OFFICE FUNDAMENTALS MOVE FORWARD

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1 OFFICE MARKET REPORT: 2Q2015 OFFICE FUNDAMENTALS MOVE FORWARD Prepared by: Galen M. Raza-Self Real Estate Market Research PNC Real Estate 249 Fifth Avenue Pittsburgh, PA (412) PNC and PNC Bank are registered service marks of The PNC Financial Services Group, Inc. PNC Bank and certain of its affiliates, including PNC TC, LLC, an SEC registered investment advisor wholly-owned by PNC Bank, do business as PNC Real Estate. PNC Real Estate provides commercial real estate financing and related services. Through its Tax Credit Capital segment, PNC Real Estate provides lending services, equity investments and equity investment services relating to low income housing tax credit ( LIHTC ) and preservation investments. PNC TC, LLC provides investment advisory services to funds sponsored by PNC Real Estate for LIHTC and preservation investments. Registration with the SEC does not imply a certain level of skill or training. This material does not constitute an offer to sell or a solicitation of an offer to buy any investment product. 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. ECONOMY: During 2Q15, the economy expanded at an annualized rate of 3.7%, a marked change from last quarter s upwardly revised 0.6%. Office-using employment rebounded from last quarter s slowdown to account for just over a third of this quarter s overall job growth of 678,000 (226,000/month), while the unemployment rate fell 20 bps to 5.3%. PNC Economics Group forecasts GDP expanding approximately 3.0% during 2H15, with 2.1% job growth (250,000/month), and an unemployment rate of 5.1% in 4Q15. ABSORPTION: Strong rebound from 1Q15 s weak 10.6 msf to 25.1 msf this quarter (second only to 4Q14 s cyclical high of 31.1 msf). Demand was relatively balanced between Class A and overall, with Class A accounting for about 57.0% of net absorption. Brokerage firms continued to report that demand remained broad-based, with the strongest activity occurring in southern and western metros, led by technology sector firms. Activity among the major office markets was mixed, with Atlanta, Boston, and Dallas/Ft Worth continuing to show gains, while Washington, DC and Northern New Jersey struggled. SUPPLY: The value of completed office space rose 5.9% sequentially to $55.4 billion, while the amount of completed square footage slowed 1.6 msf from last quarter to 13.6 msf. Although the amount of space under construction ticked-up about 17.0 msf from 1Q15 to msf, as a percent of inventory, it remains low by historical levels at about 1.3%. The number of markets with more than 1.0 msf underway increased from 27 last quarter to 30. While the amount of pre-leased space softened slightly from 1Q15 s 62.2% to 59.5%, none of the markets exhibit significant levels of speculative space. VACANCY: Nationally, vacancy rates continued their slow (but steady) improvement, as a number of the brokerage firms reported rate declines across an increasing number of markets. The average vacancy rate for the nation s 10 largest office markets eased 15 bps sequentially to 12.0%, with eight of them below year ago levels, while Houston and Washington, DC moved higher. RENTS: Nationally, office rents continued to trend higher this quarter. Landlords have been able to push rents, due to a relatively disciplined pipeline of new supply and higher levels of office-using employment that have reduced the amount of vacant space. Although a relatively small portion of CBD inventory, Class C space experienced a 3.5% quarterly increase, well above the overall CBD increase of 1.5%. Among the nation s largest office markets, New York City and Atlanta achieved the strongest increases, up 5.7% annually, while Chicago, and Washington, DC were slightly positive (or slightly negative for Class A space). TRANSACTION ACTIVITY: Led by suburban sales of $18.4 billion, office volume grew 2.5% sequentially to $33.4 billion. CBD pricing rose 10.3%, handily outpacing suburban price growth of 3.8%. CBD cap rates declined about 5 bps to 5.8%, while Suburban cap rates decreased 8 bps to 6.7%.

