RESEARCH & FORECAST REPORTNORTHEAST FLORIDA

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Office Market Summary OVERVIEW

The Jacksonville Office market continues to experience improvement in occupancy during the second quarter of 2011 with positive absorption from 314,359 to 280,001 square feet. Absorption for the past three quarters continues to exceed the net absorption of the previous three years. The vacancy rate was down over the previous quarter at 13.9% from 14.5%.

There were a number of large deals executed during 2010, including CSX for 172,000 square feet in the 550 Water Street Building, Comcast of Greater Florida/Georgia for 106,253 square feet in the Deerwood North Building, the Adecco Group for 78,292 square feet in Flagler’s Deerwood Park South Building 200, PNC Financial for 57,865 square feet at 5011 Gate Parkway, Availity for 49,948 square feet in the WaterView Building II, and Rayonier for 35,619 square feet in the Riverplace Tower on the Southbank of Downtown Jacksonville. These deals are being followed up in 2011 by Wells Fargo for 112,966 square feet in Wells Fargo Plaza (formerly the Modis Building) and the City is working with and has approved incentives for EverBank to relocate to the Central Business District for 225,000 square feet. Other large lease signings in 2011 include the 41,421 square feet at 12735 Gran Bay Parkway West in Baymeadows, 15,995 square feet at 10151 Deerwood Park in Baymeadows, and ICS Logistics recently leased 18,280 square feet in the BBVA Compass Bank building on 10060 Skinner Lake Drive, where Colliers International and Jones Lang LaSalle brokered the lease.

During the second quarter, the market experienced an increase in investors seeking income-producing properties. With the high level of inventory consisting of distressed and bank-owned properties, investors are taking advantage of lower prices and attractive cap rates. Business owners are also becoming more active in the market. Many are finding it more advantageous to buy at this time and are receiving financing through the low interest rates on SBA loans.

MARKET INDICATORS

VACANCY RATE TRENDS

Q1-2011 Q2-2011

VACANCY

VACANCT SUBLEASE

NET ABSORPTION

RENTAL RATE

CONSTRUCTION

Q2 2011 | OFFICE

16.00%15.00%14.00%12.00%10.00%

2Q 10 3Q 10 4Q 10 1Q 11 2Q 11

15.2% 15.5% 15.0%

14.5% 13.9%

.

Office Statistics2nd Quarter 2011

Office Building Inventory 60,082,205 SF

Vacancy 13.9%

YTD Net Absorption 280,001 SF

Under Construction

14,560 SF

Asking Full ServiceClass A - $19.82/SF Class B - $16.90/SF Class C - $15.46/SF

Estimated Operating ExpensesAll Classes

$5.50 - $8.50 / SF

Estimated TenantImprovement Cost

$30 - $40/sf (1st generation)$10 - $25/sf (2nd generation)

Office Cap RatesClass A - 8% – 9%

Class B & C - 9% - 10%

PROPERTY ADDRESS BUILDING CLASS SALE PRICE SIZE SF SUBMARKET7510 Baymeadows Way Class B $5,800,000 116,974 Baymeadows

7185 Bonneval Road Class B $3,675,000 27,273 Southpoint

750 Cassat Avenue Class C $1,260,000 32,450 Westside

PROPERTY ADDRESS BUILDING CLASS TENANT SF LEASED SUBMARKETOne Independent Drive Class A Wells Fargo 112,966 Downtown

