u.s. office outlook - q4 2015 - jlljll | united states | office outlook | q4 2015 6 for the second...

Office Outlook

United States | Q4 2015

No sign of a

slowdown

for U.S.

office market

The bar was set high for market momentum and growth going into 2015 and year-end results proved that economic expansion has reached a tipping point in many markets; constricting supply and pushing rental rates to prerecession levels. While expansion activity persists in innovation markets in the West and Northeast, it is also spreading significantly into Sun Belt markets on the heels of demographic, financial and professional business services growth.

JLL | United States | Office Outlook | Q4 2015 2

WHAT’S

INSIDE:

3

5 office market trends 4

United States office market 5

United States office clock 8

United States economy 10

United States investment sales 13

Local U.S. office markets

Atlanta 16

Austin 17

Baltimore 18

Boston 19

Charlotte 20

Chicago (CBD) 21

Chicago (Suburban) 22

Cincinnati 23

Cleveland 24

Columbus 25

Dallas 26

Denver 27

Detroit 28

East Bay 29

Fairfield County 30

Fort Lauderdale 31

Hampton Roads 32

Greater Hartford 33

Houston 34

Indianapolis 35

Jacksonville 36

Long Island 37

Los Angeles 38

Miami 39

Milwaukee 40

Minneapolis 41

Nashville 42

New Jersey 43

New York 44

Northern Virginia 45

Oakland 46

Orange County 47

Orlando 48

Philadelphia (CBD) 49

Philadelphia (Suburban) 50

Phoenix 51

Pittsburgh 52

Portland 53

Raleigh-Durham 54

Richmond 55

Sacramento 56

Salt Lake City 57

San Antonio 58

San Diego 59

San Francisco (CBD) 60

San Francisco (Mid-Peninsula) 61

Seattle-Bellevue 62

Silicon Valley 63

St. Louis 64

Suburban Maryland 65

Tampa 66

Washington, DC 67

West Palm Beach 68

Westchester County 69

Appendix 71

Contacts 80

JLL | United States | Office Outlook | Q4 2015

TABLE OF

CONTENTS

4

1.


OFFICE MARKET TRENDS 5

2.

3.

4.

5. 48.9 M.S.F.

LOWEST VACANCY IN

8 YEARS

and what they mean for 2016

2.3% 2.7% 2.8% 3.3% 3.5% 3.6%

4.7% 6.3% 6.4%

7.3% 8.9%

15.9% 16.8%

Education Accounting consulting research strategy

Telecom Aerospace and defense

Energy and utilities Life sciences

Other professional and business services Law firm

Other Healthcare

Government Banking and financial services

Technology

0% 5% 10% 15% 20%

Share of leasing activity (%)

While companies are expanding within their home market, many are also

looking to new markets across the country as more than 1.7 million

square feet of new-to-market leases were signed during the fourth

quarter, bringing total 2015 volume to 7.5 million square feet. Buxalta will

be opening a new 260,804-square-foot location in the suburban Chicago

submarket North while Nationwide plans to open a 246,442-square-foot

location in Columbus’ Grandview/Upper Arlington and SuveryMonkey

plans to open a 210,000-square-foot location in San Francisco

Peninsula’s San Mateo submarket. For Buxalta, this is one of two new

leases in the Chicago metro area, the second being signed in the CBD’s

West Loop. Other multi-market expansions during 2015 included Brown

& Toland’s two leases in New Jersey and Oakland, Industrious’s leases

in Columbus, Minneapolis and Raleigh-Durham and co-working giant

WeWork’s leases in Portland, Denver, and two in Chicago.

West Coast markets are ahead in occupancy growth, yet new markets try to take the lead

Recording more than 18.7 million square feet of positive net absorption,

occupancy gains during the fourth quarter of 2015 were the highest on

record during this cycle, and 16.5 percent higher than the previous high

water mark in the fourth quarter of 2014 at 16.0 million square feet. For

the first time in more than two years, occupancy growth was

overwhelmingly led by West Coast markets, which contributed to 45.6

percent of net absorption as Los Angeles and Phoenix posted 1.6 and

1.1 million square feet of net absorption, respectively—five and three

times higher than their five-year average. In Los Angeles, this was the

result of expansion by The Honest Company, Facebook and Yahoo;

while in Phoenix, State Farm and Isagenix moved into their newly

delivered headquarters. Only two West Coast markets, Orange County

and San Diego, posted occupancy losses totaling, 188,619 square feet.

Activity diversifies across the United States, but remains driven by only a handful of industries

Secondary and tertiary markets are gaining speed as economic

expansion diversifies across the country. Aside from Washington, DC,

which recorded leasing activity at a rate of 2.5 percent of its total

inventory (compared to a national average of 1.5 percent), the highest

leasing levels made their way outside of typical tech, finance and

government heavy markets and into Austin (2.7 percent of inventory),

Jacksonville (2.6 percent), Tampa (2.5 percent) Fairfield County (2.3

percent), and Indianapolis (2.1 percent). However, both CBDs and

suburbs maintained the same rate of activity at 1.5 percent of total

inventory, a reflection of the growing balance between the two markets.

While a more diverse group of markets are finally seeing some

momentum locally, activity at the industry level remained firmly

unchanged with technology and banking and financial services

companies responsible for a combined total of 26.8 percent of leasing

activity in the fourth quarter and 30.5 percent for 2015—distantly followed

by healthcare’s 6.8 percent annual volume. Individually, these industries

are expanding–with 70.1 percent of technology and 46.5 percent of

banking and financial services leasing activity representing growth. The

majority of leasing activity overall has also represented company

expansion consistently over the past six quarters, while the rate of

occupancy contraction has averaged less than 10.0 percent during that

same time.

5 JLL | United States | Office Outlook | Q4 2015

UNITED STATES

OFFICE MARKET

Technology and banking and financial services companies are responsible for a combined total of 26.8 percent of leasing activity in the fourth quarter

Tech and finance companies have consistently pushed occupancy growth across markets over the past two years

Source: JLL Research – only for leases larger than 20,000 square feet and industries

with more than 2.0 percent share of activity

More than 1.7 million square feet of new-to-market leases were signed during the fourth quarter

Occupancy growth was overwhelmingly led by West Coast markets

Vacancy mostly on the decline, but laggards remain where market drivers are lacking

Inching nearer the prerecession low of 13.8 percent, vacancy declined to

14.7 percent by year-end, narrowly missing last year’s projection of a

100 basis point decline by just 10 basis points, but affirming the velocity

at which markets are moving. Vacant supply in CBDs remained

constricted at 12.1 percent as compared to the suburbs’ 16.3 percent

vacancy rate. Within the Class A segment of the market (which captures

the most demand) it’s even lower, with 12.0 and 15.3 percent vacancy

rates in CBDs and suburbs, respectively, and the suburbs providing

approximately 90 million square feet more supply than CBDs. However,

with average Class A rental rates in CBDs 59.1 percent higher than

those in suburbs, suburban markets are awaiting sharper vacancy

reductions as pricing encourages tenants to explore suburban

opportunities over the next 12 to 24 months.

Within CBDs, urban locales remain the most popular with vacancy rates

in Midtown South, Portland Central City, Oakland, San Francisco and

Philadelphia CBDs ranging from 6.3 percent to 8.5 percent. In the

suburbs, hot markets on the outskirts of CBDs also maintained low

vacancy, with Salt Lake City suburbs, Boston-Cambridge, San Francisco

Non-CBD, Portland Eastside suburbs and Seattle-Bellevue’s Eastside

posting vacancy rates ranging from 5.1 percent to 10.2 percent.

Meanwhile, on the East Coast, which contributed to 4.9 million square

feet of net absorption, Boston and Philadelphia led the pack, each

contributing approximately 1.1 million square feet in occupancy growth.

On the other hand, Hampton Roads, Jacksonville, Long Island, New

Jersey, New York and Westchester County saw occupancy decline by a

total of 1.5 million square feet. For the second time this year, New York

recorded occupancy losses—in the first quarter occupancy declined by

1.6 million square feet and in the fourth quarter fell by 900,500 square

feet. Although mid-year activity amounted to 2.3 million square feet of

occupancy growth in New York, it wasn’t enough to end the year on the

positive side, with total year-end absorption coming in at

-217,760 square feet.

Despite smaller markets that generally record significantly lower

occupancy gains, Central U.S. markets contributed to 25.6 percent of

total net absorption, with Chicago, Denver and Dallas—the latter two

being two of the country’s hottest secondary markets—posting the

largest gains at 1.1 million, 839,000 and 854,000 square feet,

respectively. Some of these gains were seen as a result of Google and

Quintessite’s expansions in Chicago, Raytheon’s move into its newly

delivered build-to-suit in Dallas and CoBank’s expansion into its new

headquarters in Denver. Only three markets (Houston, Indianapolis and

Pittsburgh) recorded losses during the quarter for a total of negative

253,700 square feet, with Houston tenants yet to vacate any of the

approximately 8.0 million square feet of sublease space currently on

the market.


For the second time this year, New York recorded occupancy losses

More than 1.0 million square feet of absorption in Los Angeles, the SF Peninsula and Silicon Valley boosted West Coast in Q4

Suburban markets are awaiting sharper vacancy reductions as pricing encourages tenants to explore suburban opportunities

Vacant supply in CBDs remained constricted at 12.1 percent

NYC

Source: JLL Research

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015

Shar

e of q

uarte

rly n

et ab

sorp

tion

East Coast Central West Coast

The 18.7 m.s.f. of absorption in Q4 pushed vacancy down sharply by 40bp to 14.7%; first time it has fallen below 15.0% this cycle


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Tot

al v

acan

cy (

%)

14.0%

16.0%

18.0%

20.0%

Meanwhile, eight markets have no construction at all. However, some of

these markets include Jacksonville, Oakland/East Bay, Sacramento and

West Palm Beach, which are starting to see renewed interest and

activity, resulting in above average rent increases within their hottest

submarkets.

Looking ahead, 2016 will receive an additional 48.9 million square feet

of new supply, preleased at a rate of 47.6 percent, with anticipated

deliveries including: 10 Hudson Yards in New York’s Penn

Plaza/Garment District, Phillips 66 headquarters in Houston’s Westchase

and Moffett Gateway in Silicon Valley’s Sunnyvale. For speculative

projects only, which total 35.2 million square feet, the prelease rate

declines to 32.1 percent, providing tenants with plenty of large-block

opportunities for expansion.

While vacancy in general is on the decline, there remain pockets of

stagnancy in local markets lacking industry drivers as a result of

diminishing appeal from the growing millennial workforce. In Central

markets, Cleveland, Indianapolis and Houston each saw vacancy

increase by 340, 190 and 180 basis points year-over-year, respectively.

Plagued with company downsizing, relocations outside of market and a

sharply declining oil industry, these markets must also compete with

nearby and booming Chicago, Dallas and Austin.

Additionally, on the East Coast vacancy in Fairfield and Westchester

Counties has continued to mount with year-over-year increases of 260

and 200 basis points, respectively. Meanwhile, in Northern Virginia

vacancy has increased by 510 basis points since 2010, compared to a

national decrease in vacancy of 380 basis points during that same time.

Lacking in walkable districts, competing against nearby New York City

and Washington, DC for talent and victim of corporate contraction in both

the public and private sector, it will be some time before these markets

see a real turn around in activity.

New supply creating new options, but not impacting vacancy as demand remains strong

Development volumes declined quarter-over-quarter at the end of the

year from 92.8 million square feet in the third quarter (a cycle high) to

88.3 million square feet at year-end. Despite this, more than 7.3 million

square feet of new construction starts were recorded during the fourth

quarter, a trend that is expected to persist and even grow as

fundamentals in supply constrained secondary and tertiary markets

continue to constrict and instill confidence in developers to move forward

with proposed projects. As leasing demand has largely focused on

primary markets and CBDs, 60.0 percent of the total development

pipeline currently resides in just 10 out of 50 U.S. office markets. With

the exception of New York and Houston, both of which have recently

recorded occupancy losses, the other ten markets had annual occupancy

gains that were 1.8 times higher than new deliveries, on average.

Chicago’s occupancy growth to new supply was the highest at 6.6 times,

followed by Philadelphia at 2.3 and Boston at 1.5 times, respectively.


Fundamentals in supply constrained secondary and tertiary markets continue to constrict and instill confidence in developers to move forward with proposed projects

2016 will receive an additional 48.9 million square feet of new supply

60.0 percent of the total development pipeline currently resides in just 10 out of 50 U.S. office markets

There remain pockets of stagnancy in local markets lacking industry drivers

A number of large deliveries and groundbreakings in Q1 2016 pushed quarterly activity down in Q4 2015


0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

2010 2011 2012 2013 2014 2015

Und

er c

onst

ruct

ion

(s.f.

)

The JLL office clock demonstrates where each market sits within its real estate cycle. Markets generally move clockwise around the clock. Geographies on the left side of the clock are generally landlord-favorable, while markets on the right side of the clock are typically tenant-favorable. As of the fourth quarter, the vast majority of markets are firmly positioned on the left side of the clock. Posting the largest quarterly gain of the cycle, rental rates during the fourth quarter increased 2.2 percent to reach $31.26 per square foot. While this rate surpasses 2008’s peak rent of $30.42 per square foot, when adjusted for inflation rents are still 10.2 percent lower. However, this is expected to change over the next two years as markets prepare to welcome some of the most expensive developments ever delivered and landlords of existing buildings push rents to keep pace with an increasing market. Across the more than 48.9 million square feet of new developments that are expected to deliver in 2016, rents average $40.78 per square foot—a 30.5 percent premium over the current rate. Further into the development cycle, those rents are even higher with rental rates for 2017 and 2018 deliveries currently averaging $51.00 per square foot and $58.67 per square foot—63.2 and 87.7 percent premiums, respectively. Even when compared to average Class A rents only, premiums for 2016, 2017 and 2018 deliveries are 11.7, 39.7 and 60.6 percent respectively. In addition to high-priced developments, strong tenant demand is also encouraging landlords to raise rents where supply and demand have begun to veer apart. Following Uber’s building acquisition, and coupled with a 7.5 percent vacancy rate (and no new supply on the horizon), Oakland’s CBD posted a 14.1 percent quarterly rent increase during the fourth quarter. Boston’s Cambridge

market, also in high demand by the metro’s innovative and technological tenants, recorded a 6.9 percent increase quarter-over-quarter. With a 6.6 percent vacancy rate, and the addition of a mere 507,000 square feet of new supply, rents averaged $58.22 per square foot—higher than Washington, DC and New York’s Downtown market. Other notable increases include Jacksonville suburbs seeing rents jump by 8.4 percent and Tampa Bay suburb growing by 6.5 percent—the former a result of increasing demand paired with virtually no new supply and the latter a result of new, high-priced construction as well as growing demand. Overall, Class A rents across the country maintained a significant premium over the market at 16.8 percent, but that premium is even higher when compared to just Class B office, which was 43.3 percent lower than Class A rents at year-end. In urban markets where architecturally unique Class B office is being renovated to meet growing creative space demand, the delta between Class A and B is very narrow, with demand for creative Class B surpassing Class A demand in some cases. In Portland’s Central City, Class B rents are 6.8 percent lower than Class A. In San Francisco, the delta is only 12.3 percent, with some Class B buildings in SOMA asking for more rent than Class A buildings in the Financial District. However, in markets with languishing demand, the opposite is true. In Fairfield County’s Stamford CBD/Railroad market, where overall demand has long been on the decline (and rents are reflective of that), tenants only want high-quality space. As a result, the difference between Class A and Class B rent is 75.6 percent. The same is also true for the Greenwich CBD/Railroad and White Plains CBDs, which must compete with New York for both companies and talent. Class B rents in these markets are 68.4 and 55.3 percent lower, respectively, than Class A. Looking ahead, sustained tenant demand and tightening fundamentals will continue to place pressure on local markets; giving landlords leverage to raise rents further and creating a competitive negotiating environment for tenants. With the exception of Houston, which will continue to see softening amidst high sublease vacancy and halted demand, U.S. markets in general will remain on the upswing over the next 24 months.


The JLL office clock demonstrates where each market sits within its real estate cycle

landlord confidence across the U.S. has positioned all but Houston on the left side of the clock

UNITED STATES

OFFICE CLOCK

Peaking

phase

Falling

phase

Rising

phase

Bottoming

phase

Dallas, San Francisco

Charlotte, Fort Lauderdale, Kansas City, Oakland-East Bay, Orlando, Salt Lake City

Houston

Cleveland, Indianapolis, Raleigh-Durham, St. Louis

San Francisco Peninsula

Baltimore, Detroit, Hartford, San Antonio, West Palm Beach, Westchester County

Los Angeles, San Diego

Silicon Valley

Atlanta, Jacksonville, Miami, Orange County, Richmond, United States

New York, Pittsburgh, Portland, Tampa

Denver, Minneapolis, Seattle-Bellevue

New Jersey, Washington, DC

Chicago, Phoenix

Columbus, Sacramento

Long Island, Philadelphia

Boston

Cincinnati, Fairfield County, Hampton Roads, Milwaukee

Austin

Nashville


UNITED STATES

CBD OFFICE CLOCK

UNITED STATES

SUBURBAN OFFICE CLOCK

Peaking

phase

Falling

phase

Rising

phase

Bottoming

phase

Dallas

Charlotte, Chicago, Cleveland, East Bay, Indianapolis, Westchester County

Fort Lauderdale, Orlando, Miami, Milwaukee, Raleigh-Durham

Houston San Francisco Peninsula

Central NJ, Detroit, Hartford, West Palm Beach

Los Angeles, Nashville, San Diego

Silicon Valley

Atlanta, Baltimore, United States

Austin, Bellevue, Richmond

Boston, Minneapolis, Phoenix, Seattle, Salt Lake City

Washington, DC Cincinnati, Fairfield County, Hampton Roads, Oakland

Lehigh Valley, Northern DE, Northern NJ, Sacramento

Philadelphia

Cambridge

Nassau County, Orange County, Tampa

Columbus, San Antonio

San Francisco (non-CBD)

Jacksonville, Pittsburgh, Portland, St. Louis

Southern NJ

Suffolk County

Denver

Kansas City

Peaking

phase

Falling

phase

Rising

phase

Bottoming

phase

Dallas, Fort Lauderdale, Los Angeles, Portland

Charlotte, New York (Midtown), Philadelphia, Raleigh-Durham

Houston

Cincinnati, Milwaukee, Phoenix, West Palm Beach

Jacksonville, Oakland, Orlando

Austin, Nashville, New York (Midtown South), Silicon Valley

Baltimore, Kansas City

Atlanta Boston, New York (Downtown), Pittsburgh

Denver, Seattle

Detroit, Hartford, Washington, DC

Chicago, Miami, San Diego, United States

Sacramento, White Plains

Salt Lake City

Columbus, Richmond, San Antonio, St. Louis

San Francisco

Minneapolis, Tampa

Cleveland, Indianapolis Fairfield County

After more than a year of caution, the Federal Reserve confirmed its

more optimistic outlook on the U.S. economy during the fourth quarter by

enacting a 0.25 percent interest-rate hike, the first step in a larger

program of tightening. Buoyed by a combination of sustained job growth,

declines in unemployment and improvements in personal expenditures

and domestic investment, the Federal Open Market Committee “sees the

risks to the outlook for both economic activity and the labor market as

balanced”; despite inflation remaining below the 2.0 percent threshold

due to suppressed oil prices and net exports lagging expectations. The

decision comes after an unprecedented streak of near-zero interest rates

since 2009 and sets the stage for cautious action by the Federal Reserve

in future quarters.

Other economic metrics also demonstrate stability in the U.S. economy,

even as the global picture remains patchy. In line with employment

growth of more than 2.3 million jobs through November 2015, real GDP

is up 2.1 percent year-over-year, higher than nearly all other major

developed economies, and standing at a nominal total of $18.1 trillion.

Even the housing market, which has lagged the overall economy, is

seeing a resurgence with year-to-date starts of nearly 1.1 million units,

exceeding year-to-date 2014 totals by 11.6 percent. Not only has such

performance translated to higher consumer confidence, but the office

market has responded with 55.5 million square feet of occupancy growth,

the highest annual total during the current cycle.

Minimal inflation to further improve consumer spending and business investment, driving greater GDP gains and improved earnings mileage Notable over the past 12 months has been the sharp drop in inflation; the

consumer price index has increased by only 0.4 percent over the year, in

large part due to a sharp fall in oil prices. The energy and energy

commodities components of the CPI are down 21.4 and 33.6 percent

respectively from their 2014 peaks, a downturn that has particularly impacted

resource-intensive office markets such as Houston and Calgary. Aggregate

drops in the prices of goods has helped to make the slow but steady rise in

wages more meaningful, with average hourly pay up 2.3 percent year-on-

year. In turn, personal expenditure growth is outperforming that of the overall

economy by 100 basis points (+3.1 percent), concentrated particularly in

durable goods.


UNITED STATES

ECONOMY

$

The Federal Reserve confirmed its more optimistic outlook on the U.S. economy during the fourth quarter by enacting a 0.25 percent interest-rate hike

Real GDP is up 2.1 percent year-over-year, higher than nearly all other major developed economies

The office market has responded with 55.5 million square feet of occupancy growth, the highest annual total during the current cycle

Interest rate hike coming after unprecedented time near 0 percent, fueled by improved job growth

Source: JLL Research, Bureau of Labor Statistics

Flat CPI growth is having a meaningful impact on already rising wages, in turn boosting spending and GDP gains


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

-1,000

-800

-600

-400

-200

0

200

400

600

Fede

ral f

unds

rate

(%)

1-m

onth

net

chan

ge (t

hous

ands

) 1-month net change (thousands) Federal funds rate (%)

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2010 2011 2012 2013 2014 2015

Year

-ove

r-yea

r gro

wth (

%) CPI growth GDP growth Wage growth

Mountain West—particularly the hyper-diverse Dallas and Atlanta metro

areas and smaller powerhouses such as Denver, Charlotte, Raleigh-

Durham, Nashville and Salt Lake City. The office-using industries, which

include many information and professional services subsectors

prominent in tech, are gaining even greater momentum in many of these

markets. In Silicon Valley, for instance, office-using gains of 8.2 percent

are the highest of any large metropolitan area, with Austin only slightly

behind at 6.4 percent.

A broader range of markets chipping away at unemployment has also

been a boon to most subsectors and industries; with education and

healthcare notably edging out professional and business services (PBS)

as the leader in job creation over the course of the year with 638,000 net

new jobs. Smaller, but rapidly growing, are areas such as other

information services (+7.2 percent), computer systems design (+5.4

percent), management and consulting (+4.1 percent) and motor vehicles

and parts (+3.7 percent). On the other hand, turmoil in the energy

industry has resulted in a contraction of 123,000 jobs, or -13.5 percent.

As a result, organic growth is likely to lead to further net absorption

across the U.S. office market, even as new space begins to come to the

market throughout 2016.

This level of increased personal consumption has displayed itself in a

broader base of business investment as well as a return to higher levels

of individual debt and lower savings rates; both signs of a more robust

and dynamic economy. As with much of the recovery so far, highly

technical and specialized segments of the economy (such as information

processing, research and development and software) are surpassing

base-line levels of growth, as is investment in the residential sector.

Increased personal expenditures are placing upward momentum on retail

sales, in turn augmenting demand for transportation and logistics

providers and their equipment manufacturers. As year-to-date retail sales

remain on the rise at 2.0 percent, and at 6.9 percent for motor vehicles,

so too will profits be reinvested into business and growth.

Geographical spread of growth solidified as nearly all markets are adding jobs; unemployment down across the board. Nearly all primary, secondary and even tertiary geographies are

contributing to the recovery in the labor and office markets to varying

degrees, with declining unemployment pushing employee

underutilization below the national average and driving up wages as

employers compete for a shrinking talent pool. Leading markets remain

those with a strong tech foundation (the Bay Area, Seattle, Austin,

Portland and Boston) as well as many parts of the Sun Belt and


Tech and Sun Belt cities lead office-using job growth; Silicon Valley approaches double-digit increases

Source: JLL Research, Bureau of Economic Analysis

Leading markets remain those with a strong tech foundation

Investment in technical and residential business seeing growth triple that of the overall economy

Source: JLL Research, Bureau of Economic Analysis

Education and healthcare are notably edging out professional and business services (PBS) as the leader in job creation over the course of the year with 638,000 net new jobs

Turmoil in the energy industry has resulted in a contraction of 123,000 jobs, or -13.5 percent

-10.1%

-1.2%

2.6%

3.3%

3.9%

4.0%

4.9%

6.5%

9.4%

10.5%

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0%

Other equipment

Structures

Industrial equipment

Arts and entertainment

Transportation equipment

Computers

Software

Research and development

Residential

Other information processing

12-month % change

3.3%

3.4%

3.4%

3.4%

3.6%

3.9%

4.1%

4.1%

4.2%

4.2%

5.8%

5.9%

6.3%

6.4%

8.2%

2.0% 4.0% 6.0% 8.0% 10.0%

Dallas

San Diego

Washington, DC

Portland

Detroit

Nashville

Atlanta

Seattle-Bellevue

West Palm Beach

Salt Lake City

San Antonio

San Francisco

Fort Lauderdale

Austin

Silicon Valley

12-month % change in office-using jobs

Personal expenditure growth is outperforming that of the overall economy by 100 basis points

A strong 2015 will lead to an even stronger 2016, although global prospects remain difficult to predict Overall, 2015 presented a more robust and resurgent economy, building

on the foundations laid in 2013 and increased throughout 2014.

