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Mid-Year 2017
Avison Young Office Market Report

North America and Europe
Partnership. Performance.
Disclaimer
The information contained in this report was obtained from sources that we deem reliable and, while thought to be correct, is not
guaranteed by Avison Young (Canada) Inc. All opinions expressed and data provided herein are subject to change without notice.
This report cannot be reproduced, in part or in full, in any format, without the prior written consent of Avison Young (Canada) Inc.
2 Avison Young Mid-Year 2017 Office Market Report

Contents
Overview
05 Canada Office Market Overview 43 Hartford Mexico
11 U.S. Office Market Overview 44 Houston
74 Mexico City
45 Indianapolis
Canada 46 Jacksonville United Kingdom
17 Calgary 47 Las Vegas
76 Coventry
18 Edmonton 48 Long Island
77 London
19 Halifax 49 Los Angeles
20 Lethbridge 50 Miami Germany
21 Montreal 51 Minneapolis
79 Berlin
22 Ottawa
52 Nashville
80 Duesseldorf
23 Regina
53 New Jersey
24 Toronto 81 Frankfurt
54 New York
25 Vancouver 82 Hamburg
55 Oakland
26 Waterloo Region 83 Munich
56 Orange County
27 Winnipeg
57 Orlando Romania
United States 58 Philadelphia
85 Bucharest
59 Phoenix
29 Atlanta
30 Austin
60 Pittsburgh More from Avison Young
61 Raleigh-Durham 88 Company Overview
31 Boston
32 Charleston 62 Reno 90 Publications and Social Media
33 Charlotte 63 Sacramento
91 Contact Us
34 Chicago 64 San Antonio
35 Cleveland 65 San Diego County
36 Columbus, OH 66 San Francisco
37 Dallas 67 San Mateo

38 Denver 68 St. Louis
39 Detroit 69 Tampa
40 Fairfield County 70 Washington, DC
41 Fort Lauderdale 71 West Palm Beach
42 Greenville 72 Westchester County
avisonyoung.com 3
Canada
Office Market Overview
Evolving trends and varying fundamentals challenge

stakeholders to adapt
Trends prevalent in 2016 continued to play out in the first half of 2017 and will likely
shape Canadas office market in the foreseeable future as the sector adjusts to the
changing dynamics.
The prevailing trends include urban intensification, transit-oriented development,

consolidation, workplace design and millennials live-work-play preferences. In addition,
Albertas battered energy sector underscores regional differences in performance,
especially in Calgary and Edmonton where new supply has resulted in soaring
vacancy rates, negative absorption and depressed rents. Elsewhere, though demand
from traditional sectors has been patchy, technology and the co-working craze are
transforming the marketplace, garnering an increasing share of the leasing pie.
Co-working space providers have expanded rapidly due to the need to cater to startups,
entrepreneurs and the increasing demand for affordable workplaces on flexible lease
terms. Notably, U.S.-based WeWork has leased big blocks of space in Vancouver and
Toronto after opening its first Canadian location in Montreal in 2016. Meanwhile,
e-commerce is another ubiquitous driver, prompting firms such as Amazon (in Toronto)
and home-grown Shopify (in Toronto and Ottawa) to grow their real estate footprints.
These trends will challenge owners and occupiers to adapt to evolving

circumstances and varying fundamentals in markets from coast to coast.
avisonyoung.com 5
Notable Mid-Year 2017 Canadian Office Market Highlights
Canada recorded 12-month absorption of more than Developers added almost 10 msf of new office space in
3.7 million square feet (msf). Losses in some western the past year, increasing Canadas inventory to more than
markets, largely in Calgary and Edmonton and, to a lesser 527 msf. Almost two-thirds of the supply was added to
extent, in Winnipeg, were offset by gains in Toronto, the nations downtown markets. Exacerbating vacancy
Montreal and Vancouver. levels, Calgary saw the most deliveries overall and
downtown, slightly ahead of Toronto.
Negative absorption in Calgary and Edmonton and new
development in most markets raised the national office Undeterred by supply-demand imbalances across
vacancy rate 70 basis points (bps) year-over-year to 12.1%; markets and taking a long-term view, developers had
vacancy increased in five of 11 markets. Not surprisingly, almost 13 msf under construction (48% preleased) at
Calgary had the highest vacancy (23.5%); Winnipeg once mid-year 2017, as downtown construction outpaced the
again had the lowest (6.6%), while Edmonton saw the suburbs by more than a two-to-one margin. Toronto
biggest change (+530 bps to 17.2%). had the most space under construction overall (6.4 msf),
as well as the most downtown space (5.3 msf) being
Due to disproportionate negative absorption and new built, while Montreal had the most suburban space
supply, downtown markets posted an 11.3% vacancy rate underway (1.3 msf). Year-over-year, Toronto saw the
at mid-year 2017 up 160 bps in the past 12 months. largest development pipeline increase (+1.8 msf), while
Vacancy was higher in seven of 11 downtown markets; the greatest decrease took place in Calgary (-3.9 msf) as
four remained in single-digits, while six were below the the citys construction cycle draws to a close.
national downtown average. Torontos record low of 3.3%
was the lowest downtown vacancy in Canada and the Average downtown class A gross rents increased $0.52
lowest among major markets in North America. per square foot (psf) year-over-year to $41.42 psf at mid-
year 2017 led by Vancouver ($53.50 psf) and Toronto
Owing to robust positive absorption (led by Toronto ($49.16 psf). Regina ($39.50 psf) edged out Vancouver
and Montreal), suburban markets combined for a 13.6% ($37.25 psf) to boast the highest suburban class A gross
vacancy rate at the midway point of 2017 marginally rents. Suburban class A gross rents jumped an average of
lower than the midway mark of 2016. Apart from $1.48 psf year-over-year.
Winnipeg (4%), double-digit vacancy prevails across
Canadas suburban markets. However, vacancy declined
in seven of 11 markets year-over-year, with five markets
below the national suburban average.

Canadian Office Market Snapshot
3.3% VACANT 527 MILLION SF

Torontos downtown Canada's office footprint
vacancy rate is 3.3% totals 527 msf Toronto (34%)
the lowest among major and Montreal (18%).
markets in North America.
OFFICE NEW SUPPLY

Completions + New Construction
EDMONTON
2 MSF
CALGARY
4.2 MSF
WINNIPEG MONTREAL
474 KSF 3.1 MSF
LETHBRIDGE REGINA
VANCOUVER
20 KSF 44 KSF
1.5 MSF TORONTO
9.4 MSF HALIFAX

578 KSF
WATERLOO REGION OTTAWA
SF COMPLETIONS (LAST 12 MOS) = 9.7 MSF
604 KSF 506 KSF
SF UNDER CONSTRUCTION (Q2 2017) = 12.8 MSF
$31 PSF 12.8 MILLION SF

Average downtown class A Office construction in Canada
asking net rent in Vancouver amounts to 12.8 msf
the highest in Canada and
8.6 msf in Toronto (50%)
above the national average
and Montreal (18%) alone.
of $20.81 psf.
avisonyoung.com 7
Canada Overall Office Vacancy Rate
Mid-Year 2017
25%
20%
15%
10%
5%
0%
CANADIAN AVERAGE
Canada Downtown & Suburban Office Vacancy Rates

Mid-Year 2017
30%
25%
20%
15%
10%
5%
0%
DOWNTOWN SUBURBAN
Canada Office Absorption

12 Months Ending Mid-Year 2017
4
MSF
-1
-2

Canada Downtown Class A Average Asking Gross Rental Rates*
Mid-Year 2017
$60
$ PER SQUARE FOOT
$50
$40
$30
$20
$10
$0
AVG. ASKING NET RENTAL RATE AVG. ADDITIONAL RENT CANADIAN AVG. GROSS ASKING RENTAL RATE
Canada Suburban Class A Average Asking Gross Rental Rates*

Mid-Year 2017
$50
$ PER SQUARE FOOT
$40
$30
$20
$10
$0
AVG. ASKING NET RENTAL RATE AVG. ADDITIONAL RENT CANADIAN AVG. GROSS ASKING RENTAL RATE
*RENTAL RATES SHOWN IN CAN$
avisonyoung.com 9
United States
Office Market Overview
Mid-year results positive
The trends shaping the Canadian office market are mirrored in

the U.S. with tenants displaying a preference for transit-oriented
development and with co-working and flexible-office-space
operators gaining market share. Landlords are responding by
retrofitting common areas to include tenant amenities and social-
gathering spaces. This preference for plug-and-play leasing options
has contributed to the rise of speculative office suites in buildings'
available vacancy.
Building renovations and repurposing continue as class B buildings

are upgraded to be competitive and obsolete buildings are
redeveloped as apartments, schools and even self-storage facilities.
Suburban markets with a sense of place walkable, accessible to
transit and with amenity, entertainment or destination retail are
emerging as their own urban centers.
The U.S. office market tracked by Avison Young comprised 5 bsf

of office space at mid-year 2017. Approximately 3.3 bsf was in the
suburban markets dominating market share with twice as much
inventory as downtown markets.
avisonyoung.com 11
Notable Mid-Year 2017 U.S. Office Market Highlights
Seventeen markets represented 77% of the 5-bsf Of the major markets, Houston had one of the
U.S. office inventory. Eleven of those had lower countrys highest mid-year 2017 total vacancy
vacancy rates at mid-year 2017 compared with the rates (16.8%), yet continues to stabilize. Its
same point in 2016. recovery is hampered by a glut of sublease space
and tenants giving space back, keeping market
Although overall U.S. vacancy remained the conditions softer longer. Meanwhile, Dallas,
same at 12.2% year-over-year, the disparity in where vacancy remains above 14%, had 4.7 msf
market performance between the suburbs and of absorption (the highest in the country) and
downtowns is clearly evident in net absorption. enjoyed corporate expansion and build-to-suit
The suburbs finished the 12-month period ending construction activity.
mid-year 2017 with 30.5 msf of absorption,
compared with 33.4 msf one year earlier. Among the downtown markets, New York again
Conversely, 2.4 msf of occupancy was lost in the led the country in class A average asking gross
downtown markets compared with 13.6 msf of rent at mid-year 2017 ($83.77 psf ), with six other
positive absorption in the prior 12-month period. markets (San Mateo, San Francisco, Boston,
Washington, DC; Austin and Fairfield County) also
At mid-year 2017, the downtown markets had exceeding the national average of $53.94 psf.
43.4 msf under construction (49% preleased),
and the suburban markets had 47.7 msf under In suburban markets, the national class A average
construction (61% preleased). Taken together, asking gross rent was $30.88 psf at mid-year
projects under construction were 55% preleased 2017. Notably, when the top seven downtown
at mid-year 2017. submarkets were excluded, the delta between
suburban class A and downtown class A national
Of the 91 msf underway in the U.S., 47% is in five average rent was reduced to 10%.
markets: Washington, DC (12.7 msf ), Dallas (9.9
msf ), New York (9.4 msf ), Los Angeles (5.7 msf )
and San Francisco (5.6 msf ).

U.S. Office Market Snapshot
12% U.S. VACANCY 5 BILLION SF

Nashville's 6% vacancy U.S. office footprint
is the lowest reported totals 5 bsf across
among U.S. markets. 44 markets.
OFFICE NEW SUPPLY

Completions + New Construction
CLEVELAND 1.6 MSF
MINNEAPOLIS
4.2 MSF
CHICAGO
BOSTON 6 MSF
6.1 MSF NEW YORK 11.2 MSF
SAN FRANCISCO 6.6 MSF ST. LOUIS COLUMBUS
NEW JERSEY 1.8 MSF
DENVER
1.8 MSF 1.9 MSF 5.9 MSF
6.8 MSF PHILADELPHIA
OAKLAND 1.3 MSF WASHINGTON, DC 15 MSF
SAN MATEO 2.5 MSF NASHVILLE RALEIGH-DURHAM 2.8 MSF

DALLAS 5.1 MSF CHARLOTTE 3.7 MSF
LOS ANGELES 8.6 MSF 15.4 MSF
ORANGE CO. 2.8 MSF PHOENIX ATLANTA
3.6 MSF 4.6 MSF
SAN DIEGO CO. 2.1 MSF AUSTIN
3.2 MSF
HOUSTON
5.7 MSF
SAN ANTONIO
1.7 MSF
SF COMPLETIONS (LAST 12 MOS) = 48.3 MSF MIAMI 1.5 MSF
SF UNDER CONSTRUCTION (Q2 2017) = 91.1 MSF
*U.S. OFFICE MARKETS WITH TOTAL NEW SUPPLY EXCEEDING 1 MSF.
$83.77 PSF 91 MILLION SF

Average downtown class A Office construction in the
asking net rent in New York is U.S. amounts to 91 msf
nearly $84 psf the highest 55% preleased and 47%
downtown rent in the U.S.
concentrated in five
The national average is $53.94 psf. markets.
avisonyoung.com 13
U.S. Overall Office Vacancy Rate
Mid-Year 2017
20%
15%
10%
5%
0%
U.S. AVERAGE
U.S. Downtown & Suburban Office Vacancy Rates

Mid-Year 2017
25%
20%
15%
10%
5%
0%
DOWNTOWN SUBURBAN
U.S. Office Absorption

12 Months Ending Mid-Year 2017
MSF
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6

U.S. Downtown Class A Average Asking Gross Rental Rates*
Mid-Year 2017
$90
$ PER SQUARE FOOT
$80
$70
$60
$50
$40
$30
$20
$10
$0
AVG. ASKING NET RENTAL RATE AVG. ADDITIONAL RENT U.S. AVG. GROSS ASKING RENTAL RATE
U.S. Suburban Class A Average Asking Gross Rental Rates*

Mid-Year 2017
$60
$ PER SQUARE FOOT
$50
$40
$30
$20
$10
$0
AVG. ASKING NET RENTAL RATE AVG. ADDITIONAL RENT U.S. AVG. GROSS ASKING RENTAL RATE
*RENTAL RATES SHOWN IN US$
avisonyoung.com 15
Canada
17 Calgary
18 Edmonton
19 Halifax
20 Lethbridge
21 Montreal
22 Ottawa
23 Regina
24 Toronto
25 Vancouver
26 Waterloo Region
27 Winnipeg

Calgary Office Market
No new projects anticipated in coming years Absorption and Vacancy
DOWNTOWN ABSORPTION (12 MOS) VACANCY
Overall vacancy in Calgarys office market rose to 23.5% from 19.5% in the 12-month period SUBURBAN ABSORPTION (12 MOS) VACANCY
ending mid-year 2017. The increase was anticipated, as it is largely attributable to the addition
1,500 30%
ABSORPTION (THOUSANDS SF)
VACANCY RATE (%)

of 3.4 msf of new inventory to the market. Vacant space in Calgarys office market totalled
17.7 msf, with head lease space accounting for 12.2 msf (69%) and sublease space accounting 1,000
25%
for 5.5 msf (31%). It is anticipated that some sublease availability will continue to transition to 500
head lease availability over the course of the year as sublease terms expire. 0 20%
Absorption for the 12-month period ending mid-year 2017 was negative 949,000 sf. This -500
15%
level is a noticeable improvement compared with the negative 3.8 msf of absorption -1,000
recorded in the previous 12-month period. Smaller tenants leasing activity grew noticeably
-1,500 10%
as demand for spaces less than 5,000 sf continued to be high. An abundance of existing
-2,000
options in this size range, combined with pressure on landlords and sub-landlords to 5%
demise large blocks of space that are not attracting tenants, is keeping rental rates -2,500
competitive. Inducements, such as free rent and improvement allowances, are substantial -3,000 0%
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
in many cases. Meanwhile, the market for large blocks of contiguous space will have Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
significant competition beyond 2017, maintaining downward pressure on rental rates.
ARROWS INDICATE YEAR-OVER-YEAR CHANGE

New Supply
DOWNTOWN COMPLETIONS (12 MOS) UNDER CONST.
SUBURBAN COMPLETIONS (12 MOS) UNDER CONST.
6,000
SQUARE FEET (THOUSANDS)

-0.9 MSF 23.5% 0.8 SF 3.4 MSF 5,000
ABSORPTION VACANCY RATE UNDER CONSTRUCTION COMPLETIONS
4,000
No new construction is anticipated to be announced in the city for several years given
3,000
widespread availability across the entire Calgary office market. At least four office projects
totalling 1.3 msf have halted construction in the last 12 months. Approximately 810,000 sf of
2,000
new office space remains under construction across Calgary. The majority of this new space
is in Downtown (57%) followed by the Suburban North (31%), Beltline (8%), and Suburban
1,000
South (4%) submarkets.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
Avg. Gross Asking Rent - Class A

DOWNTOWN ASKING NET RENT ADDITIONAL RENT
Notable Office Lease Transactions by Size - First Half 2017 SUBURBAN ASKING NET RENT ADDITIONAL RENT
$60
Size
$ PER SQUARE FOOT
Address / Complex Tenant Lease Type

$50
1 Meredith Block
105,000 sf
Benevity New
$40
2 150 - 9th Avenue S.W.

75,000 sf
RocketSpace New
$30
3 Eighth Avenue Place East

73,500 sf
Ridgeback Resources New $20
4 Eau Claire Tower

55,000 sf
Solium Capital $10
Sublease
5 Gulf Canada Square

48,000 sf $0
Geologic Systems Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Sublease Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 17
Edmonton Office Market
Stantec Tower expected to boost vacancy Absorption and Vacancy
Several high-profile sales transactions and new construction were highlighted in a flurry of SUBURBAN ABSORPTION (12 MOS) VACANCY
activity in Edmontons office market between mid-year 2016 and mid-year 2017. In the 12
400 20%
VACANCY RATE (%)

months ending mid-year 2017, more than 1.2 msf of office space was delivered in the downtown
300 18%
core, 89% of which was preleased. The increase in downtown inventory will continue into
2018 with the addition of Stantec Tower, a 660,000-sf, mixed-use building that is nearly 100% 200 16%
preleased. As part of its Alberta portfolio disposition, Dream Office REIT sold five downtown 100 14%
office towers. Highfield Place was sold to Cidex Holdings; Alberta Investment Management 0 12%
Company (AIMCo) purchased HSBC Bank Place and Enbridge Place; and the Milner Building and -100 10%
HSBC Building were sold to Crescent Star Holdings. In addition to the Dream assets, the Bank of
-200 8%
Montreal Building was also sold.
-300 6%
Downtown vacancy rose to 18.4% in the second quarter of 2017 an increase of 6 percentage -400 4%
points year-over-year. The office market recorded absorption of negative 643,400 sf in the -500 2%
12-month period ending mid-year 2017. Vacancy is expected to climb once again when the -600 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
completed construction of the Stantec Tower adds more inventory to the market. Landlords Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
with large pockets of backfill space will look to entice tenants whose expiries are approaching

New Supply
2,000

1,800
-0.6 MSF 17.2% 0.8 MSF 1.2 MSF 1,600
1,400
1,200
from lower-quality buildings. As tenants move up the quality ladder, landlords of older, dated
1,000
buildings will struggle to compete, renewing the urgency to reinvest or redevelop properties.
800
New office development has been spurred by growing populations in Edmontons suburban 600
southeast and southwest neighbourhoods. Concentrated in Windermere, Summerside and 400
Ellerslie, much of the new office construction was built to serve owner-occupiers with full-floor
200
opportunities available for lease. Vacancy across all suburban markets rose to 15.4% at mid-
0
year 2017 (up 4.1 percentage points year-over-year). The increase was driven primarily by the Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
Eastgate and Sherwood Park submarkets, as many office tenants there continue to struggle to 2013 2014 2015 2016 2017
cope with the fallout from weak energy markets.

$45
Size
$ PER SQUARE FOOT
Address / Complex Tenant Lease Type $40
1 Telus Plaza North

90,000 sf
PWGSC $35
Renewal
$30
2 Commerce Office Park Building D

74,200 sf
WorleyParsons $25
Renewal
$20
3 Cityview Business Park Building 12
290,000 sf
Emkade Distribution Renewal $15
$10
4 Commerce South 2
24,400 sf
Telecon Group New
$5
5 Manulife Place
22,000 sf $0
Deloitte Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Expansion Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Halifax Office Market
Landlords remain vigilant amidst delayed projects Absorption and Vacancy
Unforeseen delays have held up the construction of major office and mixed-use projects SUBURBAN ABSORPTION (12 MOS) VACANCY
that had been set to come on stream in 2017; however, notable developments such as the
300 16%
VACANCY RATE (%)

new World Trade and Convention Centre complex should be completed by the end of the
year. Landlords with office assets within Halifaxs central business district remained vigilant, 200 14%
offering attractive lease rates and tenant incentives to defend against rising vacancy in
100 12%
the city and leasing campaigns launched by suburban landlords. Downtown vacancy
increased to 14.8% at the end of the second quarter of 2017, up from 14.2% one year earlier. 0 10%
Overall vacancy is expected to increase slightly in the second half of 2017 as new projects -100 8%
are delivered. Despite the rise in vacancy, asking net rental rates have increased slightly to
-200 6%
compensate for inflation and growing tenant-improvement allowance offerings.
-300 4%
With the completion of two large, high-end multi-residential projects and commencement
of additional mixed-use developments planned for late 2017 or early 2018, the downtown -400 2%
core continues to become more attractive to working-class consumers and residents. This -500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
re-urbanization, whereby people, especially millennials, want to live in the downtown core Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
again, is likely to help slow the increasing office vacancy during the next 12 months.