12735 Gran Bay Pky W. Class B Outreach Financial Svs 41,421 Baymeadows

10060 Skinner Lake Dr. Class A ICS Logistics 18,280 Southside

2011 LARGEST OFFICE BUILDING LEASES

P. 2 | COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | NORTHEAST FLORIDA

2011 LARGEST OFFICE BUILDING SALES

Class Bldgs "Sublease Vacant

"Total Vacant

Total InventorySF Direct SF

Total Vacant SF

YTDNet Absorption

UnderConstruction

SFQuoted Rates

DOWNTOWN CBDA 18 6,684,943 1,033,859 15.6% 8,204 0.2% 1,042,063 0 $19.42 B 131 7,279,786 783,272 10.9% 9,084 0.0% 792,356 0 $16.96 C 384 2,326,002 376,809 16.2% - 0.0% 376,809 0 $17.34 Total 503 15,972,785 2,068,000 14.2% 17,288 0.1% 2,085,288 0 $18.40 RIVERSIDEB 122 1,012,953 89,877 8.9% 0 0.0% 89,877 0 $16.24 C 394 1,678,049 135,102 8.4% 0 0.0% 135,102 0 $16.02 Total 516 2,691,002 224,979 8.6% 0 0.0% 224,979 0 $16.13 SAN MARCOA 1 113,682 11,463 10.1% 0 0.0% 11,463 0 $19.50 B 48 922,094 152,185 16.5% 0 0.0% 152,185 0 $15.08 C 177 997,778 216,819 21.7% 0 0.0% 216,819 0 $15.67 Total 226 2,033,554 380,467 18.7% 0 0.0% 380,467 0 $15.64 ARLINGTON / REGENCYB 22 689,190 73,054 10.6% 0 0.0% 73,054 0 $14.78 C 113 739,312 80,775 10.9% 0 0.0% 80,775 0 $15.01 Total 135 1,428,502 153,829 10.8% 0 0.0% 153,829 0 $14.89 BUTLER / BAYMEADOWSA 39 4,825,875 407,756 9.2% 36,925 0.5% 444,681 0 $19.53 B 177 8,070,455 1,468,067 18.6% 29,099 0.5% 1,497,166 4560 $16.37 C 61 907,939 249,000 27.4% 0 0.0% 249,000 0 $15.52 Total 277 13,804,269 2,124,823 15.9% 66,024 0.5% 2,190,879 4560 $17.02 SOUTHSIDEA 23 3,556,806 128,057 4.0% 13,031 0.2% 141,088 0 $18.74 B 220 4,669,398 863,350 18.6% 5,450 0.1% 868,750 0 $14.81 C 373 3,702,349 655,149 17.7% 0 0.0% 655,149 0 $14.37 Total 616 11,928,553 1,930,340 14.0% 14,088 0.2% 1,713,723 0 $15.01 NORTHWEST (Northwest A 0 0 0 0.0% 0 0 - 0 0 0 B 19 274,506 38,327 14.0% 0 0.0% 38,327 0 $14.19 C 151 540,732 34,239 6.3% 0 0.0% 34,239 0 $13.11 Total 170 815,238 72,566 8.9% 0 0.0% 72,566 0 $13.68 NORTHSIDE (Northeast B 25 266,241 57,702 21.7% 0 0.0% 57,702 0 $16.94 C 37 270,291 41,130 15.2% 0 0.0% 41,130 0 $13.83 Total 62 536,532 98,832 18.4% 0 0.0% 98,832 0 $15.48ORANGE PARKA 1 85,000 0 0.0% 0 0.0% 0 0 0 B 161 1,601,443 314,508 20.2% 9,400 2.0% 324,008 0 $20.56 C 151 934,408 77,811 8.3% 0 0.0% 77,811 0 $17.76 Total 313 2,620,851 392,319 15.3% 9,400 0.7% 401,819 0 $20.05 MANDARINB 139 1,414,842 258,213 18.3% 1,080 0.3% 259,293 0 $17.92 C 96 622,654 100,488 16.1% 0 0.0% 100,488 0 $14.92 Total 235 2,037,496 358,701 17.7% 1,080 0.1% 359,781 0 $16.92 BEACHESA 7 431,553 121,376 28.1% 0 0.0% 121,376 0 $27.05 B 161 1,760,789 191 11.9% 2,640 0.2% 189,268 0 $22.83 C 196 902,256 78,127 8.8% 1,050 0.1% 79,177 0 $16.84 Total 355 2,930,676 384,487 16.1% 3,690 0.1% 388,177 0 $22.66MARKET TOTALA 92 15,925,535 1,721,132 11.2% 58,160 0.1% 1,779,292 0 $19.82 B 1,548 30,368,324 4,574,646 15.3% 59,111 0.3% 4,633,757 0 $16.90 C 2,211 13,788,346 1,946,945 14.1% 0 0.0% 1,946,945 0 $15.46 Total 3,851 60,082,205 8,242,723 13.9% 117,271 0.2% 8,359,994 0 $17.30

NOTE: Does not include Baker or St. Johns County. Research findings contained in this report are based on the following criteria: 1.) Building space less than 10,000 square feet is not included. 2.) Absorption calculations include only

buildings with a certificate of occupancy. 3.) Guidelines adhere to the National Association of Industrial and Office Properties (NAIOP) and Jacksonville Chamber of Commerce/Cornerstone database standards. Due to continual updates and

refinements in the historical database some of the data in this report may not match previously published reports. Information contained in this report has been obtained from sources deemed reliable but not guaranteed. The information

herein is presented without any warranty or representations as to its accuracy. Source: CoStar Property & Colliers International.