Importantly, consistent employment growth has dwindled underutilization

in the labor market in many geographies to the point that employees now

have greater advantages and leverage in terms of pay and job choice.

For the office market, the need to accommodate larger workforces will

mean more expansionary activity, although a dearth of large blocks may

lead to additional groundbreakings throughout the year. Similarly, rising

wages in an environment of limited inflation will mean stronger consumer

spending, pushing up real GDP growth further.

Heading into 2016, the effects of the Federal Reserve’s bump in interest

rates, coupled with changes in resource-based emerging markets and

variations in net exports (due to a stronger dollar), will play an important

role in shaping economic policy and the rate of both the GDP and

corporate expansion throughout the remainder of the cycle.


The need to accommodate larger workforces will mean more expansionary activity

13

2015 transaction volumes up 16.5 percent despite a fourth quarter decline

Despite a year-over-year decline in quarterly sales in the fourth quarter,

fourth quarter 2014 is the largest quarter in terms of volume in the

current cycle, totaling $38.3 billion. This remains the highest volume of

quarterly sales since the prior peak in 2007.

While the fourth quarter was the least active in the year, 2015 recorded

the highest volume in the office sector since 2007. Strong growth in the

first three quarters of the year (averaging 29.0 percent from Q1-Q3)

offset declined quarterly figures this quarter. Noteworthy large

acquisitions included 1211 Avenue of the Americas in the Plaza district

of New York, a 50.0 percent stake of which was purchased by Ivanhoe

Cambridge and Callahan Capital Partners for $895.2 million, and a

portfolio of two assets in Boston, 500 Boylston Street and 222 Berkeley

Street, acquired jointly by Oxford Properties and JP Morgan for $1.1

billion. Heading into 2016, we anticipate stable full-year office growth

between 10.0 and 15.0 percent.

With interest rate hike, spreads remain stable with modest widening at year-end

As we move further into the cycle, overall cap rate compression is being

driven by secondary markets. However, secondary markets are still

pricing at a discount to the long-term average. Secondary markets

driving compression were Atlanta, Charlotte and Phoenix, each of which

recorded 50 basis points of yield compression in 2015. Primary markets

recording stronger yield compression in 2015 were San Francisco and

Los Angeles, each exceeding 20 basis points.

After a highly anticipated increase to the risk-free rate by the Federal

Reserve, cap rate spreads to the 10-year Treasury are stable and, in

fact, have modestly expanded since year-end 2014. Spreads widened

from 205 and 270 basis points in primary and secondary markets to 219

and 296 basis points, respectively. With strengthening leasing conditions

and robust levels of unplaced capital active or entering the markets,

spreads are expected to slowly tighten into 2017.

As inbound office investment increases 126.0 percent year-over-year, capital diversifying deeper into primary markets and into select secondary assets

Canada is again the most active country of origin for foreign capital in

2015 after Germany and Norway pushed ahead in 2014. With $6.3 billion

of investment, Canada was more than twice as active as the next largest

source of capital, China, with $2.9 billion. Ivanhoe Cambridge was the

most active foreign group in the year, primarily in New York. A notable

transaction was 1095 Avenue of the Americas, in which the highest price

per square foot in any market was achieved over the year; $2,122 per

square foot. The five most active foreign countries of origin—Canada,

China, Germany, Norway and South Korea—in aggregate acquired

$15.0 billion worth of product in the year, accounting for 81.0 percent of

total foreign activity. While smaller in volume, buyers from Brazil, Spain,

Australia and the Middle East have become more active this year at

varying scales.


UNITED STATES

INVESTMENT SALES

Realized diversification deeper into primary markets, secondary markets and larger transactions spurs 16.5 percent growth in 2015

Source: JLL Research, Real Capital Analytics (Transactions larger than $5.0m)

Fourth quarter investment sales volume of $36.1 billion brought full-year volume for 2015 to $140.9 billion, a 16.5 percent increase over 2014.

Canadian and Asian capital continue to dominate inbound capital

European and Middle Eastern groups are present, though did not buy at scale in 2015

Source: JLL Research (Assets larger than 50,000 s.f.)

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Offic

e inv

estm

ent s

ale vo

lum

es

(billi

ons o

f $US

)

Q1 Q2 Q3 Q4 Forecast

18.8%

32.1% 19.6%

16.5%

Moderate growth

forecasted in 2016

Most active foreign investors (2014) Most active foreign investors (2015)

24.0%

21.9%

15.3%

13.5%

9.0%

16.4% 35.1%

15.8% 15.5%

9.5%

5.6%

18.5%

Canada Hong Kong

China Norway

Germany Singapore

South Korea All others

With strengthening leasing fundamentals, secondary markets driving investment sales growth, increasing by 76.0 percent compared to 46.0 percent in primary markets this year

Four markets recorded over $1.0 billion of investment to foreign groups

in the year: New York, Washington, DC, Boston and Seattle. These four

markets made up over 51.0 percent of all inbound capital into the office

sector with very little of this capital making its way to suburban assets. In

2015, foreign investment into primary suburban assets decreased from

10.5 percent, on average, in 2013 and 2014 to 5.5 percent. While

overshadowed by foreign activity in primary markets, secondary market

investment doubled in 2014, from $442.1 million in 2013 to $801.4

million. In 2015, the increase was even more substantial, reaching $2.2

billion. The largest secondary markets for foreign activity were Miami,

Atlanta and Denver. Miami was the most active secondary market

destination for foreign capital, with seven transactions totaling $709.1

million. Of these markets, 89.4 percent was in suburban assets,

differing significantly from profile of assets purchased by foreign groups

in primary markets.

Foreign buyers are also diversifying into Class B space. While Trophy

and Class A (as a percentage of total) acquisitions declined slightly,

Class B increased from 7.3 percent in 2014 to 21.6 percent in 2015. This

equates to $4.1 billion of Class B acquisitions in 2015, up from $644.5

million the prior year. New York has most evidenced this trend, having

increased by a multiple of 8.0 this year to $1.7 billion. Relative to activity

in 2013 and 2014, Class B investments have diversified from the

Gramercy Park and Midtown submarkets to Chelsea, Grand Central and

Columbus Circle. Outside of New York, diversification of Class B activity

across submarkets is not as evident with groups focused on prime

submarkets, including Central Loop (Chicago), CBD (Washington, DC),

Westside (Los Angeles), Seaport (Boston) and Brickell (Miami).


Foreign activity into Class B increased from $644.5 million in 2014 to $4.1 billion, equating to 20.0 percent of total

Source: JLL Research (Foreign acquisition activity, Assets larger than 50,000 s.f.)

Of the top destinations for foreign capital, primary markets remain ahead, though secondary markets emerge

Source: JLL Research (Foreign acquisition activity, Assets larger than 50,000 s.f.)

Despite inbound volume gains, foreign activity remains concentrated in primary markets, accounting for over 90.0 percent of acquisitions in 2015.

Secondary market momentum realized in 2015 with 11 markets exceeding $1.0b, led by Atlanta, Dallas/Forth Worth and Philadelphia


$11,

237

$2,3

23

$1,9

35

$1,1

84

$995

$709

$602

$515

$394

$347

$249

$172

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Quar

terly

offi

ce in

vest

men

t vol

ume

(milli

ons o

f $US

)

Primary markets Secondary markets

Trophy A B

2013 Trophy A B

2014

2015

Trophy A B

10.5%

56.3%

33.3%

60.3%

33.3%

6.7%

20.0%

57.1%

22.9%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Seco

ndar

y mar

ket i

nves

tmen

t vol

umes

(m

illion

s of $

US)

2014 2015

Sixteen secondary markets doubled activity in 2015 with 11 recording transaction volumes over $1.0 billion

This represents a near tripling from the four secondary markets which

exceeded $1.0 billion last year. Of secondary markets, Atlanta, Dallas,

Philadelphia and Denver recorded the most activity with Atlanta reaching

volumes of $3.5 billion and Dallas, Philadelphia and Denver all over $2.0

billion. Strong leasing fundamentals defined these markets: Dallas, for

instance, recorded nearly 5.0 million square feet of absorption in 2015.

Atlanta, Philadelphia and Denver recorded an average of 2.5 million

square feet of absorption over the year. Other strengthening occupier

markets of note include Phoenix and Miami. Outside of these markets,

Mesirow Realty made the second largest transaction of the year a 49.0

percent stake of the net leased Verizon Center in the Route 78

submarket of New Jersey for $650.3 million, or $465 per square foot.

In line with U.S. markets at-large, institutional investors and advisors

have been the most active buyers in these markets; although, not by a

large margin relative to private investors. While institutional investment

remains disciplined outside of the primary markets relative to the prior

cycle, expanding secondary market activity continues to provide

attractive yields, averaging a 230-basis-point discount to primary

markets, with lagging yield compression in markets such as Philadelphia

and Dallas relative to the prior peak.

As Class A and B assets drive activity, supply-demand gap for Trophy pushing pricing appreciation

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Class A Class B Trophy

Annu

al gr

owth

in p

rice p

er sq

uare

foot

(%)

Annu

al in

vest

men

t sale

s vol

ume

(milli

ons o

f $US

)

2014 volumes 2015 volumes Year-over-year pricing change

Activity in Trophy space, while increasing, is lagging peer building

classes—a result of heightened transaction activity in the latter part of

2014. Year-over-year, volume growth in the Trophy space was 20.0

percent, while growth in Class A and B has increased by 46.0 and 50.0

percent, respectively. This is broadly reflecting a capital supply-demand

gap for Trophy assets which is pushing pricing appreciation to

outperform the markets at-large. While Class A and B on average

increased by 7.0 and 11.0 percent, respectively, Trophy assets recorded

an increase in pricing per square foot of 32.0 percent this year. Of these

transactions, Five assets traded at per-square-foot pricing in excess of

$1,000 per square foot, all of which were located in New York or

Washington, DC. Of buyers, 79.0 percent were institutional, an increase

from 65.0 percent last year, with foreign capital accounting for 44.0

percent of overall activity. While defensive, core investors with lower

return requirements remain focused on Trophy transactions, the overall

pool of higher return, value add and opportunistic capital has and

continues to expand, providing a boost to capital growth in markets.


Trophy investment volume was outpaced by Class A & B


However, supply-demand gap for Trophy product spurred leading per-square-foot pricing

appreciation in 2015

16

- Ryan Harchar Senior Research Analyst,

Atlanta


ATLANTA

Modest large available Class A block asking rate increases


Weakening Class B net absorption as % of total


2015 Office sales dollar volume trails off


Rent increases for large Class A blocks slowed substantially in Q4 Over the final months of 2015, landlords seemed to be less aggressive relative to

previous quarters. On the whole, average asking rates of large, contiguous

blocks of Class A space (those 50,000 square feet and larger) increased by only

$1.13 per square foot, much less than in previous quarters. Even more telling is

how few blocks actually increased in price over the same period. Landlords of

only eight blocks pushed rates. Could this foreshadow a softening in the office

market or is it only the calm before landlords again use Q1 to put pressure on

large occupiers seeking space options?

Year-end office demand trends defy analyst projections

Declines in the metro unemployment rate, meaningful population increases, a

growing GDP and strong corporate cash positions all pointed to substantial

increases in annual demand for Atlanta office space. On the contrary, 2015 net

absorption figures totaled less than in 2014. Actual figures fell short of analysts’

projections of 3.0 million square feet by about 400,000 square feet.

Diversification trends also moved counter to expectations as demand failed to

broaden further into the Class B segment as one would expect in a supply-

constrained market with positive tenant demand. Could this signal a slowing of

momentum in Atlanta’s landlord-favorable conditions?

Investors throttle acquisition pace in the year’s final months November and December sales activity ended the year with somewhat of a

whimper rather than a roar. Investors, presumably, are still digesting the massive

buys from earlier in the year as others wait on the sidelines to see if the strong

market fundamentals remain durable. Still, in the back of everyone’s mind also

remains the possibility of new development breaking ground, threatening buyers’

underwriting assumptions. Projects are increasingly justifiable in several pockets

around the metro. Firms seeking space, especially smaller occupiers, would

benefit greatly from the additional leverage that new inventory would bring.

Are landlords and investors letting off on the gas?

133,555,157 Total inventory (s.f.)

778,841 Q4 2015 net absorption (s.f.)

$22.54 Direct average asking rent

885,000 Total under construction (s.f.)

17.5% Total vacancy

2,578,651 YTD net absorption (s.f.)

10.2% 12-month rent growth

22.3% Total preleased

13

31

14

13

8

Q4…

Q1…

Q2…

Q3…

Q4…

$1.29

$1.50

$1.24

$1.29

$1.13

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Average rate increase (p.s.f.) Total blocks which increased

2012 2013 2014 2015

Class B

2.7%

Class B

0.0%

Class B

32.5%

Class B

19.9%

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

17

- Travis Rogers Research Analyst,

Austin


AUSTIN

Top performing submarkets by YTD absorption (s.f.)


Citywide projected construction deliveries by quarter (s.f.)


Target submarkets from tenants in the market (%)


Record breaking citywide absorption places Austin in second Austin closed out 2015 with the second highest citywide absorption as a percent

of inventory in the nation. Coming in first place was the San Francisco Mid-

Peninsula region at 4.9 percent (1.4 million square feet), followed by Austin at

4.6 percent (2.3 million square feet) and Silicon Valley at 4.2 percent (2.9 million

square feet). Austin has never experienced a greater amount of absorption within

a twelve-month period. The submarkets that yielded the greatest absorption

include the CBD (722,000 square feet), Northwest (660,000 square feet) and

Southwest (574,000 square feet). The first half of 2016 will also behold a period

of record-high absorption as large leases executed in early 2015 will commence.

Austin ranks third in the nation for most construction deliveries The top three markets for new deliveries in 2015 are all located within the Lone

Star State: Houston with 8.7 million square feet (3.6 percent of inventory), Dallas

with 4.7 million square feet (4.7 percent of inventory) and Austin with 2.9 million

square feet (4.1 percent of inventory). Two large projects in Northwest Austin

expected to deliver during the fourth quarter have now been pushed to the first

quarter of 2016 (Research Park Plaza V and Domain 1). Fourth quarter

deliveries include: Lamar Central (132,000 square feet), Aspen Lake 2 (129,000

square feet), Encino Trace II (158,000 square feet) and Quarry Oaks III (138,000

square feet). Collectively, these projects are 70.0 percent leased with the largest

tenants being BazaarVoice at Quarry Oaks III (138,000 square feet) and Q2

Holdings at Aspen Lake 2 (129,000 square feet).

One in three tenants are searching in this submarket and it’s not the CBD While demand for office space downtown is at an all-time high, tenants during

the fourth quarter showed more interest in the Northwest submarket. Of 165

tenants searching for space, 32.0 percent searched Northwest (53 deals), 26.0

percent searched downtown (43 deals) and 15.0 percent searched Southwest

(25 deals). While only 2.0 percent of tenants in the market (3 deals) looked

Northeast, these tenants required the largest average size requirement of

110,000 square feet. Citywide searches boasted the second highest average

size requirement at 83,000 square feet (7 deals) while Central ranked in at third

with 53,000 square feet (11 deals).

2015 is one for the record books in Austin

2,257

722,319

660,036

574,442

206,861

90,272

75,923

CBD

Northwest

Southwest

Far Northwest

Central

Southeast

694,953 556,173

807,978

66,072 124,000

1,009,616

0

500,000

1,000,000

1,500,000

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

32%

26%

15%

7% 4%

4% 4%

2%

Northwest CBDSouthwest CentralEast CitywideSoutheast Far NorthwestNorth NortheastSouth

165 Tenants In The Market > 5K SF




2,007,666 Total under construction (s.f.)

12.4% Total vacancy



32% Total preleased

Next Wave

18

- Patrick Latimer Manager,

Baltimore


BALTIMORE

Class A and Class B vacancy diverge at rapid pace


Development pipeline increases


Year-over-year rental rate growth in select submarkets


Construction increases as Class A vacancy dips

2,257 6.5%

5.0%

5.2%

4.2%

3.3%

4.8%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

Columbia Town Center

Columbia South

Annapolis

CBD

Baltimore Southeast

I-83 North





12.9% Total vacancy

366,456 YTD net absorption (s.f.)



Performance between Class A and Class B continues to diverge Vacancy for Class A space across the Baltimore metro market dipped to 10.0

percent while the lower segments of the market languished with low leasing

velocity and elevated vacancy. In the Central Business District, Class B vacancy

has jumped to 23.0 percent as off-water buildings struggle to backfill tenants who

have upgraded to more modern and efficient space. In Howard and Anne

Arundel counties, landlords have begun to reinvest in Class B product with

extensive renovations: COPT fully renovated 71,990 square feet at 1201

Winterson Road and demolished a vacant 56,452-square-foot Class B building at

921 Elkridge Landing Road to make way for retail amenities.

Development activity significantly increases Following a record minimum for new deliveries in 2015, construction across the

market increased as projected deliveries for the coming year are set to be the

highest since 2011. The largest project scheduled for delivery is Exelon’s

420,000-square-foot headquarters at Harbor Point in Baltimore City. Several

additional projects should break ground in the near term: 320,000 square feet at

99 Shawan Road for McCormick’s consolidation in Hunt Valley and 130,000

square feet at 40 Wight Avenue for JMT Engineering, also in Hunt Valley. The

development has come as large blocks of existing Class A space across the

market have become increasingly limited.

Select submarkets post Class A rental rate growth Several submarkets from Baltimore City to the suburbs experienced

considerable rental rate growth for Class A product over the course of 2015. As

vacancy for Class A space has fallen below 10.0 percent in many of these

submarkets and blocks of existing availability have dwindled, market leverage

has shifted in favor of landlords for many Class A buildings and rental rates have

accordingly risen. Rates have risen the sharpest in Columbia Town Center,

which offers a mixed-use environment with walkable amenities, where available

blocks of just 10,000 square feet have become scarce. In the CBD, Pratt Street

drove rental rate growth as vacancy for Class A product dropped below 6.0

percent in the upper tiers of the market.

5%

10%

15%

20%

2010 2011 2012 2013 2014 2015

Class A vacancy

Class B vacancy

0

500

1,000

1,500

2,000

2010 2011 2012 2013 2014 2015 2016

Tho

usan

ds s

.f.

Preleased s.f.

19

- Lisa Strope Research Manager,

New England


BOSTON

Q4 Leasing transactions by submarket

Source: JLL Research, leases signed over 20,000 s.f.

Forecast deliveries for projects under construction


Boston MSA unemployment forecast through 2020

Source: JLL Research, Moody’s, Boston MSA

0

1,000,000

2,000,000

3,000,000

4,000,000

2006 2008 2010 2012 2014 2016 2018

SF Delivered Forecast

2015 ends on a high note across all submarkets

2,257


1,080,136 Q4 2015 net absorption (s.f.)



13.8% Total vacancy




Underway for 2016 3.8 million sf

7.9%

4.3% 4.6%

3.0%

5.0%

7.0%

9.0%

2010 2012 2014 2016 F 2018 F 2020 F

0

250,000

500,000

750,000

1,000,000

CBD Suburbs Cambridge

17 21 3

Tot

al s

.f. o

f le

ases

sig

ned

Q4 hits a high-water mark for leasing activity Boston has become a critical and strategic location for growing global brands

and the nearly 1.9 million square feet in organic growth from local tenants this

quarter — such as Wayfair, HubSpot, Rockport, Bullhorn and LevelUp has

pushed fundamentals across the market. Direct average asking rents reached

above the previous peak for the fifth quarter in a row to $34.04, and total

vacancy dipped to its lowest point since 2007; dropping 500 basis points over

the quarter to 13.8 percent. 2015 ended the year with a flurry of leasing activity

— closing nearly 3.5 million square feet in transactions in the fourth quarter,

up nearly 15.0 percent quarter-over-quarter, and triple the volume of the

snowy first quarter. Boston’s Downtown and Rt. 128/Mass Pike submarkets

were the most active, each closing nearly 1.0 million square feet in leases

over 20,000 square feet.

Spec development sprouting up The tightening market has created a supply-demand imbalance and

developers have taken notice. With only 50.0 percent of the over 5.8 million

square feet under construction available for deliveries through 2018,

speculative developments are sprouting in nearly every submarket. Early in

2016, several fully available developments are expected to deliver including:

the repositioned former mall in Chestnut Hill, Bulfinch’s 286,000-square-foot

Atrium Center and the brick-and-beam renovation of 9 Channel Center in the

Seaport. Tenants in the market now have the option to choose between new

and older, existing office space.

Tech cycle has room to run and Boston is well positioned Driven by knowledge-intensive industries such as tech and life sciences,

Boston’s job growth continues to outperform both Massachusetts and the

nation. Forecasts through 2020 remain optimistic with steady growth expected

to continue at nearly 2.0 percent per year for the next two to three years;

keeping the regional unemployment rate below 5.0 percent through 2020.

While there is a general consensus that the probability of recession by 2017 is

low, it will likely be a bumpy ride with a correction early in the next decade.

20

- Patrick Byrnes Research Analyst,

Charlotte


CHARLOTTE

CBD Under Construction


Asking rates continue to push (p.s.f.)


Sales activity finishes out Q4


2,257



$23.03 Q4 direct average asking rate


12.3% Q4 Total vacancy




$15.00

$17.00

$19.00

$21.00

$23.00

$25.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1,829,160 s.f. Total s.f. traded in Q4

0.00

1,000,000.00

2,000,000.00

3,000,000.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

New product on the way in CBD For the first time in the past five years, development is surging in the CBD

submarket. Highlighting the development in Uptown are three major projects that

are underway. First, Portman Holdings is developing 380,000 square feet of

space at 615 South College Street. Second, Spectrum Properties and Mass

Mutual are behind the 300 South Tryon development which will total 630,000

square feet at completion. AvidXchange’s new headquarters will be located at

935 Hamilton Street adjacent to the NC Music Factory. The Hamilton Street

project is being developed by Red Rock Developments and will total 200,000

square feet at completion.

Rental rates keep climbing Asking rates continued to push higher in the fourth quarter, currently sitting at

$23.03 per square foot. The increase in average rental rates is due in large part

to the CBD, SouthPark and Highway 51/Ballantyne submarkets that have set the

bar above $30.00 per square foot. In the emerging Midtown submarket, the 1616

Center building is advertising rates above the $30.00 per square foot mark as

well. As new projects capture significant preleasing activity, look for asking rates

to hold steady in the foreseeable future.

Investment sales noticeable to end the year There was plenty of sales activity to finish out 2015 in the Charlotte office

market. In the CBD, 121 West Trade Street sold for $71.6 million ($216.00 per

square foot) to Lincoln Property Company. The building totals 330,000 square

feet and was previously owned by The Dilweg Companies. In the Highway

51/Ballantyne submarket, Toringdon Office Park sold to American International

Group and Trinity Capital Advisors for $114 million ($210.00 per square foot).

The office park consists of six buildings that total 519,602 square feet and was

previously owned by Stockbridge Capital Group Madison International Group,

and Trinity Capital Advisors.

Development coming on strong

21

- Hailey Harrington Research Analyst,

Chicago CBD


CHICAGO (CBD)

Historical Class A, CBD vacancy rates


YTD absorption by submarket (as % of submarket stock)


Net absorption vs. new construction ratio

1:1 Source: JLL Research

Incredibly strong market momentum at year end For those watching the long-term leasing patterns in Chicago, 2015 looks a lot like 2007.

Leasing activity, space absorption and vacancy rates are all essentially at their

prerecession levels. Although space available for sublease continues to rise, many large

blocks have been quickly backfilled; further indicating the positive momentum in the city.

While new buildings attract major headlines and expanding tenants, the CBD continues

to be a center of value-add investment with owners repositioning older properties, and

attracting tenants from within – and from outside – the metro area. Fortunately for

occupiers, rents have risen conservatively across most of the CBD; although tenants

should be on the lookout for local rent spikes in 2016.

River West (Fulton Market) expanding at an unprecedented pace In 2015, all of the stars aligned for the River West submarket. The occupancy of 1K

Fulton and surrounding tech office properties drove absorption to the highest levels on

record. The continued growth of multifamily and hotel investment in the neighborhood

has created a positive feedback loop for owners and investors. The question will be

whether or not tenants will still be drawn to the area as rents rise dramatically. Asking

office rents in River West now match those of other more established areas. Now, new

entrants into the market, such as Tucker Development, are making large bets which will

test the long-term strength of the market. All of this activity makes the River West

submarket the area to watch in Chicago over 2016 for continued growth, or for potential

continued growth, or for potential signs of overheating.

New office developments thriving and justified Two large towers currently under construction in the CBD (150 N. Riverside and 444 W.

Lake) have seen incredibly strong preleasing demand. In this environment, it appears

that limited new development is justified in the market. With year-to-date absorption of

more than two million square feet (1.7 percent of inventory), downtown tenants are

expanding at a pace that is sufficient to offset the efficiencies and consolidations of

others. Well located and properly scaled developments, such as 151 N. Franklin, should

be successful as leasing demand remains steady, downtown migrations continue and

competing deliveries remain limited.

Rising tide lifts market and new developments

2,257





12.4% Total vacancy



64% Total preleased

For every square foot of space absorbed in

the CBD this year, there is one square foot

of new inventory currently under

construction–a sign of a healthy balance for

the Chicago office market.

