The CoStar Office Report. F i r s t Q u a r t e r National Office Market

Transcription

1 The CoStar Office Report F i r s t Q u a r t e r

2 First Quarter 2015 National Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview Inventory & Development Analysis Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance by Class & Submarket Figures at a Glance Grouped by CBD vs Suburban Historical Figures at a Glance Leasing Activity Analysis Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions 2015 CoStar Group, Inc. The CoStar Office Report A

3 National First Quarter 2015 Methodology The CoStar Office Report, unless specifically stated otherwise, calculates office statistics using CoStar Group s entire database of existing and under construction office buildings in each metropolitan area. Included are office, office condominium, office loft, office medical, all classes and all sizes, and both multi-tenant and single-tenant buildings, including owner-occupied buildings. CoStar Group's global database includes approximately 95.6 billion square feet of coverage in 4.4 million properties. All rental rates reported in the CoStar Office Report have been converted to a Full Service equivalent rental rate. CoStar regularly opens new markets to expand its geographic coverage which results in varying start dates for historical data. Due to differences in market start dates and a desire to show as long a historical timeframe as possible, only the following markets are included in the historical charts within this report: Atlanta, Austin, Baltimore, Boston, Broward County, Charlotte, Chicago, Cincinnati, Cleveland, Columbus, Dallas/Ft Worth, Dayton, Denver, Detroit, East Bay/Oakland, Houston, Indianapolis, Inland Empire (California), Jacksonville (Florida), Kansas City, Long Island (New York), Los Angeles, Memphis, Miami-Dade County, Nashville, Northern New Jersey, Orange (California), Orlando, Palm Beach County, Philadelphia, Phoenix, Pittsburgh, Raleigh/Durham, Sacramento, San Diego, San Francisco, Seattle/Puget Sound, South Bay/San Jose, St. Louis, Tampa/ St Petersburg, Washington, and Westchester/So Connecticut. When ever possible all markets are included to provide as broad as possible national coverage. The Market Highlights and Overview narrative includes all markets. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2015 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc L ST NW Washington, DC (800) NASDAQ: CSGP B The CoStar Office Report 2015 CoStar Group, Inc.

4 First Quarter 2015 National Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-ofa-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different 2015 CoStar Group, Inc. The CoStar Office Report C

5 National First Quarter 2015 tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: Buildings in a state of construction, up until they receive their certificate of occupancy. In order for CoStar to consider a building under construction, the site must have a concrete foundation in place. Abbreviated UC. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D The CoStar Office Report 2015 CoStar Group, Inc.

6 Overview First Quarter 2015 National U.S. s Vacancy Decreases to 10.9% Net Absorption Positive 15,396,516 SF in the Quarter The U.S. Office market ended the first quarter 2015 with a vacancy rate of 10.9%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 15,396,516 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 41,608,407 square feet. Rental rates ended the first quarter at $22.74, an increase over the previous quarter. A total of 244 buildings delivered to the market in the quarter totaling 16,505,478 square feet, with 115,936,386 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall U.S. Office market was positive 15,396,516 square feet in the first quarter That compares to positive 37,931,775 square feet in the fourth quarter 2014, positive 25,105,567 square feet in the third quarter 2014, and positive 25,370,666 square feet in the second quarter Tenants moving out of large blocks of space in 2015 include: JP Morgan Chase moving out of 946,674 square feet at 28 Liberty in the New York City market, FDIC moving out of 107,266 square feet at 1310 N Courthouse Rd in the Washington, DC market; and Pearson Education moving out of 474,801 square feet at 1 Lake Street in the Northern New Jersey market. Tenants moving into large blocks of space in 2015 include: Mount Sinai moving into 448,819 square feet at 150 E 42nd Street in the New York City market; SAGE Computing moving into 38,096 square feet at RTC West III in the Washington, DC market; and United Water moving into 116,360 square feet at Mack-Cali Centre 6 in the Northern New Jersey market. The Class-A Office market recorded net absorption of positive 8,083,290 square feet in the first quarter 2015, compared to positive 21,149,255 square feet in the fourth quarter 2014, positive 15,349,854 in the third quarter 2014, and positive 13,298,185 in the second quarter The Class-B Office market recorded net absorption of positive 5,993,374 square feet in the first quarter 2015, compared to positive 12,503,795 square feet in the fourth quarter 2014, positive 7,875,807 in the third quarter 2014, and positive 9,585,750 in the second quarter The Class-C Office market recorded net absorption of positive 1,319,852 square feet in the first quarter 2015 compared to positive 4,278,725 square feet in the fourth quarter 2014, positive 1,879,906 in the third quarter 2014, and positive 2,486,731 in the second quarter Net absorption for U.S. s central business district was positive 3,275,466 square feet in the first quarter That compares to positive 7,959,310 square feet in the fourth quarter 2014, positive 4,885,283 in the third quarter 2014, and positive 4,123,315 in the second quarter Net absorption for the suburban markets was positive 12,121,050 square feet in the first quarter That compares to positive 29,972,465 square feet in fourth quarter 2014, positive 20,220,284 in the third quarter 2014, and positive 21,247,351 in the second quarter Vacancy Rates by Class* % Class A Class B Class C Total Market 16% 15% 14% Vacancy Rate 13% 12% 11% 10% 9% 8% 7% q q q q q q q q q q q q q q q * Select markets included in this historical chart - see Methodology page CoStar Group, Inc. The CoStar Office Report 1 Absorption & Deliveries*

