4Q

2011

Forecast

2012

VACANCY

NET ABSORPTION

CONSTRUCTION

ASKING RATE

MARKET REPORTNASHVILLE

www.colliers.com/Nashville

Market Improves in 2011, 2012 Will Be the Time to Act

With an economy still recovering from a recession, it’s easy to see the bleak side in the business world, especially in an industry like commercial real estate. However, the numbers from the past year paint a different picture. Though the market has not recovered to pre-recession levels, the market is trending in the right direction.

Vacancy rates are down, absorption is up and there are almost daily announcements about a new development coming to the area. Among these announcements are the 1.5 million square foot office space development by MarketStreet Enterprises in the Gulch, the continued construction at the Trolley Barns at Rolling Mill Hill downtown, the speculative buildings at Meridian in Cool Springs and the project driven by LifePoint Hospitals at Seven Springs in Brentwood. All these factors indicate positive momentum in the office real estate market in the coming year. Business is picking up and landlords are gaining the upper hand in negotiations with the tightening of the market. That means now is the time for tenants to act.

Nashville continues to prove itself as a popular city for business relocation, having been named as the “Next Big Boom Town” in 2011 and ranked as the sixth “Best City for Business & Career” by Forbes Magazine. Tennessee was also rated as the fourth best business climate in the Development Counselors International’s latest “Winning Strategies in Economic Development Marketing” survey in 2011. The U.S. Chamber of Commerce named Tennessee as the best state in the country for business based on state taxes and regulations. Recognizing many of the reasons why Nashville has a great business climate, several companies such as Amazon.com, HCA, Nissan North America,

MARKET INDICATORS

4Q 2011 | OFFICE

Nashville Office MarketSummary of Statistics, Q4 2011

Vacancy Rate: 10.3%

Absorption: 202,526 SF

Under Construction: 333,496 SF

Asking Rents Per Square Feet:Class A: $22.51Class B: $17.45Class C: $14.91Overall Rental Rates: $19.92

Downtown Class A: $22.44Suburban Class A: $22.40

Quarterly Comparisons and Totals

QUARTER BLDGSTOTAL

INVENTORY SF

DIRECT VACANT

DIRECT VACANCY

RATE

SUBLEASE VACANCY

RATE

NET ABSORPTION

CURRENT QTR

NET ABSORPTION

YTD SF

UNDER CONSTRUCTION

SF

AVG ASKING RATE

Q4.11 382 31,098,659 3,218,448 10.3% 2.2% 202,526 487,786 333,496 $19.92

Q3.11 380 31,039,756 3,399,841 11.0% 2.2% 105,707 285,561 320,820 $19.78

Q2.11 381 31,056,877 3,506,318 11.3% 2.2% 166,274 210,025 267,832 $18.05

Q1.11 419 33,633,050 3,641,291 11.9% 2.0% 68,010 68,010 128,110 $19.71

Q4.10 380 30,983,891 3,701,006 11.9% 2.0% 101,282 609,124 128,110 $20.05

Updated 7-2011

and Viacom have all relocated to Nashville. Expansion has also become prevalent in the area with several companies including GM, Tractor Supply Co., Service Source, and MedSolutions making moves to grow their businesses here.

The relocation and expansion trends will only continue as various market reports have indicated. As companies look outside primary markets such as New York City, Los Angeles and Chicago, secondary cities like Nashville are being targeted for their great spaces at reasonable rates. Thus, office and retail space is filling up fast, especially in submarkets like Brentwood, West End and Cool Springs. In response to the steady demand of office

space due to corporate relocations and expansions, developers have identified areas of opportunity in the market. As more buildings are completed, landlords in existing buildings may need to reposition their retention strategies in order to keep tenants interested. This means that potential deals are out there if you know how and where to look.

“I expect we’ll see a steady increase of speculative building over the course of the year,” states managing partner Nate Greene, CCIM. “This will launch positive growth that will be great for Nashville’s economy and with such a strong business climate already, Nashville is going to really excel in 2012.”