11.2% 11.3%

16.6% 16.4% 16.2% 13.7% 14.3%

11.5% 11.4%

0.0%

5.0%

10.0%

15.0%

20.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015

22

- Amy Binstein Research Analyst,

Chicago Suburban


CHICAGO (SUBURBAN)

YTD total net absorption (s.f.)


Large blocks by class


Historical Overall Class A direct rental rates

Source: BLS, JLL Research

Leasing activity back on the rise in 2015 The suburban market had its second year of improved leasing activity following a

slow 2013. The largest lease signed this quarter was in the Eastern East-West

submarket at 747 E 22nd Street; a long-vacant building. Quintessite Technology

Partners signed a lease for 108,000 square feet which will be used primarily as a

data center. The North submarkets (Cook and Lake counties) combined had the

most active year totaling almost 1.3 million square feet in major leasing activity.

This number included leases signed by Donlen Corporation, Option Care,

Protective Life and Solo Cup. Of major leases over 10,000 square feet signed

year-to-date, 2.6 million square feet was completed in Class A properties. With a

lengthy tenants-in-the-market list of over 3.8 million square feet of requirements,

2016 looks to be a strong year for leasing activity.

Despite high number of large blocks, suburban vacancy rates dip The fate of the suburban office market largely depends on the future use of

corporate campuses and large single-tenant office buildings. As described above,

the current momentum in the multi-tenant leasing market is very strong, but when

factoring in some of the abandoned or under utilized campuses, such as Navistar,

Office Max, Lucent and AT&T, the vacancy rate spikes. The suburbs currently

have 72 blocks of non-owner occupied spaces totaling 10 million square feet.

Looking into 2016, companies like Gallagher, Zurich and ConAgra will also be

vacating large blocks which will create additional large single-tenant opportunities,

or chances for intrepid developers to redefine the use of

these properties.

Suburban office space remains a great value The suburban office market has continued to be a great opportunity for tenants.

Over the past 10 years, rental rates have remained essentially flat; even without

accounting for inflation. This makes the suburbs a great deal for tenants. This is

especially true in comparison to escalating lease rates in the CBD. The cost

savings in the suburbs can be as much as $15 per square foot in base rent for

Class A office space. When combined with the savings in taxes and operating

expenses, the suburban Chicago market is an incredible value for tenants.

2,257

$15.00 PSF rent savings on a Class A

suburban space vs CBD

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

24 15 8

11 11

3

0

10

20

30

40

50,000 - 100,000 s.f. 100,000 - 200,000s.f.

> 200,000 s.f.

# o

f bl

ocks

Class A Class B





18.5% Total vacancy


-0.6% 12-month rent growth

100% Total preleased

Midrange leases support strong finish to 2015


- Ross Bratcher Research Analyst,

Great Lakes

CINCINNATI

Q4 office leases >30,000 square feet


Class A vacancy for select submarkets


Class A and B asking rent by submarket


Leasing activity heats up in Midtown, Kenwood The Midtown submarket saw significant leasing activity with CDK Global leasing

over 161,000 square feet in Buildings I and II at Central Parke. CDK’s lease in

the submarket isn’t the only positive sign, with Riverhills Neuroscience signing a

18,000-square-foot lease at Linden Pointe on the Lateral. Leasing activity in the

Kenwood was led by the Kenwood Collection, the submarket’s most recently

delivered Trophy office tower. Merrill Lynch and Roundtower Technologies both

signed leases at Kenwood Collection combining for over 82,000 square feet of

office space.

Tenants still prefer high quality office space Class A product continued to outpace Class B product in vacancy. Class A

space dipped to 16.5 percent for the quarter while Class B space had a 21.2

percent vacancy rate. The amount of new development delivered over the course

of 2015 has allowed companies to expand or relocate into Class A space, driving

up occupancy rates. This can also be attributed to redevelopment of struggling

office space to meet the high quality demands of tenants in today’s market place.

This trend should reverse in 2016 as Class A vacancy tightens and rates rise,

forcing tenants to look for Class B space.

Rents continue to steadily grow Asking rents in the Cincinnati office market continued their upward trend through

the fourth quarter. The average asking rent for Class A space ended the year at

$21.91 per square foot, an increase of $0.11 from the third quarter. Meanwhile,

Class B space averaged $15.94 per square foot, an increase of $0.05 from the

third quarter. Overall, asking rents across Class A and B space stand at $19.18

per square foot, slightly higher than the year before. The Kenwood office market

demanded the highest asking rates in the market, with $27.26 being the average.

This growth can be attributed to new development in the long-time sought after

suburban submarket.

Leasing accelerates and rents record gains

2,257





18.1% Total vacancy


.05% 12-month rent growth


2,257

9%

11%

13%

15%

Blue Ash /Montgomery

West Chester East Midtown Kenwood

81,845

79,552

50,000

42,651

38,517

32,406

31,599 CDK Global

CDK Global

Merrill Lynch

Trustaff

Tata Consulting

Roundtower

Process Plus

$0.00

$10.00

$20.00

$30.00

Kenwood Midtown CBD

Class B Class A

24

- Andrew Batson Manager,

Great Lakes


CLEVELAND

CBD vacancy


Asking rents, market averages


Cumulative sales volumes ($ millions)


Tenant-favorable conditions downtown to continue into 2016 Despite renewed interest in the urban core and a roster of new tenants, vacancy

downtown increased in 2015 amid a number of corporate rightsizings. This

market shift was most apparent in the Trophy product type, where vacancy

increased 9.2 percentage points year-over-year. Key Bank’s renewal and

downsizing of roughly 200,000 square feet was the main driver of this vacancy

increase. Class B vacancy was also up in 2015, albeit marginally. While this

product class will benefit from office-to-residential conversions, absorption gains

have been slow to come and elevated vacancy rates are forecasted over the

next year as relocations and rightsizings will offset absorption gains.

Rents are unlikely to move until further vacancy declines are recorded Office rents in Cleveland have historically been less volatile than in primary

markets given the relatively fixed levels of supply and demand. Furthermore,

with elevated vacancy rates and tenant-favorable conditions, landlords have had

limited ability to raise rents. Contrary to rents, landlords have been more active

in adjusting concessions such as free rent and tenant improvement allowances

based on shifts in market conditions, and in recent years, these concessions

have tightened modestly. At the end of 2015, Class A rents were recorded at

$23.04, up 35 basis points year-over-year while Class B rents were recorded at

$17.68, up 99 basis points year-over-year.

With primary markets picked over, investors find opportunity in Cleveland Sales activity has been intensifying in Cleveland and investment-grade assets

have been making up a larger percentage of trades in recent quarters. With

primary markets oversold during the current cycle, investors have turned to

secondary markets like Cleveland for opportunities with attractive returns. Both

value-add and core assets are available for purchase, including the Key Center

complex in downtown Cleveland. One investor who has been particularly active

in Cleveland is the Hertz Investment Group, which purchased the 508,000-

square-foot Fifth Third Center for $53.3 million in April followed by the 321,000-

square-foot Skylight Office Tower for $35.4 million in September.

Rightsizings persist downtown, vacancy increases

2,257





19.6% Total vacancy




$16

$20

$24

2007 2009 2011 2013 2015

Class B Class A

$0

$300

$600

2007 2009 2011 2013 2015

5%

15%

25%

2007 2009 2011 2013 2015

Class B Class A Trophy


COLUMBUS

Select submarket vacancy rates


Office employment trends (12-month change, 000s)


Notable office projects under construction


Vacancy rates continue steady decline in 2015 Steady demand across the Columbus office market has led to continued

decreases in vacancy across both Class A and Class B assets. Class A vacancy

currently stands at 8.4 percent, a product of strong absorption in class A assets

during the fourth quarter. Meanwhile, Class B vacancy is 14.4 percent, a decline

of six basis points from the prior quarter. Leasing activity was mixed in the fourth

quarter as the CBD saw strong positive absorption while suburban absorption

was negative. This trend is attributed to companies looking to move into the

urban core to lure the millennial workforce. Looking into 2016, corporate

consolidations in the suburbs will likely increase vacancy rates.

Rent growth is likely to level off in 2016 Rents continued to appreciate in Columbus as demand outpaced supply

additions. However, due to the consolidation of multiple large office users into

corporate campuses, the amount of available space is projected to increase

significantly in 2016 and likely drive rents down. These users include Nationwide

and Verizon, whose suburban departures will have a measurable impact on the

market. Currently, the Northwest submarket cluster boasts the highest averaging

asking rent, at $18.88 per square foot, driven largely by the in-demand Dublin

and Grandview/Arlington submarkets.

Mixed-use and owner-occupied projects drive construction Construction remains active in the Columbus market for both speculative and

owner occupied buildings. While 250 S. High was delivered in downtown,

construction began on Dublin’s Bridge Park project which will include 93,000

square feet of office space, 43,000 square feet of restaurant space, and 9,000

square feet of other retail. Amazon continued construction on their two data

centers totaling 870,000, while Nationwide continued construction on their

corporate campus in Grandview. Expedient completed and opened their 60,000

square foot data center in Dublin.

Vacancy declines further amid demand gains

2,257





13.1% Total vacancy




280,048

750,000

120,000

93,000 NationwideGrandview Yard

Amazon Dublin

Amazon Hilliard

Bridge Park

-15.0

0.0

15.0

2010 2011 2012 2013 2014 2015

Professional & Business Services InformationGovernment Financial Activities

0%

10%

20%

Arena District Easton Polaris Grandview Dublin

- Ross Bratcher Research Analyst,

Great Lakes

26

- Walter Bialas Vice President, Research,

Dallas


DALLAS

Majority of net absorption in 2015 was in new construction


Class A & B rental rates by submarket p.s.f.


In-demand submarkets seeing the most new construction


Demand for space closely tied to new construction deliveries The Dallas economy has shown great strength in 2015 with 103,500 jobs added

over the past 12 months. The improving labor market has resulted in office net

absorption running at more than double the 10-year average. Almost 4.8 million

square feet were absorbed in 2015; while the 10-year average is about 2.2

million square feet. For 2015, the vast majority of positive net absorption was

directly attributed to recently completed new construction. The Richardson/Plano

submarket recorded the most new construction and net absorption, all of which

were built-to-suit projects for State Farm and Raytheon, while Far North Dallas

and the Downtown area saw more of a mix of built-to-suit and spec projects

(FedEx, KPMG, Frost Bank, The Richards Group).

Rate pressure remains in place Though a significant amount of new construction has been brought to the market,

vacancy did not increase and upward rate pressure remains strong. The 18.7

percent total vacancy rate is not low by national standards, but is low by local,

historic standards. The lower vacancy rate has helped push rates higher for all

local area submarkets. Year-over-year, overall direct asking rates increased for

Class A & B space by 6.6 percent, and ranged from 1.1 percent in Preston

Center to 11.5 percent for North Central Expressway. Class A space is outpacing

this slightly (6.9 percent) with some of the more value-driven submarkets seeing

above average increases (Class A space in North Central Expressway and LBJ

Freeway went up 12.9 percent and 14.2 percent, respectively).

Construction pipeline is large; high absorption needed to keep pace Over the next year about 4.5 million square feet of space is expected to deliver to

the market. Of that near term construction pipeline, over 2.6 million square feet is

unaccounted for (not built-to-suit or preleased). In addition, a half dozen

properties in the West End area of the CBD are in various stages of renovation

that will convert them from old industrial properties into office properties. To keep

new supply and demand in balance, the Dallas market will have to maintain near

record absorption levels over the next two years to match the current

construction pipeline.

2015 a banner year for demand and rate increases

2,257

84%





18.7% Total vacancy



57% Total preleased

Of the 4.8 million sf of positive net

absorption in 2015, about 85%

was directly attributed to tenants

taking occupancy of new

construction.

$0.0

$10.0

$20.0

$30.0

$40.0

23.4%

11.6% 14.5% 17.1%

27.1%

17.7% 10.1% 14.9%

29.8%

0.0%

10.0%

20.0%

30.0%

27

- Amanda Seyfried Senior Research Analyst,

Denver


DENVER

Denver technology employment composition


West Texas Intermediate Spot ($ per barrel)

Source: JLL Research, Economy.com

Front Range region sees 221 newcomers every day

Source: JLL Research, U.S. Census Bureau

Technology startups blossom in Denver As Denver escapes its one-trick pony reputation as just an oil town, one of the

industries rapidly growing its footprint here is technology. Historically, tech has

struggled to succeed locally given, among other factors, its considerable

distance from Silicon Valley. Now, skyrocketing prices and tightening regulations

in California have companies and investors alike looking to markets like ours.

Firms like ProtectWise, Altitude Digital, Four Winds Interactive and Ibotta have

all been dubbed “Denver Gazelles,” or fast growing startups. Other companies

are following suit, and the metro is poised for even more such success stories.

Aware that tech is both the present and the future, Denver continues to invest in

the sector and aims to foster more homegrown and high earning tech talent.

Oil price rebound? Don’t bet on any time soon Since July, the price of oil has hovered below $50 per barrel—its pricing cut

nearly in half since year-end 2014. The EIA projects crude to stay near $51 per

barrel through 2016. Given this environment, some energy-related companies

have been forced to cut payrolls or even shutter local offices. In 2015, the

industry brought 652,000 square feet of sublease space to the CBD with more

expected in the months ahead. Approximately 15.0 percent of currently vacant

CBD stock is energy sublease space. So, while tenants—thanks to collapsing oil

prices—may have more options, leverage still largely lies with landlords.

Colorado’s population second fastest-growing in nation Besting all annual gains made over the last 14 years, and significantly outpacing

projections, Colorado’s population growth during the 12 months ending this past

July was exceptionally strong. In fact, its rate of growth more than doubled the

national level. Natural gains are not driving the increase; rather, net migration

accounted for two-thirds of growth. Four of every five new residents have made

their homes along the Front Range, which may help explain Denver’s booming

housing market and steady urbanization. The region will have to increasingly

invest in infrastructure in order to keep up with such a sizable influx of new

residents. Going forward and looking at the office market, expect an even higher

premium placed on transit-oriented development and further densification.

Diversified economy helps sustain overall optimism

2,257

57.0%

12.0%

12.0% 11.0% 4.0%

3.0%

1.0%

Computer Systems Design

Data Processing & Hosting

Software Publishers

Computer Product Manufacturing

Other Information Services

E-Retailers

Electronic Equipment Manufacturing

101,000 New residents in Colorado

in past 12 months





13.1% Total vacancy




$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

2007 2009 2011 2013 2015 2017

28

- Aaron Moore

Research Analyst,

Great Lakes


DETROIT

Historical office cap rates


Attracting the high-tech sector


Average office asking rents


Detroit, attracting outside money and technology

2,257





19.0% Total vacancy




Out of bankruptcy, Detroit is coming back strong A little over a year ago people were counting Detroit out. It was on the verge of

entering bankruptcy, which it eventually did. Fast forward to a year later and

Detroit is emerging from its bankruptcy financially stronger than it was. The city

is improving services, enjoying a construction boom, and just gave the police

force a raise. As a result, the real estate market is seeing a boost. Comparatively

high rates of return on real estate investments continues to attract investors to

the region in search of deals. Using capitalization rates to measure returns,

investors are opting for Detroit’s best investment-grade office properties in prime

locations with capitalization rates between 7.0 to 8.5 percent.

Detroit welcomes new technology When reading news articles concerning Detroit and technology one has to ask

themselves, when was Detroit ever not tech oriented? The automobile is one of

the greatest technological advances of mankind. Detroit has always brought

together the heavyweight sectors of transportation, information, and energy. Now

the region is leading in creating ubiquitous connectivity, shared-economy willing-

ness, and energy options for the 21st century. Ford recently announced its joint

venture with Google to launch self-driving cars. Count on more infrastructure

investments such as RocketFiber to turn Detroit into an elite market in which

technology companies naturally and quickly emerge inside its borders.

Detroit’s suburbs still have advantages over the CBD With initiatives such as Move Across Troy, which aims to improve pedestrian

access between office buildings and businesses in nearby strip malls, suburban

submarkets such as Troy and Southfield have shown a willingness to adapt in

order to compete for credit worthy tenants. It is hard not to be influenced by all

the excitement downtown, but there are attributes about the CBD that either

make sense for your company or do not. Contrary to the urban core, the suburbs

offer readily available parking, discounted rental rates and shorter commute

times. Large tech-oriented tenants will need to closely examine the benefits of an

urban versus suburban address before making their next real estate decision.

6.0%

8.5%

11.0%

2015201420132012

$15.00

$17.50

$20.00

2012 2013 2014 2015

CBD Southfield Troy

Share of U.S funding

Employee cost $84,101 average tech wage 2014

3.2% annual tech wage growth 2014

Talent pool 28.1% % of population with bachelor’s or higher

18.8% share of millennials (work age, 20-34)

Venture capital $4.6M total funding Q314-Q215

0.0%

29

- Katherine Billingsley Research Analyst,

Oakland - East Bay


EAST BAY

BART location drives rent growth (Y-O-Y)


680 Corridor availability* stratification by submarket

Source: JLL Research, *Spaces include Class A & B

Positive net absorption consistent throughout 2015


Landlords command more rent along BART lines As market fundamentals tighten in San Francisco and Oakland, tenant demand

continues to follow the BART lines into the 680 Corridor. Nearly 700,000 square

feet of tenant demand is targeting submarkets along BART lines. These markets

have shown a significant increase in rental rates over the past 12 months. For

instance, select Class A assets in Pleasant Hill BART are asking near $4.00 per

square foot, a 19.5 percent increase since last year, on par with rates in Oakland-

CBD. Overall, weighted rent growth in BART-centric submarkets has increased by

10.1 percent year-over-year, compared to a 2.1 percent increase in non-BART

submarkets. The East Bay has experienced lasting effects of the outer-market

spillover, and corporate tenants coming from surrounding markets favor BART

locations and are willing to pay a premium for access to transportation.

Title 24 contributes to rising concessions; tenants releasing space to market Construction costs are increasing due to California’s energy compliance standards

(Title 24); prompting landlords to raise tenant improvement costs in addition to

increasing rental rates in select markets. Existing tenants are consolidating their

footprint in order to achieve cost efficiency, and moving their operations to markets

where costs are lower for rent and labor. As a result, an abundance of space is

being released to the market due to large corporate give-backs. EMC, Safeway,

Best Buy and Sybase are some of the major contributors to supply growth this year,

giving mid-t o large-sized tenants more available options to consider, and

alleviating demand pressures from surrounding markets.

680 Corridor anticipates tightening moving into 2016 Robust leasing activity in the last stretch of 2015 has translated into another quarter

of positive net absorption, and will continue to accelerate as tenants occupy their

space early next year. In the North 680, a concentration of traditional sectors are

dominating demand however large users look to the South 680 corridor area—the

only market in the East Bay with blocks of space larger than 50,000 square feet.

Major office campuses are developing City Center-like features such as retail and

restaurants to create a live-work-play environment in order to attract and retain

talent. Coupled with a strong, growing economy and a large inventory of available

space, the East Bay will remain a viable overflow market for tenants who seek

quality space at lower-cost options.

2,257

0

100,000

200,000

300,000

Q1 2015 Q2 2015 Q3 2015 Q4 2015

28%

21% 15%

15%

9%

5% 4% 3%

Pleasanton-N

Bishop Ranch

Dublin

Concord

Downtown WC

PH-BART

Pleasanton-S

San Ramon-Other




0 Total under construction (s.f.)

14.6% Total vacancy




Inventory grows as tenants release space

0.4%

2.6%

2.7%

4.4%

8.0%

9.0%

9.5%

19.2%

Bishop Ranch

San Ramon-Other

Pleasanton-North

Pleasanton-South

Downtown WC

Pleasant Hill

Concord

Pleasant Hill BART

BART located

Non-BART located

30

- Dayna McConnell Research Analyst,

Fairfield County


FAIRFIELD COUNTY

Leasing velocity in 2015


Lease type on transactions over 20,000 square feet


Absorption in 4th quarter


Leasing activity surges in the fourth quarter

Leasing activity accelerated through year end 2015; consequently, driving

positive net absorption of 846,360 square feet. As new demand remains limited

in many submarkets; rental rates stayed at steady levels throughout the county.

The one exception to this trend is the South Stamford submarket which has seen

rents rise steadily for the past 18 months. Many tenants who had lease

expirations during the quarter also chose to execute renewals rather than

relocate. The overall vacancy rate, as a result, declined to 24.4 percent. The

market is poised to receive more activity in 2016 with market fundamentals

remaining stable.

Renewals dominate large leases Absorption was positive in the quarter; however, more than half of the leases

signed in 2015 larger than 20,000 square feet were renewals. There is a scarce

availability of large block space; especially in transit-oriented submarkets. With

just six class A buildings being able to accommodate a 50,000 square foot tenant

in contiguous space, large block options are limited. With such a small number of

large block spaces available, it helps to explain why so many of the larger

tenants are choosing to renew their leases rather than test the market.

Millennials migrating to Stamford 2015 started with the suburban markets outperforming the traditional business

hubs of Stamford and Greenwich. As the year progressed, that trend has flipped

in rather dramatic fashion. With the exception of Danbury/Bethel submarket,

Stamford and Greenwich accounted for over 60.0 percent of leasing velocity in

the fourth quarter. The largest deal signed in the quarter was in Stamford as GE

Capital inked a deal at 201 High Ridge Road. It seems as though the national

trend of flight to transportation has finally caught on in Fairfield County.

2015 produces greatest leasing velocity in 9 years

2,257





24.4% Total vacancy

-413,907 YTD net absorption (s.f.)


0% Total preleased

3,664,998 s.f. Leasing velocity in 2015

62.0% 17.8%

20.2% Renewal

Relocation

New to Market

-100,000 -50,000 0 50,000 100,000 150,000 200,000 250,000

Greenwich CBD

Stamford CBD

Route 7

Trumbull

Westport

31

- Marc Miller Research Manager, Florida

Fort Lauderdale


FORT LAUDERDALE

Investment in the county peaks since the start of 2014


Plantation sublet vacancy grows in the fourth quarter


First multi-tenant delivery in seven years

Record high year for office investment in Broward County Investor confidence in the Broward County office market continues to grow as

there have been 39 major building sales year-to-date in 2015 following 19 trades

in 2014. In total, this amounts to 29.9 percent of the county’s total stock, or 5.6

million square feet in transactions. The suburbs has seen the majority of this

activity as a joint venture led by Starwood purchased nearly 1.4 million square

feet in the western suburbs through a number of portfolio purchases; making

them the largest multi-tenant office owner in the Broward County. In total,

investment in Broward County exceeded $650 million in 2015—the highest year

on record. Further, while there has been no year-to-date investment in the CBD,

there are a few major trades expected for early 2016.

Plantation has a number of large blocks which may loom on the market Plantation still remains one of the strongest suburban submarkets in the South

Florida metro area with vacancy at 15.2 percent; however, the future is uncertain

as the submarket has recorded a growing number of large blocks on the market

and several more expected to come online. Currently there are five large blocks

over 20,000 square feet, of which two are sublet spaces. In addition, the

submarket maintains the largest variance between direct and total vacancy as

sublet vacancy ticked up this quarter to 2.5 percent. The largest availability is the

118,700-square-foot sublet block in Jacaranda Park of Commerce. However, the

American Express building could surpass that block once they move into their

new facility in Sawgrass Park; therefore, potentially bringing a 388,400-square-

foot block to market.

Growing office development pipeline The office development pipeline in Broward is growing for the first time since the

downturn, and the majority of proposed development is in Southwest Broward.

Pembroke Pointe was delivered late in the fourth quarter and is the first major

office delivery in more than seven years. While no major leases have been

announced, the building’s performance over the next four to six months will likely

be an indicator of how soon the next major project will break ground.

2015 a banner year for capital markets

2,257

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2011 2012 2013 2014 2015





16.1% Total vacancy




0.0

2.0

4.0

6.0

CB

D

Cypre

ss

Cre

ek

Pla

nta

tio

n

Saw

gra

ss

SW

B

s.f

. in

Mil.

s.f. traded Submarket s.f.

Name Submarket RBA Building Status Pembroke Pointe A SW Broward 143,535 Complete

NSU Center for

Collaborative Research Plantation/Davie 215,000 Under Construction

American Express Sawgrass 400,000 Under Construction

Pembroke Pointe B SW Broward 143,535 Proposed

Monarch Lakes II SW Broward 105,000 Proposed

Two Financial Plaza Downtown 500,000 Proposed

32

- Geoff Thomas Senior Research Analyst,

Richmond


HAMPTON ROADS

Investment office sale s volume (excludes medical)


Office space delivered by year and current vacancy


Office vs mid-rise and high-rise multifamily inventory


96.4

206.0 242.8

50.0

- -

142

28

2012 2013 2014 2015

s.f.

(in th

ousa

nds)

s.f. delivered Current s.f. vacant

Office investment sales volume reaches historic level

2,257


-4,756 Q4 2015 net absorption (s.f.)


287,858 Total under construction(s.f.)

14.5% Total vacancy




$6.1

$78.3 $26.9

$62.0 $52.2

$259.1

2010 2011 2012 2013 2014 2015

$ M

illio

ns

8.1 8.1 8.0 8.0 7.8 7.5

11.2 11.5 12.3 13.2 14.6

16.4

-

5

10

15

20

2010 2011 2012 2013 2014 2015

SF

in M

illio

ns

Pre 1970's office Multifamily

Investors flock to Hampton Roads for greater yields The closing window of near-zero interest rates and cap rate compression in core

markets left investors seeking investment opportunities in tertiary markets. With

cap rates ranging from 7.0 to 8.0 percent for Class A assets with vacancy rates

of 10.0 percent or less, Hampton Roads became an attractive option over

primary and secondary markets where cap rate averages ranged from 3.7

percent (San Francisco, CA) to 6.6 percent (Charlotte, NC). In comparison, core

assets in Hampton Roads such as The Concourse Building, fully leased to

Amerigroup, and the Fulton Bank Building, 95.3 percent leased, were under

contract with 7.0 percent cap rates.