New Supply
700

-0.2 MSF 14.7% 0.6 MSF 0 SF 600

500
400
Overall suburban vacancy rose to 14.6% at the end of the second quarter of 2017, but
is expected to remain flat for the balance of 2017 with no new projects scheduled for 300
completion and the stabilized migration of tenants into the downtown core. Average net
rental rates for class A suburban office space remained flat year-over-year at $15.82 psf as of 200
mid-2017, while operating costs increased only slightly, averaging $11.60 psf. Suburban rental
100
rates are expected to remain flat through the balance of 2017.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$40
Size
$ PER SQUARE FOOT

$35
1 84 Chain Lake Drive

31,000 sf
Fleetway New $30
$25
2 99 Wyse Road
7,000 sf
Fisheries and Oceans Canada New
$20
3 99 Wyse Road
4,000 sf
Desjardins Financial Security $15
New
$10
4 237 Brownlow Avenue
3,900 sf
Crawford Adjusters Renewal $5
5 1741 Brunswick Street

2,900 sf $0
Flight Shops Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 19
Lethbridge Office Market
Redeveloped call centre spells positive absorption Absorption and Vacancy
Lethbridges office market went through an expected transition between mid-year 2016 and SUBURBAN ABSORPTION (12 MOS) VACANCY
mid-year 2017. In 2016, a major tenant relocated its call centre operations to the U.S., pushing
140 30%
VACANCY RATE (%)

office vacancy to an all-time high of 18.7%. That vacancy was filled, bringing the overall rate
to 14.9% at the end of the second quarter of 2017. Positive net absorption of 106,051 sf was 120
25%
recorded in the 12-month period ending mid-year 2017, largely due to the lease-up of the
50,000-sf call centre that was redeveloped to accommodate several new users. 100
20%
80
There is a trend in Lethbridges office market toward creating small, efficient spaces.
15%
Landlords are dividing large spaces into smaller suites to attract smaller office users. With 60
paperless strategies, collaborative workspaces and efficient space design, tenants are
10%
finding they need less square footage to get the job done. By creating small finished spaces, 40
landlords provide potential tenants with the opportunity to visualize what the space will 5%
20
look like, outfit it and be fully operational within 60 days. This is a huge advantage for
tenants compared with a raw space, where timelines can often exceed six months. Small, 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
built-out space options are proving popular with a diverse range of tenants. Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

New Supply
35

0.1 MSF 14.9% 0 SF 20 KSF 30

25
Potential tenants still have a variety of options to choose from and are in a position to ask 20
for incentives and/or discounts. Asking net rent has decreased slightly as landlords have
15
become more competitive in efforts to secure quality tenants. The outlook for the office
market is positive for the remainder of 2017 and into 2018. Lethbridge is expected to be 10
Albertas strongest municipal economy in 2017, according to ATB Financials chief economist,
5
Todd Hirsch no small feat considering the downturn that the provinces economy has
experienced in recent years. 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 450 31 Street N.
15,000 sf
Red Crow Community College New $25
2 3688 32 Avenue N.
10,200 sf
AltaLink Management LP $20
New
$15
3 550 W. T. Hill Boulevard S.
9,100 sf
Awin Insurance Brokerage New
$10

8,100 sf
Laurie, Kenna & Associates New $5

3,100 sf $0
Dominion Lending Centres Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Montreal Office Market
Nearly 1 msf of office space under construction downtown Absorption and Vacancy
The Greater Montreal Area (GMA) office market remained stable with vacancy decreasing to SUBURBAN ABSORPTION (12 MOS) VACANCY
12.5% at the end of the second quarter of 2017, down 20 bps year-over-year. Nonetheless,
2,000 18%
VACANCY RATE (%)

landlords in Downtown Montreal are still facing challenges as vacancy increased 50 bps year-
over-year to 9.7% at mid-year 2017. 16%
1,500
14%
Class A rental rates also increased when compared with mid-year 2016. The average net asking
1,000 12%
rent rose to $20.08 psf from $19.30 psf and average additional rent grew to $21.94 psf from
$21.28 psf at the end of the second quarter of 2017. Despite high vacancy, landlords remain 10%
500
positive looking towards year-end as the provinces unemployment rate hit its lowest level on 8%
record, at 6% as of May 2017.
0 6%
Midtown is one of the citys most active submarkets as outdated light-industrial buildings have 4%
-500
been converted into plug-and-play, tech-friendly, loft-style offices during the past several years. 2%
This trend is not expected to slow due to a significant increase in demand for non-traditional
-1,000 0%
workspace. With 14.4% vacancy, Midtown holds the second-largest office inventory in Montreal, Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2 Q2
Q2 2017
after the Downtown area. 2013 2014 2015 2016 2017

New Supply
2,500

1.7 MSF 12.5% 2.2 MSF 0.9 MSF 2,000
1,500
Nearly 1 msf of office space is currently under construction in Downtown Montreal. Broccolini
Construction will start construction of the new Maison de Radio-Canada by the end of the year,
1,000
adding nearly 450,000 sf of office space (including multimedia studios) to the inventory upon
the projects scheduled completion in 2020. Radio-Canada will be the sole tenant under a 30-
year lease. 500
The highlight of the first half of 2017 was the sale-leaseback of SNC-Lavalins headquarters
0
located at 455 Ren-Lvesque Boulevard West. The 21-storey building was purchased by Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
GWL Realty Advisors for $173 million and will be renovated into a more dynamic and efficient 2013 2014 2015 2016 2017
workspace that will bring most of SNC-Lavalins Montreal-based employees under one roof. The
engineering and construction firm signed a 20-year lease for the 331,402-sf building.
$45
Size
$ PER SQUARE FOOT
1 455 Ren-Lvesque Boulevard West

331,400 sf
SNC-Lavalin $35
Sale / Leaseback
$30
2 5445 De Gasp
86,700 sf
Ubisoft Divertissements $25
Expansion
$20
3 Maison Manuvie
86,700 sf
EY New $15
$10
4 5455 De Gasp
81,500 sf
Studios Framestore Renewal
$5
5 5 Place Ville Marie

73,500 sf $0
Cogeco Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Renewal Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 21
Ottawa Office Market
Forthcoming LRT system whets investor appetite Absorption and Vacancy
The Ottawa office market overall can be characterized as in recovery going into the second SUBURBAN ABSORPTION (12 MOS) VACANCY
half of 2017. As of mid-year, the city continued to experience increased construction
500 16%
VACANCY RATE (%)

activity on its light-rail-transit (LRT) system. With the first phase of the LRT system slated to
400
commence operating in 2018, the promise of a renewed investor appetite for the downtown 14%
core is being realized. The infrastructure spending boost, coupled with Shopify leasing 300
12%
upwards of 325,000 sf of class A space, has certainly spurred a turnaround in Ottawas core 200
office market. Class AA buildings had sub-6% vacancy at mid-year 2017, with large-block 100
10%
space a rare commodity. While the class B market continued to struggle, it will not be long 0 8%
before these buildings get pulled along with the low-vacancy wave, mirroring the rise in
-100
6%
class A rental rates as tenants realize the benefits of proximity to LRT stations in the core.
-200
4%
The Ottawa East submarket continues to be adversely affected by one significant vacancy -300
that skews the occupancy picture. As late as fourth-quarter 2014, this market had sub-5% -400
2%
vacancy, but has since struggled, with vacancy rising above 17% as of mid-year 2017. The -500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Blair Road LRT station, opening in summer 2018, is expected to boost the appeal of Ottawas Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
eastern markets.

New Supply
1,000

900
0.1 MSF 12.7% 0 SF 0.5 MSF 800
700
600
500
The Ottawa West and technology-heavy Kanata submarkets have had their prospects
400
boosted by the aggressive funding announcement made by the provincial and federal
governments, extending an additional $3.6 billion in funding for the phase 2 western and 300
eastern extensions of the LRT system. The LRT will be extended east to Orleans and west to 200
Moodie Drive with work to be completed by 2023. Net effective rental rates in the Kanata 100
submarket are approaching $12 psf, after having languished in the $8-psf range for the last 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
several years. It would seem that market, like the downtown core, has started to turn the Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
corner.

$60
Size
$ PER SQUARE FOOT

$50
1 234 Laurier Avenue
325,500 sf
Shopify New
$40
2 353 Preston Street

120,000 sf
Infrastructure Ontario Renewal
$30
3 400 Maplegrove Road

107,000 sf
Honeywell Renewal $20
4 3001 Solandt Road

63,300 sf
Flextronic $10
New
5 150 Slater Street

53,700 sf $0
PWGSC Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Regina Office Market
Soft market continues to impact absorption Absorption and Vacancy
Reginas office market has plateaued and will continue to be viewed as soft with little chance SUBURBAN ABSORPTION (12 MOS) VACANCY
of reaching the below-national-average vacancy of the past 20-plus years. As of mid-year
150 18%
VACANCY RATE (%)

2017, the vacancy rate for all competitive office space was 12.8%. The provincial economy has
cooled, particularly in the resource sector, impacting leasing activity. The higher-than-average 16%
vacancy rate is expected to continue into the foreseeable future, changing the way industry 100
14%
stakeholders conduct their development and transactional business. Construction of new 12%
space has ceased downtown, while more efficient floorplates and space planning in newer 50
10%
product continue to impact absorption. The amount of space occupied by government and
the resource sector continues to contract and expansion plans are being deferred. As a result 8%
0
of these trends, owners and occupiers of office space are adjusting their respective plans, while 6%
owners consider reducing net asking rates or increasing inducements to attract and/or retain
4%
-50
tenants.
2%
The market recorded positive net absorption of almost 12,000 sf during the 12-month period -100 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
ending mid-year 2017, largely due to a single swing-space lease by the University of Regina. Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
Class A vacancy rose to 11.2% from 10% year-over-year, class B space vacancy dropped from

New Supply
450

400
12 KSF 12.8% 44 KSF 0 SF
ABSORPTION VACANCY RATE UNDER CONSTRUCTION COMPLETIONS 350
300
250
18.7% to 7.1% (the notable drop was the result of a re-classification of some buildings, not 200
absorption), and class C rose to 20.4% from 19.7% at mid-year 2016. Average asking rental rates
150
for vacant downtown and suburban space were stable or moderately lower year-over-year. As
of mid-year 2017, the average class A net asking rate was $25 psf, while class B and class C space 100
averaged $21 psf and $15 psf, respectively. 50
0
In the suburbs, Eastgate Alliance Centre, a four-storey medical office building located on Prince Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
of Wales Drive, remained on schedule for completion in October 2017. 2013 2014 2015 2016 2017

$45
Size
$ PER SQUARE FOOT
1 2500 Victoria Avenue

24,000 sf
Kanuka Thuringer $35
Renewal
$30
2 1919 Saskatchewan Drive

22,000 sf
FCAA $25
Renewal
$20
3 2151 Scarth Street
17,000 sf
University of Regina New $15
$10
4 2401 Saskatchewan Drive
10,000 sf
Merchant Law Group Renewal
$5
5 4545 Parliament Avenue

3,500 sf $0
PearsonVUE Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 23
Toronto Office Market
Big development and lease announcements define market Absorption and Vacancy
As the first half of 2017 came to an end, the Greater Toronto Area (GTA) office leasing market SUBURBAN ABSORPTION (12 MOS) VACANCY
could best be described as a tale of two distinct markets: the robust and landlord-favouring
1,800 14%
VACANCY RATE (%)

downtown and the inconsistent and tenant-favouring suburbs. Despite an ongoing spread
1,600
in relative performance between the two markets, there is a similar trend across the region: 12%
continued development. Almost 3 msf was completed in the 12-month period ending at 1,400
mid-year 2017, and another 6.4 msf was under construction (46% preleased and equating to 1,200 10%
3.6% of existing stock) with 5.3 msf located downtown. GTA vacancy trended lower year-over- 1,000
8%
year (-60 bps) to 7.2% a six-year low. Though demand has been broad-based, the regions 800
attraction for technology companies and knowledge workers is growing. 6%
600
The catalyst for the entire region remains Torontos Downtown market, which has displayed 400 4%
historically low vacancy (3.3%), robust demand, diminishing large blocks of contiguous available 200
2%
space, rising rental rates and steady new construction. The first half of 2017 featured big 0
development and lease announcements. Ivanho Cambridge and Hines announced that CIBC -200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
has leased up to 1.75 msf as the anchor tenant in the $2-billion, 2.9-msf, two-tower complex Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
(branded CIBC Square) at 81 and 141 Bay Street, scheduled for completion in 2020 and 2023,

New Supply
6,000

3.1 MSF 7.2% 6.4 MSF 3 MSF 5,000
4,000
3,000
respectively. CIBCs lease-up followed the announcement of a speculative construction project
from Cadillac Fairview (with the Ontario Pension Board): a $479-million, 879,000-sf office tower
2,000
at 16 York Street, slated for completion in 2020.
1,000
Although suburban vacancy declined 80 bps year-over-year to 11.1%, tenants enjoy ample space
options at favourable rental rates. Transit-oriented development continued to gain traction as
0
the Greater Toronto Airports Authority announced plans for the Pearson transit hub. Along with Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
improvements facilitating future commercial development around the hub itself, this endeavour 2013 2014 2015 2016 2017
bodes well for the existing airport-area office market and the overall suburban West market.

$60
Size
$ PER SQUARE FOOT

$50
1 CIBC Square
1,750,000 sf
CIBC New
$40
2 161 Bay Street

175,000 sf
TD Bank Renewal
$30
3 145 King Street West

125,000 sf
Home Capital Renewal $20
4 Scotia Plaza
112,000 sf
Amazon $10
New
5 5000 Yonge Street

102,000 sf $0
Franklin Templeton Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017

Vancouver Office Market
Suburban leasing tightens regional vacancy Absorption and Vacancy
Metro Vancouver office vacancy tightened year-over-year slipping to 9.1% at mid-year SUBURBAN ABSORPTION (12 MOS) VACANCY
2017 from 10.4% as absorption of suburban office space offset moderate leasing activity
1,000 14%
VACANCY RATE (%)

in the downtown core due in part to a lack of CBD options. More than 500,000 sf has been
absorbed regionally since mid-year 2016 with the vast majority 497,000 sf located in the 800 12%
suburbs. This absorption followed more than 2 msf of regional absorption recorded from
600
mid-year 2014 to mid-year 2016. Despite delivery of more than 4.1 msf of new inventory 10%
since mid-2013, Metro Vancouvers nearly 50.6-msf office market was stable and balanced at 400
8%
mid-year 2017. 200
6%
Even with the addition of almost 1.9 msf of new downtown office space since mid-year 0
2014, downtown vacancy declined to 6.8% at mid-year 2017 from 7.8% one year earlier. With 4%
-200
almost no new office space scheduled for delivery downtown until late 2019/early 2020,
2%
vacancy will tighten as large blocks of contiguous space grow increasingly scarce. The next -400
wave of downtown development will break ground in the second half of 2017. Suburban -600 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
vacancy declined sliding to 11.5% at mid-year 2017 from 13% a year earlier as office Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
space was absorbed and two new high-profile office buildings that delivered vacant in 2016

New Supply
2,000

1,800
0.5 MSF 9.1% 1.1 MSF 0.4 MSF 1,600
1,400
1,200
were leased. Downtown office rental rates continue to register upward pressure in 2017 as
1,000
suburban rates resumed an upward trajectory after a slight retrenchment in 2016. If vacancy
800
tightens further in 2017, rents are expected to continue rising.
600
Even with slightly more than 1 msf of office construction (37% downtown, 63% suburban) 400
underway in Metro Vancouver (33% preleased), significant new suburban office
200
developments will likely launch in the next six to 18 months. Developers are already at the
0
starting gate to kick off the next wave of new downtown office towers that would complete Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
in late 2019 to 2021. 2013 2014 2015 2016 2017

$60
Size
$ PER SQUARE FOOT

$50
1 Bentall 3
77,000 sf
WeWork New
$40
2 Cathedral Place
53,000 sf
Lawson Lundell LLP Renewal
$30
3 Robson Court
53,000 sf
WSP Global New $20
BC Emergency Health Services 49,500

4 2920 Virtual Way
sf
$10
New
5 268 Keefer Street

49,000 sf $0
BC Artscape Society Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 25
Waterloo Region Office Market
Higher vacancy reduces lease rates Absorption and Vacancy
The robust Waterloo Region office market continued to see expansion with more than SUBURBAN ABSORPTION (12 MOS) VACANCY
300,000 sf currently under construction and a number of significant projects planned. The
150 16%
VACANCY RATE (%)

14.5-msf office market, which comprises Kitchener, Waterloo, Guelph and Cambridge, is
situated 45 minutes west of the Greater Toronto Area. 100 14%
12%
Included in the new projects is Evolv1, an office development in the Waterloo market by 50
Cora Group, a local developer with close ties to the community. The building will be the 10%
0
regions first net-zero commercial multi-tenant office structure. Waterloo Regions TextNow
8%
and EY have both completed leases in the building. -50
6%
With the continued construction and availability of larger blocks of space, regional vacancy -100
4%
increased 110 bps year-over-year to 13.5% at mid-year 2017. This rise has led to slightly lower
average lease rates in both the downtown and suburban markets. The technology sector, -150 2%
with startups steadily growing and expanding or completing mergers and acquisitions,
-200 0%
continued to be a major driver. (The market is primarily driven by the tech, insurance and Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
financial sectors.) 2013 2014 2015 2016 2017

New Supply
300

11 KSF 13.5% 0.3 MSF 0.3 MSF 250
200
Companies from outside the region continue to come to the area to set up branches or
150
relocate operations. The attraction is based on the regions economic growth, quality of life
for employees and infrastructure including the anticipated completion of ION LightRail
100
Transit (the regions LRT system), the expansion of Highway 401 through the area from six to
10 lanes, and a technology corridor (which boasts 15,000 tech companies with 200,000 tech
50
workers) connecting Waterloo Region with the GTA.
0
Vacancy rates are expected to remain flat in many areas of Waterloo Region, with continued Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
absorption as the LRT is completed and tenants take occupancy in some of the new 2013 2014 2015 2016 2017
buildings coming to market. The area has significant growth projections, and tenants and
landlords continue to invest in the market.
$30
Size
$ PER SQUARE FOOT

$25
1 137 Glasgow Street, Kitchener
130,000 sf
Miovision New
$20
2 451 Phillip Street, Waterloo

100,000 sf
GHD New
$15
3 451 Phillip Street, Waterloo

60,000 sf
MCAP New $10
4 57 Erb Street West, Waterloo

40,000 sf
Shopify $5
Expansion
5 160 King Street East, Kitchener

22,500 sf $0
Sortable Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Winnipeg Office Market
More than 45,000 sf of inventory added Absorption and Vacancy
Winnipegs future remains bright as the employment rate rises after a slight decline in SUBURBAN ABSORPTION (12 MOS) VACANCY
2016. This improvement comes despite announcements from Great-West Life cutting
40 10%
VACANCY RATE (%)

450 positions, the provincial health authorities cutting their labour forces by a combined
20 9%
15%, and layoffs by Investors Group that will return more than 18,000 sf of office space
to inventory. Despite negative absorption in early 2017, the office market is expected to 8%
0
rebound later in the year as startup firms and Winnipegs IT sector start absorbing vacant -20
7%
spaces left by larger firms that downsized. Think Shift an advertising agency recently 6%
-40
announced plans to lease up to 10,000 sf in the former James Avenue pumping station. 5%
This deal is part of the $17-million revitalization plan that will eventually turn the pumping -60
4%
station into a mixed-use commercial and residential complex. -80
3%
-100
More than 45,000 sf of office inventory was added in the second quarter of 2017 as Building 2%
2 in the Tuxedo Business Park was completed. An additional 380,000 sf (True North Square) -120 1%
was under construction as of mid-year 2017 with a further 140,000 sf in future planned -140 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
projects including SkyCity, a 45-storey mixed-use parkade, residential and commercial Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017
development.