7 National First Quarter 2015 Overview Vacancy The Office vacancy rate in the U.S. market area decreased to 10.9% at the end of the first quarter The vacancy rate was 11.0% at the end of the fourth quarter 2014, 11.2% at the end of the third quarter 2014, and 11.4% at the end of the second quarter Class-A projects reported a vacancy rate of 12.3% at the end of the first quarter 2015, 12.3% at the end of the fourth quarter 2014, 12.5% at the end of the third quarter 2014, and 12.7% at the end of the second quarter Class-B projects reported a vacancy rate of 11.4% at the end of the first quarter 2015, 11.5% at the end of the fourth quarter 2014, 11.7% at the end of the third quarter 2014, and 11.9% at the end of the second quarter Class-C projects reported a vacancy rate of 7.9% at the end of the first quarter 2015, 8.0% at the end of fourth quarter 2014, 8.2% at the end of the third quarter 2014, and 8.4% at the end of the second quarter The overall vacancy rate in U.S. s central business district at the end of the first quarter 2015 decreased to 10.2%. The vacancy rate was 10.3% at the end of the fourth quarter 2014, 10.6% at the end of the third quarter 2014, and 10.8% at the end of the second quarter The vacancy rate in the suburban markets changed to 11.2% in the first quarter The vacancy rate was 11.2% at the end of the fourth quarter 2014, 11.4% at the end of the third quarter 2014, and 11.5% at the end of the second quarter Largest Lease Signings The largest lease signings occurring in 2015 included: the 500,000-square-foot lease signed by MetLife, Inc. at the MetLife Building in the New York City market; the 292,013-square-foot lease signed by TIBCO Software, Inc. at Hillview Ave in the South Bay/San Jose market; and the 274,000-squarefoot lease signed by Facebook, Inc. at the Dexter Station building in the Seattle/Puget Sound market. Sublease Vacancy The amount of vacant sublease space in the U.S. market increased to 41,608,407 square feet by the end of the first quarter 2015, from 41,425,037 square feet at the end of the fourth quarter There was 41,992,925 square feet vacant at the end of the third quarter 2014 and 42,047,375 square feet at the end of the second quarter U.S. s Class-A projects reported vacant sublease space of 24,573,800 square feet at the end of first quarter 2015, down from the 24,661,865 square feet reported at the end of the fourth quarter There were 24,440,283 square feet of sublease space vacant at the end of the third quarter 2014, and 25,069,678 square feet at the end of the second quarter Class-B projects reported vacant sublease space of 14,831,060 square feet at the end of the first quarter 2015, up from the 14,662,238 square feet reported at the end of the fourth quarter At the end of the third quarter 2014 there were 15,451,771 square feet, and at the end of the second quarter 2014 there were 15,019,603 square feet vacant. Class-C projects reported increased vacant sublease space from the fourth quarter 2014 to the first quarter Sublease vacancy went from 2,100,934 square feet to 2,203,547 square feet during that time. There was 2,100,871 square feet at the end of the third quarter 2014, and 1,958,094 square feet at the end of the second quarter Sublease vacancy in U.S. s central business district stood at 11,160,049 square feet at the end of the first quarter It was 11,411,693 square feet at the end of the fourth quarter 2014, 11,699,658 square feet at the end of the third quarter 2014, and 12,298,746 square feet at the end of the second quarter Sublease vacancy in the suburban markets ended the first quarter 2015 at 30,448,358 square feet. At the end of the fourth quarter 2014 sublease vacancy was 30,013,344 square feet, was 30,293,267 square feet at the end of the third quarter 2014, and was 29,748,629 square feet at the end of the second quarter Rental Rates The average quoted asking rental rate for available Office space, all classes, was $22.74 per square foot per year at the end of the first quarter 2015 in the U.S. market area. This represented a 0.4% increase in quoted rental rates from the end of the fourth quarter 2014, when rents were reported at $22.65 per square foot. The average quoted rate within the Class-A sector was $28.75 at the end of the first quarter 2015, while Class-B rates stood at $20.39, and Class-C rates at $ At the end of the fourth quarter 2014, Class-A rates were $28.69 per square foot, Class-B rates were $20.24, and Class-C rates were $ The average quoted asking rental rate in U.S. s CBD was $28.95 at the end of the first quarter 2015, and $21.34 in the suburban markets. In the fourth quarter 2014, quoted rates were $29.05 in the CBD and $21.22 in the suburbs. Deliveries and Construction During the first quarter 2015, 244 buildings totaling 16,505,478 square feet were completed in the U.S. market area. This compares to 237 buildings totaling 18,225,825 square feet that were completed in the fourth quarter 2014, 269 buildings totaling 13,639,576 square feet completed in the third quarter 2014, and 12,776,294 square feet in 256 buildings completed in the second quarter There were 115,936,386 square feet of Office space under construction at the end of the first quarter Some of the notable 2015 deliveries include: ExxonMobil Campus - Phase II, a 1,500,000-square-foot facility in the Houston market that delivered in first quarter 2015 and is now 2 The CoStar Office Report 2015 CoStar Group, Inc.

8 Overview First Quarter 2015 National 100% occupied, and 1K Fulton, a 689,067-square-foot building in the Chicago market that delivered in first quarter 2015 and is now 39% occupied. Inventory Total Office inventory in the U.S. market area amounted to 10,501,740,932 square feet in 505,018 buildings as of the end of the first quarter The Class-A Office sector consisted of 3,287,357,965 square feet in 17,200 projects. There were 193,861 Class-B buildings totaling 4,879,651,453 square feet, and the Class-C sector consisted of 2,334,731,514 square feet in 293,957 buildings. Within the Office market there were 22,321 owner-occupied buildings accounting for 951,722,203 square feet of Office space. Sales Activity Tallying Office building sales of 15,000 square feet or larger, U.S. Office sales figures fell during the fourth quarter 2014 in terms of dollar volume compared to the third quarter of In the fourth quarter, 888 Office transactions closed with a total volume of $24,972,914,495. The 888 buildings totaled 103,581,268 square feet and the average price per square foot equated to $ per square foot. That compares to 825 transactions totaling $26,033,690,232 in the third quarter The total square footage in the third quarter was 102,879,906 square feet for an average price per square foot of $ Total Office building sales activity in 2014 was up compared to In the twelve months of 2014, the market saw 3,181 Office sales transactions with a total volume of $89,707,727,656. The price per square foot averaged $ In the same twelve months of 2013, the market posted 2,946 transactions with a total volume of $74,402,992,616. The price per square foot averaged $ Cap rates have been lower in 2014, averaging 7.41% compared to the same period in 2013 when they averaged 7.93%. One of the largest transactions that has occurred within the last 4 quarters in the U.S. market is the sale of America s Square in the Washington market. This 461,484-square-foot office building sold for $500,000,000, or $1, per square foot. The property sold on 2/24/2015, at a 4.46% cap rate. Albany/Schenectady/Troy and positive 26,114 square feet of net absorption, Albany/ Schenectady/Troy s vacancy rate went from 7.5% to 7.4% in the quarter. Rental rates went from $14.24 to $14.58 during that time. At the end of the quarter, there was 6,447 square feet underway for future delivery. Albuquerque The Albuquerque Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 166,302 square feet caused the vacancy rate to decrease from 11.2% to 10.7% in the quarter. Rental rates stood at $ Anchorage and negative (14,743) square feet of net absorption, Anchorage s vacancy rate went from 5.4% to 5.5% in the quarter. Rental rates went from $29.21 to $28.53 during that time. At the end of the quarter, there was 133,361 square feet underway for future delivery. Asheville and positive 54,262 square feet of net absorption, Asheville s vacancy rate went from 6.7% to 6.2% in the quarter. Rental rates went from $16.36 to $16.25 during that time. At the end of the quarter, there was 174,000 square feet underway for future delivery. Atlanta The Atlanta Office market ended the quarter with a vacancy rate of 14.1%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 703,081 square feet. Vacant sublease space increased to 1,350,633 square feet. Rental rates ended the first quarter at $19.45, a decrease over the previous quarter. A total of two buildings with 212,800 square feet of space delivered to the market, with 1,774,433 square feet still under construction at the end of the quarter. Augusta/Richmond County and negative (23,621) square feet of net absorption, Augusta/ Richmond County s vacancy rate went from 9.3% to 9.5% in the quarter. Rental rates went from $13.91 to $13.45 during that time. At the end of the quarter, there was 82,324 square feet underway for future delivery. Austin The Austin Office market ended the quarter with a vacancy rate of 8.6%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 419,736 square feet. Vacant sublease space decreased to 635,121 square feet. Rental rates ended the first quarter at $29.35, an increase over the previous quarter. A total of 11 buildings with 555,075 square feet of space delivered to the market, with 2,972,306 square feet still under construction at the end of the quarter. Bakersfield The Bakersfield Office market ended the quarter with a vacancy rate of 7.0%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (25,118) square feet. Vacant sublease space increased to 48,943 square 2015 CoStar Group, Inc. The CoStar Office Report 3

