MARKET REPORT. Downtown Leads Manhattan Office Sector as Job Growth Bolsters Leasing Activity MANHATTAN OFFICE 2Q2014 OFFICE

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1 2Q2014 OFFICE MANHATTAN OFFICE MARKET REPORT Downtown Leads Manhattan Office Sector as Job Growth Bolsters Leasing Activity The Manhattan office market posted solid results in the second quarter, buoyed by robust leasing activity Downtown, which also saw the biggest drop in availability and strong net absorption. In contrast, the results in Midtown North and Midtown South were mixed, with more tepid leasing activity in those markets. Despite the drop in closed deals, average asking rents increased in both Midtown North and Midtown South. And while availability declined in Midtown North, it was flat in Midtown South. Still, the momentum in the Manhattan market accelerated in the second quarter as shown by the overall drop in the availability rate to 11.0% from 11.4% at the end of the first quarter. HEALTHY JOB GROWTH SYNCHRONIZES WITH AVAILABILITY RATE DECLINES At 1.94 million square feet, net absorption for Manhattan office space was stronger than in the three prior quarters. Further, the overall availability rate has declined for four consecutive quarters while rents have increased during that time. These quarterly results are consistent with New York City s healthy job growth over the last 18 months. New York City added 34,300 jobs in the first five months of 2014, putting it ahead of the pace of job growth in 2013, when 30,100 jobs were added through May. Logically, the office leasing market should mirror the broader economy, which for New York City has been healthier than the U.S. However, more of New York City s job growth has been outside of the office sector. Health services, private education, retail, and restaurants have reaped more than half the job gains this year as they have consistently in previous years. New York City s office sector, which accounts for 38% of all jobs, has accounted for only 31% of the job gains this year. In short, while technology firms have been adding jobs at a rapid pace, Wall Street has continued to shed jobs this year. Other office-based industries such as law, accounting, media, and advertising have been growing steadily, as these industries are highly correlated to the broader U.S. economy, which has also seen job growth accelerate this year in spite of weak GDP growth in the second quarter.

2 MANHATTAN MARKET OFFICE LEASING REPORT 2Q2014 2

3 MIDTOWN NORTH: OPTIMISM AND MAJOR LEASES SIGNED DRIVE UP RENTS BUT BIG BLOCKS REMAIN After a mixed first quarter, Midtown North posted positive results in the second quarter. The availability rate declined to 11.4%, from 11.8% at the end of the first quarter, and 12.2% at this time last year. In fact, Midtown North recorded 1.9 million square feet of positive net absorption over the last 12 months. With 902,000 square feet absorbed in the second quarter alone as a result of several large leases signed for Class A space, the Class A availability rate declined to 11.9% from 12.4% at the end of the first quarter. The most significant transaction was Blackstone Group s 450,650-square-foot lease at 345 Park Avenue, which included a renewal and expansion for an additional 38,000 square feet. In addition, law firm White & Case LLP leased 440,000 square feet at 1221 Avenue of the Americas, a major expansion and relocation from its 300,000-square-foot occupancy at 1155 Avenue of the Americas. Neuberger Berman also signed to relocate from Third Avenue, taking 355,000 square feet at 1290 Avenue of the Americas. However, overall leasing activity measured only 4.0 million square feet in the second quarter, down from 4.5 million in the first quarter and 5.0 million square feet in the fourth quarter of Nevertheless, the overall Midtown North average asking rent continued its rapid 18-month ascent. It reached $74.29 per square foot, up from $73.49/psf at the end of the first. The average Class A rent increased from $75.02/psf to $76.00/ psf in the quarter, a growth of 1.3%, but more significantly, up 12.8% from $67.39/psf at this time last year. Midtown North does have its challenges however. Although fewer new blocks of space were added to the market in the second quarter in contrast to previous quarters when occupancies for Condé Nast and other firms relocating to Downtown were listed Midtown North currently has 38 buildings with more than 100,000 square feet of contiguous space on the market, including 10 that have more than 250,000 square feet of contiguous available space. Furthermore, Time Inc. s recent Downtown lease will put a sizable block of space on the market at 1271 Avenue of the Americas in the near future. Manhattan Availability Rates and Asking Rents 15% 12% 9% 6% 3% Total Availability Rate Average Asking Rent 12.5% 11.0% $56.69 $100 $80 $64.46 $60 2Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2008 Midtown North Availability Rates and Asking Rents 15% 12% 9% 6% 3% Largest Blocks of Contiguous Availability Address Total Availability Rate 12.2% 11.4% $66.08 Contiguous SF Available 4 Times Square 817, Madison Avenue 445, Broadway 415, Third Avenue 341, East 42nd Street 335, Avenue of the Americas 303, West 46th Street 290, Avenue of the Americas 285, Broadway 277, Broadway 254, Park Avenue 248,562 9 West 57th Street 247,500 $40 $20 $100 $80 $ Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2008 Average Asking Rent $60 $40 $20 MIDTOWN SOUTH: RENTS CONTINE TO CLIMB DESPITE SLIGHT PAUSE IN LEASING ACTIVITY Given its status as the go-to location for creative and technologyrelated firms, Midtown South still boasts the lowest availability rate of all the Manhattan submarkets including one of the lowest in the country and has seen steady increases in asking rents to $56.47/psf in the second quarter, up from $55.53/psf at the end of the first quarter and $51.60/psf in the second quarter of