Shift in demand takes focus away from recently delivered Class A space Three major influences have shifted demand away from new construction in

Hampton Roads: the 33.3 percent premium for new construction over existing

Class A rental rates, the increased popularity of teleworking in Hampton Roads

and the numerous, but now less frequent, downsizes that occurred between

2009 and present. Additionally, growing demand from call centers created the

largest active requirements in market, but focused solely on low-cost options

with generous parking ratios. This criteria made the conversion of aging

shopping malls to call center operation facilities an alternative to traditional

office space.

Repurposing and renovating office buildings shrinking the inventory Downtown Norfolk has been the epicenter of redevelopment in the Hampton

Roads market. Most recently, 1 Commercial Place (Bank of America Center)

was slated for multifamily conversion while 2 Commercial Place, a circa 1978,

287,858-square-foot office building, went under renovation and will absorb most

tenants displaced by the conversion. Once complete, the redevelopment will

remove a circa 1968 office building that has maintained an average vacancy rate

of 52.0 percent (180,156 square feet) since 2010.


GREATER HARTFORD

Leasing in the West and CBD sales lead the way 2015 Leasing transactions by submarket

Source: JLL Research, leases signed over 15,000 s.f.

Greater Hartford Class A total vacancy


Hartford MSA unemployment rate

Source: JLL Research, Moody’s, Hartford MSA

Q4 caps off year of high sales volume Amidst a revitalization of downtown, the Hartford CBD was highlighted by

particularly strong sales activity in 2015, including four high profile Class A

Towers. Paradigm Properties led the charge, purchasing the state’s tallest

building at CityPlace I for $113.3 million. New York-based BHN Associates also

acquired Constitution Plaza, a six-building office campus downtown, for $71.1

million earlier this year. This trend carried over to the suburbs where there were

multiple office sales in each submarket throughout the year. This was

underscored in Q4 with the sale of the I-91 Tech Center in the South market. The

five-building office complex in Rocky Hill sold to Capstone Partners for $110-per

square foot.

West market drives up leasing activity High sales transactions downtown were complemented by strong leasing activity

in the suburbs, particularly in the West. Webster Bank signed a lease for 86,000

square feet at 200 Executive Boulevard in Southington, representing a renewal

and expansion within the market. Blum Shapiro also retained 47,000 square feet

in West Hartford. These leases, amongst others, contributed to over 150,000

square feet of positive absorption in the West, driving vacancy down to 11.0

percent in the submarket. However, the largest lease of the quarter was in the

North and belonged to SS&C Technologies. The financial services tech company

renewed for 93,000 square feet at 80 Lamberton Road in Windsor, helping

contribute to a suburban vacancy rate of 17.7 percent. Leasing activity increased

over the year, and is expected to continue in 2016.

New developments in the CBD lead revitalization

The unemployment rate in the Greater Hartford metropolitan has reached a

seven-year low, currently at 5.9 percent. Under the vision of the CRDA, it was a

newsworthy year for development projects and urban revival. This ranged from

new residential buildings coming onto the market to UConn committing to an

urban campus in the CBD. It continued in the Downtown North, or “DoNo,” where

the city’s new minor league baseball stadium broke ground and will be

complemented by New England’s first Hard Rock Hotel come 2018. There is

much to look forward to in 2016 and beyond.

2,257

11.8% 13.7%

16.8%

22.2% 21.2% 22.1% 20.2%

15.4% 17.8% 18.6%

5.0%

10.0%

15.0%

20.0%

25.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014





18.2% Total vacancy




0

100,000

200,000

300,000

400,000

CBD North East West South

2

3 3

Tot

al s

.f. o

f le

ases

sig

ned

6

3

8.0% 9.2% 8.8% 8.4%

7.0% 6.6% 5.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2009 2010 2011 2012 2013 2014 2015

- Wes Simon Research Analyst,

Boston

34

- Eli Gilbert Research Director,

Houston


HOUSTON

Houston major submarket leasing activity Q4


Less than 2M s.f. of construction set to deliver after 2016


More than $2.0B in office sales in 2015


Limited pockets of activity not enough to offset significant losses in 2015 2015 concluded as an uneven but eventful year for Houston’s office market with

positive events in the fourth quarter that helped lessen the impact of the

decelerating Houston office market. After a 370 basis point jump in vacancy year-

over-year resulting in the first annual net occupancy loss since 2010, asking rental

rates saw growth of 1.7 percent and several large leases were signed during the

quarter. Additionally, despite the infusion of over 8.7 million square feet of new

inventory, vacancy remained in the mid-teens. Whether silver linings such as these

continue into 2016 remains to be seen, as oil prices are to remain under $50.00 a

barrel and Houston’s job growth is forecasted to be weak.

The spigot is turned off on the construction faucet As M&A activity and right-sizing by companies contribute to a dramatic slowdown

in leasing, a secondary (and welcome) result is the abrupt halt of new construction

starts within Houston both on a build-to-suit and speculative basis. This time last

year, Houston accounted for nearly 20.0 percent of all the office buildings under

construction within the United States; today that number is roughly half. To further

illustrate how dramatic construction has halted, when completions slated for 2016

are removed, less than 1.6 million square feet remain in the pipeline to be delivered

in 2017 and 2018; making them the lightest delivery years since the recession.

Looking ahead, with the inventory of direct and available sublease space growing,

the likelihood of new office projects breaking ground in 2016 is slim, barring those

tenants who opt for the build-to-suit route.

Building sales activity gives some positive momentum to 2015 Prices for West Texas Intermediate oil, the benchmark for American oil production,

fell by roughly 31.0 percent during 2015. With Houston so deeply tied to the energy

sector, the impact has been far-reaching. However, 2015 remained a solid year for

office sales transactions. By year-end, nearly $2.0 billion in building sales were

inked in 38 transactions. Notably, the fourth quarter saw a few Class A buildings

trade over $500 per square foot including 2200 Post Oak in the Galleria submarket

($527 per square foot) and 935 N. Eldridge in the Energy Corridor ($503 per square

foot). Investors still have a steady appetite for well-tenanted office buildings in

Houston despite volatility in the energy market.

2015 closes in the red as oil volatility catches up

2,257

935 N. Eldridge and 2200 Post Oak sold for greater than

$500/p.s.f.

253,336

408,802

83,427 233,914

74,739 31,771 0

100,000

200,000

300,000

400,000

500,000

CBD Galleria Greenway Katy Freeway Westchase Woodlands

SF

of

leas

ing

Class A Class B





16.5% Total vacancy




0

2,000,000

4,000,000

6,000,000

2016 2017 2018

35

- Mike Cagna Senior Research Analyst,

Indianapolis

*Significant alterations to our tracked inventory and methodology were made in the first quarter,

rendering statistical results that diverge from the recent historical trend.


INDIANAPOLIS

Active office requirements by industry


Speculative office projects currently under construction


Several office properties traded this year


Tenant demand remains solid heading into 2016 Today’s strong business climate has several local companies in expansion mode.

This is driving the need for additional office space. Nearly 150 office transactions

totaling almost 2.5 million square feet closed this year (this data includes leases

of 5,000 square feet or greater). Of this total, 45.0 percent of companies are

growing, 39.0 percent remain stable and only 16.0 percent are shrinking.

Currently, there remain approximately 120 tenants actively in the market for 2.2

million square feet of space. Of this total, 44.0 percent are looking to expand

their footprint while only 8.0 percent plan to downsize; which will continue to

tighten fundamentals in the commercial real estate market in Indianapolis.

More office construction on the horizon Phase II of Milhaus’ mixed-use Artistry project in downtown Indianapolis was

the only new speculative office construction completed in 2015. Much more is on

the way with over 200,000 square feet of speculative office development due for

delivery in 2016. Roughly 20.0 percent of this total is preleased. This will mark

the highest level of speculative construction since the recession. We are likely

to see even more speculative construction in 2017 as the first buildings of the

Midtown Carmel office project are completed. Approximately 250,000 square

feet will be delivered, although most or all of that is expected to lease prior

to completion.

Investment activity continues Investors remained high on Indianapolis in 2015 as several significant

transactions closed this year. The biggest of which was also the only one that

involved a foreign investor. Group RMC, based out of Canada, closed on a

Castleton Park portfolio comprised of approximately 700,000 square feet of

primarily Class B office and flex product on the northeast side of Indianapolis.

Meanwhile, Minneapolis-based Onward Investors completed three separate

transactions in Indianapolis this year acquiring College Park Plaza, Disciples

Center and most recently River Road I & II. All told, 19 investment transactions

closed in 2015.

Leasing activity and new construction on the rise

2,257





15.9%* Total vacancy


10.8%* 12-month rent growth


Project Size Delivery

River North at Keystone 90,000 Q1 2016

Lakeside Green Business Center 61,050 Q2 2016

Fidelity Keystone II 29,200 Q1 2016

Marietta on Mass 25,500 Q3 2016

0

10

20

30

40

Professionaland business

services

Creative Science andtechnical

Nonprofit Finance

Shrinking Stable Growing

# o

f act

ive

tena

nts

$221 million Total dollar amount of office investment sales that

occurred in Indianapolis in 2015

36

- Drew Gilligan Research Analyst,

Central Florida


JACKSONVILLE

Annual net absorption Jax CBD & Butler Boulevard


Declining vacancy across the market


Strong local economy

Source: JLL Research, BLS

Despite a weak fourth quarter annual absorption strong Jacksonville continues to experience strong annual net absorption with both

major submarkets’ occupancy increasing. Butler Boulevard has now recorded six

straight years of positive absorption, totaling over 1.2 million square feet during

that time and accounting for more than 10.0 percent of the total inventory. The

CBD market has experienced similar growth in recent years; totaling over

670,000 square feet over the past four years, and making up over 10.0 percent of

the total inventory. Jacksonville is currently a neutral market, but moving in favor

of landlords; especially if positive absorption continues in 2016 as expected.

CBD market conditions catching up to Butler Boulevard Butler Boulevard has consistently had stronger market conditions than downtown

Jacksonville, with lower vacancy and higher rental rates. As space has gotten

tighter over the past year and quality large blocks are becoming scarce, tenants

are beginning to look to the CBD where multiple large blocks exist at competitive

rental rates. Downtown also remains a popular place for companies new to the

Jacksonville market, where multiple large, back-office locations of large Fortune

500 financial companies are already located. The Jacksonville area will remain a

popular place for new companies because of the favorable business tax climate

and the large, qualified workforce.

Jacksonville economy showing strong growth Many factors are working in Jacksonville’s favor; which has led to positive job

creation for the seventh consecutive year and a growing population. The

unemployment rate recently dropped to 4.8 percent—20 basis points below the

national average. As larger markets such as New York continue to get more

expensive, Jacksonville will remain a popular relocation option for companies.

Outside of the office market, the Jacksonville Port is planning on investing a

large amount of money to rehabilitate the facility and expand local operations to

support more traffic through the port; consequently, helping to grow the local

economy for years to come.

Market fundamentals remain strong

2,257





14.7% Total vacancy




-300,000

-100,000

100,000

300,000

2010 2011 2012 2013 2014 2015

Jax CBD Butler Boulevard

10.0%

15.0%

20.0%

25.0%

30.0%

2010 2011 2012 2013 2014 2015

Dire

ct V

acan

cy

Jax CBD Butler Boulevard

0.0%

5.0%

10.0%

15.0%

500,000

550,000

600,000

650,000

700,000

2009 2010 2011 2012 2013 2014 2015 Unem

ploy

men

t Rat

e

Empl

oym

ent

Total Employment Unemployment Rate

37

- Sarah Bouzarouata Research Analyst,

Long Island


LONG ISLAND

Total net absorption by Class (s.f.)


Class A direct asking rental rate trends (p.s.f.)


Vacancy rate trends (%)


Nassau County leads office market with Class A absorption

As Class A space remains the product of choice for tenants, the Western Nassau

submarket represented more than 60.0 percent of the 473,844-square-feet Class

A space absorbed in Nassau County and elevated Long Island absorption totals

to 148,677 square feet. Much of the major leasing activity in the fourth quarter

was focused in the top-performing Eastern Nassau submarket, which posted

50,816 square feet absorption. Contributing to this absorption was South Nassau

Communities Hospital’s lease of nearly 61,000 square feet at 2020 Wantagh Ave.

and Arthur J. Gallagher’s lease of 21,000 square feet at 1 Jericho Plaza.

Class A direct asking rental rates escalate toward the end of the year While the Long Island Class A vacancy rate trended lower, the average asking

rental rate for Class A space escalated in the last quarter. The average asking

Class A rental rate for direct space was approximately $31.15 per square foot in

the fourth quarter; a 2.7 percent increase from the previous year. The Eastern

Nassau submarket maintains the highest Class A rents in the Long Island office

market with an asking rental rate of $34.93. As flight-to-quality continues to

increase, space absorption and asking rents will follow suit.

Nassau County office vacancy rate falls to lowest level in four years The Nassau County office market vacancy rate has fallen to its lowest level in

more than four years despite a slight decrease in leasing activity this quarter.

The sharp decline in vacancy year-over-year is in large part due to the strong

demand in the health care industry. North Shore-LIJ Health System leading the

way for occupancy of large blocks of space after their leasing of 252,000 square

feet at 600 Community Drive in Manhasset.

Demand in Class A office space drives

market activity

2,257



$26.35 Direct average asking rent (p.s.f.)


16.8% Total vacancy




$30.13 $30.00 $30.15

$31.77

$29.00

$30.00

$31.00

$32.00

Q1 2015 Q2 2015 Q3 2015 Q4 2015

473,844

-59,741 -18,392

-247,034 -300,000

-150,000

0

150,000

300,000

450,000

600,000Nassau Suffolk

Class A

Class B

17.0% 16.8% 16.2% 15.9% 14.2%

10.0%

15.0%

20.0%

25.0%

2011 2012 2013 2014 2015

Nassau

Suffolk

38

- Henry Gjestrum Senior Research Analyst,

Los Angeles


LOS ANGELES

Almost all markets see significant year over year rent growth


Playa Vista continues to see large volume of new entrants


Cap rates continue to compress - further declines projected

Source: JLL Research, NCREIF

6.2% 6.1% 5.8% 5.2% 5.0% 4.8% 4.7% 4.5% 4.5%

0.0%

2.0%

4.0%

6.0%

8.0%

2009 2010 2011 2012 2013 2014 2015Q1

2015Q2

2015Q3

4

1

6

3 2

8

1 1

6

1

5

1

11

1

4

6

0

2

4

6

8

10

12

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

Rents continue to rise across all major markets The Los Angeles market has seen significant rental rate growth across the entire

metro area. As local economic conditions improve and tenants continue to

expand, landlords in both urban and suburban markets have remained bullish;

pushing asking rates and pulling back on discounts and concessions. While rents

have increased in dynamic markets with high-growth technology and media

tenants located primarily on the Westside, Mid-Wilshire and Hollywood, we are

also seeing rent growth in more traditional markets like the CBD which is home

to high concentrations of professional services and legal firms.

Playa entices tenants from neighboring Westside micro markets Playa Vista has quickly positioned itself as the new capital of Southern

California’s Silicon Beach. The Los Angeles technology and new media scene

which originally migrated from Venice Beach to Santa Monica has now slowly

migrated back south to Playa Vista. Enticed by new, creative development, tech

giants and smaller startups alike have shown up in droves. The micro market

witnessed 35 new entrants to the area since the start of 2014. The large volume

of deals, coupled with ground breaking and plans for future development signal

continued strength for the area.

Investment market heats up as cap rates decline Los Angeles is currently seeing strong investment activity and has recorded

growth in sales volume. A number of high profile assets have recently hit the

market for sale. The most notable being the assets from the Blackstone/Equity

Office Portfolio in Westwood which consists of four low risk, well performing

Class A office properties. This trade will likely fetch a market-high price per

square foot, and trade at a cap rate in line with current market rates. The market

is expecting to see a number of other portfolios come to market in 2016, likely of

the same asset grade and quality, proving that Los Angeles has plenty of

opportunity and is a viable place for investment dollars.

Strong finish due to improving fundamentals

2,257





15.5% Total vacancy




$0

$10

$20

$30

$40

$50

SanGabrielValley

South Bay Mid-Wilshire

Tri-Cities CBD Westside

Q4 2014 Q4 2015

39

- Tim Powers Research Analyst,

Miami


MIAMI

Transaction activity diverges with landlord attitudes Miami-Dade County’s fourth quarter office market leasing activity slowed slightly

as 160 lease contracts were signed across the market (down from an average of

180 transactions through the previous three quarters). The marginal slowdown

was driven largely by suburban submarkets, where leased space decreased to

250,000 square feet from an average of 435,000 square feet through the first

three quarters of 2015. Activity in Miami's CBD, in contrast, remained largely

unchanged at 275,000 square feet; compared to an average of 280,000 square

feet through the previous three quarters.

Suburban rents begin to rise as CBD rents remain stagnant to end 2015 Suburban landlords appear unperturbed by the downturn in lease transactions;

however, as average direct asking rates across these submarkets continue to

increase (up 3.8 percent year-on-year)–led by Miami Beach at an 8.6 percent

annual increase. Downtown and Brickell landlords have begun exhibiting signs of

a shift in attitudes toward pricing; however, and while growth in these

submarkets’ direct average asking rates remains robust on a year-on-year basis

(up 4.8 percent), quarter-on-quarter rates remained relatively stable in the fourth

quarter due perhaps to the recent increase of availabilities in the urban core.

Current and future availabilities drive CBD price adjustments Across the CBD submarkets, availabilities currently represent 19.0 percent of

inventory and are set to increase to 20.2 percent with the delivery of Brickell City

Centre’s two mid-rise (12 story) office towers in the first half of 2016. Of the

CBD’s available spaces, more than two-thirds have been listed for more than

one year (and 48.0 percent listed for longer than two years). Further, within the

CBD Class A submarket, the anticipated 1.2 million square feet of first quarter

2016 total available space represents 20.2 percent of the submarket’s Class A

inventory, of which nearly 40.0 percent will have been on the market for more

than three years. Nearly 83.0 percent of this CBD Class A availability is on or

below the 30th floor; a further indication of a competitive Class A market over the

medium term.

Submarket transaction trends diverge


CBD rates slip slightly as Suburban rates strengthen


Large amount of Class A availabilities linger on the market


Pricing adjustments in preparation for 2016

2,257





12.3% Total vacancy




0

100

200

300

400

500

600

0-1 year 1 - 2 years 2 - 3 years 3+ years

s.f., thd

25.00

30.00

35.00

40.00

45.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$ p.s.f. CBD Suburban

0

100

200

300

400

CBD Airport Coral Gables Other Suburbs

s.f. leased, thd 1Q 2Q 3Q 4Q


- Christian Beaudoin Research Director,

Chicago CBD

MILWAUKEE

Average lease term (months) by quarter


Total net absorption: Suburbs vs CBD


Construction activity broken ground in 2015


Spurred activity in Milwaukee comes with desire for flexibility Recent residential developments such as The Moderne, MKE Lofts, and The

North End in Milwaukee, along with promised infrastructure developments such

as the Lakefront Gateway Project and Streetcar, have identified the potential for

growth for Milwaukee. This has left landlords and tenants alike to speculate

about the short- to mid-term future of Milwaukee, and whether it is best to

commit to long-term leases amidst the evolving environment. This, in part, is

evident through slightly shorter average lease terms in office transactions

between 2014 and 2015. As uncertainty builds around future lease rates,

availability of space, and inflation, flexibility through shorter lease terms may

be desirable.

Large leases in first three quarters leave fewer options in CBD A strong first and third quarter in terms of both size and number of office lease

transactions throughout the Milwaukee market, within the CBD in particular, had

filled some of the remaining large availabilities of space. While the suburbs again

observed positive total net absorption of nearly 50,000 square feet, it was almost

completely offset by negative total net absorption within the CBD. It will become

a question of whether current availabilities paired with near completions such as

833 E. Michigan will be able to accommodate firms looking to be a part of the

activity downtown.

Class A office space to be delivered in 2016 continues to add up Irgens’ 18-story office tower at 833 E. Michigan has remained in the spotlight

throughout 2015 as a large deliverable for the CBD, but Irgens has invested in

the suburbs as well. A 150,000-square-foot office building is under construction

in Wauwatosa. The Corridor, offering up to 180,000 square feet of office space,

is planned for Brookfield. In terms of renovations, two skyline buildings (330

Kilbourn and Two-Fifty) have announced delivery of luxury office space as early

as 2016, which make them viable options for tenants looking to move or grow in

the CBD.

Milwaukee activity continues to drive leasing market

2,257

24

36

48

60

72

84

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


429 Q4 2015 net absorption (s.f.)



19.4% Total vacancy




0

200,000

400,000

600,000

800,000

1,000,000

CBD Suburban

s.f. Under Construction Under Renovation

49,609 s.f. of positive

absorption in

suburbs is

offset by…

-49,180 s.f. of negative

absorption in

CBD

2014 2015

41

- Carolyn Bates Senior Research Analyst,

Minneapolis


MINNEAPOLIS

West rental rates have been increasing at a rapid clip


Population growth year-over-year by city


2015 annual absorption in Northeast by class


West submarket now the most expensive The first quarter of 2015 was the first time that the average rental rate in the

West surpassed any other submarket—including the Minneapolis CBD. This

quarter has seen a marked cost increase in the West as more premium space is

being listed for lease. Over 50,000 square feet of Class A space has re-entered

the market in recent quarters; therefore, drastically raising average asking rates

in an already tight market. For instance, the 601 Tower at Carlson Center with

19.0 percent vacancy now has gross lease rates nearing $40.00 per square foot.

The economic moment is right for new office construction in the I-394 corridor,

and in October it was announced that Ryan Cos. and Artis REIT plan to build a

14-story office tower at 801 Carlson Parkway.

Minneapolis & St. Paul CBDs: a tale of two cities It is unusual for the St. Paul CBD to experience more activity than the

Minneapolis CBD, but large employer moves within St. Paul, including Pioneer

Press and financial services firm Green Tree, have created significant churn.

Absorption of high quality space drove down the average Class A rental rate this

quarter, while a number of less-attractive Class B spaces continually sit vacant.

The St. Paul CBD currently has the smallest difference in class asking rates

(only an 11.0 percent premium for Class A) out of all the office submarkets.

Meanwhile, the Minneapolis CBD is accommodating more rightsizing and cost-

aware moves; especially among law firms.

Plenty of Class A space in Northeast despite a growing demand for Class B This was a challenging quarter for the Northeast submarket as it saw

exceptionally large negative absorption totals. Be the Match finally relocated to

their new build-to-suit headquarters in the North Loop and opened up substantial

contiguous Class A space. Unfortunately, Class B space moves much more

quickly in the Northeast submarket and is even highly prized in the Arts District

with its renovated warehouses that host creative agencies, boutique retailers and

expanding breweries. To capitalize on the shift towards more aesthetic and

historic office space, Ackerberg is redeveloping the 48,500-square-foot Miller

Textile Building at 861 Hennepin Ave. in the heart of Northeast Minneapolis.

Suburban submarkets heating up faster than CBDs

2,257

$26.29 $27.89 $27.25 $27.93 $28.04 $28.80

$32.48

$22.15

$25.27 $25.50

$22.42 $22.79 $23.59 $24.90

$20

$25

$30

$35

2009 2010 2011 2012 2013 2014 2015

Class A rental rate Class B rental rate





14.6% Total vacancy




-0.9% -1.1%

1.4% 1.1%

2.3% 1.6%

-0.2%

-0.8%

0.5% 1.0%

2.5%

0.4%

-2.0%

0.0%

2.0%

2009 2010 2011 2012 2013 2014

Minneapolis

St. Paul

-144,266

110,394

-150,000

-50,000

50,000

150,000

Class A Class B

42

- Hensley Loeb Research Analyst,

Nashville


NASHVILLE

Historical transactions (average price per square foot)


Daily commute time for the Nashvillian continues to rise

Source: Thomson Reuters, JLL Research

Office construction pipeline (first 7 of 15 under construction)


Property sales soar past the crane-filled horizon Over $820 million in office investment transactions closed in Nashville in 2015, making it

the most active year ever and representing a 35.4 percent increase from last year. In this

18-hour city, outside investors are driving local real estate investment base prices

upward. Prices per square foot are also hitting new highs, which is pricing local investors

out of the market. During the fourth quarter a historical investment was made by San

Diego-based Southwest Value Partners: the purchase of the nearly 15-acre, one million-

square-foot Downtown Lifeway campus for $125 million. These high price tags, combined

with historically low vacancy rates, have pushed rental rates to unforeseen highs.

Citywide, investment base prices have increased and rents have been pushed upwards

with no relief in sight.

Traffic congestion, a marker for population and economic growth As a commuter, congestion usually lends itself to large scale frustration. According to the

U.S. Census Bureau, the average commuter in Nashville spends over 26 minutes en

route to and from work. Reframe those minutes and that frustration: congestion as tight

as Nashville is experiencing affirms its place as a NERDS city. Nashville’s population

growth is well above national average, and its vacancy rates and rental rates are well

below. In the short term, congestion speaks to the fact that Nashville is rapidly growing.