9 National First Quarter 2015 Overview feet. Rental rates ended the first quarter at $17.14, an increase over the previous quarter. A total of one building with 15,600 square feet of space delivered to the market, with 55,586 square feet still under construction at the end of the quarter. Baltimore The Baltimore Office market ended the quarter with a vacancy rate of 11.1%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 435,330 square feet. Vacant sublease space decreased to 311,719 square feet. Rental rates ended the first quarter at $21.37, an increase over the previous quarter. A total of three buildings with 123,170 square feet of space delivered to the market, with 764,768 square feet still under construction at the end of the quarter. Baton Rouge and positive 78,402 square feet of net absorption, Baton Rouge s vacancy rate went from 9.7% to 9.3% in the quarter. Rental rates went from $15.72 to $15.97 during that time. At the end of the quarter, there was 231,400 square feet underway for future delivery. Beaumont/Port Arthur The Beaumont/Port Arthur Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (21,127) square feet caused the vacancy rate to increase from 4.9% to 5.1% in the quarter. Rental rates stood at $ Birmingham The vacancy rate remained unchanged in Birmingham in the first quarter. With 14,000 square feet in deliveries, and positive 31,562 square feet in net absorption, the vacancy rate held at 9.5%, the same rate reported in the previous quarter. The market had 42,018 square feet under construction at the end of the quarter, and rental rates stood at $16.15 per square foot. Boise City/Nampa The Boise City/Nampa Office market ended the quarter with a vacancy rate of 10.0%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 227,351 square feet. Vacant sublease space decreased to 130,412 square feet. Rental rates ended the first quarter at $15.40, an increase over the previous quarter. A total of five buildings with 39,637 square feet of space delivered to the market, with 97,521 square feet still under construction at the end of the quarter. Boston The Boston Office market ended the quarter with a vacancy rate of 9.1%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 825,368 square feet. Vacant sublease space decreased to 1,648,278 square feet. Rental rates ended the first quarter at $21.27, an increase over the previous quarter. A total of three buildings with 574,000 square feet of space delivered to the market, with 5,490,707 square feet still under construction at the end of the quarter. Bremerton/Silverdale and positive 6,045 square feet of net absorption, Bremerton/ Silverdale s vacancy rate went from 8.9% to 8.8% in the quarter. Rental rates went from $17.45 to $18.72 during that time. At the end of the quarter, there was 10,687 square feet underway for future delivery. Broward County The Broward County Office market ended the quarter with a vacancy rate of 11.9%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (44,136) square feet. Vacant sublease space increased to 151,266 square feet. Rental rates ended the first quarter at $24.38, an increase over the previous quarter. A total of two buildings with 53,888 square feet of space delivered to the market, with 448,705 square feet still under construction at the end of the quarter. Brownsville/Harlingen The Brownsville/Harlingen Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 13,710 square feet caused the vacancy rate to decrease from 9.7% to 9.2% in the quarter. Rental rates stood at $ Buffalo/Niagara Falls The Buffalo/Niagara Falls Office market saw vacancies fall and rental rates decrease from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 9.8%, from 9.9% in the previous quarter. Rental rates ended the quarter at $14.96 per square foot, from $15.02 in the previous quarter. There was a total of 31,000 square feet that delivered in the quarter, with 613,000 square feet still under construction at the end of the quarter. Charleston WV The Charleston WV Office market reported no new deliveries and no space under construction at the end of the 4 The CoStar Office Report 2015 CoStar Group, Inc.

10 Overview First Quarter 2015 National first quarter With this limited construction activity, net absorption of negative (17,093) square feet caused the vacancy rate to increase from 7.7% to 7.9% in the quarter. Rental rates stood at $ Charleston/N Charleston The Charleston/N Charleston Office market ended the quarter with a vacancy rate of 7.1%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 208,615 square feet. Vacant sublease space decreased to 21,467 square feet. Rental rates ended the first quarter at $20.63, an increase over the previous quarter. A total of two buildings with 169,000 square feet of space delivered to the market, with 378,134 square feet still under construction at the end of the quarter. Charlotte The Charlotte Office market ended the quarter with a vacancy rate of 9.8%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 147,384 square feet. Vacant sublease space increased to 290,458 square feet. Rental rates ended the first quarter at $20.60, an increase over the previous quarter. A total of two buildings with 56,037 square feet of space delivered to the market, with 479,838 square feet still under construction at the end of the quarter. Chattanooga With no space currently under construction, Chattanooga absorbed 34,708 square feet of space and delivered 76,496 square feet of space, resulting in a vacancy rate that went from 9.1% to 9.3% over the course of the quarter. Rental rates went from $15.83 to $15.52 per square foot. Chicago The Chicago Office market ended the quarter with a vacancy rate of 13.8%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (147,231) square feet. Vacant sublease space decreased to 2,991,946 square feet. Rental rates ended the first quarter at $22.98, a decrease over the previous quarter. A total of one building with 689,067 square feet of space delivered to the market, with 5,477,105 square feet still under construction at the end of the quarter. Cincinnati The vacancy rate remained unchanged in Cincinnati in the first quarter. With 250,000 square feet in deliveries, and positive 244,546 square feet in net absorption, the vacancy rate held at 12.0%, the same rate reported in the previous quarter. The market had 1,798,696 square feet under construction at the end of the quarter, and rental rates stood at $15.48 per square foot. Cleveland The Cleveland Office market ended the quarter with a vacancy rate of 11.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 491,076 square feet. Vacant sublease space increased to 283,171 square feet. Rental rates ended the first quarter at $16.65, a decrease over the previous quarter. A total of two buildings with 373,735 square feet of space delivered to the market, with 762,594 square feet still under construction at the end of the quarter. Colorado Springs The Colorado Springs Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 148,101 square feet caused the vacancy rate to decrease from 12.3% to 11.7% in the quarter. Rental rates stood at $ Columbia The Columbia Office market saw vacancies fall and rental rates increase from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 8.3%, from 8.6% in the previous quarter. Rental rates ended the quarter at $14.79 per square foot, from $14.33 in the previous quarter. There was a total of 19,925 square feet that delivered in the quarter, with 194,069 square feet still under construction at the end of the quarter. Columbus The Columbus Office market ended the quarter with a vacancy rate of 8.2%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 627,047 square feet. Vacant sublease space increased to 141,784 square feet. Rental rates ended the first quarter at $16.61, an increase over the previous quarter. A total of four buildings with 248,340 square feet of space delivered to the market, with 77,500 square feet still under construction at the end of the quarter. Columbus GA and negative (674) square feet of net absorption, Columbus GA s vacancy rate remained at 8.0% in the quarter. Rental rates went from $11.71 to $11.68 during that time. At the end of the quarter, there was 249,000 square feet underway for future delivery. Corpus Christi The Corpus Christi Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 7,670 square feet caused the vacancy rate to decrease from 10.0% to 9.9% in the quarter. Rental rates stood at $ CoStar Group, Inc. The CoStar Office Report 5

