OFFICE MARKET IMPROVEMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION

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1 OFFICE MARKET REPORT: 1Q OFFICE MARKET IMPROVEMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION Prepared by: Galen M. Raza-Self Real Estate Market Research PNC Real Estate 249 Fifth Avenue Pittsburgh, PA (412) ECONOMY: Although 1Q14 GDP contracted at a seasonally-adjusted annualized rate of -1.0%, PNC Economics Group expects that the economy will exhibit stronger growth in 2Q14 of 4.0% and expand at a 2.8% annual rate during the second half of the year. In 1Q14, total job growth reached 569,000 (190,000/month), with office-using jobs (mainly professional/business services) strengthening to 177,000 (59,000/month). The unemployment rate remained at 6.7%, due to a higher labor participation rate. PNC Economics Group forecasts job growth to average 200,000 per month, lowering the unemployment rate to 6.1% by year-end. ABSORPTION: Overall 1Q14 net absorption slowed from last quarter, decreasing from 1.7 msf to 15.8 msf; however, it is 6.7 msf higher than a year ago. Demand was led by Class A at 8.1 msf, while Class B was 7.2 msf. Absorption was lower than a year ago among several of the largest office markets, including New York City, Washington, DC, Chicago, and Northern New Jersey. SUPPLY: Construction activity ticked up from 4Q13 s 86.9 msf to 90.1 msf this quarter, but remained near historical lows, representing just 0.9% expansion of existing supply. Led by Houston s 12.6 msf, the nation s 10 largest office markets represent 52.2% of the construction underway. Speculative construction remained limited to San Francisco and Austin. VACANCY: The national office vacancy rate continued its slow improvement, tightening 10 bps sequentially and 51 bps annually to 12.1%. Partially leased new deliveries have slowed improvements in Class A, which decreased 4 bps sequentially and 50 bps annually to 13.2%. Large Sunbelt markets, such as Atlanta and Houston improved the most from 4Q13, while vacancy in Chicago and Washington, DC increased. RENTS: During 1Q14, the average office rent grew at a slower rate than 4Q13 s 1.0% ($0.32/sf), increasing 0.6% ($0.14/sf) to $23.82/sf. However, it is up 3.9% annually. While CBD Class B rents rose the most sequentially, gaining 1.3% ($0.31/sf) to $24.02, Class A CBD rents have increased the most annually, rising 4.0% ($0.34/sf) to $32.89/sf. New York City rent growth outpaced Houston s, while Washington, DC remained nominally negative. CAPITALIZATION RATES: Office sales of $22.1 billion in 1Q14 were 34.2% higher than a year ago, but down 39.3% from last quarter. Sequentially, cap rates continued to compress with CBD down 26 bps to 5.9% and suburban down 9 bps to 7.0%. PNC is a registered service mark of The PNC Financial Services Group, Inc. This document is for general informational purposes only and is not intended as specific advice or recommendations. The information contained herein is gathered from public sources believed by PNC to be accurate and reliable at time of publication, but neither PNC nor any of its affiliates is providing any guaranty or warranty as to the accuracy, completeness or reliability of that information or of the conclusions presented in this document. In addition, markets do change. Opinions expressed herein are subject to change without notice. The information set forth herein does not constitute legal, tax or accounting advice. You should obtain such advice from your own counsel or accountant. Any reliance upon the information provided herein is solely and exclusively at your own risk.. The PNC Financial Services Group, Inc. All rights reserved.