New Supply
450

400
-25 KSF 6.6% 0.4 MSF 0 SF
300
Downtown class A and C vacancy rates, while elevated, are still well within an acceptable 250
range. However, class C vacancy has risen in each of the past five quarters, as historical 200
buildings are becoming more expensive to maintain. With parking becoming a luxury,
150
tenants are looking for cheaper alternatives with efficiencies, open office and some
100
telecommuting being offered. At mid-year 2017, downtown class A vacancy was 3.3%
down from 4.7% one year earlier, while downtown class B vacancy increased 80 bps year- 50
over-year to 8%. As more Canadian companies look to expand within Winnipeg rather than 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
the more expensive Vancouver and Toronto markets, Winnipegs highly skilled workforce, Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
historically low rents, and constant rejuvenation continue to solidify its position as a highly
attractive choice.
$40
Size
$ PER SQUARE FOOT

$35
1 360 Main Street

68,000 sf
Canada Revenue Agency New $30
$25
2 220 Portage Avenue
42,000 sf
Marwest New
$20
3 303 Main Street

Canadian International Grain 30,000 sf $15
Institute Renewal
$10
4 333 Main Street
30,000 sf
Wawanesa Sublease $5
5 400 Ellice
17,500 sf $0
Ministry of Transportation Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 27
United States
29 Atlanta
30 Austin
31 Boston
32 Charleston
33 Charlotte
34 Chicago
35 Cleveland
36 Columbus, OH
37 Dallas
38 Denver
39 Detroit
40 Fairfield County
41 Fort Lauderdale
PLACEHOLDER FOR
42 Greenville
43 Hartford
44 Houston
U.S. DIVIDER
45 Indianapolis
46 Jacksonville
47 Las Vegas
48 Long Island
49 Los Angeles
50 Miami
51 Minneapolis
52 Nashville
53 New Jersey
54 New York
55 Oakland
56 Orange County
57 Orlando
58 Philadelphia
59 Phoenix
60 Pittsburgh
61 Raleigh-Durham
62 Reno
63 Sacramento
64 San Antonio
65 San Diego County
66 San Francisco
67 San Mateo
68 St. Louis
69 Tampa
70 Washington, DC
71 West Palm Beach
72 Westchester County
Atlanta Office Market
Market should continue to favor landlords Absorption and Vacancy
Atlantas office market remains tight, with vacancy declining despite 1.4 msf of new SUBURBAN ABSORPTION (12 MOS) VACANCY
inventory delivered to the market during the first half of 2017. As of mid-year 2017, a total
2,500 25%
VACANCY RATE (%)

of 3.1 msf of office product was under construction with 1.5 msf preleased. After a sluggish
start to 2017, strong leasing activity pushed absorption back to positive territory in the
2,000
second quarter as 559,280 sf was absorbed the most in a single quarter since the fourth 20%
quarter of 2015, representing an increase of 324% compared with the second quarter of 1,500
2016. 15%
1,000
Following a slight increase in the first quarter of 2017, vacancy decreased to 16% at mid-year
10%
and was down 30 bps year-over-year. As vacancy declined, asking rental rates continued
500
to break records. Average asking rental rates rose 5.8% year-over-year, ending the second
quarter at $24.71 psf. Since 2013, office rents have grown 21% an unprecedented increase 0
5%
in the Atlanta market. In one of the largest new leases of second-quarter 2017, Serta
Simmons preleased 210,000 sf at the Assembly campus, a new construction project on the -500 0%
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
site of the former Doraville General Motors plant. The project will break ground later in 2017 Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
and comprise more than 3 msf of office, retail and residential space.

New Supply
2,500

0.7 MSF 16% 3.1 MSF 1.5 MSF 2,000
1,500
The Atlanta office market should remain in landlords favor, as new product entering the
market is heavily preleased and desirable existing space remains limited. These two factors
1,000
will also lead to rising rental rates as new construction demands a higher rental rate to cover
increased construction costs. Leasing activity is expected to continue at a strong pace as
companies continue to select Atlanta based on its low cost of living and doing business. 500
Overall, the Atlanta office market should remain positive through the rest of 2017.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 Assembly
210,000 sf
Serta Simmons New $25
2 400 Northpark
194,000 sf
WestRock $20
New
$15
3 Three Alliance
104,800 sf
CBRE New
$10
4 One Glenlake
66,100 sf
Cotiviti New $5
5 2300 Defoor Hills

60,800 sf $0
Reliance Worldwide Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 29
Austin Office Market
Downtown average rent reaches all-time high Absorption and Vacancy
Demand from office-using employers relocating to the Austin market remained healthy SUBURBAN ABSORPTION (12 MOS) VACANCY
despite suggestions that the local economy may be slowing. Rental-rate growth persisted
1,800 14%
VACANCY RATE (%)

with a year-over-year increase of nearly $5 psf at mid-year 2017 in both the downtown and
suburban market segments. Average class A gross asking rates reached an all-time high of 1,600
12%
$56.06 psf downtown and $40.76 psf in the suburbs. Higher operating expenses are largely 1,400
responsible for such marked increases with rising building valuations commanding higher 10%
1,200
taxes.
1,000 8%
Construction deliveries that were slow to come online during the first quarter of 2017 made 800 6%
a dramatic rebound during the second quarter. As a result, nearly 1.3 msf of office product
600
was delivered to the market between the third quarter of 2016 and the second quarter of 4%
400
2017. Developers confidence in the Austin office market is made apparent by continued new
2%
development, even in the face of a diluted market-wide preleasing rate of 27%. Moreover, 200
weakened preleasing activity in suburban markets may also signal demand trending away 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
from Austins urban core into less-saturated submarkets that offer lower rates and less Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
competition for space.

New Supply
3,000

1.5 MSF 8.7% 1.9 MSF 1.3 MSF 2,500
2,000
While lower than the 2015-2016 interval, market-wide absorption was positive between mid-
1,500
year 2016 and mid-year 2017 as the delivery of new construction helped temper high levels
of demand. Downtown absorbed 372,019 sf between mid-year 2016 and mid-year 2017 while
1,000
Austins suburban markets absorbed nearly 1.2 msf during that time. Overall office vacancy
remained low, though marginally higher than it was in the second half of 2016. Downtown
500
continued to boast lower vacancy (7.3%) than its suburban counterparts (9%).
0
As 2017 progresses and class A supply grows, rental rates are expected to remain high. Vacancy Q2 2013
Q2 Q2
Q2 2014
Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
and absorption are expected to be kept in check as Austin employment continues its gradual 2013 2014 2015 2016 2017
expansion.

$60
Size
$ PER SQUARE FOOT

$50
1 Domain 11
298,800 sf
HomeAway New
$40
2 Northview Business Center

87,900 sf
Rackspace New
$30
3 500 W. 2nd
65,200 sf
Google Expansion $20
4 Springdale General
60,000 sf
The Center for Social Innovation $10
New
5 Ladera Bend
56,500 sf $0
Asure Software Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Boston Office Market
GE Effect comes to fruition Absorption and Vacancy
During the first half of 2017, the Greater Boston office market recorded robust occupancy SUBURBAN ABSORPTION (12 MOS) VACANCY
growth while leasing velocity remained strong to support a healthy construction pipeline.
2,500 16%
VACANCY RATE (%)

Year-over-year, the market absorbed more than 1.9 msf that contributed to overall vacancy
of 11% at mid-year 2017. While a modest 318,000 sf was absorbed in downtown Boston, the 14%
suburbs, which include Cambridge, absorbed more than 1.6 msf. 2,000
12%
Market asking rents remained steady in most urban submarkets, although select areas had rent 1,500
10%
spikes due to single-digit vacancy and influential developments such as Boston Properties
8%
mixed-use North Station development and General Electrics Fort Point project, now dubbed
1,000
Innovation Point. In the suburbs, asking rents increased slightly with notable rent yields 6%
growing significantly for office space in single-story flex buildings.

4%
500
The GE Effect is now coming to fruition as notable market entrants commit to areas near 2%
Innovation Point. Specifically, Red Hat moved into approximately 40,000 sf at 300 A Street while
0 0%
Amazon committed to a large footprint at 253 Summer Street, simultaneously announcing Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2 Q2
Q2 2017
plans to hire 900 people in Boston. Technology and life-science tenants continue to drive 2013 2014 2015 2016 2017

New Supply
4,500

4,000
1.9 MSF 11% 3.2 MSF 2.8 MSF
ABSORPTION VACANCY RATE UNDER CONSTRUCTION COMPLETIONS 3,500
3,000
leasing velocity in both the city and suburbs, while more traditional companies are downsizing 2,500
or consolidating in search of rent relief and efficiency. Most notably, Wells Fargo consolidated 2,000
its downtown operations in the first half of 2017, and the Boston Consulting Group signed up to
1,500
consolidate into a new building in Bostons booming Seaport district.
1,000
Looking ahead, Greater Boston is projected to add more than 3 msf of office space in the next 500
two years. Approximately 40% of construction space still is in need of leasing commitments.
0
Compared with mid-year 2016, preleasing activity decreased slightly in the suburbs while Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
increasing in the city. With a strong group of companies external to Boston currently looking 2013 2014 2015 2016 2017
for space in the city, current developments are expected to be further leased by year-end 2017.

$70
Size
$ PER SQUARE FOOT

$60
1 301 Binney Street, Cambridge

233,000 sf
Ironwood Pharmaceuticals Renewal $50
2 21-25 Drydock Avenue, Boston

220,000 sf
Reebok $40
New
$30
3 253 Summer Street, Boston
144,500 sf
Amazon New
$20
4 45 Sidney Street, Cambridge

99,800 sf
BluePrints Medicine New $10
5 4 Tech Park Drive, Westford

97,500 sf $0
Sonus Networks Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017
avisonyoung.com 31
Charleston Office Market
Local employment exceeds national average Absorption and Vacancy
Known for its historic architecture, charm and numerous church steeples, Charleston is quickly SUBURBAN ABSORPTION (12 MOS) VACANCY
being discovered as a highly livable city. Employers have taken note of this trend as well as the
600 12%
VACANCY RATE (%)

booming population and growing employee base, and are increasingly choosing to locate in
or near the Holy City. 500
10%
400
Swedish automaker Volvo is constructing what will be its only North American manufacturing
8%
site in Berkeley County just west of Charleston. The $500-million, 2.3-msf plant is due for 300
completion in 2018 and will produce the newly redesigned V60 sports wagon. Meanwhile,
200 6%
Boeing is increasing production of its 787 Dreamliner at its North Charleston facility, which has
flourished since opening in 2009 and employs approximately 6,000 people. Finally, Mercedes- 100
4%
Benz Vans is expanding its $500-million manufacturing site at the Palmetto Commerce Park,
0
which will now house logistical processes associated with the production of its Sprinter van. 2%
-100
Even taking just these employers and their numerous ancillary suppliers and vendors into
-200 0%
consideration, it is little wonder the local workforce is expanding. Between 2010 and 2016, Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
the local civilian labor force grew four times faster than the U.S. average, growing by 14.5%, 2013 2014 2015 2016 2017

New Supply
600

0.4 MSF 7.2% 0.5 MSF 0.1 MSF 500
400
compared with the state and national averages of 7.3% and 4.7%, respectively. Currently
300
pegged at 761,000, the Charleston regions population is growing at three times the national
average, making it the 24th-fastest growing metro area in the U.S.
200
These factors add up to a growing demand for office properties. Developers have responded
100
to what had been a sustained shortage of class A office space, and an accompanying spike
upward in rental rates. A variety of office projects have been brought to market with many
0
more proposed and/or under development. The developments are increasingly in non- Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
traditional submarkets as the boundaries of the office market expand to meet burgeoning 2013 2014 2015 2016 2017
demand. As the new projects are occupied, absorption will increase, and remain elevated in
the coming year.
$45
Size
$ PER SQUARE FOOT
1 5935 Rivers Avenue

25,300 sf
Benefitfocus.com $35
New
$30
2 2431 Aviation Avenue

19,800 sf
Southeastern Institute $25
New
$20
3 6209 Rivers Avenue
19,500 sf
The Salvation Army New $15
$10
4 4400 Leeds Avenue
19,100 sf
Blue Cross Blue Shield New
$5
5 1483 Tobias Gadson Boulevard

10,600 sf $0
CareAlliance Health Services Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017

Charlotte Office Market
Ballantyne development sale sets all-time record Absorption and Vacancy
Charlottes office market continued to experience robust activity from both tenants SUBURBAN ABSORPTION (12 MOS) VACANCY
and investors in the first half of 2017 thanks to strong job growth and healthy leasing
1,800 25%
VACANCY RATE (%)

fundamentals. The biggest story in the first half was the sale of the Ballantyne development
the largest real estate transaction in Charlottes history. Northwood Investors paid more 1,600
than $1 billion to purchase the majority of the development, located in the South/485 20%
1,400
submarket, from The Bissell Companies. The acquisition included 4.1 msf of office space as 1,200
well as four hotel properties and land for future development. 15%
1,000
An uptick in construction deliveries drove vacancy to 13.1% from 11.6% in the 12 months 800
10%
ending at mid-year 2017. Completions totaled nearly 1 msf during this time, almost double
600
what was recorded in the previous 12-month period. Another 2.7 msf remained underway
400
as of mid-year 2017 with a mix of both build-to-suit and speculative projects in urban 5%
and suburban locations. Demand for the new space has been strong with 52% preleased. 200
Landlord-favorable conditions, combined with the higher price point of new construction, 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
continued to place strong upward pressure on rental rates. The average class A asking rate Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
rose 7% year-over-year, while the average class B rate increased 4% during the same period.

New Supply
1,800

1,600
0.6 MSF 13.1% 2.7 MSF 1 MSF
1,200
In the largest office lease of the first half, Bank of America committed to take 541,584 sf in 1,000
an 850,000-sf tower under construction at the former Charlotte Observer site in the CBD. 800
Additional new construction will likely push vacancy higher during the next 12 months,
600
but market fundamentals are expected to remain strong. Despite the recent increase in
400
development activity, new supply remained below historical levels. Healthy job growth
in the Charlotte metro area is fueling strong tenant demand. The addition of new leasing 200
options is a welcome development for tenants faced with limited choices and stiff 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
competition for space. Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 620 South Tryon

541,600 sf
Bank of America New $25
2 525 North Tryon

194,000 sf
Bank of America $20
Renewal
$15
3 2401 Sardis Road North
92,300 sf
Verizon Wireless New
$10
4 NASCAR Plaza
Cardinal Innovations 69,300 sf
Healthcare New $5
5 615 South College Street

51,500 sf $0
WeWork Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 33
Chicago Office Market
CBD continues to outperform suburbs Absorption and Vacancy
Chicagos office market continued to register positive growth throughout the first half SUBURBAN ABSORPTION (12 MOS) VACANCY
of 2017. Overall market vacancy stood at 13.8% as of mid-year 2017, a 110-bps uptick from
2,500 20%
VACANCY RATE (%)

mid-2016. The CBD continued to outperform suburban markets, with downtown vacancy
18%
at 11.1% compared with suburban vacancy of 17.6% (up 200 bps year-over-year). Strong 2,000
tenant demand spurred leasing activity within the CBD with 4 msf leased in the first half of 16%
1,500
2017. Much of the activity was centered in the West and Central Loop submarkets. Demand 14%
prompted net absorption to spike within the suburban OHare submarket, which increased 1,000
12%
to 243,960 sf during the first half of 2017 up from negative 152,659 sf in first-half 2016. 500 10%
8%
Bank of Americas 533,201-sf lease prompted the anticipated construction of an additional 0
trophy class A tower to be built within the CBD. The 1.2-msf development is expected to 6%
-500
break ground in early 2018. Neilson has announced a major consolidation of several area 4%
offices and is expanding into 215,000 sf in the West Loop. Continuing with the recent trend -1,000
2%
of corporate migrations to the market, Caterpillar has leased 116,071 sf with the intention -1,500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
of relocating its headquarters to suburban Deerfield from Peoria. Bringing 300 employees Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
to the market, the company chose the suburbs over the CBD based on easy access to

New Supply
4,000

3,500
0.4 MSF 13.8% 2.4 MSF 3.7 MSF
2,500
OHare International Airport, commuter rail service to downtown and the diversity of living
2,000
options for employees. The CBD has recently recorded an uptick in construction activity
predominantly within the West Loop and River West submarkets with nearly 2.5 msf 1,500
delivered from fourth-quarter 2016 to second-quarter 2017. Eight properties totaling 2.4 msf
1,000
were under construction as of mid-year 2017.
500
Chicagos economy continued to record substantial improvement. As of June 2017,
0
unemployment stood at 4.9%, a 110-bps drop year-over-year. With no large deliveries Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
expected until 2018 and strong leasing demand, the CBD and suburban office markets 2013 2014 2015 2016 2017
should post declining vacancy rates.

$50
Size
$ PER SQUARE FOOT
1 110 N. Wacker Drive

533,200 sf $40
Bank of America New
$35
2 515 N. State Street

385,100 sf $30
Outcome Health New
$25
3 3100 Sanders Road

164,000 sf $20
Old World Industries New
$15
4 The Willis Tower

148,500 sf $10
Schiff Hardin LLP Renewal
$5
5 200 W. Jackson Boulevard

143,000 sf $0
Nielsen NV Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Cleveland Office Market
Net absorption soars in the suburbs, falls downtown Absorption and Vacancy
Clevelands suburban office market remained strong in the first half of 2017, while activity SUBURBAN ABSORPTION (12 MOS) VACANCY
in the downtown market plateaued. The downtown market posted negative absorption of
1,400 25%
VACANCY RATE (%)

23,187 sf for the 12-month period ending mid-year 2017, marking the first time since 2012
that CBD absorption was in the red. However, downtown vacancy decreased 30 bps year- 1,200
over-year to 19.8% at mid-2017 due in part to redevelopment of office space into apartments. 20%
1,000
Meanwhile, the suburban office market continued to tighten, posting a 10.3% vacancy rate
(down 80 bps year-over-year). Net absorption in the suburbs (1.3 msf) more than doubled 800
15%
between mid-year 2016 and mid-year 2017 from the prior 12-month period (541,047 sf). This 600
increase has spurred development of several east-side class A projects such as Pinecrest,
10%
400
Link 59, 3900 Park East and the Van Aken Project, all slated for delivery by early 2018. Thus far,
60% of the 606,304 sf of space under construction has been preleased. 200
5%
Downtown development continued to be focused around multi-residential projects that 0
look to centralize the population and create a live-work-play environment. The most notable -200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
proposed CBD development is Stark Enterprises 45-story, mixed-use nuCLEus project that Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
would deliver 200,000 sf of office; however, the project has been stalled due to public

New Supply
2,500

1.3 MSF 13.1% 0.6 MSF 1 MSF 2,000
1,500
financing issues. Benesch, a Cleveland-based law firm, is committed to taking more than half
of the office space upon delivery of the building.
1,000
Notable first-half 2017 sale transactions included two of Clevelands well-known office
buildings. Key Tower (1.4 msf) and Terminal Tower (585,000 sf) have both been acquired 500
by local investors within the past year. Gradual tightening of vacancy in the downtown
market is expected given the continued redevelopment of old office space into apartments.
0
The short-term outlook for the suburban office market remained positive with consistent Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
demand for class B office space from budget-minded tenants. 2013 2014 2015 2016 2017

$25
Size
$ PER SQUARE FOOT
1 127 Public Square

147,800 sf $20
Forest City New
2 200 Public Square

100,000 sf $15
Benesch Renewal
3 388 S. Main Street

55,000 sf $10
Homeside New
4 127 Public Square

45,100 sf $5
Millennia Companies New
5 1228 Euclid Avenue

41,300 sf $0
The NRP Group Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 35
Columbus Office Market
Mixed-use buildings coming to the Short North Absorption and Vacancy
The Columbus workforce continued to thrive and expand in the first half of 2017, particularly SUBURBAN ABSORPTION (12 MOS) VACANCY
with local startups, forcing a shift in the office market toward creative environments and
1,000 12%
VACANCY RATE (%)

open floorplates. Culture and the desire to differentiate themselves from competition are
top priorities for these growing companies. This approach is creating demand for class A
800 10%
office space with unique amenities. In response to these trends, new investment in areas
such as Dublin and the CBD is growing, whether creating new space or improving existing 600 8%
inventory. Notable purchases in the first half of 2017 included One Columbus in the CBD and
a broad portfolio totaling 1.1 msf in Dublin. There are also many new mixed-use buildings 400 6%
coming to the Short North arts district that offer class A office space within the vibrant
neighborhood of shops and restaurants. 200 4%
Office vacancy, both downtown and in the suburban markets, declined year-over-year 0 2%
with mid-year 2017 rates of 6.2% and 7.8%, respectively. Net absorption for the 12-month
period ending at mid-year 2017 for all classes in the CBD was 321,794 sf, while the suburban -200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
market was negative 4,302 sf. Construction remained steady with 257,900 sf under Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
construction downtown and more than 1 msf in the suburbs as of mid-year 2017. This level