11 National First Quarter 2015 Overview Dallas/Ft Worth The Dallas/Ft Worth Office market ended the quarter with a vacancy rate of 14.7%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,993,344 square feet. Vacant sublease space decreased to 2,433,356 square feet. Rental rates ended the first quarter at $21.87, an increase over the previous quarter. A total of 34 buildings with 2,467,302 square feet of space delivered to the market, with 6,637,696 square feet still under construction at the end of the quarter. Davenport/Moline/Rock Island The Davenport/Moline/Rock Island Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (21,371) square feet caused the vacancy rate to increase from 12.8% to 13.1% in the quarter. Rental rates stood at $ Dayton and positive 119,553 square feet of net absorption, Dayton s vacancy rate went from 15.1% to 14.8% in the quarter. Rental rates went from $14.75 to $14.61 during that time. At the end of the quarter, there was 49,500 square feet underway for future delivery. Deltona/Daytona Beach The Deltona/Daytona Beach Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 16,726 square feet caused the vacancy rate to decrease from 8.1% to 8.0% in the quarter. Rental rates stood at $ Denver The Denver Office market ended the quarter with a vacancy rate of 10.2%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 282,253 square feet. Vacant sublease space increased to 1,210,299 square feet. Rental rates ended the first quarter at $23.50, an increase over the previous quarter. A total of two buildings with 15,227 square feet of space delivered to the market, with 2,673,204 square feet still under construction at the end of the quarter. Des Moines The Des Moines Office market saw vacancies fall and rental rates decrease from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 6.1%, from 6.4% in the previous quarter. Rental rates ended the quarter at $14.07 per square foot, from $14.10 in the previous quarter. There was a total of 215,829 square feet that delivered in the quarter, with 176,000 square feet still under construction at the end of the quarter. Detroit The Detroit Office market ended the quarter with a vacancy rate of 15.3%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 451,713 square feet. Vacant sublease space increased to 314,390 square feet. Rental rates ended the first quarter at $17.99, an increase over the previous quarter. A total of two buildings with 47,000 square feet of space delivered to the market, with 573,890 square feet still under construction at the end of the quarter. Duluth The Duluth Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (761) square feet caused the vacancy rate to remain at 4.5% in the quarter. Rental rates stood at $ East Bay/Oakland and positive 180,710 square feet of net absorption, East Bay/Oakland s vacancy rate went from 11.3% to 11.2% in the quarter. Rental rates went from $24.61 to $24.81 during that time. At the end of the quarter, there was 115,000 square feet underway for future delivery. El Paso The El Paso Office market ended the quarter with a vacancy rate of 7.0%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 3,087 square feet. Vacant sublease space increased to 100,210 square feet. Rental rates ended the first quarter at $16.19, a decrease over the previous quarter. A total of one building with 25,000 square feet of space delivered to the market, with 1,500 square feet still under construction at the end of the quarter. Erie The Erie Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 2,151 square feet caused the vacancy rate to remain at 4.7% in the quarter. Rental rates stood at $ Evansville The Evansville Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 4,448 square feet caused the vacancy rate to remain at 8.3% in the quarter. Rental rates stood at $ Fayetteville and negative (16,973) square feet of net absorption, Fayetteville s vacancy rate went from 9.2% to 9.5% in the quarter. Rental rates went from $15.17 to $15.35 during that 6 The CoStar Office Report 2015 CoStar Group, Inc.

12 Overview First Quarter 2015 National time. At the end of the quarter, there was 51,510 square feet underway for future delivery. Fayetteville/Springdale/Rogers The Fayetteville/Springdale/Rogers Office market ended the quarter with a vacancy rate of 8.7%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 160,133 square feet. Vacant sublease space increased to 28,427 square feet. Rental rates ended the first quarter at $15.39, an increase over the previous quarter. A total of three buildings with 29,636 square feet of space delivered to the market, with 13,720 square feet still under construction at the end of the quarter. Fort Smith The Fort Smith Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (410) square feet caused the vacancy rate to remain at 4.5% in the quarter. Rental rates stood at $ Fort Wayne and positive 15,968 square feet of net absorption, Fort Wayne s vacancy rate went from 9.9% to 9.8% in the quarter. Rental rates went from $13.12 to $12.76 during that time. At the end of the quarter, there was 116,600 square feet underway for future delivery. Fresno The Fresno Office market ended the quarter with a vacancy rate of 10.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 51,848 square feet. Vacant sublease space decreased to 17,568 square feet. Rental rates ended the first quarter at $16.58, a decrease over the previous quarter. A total of one building with 10,669 square feet of space delivered to the market, with 39,166 square feet still under construction at the end of the quarter. Green Bay The Green Bay Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (82,935) square feet caused the vacancy rate to increase from 10.8% to 11.3% in the quarter. Rental rates stood at $ Greensboro/Winston-Salem The Greensboro/Winston-Salem Office market ended the quarter with a vacancy rate of 10.6%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (112,637) square feet. Vacant sublease space increased to 190,388 square feet. Rental rates ended the first quarter at $14.28, a decrease over the previous quarter. A total of 117,000 square feet was under construction at the end of the quarter. Greenville/Spartanburg The Greenville/Spartanburg Office market ended the quarter with a vacancy rate of 8.5%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 245,007 square feet. Vacant sublease space stayed the same at 36,051 square feet. Rental rates ended the first quarter at $15.01, an increase over the previous quarter. A total of seven buildings with 67,591 square feet of space delivered to the market, with 225,200 square feet still under construction at the end of the quarter. Hampton Roads The Hampton Roads Office market ended the quarter with a vacancy rate of 11.7%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (18,459) square feet. Vacant sublease space decreased to 100,013 square feet. Rental rates ended the first quarter at $16.78, a decrease over the previous quarter. A total of one building with 19,115 square feet of space delivered to the market, with 114,360 square feet still under construction at the end of the quarter. Hartford and positive 293,243 square feet of net absorption, Hartford s vacancy rate went from 9.3% to 9.0% in the quarter. Rental rates went from $18.24 to $18.11 during that time. At the end of the quarter, there was 5,928 square feet underway for future delivery. Hawaii and negative (13,806) square feet of net absorption, Hawaii s vacancy rate went from 5.2% to 5.3% in the quarter. Rental rates went from $29.98 to $31.00 during that time. At the end of the quarter, there was 6,767 square feet underway for future delivery. Houston The Houston Office market ended the quarter with a vacancy rate of 11.6%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 1,706,841 square feet. Vacant sublease space increased to 2,046,628 square feet. Rental rates ended the first quarter at $27.46, an increase over the previous quarter. A total of 24 buildings with 4,413,738 square feet of space delivered to the market, with 14,976,388 square feet still under construction at the end of the quarter. Huntington/Ashland The Huntington/Ashland Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (24,160) square feet caused the vacan CoStar Group, Inc. The CoStar Office Report 7

