DALLAS OFFICE Economy In the first quarter of 2015, the unemployment rate held steady at 4.2 percent in Dallas, much lower than the U.S. rate of 5.5 percent. Unemployment is at a 14-year low in Dallas. Interestingly, DFW employment declined at a 3.1 percent annual rate in March. This is the first drop since December 2013, when DFW payrolls edged down an annualized 0.2 percent, shedding 500 jobs. Job creation remained broad-based across sectors, leisure and hospitality services category saw the fastest rate of increase at 6.5%, followed by the information services and trade, transportation and utilities.

Housing prices have passed their prerecession peak and have recently accelerated again due to the strong job growth, income growth, and population gains twice the national average. In March, existing-home sales rose 1.3 percent in Dallas and year-over-year sales were up a strong 4.7 percent in Dallas. Home inventories remain tight, edging down to 1.9 months in Dallas. Strong demand and a limited supply have continued to spur residential construction. The gains in housing will lift the rest of the local economy, as the proportion of employment devoted to housing-related activities is above the national average.

Additionally, the above-average growth in financial services over the past several years will continue, adding to the metro area’s overall expansion. Several factors will contribute to the increases. First, growth in housing will lift demand for mortgage and corporate lending officers and back-office operations. The list of banks that have either begun or expanded operations in Dallas in recent years is long and includes Liberty Mutual, Frost Bank, UMB Bank, MoneyGram International, BB&T, and CapitalOne. Second, increased housing activity generates demand for insurance, helping to explain State Farm’s huge ongoing expansion of its regional operations. The third factor is simply Texas’ business friendly environment, one of the reasons for the relocation from California of Toyota Financial Services, which is adding 4,000 jobs.

The Dallas economy will remain stable in the coming year as the population continues to grow and corporation continue to relocate to the metroplex.

Absorption vs. Office-using Employment Growth EMPLOYMENT GROWTH IN DALLAS SUGGESTS 2015 WILL BE A BIG YEAR FOR OFFICE LEASING

Net Absorption/Asking Rent

Market IndicatorsQ1 14 Q1 15 12-Month

Forecast

Overall Vacancy 18.7% 18.8%

Net Absorption 1,108,681 1,489,066

Under Construction 5,044,291 5,594,475

Average Asking Rent $21.44 $22.42

Economic IndicatorsQ1 14 Q1 15 12-Month

Forecast

Dallas Employment 2.26M 2.36M

Dallas Unemployment 5.4% 4.2%

U.S. Unemployment 6.7% 5.5%

Net Absorption/Asking Rent

$18

$19

$20

$21

$22

$23

-0.8

-0.4

0.0

0.4

0.8

1.2

2010 2011 2012 2013 2014

Net Absorption, MSF Asking Rent, $ PSF

1

Absorption vs. Office-using Employment Growth

1700

1800

1900

2000

2100

2200

2300

2400

0

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2

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4

5

04 05 06 07 08 09 10 11 12 13 14 Q1'15

Job

Gro

wth

, 000

’s

Abs

orpt

ion,

MSF

Net Absorption Office-using Employment, Yr/Yr Chg.

3

DALLAS

Office Market SnapshotFirst Quarter • 2015

www.dtz.com | 2

Market Overview

Dallas’ office market absorbed 1,489,066 SF in the first quarter of 2015, while inventory increased by 1,915,718 SF. Overall market vacancy remained steady at 18.8%.

Class A vacancy decreased to 17.8% from the previous year of 17.9%, absorption continues to be a Class A story reporting 94% (1,390,668 SF) of the total absorption at the end of the first quarter. Class A absorption was concentrated in Richardson/ Plano and Far North Dallas (South of 190). Richardson / Plano carried the Class A market with 1,159,508 SF absorbed – State Farm absorbed 1,533,199 SF alone by moving into their Campus at City Line developed by KDC. Far North Dallas (South of 190) absorbed 184,150 SF. Sundown Energy, Providence Energy, and Allegiance Capital moved into the Bill Cawley’s new development, Knoll Trail Plaza, to absorb 108,008 SF. Additionally, Compass Productions Partners moved into 30,786 SF at Addison Circle One and Axxess Technology moved from East LBJ to Tollway Plaza South to occupy 24,328 SF.

