Frozenomics Thaw Unfreezes Office Market in Q2

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1 OFFICE NORTH AMERICA HIGHLIGHTS Frozenomics Thaw Unfreezes Office Market in Q2 ANDREA CROSS National Office Research Manager USA INDICATORS Relative to prior period US Q2 US Q3 * Canada Q2 NORTH AMERICAN OFFICE Summary Statistics, Canada Q3 * NET CONSTRUCTION RENTAL RATE** *Projected Construction is the change in Under Construction. **Rental rates for current quarter are for CBD Class A space. Rent forecast is for metro-wide rents. US CAN NA CHANGE FROM Q1 (%) (MSF) NEW CONSTRUCTION (MSF) UNDER CONSTRUCTION (MSF) ASKING RENTS PER SF US CAN DOWNTOWN CLASS A ($) CHANGE FROM Q1 (%) SUBURBAN CLASS A ($) KEY TAKEAWAYS Both the U.S. and Canada surmounted the effects of Frozenomics in Q2. The U.S. added more than 200,000 jobs each month between February and July the longest stretch since Projected job growth and rising business confidence levels bode well for office demand through the remainder of. The U.S. economic recovery is broadening: half of the metro areas tracked by Colliers have recovered all of the office-using jobs lost during the recession, including hard-hit markets like Atlanta, Miami and Jacksonville. Continuing the trend of recent quarters, the overall U.S. vacancy rate decreased by 21 basis points to 13.72% in and the overall Canadian vacancy rate increased by 52 basis points to 8.52%. Of the markets tracked by Colliers reporting both Q1 and Q2 data, 56 of 72 U.S. markets posted quarterly vacancy decreases, whereas vacancies declined in only one of the seven Canadian markets. North American absorption totaled about 16.9 million square feet in, up from 15.3 million square feet in Q1. The U.S. posted just under 17 million square feet of positive absorption, compared with 83,530 square feet of negative absorption in Canada. Construction activity continued to increase in both countries, but at a faster pace in the U.S. At mid-year, million square feet were under construction in the U.S. and Canadian markets tracked by Colliers, up from 92.1 million square feet at the end of Q1 and 75.7 million square feet one year earlier. CHANGE FROM Q1 (%)

2 HIGHLIGHTS OFFICE NORTH AMERICA U.S. Economic Trends Following the weak, weather-impacted first quarter of, the U.S. economy bounced back strongly in Q2. After a 2.1% contraction in Q1 the largest decline since Q real GDP surged by 4.2% in, with gains in nearly every category. The U.S. labor market continued to show signs of improvement, with more than 200,000 jobs added each month since February. The average monthly gain of 277,000 jobs in was the highest total since Q Also, weekly initial uninsurance claims dipped below 300,000 in recent weeks, on par with levels. Growth in office-using employment continues to track ahead of overall employment growth, an encouraging sign for the office market. As of July, the primary office-using employment sectors had recovered about 122% of jobs lost during the recession, compared with the recovery in total employment of approximately 107% of jobs lost in the downturn. Professional and business services, which contains many jobs in the technology sector, has been the main driver of office-using employment growth, having recovered about 173% of jobs lost during the recession. However, since bottoming in early 2011, financial activities has also been adding jobs at a modest pace. Tech and energy markets continue to lead the recovery, although economic growth is broadening to include additional markets. As of June, half of the 84 metro areas tracked by Colliers had recovered all of the office-using jobs that were lost during the recession. This includes many Sunbelt markets such as Atlanta, Charlotte and Miami that were hit particularly hard by the housing bust and financial crisis. Officeusing employment is approaching the pre-recession peak in other highly impacted markets, including Orlando, Tampa-St. Petersburg, West Palm Beach and Phoenix. Many of these markets are benefiting from financial services firms relocating to or expanding within lower-cost areas. In contrast, many traditional financial centers, including Chicago, Boston, Los Angeles, San Francisco and New York, are lagging the national recovery in financial activities employment growth. Instead, growth in TAMI (technology, advertising, media and information) industries remains the driver of the office market recoveries in these markets. Tech-driven submarkets, such as San Francisco s SoMa, New York s Midtown South, Los Angeles Westside, Chicago s River North and Boston s Seaport District and Cambridge, remain among the strongest in the U.S., with a shortage of available space and high rents driving demand to other submarkets in these metro areas and adjacent markets. Although robust growth in temporary hiring has garnered much attention, the recovery in permanent employment has gained steam during the last few years. In fact, the recovery in the professional and business services sector excluding temporary employment is ahead of the recovery in temporary employment, with nearly two permanent jobs in the professional and business services sector regained per one lost during the recession, compared with about 1.25 temporary jobs regained for every one lost. This trend reflects businesses greater confidence in the strength of the economic recovery and is boosting office demand. OFFICE, INVENTORY & NORTH AMERICA EMPLOYMENT FROM CYCLICAL PEAK US 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% Total Employment Office-Using Employment Professional & Business Services Financial Activities UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT US 700, , , , , , , % vac. MONTHS Note: Latest data as of July ; x-axis indicates number of months elapsed since each sector s previous cyclical employment peak; office-using employment sectors include professional and business services, financial activities and information services; information services not displayed separately because sector peaked in Sources: Bureau of Labor Statistics, Colliers International ( Absorption Per Market q1 '14 - q2 '14 1,600, , , , ,000-1,600,000 Sq. Ft. By Region 2 billion 1 billion 200 mil. Occupied Sq. Ft. Vacant Sq. Ft. Note: Latest data as of August 9, ; data are seasonally adjusted. Sources: Bureau of Labor Statistics, Colliers International. P. 2 COLLIERS INTERNATIONAL