13 National First Quarter 2015 Overview cy rate to increase from 6.2% to 6.4% in the quarter. Rental rates stood at $ Huntsville and positive 3,219 square feet of net absorption, Huntsville s vacancy rate remained at 11.4% in the quarter. Rental rates went from $14.17 to $14.05 during that time. At the end of the quarter, there was 60,000 square feet underway for future delivery. Indianapolis The vacancy rate remained unchanged in Indianapolis in the first quarter. With 85,847 square feet in deliveries, and positive 111,044 square feet in net absorption, the vacancy rate held at 8.6%, the same rate reported in the previous quarter. The market had 380,392 square feet under construction at the end of the quarter, and rental rates stood at $16.81 per square foot. Inland Empire (California) The Inland Empire (California) Office market saw vacancies fall and rental rates decrease from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 10.8%, from 11.0% in the previous quarter. Rental rates ended the quarter at $19.32 per square foot, from $19.52 in the previous quarter. There was a total of 48,029 square feet that delivered in the quarter, with 87,122 square feet still under construction at the end of the quarter. Jackson and positive 30,947 square feet of net absorption, Jackson s vacancy rate went from 7.6% to 7.5% in the quarter. Rental rates went from $15.98 to $16.20 during that time. At the end of the quarter, there was 117,500 square feet underway for future delivery. Jacksonville (Florida) The Jacksonville (Florida) Office market ended the quarter with a vacancy rate of 11.4%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 138,103 square feet. Vacant sublease space decreased to 155,189 square feet. Rental rates ended the first quarter at $17.96, an increase over the previous quarter. A total of one building with 24,041 square feet of space delivered to the market, with 214,552 square feet still under construction at the end of the quarter. Kansas City The Kansas City Office market ended the quarter with a vacancy rate of 10.9%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 263,528 square feet. Vacant sublease space decreased to 370,465 square feet. Rental rates ended the first quarter at $17.40, an increase over the previous quarter. A total of three buildings with 93,572 square feet of space delivered to the market, with 410,771 square feet still under construction at the end of the quarter. Killeen/Temple/Fort Hood The Killeen/Temple/Fort Hood Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 24,004 square feet caused the vacancy rate to decrease from 8.4% to 7.5% in the quarter. Rental rates stood at $ Kingsport/Bristol/Bristol The Kingsport/Bristol/Bristol Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (48,109) square feet caused the vacancy rate to increase from 8.6% to 9.4% in the quarter. Rental rates stood at $ Knoxville and positive 108,283 square feet of net absorption, Knoxville s vacancy rate went from 8.3% to 7.9% in the quarter. Rental rates went from $14.93 to $14.72 during that time. At the end of the quarter, there was 2,400 square feet underway for future delivery. Lafayette The Lafayette Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 4,243 square feet caused the vacancy rate to remain at 6.4% in the quarter. Rental rates stood at $ Las Vegas The Las Vegas Office market ended the quarter with a vacancy rate of 17.4%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (160,945) square feet. Vacant sublease space decreased to 394,889 square feet. Rental rates ended the first quarter at $20.07, an increase over the previous quarter. A total of four buildings with 35,947 square feet of space delivered to the market, with 580,315 square feet still under construction at the end of the quarter. Lexington/Fayette and positive 99,651 square feet of net absorption, Lexington/ Fayette s vacancy rate went from 10.3% to 9.8% in the quarter. 8 The CoStar Office Report 2015 CoStar Group, Inc.

14 Overview First Quarter 2015 National Rental rates went from $15.42 to $15.45 during that time. At the end of the quarter, there was 255,634 square feet underway for future delivery. Lincoln and positive 39,745 square feet of net absorption, Lincoln s vacancy rate went from 6.4% to 6.1% in the quarter. Rental rates went from $13.36 to $13.99 during that time. At the end of the quarter, there was 12,750 square feet underway for future delivery. Little Rock/N Little Rock and positive 283,575 square feet of net absorption, Little Rock/ N Little Rock s vacancy rate went from 6.1% to 5.2% in the quarter. Rental rates went from $15.48 to $15.15 during that time. At the end of the quarter, there was 26,000 square feet underway for future delivery. Long Island (New York) The Long Island (New York) Office market saw vacancies rise and rental rates increase from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 8.4%, from 8.2% in the previous quarter. Rental rates ended the quarter at $26.77 per square foot, from $26.44 in the previous quarter. There was a total of 344,905 square feet that delivered in the quarter, with 893,197 square feet still under construction at the end of the quarter. Los Angeles The Los Angeles Office market ended the quarter with a vacancy rate of 11.6%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (242,140) square feet. Vacant sublease space increased to 1,201,495 square feet. Rental rates ended the first quarter at $30.04, a decrease over the previous quarter. A total of nine buildings with 427,813 square feet of space delivered to the market, with 2,571,135 square feet still under construction at the end of the quarter. Louisville The Louisville Office market saw vacancies fall and rental rates increase from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 9.1%, from 9.4% in the previous quarter. Rental rates ended the quarter at $16.01 per square foot, from $16.00 in the previous quarter. There was a total of 18,125 square feet that delivered in the quarter, with 203,270 square feet still under construction at the end of the quarter. Lubbock and positive 5,663 square feet of net absorption, Lubbock s vacancy rate went from 5.9% to 5.9% in the quarter. Rental rates went from $13.93 to $14.61 during that time. At the end of the quarter, there was 55,996 square feet underway for future delivery. Madison and positive 132,777 square feet of net absorption, Madison s vacancy rate went from 8.6% to 8.2% in the quarter. Rental rates went from $14.99 to $15.07 during that time. At the end of the quarter, there was 40,000 square feet underway for future delivery. McAllen/Edinburg/Pharr The McAllen/Edinburg/Pharr Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 76,043 square feet caused the vacancy rate to decrease from 9.8% to 8.7% in the quarter. Rental rates stood at $ Memphis The Memphis Office market ended the quarter with a vacancy rate of 11.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 422,900 square feet. Vacant sublease space decreased to 103,202 square feet. Rental rates ended the first quarter at $16.02, a decrease over the previous quarter. A total of two buildings with 383,581 square feet of space delivered to the market, with 649,865 square feet still under construction at the end of the quarter. Miami-Dade County The Miami-Dade County Office market ended the quarter with a vacancy rate of 11.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 132,354 square feet. Vacant sublease space decreased to 189,184 square feet. Rental rates ended the first quarter at $29.88, an increase over the previous quarter. A total of two buildings with 56,942 square feet of space delivered to the market, with 624,353 square feet still under construction at the end of the quarter. Milwaukee and positive 162,353 square feet of net absorption, Milwaukee s vacancy rate went from 10.5% to 10.0% in the quarter. Rental rates went from $15.35 to $15.71 during that time. At the end of the quarter, there was 1,845,217 square feet underway for future delivery. Minneapolis The Minneapolis Office market ended the quarter with a vacancy rate of 8.9%. The vacancy rate was down over the 2015 CoStar Group, Inc. The CoStar Office Report 9