2 OFFICE FUNDAMENTALS MOVE FORWARD 2 ECONOMY This section summarizes changes in the national economy and discusses employment trends that influence office space demand. GDP The BEA s second estimate indicated that GDP growth accelerated from 1Q15 s upwardly revised annualized rate of 0.6% to 3.7% this quarter (even faster than the initial 2.3% estimate), due to positive contributions from nonresidential and residential fixed investment, as well as consumer and state/local government spending. In addition, corporate profitability swung from a 7.9% ($123.0 billion) loss last quarter to a 1.3% ($47.5 billion) gain in 2Q15. PNC Economics forecasts that the economy will grow at about a 3.0% annualized rate in the second half of EMPLOYMENT During 2Q15, total non-farm employment grew by 678,000 (226,000/month) from 1Q15 to million. Although the unemployment rate declined 20 bps sequentially to 5.3% (it s lowest since April 2008), this was more of a function of people leaving the labor force, as the labor participation rate eased 10 bps sequentially to 62.6%, while the employment-to-population rate was unchanged at 59.3%. For 2015, PNC s economists expect job growth to average 2.1% (250,000/month) and an unemployment rate of 5.1% during 4Q15. Nationally, office-using employment rebounded from 1Q15 s slowdown 160,000 jobs (53,300/month) to 249,000 jobs (83,000/month) during 2Q15 and accounted for 36.7% of this quarter s overall job growth, up from 27.5% last quarter. Professional/business services (PBS) accounted for the lion s share of office-using employment growth, with 203,000 jobs (67,700/month) this quarter, nearly double 1Q15 s 108,000 (36,000/month), while the proportion of temporary service jobs held steady at 14.7% of PBS jobs. The two other major components of office-using employment were mixed, with finance job growth declining from 41,000 last quarter to 33,000, while IT increased by from 11,000 to 13,000 over the same period. This quarter, office-using employment among the 10 largest markets represented a larger portion (28.9%) of the 249,000 office jobs created nationally (vs. 18.0% in 1Q15). Washington, DC s office job creating machine sprung back into action this quarter with just under 19,000 jobs (and representing nearly 90% of annual job creation). Atlanta and Dallas/Ft Worth trailed at 12,500 and 13,700 jobs, respectively. Meanwhile, Philadelphia experienced its second consecutive quarter of losses, shedding another 4,400 positions and New York City gained less than 1,000, while Northern New Jersey turned positive for the first time in a year. Despite ominous headlines about energy prices and jobs, Houston added just over 3,200 jobs during 2Q15.

3 OFFICE FUNDAMENTALS MOVE FORWARD 3 OFFICE MARKET TRENDS As noted in the Economy Section, 2Q15 office-using employment expanded at a substantially quicker pace than in 1Q15, contributing to a rebound in office market fundamentals. Please refer to Table I in 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, which represent roughly 45% of PNC s Footprint Market office space inventory. ABSORPTION While office-users continue to target increased space efficiency, 2Q15 s robust office-using job growth figures are moving absorption back to prerecession levels in most major markets. According to CoStar, demand rebounded strongly from last quarter s seasonally weak 10.6 msf to 25.1 msf this quarter (second only to 4Q14 s cyclical high of 31.1 msf. Leasing was relatively balanced between Class A and overall space, with Class A accounting for approximately 57.0% of this quarter s net absorption. CBRE data indicated that demand is broad-based. Among the 54 office markets they monitor, 50 (vs. 42 in 1Q15) had positive net absorption in 2Q15, with both CBD and suburban posting postrecession highs. They noted