3 HIGHLIGHTS OFFICE NORTH AMERICA We expect steady growth in job creation to continue through and 2015, driving office absorption. IHS projects the addition of an average of 208,000 jobs per month in for a total of 2.5 million jobs to be added this year, the highest annual total since 2000, followed by nearly 2.7 million jobs added in Due to the weak Q1 GDP figure, IHS expects real GDP growth to slow slightly, from 2.22% in 2013 to 2.11% in, accelerating to 2.84% in Steady job creation and economic growth as well as rising business confidence bode well for office demand during the next few years. OFFICE Q US Vacancy % FASTEST OFFICE-USING EMPLOYMENT GROWTH JUNE US MSA PERCENT CHANGE MSA PERCENT CHANGE Raleigh 9.8 Charlotte Q Q3 Q4 Q Q2 Q3 Q4 Q1 Q2 Absorption MSF Completions MSF Vac Rate (%) Source: Colliers International. Austin 6.9 Los Angeles 3.4 Nashville 5.6 Atlanta 3.3 Inland Empire 5.4 Memphis 3.3 Indianapolis 5.3 Miami 3.2 Dallas - Fort Worth 5.1 Sacramento 3.2 San Francisco 3.8 St. Louis 3.2 Jacksonville 3.6 West Palm Beach 3.1 Las Vegas 3.5 Orlando 3.1 Richmond 3.4 San Jose - Silicon Valley 3.1 UNITED STATES: 2.4 Note: All data are seasonally adjusted as of June ; Includes markets tracked by Colliers with at least 100,000 office-using jobs as of June. Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Colliers International. OFFICE-USING EMPLOYMENT SECTOR RECOVERY - MAJOR S MSA FINANCIAL ACTIVITIES JOBS RECOVERED % PROFESSIONAL & BUSINESS SERVICES JOBS RECOVERED % Chicago Boston Los Angeles San Francisco New York Washington, DC UNITED STATES: Note: Data represent % of jobs lost during the recession that have been regained as of Jun-14. Sources: Bureau of Labor Statistics, Federal Reserve of St. Louis, Colliers International. TOP 20 S FOR OFFICE-USING JOBS RECOVERED JUNE US MSA PERCENT RECOVERED MSA PERCENT RECOVERED Austin Indianapolis Raleigh Baltimore Nashville St. Louis San Francisco Denver Pittsburgh Charlotte Dallas - Fort Worth Atlanta San Jose - Silicon Valley Jacksonville Houston Minneapolis - St. Paul Columbus Portland, OR Omaha Boston UNITED STATES: Note: All data are seasonally adjusted as of June ; Includes markets tracked by Colliers with at least 100,000 office-using jobs as of June. Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Colliers International. S WITH FINANCIAL ACTIVITIES EMPLOYMENT AT OR ABOVE PRE-RECESSION PEAK JUNE US MSA % OF JOBS RECOVERED MSA % OF JOBS RECOVERED St. Louis Richmond Dallas - Fort Worth Phoenix Nashville Jacksonville Omaha Cincinnati Austin Birmingham Pittsburgh UNITED STATES: 37.4 Note: All data are seasonally adjusted as of June ; Includes markets tracked by Colliers with at least 25,000 financial activities jobs as of June. Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Colliers International. COLLIERS INTERNATIONAL P. 3

4 HIGHLIGHTS OFFICE NORTH AMERICA CANADA ECONOMIC TRENDS The Canadian economy expanded further through the first half of, adding nearly 53,000 jobs. Major drivers included growth in the energy and tech industries, the improving economy in its key trading partner the United States, and low interest rates. Looking forward, the Conference Board of Canada projects accelerating employment and GDP growth driven by the private sector into 2015, which should support further demand for office space. In and 2015, the Conference Board predicts average annual employment growth of 1.4% and 1.8%, respectively. Real GDP growth is expected to accelerate from 1.8% in 2013 to 2.4% in and 2.6% in Edmonton and Calgary should remain leading markets, fueled by robust energy industry growth in Alberta. Vancouver and Toronto also should experience above-average economic growth, benefiting from both expansions by local tech firms and tech companies relocating from other areas, as well as a preference among many young employees for a walkable environment accessible to transit, restaurant, retail and entertainment options. CANADA AVERAGE FORECASTED REAL GDP GROWTH % CITY 2015F-2018F CITY 2015F-2018F Edmonton 3.1 Winnipeg 2.4 Calgary 2.9 Kitchener - Cambridge - Waterloo 2.4 Vancouver 2.8 Victoria 2.3 Abbotsford - Mission 2.7 Ottawa-Gatineau 2.2 Saskatoon 2.7 Halifax 2.2 Toronto 2.6 Moncton 2.1 Oshawa 2.4 Montreal 2.1 Regina 2.4 (%) (%) Toronto, ON 6.29 San Francisco, CA 8.28 Saskatoon, SK 6.86 Pittsburgh, PA 8.36 Bakersfield, CA 7.77 Montréal, QC 8.68 Winnipeg, MB 7.84 Calgary, AB 8.77 Nashville, TN 8.00 CANADA 2.2 LOWEST OVERALL RATES NA NYC - Midtown South Manhattan NORTH AMERICA Source: The Conference Board of Canada Source: Colliers International. OFFICE OUTLOOK BEHIND THE STATISTICS & BEYOND THE BASICS Scope of Colliers Office Outlook Report: Colliers office space universe encompasses 87 markets in the U.S. and Canada with a combined total of more than 6.4 billion square feet. The 75 U.S. markets account for most of this space, with nearly 6.0 billion square feet of tracked inventory and the remaining 448 million square feet in Canada. Our coverage includes 21 markets with more than 100 million square feet of space, which combined account for 3.8 billion square feet, or nearly 60% of our office market inventory. The largest U.S. markets are New York, Washington, D.C., Chicago, Dallas and Atlanta; Toronto is the only Canadian market with more than 100 million square feet of space. Vacancy Vacancy rate trends in mirrored recent quarters. In the U.S., both the CBD and suburban vacancy rates decreased at a moderate pace, driven by solid office-using employment growth and relatively low levels of new supply. The overall U.S. vacancy rate decreased by 21 basis points to 13.72% in, a slightly faster rate than the 16 basis-point quarterly average decrease since the vacancy rate s cyclical peak in Q Of the 72 U.S. markets tracked by Colliers reporting both Q1 and Q2 vacancy rates, 56 posted vacancy rate decreases during the quarter. In Canada, both the CBD and suburban vacancy rates increased as new supply came online. The overall Canadian vacancy rate increased by 52 basis points to 8.52%, with all but one of the Canadian markets reporting both Q1 and Q2 data posting vacancy rate increases in. LARGEST Q-o-Q DECREASE IN OVERALL RATE NA MSA Q1 BASIS- POINT CHANGE Savannah, GA San Francisco, CA Nashville, TN New York, NY - Downtown Manhattan Waterloo Region, ON Las Vegas, NV Fairfield County, CT Charleston, SC Orange County, CA Ft. Lauderdale - Broward, FL NORTH AMERICA Source: Colliers International. P. 4 COLLIERS INTERNATIONAL