Class A Class B Class C

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4Q 2011 | Vacancy Space By Type

Class A 1,151,983 SF

Class B 1,578,532SF

Class C 487,933 SF

4Q 2011 | Net Absorption By Submarket

RECENT SALES TRANSACTIONSSALES ACTIVITY

PROPERTY BUYER SALE PRICE SIZE SF SUBMARKET

FBI Building HCI LP $5,075,000 30,858 Airport North

2195 Nolensville Pike Conexicon Americas $3,250,000 28,000 Airport SouthAthlon Building Giarratana Development LLC $3,250,000 27,815 West End

St. Cloud Corner St. Cloud Partners $3,100,000 76,588 DowntownDemoss Building Rodney French $1,875,000 21,000 Downtown

RECENT LEASING TRANSACTIONSLEASING ACTIVITY

PROPERTY TENANT SIZE SF TYPE SUBMARKET

Nine Corporate Centre Healthcare Management Systems 60,112 New Cool Springs/Franklin

Three Corporate Centre Viacom 43,788 New Cool Springs/Franklin

The Pinnacle at Symphony Place Frost Brown Todd 29,771 New Downtown

Baker Donelson Center FirstBank 21,958 New DowntownFourth and Church Building ServiceSource 17,178 Expansion Downtown

DEFINITIONS

Absorption - The net change in occupied space between the current quarter and the previous quarter, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

Class A Building - Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Class B Building - Buildings competing for a wide range of users with average rents. Building finishes are fair to good for the area and systems are adequate but the building does not compete with Class A at the same price.

Class C Building - Buildings competing for tenants requiring functional space at rents below the average for the area.

Total Building SF - All single & multi tenant office buildings above 20,000 SF excluding medical, government and owner occupied.

Vacancy Rate - Percentage rate of the total amount of physically vacant space divided by the total amount of existing inventory.

Bold text denotes Colliers International Nashville transactions.

MARKET REPORT | Q4 2011 | OFFICE | NASHVILLE

www.colliers.com/Nashville

HIGHLIGHTS FROM THE YEAR• We welcomed Carter Steele in

November. Carter has been a broker in the Nashville area for over 20 years and specializes in healthcare services brokerage.

• Four of our office’s brokers received their CCIM designation in October. Congratulations to Shane Douglas, Charlotte Ford, Chris Grear and Radley Hendrixson.

• SIOR announced Terry E. Smith as their President-Elect in October. Terry has been a broker for over 30 years and a member of SIOR since 1992.

• Colliers International | Nashville sponsored the Nashville Business Journal’s Shaping a Greater Nashville event that featured speaker Mayor Karl Dean.

• Company partners, Nate Greene and Bert Mathews were named among the Nashville Post’s CRE 50, a list of the top commercial real estate professionals in the area.

• We welcomed Allison Schepman in July as the new Marketing Director.

• Bert Mathews was named as Chairman of the Nashville Area Chamber of Commerce.

• Colliers International was ranked as one of the top 5 commercial real estate brokerage firms in the city in 2011.

• We welcomed brokers Bill Buckley in March, who specializes in the industrial brokerage and Bill Schulz in May, who specializes in retail.