that the highest demand is in southern and western markets, including San Jose, Seattle, Austin, and Oakland, as well as housing bust markets, such as Orlando, Ft. Lauderdale, and Phoenix. A recent Jones Lang LaSalle report indicated that among leases over 20,000 sf, more than 40.0% were expansions, led by technology firms, which accounted for a third of demand. Large leases in Silicon Valley included Palo Alto Networks (752,000 sf) and Aruba Networks (205,000 sf) at Phase II of Menlo Equities/Beacon Capital s Scott Boulevard office campus in Santa Clara. Up the coast in Seattle s South Lake Union submarket, Amazon signed for Troy Block-North Tower (419,000 sf) and down in Austin, Apple (217,500 sf) and Solar Winds (117,900 sf) expanded. Shared office space provider to tech startups (and other entrepreneurs), WeWork added more space in New York City, including 315 W 36 th (140,000 sf) and 77 Sands Street (75,200 sf) in Brooklyn s Dumbo Heights neighborhood. Year-to-date demand among the nation s 10 largest markets is mixed. While Dallas/Ft Worth has strengthened to 4.3 msf, Houston remains nominally positive at just 0.7 msf, as the effects of volatile energy prices overshadow tenant expansion plans, a situation that is likely to impact its western submarkets along I-10, such as Katy Freeway, Westchase, Energy Corridor, and Far West, where there is a concentration of energy industry tenants and new development. Absorption increased in Atlanta and Boston, while Washington, DC contracted to 0.7 msf and New York City was muted by several large blocks of available space that hit the market, as landlords pursued higher rents through repositioning. PNC s 22 footprint markets recorded year-to-date net absorption of 11.6 msf, with four markets (Atlanta, Detroit, Philadelphia, and Raleigh-Durham) responsible for 7.2 msf (61.6%) of it. As in previous quarters, Northern New Jersey experienced negative net absorption, while Washington, DC made some progress.

4 OFFICE FUNDAMENTALS MOVE FORWARD 4 SUPPLY During 2Q15, the value of office projects completed rose 5.9% sequentially to $55.4 billion with the share of private office projects inching up from 1Q15 s 84.6% ($47.5 billion) to 85.1% ($47.2 billion). Sequentially, completions slowed from 15.2 msf to 13.6 msf, but remain above a year ago s 10.5 msf. Significant completions this quarter include Facebook s 435,000 sf West Campus (MPK20) in Menlo Park and Cox Communications 578,000 sf at their Sandy Springs HQ. In Chicago s Fulton Market neighborhood, conversion of a six-story 83,200 sf meat processing facility into office loft/creative space for WeWork concluded. Houston s pipeline continued to pump out finished office buildings, including Energy Center 3, a 546,600 sf LEED Gold building in the Katy Freeway submarket that is 100% leased to ConocoPhilips. Houston also continued to have the most Green buildings reach completion, with about 760,000 sf of Leadership in Energy and Environmental Design (LEED) certified office space. Please refer to Table II in the Appendix for additional data on approximately 3.5 msf of 2Q15 LEED completions. The amount of office space under construction nationwide ticked-up from 1Q15 s msf to msf this quarter. Nationally this equates to about 1.3% of existing inventory; however, vacancy constrained tech-oriented markets Seattle and San Jose have construction levels of 5.1% and 7.3% of existing inventory. The nation s 10 largest office markets represent about 60.4 msf (45.2%) of the office space under construction, while PNC s footprint markets contained 32.1 msf (24.1%) with concentrations in Washington, DC and Chicago. The breadth of markets with substantial amounts of construction activity (more than 1.0 msf) increased from 27 last quarter to 30 in 2Q15. Cumulatively, these 30 markets have