Year-end Class B absorption totaled 38,683 SF with the vacancy rate 20.2% from 19.8% at the end of 2014. The most active Class B submarket was LBJ with 121,706 SF of positive absorption. Most of LBJ’s absorption came from smaller tenants wanting the “value-option” that the tollway no longer offers. Two of the larger tenants that occupied this quarter were both in The Centre Office Park - Futurestep (21,267 SF) at 4100 Alpha Rd and Nutur Health (23,893 SF) at 4001 McEwen Rd. The quoted rental rates increased from $16.47 Full Service in the first quarter 2014 to $17.27 Full Service in the first quarter of 2015, a 5% increase. Additionally, LBJ’s vacancy dropped from 29% in 2014 to 27.8% in the first quarter of 2015.

Outlook• Developments in “$5B mile” in Frisco / Plano will continue

to garner demand because of the affordable land, strong job growth, confluence of the quality of living, excellent school districts

• Top Submarkets will continue to tighten thus pushing rates, driving tenants to consider amenity-rich Class B product

• Multinational companies will continue to look at Dallas for possible expansions and relocations because of the diversity of its local economy (ranking second globally and keeping that ranking projected into 2017)

Submarket Comparison

New Supply

Class A Vacant Space by Submarket

New Supply

0

1

2

3

4

5

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16M

SF

Historic Average = 2.1 MSF

2

Vacant Space by Submarket

% of Total Vacant Space Q1 2015

25%

18%

15%

19%

26%

9%

17%

12%CBDCentral ExpresswayFar North DallasLas ColinasLBJPreston CenterRichardson / PlanoUptown

5Submarket Comparison

0

4

8

12

16

20

24

28

32

CentralExpressway

CentralBusinessDistrict

Far NorthDallas

(North of 190)

Far NorthDallas

(South of 190)

Las Colinas LBJ Freeway Uptown

MSF

A Occupied A Vacant

B Occupied B Vacant

4

DALLAS

Office Market SnapshotFirst Quarter • 2015

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Key Sales Transactions 1Q 2015

TOTAL BLDGS

INVENTORYDIRECT

VACANTTOTAL

VACANTVACANCY

RATEQ1 2015 NETABSORPTION

NETABSORPTION

UNDER CONSTRUCTION

AVERAGE ASKING RENT

SUBMARKET

Central Expressway 103 12,386,240 2,191,067 2,237,783 18.1% (38,308) (38,308) 149,510 $23.43

Dallas CBD 79 29,189,633 7,120,150 7,283,856 25.0% 186,918 186,918 450,000 $22.55

East Dallas 175 7,420,863 889,486 892,578 12.0% 23,174 23,174 20,773 $19.37

FND (South of 190) 199 20,684,471 3,095,334 3,305,895 16.0% 197,628 197,628 2,529,239 $20.45

FND (North of 190) 215 20,152,530 2,522,238 2,878,391 14.3% 146,894 146,894 0 $27.70

Las Colinas/Freeport 261 30,888,214 5,630,688 5,994,919 19.4% (270,078) (270,078) 0 $22.30

LBJ Freeway 164 20,864,826 5,316,599 5,374,448 25.8% 111,785 111,785 0 $19.04

Lewisville/Denton 153 8,193,670 1,313,262 1,317,487 16.1% (182,081) (182,081) 269,134 $19.60

Preston Center 48 4,260,987 356,007 377,734 8.9% (6,429) (6,429) 206,000 $33.35

Richardson/Plano 312 24,190,757 3,861,356 4,056,873 16.8% 1,220,112 1,220,112 1,122,084 $20.08

Southlake / Westlake 98 5,317,689 1,051,754 1,153,386 21.7% 46,723 46,723 0 $25.09