5 HIGHLIGHTS OFFICE NORTH AMERICA Like the employment data, the U.S. vacancy data indicate that the office market recovery is broadening to include more markets. Although some leading markets such as San Francisco and Nashville still rank high in terms of vacancy rate decrease, hard-hit markets such as Las Vegas, Orange County, Fort Lauderdale and West Palm Beach also posted significant decreases in the quarter. We also are observing more spillover demand from the tightest markets and submarkets to adjacent areas with greater availabilities and/or lower rents. Examples include Oakland (spillover demand from San Francisco and Silicon Valley) and Downtown and Midtown Manhattan (spillover demand from Midtown South), all of which posted faster vacancy rate decreases than the U.S. average. Rent trends also reflect increasing demand in these markets: Midtown Manhattan (12.8%) and Downtown Manhattan (7.9%) posted the first-highest and third-highest year-over-year Class A CBD rent growth among Northeast markets in, with Midtown South (8.7%) ranking second; and Oakland (7.5%) posted the fifth-highest year-over-year Class A CBD rent growth among West markets during the quarter, although growth still trailed San Francisco (18.8%) and San Jose/ Silicon Valley (15.5%). In many Canadian markets, the large amount of new supply coming online is contributing to an upward trend in vacancies. Of the markets reporting both Q1 and Q2 data, only the Waterloo Region posted a quarterly decrease in vacancy rate. In general, the Canadian office market has shifted in favor of tenants, particularly for older buildings as companies move into newly constructed properties. However, the overall Canadian office vacancy rate remains well below the 10% threshold considered indicative of a healthy market, and anticipated continued job growth bodes well for market fundamentals into Tenant Demand and Leasing Activity Tenants in many industries, particularly tech and other creative firms, continue to lease space in areas and properties preferred by their employees in order to attract and retain top talent. For example, many tech firms in New York are eschewing contemporary corporate space for the renovated nineteenth-century cast-iron buildings common in Midtown South, driving robust rent growth in this office market. Several non-tech companies opened offices or signed leases for their tech operations in the San Francisco Bay Area in recent months, reflecting the region s deep talent base. Examples included: Wal-Mart s recently signed lease for an additional 127,000 at Sunnyvale Business Park, for a total footprint of about 312,000 square feet at the park; a new McDonald s tech incubator on San Francisco s Market Street; and Target s recently opened second Bay Area tech hub in Silicon Valley s Sunnyvale submarket, following the opening of its Technology Innovation Center in San Francisco in Brooklyn also remains a preferred location by tech tenants in response to many of their employees preference to live and work in the borough. Etsy recently signed on to anchor the Dumbo Heights complex where it will have space to grow its current employee base of 350 to 650 or more in the next five years. Also, Vice Media will double its current Williamsburg, Brooklyn footprint by leasing 60,000 square feet that will accommodate its growing workforce, set to increase from 400 employees to 925 employees, citing that three-quarters of its employees live in the neighborhood as a key reason for locating there. Other premier tech submarkets such as Manhattan s Meatpacking District continue to experience strong demand from tenants seeking to use their office space as a recruiting tool. Samsung Electronics North America leased the entire building at 837 Washington Street in the Meatpacking District for more than $100 per square foot, illustrating the area s tremendous appeal to TAMI and fashion tenants. In Los Angeles, True Car will double the size of its Santa Monica office to 33,700 square feet when it relocates to oceanfront Portofino Plaza, which will accommodate up to 400 employees. In Chicago, the Merchandise Mart in the River North submarket continues to draw tech tenants. ebay unit Braintree will relocate from 27,000 square feet in the West Loop to 60,000 square feet at the Merchandise Mart, with plans to hire about 360 additional people through Also, in August, Yelp announced plans to expand from its current Chicago incubator space into a permanent 50,000 square-foot office at the Merchandise Mart, at which it will hire about 300 people during the coming year. Many of these deals also indicate the very high densities employed by tech companies due to open, collaborative layouts as well as the increased mobility of their workforces. North American Downtown Markets: Excluding renewals, of the leases signed this quarter in your CBD/downtown, did most tenants...? Contract 9.7% Expand 16.7% Hold Steady 73.6% North American Downtown Markets: What was the trend in Free Rent (in months) offered by CBD landlords this quarter? Less 14.3% More 2.9% Same 82.9% North American Downtown Markets: What was the trend for tenant improvement allowances offered by CBD landlords this quarter? Less 12.9% More 8.6% Same 78.6% North American Suburban Markets: Excluding renewals, of the leases signed this quarter in your suburban market, did most tenants...? Contract 11.0% Expand 26.0% Hold Steady 63.0% Note: Charts above reflect % of markets reporting COLLIERS INTERNATIONAL P. 5