2 OFFICE MARKET IMPROVMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION 2 ECONOMY This section summarizes changes in the national economy and discusses employment trends that influence office space demand. EMPLOYMENT The Bureau of Economic Analysis second estimate of 1Q14 GDP was revised down from its advance estimate of 0.1% to a seasonally-adjusted annualized rate -1.0% (the first contraction since 1Q11). The majority of the downward revision was attributable to a larger decline in inventory, as well as declining exports, declines in both residential and nonresidential fixed investment and lower local government spending. PNC s Chief Economist, Stu Hoffman, indicated that the negative reading was weather-related, which coiled the economic spring even tighter for a sharp snap-back (boing!) in 2Q14 of 4.0% and 2.8% during the second half of. Despite a weak 1Q14, PNC Economics Group expects that GDP will expand 2.4% this year and job growth should total 2.4 million jobs (200,000/month), lowering the unemployment rate to 6.1% by year-end. During 1Q14, total employment increased 569,000 (190,000/month) to million, approximately 400,000 jobs shy of the prior peak in January While the unemployment rate remained at 6.7%, the labor participation rate ticked up from 62.8% in December to 63.2% in March, an encouraging sign of growing confidence by both employers and job-seekers. Although January and February job counts were revised up, severe weather across most of the nation was partially responsible Source: Moody's Analytics; PNC Real Estate Market Research for the number of office-using jobs dipping slightly from 4Q13 s 188,000 (63,000/month) to 177,000 (59,000/month) in 1Q , Source: Moody's Analytics; PNC Real Estate Market Research New York City 1.2 Y/Y Chg (000s) Y/Y Chg (%) Washington, DC Total Monthly Nonfarm Jobs (L) Monthly Office Jobs (L) Unemployment Rate (R) Chicago Los Angeles 2006 Philadelphia 2007 Boston 2008 N. New Jersey EMPLOYMENT 12% 10% 8% 6% 4% 2% 0% OFFICE EMPLOYMENT 10 LARGEST MARKETS Dallas/Ft Worth Atlanta Houston 4% 3% 2% 1% 0% -1% -2% As the largest office-using segment, professional/business services added 183,000 jobs (61,000/month), roughly a third of the positions were temporary help. Modest increases in the real estate and insurance segment contributed to the financial sector adding 9,000 jobs (3,000/month), the information sector trimmed 15,000 jobs (5,000/month), mainly in the motion picture and sound recording industries. During 1Q14, office-using jobs represented 31.1% of the 569,000 jobs created nationally, while the 10 largest office markets were responsible for roughly 42,000 (23.6%) of the 177,000 office-using jobs. Over the past year, office-using employment was strongest in Los Angeles and Dallas, up 39,000 and 28,000, respectively. However, Washington, DC continued to shrink losing 13,000 office-using jobs.

3 OFFICE MARKET IMPROVMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION 3 OFFICE MARKET TRENDS As noted in the Economy Section, office-using employment growth has slowly materialized into better office market fundamentals, while severe winter weather across most of the nation did not substantially impact 1Q14 s office market performance. Please refer to the Appendix for additional data on PNC s 22 Footprint Markets, which represent approximately 34% of the nation s office space and include five of the nation s largest office markets. ABSORPTION Demand from energy and technology firms continued in 1Q14. Businesses in the Energy industry continue to cluster in Houston s Energy Corridor, as well as Dallas North Dallas submarket and Denver s Downtown. Technology companies have gravitated to urban offcore locations, such as Boston s Seaport District, San Francisco s Mid-Market, Denver s Lo-Do, and New York City s Midtown South. Net absorption slowed slightly from last quarter, decreasing 1.7 msf to 15.8 msf in 1Q14, but 6.7 msf higher than a year ago. Class A space accounted for 66.7% of 1Q14 s net absorption, up from 45.0% in the prior quarter. Notable Class A markets included Baltimore (1.1 msf), Boston (2.1 msf), and Houston (2.2 msf), while Washington, DC weakened (-1.0 msf). Cassidy Turley reported that among the 80 metros they monitor, 43 had stronger net absorption than a year ago, while CBRE recorded positive net absorption in 43 of the 54 markets they track. Absorption estimates for vary considerably, ranging from Reis 45.0 msf to Marcus & Millichap s msf. Among the nation s largest office markets, Atlanta, Boston, Dallas/Ft Worth, and Houston had considerably stronger demand than a year ago; however, demand for the other six was weaker than a year ago. Collectively, the top 10 markets had 8.4 msf of net absorption and accounted for 38.7% of 1Q14 s leasing. msf New York City Washington, DC Chicago Los Angeles Philadelphia Boston N. New Jersey Dallas/Ft Worth Atlanta Houston (0.8) (0.7) (0.4) (0.5) (0.3) (0.3) (0.2) OFFICE SPACE ABSORPTION Overall Net Absorption Class A Net Absorption Overall Delivery Class A Delivery (1.5) (0.5) Q14 vs. 1Q13 YTD NET ABSORPTION 10 LARGEST MARKETS 2.5 1Q14 1Q13 As a percent of existing inventory, absorption averaged 0.2% nationally and 0.1% among PNC s 22 footprint markets. As in the prior quarter, absorption in several of the Bank s small/medium-sized markets exceeded these averages, including Baltimore and Louisville at 0.6%, while Dayton and Washington, DC lagged behind at -0.2%.

