The Little Train That Could

Research & Forecast Report RENO OFFICE Q3 2015 The Little Train That Could > > Rents continued to move higher as rates over $2.00 per square foot are becoming more common in the Class A buildings in the Downtown and Meadowood submarkets. > > The vacancy rate for Class A space in Meadowood is now 7.8%. > > The vacancy rate for Class A space in Downtown is now 11.9%. Much like the children s story of our childhood, the Reno/Sparks market is making steady progress to health and prosperity with many professionals chanting the memorable phrase I think I can, I think I can! Once again, this quarter showed an overall reduction in the direct vacancy rate with it falling below 15.0 percent for the first time since the first quarter of 2008 when it was 13.3 percent. Interestingly, there were not any significant transactions that impacted the market either positively or negatively. The quarter ended with a direct vacancy rate of 14.9 percent. Market Indicators Unemployment Rate Nevada 6.7 % Market Indicators Relative to prior period Q3 2015 Q4 2015* NET ABSORPTION COMPLETIONS RENTAL 10-Year Nominal Interest Rate National Consumer Confidence 2.06 103.0 *Projected Historical Vacancy Rates and Asking Lease Rates Summary Statistics Q2 2015 Reno Market Q2-2015 Q3-2015 Vacancy Rate 16.0% 14.9% Asking Rent (PSF, FSG) $1.41 $1.42 Net Absorption (SF) 38,779 46,876 New Completions (SF) 0 0 Overall Asking Rents Per Square Foot Previous Quarter Current Quarter. Class A $1.66 $1.66 Class B $1.47 $1.46 Class C $1.09 $1.15

Surprisingly, the largest office user did not even go into an office building with TelePerformance leasing 45,000 square feet in the closed Walmart on North McCarran. While this helped the retail statistics, it did nothing to help the office statistics. And yet, we posted a positive net absorption of 42,876 square feet. IT Convergence leased 8,478 square feet at 5370 Kietzke Lane, also known as the NevDex Property. In addition, Pinnacle Capital Mortgage leased 6,291 square feet on the second floor of the Village at Lakeridge, 6900 South McCarran. All other leases were smaller spaces with local companies expanding to handle the growth of the Reno/Sparks economy. Historical Net Absorption vs.completions Rents continued moving higher as rates over $2.00 per square foot are becoming more common in the Class A buildings in the Downtown and Meadowood submarkets. Rents are now within striking range of making new construction pencil, especially in the Meadowood submarket where surface parking is prevalent. The vacancy rate for Class A space in Meadowood is now 7.8 percent. This is the official signal for office developers to start planning new projects. As reported last quarter, McKenzie Development already has plans to come out of the ground with a four-story, 40,000 square foot, office building behind the City National Bank Building on Kietzke Lane. It would not be surprising to see a similar move by the new owners of the Rancharrah land. Leasing Rates by Submarket The vacancy rate for Class A space in Downtown is now 11.9 percent. This too will encourage developers to take greater notice. However, the cost to build the associated parking garage makes Downtown a little further down the road as compared to Meadowood. South Meadows Class A vacancy is still high at 18.5 percent with the return of over 50,000 