6 HIGHLIGHTS OFFICE NORTH AMERICA Absorption North American absorption increased in, totaling about 16.9 million square feet, up from 15.3 million square feet in Q1. Positive Q2 absorption was solely due to the U.S., which posted just under 17 million square feet of positive absorption, compared with 83,530 square feet of negative absorption in Canada. Although the U.S. absorption figures are volatile on a quarterly basis, the trend has been consistent improvement: four-quarter trailing average quarterly absorption reached more than 17.6 million square feet in, the highest figure during the current recovery. More than three-quarters of the markets tracked by Colliers posted positive absorption on both a quarterly and year-to-date basis in. Once again, Houston led all North American markets, with 1.6 million square feet of absorption in and nearly 3.9 million square feet of absorption through the first half of the year, as energy firm leasing remained robust. The confluence of energy and technology remains key to the market s strength, with advanced oil and natural gas extraction techniques driving the current boom. Illustrative of this trend, Element Materials Technology recently opened its new Oil and Gas Materials Technology Centre near the booming Energy Corridor. The tech industry drove absorption in many of the other top markets in Q2, including San Francisco, Orange County, Seattle and Chicago. Phoenix also is benefiting from tech industry growth. Recent announcements included San Francisco-based Weebly s plan to open a 25,000 square-foot North American customer operations headquarters in Scottsdale, and Silicon Valley Bank s plan to add 250 positions, including finance and IT roles, in Tempe during the next three years and make at least $100 million in loans to Arizona firms during the next five years. Other top markets include Atlanta and Dallas, which continue to benefit from expansions of local firms as well as company relocations from other markets. Year-to-date absorption in Atlanta through Q2 nearly reached the total for all of 2013, and Texas continues to attract firms from out-of-state. Recent announcements included a pair of San Diegoarea firms, Active Network and Omnitracs, moving their headquarters and a total of nearly 1,500 jobs to Dallas, and Charles Schwab moving 1,200 jobs to El Paso and Austin. Many markets without significant tech and energy industry concentrations and that were hit particularly hard by the housing bust and financial market correction have been lagging in the recovery. However, positive signs have emerged in many of these markets in recent quarters. For example, although their overall vacancy rates remain high, Las Vegas and the Inland Empire each posted positive absorption for four or more consecutive quarters through Q2. Moderate improvements should continue in these office markets, driven by continued job growth, rising business confidence and a lack of new supply. TOP S FOR METRO OFFICE YTD NA (MSF) (MSF) Houston, TX 3.86 Boston, MA 1.41 NYC - Downtown Manhattan 2.45 NYC - Midtown South Manhattan Construction Activity Construction activity continued to tick up in, driven by higher occupancy gains and rents, rising business and developer confidence, a gradually loosening lending environment, and a shortage of certain types and blocks of space in some markets. At mid-year, million square feet were under construction in the U.S. and Canadian markets tracked by Colliers, up from 92.1 million square feet at the end of Q1 and 75.7 million square feet one year earlier. The amount of new construction increased in both countries during the last 12 months. However, with concerns growing regarding new supply levels in some Canadian markets, construction activity increased at a slower pace than in the U.S., which is further behind in the development cycle. Between mid-year 2013 and mid-year, the amount of square footage under way in the markets tracked by Colliers increased by about 25% in Canada, compared with a 37% increase in the U.S. Absorption in the U.S. and Canada during the first half of totaled 32.2 million square feet, outpacing new supply totaling 27.2 million square feet a 1.2:1 ratio. However, the new supply picture varied significantly between the two countries. The absorption to new supply ratio through H1 in the U.S. was nearly 1.4:1, whereas the ratio was 0.1:1 in Canada. Despite the increase in construction activity in the U.S., overbuilding is generally not a concern yet, with development activity still concentrated in the strongest markets and submarkets. The top 10 markets for square footage under construction at mid-year accounted for about 69% of all construction under way in Colliers U.S. markets, down only slightly from 72% at mid-year Moreover, the top ten markets for construction activity include many of the strongest intellectual capital, energy and education (ICEE) markets where tenant demand remains robust, such as Houston, San Jose/Silicon Valley, San Francisco, Seattle and Manhattan s Midtown South. In other markets with construction under 1.31 Atlanta, GA 2.05 Phoenix, AZ 1.11 Dallas, TX 1.96 Minneapolis, MN 1.04 San Francisco, CA 1.77 Baltimore, MD.96 YTD NORTH AMERICA : 16.9 MSF Source: Colliers International. P. 6 COLLIERS INTERNATIONAL

7 HIGHLIGHTS OFFICE NORTH AMERICA way, development generally is occurring in response to a shortage of a particular type of space or lack of availabilities in a given submarket. Tishman Speyer recently announced groundbreaking on Three Alliance Center, Atlanta s first new office tower since 2008, in the Buckhead submarket, which has one of the lowest vacancy rates in the metro area. In Phoenix, tightening market conditions in eastern and southeastern submarkets such as Tempe, Scottsdale, Gilbert and Mesa are prompting development activity; all of the 1.8 million square feet under construction at mid-year were in these areas. TOP S FOR OFFICE SPACE NEW SUPPLY YTD NA MSA YTD SQUARE FEET DELIVERED Houston, TX 3,855,608 New York, NY - Downtown Manhattan 2,861,402 Washington DC 2,820,143 Calgary, AB 1,375,670 Dallas, TX 1,311,871 Boston, MA 1,300,000 San Francisco, CA 1,194,405 Montréal, QC 937,060 New York, NY - Midtown South Manhattan 894,672 Baltimore, MD 778,400 MSA Note: Rankings are based on the 87 U.S. and Canadian markets tracked by Colliers International. Source: Colliers International. CONSTRUCTION AS % OF INVENTORY NA SQUARE FEET UNDERWAY (MSF) % OF INVENTORY Calgary, AB % Houston, TX % San Jose - Silicon Valley % Vancouver, BC % Edmonton, AB % Halifax, NS % San Francisco, CA % Toronto, ON % Regina, SK % Seattle/Puget Sound, WA % NORTH AMERICA % Note: Rankings are based on the 87 U.S. and Canadian markets tracked by Colliers International. Source: Colliers International Owners in both the U.S. and Canada are repositioning existing buildings to make them more competitive with newer buildings, with a focus on attracting the creative, tech and media tenants that have been the greatest source of current office demand in many markets. With new supply outpacing absorption in Canada and a large amount of space still under construction, some landlords in markets including Calgary, Vancouver and Ottawa are renovating older buildings to incorporate features such as higher ceilings, energy efficient upgrades, increased on-site amenities, and highly customized spaces. In the U.S., tech tenant demand continues to spread from the strongest tech submarkets to adjacent areas, and developers are repositioning assets to capture this spillover demand. Lane Partners plans to redevelop the 400,000 square-foot Sears Building in downtown Oakland into creative office space in response to a shortage of sizeable blocks of space in buildings with large floorplates in San Francisco and Oakland. Also, Ridge Capital Investors and Contrarian Capital Management recently purchased the 114,000 square-foot Latham Square office building in downtown Oakland with plans to renovate it into creative space. In Downtown Los Angeles, several developers are repositioning former warehouses to attract tech/ creative tenants, including Lincoln Property, which recently signed a lease with AEG to occupy all of the 82,000 square feet of office space at The Desmond, a former department store warehouse that currently is under renovation in the South Park submarket. Redevelopment activity in both Oakland and Downtown Los Angeles also reflects their growing popularity as residential areas, particularly among Millennials desiring a walkable environment and access to public transit. CAPITAL S & TRANSACTION ACTIVITY Investment in North American office properties increased through the first half of, with transaction volume totaling $52.9 billion, up 25% compared with the year-earlier period according to Real Capital Analytics (RCA) data. The increase was entirely due to growth in U.S. transaction activity, which grew by 30% to $51.0 billion during the period. Canadian office transaction volume decreased by nearly 40% to $1.9 billion. OFFICE TRANSACTION VOLUME NA Bil. $300 $250 $200 $150 $100 $50 $ % 150% 100% 50% 0% -50% -100% 12-Month Trailing Volume (left-axis) Year-Over-Year % Change (right-axis) Note: Latest data as of ; all data are 12-month trailing. Sources: Real Capital Analytics; Colliers International. P. 7 COLLIERS INTERNATIONAL