In fact, by 2040, between one and two million people will move to the area. Music City’s

population expansion drives the economy upward. Congestion in this sense can be

termed a positive marker for growth. If transportation challenges are not addressed now,

tenants will face a long-term tradeoff between amenities usually associated with the

Downtown submarket or the convenience usually associated with the suburban markets.

Mobility is critical for ensuring Nashville’s future.

2017 leasing activity may be the barometer for market outlook For the fifth consecutive quarter, vacancy rates hit an all time low, landing at 6.7 percent

compared to last quarter’s 7.3 percent. Vacancy rates are expected to continue declining

until new product arrives in 2017. With over 2.5 million square feet of office under

construction, Nashville is experiencing a building boom. Product delivering in 2016 is

73.4 percent preleased, whereas product delivering in 2017 is roughly 41.3 percent

preleased. Over the course of the next year, 2017 preleasing activity will be indicative of

what Nashville can expect for the future growth of the market. If leasing activity in new

construction stays as tight as it currently is, vacancy rates will most likely continue to

decline, despite the arrival of new product to the market.

A historic quarter for an historic year





6.7% Total vacancy




$117 $130 $131 $140 $138 $148

$134 $141 $159

$0

$50

$100

$150

$200

2007 2008 2009 2010 2011 2012 2013 2014 2015

26m 30s Average Nashville commute

Project SF Delivery Leased Submarket Onec1ty (Building 6) 110,000 Q4 2015 100% Midtown

Mallory Park – Phase 1 80,000 Q1 2016 100% Cool Springs

35 MSE 95,000 Q1 2016 81.5% Midtown

Seven Springs West 203,884 Q2 2016 85.3% Brentwood

Hill Center Brentwood B 114,000 Q3 2016 81.6% Brentwood

1201 Demonbreun 285,000 Q3 2016 60.0% Downtown

Capitol View – HCA 475,000 Q4 2016 100.0% Downtown

43

- Steve Jenco Vice President, Research,

New Jersey


NEW JERSEY

New Jersey employment changes by month (2015)

Source: NJ Dept. of Labor & Workforce Development

Northern and Central New Jersey vacancy rate trends


Metropark Class A vacancy rate trends


Employment growth on pace for biggest gain in 15 years After adding less than 30,000 jobs in 2014, the New Jersey employment market

registered signs of growth during the past year. With the exception of a brief

downturn during June and July, when 23,000 jobs were shed, the New Jersey

employment market posted monthly job gains in 2015. With 7,900 jobs added in

November, approximately 55,000 jobs have been created in the Garden State

since the beginning of the year. This represented the largest gain since 78,400

jobs were created in 2000. Accelerating gains in the employment market will help

to position the office market on the road to recovery in the coming year.

Class A vacancy rate slides to lowest level since mid-2013 Class A space emerged as the product of choice for office users during the past

year. Companies increasingly promoted their Class A work environments to help

retain as well as recruit new employees. After registering 691,500 square feet of

negative net absorption during 2014, rebounding demand led to nearly 1.4 million

square feet absorbed in the Class A office market one year later. The Class A

vacancy rate declined one percentage point from 2014 to 24.1 percent— its

lowest level since mid-2013. This was in contrast to the 1.1 million square feet of

negative absorption recorded in the Class B office market; where the vacancy

rate approached 26.0 percent— its highest level in three years.

Broad spectrum of commuting options attract tenants to Metropark Since nearing 25.0 percent in 2014, the Metropark Class A vacancy rate trended

lower during the past year in the wake of persistent leasing velocity. One year

later, the Class A vacancy rate had fallen below 19.0 percent, which represented

the lowest vacancy rate in Central New Jersey. Among the largest transactions

recently signed in this submarket involved the New Jersey Turnpike Authority’s

lease of the 205,000-square-foot former Hess headquarters building in

Woodbridge. The Turnpike Authority will be relocating its operations from 581

Main Street, also in Woodbridge. With its superior highway access and

commuter rail service via Metropark Train Station, this submarket is poised to

remain on the radar screen for office tenant requirements.

Class A market poised for continued growth

2,257

159,359,182 Total

inventory (s.f.)


$25.17 Direct average asking rent (p.s.f.)


24.6% Total vacancy




22.3%

20.2%

24.9%

18.7%

10.0%

15.0%

20.0%

25.0%

30.0%

2012 2013 2014 2015

5,600 8,600

1,900 3,900

9,800

-12,500 -10,500

15,500

8,000

16,800

7,900

-20,000

-10,000

0

10,000

20,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

23.0%

24.0%

25.0%

26.0%

Q1 2015 Q2 2015 Q3 2015 Q4 2015

Class A Class B

44

- Tristan Ashby Vice President, Research,

New York City


NEW YORK

Rent growth since market bottom (2010)


Manhattan tech leasing activity by year


Number of large-block leases in Lower Manhattan


Midtown Trophy index outperforms While New York’s banking sector continues to struggle, high-end financial

services—private equity, sovereign wealth and hedge funds—have driven

demand for Manhattan’s premier space. The Midtown Trophy Index—a subset

comprised of New York City’s most exclusive office buildings—has outperformed

the rest of the Midtown market; with the Midtown Trophy average asking rent

increasing 6.5 percent in 2015 to $99.43 per square foot. The average Midtown

Class A asking rent has grown 4.1 percent to $80.24 per square foot during the

same time period. Since the market bottom in 2010, the Midtown Trophy asking

rent has recorded some of the highest growth rates in Manhattan at 38.9 percent.

Tech leasing levels off in 2015 After steadily rising over the last five years, tech leasing leveled off in 2015. A

record number of large block leases (100,000 square feet or greater) helped

push overall activity to blockbuster levels in 2014 as companies looked to

establish or expand their operations and tap NYC’s creative talent pool. The

city’s maturing tech scene has come at a cost: asking rents in Midtown

South—the preferred tech location—are at an all-time high and available space

is limited. As a result, some tenants are considering short-term options at

co-working space providers like WeWork while others are looking to adjacent

markets

or Brooklyn.

Large block leasing velocity slows in Lower Manhattan At just 4.6 million square feet, Downtown leasing activity dropped 50.2 percent in

2015 from 2014; a watermark year for the market. Strong rent growth in

Downtown versus the larger market may have contributed to the slowdown—the

discount between Downtown and Midtown overall asking rents fell to nearly 20

percent throughout 2015, among the least since 2000. Increasing asking rents,

up 5.8 percent year-over-year, may have also slowed early renewal activity. Net

effective rents in the Class B sector nearly matched Class A levels due to an

increased desirability for loft-style office space, resulting in fewer leases by

price-sensitive tenants.

Rents end year higher, but leasing activity slows

2,257





9.6% Total vacancy




0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015

m.s

.f.

23.5%

24.9%

38.9%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Midtown Class B

Midtown Class A

Midtown Trophy

15 13

10

6

0

5

10

15

20

2012 2013 2014 2015

100,

000+

s.f.

leas

es

45

- Robert Sapunor Research Analyst,

Northern Virginia


NORTHERN VIRGINIA

100,000+ square foot leases


Half of all 20,000 s.f. or greater deals involved growth


Office construction will increase each of the next three years


Big leases return to the market Nine leases over 100,000 square feet were signed in the fourth quarter in

Northern Virginia. While the largest four deals were renewals by government

agencies and contractors, there was also significant growth by tenants within

other industries. Capital One signed a 137,000-square-foot lease at the recently

renovated 7900 Westpark Drive in Tysons. This lease was signed the same

quarter as the bank moved into 136,000 square feet at 1750 Tysons Boulevard.

AECOM signed a 116,511-square-foot lease at 3101 Wilson Boulevard that

included about 25,000 square feet of growth. Carfax also signed a 103,789-

square-foot renewal with expansion at 5860 Trinity Parkway in Route 28 South.

Tenants growing as budget clarity allows forward planning After years of rightsizing, tenants are beginning to expand, which has contributed

to the third straight quarter of positive net absorption. While the Northern Virginia

tenant base is diversifying, the majority of tenants are still dependent on the

federal government. The new $1.1 trillion spending bill provides clarity to

government agencies and contractors as well as a $24.0 billion increase in

defense spending. Tenants grew their footprint in 15 of the 30 largest deals this

quarter in Northern Virginia.

Construction activity ramps up Two new projects broke ground during the fourth quarter, bringing the total

amount of space under construction to over 4.0 million square feet. Reston

Station began construction on a 368,413-square-foot spec office connected to

the Wiehle Metro station. The building will be the first to deliver along the Toll

Road since 2009. 1000 N Glebe Road also broke ground. Marymount University

will occupy 66.0 percent of the 166,767-square-foot building in Ballston. While

only three buildings totaling 114,774 square feet delivered in 2015, there is 1.1

million square feet scheduled to deliver in 2016.

Expansion activity driving market rebound

2,257

600,000 558,187

335,001

208,221

161,641

137,000

122,948

116,511 103,789

Raytheon

U.S. Department of Defense

U.S. Department of Defense

Booz Allen Hamilton Inc.

LMI Government Consulting

Capital One

Fairfax County Public Schools

AECOM

Carfax

709,049 1,050,136 1,332,081

351,913

425,044 195,700

0

1,000,000

2,000,000

2016 2017 2018

Preleased Available





19.7% Total vacancy




50.0%

3.3%

46.7%

Growing

Shrinking

Stable

46

- Katherine Billingsley Research Analyst,

Oakland - East Bay


OAKLAND

Positive net absorption to continue into 2016


Demand exceeds supply with no relief in sight for the CBD


Sales activity by building class


Economy flourishes in 2015; office market reaping benefits Strong and steady economic growth in Oakland metro has translated into a

growing interest from tenants and institutional investors over the past year. As a

result, demand, leasing and sales activity remain on the upswing, with no

expectation of the market softening in the next 12-24 months. Oakland metro

recognized over 2.5 million square feet of leasing activity year-to-date, a 25.8

percent increase in the last 12 months. Notable leases this quarter include Aduro

Biotech, Union Bank and Dentons US—totaling over 100,000 square feet.

Furthermore, year-to-date net absorption has reached well over 1.0 million

square feet; nearly doubling last year’s figures.

Companies chase scarce availabilities into the new year Oakland is buzzing with activity; characterized by a diverse tenant base with a

wide size range of requirements. Currently there are over 3.0 million square feet

of active requirements targeting Oakland metro with over 70.0 percent focused

on the CBD alone. However, tenants are chasing scarce availabilities while

existing tenants are negotiating renewals and expansions in reaction to the

demand-supply dynamic and declining vacancy rate in the CBD. Overall rental

rates have increased by 33.1 percent year-over-year as a result of demand

pressures; therefore, causing tenants to consider viable options in Alameda,

Berkeley and Emeryville where full floors can be found.

Capital markets in full swing; investor interest remain strong Over $1.2 billion of sales volume occurred in the Oakland market in 2015 with a

high-water mark price of $349 per square foot. Among these trades are the

purchases of 1221 City Center by UBS, 505 14th Street and 1300 Clay Street by

Rubicon Point Partners this quarter; a strong indication that interest from core

investors has significantly increased in the East Bay. Additional buildings are

expected to come to the market as owners come to the end of their holding

periods, giving investors a promising outlook. Furthermore, Oakland metro

should continue to flourish as a number of housing, retail and restaurant projects

contribute to the economic boom, and position the East Bay as a fundamentally

sound market for institutional investment.

2,257

-200,000

0

200,000

400,000

600,000

800,000

2010 2011 2012 2013 2014 2015

CBD

Suburbs

29,940,850 Total inventory | Oakland metro (s.f.)


$45.05 CBD direct average asking rent


11.6% Total vacancy | Oakland metro




81%

19% Active requirements

Current Available Space

Rising tide; a pivotal year for Oakland

$200,000,000 $247,000,000

$334,270,500

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

Trophy A B

47

- Jared Dienstag Senior Research Analyst,

Orange County


ORANGE COUNTY

Class B rental rate appreciation year-over-year


Expected office deliveries (SF)


Class A Vacancy


Market fundamentals grow heading into 2016

2,257

4.3%

4.5%

7.5%

11.4%

15.9%

North County

West County

Central County

Airport Area

South County

7.1% 9.8%

14.5% 17.1%

19.4% 18.4%

17.1% 14.9%

14.3% 12.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

2006200720082009201020112012201320142015





11.8% Total vacancy




Annual positive net absorption streak hits five consecutive years Despite the Orange County office market recording slightly negative net

absorption during Q4 of -114,776 square feet, 2015 was the fifth consecutive

year that experienced annual positive net absorption. This feat has not been

accomplished since the period of 2002-2006. A primary reason the market

recorded negative net absorption during the fourth quarter was that previously

owner-occupied buildings of Bandai and Emulex were sold and became

subsequently vacant. This added a total of 160,595 square feet of unoccupied

space to the market. While the Airport Area accounted for 49.6 percent (587,033

square feet) of the total net absorption for the year, several large occupancies

from throughout the market contributed to the positive trend. The significant

occupancy gains include, St. Joseph Heritage Medical Group (191,556 square

feet), Hyundai Capital (177,000 square feet), Ingram Micro (176,000 square feet),

Carrington Mortgage (127,750 square feet) and the County of Orange (111,690

square feet).

Local technology sector grows with influx of venture capital funding Following the recession, the Orange County economy has become significantly

more diverse. A large portion of this transformation has stemmed from the

quickly growing Orange County technology industry. As of Q3 2015, high-tech

venture capital funding had a year-to-date total of $467.6 million—up 120.1

percent from the same time last year. Traditional technology markets such as

Silicon Valley and San Francisco have become increasingly competitive and

expensive which has resulted in companies looking elsewhere to open new

offices. Orange County’s highly educated and talented labor pool, along with

lower costs compared to other California markets, provide for conditions that are

favorable for the local technology sector to grow.

Rising rents and a tightening market drive up sales prices Prices of investment sales have grown to the highest point since the peak of the

market in 2007. Investors are attracted to the fact that rents are increasing while

still below prerecession levels, and leaving room for further growth. With positive

demand projected to continue and new construction deliveries adding to the base

in 2016, rents and sales prices should remain on this current path of growth.

573,387

2,160,000

825,000 750,000

0

1,000,000

2,000,000

3,000,000

2016 2017 2018 2019

48

- Valerie Mnayarji Research Analyst,

Central Florida


ORLANDO

2015 tenant activity by leading tenant industries

Source: Orlando EDC, JLL Research

Tenant leases reflect large block demand


Orlando’s leasing activity by major submarkets


Orlando’s economic conditions support continued growth for tech firms

Technology continues to be a growing local industry driver; comprising nearly

46,000 employees and an annual contribution of $22.0 billion to the economy.

This year the local market experienced greater leasing velocity from these firms;

primarily through relocations and expansions. Specific deals include

Booking.com (which expanded by 18,000 square feet in their Southwest location),

and Paylocity (which expanded to 61,000 square feet in Lake Mary).

Supported by Orlando’s low cost of business operation, high quality of life, strong

labor pool and inflow of over 4,000 college graduates annually, Orlando should

remain attractive to these firms.

Large blocks of quality space are decreasing This year, the most active submarkets (CBD, Southwest and Lake Mary) all saw

large blocks of quality space decrease as major tenants like CVS Pharmacy,

CNA Insurance and Webster University leased over 255,000 square feet of Class

A space. In the CBD, Class A large block vacancies have dropped 14.3 percent

year-over-year. In the suburbs, Lake Mary saw significant large block activity with

a 5.6 percent year-over-year vacancy drop in quality space. With a limited office

construction pipeline, Orlando will continue to experience tightening among large

blocks of quality space, which should put upward pressure on rental rates.

Orlando’s suburban submarket leasing remains strong, but CBD leasing continues minimal growth This year alone, the suburbs captured 1.1 million square feet of leases, taking 8.3

percent of the total stock off the market. In comparison, the CBD saw only

401,300 square feet of leases, representing about 6.6 percent of total stock. This

trend will likely continue as financial service firms, which represent a major driver

of tenant activity and generally prefer the downtown, show a marginally flat year-

over-year local job growth of 1.6 percent while life science tenants and

technology firms, located in Lake Nona and Lake Mary, respectively, expect

strong future job growth.

Class A leases drive record high tenant absorption

2,257 401,300

180,400

388,200

338,100

600,900

- 200,000 400,000 600,000 800,000

CBD

Lake Mary

Maitland

University Area

Southwest

16%

11%

41%

24%

4% 5% Tech firms

Law firms

Professional & business services

Healthcare

Banking

Construction firms





15.8% Total vacancy



39.8% Total under construction preleased

Tenant Location Square feet Deal type

Synchrony Economic Maitland Center 105,000 New

Deloitte Lake Mary 74,000 New

Akerman CBD 54,000 Renewal

Diamond Resorts

International Tourist Corridor 52,000 New

49

- Clint Randall Research Analyst,

Philadelphia


PHILADELPHIA (CBD)

Overall rental rate increases year over year


Current and future available blocks (now through 2017)


Proposed office pipeline: BTS and speculative projects


Market West absorption helps drive CBD vacancy to new low of 8.5 percent Philadelphia’s CBD has spent all of 2015 in single-digit vacancy, but major

absorptions in both Class A and Class B buildings, including 1900 Market

(Independence Blue Cross) and 2000 Hamilton (Free Library), helped to drive

vacancy down further. Q4 also saw robust leasing activity with numerous in-

market expansions such as MakeOffice at Seven Penn Center (56,000 square

feet), Comcast at Two Logan (44,000 square feet), Azavea at 990 Spring Garden

(22,000 square feet) and AdaptImmune’s new build-to-suit at 351 Rouse

Boulevard (47,400 square feet). University City and The Navy Yard also

constricted past their previous lows to levels below 2.0 percent (spaces under

construction are not included in this statistic). Leasing activity at the forthcoming

FMC Tower and 1200 Intrepid will determine whether each of these submarkets

may see some relief in mid-2016.

Strong market performance fueling developer confidence in office space The development pipeline is responding to the CBD’s strong performance. One

Franklin Tower at 200 N 16th Street is now listing over 400,000 square feet of

potential office (up from 200,000 square feet last quarter). Pre-development work

is underway at 2400 Market and 3.0 University Place, and preliminary plans

emerged for a Brandywine-led mixed use development on the 2100 block of

Market with a major office component. The scarcity of quality large blocks in the

existing inventory makes these speculative locations attractive to large tenants

circling the market or facing lease expirations in 2017-2019. Meanwhile, plans for

entire new office districts at the Science Center (uCity Square) and behind 30th

Street Station (Innovation Neighborhood) are making progress.

Rents continue growth across submarkets Landlords are asking more for available space as recent deals set new high-

water marks. On a weighted average, full service basis, Market West Class A

broke the $30-per-square-foot mark this quarter (a year-over-year increase of 3.3

percent). Market East continued to lead with 7.3 percent Class A year-over-year

growth; fueled in part by unprecedentedly high rents at boutique and new

creative spaces in Midtown Village.

Year end absorption rent growth, and vacancy

demonstrate historically tight market conditions

2,257

4.8%

3.8%

2.8%

2.7%

1.0%

Market West

University City

Market East

Navy Yard

CBD Overall

Build to suit:

1.56 msf 41% of pipeline

12

2 5

2

1 0

10

50,000 - 100,000 s.f. 100,000 - 200,000 s.f. > 200,000 s.f.

# o

f bl

ocks

Class A Class B





8.5% Total vacancy




Speculative:

2.20 msf 59% of pipeline

50

-Lauren Gilchrist Research Director,

Philadelphia


PHILADELPHIA (SUBURBAN)

Investment sales in King of Prussia / Wayne this quarter


Contiguous blocks of available space in the PA Suburbs


Leasing activity in Delaware County


Liberty Property Trust sells Horsham portfolio Liberty Property Trust continued its exodus from the Suburban Philadelphia office

market this quarter by selling a 41-property portfolio to a joint venture between

Rizk Ventures, EverWatch Capital, Forum Partners and the JMP group.

Collectively, this is the first real estate purchase for the joint-venture known as

Workspace Property Trust. At the time of the sale, the portfolio was 84.3 percent

leased. Workspace Property Trust is expected to raise rents across the portfolio.

This is similar to how Brookwood Financial Partners raised rents after purchasing

Brandywine Realty Trust’s 29-property-portfolio in Horsham and Fort Washington

in August of 2015. Ultimately the ownership change in Horsham and Fort

Washington will increase rents and create new competition in the market.

The curious case of Philidor RX Located within the aforementioned Horsham portfolio sale is the curious case of

Philidor RX Services. In October, the mail-order pharmacy leased almost 145,000

square feet of expansion space at 507 Prudential Road and 300-399 Lakeside

Drive in Horsham. Shortly after signing those leases, the U.S. Securities and

Exchange Commission shut down Philidor for altering doctors prescriptions to

boost sales of Valeant Pharmaceutical’s brand name drugs. Philidor has

announced they will cease operations in the next 30 to 90 days, and Workspace

Property Trust will soon have an additional 207,123 square feet of availabilities to

lease in 2016.

Delaware County will experience large positive absorption in 2016 After back to back years with rising vacancies, Delaware County experienced

366,282 square feet of leasing activity this quarter as three major deals scattered

across Delaware County accounted for 82.7 percent of leasing activity.

Wilmington-based biopharmaceutical company Incyte Corporation signed two

leases for 111,500 square feet at Painter’s Crossing Office Campus in Chadds

Ford. At 2501 Seaport Drive in Chester, Power Windows and Siding agreed to an

expanded 104,661 square feet in the former Wells Fargo space. In Newtown

Square, Main Line Health agreed to lease 87,000 square feet at Ellis Preserve,

where they already occupy 130,000 square feet. Based on these thee large deals,

Delaware County is poised to experience large positive absorption in 2016.

Liberty sells Horsham, continues suburban exodus

2,257

366,282 s.f. Square footage leased in Delaware County during

the 4th quarter





15.2% Total vacancy




18 2

2

14

8 0

0

10

20

30

40

50,000 - 100,000 s.f. 100,000 - 200,000 s.f. > 200,000 s.f.

# o

f bl

ocks

Class A Class B

$245,300,000 Total value of 41 property portfolio Liberty Property

Trust sold in the 4th quarter

51

- Kiana Cox Senior Research Analyst,

Phoenix


PHOENIX

Tech tenants relocating to the CBD


Phoenix metro 2015 speculative deliveries per quarter


Tempe Class A vacancy sees slight increase


Central Business District encouraging tech migration with redevelopments Despite having many of the live-work-play elements that attract tech companies

and the millennials that often make up their workforce, the CBD has not attracted

nearly as many of the tech companies that have propelled the economies of

suburban submarkets in the East Valley. Traditional office space still prevalent

throughout the CBD has been one of the key issues deterring new tech

companies, and developers have responded with several key redevelopment

projects. While older office buildings are overhauled with more collaborative

space and higher ceilings, the Phoenix Warehouse District is also emerging as

an urban center with new live-work-play opportunities.

Construction boosts net absorption gains as tenants take new space A majority of the largest positive net absorption gains in the fourth quarter have

been from new construction, with over 1.0 million square feet of absorption

concentrated in just eight buildings. While 729,000 square feet of the positive

absorption stemmed from completed build-to-suit projects, the majority of new

deliveries have been speculative projects with significant pre-leasing success,

already 47.0 percent leased on average. With the help of these new deliveries,

the market recorded the largest single-quarter net absorption gain since the

second quarter of 2006, reaching 1.7 million square feet in the fourth quarter (2.9

million square feet total in 2015).

More options for large tenants available within Tempe submarket Just a few months ago, Tempe’s Class A vacancy rate reached as low as 3.2

percent, with few options for tenants that required 20,000 square feet of space or

more. Still one of the Valley’s most popular submarkets, more options have

become available for large tenants willing to pay a premium, including a large

sublease availability in the newly delivered Hayden Ferry III. Only five Class A

buildings in the Tempe submarket are able to accommodate a tenant of at least

20,000 feet, and due to the high demand for these spaces, some landlords are

refusing to divide floors or will only entertain multi-floor deals.

Largest absorption gains in Phoenix since recession

2,257

6.1% 6.5% 6.4%

4.8% 4.8% 3.9%

3.2% 3.8%

0.0%

2.0%

4.0%

6.0%

8.0%

14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4

0

200,000

400,000

600,000

Q1 Q2 Q3 Q4

s.f.

Leased Available





20.9% Total vacancy


$27.22 Class A average asking rent

66.0% Under construction total preleased

Tenant name Building HQ

WebPT – software 515 E Grant Street Phoenix, AZ

Galvanize – tech education 515 E Grant Street Denver, CO

Inspire Data Solutions – software 111 W Monroe Street Scottsdale, AZ

Yazamo – marketing software 112 N Central Avenue Phoenix, AZ

52

- Andrew Batson Research Manager,

Great Lakes


PITTSBURGH

Skyline vacancy forecast


Signed office tenants at 3 Crossings


Southpointe negotiating leverage


The Skyline’s vacancy forecast is contained by U.S. Steel’s decision In November of 2014 U.S. Steel announced plans for a new 268,000-square-foot

headquarters in the Lower Hill District. Clayco would act as the developer on the

project, completing construction within 22 months and then leasing it to U.S.