msf (88.3%) of the new office space underway, up slightly from last quarter s msf (88.1%). As in previous quarters, Houston remains at the top of the list with 12.4 msf underway, a decline of about 2.5 msf from last quarter. New York jumped ahead five spots to number two with 11.9 msf under construction (5.9 msf more than last quarter). Newcomers included Charlotte, Baltimore, Oklahoma City, Portland, Long Island, and Columbus, while completions pushed Raleigh/Durham, Westchester/S. CT, and Cleveland under the 1.0 msf mark. Overall, pre-leasing continued to nose down. Moving from 63.5% in 4Q14 to 62.2% in 1Q15 to 59.5% this quarter. While none of the markets in the above table exhibit significant levels of speculative construction, pre-leasing in Dallas/Ft Worth, Washington, DC, Chicago, Los Angeles, Denver, Austin, South Florida, and Long Island is below 50.0%. CONSTRUCTION ACTIVITY (> 1.0 MSF) Market # Bldgs U/C (msf) % of Inv. % Leased YTD Deliveries Houston % 61.8% 7.0 New York City % 65.4% 0.5 Seattle/Puget Sound % 57.2% 0.7 South Bay/San Jose % 78.3% 1.0 Dallas/Ft Worth % 48.4% 3.4 Washington, DC % 48.7% 0.6 Boston % 71.1% 2.1 San Francisco % 58.1% 1.0 Chicago % 47.1% 1.1 Phoenix % 78.5% 0.9 Los Angeles % 45.8% 0.9 Minneapolis % 86.1% 0.3 Denver % 45.3% 0.3 Nashville % 56.6% 0.3 Austin % 39.7% 2.1 N. New Jersey % 85.1% 0.2 Pittsburgh % 66.1% 0.3 Philadelphia % 85.6% 0.8 Charlotte % 57.5% 0.2 S. Florida % 48.4% 0.1 Milwaukee % 87.0% 0.3 Salt Lake City % 54.9% 0.3 Atlanta % 61.4% 0.8 Cincinnati % 74.9% 0.6 Baltimore % 69.1% 0.2 Oklahoma City % 76.0% 0.3 Portland % 72.2% 0.3 Long Island % 39.0% 0.4 Columbus % 88.9% 0.3 San Diego % Top % 59.5% 17.3 US TOTAL % 63.0% 34.6 Note: Bold/italicized markets are the 10 largest U.S. office markets. Due to differences in CoStar's methodology, national figures may differ from national historical data presented elsewhere in this report. Source: Cassidy Turley; Colliers; CoStar; Cushman & Wakefield; Jones Lang LaSalle; Newmark Grubb Knight Frank; PNC Real Estate Market Research

5 OFFICE FUNDAMENTALS MOVE FORWARD 5 VACANCY Nationally, office vacancy rates continued their slow (but steady) improvement. CBRE showed the most significant improvement, with vacancy dropping 40 bps sequentially to 13.5%, while CoStar s Total declined 19 bps to 11.4% and their Class A moved down 21 bps to 12.4%. Meanwhile Reis remained unchanged at 16.0%. As in prior quarters, brokerage firms reported vacancy rate declines in a growing number of markets. NGKF reported that vacancy tightened in 48 of the 58 markets they track, with notable declines in Jacksonville, Salt Lake City, and Tampa. DTZ indicated that 68 of the 80 office markets that they monitor recorded lower vacancy rates this quarter (vs. 47 last quarter). In a cautionary note, Jones Lang LaSalle commented that amenity rich, low vacancy/high cost CBD s, such as New York and San Francisco are compelling tenants to explore other markets, such as Portland, Salt Lake City, and Seattle for space and talented employees. The weighted average vacancy rate for the nation s 10 largest office markets eased 15 bps from last quarter to 12.0%. Eight of them are below year ago levels, while Houston continued to struggle with escalating rates and Washington, DC moved slightly higher. PNC s 22 footprint markets had an average weighted vacancy rate of 12.1%, down 19 bps sequentially and 56 bps annually. Atlanta lead the way with an 81 bps decline to 13.3%, closely followed by Nashville s 78 bps drop to a 5.8%, one of the lowest vacancy rates in the nation, though this could change as the 2.7 msf underway in Nashville (56.6% pre-leased) delivers. With nearly no new supply, Northern New Jersey continued to grapple with sluggish demand, resulting in its 2Q15 vacancy rate increasing 36 bps to 14.4%.