4 OFFICE MARKET IMPROVMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION 4 SUPPLY Although the amount of office space under construction remains near historic lows, it increased slightly from 86.9 msf in 4Q13 to 90.1 msf in 1Q14, which was enough to nose the supply expansion ratio up from 0.8% to 0.9%. New office supply remains focused on southern and western markets. The number of markets with more than 1.0 msf underway was little changed, easing from 24 to 22 as completions in Baltimore, Orange County (CA), and Nashville lowered them below the 1.0 msf mark, while Phoenix was added. Together, the 22 markets in the adjacent table account for roughly 84% of the office construction underway in the nation. Fueled by the energy industry, Houston remains the undisputed leader with 12.6 msf underway, primarily in the Energy Corridor, Downtown, suburban Galleria and Westchase submarkets. In New York City, the Related Companies Hudson Yards master redevelopment is bringing activity to the west side of the Midtown submarket. One of the largest office projects breaking ground in 1Q14 was Hines CalPERS Green development CONSTRUCTION ACTIVITY (> 1.0 MSF) Market # Bldgs U/C (msf) % of Inv. % Leased YTD Deliveries Houston % 62.3% 2.5 New York City % 54.5% 0.0 Dallas/Ft Worth % 54.1% 0.4 Washington, DC % 57.0% 0.7 Boston % 81.7% 2.5 San Francisco % 35.6% 0.1 South Bay/San Jose % 51.0% 0.3 Seattle/Puget Sound % 70.9% 0.0 Pittsburgh % 70.7% 0.2 Austin % 25.4% 0.4 Chicago % 60.2% 0.1 Denver % 54.2% 0.4 Salt Lake City % 29.3% 0.6 Atlanta % 68.6% 0.3 N. New Jersey % 76.2% 0.2 Minneapolis % 87.9% 0.7 Phoenix % 84.9% 0.3 Westchester/S. CT % 83.1% 0.0 Raleigh/Durham % 70.9% 0.4 Los Angeles % 36.7% 0.2 Philadelphia % 72.1% 0.1 San Diego % 68.8% 0.4 US TOTAL % 61.7% 16.1 Note: Bold/italicized markets are the 10 largest U.S. office markets Source: Cassidy Turley; Colliers; CoStar; Cushman & Wakefield; Jones Lang LaSalle; Newmark Grubb Knight Frank; PNC Real Estate Market Research fund s 609 Main at Texas in Houston, a 1.1 msf, 48-story spec tower expected to attain LEED Gold or Platinum. Other notable office projects getting underway included Tishman Speyer s nd Street in San Francisco, a 450,000 sf 26-story, LEED Gold building leased by LinkedIn and the National Science Foundation s new 661,000 sf, 14-story, LEED Gold headquarter space in Alexandria, VA s Hoffman Town Center, adjacent to the Eisenhower Avenue Metro Station. The nation s 10 largest office markets had 47.1 msf (52.2%) of the 90.1 msf underway nationally, with 15.9 msf (17.7%) of the space located in PNC s footprint markets. Due to a combination of slightly higher starts and softer leasing activity, pre-leasing declined from 4Q13 s 67.2% to 61.7% this quarter. Energy markets, such as Houston and Dallas/Ft Worth eased off the gas, while tech-oriented markets, such as San Francisco, Seattle/Puget Sound, Austin, and especially South Bay/San Jose slowed. CoStar data indicated that completions reached 16.1 msf during 1Q14, up slightly from last quarter s 14.1 msf. Green buildings accounted for a smaller portion of this quarter s deliveries; however, with the exception of the Irvine Company s pair of spec buildings in its Santa Clara Gateway office park in Silicon Valley, this quarter s deliveries are nearly 