4 MANHATTAN MARKET OFFICE LEASING REPORT 2Q2014 But in what could be deemed as an aberration, Midtown South did post 163,000 square feet of negative net absorption in the second quarter, as well as a slight uptick in availability that reached 8.9%, up from 8.8% at the end of the first quarter. Midtown South Availability Rates and Asking Rents While Midtown South has reaped some of the more high-profile leases over the last two years, the submarket was relatively quiet in the second quarter. Internet firm Yelp leased 140,000 square feet at 11 Madison Avenue. Earlier this year, Yelp secured an additional 10,000 square feet at its other location at Fifth Avenue, putting its total occupancy at that building at 70,000 square feet. Elsewhere in Midtown South, Macy s leased 131,100 square feet at 112 West 34th Street. 12% The slight downtick in activity aside, Midtown South s strong leasing activity over the last two years has left 20 buildings with more than 100,000 square feet of contiguous available space on the market, with only five of these having more than 250,000 square feet of contiguous available space. DOWNTOWN: ROBUST LEASING LEADS TO SHARP DROP IN AVAILABILITY RATE Two of the biggest leases signed in the second quarter were closed at the same building: 225 Liberty Street (formerly 2 World Financial Center and recently renamed as Brookfield Place) signed a 691,000-square-foot lease with Time, Inc., which will relocate the company from its long-term headquarters at the Time-Life Building (1271 Avenue of the Americas). Owned by Brookfield Properties, 225 Liberty Street will also be the new home for the Bank of New York-Mellon, which leased 350,000 square feet in the building, and agreed to sell its long-held headquarters at One Wall Street. These two leases accounted for more than half of the total leasing activity in Downtown, which recorded 1.99 million square feet. Although lower than the first quarter s 2.37 million square feet of leasing and 5.9 million square feet in the fourth quarter of 2013, total Downtown leasing over the last 12 months measured a whopping 11.5 million square feet. This brought the overall Downtown availability rate to 13.3%, down from 17.0% a year 4 Average Asking Rent $75 9.7% 8.9% $56.47 $60 $ % $45 6% $30 3% $15 2Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2008 The increase in overall Midtown South availability was also driven by the addition of newly converted space to the market. L&L Holding renovated 114 Fifth Avenue which brought 330,000 square feet to the market; however, L&L has already signed leases for 60% of that space, including Mashable, the digital media news and technology website, and Mastercard International. Likewise, Vornado recently converted 7 West 34th Street from home décor showrooms to office space, bringing another 330,000 square feet to the market. Finally, Orda Management is overhauling Park Avenue South where the Port Authority of NY and NJ will be vacating to relocate to 4 World Trade Center at the end of the year. This added more than 376,000 square feet to the market. Total Availability Rate 15% Largest Blocks of Contiguous Availability Address 532 Washington Street Park Avenue South 7 West 34th Street 330 West 34th Street Broadway 1440 Broadway 450 West 33rd Street 212 Fifth Avenue 11 Madison Avenue 350 Fifth Avenue 430 East 29th Street West 24th Street Contiguous SF Available 694, , , , , , , , , , , ,051

5 ago. Moreover, net absorption was a solid 1.2 million square feet in the second quarter, following 1.3 million square feet in the first quarter. Notwithstanding the drop in availability, asking rents actually declined slightly in the second quarter, to $48.96/psf, down from $50.25/psf at the end of the first quarter. The drop was mostly due to the significant removal of space at 225 Liberty Street, which was priced above most Class A buildings in Downtown. Overall asking rents in Lower Manhattan have generally not increased much in the last year despite the robust leasing activity and positive net absorption. In fact, Downtown s discount from Midtown s asking rent measured 34% in the second quarter, up from 30% a year ago. With Downtown in greater demand than perhaps any time in recent memory, the submarket still registers the largest blocks of available space, with 16 properties that currently have 100,000 square feet or more of contiguous available space, and five buildings with more than 500,000 square feet of available space. Another office tower, 3 World Trade Center, is under construction, but its status remains uncertain. ECONOMIC IMPACT: Outside of GDP, the national economy has improved significantly in The S&P 500, for example, which is approaching 2000, increased more than 22% from June 2013 to June This bodes well for New York City s office-based industries that should continue to add jobs this year at a healthy pace. However, firms continue to consolidate their space which has restricted office market growth. Downtown Availability Rates and Asking Rents 20% 16% 12% 8% 4% Total Availability Rate Average Asking Rent 17.0% 13.3% $ Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2008 $60 $48.96 $50 Largest Blocks of Contiguous Availability Address Contiguous SF Available 4 World Trade Center 1,034,969 One World Trade Center 741, Maiden Lane 728, Broad Street 637, Pearl Street 586, Broadway 457,109 1 New York Plaza 273,300 1 Liberty Plaza 242, Liberty Street 225, Vesey Street 167, Broadway 145, Trinity Place 130,240 $40 $30 $20 Although Wall Street will likely continue to lag the rest of the New York City economy for the next year, it should not prove to be a significant drag on the office leasing market. As shown in this quarter s strong leasing activity in the Downtown market especially, New York City is well-equipped to weather the headwinds from Wall Street. Continued job growth should yield a healthy pace of leasing activity in the coming months. 485 offices in 63 countries on 6 continents 15,800 professionals $75B in transaction value $2.1B in revenue 1.46B square feet under management 5