Steel for 18 years. However, in a stunning reversal, U.S. Steel announce in

November of this year that they were abandoning their new headquarter plans

and instead had signed a short-term extension at U.S. Steel Tower while the

reevaluate their long-term options. This announcement has a dramatic effect on

the long-term outlook for the Pittsburgh Skyline as U.S. Steel was set to vacate

425,000 square feet at the Class A office tower.

3 Crossings development in the Strip District tops headlines in 2015 The mixed-use project with an estimated price tag of $160 million will include

four office buildings totaling 363,000 square feet along with 300 apartment units,

retail, and a parking garage. The first office building totaling 53,000 square feet

delivered in the fourth quarter and is fully leased with Rycon Construction as the

anchor tenant. Construction is underway on the second office building which will

total 77,000 square feet. That building is scheduled to deliver in July of 2016 and

has been leased to Robert Bosch. In the spring construction will begin on the

third office building which will total 110,000 square feet. That building is

scheduled to deliver in March of 2017 and has been leased to Burns White.

With downturn in energy, office demand in Southpointe subsides Pittsburgh has long been an energy hub. First it was coal, then nuclear and most

recently natural gas. Each of these sectors however, is in the midst of a

downturn, and as a result, office demand from energy tenants has subsided. This

is particularly true in the Southpointe submarket where energy companies

associated with the natural gas industry have concentrated. Vacancy in this

submarket neared 5 percent a few years ago and is now north of 10 percent.

This has caused a shift in leverage from a purely landlord favorable position to

one of a more neutral position.

2,257





15.0% Total vacancy




3%

7%

11%

15%

2010 2011 2012 2013 2014 2015 2016 2017 2018

Tenant Building Leased s.f.

Burns White Riverfront East 80,000

Robert Bosch 2555 Smallman 52,000

Rycon Construction 2501 Smallman 25,000

Tenant favorable market

Neutral market

Landlord favorable market

‘12

‘13

‘14

‘15

‘16

U.S. Steel’s HQ reversal alters Skyline forecast

53

- Geoff Falkenberg Research Analyst,

Portland


PORTLAND

CBD Class A vs CBD Class B asking rents


CBD asking rents and absorption


Metro deliveries and forecast


Does class matter? As vacancy in Portland’s CBD stays at a record-setting low, limiting options for

large tenants and tenants with special needs alike, the amenities that tenants

demand are also moving into new territory. Demand for the creative feel is

increasing among non-creative companies, producing an environment where

Class B and C office space can pull in increasingly commanding rents. A

landscape has been formed where creative Class B office space, in specific

buildings, can bring in higher rents than traditional office space in Class A

buildings. These trends are leading to a shift in thinking about what defines Class

A space in Portland and pushing owners of Class A space to evaluate significant

renovations of their buildings/lobbies to compete for tenants.

Absorption on the rise After a tepid third quarter, market absorption ended the year with a commanding

368,818 square feet in the fourth quarter; over a third of which took place in the

CBD. Leasing activity, however, has not been limited to the CBD. The Westside

suburbs saw a flurry of action, and ended the quarter with over 100,000 square

feet of absorption. The Eastside suburbs saw over 50,000 square feet absorb

during the fourth quarter; with special note on Treehouse moving into 14,268

square feet at 1 N Fremont -West. With over 600,000 square feet of new office

space forecasted to deliver in the first quarter of next year alone, expect

absorption to remain elevated as tenants move into delivering buildings with

leases signed in 2014-15.

Metro construction begins to grow After five years of lower than average office deliveries, Portland has crossed the

10-year average of 444,399 square feet with 477,490 square feet of new or

renovated office space delivered in 2015. Though a casual step forward in 2015,

the metro area will see over 1.5 million square feet delivered in 2016—

representing a 248 percent increase from the 10-year average. JLL is currently

forecasting over 500,000 square feet to be delivered in 2017. For all

development currently under construction, approximately 55 percent is

preleased. The relocation of some larger tenants will lead to a growing amount of

shadow space in the tight Portland office market.

Absorption and deliveries are up

2,257





8.9% Total vacancy

783,626 Annual net absorption (s.f.)



$17.93

$21.77 $19.87

$29.28 $24.43

$26.38 $25.59

$31.26

$17

$19

$21

$23

$25

$27

$29

$31

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Class B Class A

-200,000

50,000

300,000

550,000

800,000

1,050,000

1,300,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Deliveries Estimated Forecast

-1,100

-100

900

1,900

$20

$22

$24

$26

$28

$30

$32

Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015

Hund

reds

CBD Absorption CBD Rents

54

- Ashley Lewis Senior Research Analyst

Raleigh-Durham


RALEIGH-DURHAM

Unemployment rates – Raleigh MSA vs. Durham MSA


Preleased square footage for Midtown construction


Sales volume best in past eight years


2015 unemployment round up Although North Carolina’s unemployment rate declined to 5.3 percent during first

quarter; it slowly escalated back up to a high point of 5.9 percent. Down from its

August 2015 high point; unemployment is now remaining steady at 5.7 percent.

Overall in 2015, North Carolina has added over 91,000 jobs in the non-farm

sector. A majority of these jobs were created within the education and health

services industry. Taking an even closer look, Durham-Chapel Hill is consistently

adding more jobs to the area than Raleigh-Cary metro. North Carolina landed the

10th spot for job growth in the United States through the first three quarters.

Raleigh-Durham expects to continue to see this unemployment percentage

decrease in 2016. Disregarding Manufacturing industries, two-thirds of

companies expect to increase employment in 2016 according to the Duke

University/CFO Global Business Outlook Survey.

Breaking ground in Midtown district once again Construction continues as the third tower in a series at North Hills Business Park

breaks ground fourth quarter. Known as Midtown Plaza, the 300,000-square-foot

12-story office tower is planned for a third quarter 2017 delivery. It is already

preleased 74.0 percent anchored by Allscripts’, which is consolidating in the

market. Midtown Plaza joins the 18-story Bank of America Tower being

constructed only a few feet away in the newly minted Midtown district. Both

buildings’ developed by Kane Realty and owned in a joint venture with KBS

Realty Advisors, offer a plethora of amenities and easy access to the

440-beltline.

2015 saw the highest in sales volume for Raleigh-Durham since 2007 In 2015, Raleigh-Durham recorded over 40.5 million square feet of office space

trades at an average of $157 per square foot. This year sets a record in sales

with major happenings in first and fourth quarters including the Duke Realty

portfolio sale of 24 buildings consisting of 2.7 million square feet at $185 per

square foot. These record-setting numbers top the past eight years of office

sales. 2015 being the year for Wake County Revenue Department to reappraise

all properties, commercial properties’ assessed values increased 19.0 percent

county-wide since the last octennial appraisal completed in 2008.

2015 sales volume hits record high

2,257

51.2%

74.3%

0.0%

50.0%

100.0%

Bank of America Tower Midtown Plaza





11.9% Total vacancy




0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2010 2011 2012 2013 2014 2015

s.f.

55

- Geoff Thomas Senior Research Analyst,

Richmond


RICHMOND

Suburban vs Downtown investment sale volume


NWQ and SWQ total Class A vacancy rate


Tenant footprint growth year to date


Investment sales volume inflated by tower trades in the CBD After a year of nearly anemic investment sales volume Downtown, several core,

core-plus and value added transactions fueled total dollar volume for the entire

Richmond market in 2015. Clayco’s recently delivered Gateway Plaza, the

newest trophy tower in the CBD, traded for roughly $104 million, or $335 per

square foot, to Lexington Realty Trust with an 8.0 percent cap rate. At the time of

the sale, only two floors remained available equating to a vacancy rate of 16.0

percent. Value added opportunities also fueled dollar volume with the sale of

Riverfront Plaza to Hertz Investment Group. The two late-1980s, Class A towers,

totaling 951,897 square feet and 72.0 percent leased, traded with a price of $155

per square foot and a rumored pro-forma cap rate of 11.6 percent.

Limited new construction may limit expansions in the suburbs

Richmond suburbs nearly reached the lowest prerecession Class- A vacancy

rate of 8.3 percent recorded in 2008; however, total square feet delivered in the

past three years equated to 10.4 percent of the square feet delivered between

2006-08. With only one Class A availability over 50,000 square feet, a result of

Capital One consolidating several leased offices to their West Creek campus,

mid-size firms seeking expansion space in the Richmond suburbs may have no

other choice than new construction. In the fourth quarter, several proposed

projects totaling over 560,000 square feet were marketed with pre-lease

requirements of 25.0-50.0 percent, but no future tenants have signed on.

Tenants growing their footprints in over half of all leases signed Expansionary activity was the recurring theme in 2015 with 66.0 percent of all

deals signed as a result of expanding tenants. For firms increasing in size, their

footprint increased by an astounding 44.6 percent. The two largest expansions

this year were completed by Minacs at 1403 Cummings Drive in Scotts Addition

(which increased in their footprint by 72.4 percent in the Richmond market) and

Kaleo (formerly Intelliject) which increased their footprint by 71.5 percent in the

Turning Basin Building in the CBD. Conversely, several firms that contracted this

year averaged a relatively modest 15.7 percent foot print reduction.

Upside potential for Downtown draws investors

2,257

$64

$145

$2

$335

$4

$138

$7 $20

$146

$61

$0

$200

$400

2010 2011 2012 2013 2014 2015

Dol

lar

volu

me

in M

illio

ns Downtown Suburban





14.1% Total vacancy




8.8% Suburban Class A vacancy

66% 6%

28% Growing

Shrinking

Stable

56

- John Sheaffer Research Analyst,

Sacramento


SACRAMENTO

Market-wide YTD total net absorption (% of inventory)


Activity spilling over into neighboring South Natomas


Leasing activity by tech firms in Folsom


Office market beginning to fire on all cylinders Year-over-year average asking rates are rising across the board among all

submarkets and all but one of those submarkets posted positive net absorption,

driving down the overall vacancy rate to 16.0 percent, the lowest figure since

2007. State agencies, insurance groups and regional healthcare systems

continue to absorb large available blocks. While professional and business

services, especially architecture and design firms, are chipping away at vacancy

from the opposite end of the size spectrum. Rising demand for healthcare

services, a balanced California state budget and continued spillover from the Bay

Area will help carry market momentum through 2016.

South Natomas rental rates closing gap on the CBD Contiguous space availability downtown has dwindled to a single block over

50,000 square feet and the average asking rate rose again for the 9 th

consecutive quarter. Located directly across the river from the grid, South

Natomas has benefited from an increasingly competitive landscape downtown,

with over 200,000 square feet of positive net absorption to date. Landlords are

capitalizing on this trend—the average asking rate shot up by 15.1 percent year-

over-year, to $2.20 full service. Cost-conscious tenants will increasingly look to

the Point West Submarket where rents sit well below the market average as the

only viable option within close proximity to downtown.

Tech presence growing, organically and by way of Bay Area spillover After a few relatively quite years, the local technology sector is showing signs of

building momentum. Folsom, Sacramento’s mini tech hub, experienced a late

flurry of activity with three tech companies taking a total of 97,000 square feet in

November alone. Two companies, both new to the market, cited Folsom’s

relative affordability, favorable demographics and STEM labor pool as

determining factors in relocating. Other Bay Area tech companies, like Google,

have expanded their local footprint as well. Sacramento is beginning to emerge

as a cost-effective destination for back-office, Bay Area tech operations.

Market closes out year with strong gains

2,257

$1.80

$2.00

$2.20

$2.40

$2.60

$2.80

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

CBD South Natomas

222,863 212,732 274,428

215,862 176,312

317,114

0

200,000

400,000

2010 2011 2012 2013 2014 2015

s.f.





16.0% Total vacancy




-3.1% 0.2% 0.4%

1.1% 1.1%

2.2% 2.3%

4.1% 5.8%

6.5%

Folsom

Campus Commons

Midtown

Point West

Rocklin

57

- Christian Forbes Research Analyst,

Salt Lake City


SALT LAKE CITY

Nearly 5,000 square feet of new office demand, every day


Unprecedented run-up in levels of newly built properties


2015 sees rents climb across geographies and asset classes


Office-using employment gains remain remarkably strong Salt Lake City office-using payrolls continued to swell beyond all-time highs

during the last quarter, adding 3,700 jobs over the last three months alone.

Perhaps most promising, these gains have been sustained; in the last five years,

office-using industries have shed jobs in only 13 months, while white-collar

employment during this time has increased by 21.3 percent. The commercial

office market continued to reap the rewards of this historically exceptional

demand. Using a 225-square-foot-per-employee average, the metro’s year-to-

date job-adds equated to users in need of an additional 1.8 million square feet of

office space.

Can red-hot construction pipeline keep pace with tenant demand? To illustrate just how desirable the office market has become, witness the pairing

of record levels of new construction and net absorption measuring north of one

million square feet for the year. Year-to-date, the 1.2 million square feet of newly

completed properties represented a six-fold increase over 2014’s amount.

Developers have struggled to build quickly enough; for every four new square

feet added to inventory during the past 12 months, three square feet were leased

prior to actual delivery. Looking ahead, another 2.7 million square feet of product

is currently being developed, of which, nearly 60.0 percent is already spoken for.

Asking rents continue to rise; further escalations expected Over the last several quarters, the availability of large block options has

diminished significantly. Sizable users have been driven to act quickly, should

they be fortunate enough to even find space that sufficiently meets their needs.

Until new supply can adequately catch up to seemingly insatiable user demand,

the market will continue to tighten as landlords push asking rents higher. Across

the metro, rates have climbed by 7.2 percent in the last 12 months, with greater

gains recorded in suburban markets. As new, more expensive product delivers,

expect rents to increase by no less than 3.0 percent annually through at least

year-end 2017.

Salt Lake City now synonymous with robust demand

2,257

22 net new office-using jobs added to the market each and

every day during the past 12 months

-

1,000,000

2,000,000

3,000,000

2010 2011 2012 2013 2014 2015 2016

Squ

are

feet





6.4% Total vacancy




Historical completions

1.8%

3.1%

4.3%

6.0%

7.1%

12.4%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

CBD, A

CBD, B

CBD, Totals

Suburbs, A

Suburbs, Totals

Suburbs, B

metro = 7.2%

58

- Travis Rogers Research Analyst,

Austin


SAN ANTONIO

Recent and projected construction deliveries (s.f.)


Annual average Class A sales price per square foot ($)


Class A & B average full service rental rates by submarket ($)


Fourth quarter closes with strong year of construction deliveries Two speculative projects, WestRidge Two at La Cantera (129,000 square feet)

and Heritage Oaks III (109,000 square feet), delivered during the fourth quarter.

Collectively, these properties delivered 100 percent vacant, however, if we look

at total preleased square footage at the time of delivery during the past 12-

months, the average prelease rate was 56.0 percent. The top three projects to

deliver in 2015 were all build-to-suit. These properties are 9500 Westover Hills

(180,000 square feet), 8100 Potranco (160,500 square feet), and WestRidge

One at La Cantera (129,000 square feet). In total, San Antonio added over 1.1

million square feet of new inventory during 2015.

Over 1.2 billion in annual sales volume San Antonio has experienced over 20 transactions larger than 50,000 square

feet during the course of 2015. Even with a handful of undisclosed sales prices,

San Antonio has cleared $1.2 billion in annual sales volume. Class A product

averaged $197 per square foot with a 7.1 percent cap rate. Over 97.0 percent of

this activity took place in the suburbs. The top three transactions in the last 12-

months were Ridgewood Park Office Campus, The Forum and Promenade at

Eilan I & II.

Where is the largest spread between Class A & B rents? Market rents can vary anywhere from $19.02 per square foot for Class B space

downtown or as high as $29.99 per square foot for Class A space in Far North

Central. The largest gap between Class A and B space is found downtown with

an almost $7.00 per square foot difference. Following downtown is Northwest

with a $6.00-per-square-foot difference. The smallest spread between office

product can be found in Far North Central at $3.59 per square foot. Looking at

the market as a whole, spreads are the lowest in northern San Antonio and

highest in the south or downtown. This is a result of newer or higher quality

Class B office product in a booming northern corridor.

Huge deliveries, mammoth sales, great 2015

2,257

$197/s.f. Citywide annual average Class A sales

price per square foot

537,515

132,569

282,024 238,015

147,000 109,000

270,000

-

100,000

200,000

300,000

400,000

500,000

600,000

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

$25.87

$29.99

$26.22 $25.77 $26.29

$19.02

$26.40

$22.51 $20.14 $20.25

$23.30

$13

$18

$23

$28

$33

Downtown Far NorthCentral

NorthCentral

Northeast Northwest South

Class A Class B





14.8% Total vacancy




59

- Josh Brant Senior Research Analyst,

San Diego


SAN DIEGO

Vacancy rate in recent speculative office developments


Q4 2015 Net Absorption for Carlsbad


Local private colleges reporting decreased enrollment

Source: San Diego Business Journal, JLL Research

New speculative office deliveries add vacancy In 2015, the San Diego office market delivered the first significant speculative

office building since 2010 with Irvine Company’s 306,000-square-foot One La

Jolla Center. Other speculative office construction delivered in 2015 included

American Assets Trust’s two 19,000-square-foot additions to Torrey Reserve in

Del Mar Heights, Kilroy Realty’s 73,000-square-foot The Heights Del Mar project,

in Del Mar Heights, and Cruzan’s 177,000-square-foot office conversion MAKE,

in Carlsbad. At the end of 2015, these properties were 81.6 percent vacant,

comprising nearly half a million square feet of vacant office space, or 4.3 percent

of the county’s 11.3 million square feet of vacancy.

ViaSat rapidly expanding and driving occupancy growth in Carlsbad Carlsbad posted the largest positive net absorption in the fourth quarter for any

submarket in the county, a total of 133,266 square feet. ViaSat, a Carlsbad

based broadband services and technology company, is a major driver in the

Carlsbad office market. ViaSat’s recent growth comes from multiple factors

including new contracts with the U.S. Navy and Virgin America airline along with

the pending launch of ViaSat’s newest satellite. Levine Investments completed a

74,000 build-to-suit office for ViaSat in the fourth quarter with a neighboring

build-to-suit for ViaSat still under construction. Additionally, ViaSat purchased 23

acres from HCP in the fourth quarter to accommodate future growth.

Private colleges continue to see enrollment decline 2015 saw the continued decline of many large for-profit colleges across the

nation. Locally, Bridgepoint Education vacated 40,000 square feet of office space

downtown in the fourth quarter, on the heels of vacating nearly 150,000 square

feet of office space in Rancho Bernardo to start the year. Overall, local

enrollment in (non-religious) private colleges decreased 9.2 percent from 2014,

with National University’s large gains offsetting some of the losses. Of private

colleges in San Diego13 out of 15 reported year-over-year enrollment losses.

Webster University closed their San Diego location in the fourth quarter and we

anticipate a further contraction for this sector of office users as enrollment

continues to trend downward.

Developers add new offices with little pre-leasing

2,257

87% Number of private non-religious colleges

reporting year-over year enrollment

losses in San Diego

133,266 s.f. Carlsbad lead the county in the 4th quarter





14.4% Total vacancy




82%

The vacancy rate for speculative

office properties which delivered in

2015 was eight-two percent at

year-end.

60

- Jack Nelson Research Analyst,

San Francisco


SAN FRANCISCO

Drastic increase in sublease space


Highest square foot delivery since 2008


Decline in total volume sold in 2015


Large availabilities drive sublease space Sublease availabilities increased to over two million square feet, the highest

since Q4 2009, largely due to major subleases from Charles Schwab, Dropbox,

Twitter, and LinkedIn. Tech companies represent the overwhelming majority of

sublease space at more than 41.0 percent. While LinkedIn and Dropbox

availabilities were expected upon relocation to their respective headquarters,

other tech subleases are the result of firms failing to grow into leased space for a

variety of reasons. However, with strong tenant demand and rapidly declining

vacancy, the increase in sublease space presents new opportunity for tenants

looking to enter or expand into the market.

2015 deliveries not providing raw supply Four projects delivered in 2015: 350 Mission, 222 Second, 333 Brannan, and 345

Brannan. Despite adding 1.2 million square feet to the inventory, at 100 percent

pre-leased these new deliveries are no relief to active tenants in the market.

However, of the buildings currently under construction for delivery over the next

two years only 35.0 percent is pre-leased, but this available space will come at a

cost. Average pricing for projects under construction is $79 per square foot, a

15.0 percent premium over the market’s current asking rate, with some space

surpassing the $100-mark where premium views are available.

Investment sales cool, but looking to heat up 2015 marked a relatively quiet year with only 15 investment sale transactions

greater than $25 million completed. These transactions total approximately $3

billion in aggregate value, roughly half of the $6 billion which was recorded in

2014. With near historic levels of investment activity in 2012 and 2014, a

substantial portion of the city’s institutional office buildings have already traded

hands this cycle, with many of these assets being acquired by investors with

long-term investment strategies. Foreign capital flows into San Francisco are

likely to increase in 2016 with the recent reform to the Foreign Investment in Real

Property Tax Act of 1980 (FIRPTA).

Major sublease availabilities, cause for concern

or mere happenstance

2,257 $0

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

2014 2015

2,053,655

1,201,418

- 500,000 1,000,000 1,500,000 2,000,000 2,500,000

2008

2009

2010

2011

2012

2013

2014

2015

49.4% Sublease space since Q3





8.2% Total vacancy




61

- Christan Basconcillo Research Manager,

Silicon Valley


SAN FRANCISCO MID-PENINSULA

Supply crunch for large tenants seeking campus expansion


Slow and steady-vacancy continues decline


Investors increase their bets on Mid-Peninsula assets


Development on the horizon; concerns of infrastructure strain The overspill of Silicon Valley tenants is pushing rents to levels high enough to

justify future speculative office construction. Recent large block transactions are

stoking a development race that will help to relieve Class A supply constraints;

especially in Downtown micromarkets. However, the ramp up in office

construction is creating concern from city officials. Some office proposals have

recently been reduced or revised to include space uses other than pure office.

Additionally, traffic congestion and transportation management have become a

growing concern. The strain on the region’s infrastructure created by the inflow of

tenants could limit future new development and offer little relief to supply

constrained submarkets.

Heated markets see tighter conditions Overall vacancy continues to decline as tenants look to the Mid-Peninsula,

especially within transit-oriented, amenities-rich areas. This has prompted

developers to bet on second generation office buildings with value add potential;

especially in areas serviced by Caltrain. Hot submarkets like Redwood City and

San Mateo are experiencing a flurry of tenant demand; consequently, sparking

the redevelopment of older buildings into mid-rise, mixed-use and new

generation space. As a result, young tech companies are flocking to downtown

micromarkets and prompting significant rent growth. As conditions begin to

tighten, tenant movement will push north toward softer submarkets of the Mid-

Peninsula unless additional suburban development breaks ground to ease

supply constraints.

Macroeconomic factors increase the pool of investors for assets Recent easing of a 35-year-old real estate tax on foreign institutional investors

has opened the door for a significant source of funds that will likely land on

assets in the Mid-Peninsula. Foreign investors have been very active in the Mid-

Peninsula and looking for a safe haven for funds that otherwise could suffer

deteriorating conditions overseas. The lift of the real estate tax on foreign

investors comes amid an environment of depreciating foreign currencies and

gradually increasing interest rates by the Federal Reserve; which provide

stronger arguments to land foreign funds locally in the Bay Area.

Tenants target new development, tightening market

2,257

7 3 0

1

0

10

20

30

50,000 - 100,000 s.f. 100,000 - 200,000 s.f. > 200,000 s.f.#

of

bloc

ks

Class A Class B





10.4% Total vacancy




$4,176.9

$188.5 $137.5 $5.3 $62.3 $318.5 $219.8

$1,354.5

$2,940.6

$M

$1,000M

$2,000M

$3,000M

$4,000M

$5,000M

2007 2008 2009 2010 2011 2012 2013 2014 2015

5.0%

15.0%

25.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Class A Class B

62

- Alex Muir Research Manager,

Seattle-Bellevue


SEATTLE-BELLEVUE





10.2% Total vacancy




Square feet of office product delivered


Historical sales volume ($mil)


Net absorption in the last three years


Development activity hits prerecession levels Seven major office projects delivered this year; totaling more than 2.2 million

square feet. This makes 2015 the most active year for development since prior to

the recession. The largest project, 929 Office Tower, is the first office building to

be delivered in downtown Bellevue since 2009. With more than 5.9 million

square feet scheduled to deliver in the next two years, construction activity will

continue to dominate the conversation. Tenants will have ample opportunity to

acquire premier space and continue migrating to, and growing in, Puget Sound;

as just 35.1 percent of the space is currently preleased. Average asking rents for

new construction space being marketed stand at $48.50 per square foot, full

service, and represent a 42.7 percent premium over the regional average.

Sales volume nearly matches the combined total of 2013 and 2014 More than $4.4 billion in office investment transactions have occurred in Puget

Sound this year. This represents a 152.5 percent increase over all of 2014. The

most active submarkets for sales have been the Seattle CBD and Lake Union,

with year-to-date volumes of $1.3 billion and $849.9 million, respectively. In the

fourth quarter, an influx of foreign capital helped drive sales volume close to the

region’s 2012 level, when Amazon purchased its headquarters. Three of the 10

buyers were foreign and accounted for 50.2 percent of quarterly volume.

Additionally, the two largest office sales in the region this year–Columbia Center

and Amazon Phase VI – were purchased by foreign investors.

Net absorption surpasses 2.0 million square feet For the third consecutive year, net absorption has surpassed 2.0 million square

feet. In Q4, 551,591 square feet of space was taken down, bringing the 2015

total to nearly 2.5 million square feet. Total vacancy in Seattle-Bellevue remains

at 10.2 percent and is as low as the market has seen in the last 10 years.