square feet in both 885 and 887 Trademark earlier this year still being felt. Without those two buildings, South Meadows would have a healthy 8.3 percent vacancy rate in Class A buildings. Looking on the horizon, we believe the fourth quarter will be strong as well. There are four office tenants between 8,700 and 12,000 square feet looking for space in South Meadows. We suspect all four of those tenants will land before the end of the year. On the negative side, Wells Fargo Insurance will relocate from Moana Lane to their Northern Nevada office building on Kietzke Lane. That will put 13,000 square feet back on the market at 604 Moana Lane. Total Vacancy vs Direct and Sublease Vacancy We are in great shape to break our 10 year average net absorption this year. We think we might finish the year with over 130,000 square feet of positive net absorption. Vacancy Rates Meadowood is leading all submarkets with a direct vacancy of just 9.9 percent. Downtown has a direct vacancy rate of 14.8 percent, while South Meadows has a ways to go with a direct vacancy of 18.7 percent. Over a third of all the vacancy in South Meadows is in two buildings on Trademark. With the leasing activity forecast for the fourth quarter, we think the direct vacancy in South Meadows will fall to the high 15 percent range. Source: CoStar 2 Reno Research & Forecast Report Q3 2015 Office Colliers International

Sales The Northern Nevada sales sector remains relatively strong. The sentiment across the industry is that sales, both owner-user and investment, would be more abundant if there were options in the market. Unfortunately, the statistics do not reflect the interest in sale properties. If there were more options available we believe the total sales would be much higher. We cannot tell you the increased emails and calls we are getting from brokers looking for off market deals due to having trouble finding listed property! 100 N Arlington Avenue sold for $1,000,000* The one thing the sales statistics do show is that prices for both investment and owner-user properties continue to increase year over year, and 2015 is posting higher sales prices than in previous years. One can only assume this is due to the lack of inventory pushing up prices making buyers not wanting to lose out on an opportunity and sellers being able to demand higher pricing. This is impressive given a few years back we had properties trading in the $100 per square foot range. In addition, we have only seen a half dozen office building foreclosures this year. Since we are weeding out the distressed assets, the prices of armslength transactions have been higher and should continue to increase. *Note: Condo portion only 435 Spokane Street sold for $500,000 The most frustrating dynamic for any real estate agent is the lack of options for a qualified and interested buyer. This is exactly what owneruser buyers in the 2,000-5,000 square footage range are experiencing. They cannot find any suitable properties currently available in the market in those size ranges and in certain locations, mostly Downtown, Meadowood and South Meadows. As of September 2015, we have had 62 office sales in the market. This is compared to 75 total sales in 2014. If we continue at the current pace, we should meet or exceed the total number of sales last year. If more options were available the 2015 total sales