6 OFFICE FUNDAMENTALS MOVE FORWARD 6 RENTS Nationally, average office rents continued to trend higher, with quarterly growth rates ranging from 0.7% (Reis) to 1.3% (CBRE). As previously noted, vacancy rates have tightened across the majority of markets, enabling landlords to raise rents. DTZ reported that 57 (up from 53 in 1Q15) of the 80 metros it tracks recorded rent growth in 2Q15. Savills Studley noted that rent growth in large markets, such as New York, Boston, and Los Angeles that are more reliant on a traditional tenant base have lagged, while Reis commented that technology-driven markets, such as Seattle, San Francisco, and San Jose are experiencing the biggest rent increases. A recent Jones Lang LaSalle report indicated that tenant improvement (TI s) packages are growing. As of 2Q15, they averaged $30.99/sf nationally, up 5.0% from a year ago and 14.2% since 2Q13 s low. They further noted that TIs are higher in markets with greater levels of office construction, especially in CBD s which averaged just over $50.00/sf. TI s for CBD space in Washington, DC were notably higher in the mid-$70s/sf, while Atlanta, New York City, Seattle, and Chicago were also above average. Although Class C CBD space represents a relatively small percentage (15.0%) of CBD office space nationally, CoStar data shows that it experienced a 3.5% quarterly increase, assisting overall CBD quarterly rent growth of 1.5% to $29.37/sf. Quarterly suburban rents increased 0.7% to $21.50/sf, with Class A achieving the strongest growth of 1.2% to $27.31/sf. On an annual basis, CBD rent growth of 3.1%, slightly trails suburban s 3.3%. Among the top ten markets, overall rents in New York City and Atlanta recorded the strongest growth, rising 5.7% annually, well above the national 3.1% average. However, Class A rents are have grown even faster in select markets, as demonstrated by Atlanta s Class A 8.5% increase and Dallas/Ft Worth s 6.5%. Although Class A rents in Washington, DC, Chicago, and Boston remain lower than a year ago, they improved sequentially. The weighted average rent for PNC s 22 footprint markets rose 0.3% sequentially to $21.98 and is up 1.8% annually. This quarter, Pittsburgh and Charlotte recorded the strongest gains, with rents advancing 4.1% and 4.0%, respectively. While impressive, both metros have a ways to go before they get close to Nashville s 11.7% annual increase.

7 OFFICE FUNDAMENTALS MOVE FORWARD 7 TRANSACTION ACTIVITY According to RCA data, institutional quality sales volume grew 2.5% sequentially to $33.4B and 26.0% annually. Sales of suburban properties comprised the bulk of this quarter s volume, growing 4.9% from last quarter to $18.4B and are up 43.9% annually. CBD properties accounted for $15.0B in sales this quarter, flat from 1Q15, but rose 9.3% from a year ago. The interest in suburban properties is partially the result of investors seeking higher yield and attractive pricing. The CPPI for the office sector shows that overall prices grew 7.2% from 1Q15. Over this period, the office CBD sub-index rose 10.3%, while the suburban office sub-index shows prices rose 3.8%. As of 2Q15, CBD office prices were 39.2% above their 1Q08 peak, while suburban office properties remain 10.0% below their 3Q07 peak. Despite being a major seller in 1Q15, Blackstone Group purchased Willis Tower in Chicago for approximately $1.3B ($343/sf), the highest price ever paid for an office tower in the USA (outside of New York City). Blackstone plans to invest heavily in the retail portion of this tower and upgrade the 103 rd -floor Skydeck to make it a comprehensive tourist destination. Another major transaction was RXR Realty purchase of 230 Park Avenue in Manhattan for $1.2B ($990/sf) from Invesco in one of the largest office building sales transactions year to date. Both RCA and PwC data indicated that suburban and CBD office cap rates posted sequential and annual declines; however, compression for both product types is more apparent on an annual basis. RCA observed that the overall office cap rate rose 5 bps sequentially to just over 6.5%, but is 23 bps lower than a year ago. Differences in cap rates between PwC and RCA are smaller for suburban properties at 30 bps, compared to CBD, which stood at 53 bps.