Southwest Dallas 75 3,173,669 395,911 395,911 12.5% 65,764 65,764 0 $15.82

Stemmons Freeway 111 11,746,984 2,951,977 3,050,098 26.0% 51,510 51,510 0 $14.81

Uptown/Turtle Creek 85 10,820,602 1,198,274 1,260,651 11.7% (17,823) (17,823) 847,735 $32.19

MARKET TOTALS

Class A 402 104,568,346 18,095,934 19,110,266 18.3% 1,443,034 1,443,034 5,056,832 $25.72

Class B 1,382 94,091,648 18,014,234 18,684,135 19.9% 33,040 33,040 537,643 $19.44

Class C 294 10,631,141 1,783,935 1,785,609 16.8% 59,715 59,715 0 $16.24

TOTAL 2,078 209,291,135 37,894,103 39,580,010 18.9% 1,535,789 1,535,789 5,594,475 $22.24

PROPERTY SF SELLER/BUYER PRICE PSF SUBMARKET

Canal Centre 238,051 JLL / Litbitzky $140.00 Las Colinas

Citymark 218,096 Hines / Bradford & American National $179.00 Uptown

Custer Court 120,596 Equite Office / Origin $151.00 Richardson/ Plano

NBC Universal 75,000 KDC / Olympus $343.00 Las Colinas

Office asking rents converted to Full Service

Key Lease Transactions 1Q 15

PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET

Tollway Office Center II 160,000 Liberty Mutual Group New FND North of 190

Riverside Commons 140,000 GE Capital New Las Colinas

Royal Ridge V 120,000 NEC New Las Colinas

Freeport 9 102,000 Conexis / Wageworks New Las Colinas

Waters Ridge Tech Center 57,000 Teladoc New Lewisville

Westway One 55,000 CEC Entertainment New Las Colinas

Rambler Park 45,000 Bapitst General Convention New NCX

Gramercy Center South 33,000 Clearsprings Loan Services New FND South of 190

DALLAS

Office Market SnapshotFirst Quarter • 2015

www.dtz.com | 4

Office SubmarketsDallas

About DTZ

DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full spectrum of property solutions. Our core capabilities include agency leasing, tenant representation, corporate and global occupier services, property management, facilities management, facilities services, capital markets, investment and asset management, valuation, building consultancy, research, consulting, and project and development management. DTZ manages 3.3 billion square feet and $63 billion in transaction volume globally on behalf of institutional, corporate, government and private clients. Our more than 28,000 employees operate across more than 260 offices in more than 50 countries and proudly represent DTZ’s culture of excellence, client advocacy, integrity and collaboration. For further information, visit: www.DTZ.com or follow us on Twitter @DTZ.

Bret Bunnett Regional Managing Principal

5956 Sherry Lane 20th Floor Dallas, TX 75225 Tel: +1 972 692 1746 Email: bret.bunnett@dtz.com

The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Copyright © 2015 DTZ. All rights reserved.

FRISCO

ARLINGTON

FREEPORT

DFWAIRPORT

FARNORTHDALLAS

(NORTH)

FARNORTHDALLAS

(SOUTH)

LEWISVILLE

DENTON

CBDFORT

WORTH

UPTOWN /TURTLECREEK

PRESTONCENTER

NORTHCENTRALEXPWY

RICHARDSON

PLANO

MCKINNEY

ALLEN

LBJ FREEWAY

LAS COLINAS

SOUTHLAKE / WESTLAKE

LOVEFIELD

STEMMONS

DALLASNORTHTOLLWAY

DALLASNORTHTOLLWAY

DALLASNORTHTOLLWAY

35E

635

635

635

35E

35W

35

35W

35W

820

820

121

121

121

114

114

121

121

121161

161

360

408

183

380

380

190

190

30 45

45

20

20

20

20

30

75

75

75

80

80

175

175

LOOP12

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DALLAS

Office Market SnapshotFirst Quarter • 2015