100% leased. Looking ahead, third-party completion estimates vary to some extent. At the low-end, Reis forecasts 33.9 msf, while Marcus & Millichap and CoStar are higher at 56.0 msf and 66.4 msf, respectively. LEED OFFICE DELIVERIES (1Q14) Property Metro SF Leased LEED Certification 4770 Buford Hwy - Building 107 Atlanta 290, % Gold 2021 E 5th Austin 30, % Gold 6100 Wabash Avenue Baltimore 538, % Silver One Channel Center Boston 500, % Silver Two City Center (South Tower) DC 293, % Gold Core & Shell Gunston Commerce Center DC 40, % Silver Westgate II Houston 186, % Silver Energy Crossing II Houston 321, % Registered Energy Tower III Houston 428, % Registered Redstone Gateway Office Park - Bldg #2 Huntsville 450, % Registered C&S Formosa South at The Lot Los Angeles 95, % Gold Hyundai Motors HQ Orange County 469, % Registered La Jolla Commons Tower II San Diego 414, % Pursuing Santa Clara Gateway - Phase II - Bldg 4 South Bay/San Jose 136, % Silver Santa Clara Gateway - Phase II - Bldg 6 South Bay/San Jose 164, % Silver TOTALS/WTD AVGS - 4,358, % - Source: CBRE-EA; CoStar; US Green Building Council; PNC Real Estate Market Research

5 OFFICE MARKET IMPROVMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION 5 VACANCY The national office vacancy rate continued its slow improvement. As of 1Q14 it stood at 12.1%, down 10 bps sequentially and 51 bps from a year ago. Improvements for Class A space; however, have been less visible in recent quarters, as new supply has come online. Currently, the national Class A vacancy rate is 13.2%, down 4 bps sequentially and 50 bps annually. CBRE recorded vacancy declines in 36 of 54 markets they track and commented that the moderate pace of improvements reflect slower job creation and tenant right-sizing. The average vacancy rate among the nation s 10 largest office markets was 12.3%, down 3 bps from the prior quarter and 13 bps from a year ago. However, averages obscure the underlying improvement that has occurred. Seven of them registered annual decreases ranging from 46 bps in Los Angeles to 94 bps in Atlanta, while the three largest (New York City, Washington, DC, and Chicago) experienced higher vacancy rates than a year ago, due to demand trailing new supply. Although the average 1Q14 weighted vacancy rate for PNC s 22 footprint market was unchanged from last quarter at 12.8%, movement among markets varied. Atlanta, Central New Jersey, Detroit, Milwaukee, and Mobile achieved improvements of 33 bps to 56 bps; however, only Milwaukee and Mobile have vacancy rates below the national average. Meanwhile, Birmingham, Raleigh/Durham, St. Louis, and Washington, DC weakened by 27 bps to 53 bps, with St. Louis and Washington, DC rates above the national average. 16% 15% 14% 13% 12% 11% 10% 9% 8% 1Q14 Class A: 13.2% 1Q14 Overall: 12.1% New York City Washington, DC Chicago Los Angeles Philadelphia Boston N. New Jersey Dallas/Ft Worth Atlanta Houston 1Q14 1Q13 OFFICE VACANCY RATES 1Q14 vs 1Q13 VACANCY RATES 10 LARGEST MARKETS 8.3% 7.2% 14.4% 13.8% 14.3% 14.0% 12.1% 12.6% 11.2% 11.7% 9.6% 10.1% 14.4% 15.0% 14.7% 15.4% 14.7% 15.6% 11.2% 11.8% 0% 5% 10% 15% 20% Due to differences among existing and future inventory monitored by third party firms, actual vacancy rates differ. However, they share a similar outlook that vacancy rates will continue to move lower in. VACANCY FORECASTS Firm Vacancy Chg CBRE 14.5% (50) CoStar 11.9% (20) Marcus & Millichap 14.8% (120) REIS 16.5% (40)