New Supply
1,200

0.3 MSF 7.2% 1.3 MSF 0.6 MSF 1,000
800
of construction accurately reflects the demand for new space to meet the needs of new and
600
evolving companies.
Leasing activity also remained strong with average asking rents for class A office space in 400
the CBD at $10.41 psf NNN and class A suburban office at $11.65 psf NNN as of mid-year 2017.
200
Gross rents averaged $19.91 psf and $18.22 psf, respectively. The biggest transaction in the
first half of 2017 was a 164,900-sf lease deal for United HealthCare at 5900 Parkwood Place.
0
Following that deal was the lease of two floors to Pillar Technology Group at 711 N. High Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
Street, the newest office building coming to the Short North. 2013 2014 2015 2016 2017

$25
Size
$ PER SQUARE FOOT
1 5900 Parkwood Place

164,900 sf $20
United HealthCare New
2 711 N. High Street

25,000 sf $15
Pillar Technology Group New
3 900 N. High Street

22,000 sf $10
Serendipity Labs New
4 10 W. Broad Street
20,000 sf $5
US Bank Renewal
5 2780 Airport Drive

18,200 sf $0
ARC Industries Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Dallas Office Market
Speculative space should alleviate tight conditions Absorption and Vacancy
The Dallas-Fort Worth (DFW) office market has sustained a historically high level of activity SUBURBAN ABSORPTION (12 MOS) VACANCY
for the past three years, resulting in falling vacancy, rising asking rates and a booming
6,000 30%
VACANCY RATE (%)

construction pipeline. Dallas has a low cost of living and a favorable business climate, which
continued to attract employers to the metro area. In the first half of 2017, vacancy rose 5,000
25%
only 20 bps to 14.6% from a decade-low 14.4% at mid-year 2016 despite almost 5.6 msf
being delivered to the market during the 12-month period. An additional 9.9 msf was under 4,000
20%
construction at mid-year 2017 with 66% preleased. Large corporations continue to announce
3,000
expansion plans in the Dallas market, keeping build-to-suit construction activity high. In the 15%
past year, speculative construction activity has increased to address the growing demand 2,000
for new product. As of mid-year 2017, speculative space under construction was only 20% 10%
1,000
preleased, which should help alleviate tight market conditions upon delivery.
5%
0
Office tenants in the Dallas market continue to make real estate decisions based on
recruiting and retention with an increased emphasis on improved amenities. Many tenants -1,000 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
are leaving existing buildings to expand into new construction. In an effort to compete with Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
the substantial amount of new product being delivered to the market, many older buildings

New Supply
12,000

4.7 MSF 14.6% 9.9 MSF 5.6 MSF 10,000
8,000
landlords are either offering concessions or renovating. New construction is, in large part,
6,000
driving rental-rate appreciation. In the 12 months ending at mid-year 2017, average class A
rates appreciated by 2.6% while class B rates remained relatively unchanged. Strong demand
4,000
is expected to place continued upward pressure on rents throughout the remainder of 2017.
2,000
Employment in the DFW metropolitan area increased 3.3% year-over-year. The remainder
of 2017 is expected to spell further progress for the DFW market with financial services,
0
technology and health care employment sectors leading the way. Q2
Q2 2013
Q2
Q2 2014
Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 The Sound at Cypress Waters

216,000 sf
Brinker International New $25
2 One Legacy West

127,000 sf
NTT DATA $20
New
$15
3 Three Galleria Tower
88,000 sf
Ansira Partners Expansion
$10
4 Granite Park Five

80,000 sf
Altice USA New $5
5 The Union
Akin Gump Strauss Hauer & 68,000 sf $0 Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Feld LLP New Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017
avisonyoung.com 37
Denver Office Market
Demand is not keeping up with large new supply Absorption and Vacancy
Millennials and young families continue to migrate to the Denver region for employment SUBURBAN ABSORPTION (12 MOS) VACANCY
opportunities and the areas enviable quality of life. Even though Denver is benefitting from
2,000 16%
VACANCY RATE (%)

additional residents, the low unemployment rate of 2.3% at mid-year 2017 indicated that
recruiting and retaining a talented workforce will continue to be a top priority for employers, 14%
30% of whom planned on increasing their workforce in the third quarter of 2017, according 1,500
12%
to the Metro Denver Economic Development Corporation. As occupancy costs rose between
mid-year 2016 and mid-year 2017, companies increased telecommuting and shared workspace 1,000
10%
initiatives while balancing employee desire for centralized locations and building amenities. 8%
500
To meet demand, 4.4 msf was under construction at mid-year 2017 with 47% preleased. Overall 6%
vacancy increased to 12% from 9.9% at mid-year 2016 due to the downturn in the energy
4%
industry. Demand is not keeping pace with the new supply coming online. Vacancy is expected 0
to tighten through the second half of 2017. Asking rents have leveled off downtown due to the 2%
large amount of available space, but continue to grow in the suburbs. Average asking rental -500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
rates increased 3.3% year-over-year to $26.55 psf gross at mid-year 2017. At mid-year 2016, asking Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
rates had increased by 5.8% from mid-year 2015.

New Supply
3,000

27 KSF 12% 4.4 MSF 2.4 MSF 2,500
2,000
Net absorption in the 12-month period ending mid-year 2017 was a mere 27,038 sf compared
1,500
with 2.1 msf absorbed in the prior 12-month period. New vacancies caused by energy industry
issues have started to abate, while increased rig counts indicate the sector is recovering. Due to
1,000
Denvers diversified economy, the energy downturn did not have an undue impact on the office
market as health care, finance and tech companies were able to sublease and fill much of the
500
vacant space. Despite slower rent growth and large projects in the pipeline, the Denver market
is expected to continue to exhibit strong fundamentals through the second half of 2017. 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$40
Size
$ PER SQUARE FOOT

$35
1 Republic Plaza
333,900 sf
Encana Oil & Gas Renewal $30
$25
2 Granite Place at Village Center
257,700 sf
Charter Communications New
$20
3 Denver Place
90,200 sf
Vertafore $15
New
$10
4 Atrium III
72,600 sf
U.S. Government Renewal $5
5 City Center
51,400 sf $0
Marketo Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Detroit Office Market
Q-Line spurs investment northward Absorption and Vacancy
Detroits office market continued to demonstrate positive trends in the first half of 2017. SUBURBAN ABSORPTION (12 MOS) VACANCY
Downtown office vacancy dropped to 10.5% at mid-year 2017 from 12.3% a year earlier.
2,000 25%
VACANCY RATE (%)

This drop in downtown vacancy is anticipated to continue as more companies relocate
1,800
downtown from the suburbs. Despite this trend, the suburban vacancy rate recorded a slight
drop to 15.8% at mid-year 2017 from 16.2% a year earlier. 1,600 20%
1,400
Detroits new streetcar system, known as the Q-Line, launched in May 2017. Aside from 1,200 15%
expected early operational hiccups, the line provides a connection between New Center,
1,000
Midtown and the CBD and has been a catalyst for new development along the Woodward
800 10%
Avenue corridor. Local and international investors have spent more than $1 billion acquiring
property along the Q-Line, including properties to its north, with the expectation that the 600
system will be extended northward to suburban Detroit. Little Caesars Arena, future home 400 5%
of the NHLs Detroit Red Wings and the NBAs Detroit Pistons, is set to open in September. 200
Development in the CBD included the 234,000-sf Little Caesars headquarters that will deliver 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
in 2018. Bedrock Detroit is preparing to break ground in December on a 1.2-msf mixed-use Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017
skyscraper at the former site of J.L. Hudsons department store. Bedrock also announced the

New Supply
700

2.1 MSF 14.6% 0.9 MSF 0.1 SF 600

500
400
Monroe Blocks development, which includes 814,263 sf of office space slated for delivery
in 2020. A 130,000-sf mixed-use development has broken ground in Royal Oak and will be 300
delivering in late 2018. The office space is 50% preleased.
200
The largest sale transaction in the first half of 2017 occurred in Troy. Osprey Management
Company sold a four-property office complex comprising 731,915 sf to a joint-venture of The 100
Hayman Company and Torchlight Investors for $55 million ($75 psf). Average suburban class
0
A gross rental rates declined slightly year-over-year to $21.22 psf from $21.37 at mid-year 2017, Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
while downtown saw a strong jump to $23.28 psf from $21.33 psf during the same period. 2013 2014 2015 2016 2017
The outlook for the remainder of 2017 is optimistic as vacancy is anticipated to decline.

$25
Size
$ PER SQUARE FOOT
1 16630 Southfield Road

90,000 sf $20
Ford Motor Company New
2 200 Galleria Officentre

58,100 sf $15
Adient US LLC New
3 400 W. Maple Road

40,300 sf $10
24G Renewal
4 1 Campus Martisu Avenue

40,000 sf $5
Microsoft New
5 200 Renaissance Center

36,200 sf $0
General Motors Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 39
Fairfield County Office Market
Local market demand drives transactions in first half Absorption and Vacancy
The Fairfield County office market demonstrated resilience in the first half of 2017 amid the SUBURBAN ABSORPTION (12 MOS) VACANCY
persistent challenges of a struggling state economy, corporate attrition and job losses, as
1,200 25%
VACANCY RATE (%)

well as uncertainty in matters of fiscal policy and health care.
1,000
As of mid-year 2017, vacancy had increased by only 30 bps to 17.8% from the close of 2016 800 20%
a negligible change compared with the latter half of 2016 when vacancy climbed to 17.2% 600
from 15.7%. That increase was largely attributable to the return of more than 740,000 sf of 400
15%
office space to the market by UBS at 677 Washington Boulevard in the Stamford CBD. The 200
first half of 2017 registered a continued slightly upward trajectory in vacancy, both in the 0
10%
CBD and suburban markets, which closed at 21.5% and 16.6%, respectively. -200
-400
Leasing velocity was 21% lower in the first half of 2017 compared to the first half of 2016. 5%
-600
Relative to some big wins recorded in 2016, transactions in the first half of 2017 were driven
-800
by local market demand. Notable suburban market deals included the expansion of Yale-
-1,000 0%
New Haven for 101,000 sf at 99 Hawley Lane in Stratford, the leasing of 64,850 sf by Epsilon Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2 Q2
Q2 2017
at 10 Westport Road in Westport, and the renewal by Blue Sky Studios of 146,675 sf at 2013 2014 2015 2016 2017

New Supply
90

80
-0.5 MSF 17.8% 0 SF 46 KSF
60
1 American Lane in Greenwich. In the Stamford CBD, insurance firm PartnerRe leased 59,674 50
sf at 200 First Stamford Place. 40
A slight year-over-year uptick of 1.8% was recorded in the overall average asking rental 30
rate, which reached $35.79 psf as of mid-year 2017. The rise was driven by a 10% increase 20
in rental rates for class A office space in the CBD markets, where asking rents remained 10
elevated despite high vacancy in a number of key buildings.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$60
Size
$ PER SQUARE FOOT

$50
1 1 American Lane
146,800 sf
Blue Sky Studios Renewal
$40
2 99 Hawley Lane
101,000 sf
Yale New Haven Expansion
$30
3 10 Westport Road
64,900 sf
Epsilon New $20
4 200 First Stamford Place

59,700 sf
PartnerRe $10
New
5 333 Ludlow Avenue

45,000 sf $0
Daymon Worldwide Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017

Fort Lauderdale Office Market
Developers pursue projects inside and outside core Absorption and Vacancy
Broward County, which includes Fort Lauderdale, continued to lead the South Florida SUBURBAN ABSORPTION (12 MOS) VACANCY
market in non-agricultural employment growth, as demonstrated by the 35,100 jobs that
1,000 25%
VACANCY RATE (%)

were added in the year ending in June 2017. The county also enjoyed a non-seasonally
adjusted unemployment rate of 4% as of June 2017, an 80-bps drop year-over-year. This
800
economic prosperity has driven the local office market into a time of unprecedented 20%
growth with strong leasing activity and absorption in many of the countys suburban 600
areas. Furthermore, development activity continued to take place in first-half 2017, with 15%
many projects expected to break ground within the next 12 months. 400
10%
While absorption is taking place in most of Browards suburban office submarkets,
200
Downtown Fort Lauderdale continued to register increasing availability in small blocks
of space. This trend can be attributed primarily to more affordable space attracting 0
5%
tenants to Broward Countys suburbs, as demonstrated by the 291,896 sf of suburban

office absorption recorded during the 12-month period ending in June 2017 contrary -200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
to negative absorption of 76,826 sf within the urban core. This shift to suburban markets Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
is further evidenced by the relative lack of lease renewals that have taken place in recent

New Supply
200

180
0.2 MSF 11.5% 0.1 MSF 0.1 MSF 160
140
120
quarters and the increase in sublet opportunities within Downtown Fort Lauderdale. This
100
shift has also led developers to pursue projects both inside and outside the urban core.
80
One of the most notable projects currently in development is TPA Groups 335,000- 60
sf office park in Pembroke Pines. The Edison will consist of two class A buildings with 40
ample parking as well as covered indoor and outdoor collaboration areas. The project
20
is currently in the site-plan-approval process and is projected to be delivered in the
0
first quarter of 2019. The markets strong employment figures are expected to lead to Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
continued strength in both the countys leasing and investment markets. 2013 2014 2015 2016 2017

$45
Size
$ PER SQUARE FOOT
1 Royal Palm I
60,000 sf
Virgin Voyages $35
New
$30
2 Royal Palm I
40,000 sf
Brookfield Asset Management $25
New
$20
3 Radice Corporate Center I
27,300 sf
MassMutual Renewal $15
$10
4 Broward Financial Center
24,800 sf
Garrett Laughlin LLC Sublease
$5
5 Sawgrass Technology Park

Cable & Wireless 24,700 sf $0 Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Communications New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 41
Greenville Office Market
Rents continue to move upward, vacancy remains low Absorption and Vacancy
The Greenville-Spartanburg office market registered near-record increases in lease rates SUBURBAN ABSORPTION (12 MOS) VACANCY
while maintaining low vacancy rates during the first half of 2017. This trend is attributed
400 18%
VACANCY RATE (%)

to the Upstates numerous accolades bringing significant job growth and citizen pride to
the region's superb quality of life. Rents for both Greenville and Spartanburg stayed on an 300 16%
upward trajectory during the 12 months ending at mid-year 2017. The average gross asking 200 14%
rate for the Greenville market was $17.44 psf while vacancy remained low. 100 12%
While Greenvilles suburban market is thriving, its CBD may see a slight correction in the near 0 10%
term. The Greenville News and Upstate Business Journal have described the hotel and multi- -100 8%
residential sectors as being overbuilt and the office market, with class A vacancy of 15%, may
-200 6%
soon merit a similar description. The CBDs elevated vacancy provides an opportunity for
-300 4%
market leverage to shift from landlord to tenant.
-400 2%
Spartanburg has spent the last few years setting itself up as a downtown area primed
-500 0%
for outside investment. Professional and business-service jobs have helped reinvigorate Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
the local economy. The city has worked with developers to ensure that there are enough 2013 2014 2015 2016 2017

New Supply
450

400
0.3 MSF 8.2% 0.2 MSF 0.2 MSF
300
residential units to support the commercial workforce. The area is attracting future tenants 250
because of low lease rates and new opportunities. While lease rates are low, they have 200
increased every year since 2013 a trend that is a significant benefit for investors.
150
As Greenville continues to garner national attention, people will keep relocating to 100
the Upstate. The second half of 2017 will likely see rental rates increase while vacancies 50
decrease with the CBD being the only possible exception. Landlords in the CBD will look
0
to offer longer lease terms at current market rates, providing opportunities for wise tenants. Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
Development in Greenville will remain steady while interest rates remain low. Spartanburg 2013 2014 2015 2016 2017
will also continue to grow as investors identify development opportunities.

$35
Size
$ PER SQUARE FOOT

$30
1
2000 Wade Hampton Boulevard, 55,700 sf
Concentrix Corporation
Greenville New $25
2 110 E. Court Street, Greenville

38,700 sf
Erwin Penland $20
New
$15
3 1310 Union Street, Spartanburg
33,100 sf
The Merit Group Renewal
$10
4 281 Fairforest Way, Greenville

12,300 sf
CIA Properties New $5
5 215 N. Pine Street, Spartanburg

10,200 sf $0
Land & Sea Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Hartford Office Market
With no significant construction in sight, vacancy remains at Absorption and Vacancy
10-year low DOWNTOWN ABSORPTION (12 MOS) VACANCY
SUBURBAN ABSORPTION (12 MOS) VACANCY
The Greater Hartford office market is gaining momentum, although a speed bump has 400 16%
VACANCY RATE (%)

arisen with the pending market departure of insurance juggernaut Aetna. Currently at 12.4%,
14%
Hartfords overall vacancy rate is at a 10-year low with rental rates increasing in both the city 200
and suburbs. Although occupancy growth had a flat start to 2017, heavy first-half leasing 12%
0
activity influenced a pricing increase.
10%
-200
The overall downtown vacancy rate of 12.5% is expected to rise in 2018 when Aetna moves 8%
its headquarters to New York City. In order to backfill the space, Hartford will need large -400
6%
commitments from companies outside the city. With city rents comparable to the suburbs,
-600
companies outside of the city may view this situation as an opportunity as Hartfords 4%
downtown area continues to improve. At 12.4%, the suburban vacancy rate decreased -800 2%
slightly (50 bps), yet remained above the five-year average of 11%.
-1,000 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Downtown Hartford asking rents averaged $23.38 psf with little discrepancy between Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
the suburbs, which averaged $22.66 psf. Albeit small, the price difference was larger than

New Supply
160

140
-0.1 MSF 12.4% 0.1 MSF 0 SF
100
historical norms due mainly to a general tightening of space in the city with no significant
80
office construction efforts in sight.
60
Moving forward, the downtown Hartford market is expected to tighten further until Aetnas
40
departure to the Big Apple, while suburban vacancy is expected to remain static. With
leasing velocity increasing in the city, Aetnas footprint is expected to be backfilled quickly. 20
The largest lease transactions during the first half of 2017 occurred downtown. Most notably,
0
Connecticut Childrens Medical Center leased 111,500 sf at 10 Columbus Boulevard Similarly, Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
United Bank signed a new lease in the city for approximately 70,000 sf. 2013 2014 2015 2016 2017

$25
Size
$ PER SQUARE FOOT
1 10 Columbus Boulevard
Connecticut Children's 111,600 sf $20
Medical Center New
2 225 Asylum Street

68,800 sf $15
United Bank New
3 755 Main Street

46,700 sf $10
Conning & Co. Renewal
4 755 Main Street

29,700 sf $5
Reid & Riege Renewal
5 90 State House Square

25,500 sf $0
Axxin Veltrope & Harkrider Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017
avisonyoung.com 43
Houston Office Market
Sublease inventory posts third straight quarterly decline Absorption and Vacancy
At mid-year 2017, the economic recovery that began in Houston a year earlier continued SUBURBAN ABSORPTION (12 MOS) VACANCY
to gain traction. Although Houston is in recovery mode, indicators in the office market will
10,000 18%
VACANCY RATE (%)

take additional time to reflect the current economic outlook. The office market was hard
hit by the downturn in the energy industry with tenants vacating sublease space just as 16%
8,000
large construction projects delivered additional available space to the market. This situation 14%
caused vacancy to hit record highs. Vacancy increased by 270 bps to 16.8% at mid-year 2017 6,000 12%
from mid-year 2016. This rise in vacancy was expected in the near term, since many leasing
10%
decisions made during the downturn are just now taking effect. However, available space in 4,000
Houston has a tendency to disappear quickly given favorable market conditions. A renewed 8%
sense of optimism is leading to an increasing number of deals that will boost absorption 2,000 6%
later in the year.
4%
0
The rate of new supply hitting the market has abated in the last year. The construction 2%
boom is nearly over, with the majority of remaining space set to deliver in 2017. New -2,000 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
construction deliveries, which have contributed greatly to Houstons oversupply concerns, Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017
will have less of an impact going forward. The aforementioned sublease space glut

New Supply
14,000

-1.4 MSF 16.8% 2.3 MSF 3.4 MSF 12,000

10,000
continued to weigh down the market. However, on a bright note, available sublease 8,000
inventory fell for the third consecutive quarter to 10.7 msf at mid-year 2017.
6,000
Going forward, vacancy will likely rise slightly during the next few quarters before abating as 4,000
the construction boom winds down and the dust from the energy industry upheaval settles.
Direct average asking rental rates have held steady throughout the downturn and are 2,000
projected to remain relatively flat in 2017 while the office market catches up with Houstons
0
brightening economic outlook. Q2 2013
Q2 Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016 Q2 2017
Q2
2013 2014 2015 2016 2017

$50
Size
$ PER SQUARE FOOT
1 Post Oak Central

524,000 sf $40
Apache Renewal
$35
2 811 Louisiana
127,000 sf $30
Targa Resources Expansion
$25
3 1401 Enclave
90,000 sf $20
IHS Markit Expansion
$15
4 Jones at Main
86,000 sf $10
WeWork Expansion
$5
5 Air Liquide Center North

73,000 sf $0
Archrock Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017

Indianapolis Office Market
Construction projects get smaller as vacancy increases Absorption and Vacancy
The Indianapolis office market is showing signs of a slowdown in leasing demand except in SUBURBAN ABSORPTION (12 MOS) VACANCY
small pockets of development in sectors such as Carmel and the Fishers/I-69 corridor. Specific
400 25%
VACANCY RATE (%)

signals of the slowdown include the diminishing scale of developments compared with
historical projects. At mid-year 2017, projects under construction ranged in size from 40,000 sf 300
to 60,000 sf compared with speculative buildings larger than 100,000 sf in the past. Demand 20%
200
is being driven by local service providers and continually expanding cloud-based technology
companies. 100
15%
0
Overall vacancy increased 100 bps year-over-year to 15.7% at mid-year 2017. The CBD vacancy
10%
rate was 17.1% a 120-bps improvement compared with one year earlier. The consolidation -100
and expansion of Salesforce set the tone for positive absorption in this submarket, as related
-200
vendors and cloud-based spin-off companies have driven demand in all classes of CBD 5%
inventory. The suburban markets have been impacted by several tenant relocations to walkable -300
urban environments that follow the millennial workforce trend. The other key trends are flexible -400 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
work hours and environments, which impact space demand. As a result, absorption was Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
negative, and suburban vacancy increased 200 bps year-over-year to 15.2% in first-half 2017.