8 HIGHLIGHTS OFFICE NORTH AMERICA Despite the specter of rising interest rates, investor demand for CBD assets in gateway cities remains voracious, further compressing cap rates. According to RCA, the average cap rate in the top quartile of CBD properties in major U.S. metros was just 4.4% in the first half of the year, and the lowest cap rates for office properties in New York, Boston, Washington, DC and San Francisco were in the low- to mid-3% range. Based on the Moody s/rca Commercial Property Price Index (CPPI), pricing for major metro CBD properties is now 16.6% above the pre-recession peak, the only segment of the office market in which pricing has fully recovered from the recession. However, quarterly price growth for major metro CBD properties decelerated to 0.2% in, the slowest growth among the four segments. Growth was strongest for non-major metro suburban properties, at 11.2%, reflecting investor interest broadening to include more geographies as well as suburban assets. Nonetheless, pricing in non-major markets remains nearly 19% off the peak for CBD assets and 24% off the peak for suburban assets. Given high pricing and stiff competition for office properties in gateway markets, we expect investor interest to continue to shift to secondary and tertiary markets as well as suburban assets in search of higher yields, driving further price growth in these areas. Foreign investors remain a key source of capital in North American real estate, particular in gateway cities. Of the $13.0 billion of crossborder capital invested in U.S. office properties year-to-date through mid-august, nearly 80% was in Boston, Manhattan, Los Angeles, Washington, DC, and San Francisco. In Canada, 15 of the 19 properties, accounting for 76% of cross-border capital flows, that were purchased by foreign investors were in Toronto. The relative stability and transparency of the North American real estate markets will likely continue to attract foreign investors to both gateway cities and, increasingly, secondary markets in search of higher returns and less competition. Looking forward, the 10-year Treasury yield is expected to rise as the Federal Reserve ends its bond purchases in October and likely begins raising interest rates in U.S. office assets, particularly secondary, tertiary and suburban properties, still offer attractive riskadjusted returns and should benefit from continued capital inflows, particularly as economic conditions strengthen further and development activity remains low and targeted in most markets. For suburban office properties, the cap rate spread to the 10-year Treasury was 469 basis points in, higher than the average of 410 basis points between Q and and well above the recent low of 183 basis points in Q Non-gateway markets with favorable growth prospects, such as many Texas markets, Raleigh/Durham, Nashville, Phoenix and Portland, will likely attract a greater amount of interest from both domestic and foreign capital sources in the coming quarters. US OFFICE SPREADS: CAP RATE TO 10-YEAR TREASURY YIELD Basis Points MOODY S/RCA COMMERCIAL PROPERTY PRICE INDICES - US OFFICE Average Cap Rates - Office U.S. Overall 5.8% Major Metro CBD 5.3% Non-Major Metro CBD 6.9% Major Metro Suburban 6.7% Non-Major Metro Suburban 7.6% Major Off-CBD Major Off-Sub CBD Suburban All Office Note: Latest data as of. Sources: Real Capital Analytics, IHS Global Insight, Colliers International Research. Non-Major Off-CBD Non-Major Off-Sub Note: Latest data as of. Sources: Moody s Investor Service, Real Capital Analytics. P. 8 COLLIERS INTERNATIONAL

9 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES DOWNTOWN OFFICE ALL INVENTORY INVENTORY NEW SUPPLY YTD NEW SUPPLY UNDER CONSTRUCTION MARCH 31, JUNE 30, YTD NORTHEAST Baltimore, MD 28,652,392 45,000 45, , ,193 Boston, MA 62,623, ,050,000 2,047, , ,702 Hartford, CT 9,971, ,168 19,926 New York, NY Downtown Manhattan 110,938, ,861,402 2,800, ,201,140 2,447,603 New York, NY Midtown Manhattan 230,068, , ,202 New York, NY Midtown South Manhattan 162,245, ,672 3,600, ,903 1,305,850 Philadelphia, PA 42,857, ,278 84,052 Pittsburgh, PA 32,091, ,560, ,805 38,023 Stamford, CT* 18,708, , ,473 Washington DC 144,431, , ,741 1,513, , ,780 White Plains, NY 7,671, ,577-90,629 Northeast Total 850,260, ,800 5,714,815 11,521, ,249,898 3,691,825 SOUTH Atlanta, GA 50,075, , , ,588 Birmingham, AL 4,985, , ,850 Charleston, SC 2,252, , ,231 37,952 Charlotte, NC 22,609, ,837-79,125 Columbia, SC 4,678, ,964-36,435 Dallas, TX 33,948, , ,176-20,070 Ft. Lauderdale-Broward, FL 8,121, , ,980 Ft. Worth, TX 10,154, , , ,173 Greenville, SC 3,293, ,169-39,468 Houston, TX 42,670, ,464, , ,159 Jacksonville, FL 15,572, , ,485 Little Rock, AR 6,482, ,815 3,330 Louisville, KY 43,702, , , , ,801 Memphis, TN 5,403, , ,321 Miami-Dade, FL 18,812, , ,323 95,249 Nashville, TN 13,240, , , ,000 Orlando, FL 12,194, , , ,132 Raleigh/Durham/ Chapel Hill, NC 14,306, , , , ,219 Richmond, VA 16,533, , , , ,579 Savannah, GA 803, ,678 18,442 Tampa Bay, FL 6,779, ,801 23,280 West Palm Beach/Palm Beach County, FL 10,086, ,859 55,850 South Total 346,707, ,424 3,650, ,040 2,674,058 * Q1-14 data used for Stamford. COLLIERS INTERNATIONAL P. 9