15 National First Quarter 2015 Overview previous quarter, with net absorption totaling positive 556,816 square feet. Vacant sublease space decreased to 396,866 square feet. Rental rates ended the first quarter at $17.99, a decrease over the previous quarter. A total of four buildings with 212,424 square feet of space delivered to the market, with 2,987,979 square feet still under construction at the end of the quarter. Mobile The Mobile Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 28,362 square feet caused the vacancy rate to decrease from 8.6% to 8.5% in the quarter. Rental rates stood at $ Montgomery The Montgomery Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 23,607 square feet caused the vacancy rate to decrease from 9.2% to 9.1% in the quarter. Rental rates stood at $ Myrtle Beach/Conway The Myrtle Beach/Conway Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 20,589 square feet caused the vacancy rate to decrease from 6.3% to 6.0% in the quarter. Rental rates stood at $ Nashville The Nashville Office market ended the quarter with a vacancy rate of 6.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 111,307 square feet. Vacant sublease space increased to 241,451 square feet. Rental rates ended the first quarter at $21.52, an increase over the previous quarter. A total of one building with 53,718 square feet of space delivered to the market, with 2,684,744 square feet still under construction at the end of the quarter. New Orleans/Metairie/Kenner The New Orleans/Metairie/Kenner Office market ended the quarter with a vacancy rate of 10.5%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (88,221) square feet. Vacant sublease space increased to 84,822 square feet. Rental rates ended the first quarter at $16.45, an increase over the previous quarter. A total of two buildings with 41,292 square feet of space delivered to the market, with 39,412 square feet still under construction at the end of the quarter. New York City The vacancy rate remained unchanged in New York City in the first quarter. With 18,000 square feet in deliveries, and negative (580,989) square feet in net absorption, the vacancy rate held at 8.1%, the same rate reported in the previous quarter. The market had 5,957,552 square feet under construction at the end of the quarter, and rental rates stood at $57.00 per square foot. North Bay/Santa Rosa The vacancy rate remained unchanged in North Bay/ Santa Rosa in the first quarter. With 56,285 square feet in deliveries, and positive 32,744 square feet in net absorption, the vacancy rate held at 12.5%, the same rate reported in the previous quarter. The market had 213,000 square feet under construction at the end of the quarter, and rental rates stood at $23.32 per square foot. Northern New Jersey The vacancy rate remained unchanged in Northern New Jersey in the first quarter. With 107,100 square feet in deliveries, and positive 63,151 square feet in net absorption, the vacancy rate held at 14.0%, the same rate reported in the previous quarter. The market had 1,179,524 square feet under construction at the end of the quarter, and rental rates stood at $23.85 per square foot. Ocala The Ocala Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (7,313) square feet caused the vacancy rate to increase from 8.0% to 8.1% in the quarter. Rental rates stood at $ Oklahoma City The Oklahoma City Office market ended the quarter with a vacancy rate of 7.3%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 281,071 square feet. Vacant sublease space decreased to 39,207 square feet. Rental rates ended the first quarter at $14.58, a decrease over the previous quarter. A total of eight buildings with 179,832 square feet of space delivered to the market, with 584,890 square feet still under construction at the end of the quarter. Olympia The Olympia Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 86,427 square feet caused the vacancy rate to decrease from 10.4% to 9.5% in the quarter. Rental rates stood at $ The CoStar Office Report 2015 CoStar Group, Inc.