UPDATE Market Comparisons

OFFICE MARKET

SUBMARKET BLDGS TOTALINVENTORY

SF

DIRECTVACANT

SF

DIRECTVACANCY

RATE

SUBLEASEVACANCY

RATE

VACANCY RATE PRIOR

QTR

NET ABSORPTIONCURRENT QTR

NET ABSORPTION

YTDUNDER

CONSTRUCTION

AVG ASKING RATE

AIRPORT NORTH 34 3,660,737 392,211 10.7% 2.7% 10.3% (2,644) (41,318 0 $18.23

AIRPORT SOUTH 56 2,852,716 463,171 16.2% 1.6% 16.3% (4,897) 53,460 0 $14.39

BRENTWOOD 75 4,818,498 259,399 5.4% 0.9% 5.1% 2,934 148,698 0 $20.61

COOL SPRINGS/FRANKLIN 53 4,936,094 255,176 5.2 1.6% 7.6% 117,739 187,088 175,000 $22.42

DOWNTOWN 57 7,583,613 1,370,889 18.1% 3.8% 19.3% 80,959 179,145 90,000 $19.63

GREEN HILLS/MUSIC ROW 42 2,059,615 92,618 4.5% 0.3% 4.7% 5,487 36,420 0 $24.08

METROCENTER 14 1,437,763 90,250 6.3% 1.06% 6.1% (2,986) (3,940) 68,496 $16.11

RIVERGATE/NORTH 15 474,037 73,970 15.6% 0.0% 16.7% 5,129 (11,857) 0 $14.65

WEST END/BELLE MEADE 36 3,275,586 220,764 6.7% 2.8% 6.6% 109,239 805 0 $23.50

CLASS

A 116 16,623,296 1,151,983 6.9% 3.4% 7.9% 185,223 373,544 175,000 $22.57

B 190 11,891,859 1,578,532 13.3% 0.9% 13.7% 28,294 122,282 158,496 $17.45

C 76 2,583,504 487,933 18.9% 0.4% 18.0% (10,991) (8,040) 0 $14.91

TOTAL 382 31,039,759 3,218,448 10.3% 2.2% 11.0% 202,526 487,786 333,496 $19.92

MARKET REPORT | Q4 2011 | OFFICE | NASHVILLE

www.colliers.com/Nashville

UNITED STATES:

NashvilleNate GreeneManaging Partner300 BroadwayNashville, TN, 37201TEL +1 615 850 2729FAX +1 615 850 3229

RESEARCHER:

NashvilleAllison SchepmanMarketing Director300 BroadwayNashville, TN, 37201TEL +1 615 850 2748FAX +1 615 244 2957

512 offices in 61 countries on 6 continents

• $1.5 billion in annual revenue• 979 million square feet under management

• 12,500 professionals

Copyright © Colliers International

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it.

Accelerating success.

Richard Fulton, CCIMDIR +1 615 850 2719

Office/Investment

Nate Greene, CCIMDIR +1 615 850 2729

Office/InvestmentManaging Partner

Bert MathewsDIR +1 615 850 2701

Office/InvestmentPrincipal

Chris Grear, CCIMDIR +1 615 850 2702

Office/Investment

John Gifford, CCIMDIR +1 615 850 2713

Office/Investment

Shane Douglas, CCIMDIR +1 615 850 2734

Office/Investment

Lee ParadiseDIR +1 615 850 2717

Office/Investment

Vickie SaitoDIR +1 615 850 2711Office/Investment

ABOUT COLLIERS INTERNATIONAL – NASHVILLE Collier International Nashville is one of the largest full service commercial real estate firms in the region. Its brokers provide a myriad of services to owners and tenants with a commitment to excellence that has won them the respect of local, national and international clients for many years. With more than 25 employees, the firm serves clients ranging from Fortune 500 corporations, major banks and insurance companies to investors, private institutions and small businesses.

Chad PoffDIR +1 615 850 2707

Office/Investment

Figure 1: Nashville Office Submarkets include Airport North, Airport South, Brentwood, Cool Springs/Franklin, Downtown, Green Hills/Music Row, Metrocenter, Rivergate/North and West End/Belle Meade.

BRENTWOOD

GREEN HILLSMUSIC ROW100 OAKS

COOL SPRINGS/FRANKLIN

WEST END

RUTHERFORD COUNTY

WILSONCOUNTY

RIVERGATE/HENDERSONVILLE

NORTHWEST

CENTRAL BUSINESS DISTRICT

AIRPORTSOUTH

AIRPORTNORTH

DOWNTOWNMETRO CENTER

Gallatin Rd.

Leba

non P

l.

West E

nd A

ve.

Harding Pl.

O ld Hickory Blvd.

Fran

klin

Moores Ln.

Murfreesboro Rd.

Nolensville Rd.

Done

lson

Pike

Briley

Pkwy.

Bell Rd

.

Woodmont Blvd.

Charlotte Ford, CCIMDIR +1 615 850 2751

Office/Investment

MARKET REPORT | Q4 2011 | OFFICE | NASHVILLE

www.colliers.com/Nashville