6 Change 2Q13 3Q13 4Q13 1Q14 2Q14 Last Year Last Qtr Midtown North Availability Rate (%) Class A 13.0% 12.3% 11.8% 12.4% 11.9% pp Class B 7.7% 7.3% 8.1% 8.5% 8.8% pp Class C 8.6% 8.6% 5.7% 6.7% 7.2% pp Asking Rental Rate Class A $67.39 $70.77 $71.25 $75.02 $76.00 $8.61 $0.98 Class B $51.46 $51.01 $51.84 $55.03 $55.05 $3.59 $0.03 Class C $35.66 $35.80 $37.61 $39.38 $41.84 $6.18 $2.46 Leasing Activity (Qtr) Total 5,620,352 3,120,607 4,971,951 4,555,084 4,005,742-1,614, ,342 Absorption (Qtr) Total 312,762 1,513, ,839 (1,270,068) 902, ,104 2,172,934 Midtown South Availability Rate (%) Class A 11.7% 12.2% 12.5% 9.6% 9.4% pp Class B 10.5% 10.2% 10.0% 9.4% 9.8% pp Class C 6.6% 6.5% 7.0% 7.1% 6.8% pp Asking Rental Rate Class A $61.81 $63.75 $64.52 $65.88 $67.16 $5.35 $1.28 Class B $49.74 $52.88 $55.05 $56.24 $57.31 $7.57 $1.07 Class C $40.76 $41.39 $44.26 $44.75 $47.07 $6.30 $2.32 Leasing Activity (Qtr) Total 2,697,155 1,954,639 2,211,898 4,973,665 1,950, ,237-3,022,747 Absorption (Qtr) Total (1,090,298) 38,127 (106,198) 1,468,753 (162,903) 927,395-1,631,656 Downtown Availability Rate (%) Class A 19.4% 18.1% 17.7% 16.4% 15.0% pp Class B 11.1% 11.5% 11.2% 10.2% 10.3% pp Class C 9.8% 4.8% 4.6% 4.4% 3.4% pp Asking Rental Rate Class A $47.25 $49.01 $51.80 $52.40 $50.97 $3.72 -$1.43 Class B $39.29 $38.19 $39.98 $40.57 $40.77 $1.48 $0.20 Class C $31.73 $31.73 $31.73 $31.73 $31.73 $0.00 $0.00 Leasing Activity (Qtr) Total 1,302,899 1,231,617 5,922,854 2,368,678 1,994, , ,544 Absorption (Qtr) Total (1,016,456) 1,214, ,314 1,246,463 1,201,140 2,217,596-45,323 Manhattan Availability Rate (%) Class A 14.5% 13.8% 13.4% 13.1% 12.4% pp Class B 10.0% 9.9% 9.8% 9.4% 9.7% pp Class C 7.1% 6.6% 6.7% 6.8% 6.5% pp Asking Rental Rate Class A $60.20 $63.00 $64.14 $67.45 $68.46 $8.26 $1.01 Class B $47.22 $49.48 $51.40 $52.88 $53.61 $6.39 $0.73 Class C $39.45 $39.80 $42.33 $42.75 $45.38 $5.92 $2.63 Leasing Activity (Qtr) Total 9,620,406 6,306,863 13,106,703 11,897,427 7,950,794-1,669,612-3,946,633 Absorption (Qtr) Total (1,793,992) 2,766,518 1,121,955 1,445,148 1,941,103 3,735, ,955 pp: percentage points 6

7 ABOUT COLLIERS INTERNATIONAL Colliers International NY LLC is the New York - New Jersey - Connecticut hub of the world s third largest commercial real estate services organization. Our company is a leading provider of specialized realty services, including tenant advisory services, owner representation, corporate services, capital markets, retail, industrial, consulting, financial services, asset management and project management. With nearly 300 employees and offices in Manhattan, New Jersey and Connecticut, the firm advised on more than $4.5 billion in sale, lease and capital markets transactions over the last 12 months. The firm manages more than 16 million square feet of prime commercial property in the tri-state region. For more information, please visit the Colliers International web site at Information contained herein has been obtained from sources that we deem reliable. We have no reason to doubt its accuracy, but we do not guarantee it. Some statements in this report are forwardlooking statements or statements regarding future events, which involve risk and uncertainty, and there can be no assurance that the results described in such statements will be realized. 7

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