6 OFFICE MARKET IMPROVMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION 6 RENTS The national average office rent grew 0.6% sequentially to $23.82/sf, while the average Class A rent increased 1.0% to $29.10/sf. On an annual basis both grew by 3.9% and 3.1%, respectively. Notably, the average CBD rent increased 1.1% sequentially and 4.9% annually to $28.26/sf, while over these periods the average suburban rent rose 0.3% and 3.3%, respectively to $20.76/sf. Cassidy Turley reported that nearly 60% of the 80 metros they track reported rent increases during 1Q14, compared to 51% last quarter. The nation s largest and priciest office market, New York City continued to post the biggest rent gains, increasing 4.2% sequentially and 9.6% from a year ago to $54.55/sf, due to tech firms in Midtown South. Houston was runner-up with a 3.3% quarterly increase and an 8.8% annual rent gain to $26.27/sf. Other top markets with annual rent growth in excess of the national average included Los Angeles, Boston, and Dallas/Ft Worth. Although Washington, DC remains the only top 10 market to experience rent losses, with the average rent easing 0.1% to $34.40/sf and Class A softening 0.5% to $38.56/sf. Among PNC s footprint markets, the average office rent eased -0.1% sequentially and was up 0.2% from a year ago. On a quarterly basis, Mobile s average office rent moved ahead 3.2%, but remained the least expensive at $12.55/sf. Pittsburgh and Raleigh/Durham gained 2.2% and 2.5%, respectively. Birmingham and Louisville weakened 2.0% and 1.9%, respectively from 4Q13. Although differences exist among current and future inventory monitored by third party firms, actual rental rates differ. However, they share a very similar expectation that asking rents will grow 3.4% to 3.6% during. $35 $30 $25 $20 $15 $10 $5 $0 Overall New York City Cl. A -0.1% Washington, DC -0.5% Chicago Los Angeles Philadelphia Boston N. New Jersey Dallas/Ft Worth Atlanta Houston 1Q14 Overall: $23.82/sf 1Q14 Class A: $29.10/sf 0.6% 2.0% 2.1% 1.9% 2.0% 2.5% 2.5% 2.4% 1Q14 Rent Y/Y % Change 10 Largest Office Markets 5.2% 5.5% 4.9% 5.9% 6.8% 5.9% 5.7% 7.1% 8.8% 9.6% (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% National Average: 3.9% OFFICE RENTAL RATES RENT FORECASTS Firm Asking Chg Effective Chg CBRE $ % Marcus & Millichap $ % REIS $ % $ %

7 OFFICE MARKET IMPROVMENTS REMAIN SLOW, BUT MOVING IN THE RIGHT DIRECTION 7 TRANSACTION VOLUME & PRICING Institutional quality office trading volume was up 34.2% from a year ago to $22.1 billion in 1Q14, but down significantly from last quarter s record $36.4 billion. The pace of office price increases (blue line) slowed from 3.6% in the prior quarter to 2.5%, due to a slowdown in appreciation for suburban offices. Prices for suburban offices in non-major markets (grey line) remained well below peak and growth slowed from 1.8% last quarter to 1.5% this quarter. Investor preference swung back to major CBD office (green line) with pricing increasing 5.0% during 1Q14, versus 3.6% during 4Q13. Office cap rates continued to compress, but remained about 200 bps above the 10-year yield, which moved lower through the quarter, due to less