figure would be even higher. On target for fourth quarter closure are 885 Trademark and Northern Nevada Corporate Center, Building I (NNCC-I), both in South Meadows. The Trademark property is a two story, 76,184 square foot office occupied by Mitel selling for $163 per square foot. The transaction involves a restructure of the Mitel lease which would leave 38,000 square feet available. NNCC-I located at 10509 Professional Circle is a 45,000 square foot fully leased office selling for $7,200,000, roughly $160 per square foot. 530 E 6th Street sold for $530,000 As we move in to the final quarter of 2015 we are hopeful that more sale options become available and interest rates continue to remain low. The SBA 504 rate stands at 4.80 percent for October 2015, which is slightly higher than in previous months, but is still under 5 percent and is extraordinarily low, historically. The Fed has continued to hold off on a rate increase and it appears they will not raise rates in 2015. That could change in 2016 and it will be interesting to see how it affects the sales market. We are hopeful that it will light a fire under some of the buyers who have been on the sidelines! 3 Reno Research & Forecast Report Q3 2015 Office Colliers International

395 Significant Sale Activity SPARKS 435, 433, 431, 429, 427, 0 Spokane St, 6,289 SF - $500,000 $163.58/SF August 2015 80 DOWNTOWN 100 N Arlington Ave,* 80 12,738 SF - $1,000,000 $78.50/SF July 2015 WEST RENO CENTRAL/ AIRPORT *Note: Condo portion only 530 E 6th St, 5,774 SF - $530,,000 $91.79/SF August 2015 MEADOWOOD 5305 Reno Corporate Dr, 6,000 SF - $1,161,500 $79.50/SF 89 LAKE TAHOE SOUTH RENO July 2015 50 937 Tahoe Blvd, Incline Village 395 15,440 SF - $2,350,000 $152.20/SF August 2015 Significant Lease Activity PROPERTY ADDRESS SALE DATE SIZE SELLER/BUYER TYPE 590 Double Eagle Court, September 2015 13,000 SF The Pasha Group Renewal 100 W. Liberty Street, August 2015 11,500 SF Dickinson Wright LLC New Lease 10509 Professional Circle, August 2015 11,800 SF MHI Renewal 6005 Plumas Street, September 2015 9,899 SF Lemons, Grundy, & Eisenberg Renewal 4 Reno Research & Forecast Report Q3 2015 Office Colliers International

Market Comparisons - Reno Office Market CLASS BLDGS RBA DIRECT VACANT SF DIRECT SUBLEASE VACANT SF SUBLEASE VACANT SF PRIOR QUARTER NET ABSORPTION CURRENT QTR SF NET ABSORPTION YTD SF COMPLETIONS CURRENT QTR SF UNDER CONSTRUCTION SF AVG ASKING RENTAL DOWNTOWN SUBMARKET A 4 558,231 66,305 11.9% 5,000 0.9% 71,305 12.8% 13.2% (5,718) (10,060) - - $2.00 B 16 508,263 110,484 21.7% 9,640 1.9% 120.124 23.6% 20.0% 2,512 3,599 - - $1.60 C 15 373,388 36,257 9.7% - - 36,257 9.7% 8.3% (9,265) (8,945) - - $1.27 Total 35 1,439,882 213,046 14.8% 14,640 1.0% 227,686 15.8% 14.3% (12,471) (22.064) - - $1.62 SOUTH MEADOWS SUBMARKET A 34 1,217,576 225,157 18.5% 29,334 2.4% 254,491 20.9% 23.3% 7,746 (28,790) - - $1.66 B 10 285,410 55,710 19.5% - 0.0% 55,710 19.5% 21.2% 0 (18,636) - - $1.25 C - - - - - - - - - - - - - - Total 44 1,502,986 280,867 18.7% 29,334 2.0% 310,201 20.6% 21.5% 7,746 (47,426) - - $1.46 MEADOWOOD SUBMARKET A 36 1,713,420 133,417 7.8% 9,394 0.5% 142.811 8.3% 10.7% 18.720 99,850 - - $1.77 B 19 437,086 78,435 17.9% - - 78,435 17.9% 20.4% 28,427 10,601 - - $1.41 C - - - - - - - - - - - - - $0.00 Total 55 2,150,506 211,852 9.9% 9,394 0.4% 221,246 10.3% 12.7% 47,147 110,451 - - $1.59 