Subsequently, average asking rents are up 7.5 percent year-over-year and have

hit a 10-year peak. Fourth quarter leasing activity was driven primarily by

technology tenants; however, Safeco’s deal at Safeco Plaza was far and away

the largest. Other tenants that signed major leases include Intellectual Ventures,

DocuSign, Salesforce and Juno Therapeutics.

Market momentum shows no signs of slowing down

2,257

$1,200.0 $1,700.0

$4,900.0

$2,800.0

$1,759.5

$4,443.2

$M

$2,000M

$4,000M

$6,000M

2010 2011 2012 2013 2014 2015

7,138,496 s.f. Net absorption in the region 2013-2015

826,705

128,904 283,545 462,312 480,000

2,251,966

0

1,000,000

2,000,000

3,000,000

2010 2011 2012 2013 2014 2015

- Christan Basconcillo Research Manager,

Silicon Valley


SILICON VALLEY

Net absorption continues its positive run


Class A vacancy on the decline


Valley companies still attracting VC dollars

Source: JLL Research, RCA

Level of demand expected to stay its course Silicon Valley experienced yet another solid quarter of net absorption. Based on

the level of touring activity, more tenants are expected to land in 2016. There are

at least one million square feet of preleased, under construction space coming

online in early 2016 to kick start the new year with positive occupancy gains.

Meanwhile, with several major tech tenants finally planting their flag in North San

Jose, the region will be well poised to be the next hot core submarket of the

Valley. Given the steady decline in newer space availability combined with the

current preleasing trend; tenants with future growth or relocation plans will

consider targeting space options earlier to avoid missed opportunities.

Tenants targeting well-located new space, including rehabs Although vacancy rates have yet to reach single digit levels, the market for

tenants in need of 100,000 square feet and larger has become much tighter

when compared to 12 months ago. The aggressive expansion of large tech

companies in core submarkets continues to push leasing activity further along

101 through Santa Clara into North San Jose. However, while there are still

some Class A under construction options available, rents for new development

are rising in response to demand. For this reason, renovated second-generation

space is becoming more attractive as it offers similar Class A finishes at

relatively less expensive rents. Several tenants with larger requirements have

yet to land. It is expected that North San Jose will capture some of this activity

and help to push overall vacancy levels closer to single digit levels.

VC money continues to flow into the Valley, but fewer IPO’s on deck Confidence in the venture capital community toward the tech sector remains

bullish. Investors are still pouring capital toward expansion and late-stage

companies as the number of Valley unicorns have increased. However, despite

VC sentiment, recent tech IPO’s have failed to impress Wall Street, and have

caused some high-flying startups to reduce their offer price or postpone their

public debut. It is expected that 2016 will see even fewer IPOs as the public

market is showing some volatility; potentially causing a correction in private

valuations and high-tech VC funding over the next 12 months.

Tenants continue to expand more activity inbound

-500,000

500,000

1,500,000

Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15

20.0% 19.4% 24.7%

30.7% 28.6% 27.1%

17.2% 16.1% 13.9% 11.9% 0.0%

10.0%

20.0%

30.0%

40.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015





12.2% Total vacancy




$0.0

$1,000.0

$2,000.0

$3,000.0

Q3 12 Q2 13 Q1 14 Q4 14 Q3 15

Funding volume ($M)

64

- Blaise Tomazic Senior Research Analyst,

St. Louis


ST. LOUIS

St. Louis dominates startup funding in Missouri

Source: JLL Research, PwC Moneytree

Class A asking rates


Absorption concentrated in the suburbs


New development is on the horizon

2,257

737,074

-38,153

-200,000 0 200,000 400,000 600,000 800,000

Suburbs

CBD

$135+ million Startup funding by St. Louis companies

$26.23 $24.48

$23.10

$20.84 $20.32 $18.97

$15.00

$20.00

$25.00

$30.00

Clayton WestCounty

SouthCounty

St. CharlesCounty

NorthwestCounty

CBD





14.7% Total vacancy




Startup and tech employment is going strong Over 1,000 new information technology jobs are coming to St. Louis. Boeing is

hiring 700 engineers, technicians and staff to build commercial airplanes and

military systems. KPMG already has 270 employees in downtown St. Louis and

is expanding IT by 175 new positions. Locker Dome is expanding its operations

and adding 300 new positions over the next several years after nearly tripling its

office space. Pandora will be Square’s new neighbor in Cortex; where Square is

hiring 200 to open its fourth U.S. office. Growth is expected to continue as local

startups secure more funding to expand business operations.

The construction drought is ending After several years of occupancy growth, a new speculative office building is

finally under construction. Delmar Gardens III, in West County along I-64, will be

125,000 square feet and has Rabo Agrifinance as the lead tenant (75,000 square

feet). The new property is expected to be completed in the summer of 2017. A

Clayton office building was also announced. The 233,000-square-foot Apogee

office tower will be located along Forsyth Boulevard. The new office building

joins four others on the same block. Forsyth Boulevard is the most expense

street for office space in the region.

Suburban markets fuel growth Suburban occupancy growth dropped vacancy in the five submarkets to 12.6

percent—a 230 basis point improvement from a year ago. The reduced vacancy

has led some landlords to begin increasing asking rates. In Clayton and West

County, several buildings increased asking rates by $0.50-$1.00. As tight

conditions in the suburban submarkets drive up rental rates; it only makes sense

for cost conscience tenants to begin looking downtown. With many large blocks

of space available, large occupiers have many options in the CBD.

65

- Sara Hines Senior Research Analyst,

Suburban Maryland


SUBURBAN MARYLAND

Suburban Maryland historical and planned deliveries (s.f.)


Suburban Maryland leasing activity (s.f.)


Sales activity by building class


Limited supply relief to come in the near-term A restrained development pipeline has provided limited new supply for tenants.

Although subdued tenant demand has not yet tightened overall market conditions,

proposed projects and new master plans could change the future landscape of

the market. Recently, it was announced that both Rock Spring Park and White

Flint would receive new master plans. In the Rock Spring plan, it was suggested

to change one office building in the park to associate with the nearby school. In

the I-270 Corridor, 4 Research Place, phases I and II, will be repurposed into to a

storage facility. 1788 holdings has planned for 2 and 4 Choke Cherry to be

demolished and changed to mixed-use.

Leasing activity remains choppy Large block leasing activity started slow at the beginning of 2015, but gained

velocity over the past two quarters. The market ended the fourth quarter with

450,300 square feet of deal volume among transactions over 20,000 square feet.

Annual leasing activity totaled 3.6 million square feet at the end of the fourth

quarter. That is 39.7 percent below the yearly average since 2000 and a 9.4

percent drop from 2014. Large tenants continued to gravitate to Metro proximate

submarkets such as Rockville Pike and Bethesda-CBD.

Class A office buildings lead sales in Suburban Maryland Class A assets captured 97.7 percent of the total sales volume and 77.9 percent

of total square footage in 2015; which is a new trend compared to the previous

year. In 2014, Class A assets accounted for only 36.4 percent of the sales by

total building size. Class A assets sold for an average of $298.00 per square

foot; an increase of 18.7 percent from last quarter. The increase was due in large

part by the sale of the Apex building, 7272 Wisconsin Avenue in Bethesda. A

deal was announced that Carr Properties would buy the asset for $105.5 million

and transfer the American Society of Health System Pharmacists into

approximately 68,000 square feet at Carr Properties’ 4500 East West Highway in

Bethesda. Carr Properties has plans to demolish the building and redevelop it

into a 935,000-square-foot office, housing and hotel project.

Restrained new construction limiting available supply

2,257

0

1,000,000

2,000,000

3,000,000

2009 2010 2011 2012 2013 2014 2015 2016

$7,100,000

$5,800,000

$543,096,000

$0 $200,000,000 $400,000,000 $600,000,000

C

B

A

0

2,000,000

4,000,000

6,000,000

8,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015





20.0% Total vacancy




66

- Drew Gilligan Research Analyst,

Central Florida


TAMPA

Historical CBD Vacancy


Annual deliveries in Tampa Bay (square feet)


Local economy continues to grow

Source: JLL Research, BLS

1,000,000

1,050,000

1,100,000

1,150,000

1,200,000

1,250,000

1,300,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Tota

l Job

s

Unem

ploy

men

t Rat

e

Unemployment Rate Total Employment

Outlook bright for suburban submarkets Vacancy dropped to 11.3 percent in the CBD and to 10.5 percent in Class A

space in CBD markets. Vacancy is now at an all-time low in both Tampa CBD

and St. Pete CBD, and tenants are seeing rents grow rapidly as large blocks

have become rare. Companies looking for space downtown are finding options

limited; especially if groups require a high parking ratio. Space in Trophy assets

downtown is even more difficult to come by, with only five full floors available

between the three buildings. More than half of the Class A buildings have traded

in downtown Tampa since 2014, which is already leading to increased rental

rates, and forcing some potential tenants to consider the suburban submarkets.

New construction on the horizon potentially Numerous groups around Tampa are actively identifying opportunities to break

ground on new developments. Over the past year, numerous large industrial and

multi-family speculative developments were delivered. However, there have yet

to be any speculative office developments to break ground in recent years.

Multiple groups have announced approval for office or mixed-use construction

around Tampa, but replacement costs still tower above current building costs.

Only one office building is currently under construction, but it is a build-to-suit for

a single user. Two Trophy buildings sold downtown in the past two quarters for

new market highs; which goes to show that it is still cheaper to buy a building

than break ground on a new one.

Strong growth continues in Tampa Bay economy

Local market conditions continue to strengthen as highlighted by new jobs added

for the seventh consecutive year in the Tampa Bay MSA. In 2015 alone, over

40,000 new jobs were added with the majority in the education and health

services,, and professional and business services sectors. There are multiple

companies touring the market that do not currently have a presence in the

Tampa Bay area and are considering expanding into the local market; which

should contribute to continued job growth.

Strong market conditions heading into 2016

2,257





14.1% Total vacancy




0

200,000

400,000

600,000

800,000

1,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Tota

l Squ

are F

eet

Deliv

ered

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Dire

ct V

acan

cy

Tampa CBD St. Pete CBD

67

- Carl Caputo Research Analyst,

Washington, DC


WASHINGTON, DC

Large tenant leasing activity totaled 2.4 m.s.f. in Q4 2015

Source: JLL Research, deals greater than 20,000 s.f.

Non-core submarkets captured a third of leasing activity

Source: JLL Research, total s.f. of deals greater than 20,000 s.f. signed in 2015

Construction activity is up 22.0 percent from year-end 2014


Private and public sector leasing activity closed out the year strong Leasing activity among private sector tenants larger than 20,000 square feet

totaled 0.9 million square feet in the fourth quarter. Most notably, Steptoe &

Johnson and Epstein Becker & Green decided to renew and renovate their

spaces at 1330 Connecticut Avenue, NW and 1227 25th Street, NW, respectively.

Activity among federal, local and quasi-government tenants surged to end the

year; comprising 65.0 percent of deals signed during the quarter. Six of the eight

federal agencies that finalized large leases during the quarter signed long-term

deals; in comparison to only three of 12 over the same period last year.

Both core and non-core submarkets seeing large tenant leasing activity In the core of the market, law firms and government affairs entities continued to

generate occupancy gains in the Trophy and Class A market, and nonprofits

drove leasing activity in the Class B segment. Overall asking rents in the core

increased 5.4 percent over 2015; averaging $59.23 p.s.f. gross at the end of the

fourth quarter. Demand in the core remained strong; however, during the fourth

quarter the non-core submarkets captured a majority of large tenant deals. The

uptick in federal activity drove demand in Southwest as U.S. Federal Mediation

and Conciliation Service and DC Department on Disability Services both

relocated to the submarket from the CBD.

Tightening market conditions generating spec development As the local and regional economy continues to improve and new construction

achieves increasingly higher rents–in some cases extending into the $60s NNN

in the core–new spec development and redevelopment activity has increased.

Construction activity in the District totaled 2.5 million square feet at the end of

2015—reaching a six-year high. Of the 1.5 million square feet actively under

construction in the core, 43.2 percent was preleased. Outside the core,

preleasing remained in the single digits as spec development of projects such as

99 M Street, SE, 800 Maine Avenue, SW and 1140 3rd Street, NE continued.

Strong leasing activity closes out 2015

2,257

67.0% 3.9%

29.1% CBD, East End, Capitol Hill (core)

West End, Georgetown, Uptown (non-core)

NoMa, Southeast, Southwest (non-core)

0

1,000,000

2,000,000

3,000,000

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Private sector Public sector





11.9% Total vacancy




0

1,000,000

2,000,000

3,000,000

2010 2011 2012 2013 2014 2015

Under construction (s.f.) Preleased (s.f.)

68

- Ilyssa Shacter Research Analyst, Florida

Fort Lauderdale


WEST PALM BEACH

Growth continues in the fourth quarter


Boca Raton North surpasses peak investment this quarter

Class A and Trophy vacancy spread grows

Palm Beach County fundamentals tighten in 2015 Of the three major South Florida markets, Palm Beach County has the highest

overall vacancy at 17.5 percent. However, the county has seen considerable

growth over the past 12 months as vacancy has declined 160 basis points–three

times more than the 50 basis point decline seen in Broward County. Further, key

indicators are positive as investment, rental rates and the development pipeline

continue to grow concurrently. Notably, CityPlace announced plans for a

300,000-square-foot Class B office building in downtown West Palm Beach, and

with the recent $24 million acquisition of a full city block, Jeff Greene has

proposed plans for a new mixed use center (which would likely include office);

however, the development program is still in its infancy.

Investment in Boca Raton North reaches record high Boca Raton North saw record high investment this quarter as four multi-tenant

buildings (totaling 400,000 square feet) and two single-tenant buildings (totaling

131,000 square feet) traded. The largest property, 900 Broken Sound, traded for

$28.3 million when Main Street Capital purchased the property from Siemens.

The fully leased Class A property is anchored by CLS Plasma, which occupies

42,500 square feet in the building. As the submarket continues to recover

towards prerecession levels, the recent infusion of investment shows growing

investor confidence in future growth. With more than half a million square feet

changing hands, this quarter marked a historic high for office investment in Boca

Raton North which totaled $123 million.

Trophy properties in West Palm Beach continue to thrive While the Core CBD in West Palm Beach continues to strengthen, Trophy

properties remain on top. Class A vacancy overall has declined 100 basis points

to 15.1 percent; however, the majority of growth is being seen within the

submarket’s Trophy Assets. Overall, Trophy vacancy hit a historic low this

quarter as it dipped 170 basis points quarter-over-quarter and 380 basis points

year-over-year to 5.0 percent. Comparably, vacancy among the Class A non-

Trophy set actually increased 150 basis points over the past year to

23.9 percent.

Trophy assets remain on top through county recovery

2,257





17.5% Total vacancy




Name Buyer Seller Price 900 Broken Sound

Mainstreet Capital

Partners Siemens $28.3M ($138/p.s.f.)

1001 Yamato Adler Kawa Detroit

Firefighters $10.9M ($124/p.s.f.)

999 Yamato Adler Kawa Detroit

Firefighters $21.3M ($259/p.s.f.)

150 E. Palmetto

Park Dividend Capital

Clarion

Partners $35.8M ($326/p.s.f.)

0.0%

10.0%

20.0%

30.0%

$24.00

$26.00

$28.00

$30.00

$32.00Rent Vacancy

0.0%

20.0%

40.0%

2011 2012 2013 2014 2015

Trophy Class A

69

- Dayna McConnell Research Analyst,

Fairfield County


WESTCHESTER COUNTY

Leasing activity by submarket


Regeneron’s footprint


Tenant demand for White Plains CBD


Several large leases lead Westchester activity Westchester experienced a slow year in terms of leasing velocity and recording

the lowest total since 2009. There were two deals specifically that drove the

leasing total this quarter over the 420,000-square-foot mark. Central National-

Gottesman signed a 62,888-square-foot expansion at Centre of Purchase and

Pentegra Services inked a 29,000-square-foot deal at 701 Westchester Avenue.

Westchester can offer more large blocks of space than neighboring Fairfield and

should continue to attract some larger tenants looking in the area because of the

plethora of choices.

Growth potential in Westchester in the form of Biotech BioMed Realty Trust at the Landmark at Eastview has now leased 99.0 percent

of the campus to Regeneron; totaling roughly 1.1 million square feet. Though the

office park is nearly at capacity, Regeneron recently purchased a plot of land

next to the Landmark to ensure that it can maintain its presence in Westchester

County as the company’s extraordinary growth continues. Because of its

demographic makeup, Westchester is a natural landing place for industry like

biotech. Westchester has a great opportunity for growth by attracting companies

such as Regeneron.

2016 will be a good year for White Plains CBD While White Plains CBD has some large leases expiring in 2016, tenants looking

in the market have a demand for space that totals over 250,000 square feet. An

overwhelming majority of those companies looking for space in the CBD are

either financial services or law firms, which is on par with the traditional

demographic in White Plains. Renovations at some of the premier Class A

buildings such as 1 N Lexington, 445 Hamilton and 10 Bank Street will be sure to

attract some of the more prestigious firms looking to move into the area.

Large leases drive velocity in 4th quarter

2,257





22.9% Total vacancy




0.0%

5.3%

12.0%

16.0%

19.6%

46.3%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Westchester North

Westchester South

I-287 West

White Plains CBD

White Plains East

I-287 East

1.1 m.s.f. Regeneron has leased at the Landmark at Eastview

29.3% Increase in tenants targeting

White Plains CBD since this

time last year

APPENDIX:

Stats

Employment

Rankings

Leases

Sales

Developments


71

Market totals

(CBD and Suburban) Inventory (s.f.)

Quarterly

total net

absorption

(Including

Subleases)

YTD total net

absorption

(Including

Subleases)

YTD total

net

absorption

(% of

Inventory)

Direct

vacancy

(%)

Total

vacancy

(%)

Current

quarter

direct

average

marketed

rent ($p.s.f.)

Quarterly

percent

change

YTD

Completions /

deliveries

(s.f.)

Under

construction

(s.f.)

Under

construction

as % of

inventory

Atlanta 133,555,157 778,841 2,578,651 1.9% 16.7% 17.5% $22.54 1.0% 0 885,000 0.7%

Austin 49,189,629 724,467 2,253,197 4.6% 11.2% 12.4% $32.26 -1.0% 2,806,242 2,007,666 4.1%

Baltimore 71,152,035 221,282 366,456 0.5% 12.5% 12.9% $22.92 2.2% 486,354 1,333,040 1.9%

Boston 165,361,095 1,080,136 3,045,721 1.8% 11.5% 13.8% $34.04 2.6% 2,054,909 5,573,171 3.4%

Charlotte 46,615,285 94,218 453,466 1.0% 11.9% 12.3% $23.03 0.4% 79,119 2,617,222 5.6%

Chicago 233,214,510 1,103,418 3,585,989 1.5% 14.0% 15.0% $29.88 -0.1% 538,735 3,055,164 1.3%

Cincinnati 34,471,571 382,600 763,222 2.2% 17.2% 18.1% $19.24 0.8% 881,148 193,000 0.6%

Cleveland 28,121,038 178,099 75,978 0.3% 18.4% 19.6% $19.11 1.6% 0 47,000 0.2%

Columbus 30,309,064 34,249 748,287 2.5% 12.8% 13.1% $17.49 1.3% 770,000 93,000 0.3%

Dallas 162,054,191 839,434 4,794,274 3.0% 17.9% 18.7% $24.38 1.9% 4,693,713 7,605,715 4.7%

Denver 107,390,870 854,613 2,142,984 2.0% 12.3% 13.1% $25.62 1.6% 1,342,155 2,739,079 2.6%

Detroit 61,651,347 157,919 872,323 1.4% 19.1% 19.0% $18.41 1.0% 0 432,480 0.7%

Fairfield County 48,491,420 846,360 -413,907 -0.9% 22.1% 24.4% $31.83 0.1% 0 0 0.0%

Fort Lauderdale 22,860,374 87,676 257,029 1.1% 15.4% 16.1% $28.06 -0.5% 183,535 27,388 0.1%

Hampton Roads 18,570,507 -4,756 59,394 0.3% 14.2% 14.5% $17.49 -4.5% 50,000 287,858 1.6%

Hartford 25,263,659 138,234 140,830 0.6% 17.2% 18.2% $20.48 0.0% 19,000 25,484 0.1%

Houston 173,679,885 308,427 -89,748 -0.1% 14.5% 16.5% $29.80 1.8% 8,728,410 6,306,180 3.6%

Indianapolis 31,845,766 -33,682 150,270 0.5% 15.6% 15.9% $18.89 -0.1% 20,220 318,250 1.0%

Jacksonville 20,110,117 -54,664 456,010 2.3% 14.3% 14.7% $19.12 4.7% 0 0 0.0%

Kansas City 48,354,530 N/A 738,559 1.5% 14.7% 15.0% $18.29 0.0% 67,924 0 0.0%

Long Island 42,537,977 -330,169 148,677 0.3% 15.4% 16.8% $26.35 0.1% 174,400 116,545 0.3%

Los Angeles 188,241,725 1,554,764 2,557,260 1.4% 14.7% 15.5% $35.92 1.8% 1,120,968 1,881,504 1.0%

Miami 35,535,399 315,017 666,036 1.9% 12.0% 12.3% $34.69 2.1% 0 664,199 1.9%

Milwaukee 27,116,072 429 -76,983 -0.3% 17.7% 19.4% $18.00 4.7% 0 506,924 1.9%

Minneapolis 69,299,256 365,061 809,898 1.2% 13.7% 14.6% $25.16 -1.8% 704,560 464,236 0.7%

Nashville 33,584,991 119,651 1,200,216 3.6% 6.7% 6.7% $20.32 -3.3% 315,000 2,840,446 8.5%

New Jersey 159,359,182 -80,546 317,902 0.2% 22.0% 24.6% $25.17 0.0% 93,700 440,445 0.3%

New York 446,774,009 -900,515 -217,759 0.0% 8.1% 9.6% $71.46 1.2% 1,173,140 13,666,640 3.1%

Oakland-East Bay 56,474,281 870,558 1,800,187 3.2% 12.7% 13.1% $31.46 2.0% 0 0 0.0%

Orange County 95,634,491 -114,776 1,183,530 1.2% 11.2% 11.8% $29.80 4.2% 67,362 573,387 0.6%

Orlando 29,013,699 27,398 557,134 1.9% 15.3% 15.8% $20.74 1.1% 177,000 271,000 0.9%

Philadelphia 130,348,460 1,137,652 2,453,633 1.9% 12.0% 12.6% $23.74 0.0% 1,078,035 3,183,329 2.4%

Phoenix 82,208,551 1,756,453 2,965,982 3.6% 20.2% 20.9% $23.49 4.4% 2,507,703 2,582,530 3.1%

Pittsburgh 49,748,464 -130,287 202,591 0.4% 13.3% 15.0% $22.65 1.8% 632,000 835,000 1.7%

Portland 58,699,534 368,818 783,626 1.3% 8.5% 8.9% $24.59 2.1% 477,490 1,567,236 2.7%

Raleigh-Durham 44,634,997 389,504 1,706,866 3.8% 11.5% 11.9% $20.53 -0.4% 1,394,471 629,214 1.4%

Richmond 24,888,123 189,255 461,960 1.9% 12.8% 14.1% $18.73 -0.5% 359,158 44,378 0.2%

Sacramento 43,791,678 416,072 985,947 2.3% 15.8% 16.0% $23.04 2.7% 0 0 0.0%

Salt Lake City 45,889,974 259,598 1,051,935 2.3% 5.9% 6.4% $20.67 1.5% 1,192,799 2,695,442 5.9%

San Antonio 26,366,851 84,067 523,700 2.0% 15.0% 14.8% $22.98 1.5% 1,138,123 526,000 2.0%

San Diego 78,536,757 237,575 341,415 0.4% 13.3% 14.4% $29.88 1.2% 987,657 0 0.0%

San Francisco 75,403,270 634,896 2,149,790 2.9% 7.1% 8.2% $68.74 2.9% 1,201,418 3,664,519 4.9%

San Francisco Peninsula 29,141,986 1,098,500 1,436,729 4.9% 9.1% 10.4% $53.98 0.9% 345,335 1,330,741 4.6%

Seattle-Bellevue 91,830,292 551,591 2,461,440 2.7% 9.6% 10.2% $33.98 0.8% 2,251,966 5,912,171 6.4%

Silicon Valley 68,545,489 1,068,581 2,891,738 4.2% 10.4% 12.2% $42.36 1.6% 2,710,388 3,276,660 4.8%

St. Louis 42,628,094 100,172 698,921 1.6% 14.0% 14.7% $19.72 0.2% 128,500 125,000 0.3%

Tampa Bay 34,205,223 471,896 1,166,157 3.4% 13.5% 14.1% $23.00 4.4% 84,976 175,998 0.5%

Washington, DC 330,742,519 580,148 1,237,721 0.4% 16.2% 17.0% $36.90 1.0% 1,115,942 6,833,786 2.1%

West Palm Beach 20,574,720 48,965 343,758 1.7% 17.2% 17.5% $30.27 1.5% 0 0 0.0%

Westchester County 32,333,229 -83,703 -307,934 -1.0% 20.9% 22.9% $24.28 0.0% 0 0 0.0%

United States totals 4,006,351,343 18,743,496 55,481,058 1.4% 13.7% 14.7% $31.28 2.3% 44,153,555 88,328,543 2.2%