16 Overview First Quarter 2015 National Omaha/Council Bluffs and negative (103,717) square feet of net absorption, Omaha/ Council Bluffs s vacancy rate went from 7.1% to 7.4% in the quarter. Rental rates went from $16.74 to $16.49 during that time. At the end of the quarter, there was 398,292 square feet underway for future delivery. Orange County (California) The Orange County (California) Office market ended the quarter with a vacancy rate of 10.4%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 163,194 square feet. Vacant sublease space increased to 550,210 square feet. Rental rates ended the first quarter at $24.94, an increase over the previous quarter. A total of one building with 16,000 square feet of space delivered to the market, with 571,406 square feet still under construction at the end of the quarter. Orlando The Orlando Office market ended the quarter with a vacancy rate of 11.4%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 380,051 square feet. Vacant sublease space decreased to 247,464 square feet. Rental rates ended the first quarter at $18.75, an increase over the previous quarter. A total of three buildings with 18,072 square feet of space delivered to the market, with 183,536 square feet still under construction at the end of the quarter. Palm Beach County The Palm Beach County Office market ended the quarter with a vacancy rate of 14.3%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 134,362 square feet. Vacant sublease space decreased to 63,203 square feet. Rental rates ended the first quarter at $26.28, a decrease over the previous quarter. A total of two buildings with 23,200 square feet of space delivered to the market, with 40,590 square feet still under construction at the end of the quarter. Pensacola The Pensacola Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (28,150) square feet caused the vacancy rate to increase from 6.1% to 6.3% in the quarter. Rental rates stood at $ Peoria The Peoria Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 6,223 square feet caused the vacancy rate to decrease from 7.5% to 7.4% in the quarter. Rental rates stood at $ Philadelphia The Philadelphia Office market ended the quarter with a vacancy rate of 10.8%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (386,143) square feet. Vacant sublease space increased to 1,306,325 square feet. Rental rates ended the first quarter at $21.89, an increase over the previous quarter. A total of seven buildings with 145,650 square feet of space delivered to the market, with 2,602,750 square feet still under construction at the end of the quarter. Phoenix The Phoenix Office market ended the quarter with a vacancy rate of 17.2%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 163,755 square feet. Vacant sublease space increased to 757,392 square feet. Rental rates ended the first quarter at $21.30, an increase over the previous quarter. A total of six buildings with 390,020 square feet of space delivered to the market, with 4,250,762 square feet still under construction at the end of the quarter. Pittsburgh The Pittsburgh Office market ended the quarter with a vacancy rate of 8.1%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 127,251 square feet. Vacant sublease space increased to 307,784 square feet. Rental rates ended the first quarter at $19.84, a decrease over the previous quarter. A total of three buildings with 298,256 square feet of space delivered to the market, with 1,691,989 square feet still under construction at the end of the quarter. Port St Lucie/Fort Pierce and negative (101,723) square feet of net absorption, Port St Lucie/Fort Pierce s vacancy rate went from 11.9% to 13.1% in the quarter. Rental rates went from $14.32 to $15.12 during that time. At the end of the quarter, there was 21,000 square feet underway for future delivery. Portland The vacancy rate remained unchanged in Portland in the first quarter. With 93,348 square feet in deliveries, and positive 97,326 square feet in net absorption, the vacancy rate held at 8.3%, the same rate reported in the previous quarter. The market had 987,405 square feet under construction at the end of the quarter, and rental rates stood at $21.57 per square foot. Portland/South Portland and negative (78,065) square feet of net absorption, Portland/ 2015 CoStar Group, Inc. The CoStar Office Report 11

17 National First Quarter 2015 Overview South Portland s vacancy rate went from 7.1% to 7.4% in the quarter. Rental rates went from $14.25 to $14.63 during that time. At the end of the quarter, there was 117,564 square feet underway for future delivery. Providence The Providence Office market saw vacancies fall and rental rates decrease from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 8.5%, from 8.7% in the previous quarter. Rental rates ended the quarter at $17.30 per square foot, from $17.73 in the previous quarter. There was a total of 97,436 square feet that delivered in the quarter, with 62,000 square feet still under construction at the end of the quarter. Raleigh/Durham The Raleigh/Durham Office market ended the quarter with a vacancy rate of 9.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 364,165 square feet. Vacant sublease space decreased to 239,818 square feet. Rental rates ended the first quarter at $19.63, a decrease over the previous quarter. A total of five buildings with 422,000 square feet of space delivered to the market, with 1,518,989 square feet still under construction at the end of the quarter. Reno/Sparks The Reno/Sparks Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 18,885 square feet caused the vacancy rate to decrease from 13.6% to 13.5% in the quarter. Rental rates stood at $ Richmond VA The Richmond VA Office market ended the quarter with a vacancy rate of 10.0%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 28,370 square feet. Vacant sublease space decreased to 438,407 square feet. Rental rates ended the first quarter at $17.53, an increase over the previous quarter. A total of three buildings with 94,403 square feet of space delivered to the market, with 575,158 square feet still under construction at the end of the quarter. Roanoke The Roanoke Office market saw vacancies fall and rental rates increase from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 8.9%, from 9.1% in the previous quarter. Rental rates ended the quarter at $14.87 per square foot, from $14.20 in the previous quarter. There was a total of 2,100 square feet that delivered in the quarter, with 66,500 square feet still under construction at the end of the quarter. Rochester and positive 79,525 square feet of net absorption, Rochester s vacancy rate went from 10.0% to 9.8% in the quarter. Rental rates went from $13.19 to $13.56 during that time. At the end of the quarter, there was 1,764 square feet underway for future delivery. Sacramento and positive 162,130 square feet of net absorption, Sacramento s vacancy rate went from 13.9% to 13.7% in the quarter. Rental rates went from $20.27 to $20.40 during that time. At the end of the quarter, there was 6,092 square feet underway for future delivery. Salinas and positive 4,203 square feet of net absorption, Salinas s vacancy rate went from 9.3% to 9.2% in the quarter. Rental rates went from $20.93 to $20.69 during that time. At the end of the quarter, there was 141,226 square feet underway for future delivery. Salt Lake City The Salt Lake City Office market ended the quarter with a vacancy rate of 6.8%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 187,196 square feet. Vacant sublease space increased to 222,802 square feet. Rental rates ended the first quarter at $18.48, an increase over the previous quarter. A total of five buildings with 262,594 square feet of space delivered to the market, with 873,724 square feet still under construction at the end of the quarter. San Antonio The vacancy rate remained unchanged in San Antonio in the first quarter. With 221,780 square feet in deliveries, and positive 230,175 square feet in net absorption, the vacancy rate held at 10.4%, the same rate reported in the previous quarter. The market had 761,356 square feet under construction at the end of the quarter, and rental rates stood at $19.64 per square foot. San Diego The San Diego Office market ended the quarter with a vacancy rate of 11.0%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 146,325 square feet. Vacant sublease space decreased to 870,753 square feet. Rental rates ended the first quarter at $28.77, an increase over the previous quarter. A total of one building with 3,820 square feet of space delivered to the market, with 923,864 square feet still under construction at the end of the quarter. 12 The CoStar Office Report 2015 CoStar Group, Inc.