New Supply
300

-0.2 MSF 15.7% 0.1 MSF 0.2 MSF 250
200
Despite the vacancy increase, class A asking rental rates continued to climb due to newer
150
product in the suburbs requiring higher face lease rates and increasing demand in the CBD
from the technology sector. Suburban class A average asking rents climbed to $23.48 psf at
100
mid-year 2017, while CBD class A asking rents averaged $21.33 psf.
50
The second half of the year is shaping up to be more active as businesses focus on what they
can control via new product development and delivery of services. Local elected officials have
0
turned their sights toward developer-backed bond programs to spur development in the CBD, Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
led primarily by hospitality-related projects. 2013 2014 2015 2016 2017

$30
Size
$ PER SQUARE FOOT

$25
1 Parkwood West
95,000 sf
Ascension Health New
$20
2 Market Square Center

80,000 sf
Marion County Prosecutor Renewal
$15
3 Capital Center North

70,000 sf
Indiana Supreme Courts New $10
4 Market Tower
36,000 sf
USA Funds $5
New
5 OneAmerica Tower
36,000 sf $0
INFOSYS Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 45
Jacksonville Office Market
Office fundamentals remain stable as vacancy declines 390 bps Absorption and Vacancy
Jacksonvilles economic fundamentals are strengthening, as indicated by a 60-bps drop in the SUBURBAN ABSORPTION (12 MOS) VACANCY
unemployment rate to 3.8% during the 12-month period ending in May 2017. More than 29,000
1,000 30%
VACANCY RATE (%)

new jobs were added during the same period, accompanied by healthy leasing activity and
slow but steady rental-rate growth. The greatest non-farm employment growth occurred within
800 25%
the professional and business services sector, which was up 6.1% year-over-year as of May 2017.
At mid-year 2017, office fundamentals remained stable with a 390-bps year-over-year decline in 600 20%
the overall vacancy rate to 13%, along with 12-month net absorption of more than 945,000 sf,
and a solid uptick in asking rental rates for well-positioned class A and B office properties. 400 15%
New class A space is underway in the Deerwood Park area as VanTrust Real Estate LLC (VanTrust)
200 10%
has broken ground on Town Center One, a 160,000-sf office building on Gate Parkway. Availity
LLC, a health care IT company, has leased 100,000 sf in the building, which is slated for delivery 0 5%
in late summer 2018. A little further south, in northern St. Johns County, VanTrust is also
preparing to begin work on Park Place at Nocatee, a 60-acre office park in the master-planned -200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Nocatee development. The first building, named Park Place One, will offer 120,000 sf of class A Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
space.

New Supply
180

160
0.9 MSF 13% 0.2 MSF 0.1 MSF
120
Investment activity for the remainder of 2017 is expected to continue at a healthy pace as 100
the growing economy supports business fundamentals, including rising rents, occupancies 80
and cash flows. The I-95/9A submarket is expected to continue to post incremental rental-
60
rate gains throughout the remainder of the year. Larger blocks of imminent vacated space,
resulting from tenant rollover, will begin to be absorbed as the still restrained speculative 40
development environment aids in tightening vacancy. 20
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$25
Size
$ PER SQUARE FOOT
1 Town Center One

100,000 sf $20
Availity New
2 Butler Plaza III

76,100 sf $15
Formativ (Northwell Health) New
3 6680 Southpoint Parkway

56,500 sf $10
CSX New
4 Capital Plaza at Deerwood

42,700 sf $5
Genpact New
5 9000 Southside Boulevard

36,300 sf $0
Arizona Chemical Company Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Las Vegas Office Market
Asking rates for existing product become more competitive Absorption and Vacancy
SUBURBAN
The Las Vegas office market continued to flourish as 75 medical and professional office ABSORPTION (12 MOS) VACANCY
leases were signed in the second quarter of 2017, slightly less than the 80 leases signed
900 20%
VACANCY RATE (%)

in the second quarter of 2016. Asking lease rates for existing product have become more
800 18%
competitive with several new projects underway. Professional office vacancy dropped
slightly to 15%. This trend is expected to continue through the end of the year as demand 16%
700
continues to show signs of significant improvement. 600
14%
12%
The Nevada School of Medicine is developing a 10-acre campus in the West submarket 500
10%
at 625 Shadow Lane that will create a world-class center of excellence and innovation for 400
8%
medical education, patient care and research. This medical school will provide Nevadas
300
physicians with the most advanced knowledge of treatments and technologies while 6%
200
serving the health care needs of the citys diverse urban community. An additional 150,000 4%
sf of new on-campus medical office buildings were under construction as of mid-year 2017. 100 2%
These projects include 80,000 sf located in the Southeast submarket at Henderson Hospital 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
and another 70,000 sf located in the Northwest submarket at Mountain View Hospital. Both Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
projects are scheduled for completion in 2017.

New Supply
700

0.8 MSF 15% 0.4 MSF 0.2 MSF 600

500
400
Meanwhile, two professional office projects of more than 50,000 sf were also underway. The
60,000-sf Building 1 at St. Rose Corporate Center is expected to deliver in August, and the
300
58,195-sf Building 2 at Marnell Airport Center is scheduled for completion in November.
200
While medical office occupancy is on the rise due to competitive and attractive lease rates,
investment purchases of large, privately owned medical practices are being sought out and 100
purchased by investment groups. Medical office sales are expected to increase in the years
0
ahead as health care properties offer solid investment opportunities in the local market. Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$40
Size
$ PER SQUARE FOOT

$35
37,800 sf
1 6605 Grand Montecito Parkway Alverson Taylor Mortenson New $30
$25
20,000 sf
2 6230 S. Decatur Boulevard Game Changers Sports New
$20
16,900 sf
3 101 Convention Center CML Media $15
New
$10
15,100 sf
4 1635 Village Center Circle Akermann LLP New $5
11,000 sf $0
5 4035 N. Rancho Drive Founders Academy LV Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 47
Long Island Office Market
Low unemployment, improving market conditions boost Absorption and Vacancy
leasing activity SUBURBAN ABSORPTION (12 MOS) VACANCY
The Long Island office market registered a noticeable increase in leasing activity 1,000 14%
VACANCY RATE (%)

during the first half of 2017. This predicted rise has been fueled by a combination of
factors, including the low unemployment rate on Long Island and improving economic 800 12%
conditions in the office sector. The most visible sign of this uptick is the disappearance
600 10%
of large blocks of available space that had been on the market for several years. Further
proof is the decrease in the vacancy rate in class A and class B properties, which was 400 8%
9.8% as of mid-year 2017. This is a dramatic decrease from the 13.2% vacancy at the end
200 6%
of 2016. Despite the recent activity, the general slowing trend in Manhattans office
market may limit further strengthening beyond current levels. 0 4%
Long Islands strongest submarkets continue to be in western Nassau, Queens and -200 2%
Brooklyn, as well as western Suffolk, and this trend is expected to continue throughout
-400 0%
the remainder of the year. The most active sectors continue to be health care, insurance Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
and legal services. 2013 2014 2015 2016 2017

New Supply
250

0.1 MSF 9.8% 0 SF 0.2 MSF 200
150
Average class A asking rental rates have dropped slightly; however, the typical
incentives, such as free rent, continue to diminish at a faster pace than the asking rents,
100
and are down significantly from the relatively high levels of the past few years. The
average asking rent for class A buildings edged down slightly to $30.58 psf full-service
gross (FSG) at mid-year 2017 down $0.18 psf year-over-year. In the broader picture, 50
overall space (classes A and B) have average asking rents of $26.28 psf FSG. There are no
new scheduled construction deliveries or starts on Long Island that would drastically 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
affect this situation during the rest of 2017 or in early 2018. Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 3400 New Hyde Park Road

233,000 sf
Dealertrack Holding New $25
2 225 West Main Street

108,000 sf
Eisen Busch Beer $20
New
$15
3 1660 Walt Whitman Road
22,000 sf
Power Windows New
$10
4 1979 Marcus Avenue

9,300 sf
The Caring Group New $5
5 201 Old Country Road

7,500 sf $0
Wagners Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Los Angeles Office Market
Stable fundamentals and leasing activity expected to persist Absorption and Vacancy
The Los Angeles County unemployment rate decreased to 4% in the first half of 2017 SUBURBAN ABSORPTION (12 MOS) VACANCY
compared with 5.4% one year earlier. Business growth continued to come from a broad
3,000 25%
VACANCY RATE (%)

range of industry sectors, including technology, media/entertainment, finance, professional
services, education and health care. Office vacancy ticked down 10 bps year-over-year to 2,500
15% as of mid-year 2017 and is expected to decline further given continued job and business 20%
2,000
growth. Average asking rental rates have increased by double-digit percentages year-over-
year in some submarkets due to increased demand and new creative office development 1,500
15%
that commands higher rates. As of mid-year 2017, the Santa Monica and Culver City office 1,000
submarkets had registered significant asking-rental-rate increases year-over-year (10% and
10%
500
23%, respectively). With rental rates increasing, Los Angeles County tenants are expected
to continue to right-size and/or pursue less expensive markets. To that end, steady leasing 0
5%
activity is anticipated for the near term especially for media, entertainment and tech
-500
companies curating media content.
-1,000 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Los Angeles creative office space remained in high demand. The bulk of the office product Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
under construction possesses some level of creative design as tenants focus more on

New Supply
4,000

3,500
-43 KSF 15% 5.7 MSF 2.9 MSF
2,500
workspace build and efficiency. While developers continue to seek preleasing opportunities
2,000
prior to project delivery, well-established areas, including activated retail corridors and those
with residential development in place, have allowed office and mixed-use developers to 1,500
commence construction prior to some level of lease-up.

1,000
Stable fundamentals and office leasing activity are expected to persist throughout the 500
remainder of the year.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$45
Size
$ PER SQUARE FOOT
1 222 West 6th Street, San Pedro

99,300 sf
Molina Healthcare $35
New
$30
2
3340 Ocean Park Boulevard, Santa 88,400 sf
Snapchat $25
Monica New
$20
3 633 West 5th Street, Los Angeles
Marsh & McLennan 71,100 sf
Companies New $15
$10
4 1299 Ocean Avenue, Santa Monica
61,800 sf
Wilshire & Associates New
$5
5
2425 Ocean Park Boulevard, Santa 60,800 sf $0
Amazon Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Monica New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 49
Miami Office Market
Employment growth drives leasing activity in array of business Absorption and Vacancy
sectors DOWNTOWN ABSORPTION (12 MOS) VACANCY
Miami-Dade Countys local economy continued to record growth in areas such as tourism and 1,400 25%
VACANCY RATE (%)

retail sales driven largely by the live-work-play environment found in many urban pockets
throughout the region. More notably, employment growth continued to thrive. In the 12 1,200
20%
months ending June 2017, non-agricultural employment grew by 26,900 jobs and the non-
1,000
seasonally adjusted employment rate fell by 50 bps to 4.7%. Such employment growth has
driven new leasing activity in a diverse array of sectors such as transportation, media, law, 800
15%
technology and financial services. In addition, many projects slated to come online later in
2017 are expected to have a substantial impact on the local office market. 600
10%
400
While most recent lease transactions have been for 30,000 sf or less, many Latin America-
5%
based firms and global companies are considering Miami as a regional headquarters site or 200
initial footprint in North America. There is also strong demand for quality office assets outside
Miamis urban core as market fundamentals drive historically high average asking rental 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Q2 Q2 Q2 Q2 Q2
rates and vacancy sits below pre-recession levels. The markets strength has also prompted 2013 2014 2015 2016 2017

New Supply
900

800
1.2 MSF 10.2% 1.1 MSF 0.4 MSF
600
developers to pursue large projects in the urban core and suburban market alike. The largest 500
project delivered in the past few years was Two and Three Brickell City Centre, a massive 400
mixed-use development located in the heart of Brickell.
300
Also, MiamiCentral is expected to come online within the next few months. The project, 200
which will be complete in late 2017, will span six downtown city blocks and serve as one of 100
the many stations connecting the states largest metropolitan areas through Brightline, All
0
Aboard Floridas high-speed rail system spanning Miami to Orlando. Miami-Dade Countys Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
strengthening office market is expected to foster continued development and leasing activity 2013 2014 2015 2016 2017
over the next few years.

$60
Size
$ PER SQUARE FOOT

$50
1 The Village of Merrick Park
88,000 sf
Bayview Financial Renewal
$40
2 Douglas Entrance - West

53,400 sf
University of St. Augustine New
$30
3 The Davenport Building

27,700 sf
Everest Business Funding New $20
4 355 Alhambra
23,900 sf
Cosentino North America $10
New
5 Citigroup Center
23,500 sf $0
Harvard Maintenance Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Minneapolis Office Market
Wells Fargo move creates ripple effect in downtown area Absorption and Vacancy
The Twin Cities, Minneapolis and St. Paul, make up the second-largest economic center in the SUBURBAN ABSORPTION (12 MOS) VACANCY
Midwest. The broader metropolitan area, encompassing seven counties, is the 15th largest
2,000 12%
VACANCY RATE (%)

in the U.S., with 3.8 million people. The Minneapolis-St. Paul and suburban office inventory
combine for a total of 151 msf with an overall vacancy rate of 7.7% as of mid-year 2017 down
1,500 10%
30 bps year-over-year. Downtown class A rental rates continued to push upward, averaging
$26.69 psf full-service at mid-year 2017, and reflected a robustly growing CBD. 1,000 8%
Despite decreasing overall vacancy, the Minneapolis CBD registered a 140-bps jump in vacancy
500 6%
to 10.2% at mid-year 2017 from mid-year 2016. The Minneapolis downtown core is still feeling
the ripple effect of Wells Fargo vacating 804,029 sf in the Wells Fargo Center and moving
0 4%
into new headquarters at the end of 2016. This move could create significant opportunities
for tenants looking for large blocks of space in a competitive environment. Some notable -500 2%
redevelopment projects in the downtown market include Baker Center, 801 Marquette, 5th
Street Towers, the former YMCA building, Art Institute Building, Minneapolis Macys and -1,000 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Riverplace (following Code42s departure to Washington Square). Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017

New Supply
3,000

-0.6 MSF 7.7% 1.6 MSF 2.6 MSF 2,500
2,000
The Northloop, a submarket within the Minneapolis CBD, has exploded with both construction
1,500
and the repurposing of older buildings. Once factories and warehouses, the new office
environments are attracting tenants of all types from various metropolitan-area markets. The
1,000
new 225,000-sf, all-wood office building built on spec by Hines has several signed tenants,
including Amazon for more than 140,000 sf. Creative build-to-suit office buildings are attracting
500
a young talent base looking for a balance of work, life and community.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$30
Size
$ PER SQUARE FOOT

$25
1 6000 Clearwater Drive
93,000 sf
Associated Financial Group New
$20
2 5995 Opus Parkway

37,000 sf
UGH New
$15
3
Flying Cloud Corporate Campus 33,500 sf
Arcserve
Building E New $10
4 Apple Valley Commons II

31,800 sf
Wings $5
New
5 Northwestern Building
16,100 sf $0
Brite Health Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017
avisonyoung.com 51
Nashville Office Market
Asking rental rates hit record highs as demand remains strong Absorption and Vacancy
According to federal census figures released in May 2017, Nashville now ranks as the 24th- SUBURBAN ABSORPTION (12 MOS) VACANCY
largest city in the country, overtaking Memphis as Tennessees largest city. This momentum
1,200 18%
VACANCY RATE (%)

shows no signs of slowing down with recent data published by the Wall Street Journal stating
that employment in Nashville grew by 23% between 2010 and 2016. 16%
1,000
14%
As of mid-year 2017, Nashvilles office vacancy rate was 6%, a 90-bps increase year-over-year.
800 12%
Market-wide asking rental rates have risen to record highs and will continue to face upward
pressure in the near term as demand remains strong and construction prices rise. The overall 10%
600
average asking rate rose to $25.51 psf at mid-year, up 5.7% compared with mid-year 2016. 8%
Following a slow start to the year, activity began to rebound with absorption totaling more
400 6%
than 300,000 sf during second-quarter 2017. Despite the large vacancy left by health care
4%
giant HCA earlier this year, the overall markets absorption for the 12 months ending at mid- 200
year 2017 was 1.3 msf, similar to the prior 12-month period. Downtown continued to register 2%
the strongest tenant demand, posting two of the largest leases during the quarter. The 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
largest was signed by Bank of America, which will occupy more than 65,000 sf in Hines 222 Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
2nd Avenue development.

New Supply
3,000

1.3 MSF 6% 2.6 MSF 2.6 MSF 2,500
2,000
Three buildings totaling 252,018 sf were completed during the second quarter, bringing
1,500
total completions for the 12 months ending at mid-year 2017 to nearly 2.6 msf. A further 2.6
msf was underway at mid-year, including speculative projects and four large single-tenant
1,000
buildings, with more than 60% of the space preleased. As space has started to deliver,
tenants are beginning to see more large blocks of space become available; however, the
500
market is poised to remain strongly in favor of landlords throughout the remainder of the
year. Developers have exercised discipline in the office sector and continue to see strong 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
preleasing activity. Tenants will continue to face rising rental rates but may find additional Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
leverage with concessions in select submarkets as new space is delivered.