UNITED STATES OFFICE STATISTICS

72

Market

Total nonfarm jobs 12-month

net change (000s)

Total nonfarm jobs 12-month

percent change

Office jobs* 12- month net change (000s)

Office jobs* 12- month

percent change

Unemployment (2015)

Unemployment (2014)

12-month unemployment

change (bp)

Atlanta 85.5 3.4% 29.3 4.1% 5.4% 6.5% -110

Austin 35.8 3.9% 14.7 6.4% 3.3% 3.8% -50

Baltimore 31.7 2.3% 7.3 2.3% 5.4% 5.7% -30

Boston 46.9 1.8% 19.4 2.8% 4.1% 4.6% -50

Charlotte 35.5 3.3% 9.5 3.3% 5.3% 5.5% -20

Chicago 46.1 1.0% 13.4 1.1% 5.1% 6.0% -90

Cincinnati 16.5 1.6% 6.8 2.7% 3.8% 4.6% -80

Cleveland 18.5 1.8% -0.5 -0.2% 4.2% 5.3% -110

Columbus 21.6 2.1% 2.8 1.0% 3.6% 4.2% -60

Dallas-Fort Worth 101.0 3.0% 30.1 3.3% 4.0% 4.5% -50

Denver 27.4 2.0% 2.5 0.6% 3.1% 3.9% -80

Detroit 9.1 1.3% 5.8 3.6% 6.3% 7.9% -160

Fort Lauderdale 26.8 3.4% 13.6 6.3% 4.7% 5.5% -80

Hampton Roads 5.4 0.7% 3.5 2.3% 4.7% 5.2% -50

Hartford 11.4 2.0% 3.4 2.4% 4.8% 6.1% -130

Houston 23.6 0.8% -4.6 -0.7% 5.3% 5.9% -60

Indianapolis 29.7 3.0% 0.9 0.4% 4.0% 5.4% -140

Jacksonville 16.2 2.6% 0.8 0.5% 4.8% 5.8% -100

Kansas City 12.1 1.2% 4.6 1.7% 4.2% 4.9% -70

Long Island 21.2 1.6% 1.8 0.7% 4.1% 4.6% -50

Los Angeles 72.0 1.7% 5.6 0.5% 5.9% 8.0% -210

Miami 17.8 1.6% 4.5 1.8% 5.9% 6.3% -40

Milwaukee 6.9 1.3% 6.3 3.3% 4.2% 5.2% -100

Minneapolis-St. Paul 30.4 1.6% 13.3 2.7% 2.9% 3.0% -10

Nashville 26.7 3.0% 8.4 3.9% 4.3% 5.1% -80

New Jersey 55.2 1.4% -1.3 -0.1% 5.0% 6.1% -110

New York 104.4 2.5% 33.7 2.6% 4.8% 6.5% -170

Oakland-East Bay 17.8 1.7% 2.9 1.1% 4.6% 5.6% -100

Orange County 38.3 2.5% 1.8 0.4% 4.3% 5.2% -90

Orlando 39.6 3.5% 7.0 2.4% 4.6% 5.5% -90

Philadelphia 34.1 1.2% 1.9 0.3% 4.9% 5.5% -60

Phoenix 49.1 2.6% 12.6 2.4% 5.2% 5.8% -60

Pittsburgh 11.9 1.0% 1.1 0.4% 4.6% 4.6% 0

Portland, OR 48.1 2.8% 12.1 3.4% 5.0% 6.0% -100

Raleigh-Durham 8.3 1.5% 4.3 2.7% 4.7% 4.4% 30

Richmond 0.2 0.0% 0.3 0.2% 4.4% 5.0% -60

Sacramento 24.1 2.7% 1.8 1.0% 5.5% 6.6% -110

Salt Lake City 23.3 3.5% 7.9 4.2% 3.1% 3.4% -30

San Antonio 35.1 3.7% 13.1 5.8% 3.8% 4.2% -40

San Diego 37.3 2.7% 11.2 3.4% 5.0% 6.0% -100

San Francisco 42.2 4.1% 22.7 5.9% 3.4% 4.1% -70

San Jose (Silicon Valley) 51.9 5.1% 26.2 8.2% 4.0% 5.0% -100

Seattle-Bellevue 42.4 2.7% 16.9 4.1% 4.5% 5.0% -50

St. Louis 9.7 0.7% -4.1 -1.3% 4.6% 5.2% -60

Stamford, CT (Fairfield County) 8.2 2.0% 1.7 1.4% 4.7% 6.0% -130

Tampa 40.4 3.3% 9.8 2.9% 4.8% 5.7% -90

Washington, DC 42.8 1.7% 26.1 3.4% 4.3% 4.7% -40

West Palm Beach 12.7 2.2% 6.4 4.2% 4.9% 5.4% -50

White Plains, NY (Westchester County) 9.9 1.4% -1.6 -1.2% 4.3% 4.7% -40

United States 2,637.0 1.9% 781.0 2.6% 5.0% 5.8% -80


UNITED STATES EMPLOYMENT

Total vacancy rates (including sublease)

Inventory


UNITED STATES

OFFICE RANKINGS

0 200 400

Hampton RoadsJacksonville

West Palm BeachFort Lauderdale

RichmondHartford

San AntonioMilwaukeeCleveland

OrlandoSan Francisco Peninsula

ColumbusIndianapolis

Westchester CountyNashville

Tampa BayCincinnati

MiamiLong Island

St. LouisSacramento

Raleigh-DurhamSalt Lake City

CharlotteKansas City

Fairfield CountyAustin

PittsburghOakland-East Bay

PortlandDetroit

Silicon ValleyMinneapolis

BaltimoreSan Francisco

San DiegoPhoenix

Seattle-BellevueOrange County

DenverPhiladelphia

AtlantaNew Jersey

DallasBoston

HoustonLos Angeles

ChicagoWashington, DC

New York

Square feet (millions)

0% 5% 10% 15% 20% 25% 30%

New JerseyFairfield County

Westchester CountyPhoenix

ClevelandMilwaukee

DetroitDallas

HartfordCincinnati

AtlantaWest Palm Beach

Washington, DCLong Island

HoustonFort Lauderdale

SacramentoIndianapolis

OrlandoLos Angeles

PittsburghKansas City

ChicagoSan Antonio

St. LouisJacksonvilleMinneapolis

Hampton RoadsSan DiegoRichmond

Tampa BayBoston

Oakland-East BayDenver

ColumbusBaltimore

PhiladelphiaAustin

CharlotteMiami

Silicon ValleyRaleigh-DurhamOrange County

San Francisco PeninsulaSeattle-Bellevue

New YorkPortland

San FranciscoNashville

Salt Lake City

Vacancy rate (%)

Marketed rents

YTD total net absorption (including sublease)


UNITED STATES

OFFICE RANKINGS

-1,000 1,000 3,000 5,000

Fairfield CountyWestchester County

New YorkHouston

MilwaukeeHampton Roads

ClevelandHartford

Long IslandIndianapolis

PittsburghFort Lauderdale

New JerseySan Diego

West Palm BeachBaltimoreCharlotte

JacksonvilleRichmond

San AntonioOrlando

MiamiSt. Louis

Kansas CityColumbusCincinnati

PortlandMinneapolis

DetroitSacramento

Salt Lake CityTampa Bay

Orange CountyNashville

Washington, DCSan Francisco Peninsula

Raleigh-DurhamOakland-East Bay

DenverSan Francisco

AustinPhiladelphia

Seattle-BellevueLos Angeles

AtlantaSilicon Valley

PhoenixBoston

ChicagoDallas

Square feet (thousands) $0.00 $20.00 $40.00 $60.00 $80.00

Hampton RoadsColumbusMilwaukee

Kansas CityDetroit

RichmondIndianapolis

ClevelandJacksonville

CincinnatiSt. LouisNashvilleHartford

Raleigh-DurhamSalt Lake City

OrlandoAtlanta

PittsburghBaltimore

San AntonioTampa Bay

CharlotteSacramento

PhoenixPhiladelphia

Westchester CountyDallas

PortlandMinneapolisNew Jersey

DenverLong Island

Fort LauderdaleHouston

Orange CountySan Diego

ChicagoWest Palm BeachOakland-East Bay

Fairfield CountyAustin

Seattle-BellevueBostonMiami

Los AngelesWashington, DC

Silicon ValleySan Francisco Peninsula

San FranciscoNew York

$ per square foot

Under construction

Under construction as % of inventory


UNITED STATES

OFFICE RANKINGS

0 5,000,000 10,000,000 15,000,000

Kansas CityJacksonvilleSacramento

Westchester CountyWest Palm BeachOakland-East Bay

Fairfield CountySan Diego

HartfordFort Lauderdale

RichmondClevelandColumbus

Long IslandSt. Louis

Tampa BayCincinnati

OrlandoHampton Roads

IndianapolisDetroit

New JerseyMinneapolis

MilwaukeeSan Antonio

Orange CountyRaleigh-Durham

MiamiPittsburgh

AtlantaSan Francisco Peninsula

BaltimorePortland

Los AngelesAustin

PhoenixCharlotte

Salt Lake CityDenver

NashvilleChicago

PhiladelphiaSilicon Valley

San FranciscoBoston

Seattle-BellevueHouston

Washington, DCDallas

New York

Square feet 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Kansas CityJacksonvilleSacramento

Westchester CountyWest Palm BeachOakland-East Bay

Fairfield CountySan Diego

HartfordFort Lauderdale

ClevelandRichmond

Long IslandNew Jersey

St. LouisColumbus

Tampa BayCincinnati

Orange CountyAtlanta

MinneapolisDetroit

OrlandoIndianapolisLos Angeles

ChicagoRaleigh-DurhamHampton Roads

PittsburghMiami

MilwaukeeBaltimore

San AntonioWashington, DC

PhiladelphiaDenver

PortlandNew York

PhoenixBoston

HoustonAustin

San Francisco PeninsulaDallas

Silicon ValleySan Francisco

CharlotteSalt Lake City

Seattle-BellevueNashville


Market Tenant Address Size (s.f.) Lease type

Charlotte Bank of America 900 W Trade Street 922,684 Renewal

Washington, DC U.S. Department of Justice 175 N Street NE 839,000 Relocation within market

Houston Apache 1990-2000 Post Oak Boulevard 505,526 Renewal

Seattle-Bellevue Safeco 1001 4th Avenue 500,000 Relocation within market

Pittsburgh U.S. Steel 600 Grant Street 470,000 Extension (< 36-month term)

Pittsburgh PNC 100 S Commons 395,000 Renewal

New Jersey Vonage 23 Main Street 350,000 Renewal

Denver Anadarko Petroleum 1099 18th Street 343,080 Renewal

Northern Virginia U.S. Department of Defense 2521 S Clark Street 335,001 Renewal

Chicago CNA 151 N Franklin Street 275,000 Relocation within market

Denver DaVita 16 Chestnut Place 265,322 Expansion in market

New York Morgan Stanley 1633 Broadway 260,829 Expansion in building

Boston BNY Mellon 1 Boston Place 250,000 Renewal

Indianapolis AT&T 220 N Meridian Street 224,208 Renewal

Washington, DC Steptoe & Johnson 1330 Connecticut Avenue NW 212,000 Renewal

Northern Virginia Booz Allen Hamilton 8285 Greensboro Drive 208,221 Renewal

New Jersey New Jersey Turnpike Authority 1 Hess Plaza 205,000 Relocation within market

New York Boston Consulting Group 10 Hudson Yards 193,306 Relocation within market

New York Teachers' Retirement System of the City of New York 55 Water Street 191,138 Renewal

Silicon Valley Silver Springs Networks 210-230 W Tasman Avenue 189,766 New to market

Houston Bracewell & Giuliani 711 Louisiana Street 189,061 Renewal

Raleigh-Durham Duke University 2200 W Main Street 188,000 Expansion in building

Boston Boston Medical Group 529 Main Street 171,800 Relocation within market

New Jersey Lowenstein Sandler 56 Livingston Avenue 170,000 Relocation within market

Chicago ConAgra 222 W Merchandise Mart Plaza 168,419 New to market

Cleveland Dealer Tire 7012 Euclid Avenue 166,000 Relocation within market

Northern Virginia LMI Government Consulting 7940 Jones Branch Drive 161,641 Renewal

Jacksonville Southeastern Grocers 8928 Freedom Commerce Parkway 159,810 Relocation within market

Denver CH2M Hill 9191 S Jamaica Street 155,209 Renewal

Seattle-Bellevue Intellectual Ventures 3150 139th Avenue SE 152,633 Renewal

Charlotte Moore & Van Allen 100 N Tryon Street 149,180 Renewal

Denver Colorado Department of Regulatory Agencies 1560 Broadway 144,543 Renewal

Los Angeles IPG 1840 Century Park East 143,296 Relocation within market

Houston St. Luke's Episcopal Health 3100 Main Street 139,424 Renewal

Los Angeles One West Bank 75 N Fair Oaks Avenue 136,194 New to market

Northern Virginia Capital One 7900 Westpark Drive 136,000 Expansion in market

Baltimore CSC 6721 Columbia Gateway Drive 131,451 Expansion in building

Chicago GrubHub 111 W Washington Avenue 128,467 Renewal

New York Indeed.com 1120 Avenue of the Americas 126,000 Relocation within market

Northern Virginia Fairfax County Public Schools 8270 Willow Oaks Corporate Drive 122,948 Renewal

New York Gensler 1700 Broadway 119,404 Relocation within market

Seattle-Bellevue Docusign 999 3rd Avenue 118,830 Relocation within market

Washington, DC Overseas Private Investment Corporation 1100 New York Avenue NW 117,769 Renewal

Phoenix Santander 1550 W Southern Avenue 116,982 New to market

Northern Virginia AECOM 3101 Wilson Boulevard 116,511 Renewal

Boston Mercury Systems 50 Minuteman Road 114,100 Relocation within market

New York WeWork 300 Park Avenue 109,361 Expansion in market

Houston Texas Children's Hospital 2450 Holcombe Road 108,804 Expansion in market

Chicago Quintessite Technology Parnters 747 E 22nd Street 108,000 New to market

Denver CH2M Hill 9189 S Jamaica Street 107,638 Renewal

SELECT LARGE LEASES

> 100,000 SQUARE FEET Sorted by lease size and completed during Q4 2015


Market Building RBA (s.f.) Sale price $

Price per square

foot ($ p.s.f.)

Buyer Seller

New York 1211 Avenue of the Americas 2,014,062 $895,200,000 $913 Ivanhoe Cambridge JV Callahan Capital

Partners Beacon Capital Partners

Boston 500 Boylston Street 707,000 $755,300,000 $1,068 Oxford Properties JV JP Morgan Asset

Management Blackstone Group

Chicago 200 E Randolph Street 2,777,187 $712,000,000 $256 601 W Companies Piedmont Office Realty Trust

San Francisco 333 Bush Street 546,182 $382,327,400 $700 Tishman Speyer DivcoWest/Mass PRIM

Miami 5200 Blue Lagoon Drive 1,408,267 $374,500,000 $266 Allianz Real Estate of America (49.0%) TIAA-CREF (49.0%)

New York 120 W 45th Street 443,956 $365,000,000 $796 Kamber Management SL Green

Dallas 5215 N O Conner Boulevard 1,395,980 $330,000,000 $236 Apollo Global RE JV Vanderbilt Capital Advisors Brookdale Group

Chicago 333 W Wacker Drive 867,821 $320,500,000 $369 PNC Realty Investors JV AFL CIO, Sumitomo

JV, GM Investment Management JV Hines

Boston 2 Channel Center 501,650 $316,500,000 $397 Tishman Speyer ARES Management, LLC

Boston 222 Berkeley Street 553,321 $316,500,000 $966 Oxford Properties JV JP Morgan Asset

Management Blackstone Group

Chicago 115 S LaSalle Street 1,296,839 $316,000,000 $244 Samsung SRA Commonwealth Partners

Boston 131 Dartmouth Street 371,000 $315,000,000 $849 TA Associates Realty

New England Teamsters &

Trucking Industry Pension

Fund

New York 51 Astor Place 400,000 $300,000,000 $1,531 FG Asset Management Edward J Minskoff Equities JV

Rockwood Capital

Silicon Valley 3333 Scott Boulevard 450,000 $299,000,000 $664 Clarion Partners JV Oregon PERS Beacon Capital Partners JV

Menlo Equities

Seattle-Bellevue 515 Westlake Avenue N 394,578 $299,000,000 $758 Union Investment Real Estate (90%) JV Metzler

(10%) Vulcan

Washington, DC 701 / 801 Pennsylvania Avenue NW 687,997 $291,550,000 $865 Columbia Property Trust JV Blackstone

Property Partners Columbia Property Trust

Boston 50 Post Office Square 779,241 $290,000,000 $372 LaSalle Commonwealth Ventures JV

Bentall Kennedy

Houston 935 N. Eldridge Parkway 546,604 $275,000,000 $503 ConocoPhillips Trammell Crow JV Principal

Real Estate Investors

Boston 225 Binney Street 306,212 $271,571,429 $887 TIAA-CREF Alexandria Real Estate

Equities

Seattle-Bellevue 400 Fairview Avenue N 341,876 $261,000,000 $763 TIAA-CREF (90.0%) Skanska (90.0%)

Orlando 200 S Orange Avenue (3 Properties) 1,087,552 $259,100,000 $238 Piedmont Office Realty Trust The Brookdale Group

Atlanta 754 W Peachtree Street 794,110 $248,733,333 $313 CBRE Global Investors VEREIT JV MacFarlan Capital

Partners

New York 370 Lexington Avenue 261,000 $247,000,000 $794 JOWA Holdings JP Morgan JV Sherwood

Equities

Philadelphia 41 Property Portfolio 2,379,626 $245,300,000 $103 Workspace Property Trust Liberty Property Trust

SF Mid Peninsula 700-800 Gateway Boulevard 284,000 $238,407,881 $839 Blackstone BioMed Realty Trust

Washington, DC 355 / 375 / 395 E Street SW 981,116 $233,930,000 $486 MEPT JV Genesis International MEPT / New Tower Trust

Company

Silicon Valley 2840-2880 Junction Avenue 417,000 $230,753,917 $553 NYSCRF MetLife

New York 31 W 52nd Street 786,647 $224,860,335 $881 Paramount Group JP Morgan Asset Management

San Francisco 580 California Street 309,932 $219,255,120 $680 JP Morgan LaSalle

Northern Virginia 22001 Loudoun County Parkway 1,800,000 $212,500,000 $118 Davidson Kempner Capital Management JV

American RE Partners Verizon

New York 114 Fifth Avenue 388,557 $210,000,000 $614 Allianz L&L Holdings JV Lubert-Adler

Silicon Valley 3100-3130 Zanker Road 574,000 $207,000,000 $361 Broadcom Boston Properties

Chicago 1 N Dearborn Street 940,000 $205,000,000 $218 Beacon Capital Partners Joseph Chetrit

Tampa Bay 101 E Kennedy Boulevard 787,000 $193,500,000 $246 Oaktree JV Banyan Street Capital MetLife

Oakland Metro 1221 Broadway 521,177 $182,000,000 $349 UBS Westcore Properties

Houston 2200 Post Oak Boulevard 326,200 $172,000,000 $527 Masaveu Inmobliaria Stream JV Redstone

Chicago 200 W Adams Street 683,129 $168,000,000 $246 Gerding Edlen Development Sterling Equities / Lincoln

Property

Atlanta 1175 Peachtree Street NE 732,000 $165,000,000 $225 North American Properties Tishman Speyer JV Lennar

Corporation

SELECT LARGE SALES

> 100,000 SQUARE FEET Sorted by total sales price and completed in Q4 2015


Market Submarket Building Construction type RBA s.f. Preleased % Expected delivery year

New York World Trade Center 3 World Trade Center Speculative 2,861,402 31.0% 2018

New York Penn Plaza/Garment 30 Hudson Yards Speculative 2,600,000 100.0% 2019

New York Penn Plaza/Garment 1 Manhattan West Speculative 2,300,000 32.5% 2019

Dallas Far North Dallas Toyota HQ BTS 2,100,000 100.0% 2017


Phoenix Tempe Marina Heights BTS 1,698,000 100.0% 2017


San Francisco South Financial District Salesforce Tower Speculative 1,420,081 50.3% 2017

Philadelphia Market Street West Comcast Innovation and Technology Center BTS 1,334,000 100.0% 2018

Chicago West Loop 150 N Riverside Plaza Speculative 1,229,064 62.1% 2017

Houston Westchase Phillips 66 HQ BTS 1,100,000 100.0% 2016

Chicago West Loop 444 W Lake Street Speculative 1,073,100 56.4% 2017

Houston CBD 609 Main Street Speculative 1,056,658 0.0% 2016

Northern Virginia Tysons Corner Capital One Tower BTS 975,000 100.0% 2018

New York Grand Central 390 Madison Avenue Speculative 858,710 0.0% 2017

Boston North Partners Healthcare HQ BTS 850,000 100.0% 2017

Seattle Seattle CBD The Mark Speculative 766,779 32.2% 2017

Chicago Northwest Zurich Insurance HQ BTS 753,000 100.0% 2016

San Francisco South Financial District Park Tower Speculative 751,000 0.0% 2018

Houston CBD 800 Capitol Street Speculative 750,000 0.2% 2018

Seattle Seattle CBD Madison Centre Speculative 746,000 5.4% 2017

Seattle Bellevue CBD 400 Lincoln Square Speculative 724,693 4.2% 2016

New York Hudson Square One SoHo Square Speculative 700,000 7.7% 2016

Northern Virginia Eisenhower Avenue 2415 Eisenhower Avenue BTS 700,000 100.0% 2017

San Francisco Mission Bay/China Basin 1800 Owens Street Speculative 680,000 0.0% 2017

Denver West CBD 1144 15th Street Speculative 640,429 1.3% 2018

Philadelphia University City FMC Tower BTS 635,000 54.4% 2016

Charlotte CBD 300 S Tryon Street Speculative 630,000 31.7% 2016

Charlotte University Red Ventures HQ BTS 630,000 100.0% 2017

Silicon Valley Sunnyvale Moffett Gateway Speculative 600,864 0.0% 2016

Houston Galleria BHIP Billiton HQ BTS 600,000 100.0% 2016

Philadelphia Markest Street West 2400 Market Street Speculative 559,740 38.6% 2017

Northern Virginia Rosslyn Central Place Speculative 552,781 64.6% 2018

Columbus Easton 3100 Easton Square Drive BTS 550,000 100.0% TBD

Dallas Uptown McKinney & Olive Speculative 530,000 40.5% 2016

San Francisco South Financial District 375 Beale Street Speculative 529,232 73.9% 2016

Houston Energy Corridor Energy Center V Speculative 524,328 0.0% 2016

Boston 495/Mass Pike 1 Boston Scientific Place (Building 3) BTS 510,878 70.6% 2016

Austin CBD 500 W 2nd Street Speculative 500,436 41.6% 2017

Atlanta Buckhead Three Alliance Speculative 500,000 0.0% 2016

Boston Seaport District 100 Northern Avenue BTS 500,000 72.0% 2016

Dallas Richardson/Plano State Farm Campus (Building D) BTS 499,992 100.0% 2016

Northern Virginia Tysons Corner 1775 Tysons Boulevard Speculative 476,913 26.2% 2016

Milwaukee Downtown East 330 E Kilbourn Avenue Speculative 469,217 64.7% 2016

Houston Westchase Millenium Tower II Speculative 445,000 100.0% 2016

Salt Lake City CBD 111 S Main Street Speculative 440,452 39.7% 2016

Los Angeles Hollywood Columbia Square Speculative 437,393 62.4% 2016

Orange County Irvine Spectrum 200 Spectrum Center Speculative 425,044 0.0% 2016

Boston Back Bay 888 Boylston Street BTS 425,000 62.4% 2016

Seattle Lake Union Troy Block (North Tower) Speculative 423,000 100.0% 2017

Baltimore Baltimore Southeast 100 Block Street BTS 420,000 100.0% 2016

SELECT DEVELOPMENTS UNDERWAY

> 100,000 SQUARE FEET Sorted by square feet and underway as of Q4 2015

CONTINUED RESURGENCE:

79

$


Posting some of the largest numbers in both leasing and investment sales of the cycle, the U.S. office market is poised for further pricing appreciation and occupancy growth in 2016 as expansionary tenant leases completed in 2015 realize absorption gains in 2016. And as tenants seek opportunity from both a cost and talent perspective, secondary and tertiary markets will enjoy a continued resurgence.

For more information, please contact:

About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased

value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $4.7 billion and gross revenue of $5.4

billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients,

the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and

completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management,

has $56.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For

further information, visit www.jll.com.

About JLL Research

JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real

estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic

and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise,

fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and dr ives successful

strategies and optimal real estate decisions.

This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means,

either in whole or in part, without prior written consent of Jones Lang LaSalle IP, Inc.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2016

Julia Georgules

Director

Office Research

+1 415 354 6908

[email protected]

Phil Ryan Research Analyst

Office and Economy Research

+ 1 202 719 6295

[email protected]

Sean Coghlan Director

Investor Research

+ 1 215 988 5556

[email protected]

Rachel Johnson Research Analyst

Capital Markets

+1 312 228 3017

[email protected]

http://www.jll.com/

u.s. office outlook - q4 2015 - jlljll | united states | office outlook | q4 2015 6 for the second...

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