10 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES DOWNTOWN OFFICE ALL INVENTORY (continued) INVENTORY NEW SUPPLY YTD NEW SUPPLY UNDER CONSTRUCTION MARCH 31, JUNE 30, YTD MIDWEST Chicago, IL 158,102, ,073, , ,097 Cincinnati, OH 18,989, ,682 12,653 Cleveland, OH 32,520, ,818 57,258 Columbus, OH 19,452, , , ,829 Grand Rapids, MI 5,314, , ,774 Indianapolis, IN 22,548, ,961-6,527 Kansas City, MO 34,737, , ,983 Milwaukee, WI 18,749, , , ,031 Minneapolis, MN 31,690, ,160, , ,204 Omaha, NE 6,457, ,615-11,707 St. Louis, MO 23,216, , ,762 St. Paul, MN 11,730, ,239-95,754 Midwest Total 409,631, ,765, ,381, ,987 WEST Albuquerque, NM 3,191, ,261 40,566 Bakersfield, CA 3,243,457 12,991 12,991 59, ,955 2,743 Boise, ID 4,177,362 46, , , , ,324 Denver, CO 34,319, , , , , ,211 Fresno, CA 3,288, ,864-51,311 Honolulu, HI 7,164, ,727-39,655 Las Vegas, NV 5,017, , , , ,621 Los Angeles, CA* 32,566, , , ,400 Oakland, CA 17,255, ,674 58,788 Phoenix, AZ 20,181, ,788 Portland, OR 34,830, , , , ,840 Reno, NV 3,337, , Sacramento, CA* 13,570, ,426 49,246 San Diego, CA 10,172, , ,760-44,306 San Francisco, CA 89,213, ,993 1,194,405 4,990, ,442,981 1,772,981 San Jose - Silicon Valley 8,060, , ,414 Seattle/Puget Sound, WA 55,619,584 58,959 58,959 3,246, , ,203 Stockton, CA 8,221, ,744 41,822 Walnut Creek, CA 12,443, , ,734 West Total 365,874, ,863 1,742,401 10,792, ,140,968 3,086,269 U.S. TOTALS 1,972,474, ,663 8,251,640 28,730, ,711,363 10,387,139 *Q1-14 data used for Sacramento and Los Angeles markets. P. 10 COLLIERS INTERNATIONAL

11 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES DOWNTOWN OFFICE CLASS A NORTHEAST INVENTORY AVERAGE QUOTED RENT (USD PSF) MAR 31, JUNE 30, YTD QUARTERLY RENT (%) RENT(%) Baltimore, MD 12,805, % 11.62% 18, , % -8.4% Boston, MA 43,673, % 13.90% -209, , % 2.4% Hartford, CT 6,771, % 13.48% -154,205-80, % -0.6% NYC - Downtown Manhattan 80,463, % 14.98% 1,173,885 2,155, % 7.9% NYC - Midtown Manhattan 197,217, % 11.86% 1,020, , % 12.8% NYC - Midtown South Manhattan 34,311, % 9.43% 71,827 1,059, % 8.7% Philadelphia, PA 30,476, % 11.34% -106,806 43, % 6.0% Pittsburgh, PA 18,367, % 7.72% 96,262-43, % 4.0% Stamford, CT* 13,339, % 21.77% 65,472 65, % -0.5% Washington DC 89,488, % 11.53% 311, , % 0.7% White Plains, NY 4,887, % 17.90% -32,789-41, % -0.3% Northeast Total 531,802, % 12.43% 2,254,630 4,575, % 8.1% SOUTH Atlanta, GA 30,396, % 16.79% 257, , % -6.6% Birmingham, AL 4,029, % 15.08% 5, , % -0.3% Charleston, SC 1,009, % 6.28% 30,753 31, % 5.7% Charlotte, NC 16,132, % 9.68% -6,576 53, % 1.0% Columbia, SC 2,131, % 10.73% 11,957-39, % 1.2% Dallas, TX 22,640, % 25.80% -154,911-54, % 5.8% Ft. Lauderdale-Broward, FL 4,494, % 14.79% 129, , % 5.9% Ft. Worth, TX 5,855, % 17.45% -21,522-5, % -0.7% Greenville, SC 2,021, % 19.14% -32,085-25, % 10.0% Houston, TX 30,778, % 9.82% 227, , % 10.0% Jacksonville, FL 6,846, % 16.50% , % 0.3% Little Rock, AR 2,635, % 10.69% 681 4, % 6.1% Louisville, KY 10,578, % 10.74% 4, , % 0.9% Memphis, TN 2,009, % 20.64% 123, , % -1.5% Miami-Dade, FL 9,980, % 17.12% 62, , % 1.7% Nashville, TN 4,058, % 9.98% 52,720 55, % 9.5% Orlando, FL 5,776, % 14.29% -99, , % 2.5% Raleigh/Durham/Chapel Hill, NC 7,059, % 6.67% -2,081 13, % 9.6% Richmond, VA 6,355, % 8.09% 110, , % 7.1% Savannah, GA 645, % 6.82% 18,273 14, % 1.6% Tampa Bay, FL 4,999, % 13.26% , % 4.8% West Palm Beach/ Palm Beach County, FL 3,515, % 17.84% 31,550 44, % 0.9% South Total 183,953, % 14.53% 749,157 1,679, % 3.3% * Q1-14 data used for Stamford. COLLIERS INTERNATIONAL P. 11