$35
Size
$ PER SQUARE FOOT

$30
1 Ovation
224,000 sf
Mars Petcare New $25
2 Highland Ridge III

110,600 sf
VF Imagewear $20
Renewal
$15
3 Capitol View - Block E
67,000 sf
HealthStream New
$10
4 222 2nd Avenue South

65,200 sf
Bank of America New $5
5 Brentwood Commons III

65,000 sf $0
Universal Health Service Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

New Jersey Office Market
State economy demonstrates continued improvement amid Absorption and Vacancy
lower unemployment SUBURBAN ABSORPTION (12 MOS) VACANCY
New Jerseys office market has displayed signs of generating momentum as vacancy, 2,000 18%
VACANCY RATE (%)

absorption and rental rates have improved during the past year. The vacancy rate dropped
16%
30 bps year-over-year to 15.9% at mid-year 2017, while 12-month absorption increased
1,500
significantly compared with the prior 12-month period. Average asking gross rental rates 14%
have also improved up more than 7% since mid-year 2013. The state economy also 12%
demonstrated continued improvement as the unemployment rate dropped 100 bps year- 1,000
10%
overyear to 4.1% in June 2017.
8%
500
The first half of 2017 was highlighted by three key events: the first was the resurgence 6%
and redevelopment of the city of Newark most notably the 22-acre Mulberry Commons
4%
0
redevelopment and the restored Hahne building. The second was the influx of live-work-
2%
play concepts, as demonstrated by the success of Bell Works in Holmdel. The third was
the strategic realignment of Mack-Calis office portfolio to higher-class buildings with its -500 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Q2 Q2 Q2 Q2 Q2
purchase of RXR Realtys Short Hill/Madison portfolio. All three of these events emphasize 2013 2014 2015 2016 2017

New Supply
3,000

1.7 MSF 15.9% 1.3 MSF 0.5 MSF 2,500
2,000
tenants tendency to place a high value on quality space that can attract employees across
1,500
the generational spectrum, from baby boomers to Generation Z.
1,000
The office market will be influenced by two major themes as 2017 moves forward. The
first one will be tenants' continued push to find quality space. Secondly, landlords and
500
tenants alike will continue their attempts to navigate the changing political landscape
in Washington, DC and, more notably, in Trenton with the upcoming election of a new
0
governor in November 2017. Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 700 Sylvan Avenue, Englewood Cliffs

320,000 sf
Unilever Sale / Leaseback $25
2 30 Knightsbridge Road, Piscataway

252,500 sf
AT&T $20
Renewal
$15
3 2 Gateway Center, Newark
160,100 sf
Broadridge Financial Solutions New
$10
4 506-508 Carnegie Center, Princeton

137,600 sf
Otsuka Renewal $5
5 765-769 Broad Street, Newark

100,500 sf $0
Newark Public Schools Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 53
New York Office Market
Healthy demand driven by increased tenant diversity Absorption and Vacancy
DOWNTOWN ABSORPTION (12 MOS)
Office leasing in New York City is comprised of three distinct markets Midtown, Midtown VACANCY
South and Downtown. Off to a slower start than in 2016, leasing volume for the first half of
8,000 14%
VACANCY RATE (%)

2017 was down 10% year-over-year. While large deals (greater than 100,000 sf) through this
period were weighted more toward sizable renewals and expansions by financial services, 6,000 12%
insurance and real estate (FIRE) and technology, advertising, media and information (TAMI)
4,000
tenants, significant transactions became more varied with lease signings commenced 10%
largely by notable government/public administration entities. This newer mix of diversified 2,000
8%
transactions has helped keep the Manhattan office leasing market in equilibrium, and there 0
are plenty of suitable space options to meet this healthy tenant demand. 6%
-2,000
Midtowns overall vacancy rate rose 90 bps year-over-year to 11% at mid-year 2017 with 4%
-4,000
most of the increase recorded in the Plaza District submarket as more class A space
2%
became available. Vacancy in Midtown South also rose 90 bps year-over-year to 7.7%, while -6,000
Downtown registered a 170-bps annual increase to 12.1% at mid-year 2017 due largely to -8,000 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
space at 3 World Trade Center becoming available. The office construction pipeline for Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
New York City is quite active. The most significant deliveries are scheduled to occur in 2018

New Supply
16,000

14,000
-5 MSF 10.7% 9.4 MSF 1.8 MSF
10,000
and 2019 with more than 6 msf scheduled for completion in the Hudson Yards area alone.
8,000
Currently, 66% of this 6 msf is already committed more recently, in large part, by sizable
finance and legal services entities. 6,000
4,000
While rising vacancies are impacting some areas of Manhattan, diverse leasing activity
undoubtedly helped to support volume levels through mid-year 2017. A growing tenant mix 2,000
is expected to take advantage of the many space options that are available.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Notable Office Lease Transactions by Size - First Half 2017 DOWNTOWN ASKING NET RENT ADDITIONAL RENT
$90
Size
$ PER SQUARE FOOT
1 1211 Avenue of the Americas

777,000 sf
21st Century Fox $70
Expansion
$60
2 452 Fifth Avenue

548,000 sf
HSBC $50
Renewal
$40
3 1211 Avenue of the Americas
444,000 sf
News Corp. Renewal $30
$20
4 200 Vesey Street
402,000 sf
Royal Bank of Canada Renewal
$10
5 4 World Trade Center

378,000 sf $0
Spotify Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Oakland Office Market
Available large floorplates could bring more tenants downtown Absorption and Vacancy
Tenants looking for space in the East Bay/Oakland market are now, more than ever, paying SUBURBAN ABSORPTION (12 MOS) VACANCY
close attention to where their employees live. Downtown Oakland, with its multiple BART
1,000 18%
VACANCY RATE (%)

transit stations and central location, currently has a number of large-floor and multi-floor
availabilities to accommodate tenants of 50,000 sf and greater. A number of multi-residential 800 16%
highrises are currently under construction and could induce more tenants to locate in 14%
600
downtown Oakland. 12%
400
While the City Center submarket has two projects starting construction in 2017, the Lake 10%
200
Merritt submarket is emerging as a tenant focal point. A former AT&T facility at 2150 Webster 8%
Street can offer up to 230,000 sf over 10 floors for lease by the second quarter of 2018. 0
6%
Uptown Station could bring up to 150,000 sf to the market by early 2018. Asking rents
-200
4%
continued to climb throughout the market in the first half of 2017. In the Oakland CBD, the
current supply of vacant office space has fueled rent growth and, with new and upcoming -400 2%
full-floor availabilities coming to the market, average asking rents are expected to grow -600 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
steadily but not nearly as quickly as a year ago. Office investment slowed throughout the Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
market during the first half of 2017. With the majority of class A and well-positioned class

New Supply
700

-0.2 MSF 7.8% 1.2 MSF 27 KSF 600

500
400
B buildings having already changed hands during the current cycle, investors have had to
broaden their approach in this market. 300
The uptick in multi-residential and, now, office construction has led to an optimistic outlook 200
on 2017 within the commercial real estate market. More cranes are expected to dot the
Oakland skyline in the coming months. Asking rents continue to rise and investors continue 100
to look to place money in the market. Leasing activity should also benefit from the growing
0
number of availabilities coming to the market. Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$60
Size
$ PER SQUARE FOOT

$50
1 601 City Center
200,000 sf
Blue Shield New
$40
2 1100 Broadway
130,000 sf
UCOP New
$30
3 1650 65th Street

125,200 sf
Zymergen New $20
4 Waterfront at Harbor Bay

110,800 sf
Exelixis $10
New
5 1111 Broadway
81,500 sf $0
WeWork Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 55
Orange County Office Market
Unemployment rate stays below state and national averages Absorption and Vacancy
The Orange County office market exhibited strong fundamentals at the close of first-half SUBURBAN ABSORPTION (12 MOS) VACANCY
2017. Rental rates continued to increase as vacancy remained relatively flat. The countys
2,000 16%
VACANCY RATE (%)

ideal geography, high quality of life and growing population helped maintain this thriving
hub of financial services, information technology, logistics and health care. The countys 14%
1,500
unemployment rate remained considerably lower than state and national averages,
12%
dropping to 3.2% in the second quarter of 2017 from 3.7% one year earlier. 1,000
10%
Orange County office vacancy has registered a slowdown in the pace of contraction over
500 8%
the past two years, as compared to the steeper year-over-year contraction that had taken
place after 2010. At mid-year 2017, vacancy was 10.1%, little changed from 10.2% one year 6%
0
earlier. New development has gained momentum throughout the past year and may
4%
maintain vacancy at current levels for the remainder of 2017. In the second quarter of 2017, -500
the average asking rental rate for all classes was $30.24 psf full-service gross (FSG), up from 2%
$28.44 psf FSG one year earlier. The highest rents remained in the Airport Area at $35.04 -1,000 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
psf FSG, followed by South County at $32.64 psf FSG. Central County exhibited the most Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
affordable rental opportunities at $24.48 psf FSG, followed by North County at $25.44 psf

New Supply
2,500

0.4 MSF 10.1% 2.5 MSF 0.3 MSF 2,000
1,500
FSG. Total net absorption for the 12-month period ending at mid-year 2017 was 411,095 sf,
slightly less than half of the 828,822 sf absorbed in the prior 12-month period.
1,000
Investment-grade office sales are experiencing a slowdown in transaction volume while

pricing approaches pre-recession highs. In the first half of 2017, sale prices were sustained 500
above $260 psf following a sharp rise in second-half 2016. At mid-year 2017, six investment-
grade office projects were under construction, amounting to more than 2.5 msf of new
0
inventory. Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$45
Size
$ PER SQUARE FOOT
1 400 Spectrum Center Drive

133,300 sf
Cylance $35
New
$30
2 3333 Susan Street

101,800 sf
The Los Angeles Chargers $25
New
$20
3 5231-5241 California Avenue
96,000 sf
Toshiba America New $15
$10
4 15253 Bake Parkway
65,000 sf
Blizzard Entertainment New
$5
5 6561 Irvine Center Drive

64,000 sf $0
LoanDepot Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Orlando Office Market
Resurgence of development and leasing in urban core Absorption and Vacancy
Orlando's economic engine continued to perform in the first half of 2017, as demonstrated SUBURBAN ABSORPTION (12 MOS) VACANCY
by the sustained decline in the unemployment rate, which stood at 3.6% as of May 2017 a
1,000 25%
VACANCY RATE (%)

60-bps decrease from the previous year. Economic fundamentals remain solid. Job growth
continued to impress with more than 55,000 new jobs added in the trailing 12-month 800
period, and there is a resurgence of development and leasing activity in the urban core. 20%
600
By mid-year 2017, office fundamentals remained strong with 12-month net absorption of 15%
400
1 msf and continued incremental gains in asking rents. Despite significant tenant rollover
during the first half of 2017, strong leasing activity resulted in a 210-bps year-over-year 200
10%
decrease in vacancy to 10.9%. Vacancies are tightest in the Winter Park, Lake Mary/Heathrow
and Maitland submarkets. Rental rates have risen significantly since mid-year 2016 by $1.07 0
to $21.95 psf full-service gross (FSG) at mid-year 2017, with class A rates up $1.05 during 5%
-200
the same period to $25.66 psf. Landlords continue to ratchet up asking rates even as they
recapture spaces that temporarily lower their occupancy levels, demonstrating a clear -400 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
confidence in the overall market. Leasing was brisk during the first half of 2017 with several Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
key deals signed in primary areas.

New Supply
700

1 MSF 10.9% 0.2 MSF 0.3 MSF 600

500
400
Orlando's speculative office development pipeline remained restrained. Healthy
employment gains continued to support business expansion. Larger blocks of space made
300
available by tenant rollover do not remain on the market for extended periods of time. Rates
continue to inch upward. Moving forward, it is expected that the new space underway 200
will only partly mitigate the pent-up demand as tenant interest remains steady and strong
100
economic fundamentals support continued business expansion.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$30
Size
$ PER SQUARE FOOT

$25
1 6039 S. Rio Grande Avenue
75,200 sf
U.S. Army New
$20
2 Colonial Center 600

66,900 sf
Ellucian New
$15
3 Science One
60,000 sf
ServiceNow New $10
4 Chase Plaza
40,000 sf
Kimley-Horn $5
New
5 Colonial Center 100

31,700 sf $0
CardWorks Servicing Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 57
Philadelphia Office Market
Vacancy falls in both the CBD and suburbs Absorption and Vacancy
Thanks to FMC Towers delivery in west Philadelphia and the impending completion of SUBURBAN ABSORPTION (12 MOS) VACANCY
the Comcast Innovation and Technology Center at year-end 2017, the CBD office market is
3,500 12%
VACANCY RATE (%)

undergoing a transformation. Class A office space represented more than 132 msf, with the
3,000
Philadelphia CBD encompassing 39.4 msf of class A space. Suburban Philadelphia has the
10%
largest concentration of class A space (93 msf). 2,500
2,000
8%
Stretching into central Pennsylvania, northern Delaware, southern New Jersey and the I-81
1,500
corridor leading into northeast Pennsylvania, the Philadelphia region comprises nearly 412
1,000 6%
msf of office space. As of mid-year 2017, vacancies were down year-over-year in both the
500
Philadelphia CBD and suburban markets. Across all classes, CBD vacancies decreased 50 bps to
4%
8.7% despite the delivery of more than 600,000 sf of space in third-quarter 2016, including 0
Brandywine Realty Trusts aforementioned FMC Tower. Meanwhile, suburban vacancy dropped -500
2%
to 8.4% from 9.2% year-over-year. Given similar vacancy trends, average class A rents are up in -1,000
the region. Bolstered by FMC Tower and new property assessments that have raised taxes, CBD -1,500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
gross rents grew 3.6% year-over-year to $32.47 psf at mid-year 2017. Rent growth also occurred Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
in the suburban market with gross rents increasing 4.5% to $26.82 psf.

New Supply
3,000

2.8 MSF 8.4% 3.9 MSF 1.9 MSF 2,500
2,000
Construction activity in downtown Philadelphia has slowed following the substantial delivery
1,500
of office space during the past year; however, almost 1.7 msf was still under construction at
mid-year 2017. Of that, 1.3 msf is expected to hit the CBD market in late 2017 and early 2018
1,000
as the Comcast Innovation and Technology Center fully opens. In the suburbs, space under
construction increased more than 500,000 sf year-over-year to 2.3 msf. With new class A office
500
space redefining downtown Philadelphia and tenants showing strong appetites for suburban
office space, the regional office market is poised for a strong second half of 2017. 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 1600 Market Street

230,000 sf
PNC Bank Renewal $25
2 785 Arbor Way, Blue Bell

86,600 sf
Cotiviti Corporation $20
New
$15
3 1600 John F. Kennedy Boulevard
80,700 sf
Elsevier Renewal
$10
4 1100 Virginia Drive, Fort Washington

76,500 sf
AON Insurance Services New $5
5 FMC Tower at Cira Centre S.

74,500 sf $0
Spark Therapeutics Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Phoenix Office Market
Tech and financial services companies play increasing role Absorption and Vacancy
Fundamentals in the Phoenix metropolitan office market remain strong due to robust SUBURBAN ABSORPTION (12 MOS) VACANCY
demographic and economic factors. U.S. Census Bureau data (released in March 2017)
3,500 25%
VACANCY RATE (%)

shows that Maricopa, the principal county in the region, is the fastest-growing in
the nation, exceeding 4.2 million people. In-migration has primarily been driven by 3,000
employment expansions in the manufacturing, bioscience, health care and aerospace 20%
2,500
industries, and a low cost of living. According to the Brookings Institute, the Phoenix area
has the highest gross metropolitan product growth in the nation. Employment grew by 2,000
15%
more than 3.1% in 2016 and is projected to grow 3% in 2017, outpacing the rest of the 1,500
western United States. On average, the Phoenix Metropolitan Statistical Area has much
10%
1,000
higher absolute projected job growth (24%) than the rest of the country (7%) through
2024. 500
5%
The Phoenix regional office market has grown to nearly 175 msf and ended the second 0
quarter of 2017 with a vacancy rate of 14.9%, lower than the mid-year 2016 mark of 15.7%. -500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Average full-service gross rental rates have increased steadily, to $23.82 psf at mid-year Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
2017 from $22.71 psf one year earlier. Technology and financial services have played an

New Supply
4,500

4,000
3.1 MSF 14.9% 1 MSF 2.6 MSF
3,000
increasing role in the office market with Quicken Loans, Web.com, Freedom Financial, 2,500
Amazon.com and Wells Fargo all committing to large blocks of space. 2,000
1,500
Absorption remained strongly positive with more than 3 msf absorbed in the 12-month
period ending at mid-year 2017, up from 1.9 msf during the prior 12-month period and 1,000
continuing a positive quarterly trend extending back to first-quarter 2015. Increasing rental 500
rates, declining vacancy and positive absorption are still driving construction, although it
0
has declined since peaking in 2015. Demand for new space is high in both the suburbs and Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
downtown as 42% of space under construction at mid-year 2017 was preleased. 2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 2100 E. Rio Salado Parkway

150,000 sf
Freedom Financial New $25
2 1 N. Central Avenue
149,300 sf
Quicken Loans $20
New
$15
3 4000 N. Central Avenue
Department of Economic 148,000 sf
Security Renewal
$10
4 2501 S. Price Road

115,400 sf
Wells Fargo New $5
5 1500 N. Priest Drive

Endurance International 71,600 sf $0 Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Group Expansion Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 59
Pittsburgh Office Market
Law firms using space more efficiently Absorption and Vacancy
Vacancy in Pittsburghs CBD increased 170 bps year-over-year to 12.9% at mid-year 2017. Class A SUBURBAN ABSORPTION (12 MOS) VACANCY
asking rental rates remained stable as a number of high-quality blocks of sublease space were
1,200 14%
VACANCY RATE (%)

absorbed in lieu of higher-priced space available directly from landlords a trend that is also
emerging in suburban markets. Notable subleases included RoadRunner Recycling, Industrious 1,000 12%
and SDLC Partners, each leasing one full floor (a total of 70,000 sf formerly occupied by the
800
Kraft Heinz Company) at One PPG Place. 10%
600
Downtown, the Union Trust Building completed high-end renovations resulting in a number 8%
of law firms (Frost-Brown, Marshall Dennehey, Blank Rome and Pepper Hamilton) executing 400
6%
leases totaling 121,000 sf. These relocations continue the trend of law firms adopting more 200
efficient occupancy measures including open planning and lower space-per-employee
4%
ratios to reduce their footprints. Elsewhere, the Strip District remains the most active fringe 0
submarket with nearly 1 msf of proposed new development and office-space conversions set -200 2%
to deliver in 2018-19. Demand is driven by the expanding technology sector, primarily software
engineering and artificial intelligence serving the autonomous-driving-vehicles sector. In the -400 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Q2 Q2 Q2 Q2 Q2
suburbs, the Parkway West and South submarkets continue to encounter headwinds due 2013 2014 2015 2016 2017

New Supply
1,400

0.8 MSF 11.8% 0.6 MSF 0.1 MSF 1,200

1,000
to rising sublease availability. In Southpointe, significant blocks for sublease will likely result 800
from EQTs proposed acquisition of Rice Energy in addition to Noble Energys sale of its oil
600
and gas holdings, bringing 135,000 sf to market. In March, Westinghouse Nuclear Energy filed
for bankruptcy protection the company occupies more than 1 msf in the North Suburban 400
submarket.
200
The remainder of 2017 will be viewed with caution as investors and developers weigh the
impact of pending federal policy and regulatory changes that have delayed corporate hiring 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
and capital expenditures. Users and occupiers may elect to take advantage of this opportunity 2013 2014 2015 2016 2017
by right-sizing and upgrading their office premises while locking in reasonable and stable
occupancy costs for the longer term.
$30
Size
$ PER SQUARE FOOT

$25
1 210 6th Avenue
54,000 sf
Evoqua New
$20
2 501 Grant Street

40,000 sf
Pepper Hamilton LLP New
$15
3 40 24th Street
23,400 sf
Argo AI Sublease $10
4 1 PPG Place
23,300 sf
RoadRunner $5
Sublease
5 4420 Baynard Street

21,000 sf $0
Oculus Research Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Raleigh-Durham Office Market
Asking rental rates surge above previous record highs Absorption and Vacancy
Conditions in Raleigh-Durhams office market continue to favor landlords. Tenants are faced SUBURBAN ABSORPTION (12 MOS) VACANCY
with rapidly increasing occupancy costs and a scarcity of quality space. Vacancy ended the
1,400 18%
VACANCY RATE (%)

second quarter of 2017 at 12.1%, down from 13% one year earlier. Asking rental rates remain on
1,200 16%
a steep upward trajectory, surging past previous record highs. The average class A asking rate
rose 5% between June 2016 and June 2017, and the average class B rate increased 12% during 1,000
14%
the same period. 800
12%
600
Fortunately for tenants, speculative development activity has also surged in the last year. 10%
400
Deliveries totaled 733,775 sf in the 12 months ending at mid-year 2017, up 21% compared 8%
200
with the prior 12-month period. The 2.1 msf underway at mid-year 2017 represented the most
6%
construction activity recorded in the market since the second quarter of 2008. With large 0
4%
blocks of class A space in short supply within existing building stock, strong preleasing activity -200
has given developers the confidence necessary to move forward with long-planned projects. -400 2%
-600 0%
In the largest lease transaction during the first half of 2017, GlaxoSmithKline sold its 1.8-msf Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2 Q2
Q2 2017
campus to a California investor, leasing back 700,000 sf on a long-term basis. The balance of the 2013 2014 2015 2016 2017

New Supply
1,800

1,600
1.1 MSF 12.1% 2.1 MSF 0.7 MSF
1,200
space, a mix of lab and office, is being marketed for lease as the new owner finalizes plans for 1,000
$80 million in improvements to the property. With local job growth strong, tenant demand is 800
expected to remain robust through the remainder of 2017. Raleigh-Durham has enjoyed a flurry
600
of economic development wins in recent months, thanks in part to the repeal of the states
400
controversial House Bill 2. Among the most recent announcements, Infosys chose the region
for a technology hub that will add 2,000 jobs, Credit Suisse announced a 1,200-job expansion, 200
INC Research announced a 550-job expansion, and MetLife committed to a third building at its 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
recently constructed 427,000-sf campus. Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 Parmer RTP
700,000 sf
GlaxoSmithKline New $25
2 Weston Lakefront III

213,500 sf
MetLife $20
New
$15
3 Perimeter Five
214,500 sf
INC Research New
$10
4 Parmer RTP
189,800 sf
Credit Suisse New $5
5 Captrust Tower at North Hills

73,900 sf $0
Captrust Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Renewal / Expansion Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 61
Reno Office Market
Positive absorption pushes rental rates upward Absorption and Vacancy
Reno broke through its historic average vacancy of 15% to 13% as of mid-year 2017. This SUBURBAN ABSORPTION (12 MOS) VACANCY
occupancy growth was led by the class A market with vacancy of 11.4%. Positive absorption
120 25%
VACANCY RATE (%)

has also translated into the first rental-rate growth in eight years with the overall average
asking rate rising $3 psf year-over-year to $24 psf at mid-year 2017. Two years ago, Tesla 100
announced plans to bring its battery production plant to Reno. Since that time, the company 20%
has added a car line and its facility has 10 msf under one roof. This development has drawn 80
technology firms to Reno. The latest is Google, which acquired 1,210 acres earlier this year 15%
60
to begin construction of its driverless-car technology plant. A projected 30% population
expansion over the next five years has turned Reno into a boom town for all real estate sectors. 40
10%
The prevailing trend in office vacancy can best be seen by looking at the past four years. 20
The overall vacancy rate decreased to 13% at mid-year 2017 from 18.4% at mid-year 2013. 5%
0
Meanwhile, only 186,398 sf of new inventory was added to the market during the same period
almost all build-to-suit. The strengthening market performance has led to new speculative -20 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
construction, as the first speculative building in Mountain View Corporate Center broke Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
ground earlier in the year, with 41,000 sf total and 16,500 sf preleased.

