2014. ING 1133 Avenue of the Americas Midtown 132,000 New FIRE UBS 299 Park Avenue Midtown 120,000 Renewal FIRE Droga5 120 Wall Street Downtown 110,000 Expansion TAMI Mitsui & Co. 200 Park Avenue Midtown 91,210 Renewal & Expansion FIRE FIRE = Finance, Insurance, and Real Estate TAMI = Tech, Advertising, Media, and Information Source: Newmark Grubb Knight Frank Research | 6 Industries Driving Leasing Key TAMI and FIRE drove 1Q16 leasing. The make-up of tenants in the market suggests Takeaway this will continue. 1Q16 Leasing by Industry Tenants in the Market in Manhattan 100% Other, 6% Other, 13% Other, 11% Apparel & Retail, 4% Apparel & Retail, Apparel & Retail, 7% Other 5% 18% 75% TAMI, 30% TAMI TAMI, 28% 31% Apparel & Retail Prof Svcs, 10% 8% 50% Prof Svcs, 12% TAMI, 68% TOTAL SF IN THE MARKET Professional Services 16% 25% FIRE, 50% FIRE, 42% Prof Svcs, 9% FIRE 28% FIRE, 5% 0% Midtown Midtown South Downtown Source: Newmark Grubb Knight Frank Research | 7 TAMI Taking Rent Comparison TAMI taking rents by price range Key The majority of TAMI deals now start in the $50s and $60s, up significantly from 2010 when the Takeaway majority were in the $20s and $30s. 2010 1Q16 45% 45% 41% 40% 40% 35% 35% 33% 30% 30% 25% 24% 25% 24% 19% 20% 20% 17% 15% 15% 13% 10% 9% 10% 6% 5% 3% 5% 3% 2% 2% 1% 1% 1% 1% 0% 0% 0% $20's $30's $40's $50's $60's $70's $80's $90's $100's $20's $30's $40's $50's $60's $70's $80's $90's $100's Source: Newmark Grubb Knight Frank Research | 8 TAMI Deals by Submarket 1Q16 Deals signed by Submarket Key TAMI tenants showed a preference for the traditional Midtown South submarkets, as well as Takeaway Downtown East, Grand Central, and Penn Station. 16% 14% 12% 10% 8% 6% 4% 2% 0% Chelsea Eastside Rock Ctr. Rock South Sixth Ave/ Sixth Murray Hill Murray Flatiron/ Soho/Noho Park Avenue Park Penn Station Penn Union Square Union Times Square Times Square Times Grand Central Grand Far West Side West Far Meatpacking Downtown East Downtown Downtown West Downtown Hudson Square/ Hudson Tribeca/City Hall Tribeca/City MIDTOWN MIDTOWN SOUTH DOWNTOWN Source: Newmark Grubb Knight Frank Research | 9 Manhattan Submarket Matrix Total Availability Rate versus Overall Average Asking Rent Key The Plaza District and Park Avenue outperformed all other submarkets. The East Village has the Takeaway lowest availability rate. $115.69 Plaza District MANHATTAN 11.1% $75.69 Midtown 11.6% $81.68 Park Avenue Eastside 8.8% $71.78 Far West Side 15.1% $81.88 Grand Central 17.1% $76.28 Sixth Avenue/ Murray Hill 10.4% $60.75 Rock Ctr. Park Avenue 8.9% $102.13 Hudson Penn Station 8.5% $63.77 ($/SF) Square/Meatpacking Far West Side Plaza District 13.1% $112.01 Grand Central Times Square Sixth Ave/Rock Ctr. 11.7% $88.87 $75.69 Flatiron/Union Eastside Times Square 11.2% $80.99 Square Westside Times Square South 10.8% $64.04 Downtown West Soho/Noho Westside 8.9% $70.49 Chelsea Average Rent Asking Average Times Square South Tribeca/City Hall Midtown South 7.8% $72.00 Penn Station Murray Hill Chelsea 7.4% $65.46 East Village East Village 2.2% $54.03 Downtown East Flatiron/Union Square 7.7% $70.31 Hudson Square/Meatpacking 11.8% $84.31 Soho/Noho 4.6% $66.22 Downtown 12.2% $61.24 $35.69 Downtown East 10.4% $55.09 0% 11.1% 22.2% Downtown West 13.7% $67.86 Availability Tribeca/City Hall 16.5% $61.64 Source: Newmark Grubb Knight Frank Research | 10 Asking Rent Trends Overall Average Asking Rent by Market Key The spread in asking rents between Midtown and Midtown South has shrunk considerably Takeaway since the prior peak. Prior Peak (2008) to 1Q16 Trough (2010) to 1Q16 $95 Percent Change Percent Change MT -8% MT +43% MTS +22% MTS +79% $85 DT +19% DT +57% $81.68 13% spread between $75 51% spread MT and MTS between MT and MTS $72.00 $65 $61.24 $55 41% spread between MT and MTS $45 $35 $25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Midtown Midtown South Downtown Source: Newmark Grubb Knight Frank Research | 11 Taking Rent Trends Average Annual Taking Rents ($/SF) Key Average base taking rents reach new historic Takeaway highs in all three Manhattan markets. Prior Peak (2008) to 1Q16 Trough (2010) to 1Q16 $95 Percent Change Percent Change MT 14% MT 62% MTS 30% MTS 80% $85.89* $85 DT 15% DT 47% 24% spread between MT $75 and MTS $69.25 $65 42% spread between $55 MT and MTS $50.92 $45 $35 $25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Midtown Midtown South Downtown Source: Newmark Grubb Knight Frank Research *Midtown 1Q16 average impacted on a weighted basis by Citadel deal at 425 Park. | 12 Taking Rent Corridor and Submarket Comparisons 1Q16 Average taking rents for direct deals with five-year terms and longer Key Midtown South submarkets and avenues Takeaway compete directly with those in Midtown. CENTRAL Average Base PARK Average Base By Submarket By Corridor Taking Rent ($/SF) Taking Rent ($/SF) PLAZA DISTRICT MIDTOWN WESTSIDE EASTSIDE MIDTOWN PARK SIXTH AVE $112.29 AVE/ Upper Fifth Avenue Plaza District ROCK $110.72 TIMES CTR (47th - 65th Streets) G.C. Park Avenue $94.86 SQUARE STATION 41ST ST PORT AUTHORITY GRAND CENTRAL Sixth Ave/Rock Ctr.