CENTRAL/AIRPORT SUBMARKET A 3 81,023 11,739 14.5% - 0.0% 11,739 14.5% 8.4% (939) 6,128 - - $1.63 B 28 910,921 139,293 15.3% 12,644 1.4% 151,957 16.7% 16.5% (7,873) 9,380 - - $1.28 C 39 775,145 163,397 21.1% 10,215 1.3% 173,612 22.4% 24.7% 2.252 39,724 - - $1.01 Total 70 1,767,089 314,429 17.8% 22.897 1.3% 337,308 19.1% 21.0% (6,560) 55,232 - - $1.31 SPARKS SUBMARKET A - - - 0.0% - - - 0.0% 0.0% - - - - - B 2 32,919-0.0% 2,255 6.9% 2.255 6.9% 20.1% 2,255 2,255 - - $1.25 C 2 26,360 9,771 37.1% - - 9,771 37.1% 37.1% - - - - $0.95 Total 4 59,279 9,771 16.5% 2,255 3.8% 12,026 20.3% 16.5% 2,255 2,255 - - $1.10 WEST RENO SUBMARKET A 1 17,728 8,000 45.1% - - 8,000 45.1% 45.1% - - - - $1.50 B 3 43,102 1,450 3.4% - - 1,450 3.4% 3.4% - - - - $1.45 C 6 97,460 16,201 16.6% - - 16.201 16.6% 13.6% 4,759 (4,668) - - $1.13 Total 10 158,290 25,651 16.2% - - 25,651 16.2% 14.4% 4,759 (4,668) - - $1.36 DOWNTOWN SUBMARKET A 4 558,231 66,305 11.9% 5,000 0.9% 71,305 12.8% 13.2% (5,718) (10,060) - - $2.00 B 16 508,263 110,484 21.7% 9,640 1.9% 120,124 23.6% 20.0% 2,512 (3,599) - - $1.60 C 15 373,388 36,257 9.7% - - 36,257 9.7% 8.3% (9,265) (8,945) - - $1.27 Total 35 1,439,882 213,046 14.8% 14,640 1.0% 227,686 15.8% 14.3% (12,471) (22,604) - - $1.62 SUBURBAN A 74 3,029,747 378,313 12.5% 38,728 1.3% 417,041 13.8% 16.2% 25,527 77,188 - - $1.31 B 62 1,709,438 274,888 16.1% 14,919 0.9% 289,807 17.0% 17.0% 22,809 3,600 - - $1.33 C 47 898,965 189,369 21.1% 10,215 1.1% 199,584 22.2% 23.8% 7.011 35.056 - - $1.03 Total 183 5,638,150 840,570 14.9% 63,862 1.1% 906,432 16.1% 17.7% 55,347 115,844 - - $1.22 MARKET A 74 3,587,978 444,618 12.4% 43,728 1.2% 488,346 13.6% 13.7% 19,809 67,128 - - $1.66 B 66 2,217,701 385,372 17.4% 24,559 1.1% 409,931 18.5% 16.4% 25,321 1 - - $1.46 C 63 1,272,353 225,626 17.7% 10,215 0.8% 235,841 18.5% 24.8% (2,254) 26,111 - - $1.15 Total 198 7,078,032 1,055,616 14.9% 78,502 1.1% 1,134,118 16.0% 17.0% 42,876 93,240 - - $1.42 QUARTERLY COMPARISON AND S Q3-15 198 7,078,032 1,055,616 14.9% 78,502 1.1% 1,134,118 16.0% 16.0% 42,876 93,240 - - $1.42 Q2-15 198 7,078,032 1,096,729 15.5% 65,273 0.9% 1,135,010 16.0% 17.0% 38,779 50,364 - - $1.41 Q1-15 198 7,078,032 1,120,927 15.8% 85,258 1.2% 1,206,185 17.0% 16.7% 11,585 11,585 - - $1.42 Q4-14 198 7,078,032 1,147,093 16.2% 36,294 0.5% 1,183,387 16.7% 17.0% 21,936 (3,207) - - $1.36 Q3-14 198 7,078,032 1,169,029 16.5% 36,294 0.5% 1,205,323 17.0% 17.7% 46,207 (25,143) - - $1.36 Q2-14 198 7,078,032 1,215,236 17.2% 36,294 0.5% 1,251,530 17.7% 17.5% (9,930) (71,350) - - $1.36 Q1-14 198 7,078,032 1,205,306 17.0% 36,294 0.5% 1,241,600 17.5% 16.8% (61,420) (61,420) - - $1.36 Q4-13 198 7,078,032 1,143,886 16.2% 48,328 0.7% 1,192,214 16.8% 17.3% 26,723 235,371 - - $1.35 Source: CoStar 5 Reno Research & Forecast Report Q3 2015 Office Colliers International

502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 $2.3 billion in annual revenue COLLIERS INTERNATIONAL RENO 100 West Liberty Street Suite 740 Reno, Nevada 89501 USA +1 775 823 9666 www.colliers.com/reno MARKET CONTACTS: Tim Ruffin, SIOR Managing Director & Executive Vice President Reno +1 775 823 9666 tim.ruffin@colliers.com Melissa Molyneaux, SIOR, CCIM Managing Director & Vice President Reno +1 775 823 9666 melissa.molyneaux@colliers.com 1.7 billion square feet under management 16,300 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.