EXISTING VACANCY CONSTRUCTION RENTS

RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | NORTHEAST FLORIDA

COLLIERS INTERNATIONAL | P. 3

EXISTING PROPERTIES VACANCY CONSTRUCTION RENTS

VACANCYJacksonville’s office vacancy rate decreased to 13.9% at the end of the second quarter 2011, compared to the 14.5% vacancy rate in the first quarter 2011..

RENTSIn the last six months, net effective office rents in Jacksonville have been significantly lower than asking rents. This trend in the market has been most evident with Class A office space, both Downtown and in the suburbs. Class B and C office buildings, meanwhile, have been more resistant to recent market fluctuations and therefore their rent levels have remained more stable.

Downtown and suburban Class A office landlords are increasingly under pressure to negotiate deals more favorable to tenants. In the Butler/ Baymeadows area, landlords are willing to give rent concessions of up to 6 months of free rent for credit tenants with 5-year terms.

Downtown landlords are also willing to give rent concessions due to the additional cost of parking. On 5-year deals, 6 months of free rent is common. There is plenty of parking downtown but it comes at a cost. Parking rates on average are $85 per month for surface space and $110 per month for covered/ garage space. Some Landlords are now offering up to two years of free parking on 5-year deals.

DOWNTOWN TRENDSDowntown features over 16 million square feet of office space, more than 1,200 businesses, two Fortune 500 headquarters and about 55,000 employees. The central business district is still the location of choice for companies seeking easy-accessibility and numerous amenities within walking distance. Financial services, insurance companies, law offices and engineering firms are some of the largest Downtown employers. One of the latest trends we are seeing is that companies are leaving the Suburbs and moving Downtown.

Downtown’s vacancy rate is stabilizing due to several factors:

- The conversion of older office buildings to mixed-use and residential usage.- The development of new residential towers in the downtown area is the result of a trend whereby more people are moving back into the urban core section of the city. These new residents want to work in offices near where they live.- Financial service companies continue to look for high profile space downtown.

- Upon completion of the Courthouse, we will see more law firms moving downtown.

SUBURBAN TRENDSThe epicenter of the suburban Class A office market is in the Butler/Baymeadows and Southside submarkets. Much like the downtown area, there has been very little new office product developed in the suburbs.

Due to Jacksonville’s solid medical presence, we continue to see development of medical office space near hospitals, as well as in the different submarkets around Northeast Florida. Continued development of hospitals and medical office buildings can be expected in Jacksonville’s suburbs in the coming years. There are currently new hospital expansions planned with a Shands facility on the Northside, St. Vincent’s in Clay County, and Memorial on the Westside.

Flagler Development Company has recently secured entitlement rights for a multi-building office complex totaling 675,000 square feet in Nocatee, a massive mixed-use developing community in south Jacksonville. This will be Flagler’s first fully sustainable development project in Northeast Florida.

Adecco Group left 114,000 SF downtown for 78,292 SF in Deerwood South.

OUTLOOK- In anticipation of a more active market, investors and developers are positioning themselves to play a key role in the next expansion phase of the city’s office market.

- Due to proximity to the port, Downtown, Arlington and the Northside will increasingly attract maritime and related business in need of office space.

- Office growth and development will continue to shift, with an expanding population, toward the southern reaches of the county and into St. Johns and Clay counties.

- The Downtown and Suburban office markets will continue to remain attractive for local growth industries: the professional and business service sector, healthcare, port related companies, government, education, and companies seeking a signature address.

- Larger companies are repositioning to take advantage of beneficial tenant economic opportunities.

Northeast Florida 1 Independent Drive Suite 2401 Jacksonville, FL, 32202 TEL +1 904 358 1206

SALES

LEASING

ASSET MANAGEMENT

ASSET RESOLUTION

SITE SELECTION

VALUATION

ACQUISITION

CONSULTING SERVICES

MARKET RESEARCH

Prepared By: Office Services Team Paul ScullPreston PhillipsChuck Diebel, CCIMFran PepisErika BjorkKimberly NormanLisa Dennis

512 Offices in 61 Countries on 6 ContinentsUnited States: 125Canada: 38Latin America: 18Asia Pacific: 214EMEA: 117

• $1.9 Billion in annual revenue

• 979 Million SF under management

• Over 12,000 professionals

• $59.6 Billion in Total Transaction Value

Information contained herein has been obtained from the owners or from other sources deemed reliable. We have no reason to doubt its accuracy but regret we cannot guarantee it. All properties subject to change or withdrawal without notice.

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RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | NORTHEAST FLORIDA