New Supply
90

80
0.1 MSF 13% 42 KSF 28 KSF
60
At mid-year 2017, only one other shovel-ready project was being advertised for lease. 50
Developers have been wary about speculative building as rental rates had not warranted new 40
construction, but with class A space drying up and rents rising accordingly, market conditions
30
have become favorable for new office development. Reno is headed towards an office-space
bottleneck with vacancy at less than 10% and average rental rates above $28 psf anticipated in 20
the next 12 months. 10
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$30
Size
$ PER SQUARE FOOT

$25
1 6100 Neil Road
43,300 sf
Microsoft Renewal
$20
2 900 Sandhill
42,100 sf
Bally Technologies Renewal
$15
3 887 Trademark
26,900 sf
Video Game Technology New $10
4 887 Trademark
17,100 sf
Everi Games Holding $5
New
5 675 Moana
12,500 sf $0
Amplify Relations Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Sacramento Office Market
Recent successes benefit almost every submarket Absorption and Vacancy
During the 17 quarters ending at mid-year 2017, the Sacramento Valley office market recorded SUBURBAN ABSORPTION (12 MOS) VACANCY
nearly 3.4 msf of positive net absorption with 1.2 msf occurring in the past year alone. The
1,400 18%
VACANCY RATE (%)

valleys recent successes are benefitting nearly every submarket in the region. With vacancy
1,200 16%
in the valleys core submarkets tightening, suburban submarkets are starting to see an uptick
in activity. The Sacramento Valley recorded a 5% unemployment rate at mid-year 2017, down 1,000
14%
100-bps year-over-year. Health care jobs in the valley increased by 4%, representing the largest 800
12%
increase of any industry in the region. 600
10%
400
Downtown Sacramentos 11.4-msf office inventory registered the greatest occupancy gains 8%
200
in the valley from third-quarter 2016 to mid-year 2017. During the same four quarters, this
6%
submarket recorded a 270-bps vacancy decrease, reaching 10.3% at mid-year 2017 the lowest 0
4%
rate since second-quarter 2003. The opening of the Golden 1 Center, located in the Downtown -200
Commons district, has been an important recruiting tool for building owners in this submarket. -400 2%
-600 0%
Average asking rental rates have remained relatively flat despite record occupancy growth in Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2 Q2
Q2 2017
this region during the past few years, ending the first half of 2017 at $22.32 psf full service gross 2013 2014 2015 2016 2017

New Supply
800

700
1.2 MSF 11.1% 0.1 MSF 0.7 MSF
500
(FSG) up 4.5% year-over-year. This situation is mainly due to quality product coming off the
400
market as vacancy has decreased. High-quality spaces, especially in core markets, have seen an
increase in asking rates during this recent surge. 300
200
Although more companies outside of government and the health care industry are starting
to move into the Sacramento Valley, it remains to be seen whether this is a trend that will gain 100
momentum over the next couple of years.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$40
Size
$ PER SQUARE FOOT

$35
1 10391 Peter A. McCuen Boulevard

106,600 sf
Sutter Health Renewal $30
$25
2 10811 International Drive
104,000 sf
Centene Corporation New
$20
3 600 Coolidge Drive

54,700 sf
TaxAudit.com $15
New
$10
4 3735 Placer Corp. Drive
39,900 sf
JLM Energy New $5
5 830 Stillwater Road

36,100 sf $0
ACS State Healthcare Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017
avisonyoung.com 63
San Antonio Office Market
Strong demand enables market to digest new supply without a Absorption and Vacancy
hiccup DOWNTOWN ABSORPTION (12 MOS) VACANCY
San Antonio enjoyed a year of healthy growth in office construction and absorption in 700 16%
VACANCY RATE (%)

2016, and that momentum has continued into 2017. The IH-35 corridor between Austin and
600 14%
San Antonio continued to record substantial growth and urbanization. San Antonios office
rates offer competitive, attractive options for companies when compared with average 500
12%
rates in Austin. Affordability, coupled with a quality workforce, has ramped up demand in 400
10%
San Antonios office market. 300
8%
More than 1.3 msf was under construction at mid-year 2017 the most development to 200
6%
occur in more than a decade. Construction began on the 462,000-sf Frost Tower this year. 100
It is the first new highrise to be built in 30 years. With 68% of its space preleased, this tower 4%
0
is revitalizing San Antonios urban core and has kicked off a wave of new development that
-100 2%
is fostering a live-work-play atmosphere. Demand for office product is keeping pace with
the new supply as the market digests what is being built. This situation has led to declining -200 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Q2 Q2 Q2 Q2 Q2
vacancy even as new space continues to be delivered. Vacancy decreased by 50 bps to 2013 2014 2015 2016 2017

New Supply
1,000

900
0.5 MSF 9.1% 1.3 MSF 0.4 MSF 800
700
600
9.1% at mid-year 2017 from mid-year 2016. Leasing has been active in existing product as
500
well. Hulu expanded by 59,000 sf at Fountainhead Business Park a move that is expected
400
to relocate 500 employees to Northwest San Antonio in late 2017.
300
Asking rental rates, particularly for class A space, continued to rise steadily in the citys 200
high-growth submarkets and are expected to keep rising through year-end 2017. Average
100
asking rates increased 2.5% year-over-year to $21.59 psf at mid-year 2017. Vacancy will likely
0
hold relatively steady through the end of the year as demand balances out the new supply Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
coming online. 2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 Fountainhead Business Park

59,000 sf
Hulu Expansion $25
2 Travis Park Plaza

20,000 sf
MCCI Medical Group $20
Expansion
$15
3 Ashford Oaks Office Building
Southwest 16,000 sf
Immunodiagnostics Expansion
$10
4 Tower West
15,000 sf
Global Project Support Renewal $5
5 Forum Offices
11,000 sf $0
GM Financial Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017

San Diego County Office Market
Available spaces vacant for shorter periods Absorption and Vacancy
The San Diego office market was robust and continuing to strengthen in the first half SUBURBAN ABSORPTION (12 MOS) VACANCY
of 2017. Tightening vacancy persisted across the county, while rents continued to
1,800 18%
VACANCY RATE (%)

increase quarter-over-quarter. Along with a desirable geography, the market benefited
from strong demand for space from health care innovators, independent research 1,600 16%
institutes and sectors that work closely with the U.S. military. San Diego Countys 1,400 14%
unemployment rate dropped 60 bps year-over-year to 3.6% in the second quarter of 1,200 12%
2017.
1,000 10%
Vacancy in the county contracted to 10.8% as of mid-year 2017 compared with 12% one 800 8%
year earlier. San Diegos office market has been able to sustain competitive vacancy levels
600 6%
even after the uptick in new deliveries during the past few years added more space.
400 4%
Available office space continued to spend less time on the market and fewer months
vacant. Rental rates reached $32.76 psf full-service gross (FSG) as of the second quarter 200 2%
of 2017, up from $30.72 psf FSG at the same time in 2016. The highest rents were found 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
in the Central Coast submarket at $39.84 psf FSG with the next highest in the Downtown Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
submarket at $30.60 psf FSG, followed by the North County Coastal area at $30 psf FSG.

New Supply
1,800

1,600
1.2 MSF 10.8% 0.8 MSF 1.3 MSF
1,200
Increases in Central Coast rents are driven largely by the strong demand from the life- 1,000
science sector, which is among the most prominent in the U.S. 800
San Diego County recorded net positive absorption of 1.2 msf for the 12-month period 600
ending at mid-year 2017. The San Diego office market had six investment-grade office 400
projects under construction in the second quarter, including life-science projects 200
amounting to 764,622 sf of new inventory that is expected to be delivered in 2017 and 2018.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$45
Size
$ PER SQUARE FOOT
1
13112 Evening Creek Drive, Rancho 109,800 sf
LabCorp $35
Bernardo Renewal
$30
2
8954 Rio San Diego Drive, Mission 51,400 sf
Union Bank $25
Valley Renewal
$20
3
5353 Mission Center Road, Mission 30,800 sf
Azusa Pacific University
Valley Renewal $15
$10
4 4921 Directors Place, Sorrento Mesa
29,400 sf
Covance Sublease
$5
5
3611 Valley Centre Drive, Del Mar 26,400 sf $0
Acadia Pharmaceuticals Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
Heights Sublease Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 65
San Francisco Office Market
Rents increase despite reduced absorption Absorption and Vacancy
San Franciscos office market continued to demonstrate signs of slow but sustained growth VACANCY
at the end of the first half of 2017. Overall vacancy was up 110 bps year-over-year to 6.6%;
2,000 10%
VACANCY RATE (%)

however, strong leasing activity and city-wide rental-rate growth indicated that tenant
9%
demand for San Francisco office space remained robust. In the 12 months ending at mid-year 1,500
2017, 11 tenants had signed leases for 100,000 sf or more in the city. However, because many 8%
of these leases were renewals or preleases on new developments, absorption stagnated. 1,000 7%
Absorption was recorded as slightly more than negative 1 msf in the 12-month period 6%
500
ending mid-year 2017, an even greater contraction than in the previous 12-month period. 5%
0
4%
Despite the negative absorption, average asking gross rental rates increased by $0.97 psf
year-over-year to $72.62 psf at mid-year 2017. In popular neighborhoods such as the North -500 3%
Financial District, the South Financial District and SOMA, average direct class A rates rose to 2%
-1,000
$77.70, $72.57 and $83.00 psf, respectively. These rents, well above national averages, have 1%
forced tenants to become more efficient in their use of space. Tenants often took slightly -1,500 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
smaller spaces than in previous years, and the trend continued toward increasing the density Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
of workers within office premises.

New Supply
6,000

-1.1 MSF 6.6% 5.6 MSF 1.1 MSF 5,000
4,000
Demand for larger blocks of space from tech tenants continued during the past year. In the
3,000
second quarter of 2017, 52% of all deals larger than 25,000 sf were done by tenants in the
tech sector. While significant deals by Facebook and Ancestry.com were still pending as of
2,000
mid-year 2017, the largest confirmed tech-sector office deals in the first half of 2017 were
Slacks 227,000-sf lease at 500 Howard and Googles 180,000-sf deal at 121 Spear.
1,000
Looking to 2018, there may be a slight uptick in vacancy as major new developments come
0
to market in early 2018; however, with strong tenant demand and continued rental-rate Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
growth, San Francisco looks poised for a year of tempered, but sustainable growth. 2013 2014 2015 2016 2017

Notable Office Lease Transactions by Size - First Half 2017 DOWNTOWN ASKING NET RENT ADDITIONAL RENT
$80
Size
$ PER SQUARE FOOT

$70
1 500 Howard Street

227,600 sf
Slack New $60
$50
2 1 Front Street
179,000 sf
First Republic Bank Renewal / Expansion
$40
3 121 Spear Street

166,500 sf
Google $30
New
$20
4 Pier 70
160,000 sf
Otto New $10
5 415 Mission Street

148,900 sf $0
Salesforce Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

San Mateo Office Market
Countys southern region commands highest rents Absorption and Vacancy
The San Mateo County office market recorded nearly 400,000 sf of absorption during the SUBURBAN ABSORPTION (12 MOS) VACANCY
12-month period ending at mid-year 2017, continuing a trend that has registered positive
700 12%
VACANCY RATE (%)

absorption for nine consecutive quarters. Year-over-year, office vacancy increased 20 bps
600
to 7.9% overall; downtown markets were at 2.8% compared with 8.6% in suburban markets.
10%
Asking rates for all classes within the county increased 3% year-over-year, ending the first 500
half of 2017 at $54.72 psf full-service gross (FSG). The countys southern region, which 400
8%
includes Menlo Park, Redwood City, San Carlos and Belmont, continued to command the 300
highest rents with an average asking rate of $68.28 psf FSG. Moving into the second half of 200 6%
2017 and 2018, average asking rates are expected to increase further, but at a slower pace
100
than during the past three years. 4%
0
Despite a year-over-year increase in available existing sublease space on the market, the -100
2%
amount of existing sublease square footage on the market is not a huge cause for concern. -200
While sublease square footage certainly needs to be watched closely in the second half of -300 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
2017, strong demand from growing tenants throughout the peninsula and Silicon Valley is Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
expected to absorb a large portion of the space.

New Supply
1,400

0.4 MSF 7.9% 1.7 MSF 0.8 MSF 1,200

1,000
Developers continue to be extremely active on the peninsula, especially in locations 800
near public transit. Nearly 756,000 sf of new product was delivered to the market in the
600
12 months ending at mid-year 2017. In addition, more than 1.7 msf of speculative office
development was under construction in San Mateo County at mid-year 2017 with 26% 400
preleased. Proposed projects within walking distance of Caltrain stations were 59%
200
preleased, while the two office projects in suburban markets had no signed commitments.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$90
Size
$ PER SQUARE FOOT
1 164 Jefferson
135,300 sf
Facebook $70
New
$60
2 777 Mariners Island Boulevard

66,500 sf
IXL Learning $50
Renewal / Expansion
$40
3 150 Shoreline Drive
54,600 sf
Auris New $30
$20
4 1800 Bridge Parkway
50,500 sf
Nevro Renewal
$10
5 1600 Bridge Parkway

50,000 sf $0
Nevro Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017
avisonyoung.com 67
St. Louis Office Market
Suburban markets continue to garner most of the growth Absorption and Vacancy
Availability in the 132-msf St. Louis metropolitan office market continued to decline at mid- SUBURBAN ABSORPTION (12 MOS) VACANCY
year 2017 as vacancy decreased 100 bps year-over-year to 8%. However, vacancy rates varied
1,600 16%
VACANCY RATE (%)

widely by submarket. Downtown vacancy was 9.7% with 1.2 msf set to come to market in
the third quarter as AT&T vacates one of its office towers. Vacancy in Clayton, the county 1,400 14%
seat, was only 4.4%, with Centene building an additional 500,000-sf tower for expansion. The
1,200 12%
class A average asking rent for Downtown was $20.14 psf full-service gross (FSG) at mid-year,
while the suburban average was $23.54 psf FSG both stable year-over-year. Almost 1.4 1,000 10%
msf of office space was under construction at the end of the second quarter with 198,000 800 8%
sf fully leased in the downtown market and the balance of the space in the suburbs (94%
600 6%
preleased).
400 4%
The National Geospatial-Intelligence Agency is relocating to a new $1-billion campus north
of downtown, which will greatly impact this now-abandoned area. Nestl announced that 200 2%
it would be moving its IT operations to St. Louis from California, occupying an additional 0 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
60,000 sf downtown. Cortex Innovation Community, located between Clayton and Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017
downtown, continues to see new developments attracting millennials to the area. Microsoft

New Supply
1,400

1.5 MSF 8% 1.4 MSF 0.4 MSF 1,200

1,000
is set to relocate to this area from the suburbs. Overall, the suburban market continued to 800
garner most of the growth; however, Clayton, Chesterfield and West Port are seeing existing
600
companies building for expansion.
400
The outlook for the metropolitan market in the second half of 2017 is that vacancy will
continue to decrease and rents will push higher. There will be differences and divergences in 200
the submarkets, especially in the CBD when the AT&T tower comes on the market for lease.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$25
Size
$ PER SQUARE FOOT
1 13655 Riverport Drive

188,500 sf $20
United Health Care Services Renewal
2 12443 Olive Boulevard

103,300 sf $15
Centene Corporation New
3 3300 Rider Trail

87,000 sf $10
TriZetto New
4 800 Market Street

53,000 sf $5
PwC Renewal
5 7701 Forsyth Boulevard

47,500 sf $0
St. Louis Club Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017

Tampa Office Market
Consumer confidence, other fundamentals remain strong Absorption and Vacancy
Economic momentum continues in Tampa Bay as demonstrated by a steadily declining SUBURBAN ABSORPTION (12 MOS) VACANCY
unemployment rate, which at 3.8% in May 2017 was 50 bps below the rate recorded one year
1,600 25%
VACANCY RATE (%)

earlier. Job growth continued with more than 55,000 new jobs added in the trailing 12-month
period. Healthy leasing activity continued, consumer confidence remained strong and the 1,400
housing market continued to outperform expectations. There is a rising sense of an urban 20%
1,200
renaissance in the downtown core accompanied by enthusiasm among developers and 1,000
business leaders. 15%
800
At mid-year 2017, office fundamentals remained solid with a 150-bps year-over-year decline in 600
10%
vacancy to 12.4%, 12-month net absorption of more than 500,000 sf, and a surge in the asking
400
rental rates to $22.71 psf full-service gross (FSG) at mid-year 2017 from $21.24 psf FSG at mid-
200
year 2016. Nearly every submarket recorded positive net absorption during the same period 5%
with the exception of Downtown St. Petersburg, where the acquisition of a tower resulted in 0
a large amount of previously unavailable space being marketed. (Downtown St. Petersburg is -200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
part of the Tampa regional market.) Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017

New Supply
500

450
0.5 MSF 12.4% 0.1 MSF 0 SF 400
350
300
Development interest is surging in Tampa Bay's downtown areas as tenant migration slowly
250
shifts toward the urban core. Millennial preferences and shrinking square footage requirements
200
are driving much of this trend. Businesses and residents alike are attracted to the growth
prospects and potential being created in both of the Tampa Bay Area's CBDs. 150
100
Looking forward, net office-space absorption is expected to continue to post incremental gains
50
within Tampa's CBD; however, a scarcity of parking will continue to present challenges that
0
must be addressed before the downtown core can achieve its full potential. Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$35
Size
$ PER SQUARE FOOT

$30
1 Renaissance Center VI
148,800 sf
AAA New $25
2 Corporate Center I
124,700 sf
Amgen $20
New
$15
3 3020 Highway 301 S.
99,000 sf
General Dynamics Renewal
$10
4 Pinebrook Business Park