18 Overview First Quarter 2015 National San Francisco and positive 968,806 square feet of net absorption, San Francisco s vacancy rate went from 7.4% to 6.8% in the quarter. Rental rates went from $45.76 to $46.66 during that time. At the end of the quarter, there was 6,119,736 square feet underway for future delivery. San Luis Obispo/Paso Robles and positive 4,467 square feet of net absorption, San Luis Obispo/Paso Robles s vacancy rate went from 3.8% to 3.7% in the quarter. Rental rates went from $17.92 to $16.94 during that time. At the end of the quarter, there was 39,000 square feet underway for future delivery. Santa Barbara/Sta Maria/Goleta The Santa Barbara/Sta Maria/Goleta Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of negative (3,957) square feet caused the vacancy rate to remain at 4.8% in the quarter. Rental rates stood at $ Santa Cruz/Watsonville With no space currently under construction, Santa Cruz/ Watsonville absorbed 11,390 square feet of space and delivered 900 square feet of space, resulting in a vacancy rate that went from 9.9% to 9.8% over the course of the quarter. Rental rates went from $21.51 to $21.71 per square foot. Savannah The Savannah Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 26,198 square feet caused the vacancy rate to decrease from 6.6% to 6.3% in the quarter. Rental rates stood at $ Seattle/Puget Sound and positive 272,782 square feet of net absorption, Seattle/ Puget Sound s vacancy rate went from 8.9% to 8.8% in the quarter. Rental rates went from $29.37 to $29.78 during that time. At the end of the quarter, there was 6,783,397 square feet underway for future delivery. Shreveport/Bossier City The Shreveport/Bossier City Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 49,402 square feet caused the vacancy rate to decrease from 14.2% to 13.7% in the quarter. Rental rates stood at $ South Bay/San Jose The South Bay/San Jose Office market ended the quarter with a vacancy rate of 9.7%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,331,505 square feet. Vacant sublease space increased to 1,015,786 square feet. Rental rates ended the first quarter at $33.60, a decrease over the previous quarter. A total of five buildings with 776,642 square feet of space delivered to the market, with 7,069,631 square feet still under construction at the end of the quarter. South Bend/Mishawaka and negative (6,814) square feet of net absorption, South Bend/Mishawaka s vacancy rate went from 8.8% to 8.9% in the quarter. Rental rates went from $14.24 to $15.16 during that time. At the end of the quarter, there was 11,446 square feet underway for future delivery. Southwest Florida and positive 32,932 square feet of net absorption, Southwest Florida s vacancy rate went from 12.4% to 12.3% in the quarter. Rental rates went from $15.90 to $15.90 during that time. At the end of the quarter, there was 346,018 square feet underway for future delivery. Spokane and negative (36,129) square feet of net absorption, Spokane s vacancy rate went from 11.3% to 11.4% in the quarter. Rental rates went from $15.20 to $15.57 during that time. At the end of the quarter, there was 8,600 square feet underway for future delivery. Springfield The Springfield Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 38,669 square feet caused the vacancy rate to decrease from 9.1% to 8.7% in the quarter. Rental rates stood at $ St. Louis and negative (470,912) square feet of net absorption, St. Louis s vacancy rate went from 10.5% to 10.8% in the quarter. Rental rates went from $18.04 to $17.86 during that time. At the end of the quarter, there was 103,000 square feet underway for future delivery. Stockton/Modesto and positive 50,016 square feet of net absorption, Stockton/ 2015 CoStar Group, Inc. The CoStar Office Report 13

19 National First Quarter 2015 Overview Modesto s vacancy rate went from 12.2% to 12.0% in the quarter. Rental rates went from $14.84 to $14.88 during that time. At the end of the quarter, there was 6,048 square feet underway for future delivery. Syracuse and positive 35,497 square feet of net absorption, Syracuse s vacancy rate went from 12.3% to 12.2% in the quarter. Rental rates went from $13.82 to $14.19 during that time. At the end of the quarter, there was 51,546 square feet underway for future delivery. Tallahassee and negative (88,031) square feet of net absorption, Tallahassee s vacancy rate went from 8.1% to 8.5% in the quarter. Rental rates went from $15.07 to $14.92 during that time. At the end of the quarter, there was 41,797 square feet underway for future delivery. Tampa/St Petersburg The Tampa/St Petersburg Office market ended the quarter with a vacancy rate of 11.3%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 323,448 square feet. Vacant sublease space decreased to 398,307 square feet. Rental rates ended the first quarter at $19.04, an increase over the previous quarter. A total of two buildings with 29,500 square feet of space delivered to the market, with 230,772 square feet still under construction at the end of the quarter. Toledo The Toledo Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 68,688 square feet caused the vacancy rate to decrease from 9.8% to 9.5% in the quarter. Rental rates stood at $ Tucson The Tucson Office market ended the quarter with a vacancy rate of 12.8%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (6,351) square feet. Vacant sublease space decreased to 87,397 square feet. Rental rates ended the first quarter at $18.57, an increase over the previous quarter. A total of three buildings with 37,179 square feet of space delivered to the market, with 30,711 square feet still under construction at the end of the quarter. Tulsa The Tulsa Office market ended the quarter with a vacancy rate of 11.4%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 19,843 square feet. Vacant sublease space increased to 97,854 square feet. Rental rates ended the first quarter at $14.03, an increase over the previous quarter. A total of three buildings with 67,618 square feet of space delivered to the market, with 131,972 square feet still under construction at the end of the quarter. Utica/Rome The Utica/Rome Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 3,018 square feet caused the vacancy rate to remain at 6.8% in the quarter. Rental rates stood at $ Visalia/Porterville The Visalia/Porterville Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 7,842 square feet caused the vacancy rate to decrease from 7.0% to 6.9% in the quarter. Rental rates stood at $ Washington The Washington Office market ended the quarter with a vacancy rate of 15.0%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (1,502,077) square feet. Vacant sublease space increased to 3,437,079 square feet. Rental rates ended the first quarter at $34.39, a decrease over the previous quarter. A total of five buildings with 393,629 square feet of space delivered to the market, with 6,514,299 square feet still under construction at the end of the quarter. West Michigan and positive 201,062 square feet of net absorption, West Michigan s vacancy rate went from 9.7% to 9.4% in the quarter. Rental rates went from $11.45 to $11.92 during that time. At the end of the quarter, there was 188,562 square feet underway for future delivery. Westchester/So Connecticut The Westchester/So Connecticut Office market saw vacancies rise and rental rates decrease from the fourth quarter 2014 to the first quarter The overall vacancy rate currently sits at 13.2%, from 12.7% in the previous quarter. Rental rates ended the quarter at $28.03 per square foot, from $28.28 in the previous quarter. There was a total of 111,000 square feet that delivered in the quarter, with 1,243,453 square feet still under construction at the end of the quarter. Wichita and positive 96,589 square feet of net absorption, Wichita s vacancy rate went from 7.2% to 6.8% in the quarter. Rental 14 The CoStar Office Report 2015 CoStar Group, Inc.

20 Overview First Quarter 2015 National rates went from $12.90 to $12.54 during that time. At the end of the quarter, there was 256,492 square feet underway for future delivery. Wilmington and negative (91,385) square feet of net absorption, Wilmington s vacancy rate went from 8.3% to 9.1% in the quarter. Rental rates went from $14.80 to $15.37 during that time. At the end of the quarter, there was 78,741 square feet underway for future delivery. Yakima The Yakima Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 8,127 square feet caused the vacancy rate to decrease from 5.8% to 5.7% in the quarter. Rental rates stood at $ Youngstown/Warren/Boardman The Youngstown/Warren/Boardman Office market reported no new deliveries and no space under construction at the end of the first quarter With this limited construction activity, net absorption of positive 56,253 square feet caused the vacancy rate to decrease from 7.1% to 6.7% in the quarter. Rental rates stood at $ CoStar Group, Inc. The CoStar Office Report 15