12 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES DOWNTOWN OFFICE CLASS A (continued) MIDWEST INVENTORY AVERAGE QUOTED RENT (USD PSF) MAR 31, JUNE 30, YTD QUARTERLY RENT (%) RENT(%) Chicago, IL 61,039, % 12.42% 267, , % 5.4% Cincinnati, OH 8,359, % 18.79% 47,903 82, % 0.4% Cleveland, OH 10,512, % 14.83% 38,894 23, % -3.3% Columbus, OH 8,377, % 11.21% 62, , % 2.9% Grand Rapids, MI 1,461, % 19.26% 47,385 65, % -4.6% Indianapolis, IN 9,501, % 12.07% -5,780-58, % 0.5% Kansas City, MO 10,518, % 20.33% 66,538 58, % 0.8% Milwaukee, WI 5,106, % 8.80% 5,931 10, % -0.4% Minneapolis, MN 13,618, % 10.85% 205,929 52, % 1.6% Omaha, NE 3,549, % 3.32% 5,544 33, % 0.6% St. Louis, MO 9,558, % 19.76% 28, , % 0.6% St. Paul, MN 2,773, % 13.51% -26, , % 8.0% Midwest Total 151,576, % 13.50% 744,198 97, % 3.5% WEST Albuquerque, NM 575, % 26.55% % 1.9% Bakersfield, CA 729, % 6.35% -1,737-13, % 0.0% Boise, ID 1,941, % 11.52% -93,934-56, % 9.0% Denver, CO 21,463, % 12.81% 93, , % 8.3% Fresno, CA 1,026, % 6.11% 23, % 2.5% Honolulu, HI 4,644, % 12.32% 29,628-30, % 1.9% Las Vegas, NV 1,103, % 13.10% -4, % 6.9% Los Angeles, CA* 18,098, % 19.48% -53,000-53, % 3.0% Oakland, CA 10,562, % 9.64% 4,133-37, % 7.5% Phoenix, AZ 9,474, % 22.75% -30,459-11, % 2.1% Portland, OR 13,302, % 10.22% -52, , % 2.9% Reno, NV 583, % 13.42% 2, % -2.2% Sacramento, CA* 5,945, % 15.29% 18,734 18, % -2.6% San Diego, CA 7,257, % 17.85% 54,316-53, % 6.0% San Francisco, CA 57,465, % 8.75% 1,190,858 1,458, % 18.8% San Jose - Silicon Valley 3,493, % 17.57% 24,544 26, % 15.5% Seattle/Puget Sound, WA 32,199, % 10.68% 110, , % 7.5% Stockton, CA 2,790, % 19.49% 77 18, % -10.0% Walnut Creek, CA 8,271, % 13.62% 82, , % 1.7% West Total 200,927, % 12.46% 1,397,884 1,739, % 10.1% U.S. TOTALS 1,068,260, % 12.95% 5,145,869 8,091, % 7.5% * Q1-14 data used for Sacramento and Los Angeles markets. P. 12 COLLIERS INTERNATIONAL

13 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES SUBURBAN OFFICE ALL INVENTORY INVENTORY NEW SUPPLY YTD NEW SUPPLY UNDER CONSTRUCTION MAR 31, YTD NORTHEAST Baltimore, MD 88,259, , % 12.15% 207,916 1,299,972 Boston, MA 112,698, , ,000 1,673, % 17.70% 291, ,713 Fairfield County, CT 40,646, % 12.85% 213, ,596 Hartford, CT 12,784, % 11.86% 150, ,283 Long Island, NY 74,486, , % 10.18% 32,915-44,348 New Jersey - Central New Jersey - Northern 131,315, , % 15.56% 135, , ,629, , % 15.79% -100, ,930 Philadelphia, PA 110,544, , , , % 14.94% 545, ,790 Pittsburgh, PA 91,138, , ,605 1,347, % 7.91% -38,625-84,678 Washington DC 289,371,434 1,916,402 1,956,402 3,796, % 17.28% 252, ,152 Westchester County, NY 38,211, % 13.24% -60, ,118 Northeast Total 1,153,085,058 2,605,221 4,050,581 7,507, % 14.75% 1,631,541 2,639,214 SOUTH Atlanta, GA 171,907, ,029, % 15.95% 424,193 1,480,850 Birmingham, AL 14,683, % 14.18% 123,347-4,800 Charleston, SC 9,818, , , % 11.13% 69, ,216 Charlotte, NC 62,302, , , , % 11.72% 382, ,161 Columbia, SC 4,966, % 22.43% 9,325 62,291 Dallas, TX 238,058, ,191 1,311,871 4,621, % 14.72% 839,485 1,983,167 Ft. Lauderdale- Broward, FL 43,222, , % 14.08% 253, ,130 Ft. Worth, TX 21,168, , , , % 10.82% 81, ,024 Greenville, SC 4,896, % 18.54% 51,783 15,959 Houston, TX 169,088,850 1,728,894 3,855,608 16,303, % 11.98% 1,290,750 3,546,701 Jacksonville, FL 46,157, , , % 11.28% 214, ,741 Little Rock, AR 7,551, % 11.83% 39,299 68,375 Memphis, TN 27,227, , % 14.77% 52, ,590 Miami-Dade, FL 65,547,026 80,000 80, , % 10.88% 334, ,769 Nashville, TN 15,010, , % 4.86% 171, ,640 Orlando, FL 54,400, , ,997 60, % 13.88% -170,392 83,408 Raleigh/Durham/Chapel Hill, NC 64,772, , ,481 1,155, % 11.99% 343, ,296 Richmond, VA 34,772, , , % 11.03% 66,862-24,099 Savannah, GA 1,461, % 19.21% 9,832 1,261 Tampa Bay, FL 57,275, , % 17.44% 127, ,957 West Palm Beach/Palm Beach County, FL 28,464, , % 17.45% 180, ,510 South Total 1,142,753,765 3,463,189 6,372,508 27,028, % 13.65% 4,895,537 10,723,147 * Q1-14 data used for Stamford. COLLIERS INTERNATIONAL P. 13