8 APPENDIX TABLE I PNC FOOTPRINT MARKETS - OFFICE 2Q15 Market Existing Inventory Vacancy YTD Net Absorption YTD Deliveries U/C Rent Total RBA (msf) Direct (msf) Total (msf) 2Q15 % Q/Q bps Y/Y bps (msf) (msf) (msf) 2Q15 Q/Q % Y/Y % Atlanta % $ % 5.7% Baltimore % $ % 1.8% Birmingham % $ % 1.4% Central New Jersey % $ % 2.5% Charlotte % $ % 7.2% Chicago % $ % 0.5% Cincinnati % $ % 0.8% Cleveland % $ % 0.1% Columbus % $ % 4.3% Dayton % $ % 0.0% Detroit % $ % 3.7% Indianapolis % $ % 1.1% Louisville % $ % 4.4% Milwaukee % $ % 0.5% Mobile % $ % 3.4% Nashville % $ % 11.7% Northern New Jersey % $ % 0.0% Philadelphia % $ % 1.4% Pittsburgh % $ % 4.1% Raleigh/Durham % $ % 4.6% St. Louis % $ % 0.3% Washington, DC % $ % 0.1% PNC FOOTPRINT TOTALS / WTD AVGS 3, % $ % 1.8% US TOTALS / WTD AVGS 10, , , % $ % 3.1% Note: Due to differences in CoStar's methodology, national and Top Ten market figures may differ from those presented in this report. The top 10 national office markets are denoted in italicized bold type. Sources: CoStar; PNC Real Estate Market Research TABLE II SELECT 2Q15 LEED OFFICE DELIVERIES Property Market Submarket SF Leased LEED Certification Key Tenants Developer The Van Ness Boston Boston/Suffolk County 237, % Gold Crico Strategies Samuels & Associates 4 Burlington Woods Boston Route 128 North 100, % Silver n/a KeyPoint Partners, LLC Lovejoy Wharf Boston Boston/Suffolk County 232, % Gold Converse The Related Companies Coventus Buffalo Buffalo CBD 335, % Platinum First Niagara Bank, Kaleida Health Ciminelli Real Estate Corporation Vintage Club Cincinnati/Dayton Northern Cincinnati Area 81, % Certified The Christ Hospital n/a 100 Saint Paul Denver Colorado Blvd/Glendale 147, % Gold First Bank, Del Frisco's Grille, Fuller Sotheby Int'l Realty Pauls Real Estate Investments, LLC Skybox Houston One Houston Katy Freeway 86, % Silver (Designed) n/a Skybox Datacenters Energy Center Three Houston Katy Freeway 546, % Gold ConocoPhillips Trammell Crow Company Mason Creek Office CHouston Katy Freeway 127, % Silver (Designed) n/a Myers, Crow & Saviers One Summerlin Las Vegas West Las Vegas 204, % Silver Business Suites Barton Springs Howard Hughes Playhouse Plaza Los Angeles Burbank/Glendale/Pasadena 155, % Silver (Designed) Alibaba IDS Real Estate Group 7 Bryant Park New York City Midtown 473, % Gold Bank of China Hines, Pacolet Milliken Enterprises, & JP Morgan 4450 Macarthur Blvd Orange County Airport Area 21, % Gold TIAA-CREF Mark IV Capital, Inc. Alliance One Raleigh Raleigh 146, % Silver (Designed) ABB, North Carolina State University Craig Davis Properties, Inc. Cornerstone I Salt Lake City Central Valley East 172, % Silver (Designed) n/a Cottonwood Partners Management, Ltd. MPK20 San Francisco Menlo Park 435, % Gold Facebook Facebook TOTALS/WTD AVGS - - 3,505, % Source: CBRE-EA; CoStar; US Green Building Council (USGBC); PNC Real Estate Market Research