robust economic growth and investors flight to quality arising from geopolitical risks (Russia s annexation of Ukraine s Crimean Peninsula and increasing tensions among South China Sea nations) outweighing the impact of the Federal Reserve s tapering of asset purchases. This quarter, the average CBD office cap rate declined 26 bps sequentially and 41 bps annually to 5.9%, while the average suburban office cap rate eased down 9 bps from last quarter and 39 bps from a year ago to 7.0%. Please see the adjacent charts for additional details and trends. This quarter s largest trade was Time Warner s sale/leaseback of its 1.1 msf New York headquarters for $1.3 billion ($1,185/sf) to a group led by The Related Companies. Time Warner will occupy the space until 2019, when it will consolidate its New York operations at The Related Companies 30 Hudson Yard. SL Green (SLG) sold its 43.7% interest in a 3.7 msf Southern California office portfolio of 52 buildings (28 properties) for $100 million plus assumption of $481.3 million in debt to an affiliate of its joint venture partner, Blackstone Real Estate Partners VII and intends to redeploy the proceeds into New York City assets. Billions ($) $40 11% 10% $35 $30 $25 $20 $15 $10 9% 8% 7% 6% 5% 4% $5 Note: Sources: 11% 10% 9% 8% 7% 6% 5% 4% $ Transaction Volume > $5M Office Major Office-CBD Non-Major Office-Suburban Major Office Markets are Boston, Chicago, Washington DC, New York, San Francisco, and Los Angeles Real Capital Analytics, PNC Real Estate Market Research Note: NCREIF data represents current value office cap rates. Sources: PwC Real Estate Investor Survey, Real Capital Analytics, RERC, NCREIF, PNC Real Estate Market Research 2008 Note: NCREIF data represents current value office cap rates. Sources: PwC Real Estate Investor Survey, Real Capital Analytics, RERC, NCREIF, PNC Real Estate Market Research OFFICE CPPI & TRANSACTION VOLUME CAPITALIZATION RATES SUBURBAN OFFICE CAPITALIZATION RATES CBD OFFICE 6.27% - PwC CBD Office 18 bps, +2.9% 5.57% - RCA CBD Office 40 bps, +7.2% 5.80% - RERC CBD Office 20 bps, +3.4% 4.79% - NCREIF Office 12 bps, +2.5% 6.78% - PwC Suburban Office 20 bps, +2.9% 7.11% - RCA Suburban Office 7 bps, +1.0% 7.10% - RERC Suburban Office 0 bps, +0.0% 4.91% - NCREIF Office 12 bps, +2.5%

8 APPENDIX PNC FOOTPRINT MARKETS - OFFICE 1Q14 Market Existing Inventory Vacancy YTD Net Absorption YTD Deliveries U/C Rent Total RBA (msf) Direct (msf) Total (msf) 1Q14 % Q/Q bps Y/Y bps (msf) (msf) (msf) 1Q14 Q/Q % Y/Y % Atlanta % $ % 2.4% Baltimore % $ % -2.0% Birmingham % $ % -3.8% Central New Jersey % $ % 0.4% Charlotte % $ % 3.1% Chicago % $ % 2.0% Cincinnati % $ % -0.5% Cleveland % $ % 3.9% Columbus % $ % 3.4% Dayton % $ % -2.5% Detroit % $ % 2.3% Indianapolis % $ % 2.8% Louisville % $ % 0.8% Milwaukee % $ % -0.2% Mobile % $ % 1.2% Nashville % $ % 2.9% Northern New Jersey % $ % 3.8% Philadelphia % $ % 1.9% Pittsburgh % $ % 4.1% Raleigh/Durham % $ % 5.4% St. Louis % $ % 1.1% Washington, DC % $ % -0.1% PNC FOOTPRINT TOTALS / W 3, % $ % 0.2% US TOTALS / WTD AVGS 10, , , % $ % 3.8% Note: Due to differences in CoStar's methodology, national and Top Ten market figures may differ from those presented in this report. Top 10 National Office Markets Are Italicized Bold Sources: CoStar; PNC Real Estate Market Research