14 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES SUBURBAN OFFICE ALL INVENTORY (continued) INVENTORY NEW SUPPLY YTD NEW SUPPLY UNDER CONSTRUCTION MAR 31, YTD MIDWEST Chicago, IL 155,576, , , , % 17.19% 110, ,665 Cincinnati, OH 46,579, , % 15.89% 66, ,673 Cleveland, OH 47,980, , , % 11.10% 147,404 29,275 Columbus, OH 44,027, , % 10.49% -11,388 36,460 Grand Rapids, MI 12,533, , , % 19.20% -31,258-31,258 Indianapolis, IN 43,264, , % 9.37% 144, ,087 Kansas City, MO 58,622, , , , % 11.33% 472, ,448 Milwaukee, WI 33,330, , % 12.00% 122, ,521 Minneapolis, MN 79,206, , , % 13.39% 76, ,834 Omaha, NE 21,486, , ,489 78, % 10.18% 275, ,931 St. Louis, MO 55,394, , , % 9.18% 152, ,682 Midwest Total 737,494, ,677 1,755,977 3,872, % 14.01% 1,524,154 2,921,390 WEST Albuquerque, NM 10,877, % 19.09% -369, ,408 Bakersfield, CA 6,070, , , % 7.24% -43, Boise, ID 17,158,432 3,576 24, , % 12.95% -87, ,958 Denver, CO 106,931,545 48,537 91, , % 12.71% 352, ,505 Fairfield, CA 4,995, , % 19.97% 3,863 12,215 Fresno, CA 17,562, , % 13.34% -43, ,469 Honolulu, HI 7,730, % 12.93% -83,603-78,267 Las Vegas, NV 36,776, , , % 21.26% 382, ,548 Los Angeles - Inland Empire, CA 20,516, ,891 58, % 18.46% 102, ,800 Los Angeles, CA* 167,879, , ,300 1,588, % 17.64% 364, ,700 Oakland, CA 16,271, % 19.03% 155, ,599 Orange County, CA 81,476, , , , % 14.98% 1,150, ,401 Phoenix, AZ 111,159, , ,332 1,997, % 18.11% 261,531 1,044,490 Pleasanton/Tri- Valley, CA 27,748, % 12.48% 90, ,837 Portland, OR 43,981, ,521 53, % 8.93% 192, ,717 Reno, NV 9,592, % 14.93% -43,645-72,526 Sacramento, CA* 52,144,531 68,417 68,417 77, % 18.91% 141, ,160 San Diego, CA 71,901,725 45, , , % 12.63% 154, ,920 San Francisco Peninsula 35,209,871 57,741 57, , % 11.11% 9,726-4,835 San Jose - Silicon Valley 64,391, , ,283 4,993, % 9.95% 260, ,899 Seattle/Puget Sound, WA 56,542, ,363, % 9.95% 287, ,577 Walnut Creek, CA 5,513, % 16.68% -22,357 19,330 West Total 972,433,224 1,211,806 2,615,896 13,474, % 14.80% 3,216,312 5,052,533 U.S. TOTALS 4,005,766,939 7,851,893 14,794,962 51,882, % 14.31% 11,267,544 21,336,284 * Q1-14 data used for Sacramento and Los Angeles markets. P. 14 COLLIERS INTERNATIONAL

15 HIGHLIGHTS OFFICE NORTH AMERICA UNITED STATES SUBURBAN OFFICE CLASS A INVENTORY AVERAGE QUOTED RENT (USD PSF) MAR 31, YTD QUARTERLY RENT (%) RENT (%) NORTHEAST Baltimore, MD 31,999, % 12.49% 207,916 1,299, Boston, MA 48,244, % 16.19% 291, , Fairfield County, CT 18,121, % 12.63% 213, , Hartford, CT 7,123, % 11.46% 150, , Long Island, NY 25,394, % 10.57% 32,915-44, New Jersey - Central 61,295, % 15.33% 135, , New Jersey - Northern 87,786, % 18.32% -100, , Philadelphia, PA 67,648, % 13.23% 545, , Pittsburgh, PA 16,920, % 8.69% -38,625-84, Washington DC 139,579, % 17.74% 252, , Westchester County, NY 17,711, % 15.66% -60, , Northeast Total 521,825, % 15.53% 1,631,541 2,639, SOUTH Atlanta, GA 81,351, % 14.08% 424,193 1,480, Birmingham, AL 9,276, % 9.55% 123,347-4, Charleston, SC 3,689, % 7.43% 69, , Charlotte, NC 20,362, % 12.38% 382, , Columbia, SC 1,001, % 18.91% 9,325 62, Dallas, TX 97,441, % 13.65% 839,485 1,983, Ft. Lauderdale-Broward, FL 10,571, % 15.18% 253, , Ft. Worth, TX 3,591, % 1.83% 81, , Greenville, SC 2,458, % 11.02% 51,783 15, Houston, TX 75,225, % 9.37% 1,290,750 3,546, Jacksonville, FL 9,183, % 7.42% 214, , Little Rock, AR 2,843, % 16.82% 39,299 68, Memphis, TN 8,310, % 8.05% 52, , Miami-Dade, FL 16,208, % 14.20% 334, , Nashville, TN 7,660, % 4.78% 171, , Orlando, FL 16,822, % 17.26% -170,392 83, Raleigh/Durham/Chapel Hill, NC 25,192, % 9.88% 343, , Richmond, VA 13,754, % 11.15% 66,862-24, Savannah, GA 490, % 16.05% 9,832 1, Tampa Bay, FL 18,368, % 16.73% 127, , West Palm Beach/ Palm Beach County, FL 8,999, % 16.32% 180, , South Total 432,804, % 12.40% 4,895,537 10,723, COLLIERS INTERNATIONAL P. 15