60,000 sf
United Healthcare New $5
5 Grand Central at Kennedy

45,000 sf $0
Quality Distribution Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 69
Washington, DC Office Market
Occupiers show preference for amenity-rich areas Absorption and Vacancy
Surprisingly, Washingtons 376-msf metropolitan office sector has experienced little SUBURBAN ABSORPTION (12 MOS) VACANCY
change in major market indicators during the past five years. During this period, the overall
2,000 20%
VACANCY RATE (%)

market has recorded modest net absorption as private-sector tenants right-size and seek
18%
efficiencies and as some federal government agencies move from competitive inventory to 1,500
owned, secure facilities. Nevertheless, select submarkets and micro markets are benefitting 16%
1,000
from occupancy growth and rental-rate increases as occupiers show a preference for 14%
amenity-rich areas. Mass transit and its surrounding amenities are key drivers of desirable 500
12%
locations. As owners build more tenant conveniences into new properties and retrofit older 0 10%
spaces, operating expenses could also tick upward. In a prevalent trend, landlords have
8%
-500
ready-to-lease spec suites to better compete with the co-working model and accommodate
6%
tenants needing space quickly. And since build-outs across the region can cost more than -1,000
4%
$50 psf, pre-built suites can offer shorter-term leases or serve tenants who do not want to
-1,500
navigate the construction process. 2%
-2,000 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017

0%
During the 12-month period ending at mid-year 2017, most of the strong suburban take-up Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
occurred in the second half of 2016. While the regions top lease transactions for first-half

New Supply
8,000

7,000
1.9 MSF 14.4% 12.7 MSF 2.3 MSF
5,000
2017 were again dominated by federal and local government renewals, two deals were
4,000
notable because they represent expansion. Amazons office-using Web Services division
took 400,000 sf in Herndon, VA for a new East Coast corporate campus, which will bring 3,000
up to 1,500 new jobs. Meanwhile, Nestl agreed to move its headquarters location from
2,000
Glendale, CA to 206,000 sf in Rosslyn, VA, creating 750 new jobs.
1,000
Looking forward, both the suburban and downtown markets have a considerable pipeline
0
(12.7 msf total) of new construction underway, including entire-building renovations and Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
ground-up development. While buildings under construction are 65% preleased, overall 2013 2014 2015 2016 2017
regional vacancy will likely increase slightly during the next 24 months unless meaningful
absorption occurs.
$70
Size
$ PER SQUARE FOOT

$60
1 13200 Woodland Park Road

400,000 sf
Amazon Web Services New $50
2 550 12th Street, SW

314,000 sf
U.S. Department of Education $40
Renewal
$30
3 20 Massachusetts Avenue, NW
U.S. DHS, Citizenship and 261,000 sf
Immigration Services Renewal
$20
4 2200 Clarendon Boulevard

235,000 sf
The County Board of Arlington Renewal $10
5 1812 North Moore Street

206,000 sf $0
Nestl Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

West Palm Beach Office Market
Economic gains spell prosperity and absorption throughout Absorption and Vacancy
county DOWNTOWN ABSORPTION (12 MOS) VACANCY
Positive economic conditions and improving employment growth continue to strengthen 800 25%
VACANCY RATE (%)

the Palm Beach County office market. According to recent figures published by the Bureau
700
of Labor Statistics, Palm Beach County had a non-seasonally adjusted unemployment rate
20%
of 4.9% as of June 2017, a 70-bps drop year-over-year. These economic gains have led to 600
prosperity in the local office market and significant absorption throughout the county.
500
Investment activity has also continued as national and local investors seek to expand their 15%
portfolios to include property within Palm Beach County. 400
10%
300
In response to rising lease rates in class A office space, significant absorption has been
recorded among class B assets throughout the county. In the 12-month period ending 200
5%
at mid-year 2017, a total of 275,026 sf of class B space was absorbed in the market, while
100
absorption in class A space was virtually non-existent. Not only is this trend further
evidenced by the general lack of new class A development, but also by the increase 0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
0%
Q2 Q2 Q2 Q2 Q2
in investment activity among class B assets. Two major properties changed hands in 2013 2014 2015 2016 2017

New Supply
180

160
0.3 MSF 12.9% 0 SF 0.1 MSF
120
the 12 months ending at mid-year 2017, highlighting this trend of investors seeking 100
redevelopment opportunities. 80
60
The first of these transactions was Butters Real Estates acquisition of the Arvida Executive
Center for $21 million. The complex was acquired with capital improvement plans to 40
increase its competitiveness among top class B buildings in the area. The second major 20
deal was W.C. & A.N. Miller Development Companys acquisition of Professional Centre
0
at the Gardens Mall, which realized a 42% gain in slightly less than two years after the Q2 2013
Q2
Q2 2014
Q2 Q2
Q2 2015 Q2 2016
Q2
Q2 2017
Q2
occupancy was increased to 98.5% at the point of sale from 50% in 2015. Continued 2013 2014 2015 2016 2017
positive absorption among class B assets throughout the county is expected along with
continued investment activity among value-add properties.
$60
Size
$ PER SQUARE FOOT

$50
1 Boca Raton Innovation Campus
37,000 sf
Shoes for Crews New
$40
2 North 40
21,600 sf
Biotest Pharmaceutical Corp. New
$30
3 Boca Raton Innovation Campus

15,100 sf
Twin Labs New $20
4 Waterfront Clematis
13,600 sf
Wm. Wrigley Co. $10
New
5 The Park at Broken Sound

9,800 sf $0
Mas Tec Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
2013 2014 2015 2016 2017
avisonyoung.com 71
Westchester County Office Market
Pace of adaptive reuse increasing as suburbs undergo change Absorption and Vacancy
A weakening in Westchesters office market was evident in the overall vacancy rate, SUBURBAN ABSORPTION (12 MOS) VACANCY
which increased 290 bps year-over-year to 19.5% at mid-year 2017. In the White Plains
400 25%
VACANCY RATE (%)

CBD, vacancy was 14% compared with 21% in the suburban submarkets. The return of 1.1
msf to the market at the former IBM campus at 294 Route 100 in Somers in the Northern 200
submarket was largely responsible for the vacancy increase. The pace of adaptive reuse is 20%
0
increasing as the suburban office market undergoes structural change.
-200
15%
At mid-year 2017, leasing velocity was estimated to be 37% lower than that of second-
-400
half 2016. In a marked trend towards increased preference for urban, transit-oriented
10%
communities versus suburban locations, the first half of 2017 saw two prominent lease -600
signings in the White Plains CBD. These deals were the lease of 101,000 sf at 1 Lexington
-800
Avenue by Sumitomo Banking Corporation and an 80,000-sf take-up by global food- 5%
products company Danone for its headquarters at 1 Maple Avenue. Meanwhile, some -1,000
notable deals occurred in the Northern suburbs, including Ascensia Diabetes Cares lease -1,200 0%
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
of 65,000 sf at 100 Summit Drive in Valhalla. There is a considerable draw in Valhalla from Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
the life-sciences and biotech sectors with a $1.5-billion project called the Westchester

New Supply
450

400
-1.1 MSF 19.5% 0 SF 29 KSF
300
BioScience & Technology Center planned for a vacant site next to the Westchester Medical 250
Center. 200
150
Growth in the overall asking rate remained fairly flat in the first half of 2017. The average
gross asking rent of $27.55 psf represented a 1.5% decrease year-over-year. Marginal 100
decreases were seen in both class A and B office product; and as expected, the steepest 50
decline in the average class A asking rent a 13% year-over-year drop occurred in the
0
Northern submarket. Q2 2013
Q2
Q2 2014
Q2
Q2 2015
Q2
Q2 2016
Q2
Q2 2017
Q2
2013 2014 2015 2016 2017

$40
Size
$ PER SQUARE FOOT

$35
1 1 N Lexington Avenue, White Plains

101,000 sf
Sumitomo Mitsui Banking Corp. New $30
$25
2 1 Maple Avenue, White Plains
80,000 sf
Danone North America New
$20
3 100 Summit Lake Drive, Valhalla

65,000 sf
Ascensia Diabetes Care US $15
New
$10
32,000 sf
USI, Inc. New $5

16,639 sf $0
Exelon Generation Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Mexico
74 Mexico City
Mexico City Office Market
Vacancy low in suburban district Absorption and Vacancy
Mexico Citys class A-plus and A office market closed the second quarter of 2017 with SUBURBAN ABSORPTION (12 MOS) VACANCY
a total inventory of 62 msf within its 10 submarkets, representing a 3.2% increase from
4,000 16%
VACANCY RATE (%)

year-end 2016 and an increase of 21% compared with mid-year 2016. Santa Fe is the largest
submarket at 12.6 msf, followed by Polanco with 11.2 msf. 3,500 14%
3,000 12%
As of mid-year 2017, the markets overall vacancy rate was 12.9% up from 10.1% one year
earlier. The 12.9% figure represents 8 msf of vacant space, of which 33% is located in the 2,500 10%
Norte corridor and a further 16% in the Polanco submarket. By contrast, the Interlomas,
2,000 8%
Lomas Altas and Bosques submarkets (in the suburban business district) accounted for only
4.3% of vacant space in Mexico City. Gross absorption in the second quarter of 2017 alone 1,500 6%
was 1.2 msf, with 51% occurring in the alternative business district submarket (Insurgentes,
1,000 4%
Norte and Perifrico Sur). Total absorption for the 12-month period ending at mid-year
2017 was more than 4.6 msf; however, this figure was down from almost 6.5 msf recorded 500 2%
in the prior 12-month period. Many buildings that are under construction have had their 0 0%
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
delivery dates postponed until later in 2017 (some until 2018) as a result of oversupply in Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
the marketplace, but more than 4.8 msf is scheduled to be completed by year-end 2017.

New Supply
14,000

4.6 MSF 12.9% 17.6 MSF 2.7 MSF 12,000

10,000
8,000
Average asking rental rates showed a decrease of just 1% compared with mid-year 2016,
closing the second quarter of 2017 at US$24.70 per square metre (sq. m) per month the
6,000
lowest average rate since first-quarter 2012. The most expensive average rental rate in
Mexico City is the CBD submarket (including Polanco, Reforma and Lomas Palmas) at US$30 4,000
per sq. m per month, although this level represents a 6% decrease compared with mid-year
2,000
2016.
0 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

$40
Size
$ PER SQUARE METRE / MONTH

$35
1 ARTZ Pedregal
105,000 sf
Janssen de Mxico New $30
$25
2 The Tower Park Plaza
99,000 sf
WeWork New
$20
3 Toreo
93,300 sf
AT&T $15
Expansion
$10
4 Virreyes
Creel, Garcia-Cuellar, Aiza y 66,100 sf
Enriquez New $5
5 Torre Mapfre
49,300 sf $0
Aeromexico Q2 2 01 3 Q2 2 01 4 Q2 2 01 5 Q2 2 01 6 Q2 2 01 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

United Kingdom
76 Coventry (Midlands)
77 London
Coventry (Midlands) Office Market
Absorption and Vacancy
Speculative development likely to be limited DOWNTOWN ABSORPTION (12 MOS) VACANCY
Coventry and Warwick remained popular office locations with occupiers due to
600 7%
VACANCY RATE (%)

excellent road and rail connections that link the region with London and the rest of the
U.K., together with the wide range of international destinations served by the nearby 6%
500
Birmingham International Airport.
5%
400
The first half of 2017 registered continued demand for office space in Coventry and
4%
Warwick. This situation is highlighted by historically low vacancy, which decreased 30 bps
300
year-over-year to 3.9% at mid-year 2017. The region has a total office stock of slightly less 3%
than 12 msf.
200
2%
In Coventry, Financial Ombudsman Services Limited leased 22,500 sf on a 10-year
100
sublease from Coventry City Council at Friargate, a new class A office development in 1%
the city centre. Meanwhile, Baldwins Accountants took 8,589 sf on a 10-year lease at
0 0%
Middlemarch Office Park. This office scheme has recently been extensively refurbished Q1 2013
Q2
Q1 2014
Q2
Q1 2015
Q2
Q1 2016
Q2 Q2
Q1 2017
with rents expected to move upwards to reflect the current market. Elsewhere, Pixel 2013 2014 2015 2016 2017
Studios Limited recently leased 6,805 sf on Regent Street in Leamington Spa. One
New Supply
ARROWS INDICATE YEAR-OVER-YEAR CHANGE DOWNTOWN COMPLETIONS (12 MOS) UNDER CONST.
160

140
0.2 MSF 3.9% 0.1 MSF 0.1 MSF 120

100
80
Warwick Technology Park (38,950 sf ) and space at Kingmaker Court (16,184 sf ) have come
back to the market, but are already receiving strong occupier interest. 60
40
With the continued cautiousness from developers and funds alike as a result of Brexit and
political uncertainty, speculative office development will likely be limited. This situation, 20
coupled with the lack of good-quality office stock in the region, means that the office
0
market should remain buoyant, with low vacancy rates promoting growth in rental rates. Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

DOWNTOWN GROSS RENT
Notable Office Lease Transactions by Size - First Half 2017

18
PER SQUARE FOOT
Size 16
14
1
One Friar Gate, Station Square, 22,500 sf
Financial Ombudsman Services
Coventry New 12
10
2 Middlemarch Office Park, Coventry
8,600 sf
Baldwins Accountants New 8
6
3
Regent Square House, Leamington 6,800 sf
Pixel Studios
Spa New 4
4 329 - 333 Broadgate House, Coventry Escape Ultima

6,200 sf 2
New
0
Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
5 Rye Hill Office Park, Coventry
5,100 sf
Duo Equipment 2013 2014 2015 2016 2017
New

London Office Market
Domestic investors reduce debt for future investment purposes Absorption and Vacancy
The general election and Brexit negotiations have dominated the headlines; however, their VACANCY
impact on the London office market has, to date, been muted. In the wider economy, the
18,000 8%
VACANCY RATE (%)

interest rate outlook remains unchanged with the Bank of England taking a wait-and-see
approach depending on the outcome of Brexit negotiations and the strength of the U.K. 16,000 7%
economy. 14,000
6%
12,000
Compared with 2016, the property cycle has turned. Economic growth is slowing; demand is 5%
reducing; rental growth is largely non-existent and leasing incentives are increasing. The outlook 10,000
4%
for the next 12 months is for market rents to fall by up to 5%, depending on the submarket. 8,000
Despite this outlook, anecdotal evidence indicates that the occupier market still feels busy with 6,000
3%
business as usual in the technology and media sectors. At mid-year 2017, the local property 2%
4,000
tax (the rates) revaluation, which came into effect in April, had not affected the market visibly.
1%
Middle Eastern and Asian property investors have supported current price levels for properties 2,000
let on long-term leases. Domestic investors, particularly the publicly listed companies, have 0 0%
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
made much of how they have reduced the level of debt in relation to equity capital to Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
historically low levels to be able to buy opportunities ahead of the next development cycle.

New Supply
16,000

14,000
13 MSF 6.3% 11 MSF 0.7 MSF
10,000
A key plank to the domestic investors thesis is the lack of future office supply. Some
8,000
commentators estimate that it could be as low as 20 msf during the next five years with core
West End supply being as low as 0.6% of stock per annum. Overall, from a low level of vacant 6,000
space across the submarkets, the expectation is that the office market will hold steady during 4,000
the next 12 months.
2,000
0
Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Notable Office Lease Transactions by Size - First Half 2017 DOWNTOWN GROSS RENT
Size 60
PER SQUARE FOOT

50
1 2 Southbank Place
284,900 sf
WeWork New
40
2 100 Bishopsgate
Freshfields Bruckhaus 249,600 sf
Deringer LLP New
30
3 125 Shaftesbury Avenue

140,000 sf
WeWork New 20
4 80 Charlotte Street
133,600 sf 10
Arup Group New
0
5 54-56 Brushfield Street
111,600 sf Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
NEX Group Sublease Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 77
Germany
79 Berlin
80 Duesseldorf
81 Frankfurt
82 Hamburg
83 Munich

Berlin Office Market
Low vacancy driving new construction activity Take-Up and Vacancy
TAKE-UP (12 MOS) VACANCY
The Berlin office market continued to perform at full throttle in the first half of 2017.
Approximately 399,000 square metres (sq. m) of space was let just shy of the record first-half
900 7%
TAKE-UP (THOUSANDS SQ. M)
VACANCY RATE (%)

2016 result. Berlin was the top German market in terms of large-scale deals in the first half
of 2017. Five deals larger than 10,000 sq. m were closed, generating 152,000 sq. m of take- 800
6%
up (37% of total market activity). Deals between 2,000 sq. m and 5,000 sq. m contributed a 700
further 18%. More than 150 transactions involved spaces of less than 500 sq. m, highlighting 5%
600
Berlins growing startup scene.
500 4%
Online retailer Zalando alone closed four deals with a total area of 93,000 sq. m. These deals 400 3%
pushed the commerce sectors share of letting activity to 31%. The traditionally strong public
300
sector was responsible for another 21%. Berlins office market boasts a diverse tenant base with 2%
200
eight industries each generating 3% to 8% of market share. Nationally, Berlin had the lowest
1%
vacancy rate, at 2.7% as of mid-year 2017 a decrease of 120 bps year-over-year. Low vacancy 100
is driving new construction activity with 60,000 sq. m completed in the first half of 2017 and 0 0%
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
another 100,000 sq. m set to deliver in the second half (68% preleased). Total space under Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
construction rose 39% year-over-year to 419,000 sq. m with 60% preleased as of mid-year 2017.

New Supply
COMPLETIONS (12 MOS) UNDER CONSTRUCTION
500
SQUARE METRES (THOUSANDS)

0.4 MSqM 2.7% 0.4 MSqM 60 KSqM 400
TAKE-UP VACANCY RATE UNDER CONSTRUCTION COMPLETIONS
300
Meanwhile, class A rents rose 8% year-over-year to 28 per sq. m per month. With supply
limited, it is expected that class A rents will soon surpass the 30 mark for the first time.
200
Berlins office market is forecasted to keep thriving and full-year letting volume greater than
800,000 sq. m is feasible in 2017. However, restricted supply may hinder an even stronger
result. Vacancy is expected to remain very limited with rent levels moving up across all 100
submarkets.
0
Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Notable Office Lease Transactions by Size - First Half 2017 DOWNTOWN
30
Size
PER SQUARE METRE / MONTH

25
1 Puschkinallee 52
Bundesanstalt fr 47,300 sq. m
Immobilienaufgaben (Bima) New
20
2 Koppenstrasse 8
42,500 sq. m
Zalando AG New
15
3 Cuvry Campus
34,000 sq. m
Zalando AG New 10
4 Schneberger Ufer 1
GSG9 / Bundesanstalt fr 13,000 sq. m 5
Immobilienaufgaben (Bima) New
5 Anschutz Quartier
10,800 sq. m 0
Zalando AG Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 79
Duesseldorf Office Market
Rent levels remain stable across various submarkets Take-Up and Vacancy
After a strong start to 2017, leasing activity kept its momentum, increasing to 113,000
square metres (sq. m) in the second quarter of 2017 and pushing the first-half total to
500 12%
VACANCY RATE (%)

208,000 sq. m. Accordingly, take-up rose almost 14% year-over-year. In the first half, three
deals of 10,000 sq. m or more were closed. These large-scale deals had a market share
10%
400
of 27%. Leasing activity soared in the 1,000-to-2,000 sq. m segment with 29 completed
deals accounting for a 19% market share. Overall demand was high, underscoring the local 8%
economys stability. 300
6%
The most active tenant group was banking and finance, responsible for 21% of take-up.
200
Large deals by HSBC (22,000 sq. m) and Bankhaus Lampe (15,000 sq. m) were the main 4%
drivers of this positive result. Public administration contributed almost 14% of take-up
and IT/telecommunications companies generated another 11%. The HSBC deal pushed 100
2%
the market share of Duesseldorfs West/linksrheinisch submarket to 18%. The City and
Kennedydamm submarkets ranked second and third with market shares of 18% and 16%, 0 0%
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
respectively. Vacancy decreased moderately year-over-year, to 8.3% at mid-year 2017. Total Q2 Q2 Q2 Q2 Q2

2013 2014 2015 2016 2017
inventory was 9.3 million sq. m, while construction (198,000 sq. m with 70% preleased) was

New Supply
300

0.2 MSqM 8.3% 0.2 MSqM 38 KSqM
200
comparable to that of the previous year. While 38,100 sq. m of new space was delivered
during the first half of 2017, a further 74,000 sq. m is set for completion in the second half.
100
CBD class A asking rates held firm year-over-year at 26.50 per sq. m per month. Rent
levels have proven stable across the various submarkets, but are showing signs of upward
movement in select locations. Office demand is forecasted to hold firm, and total letting
volume greater than 350,000 sq. m is on the horizon for 2017. Vacancy is likely to decrease
0
moderately with rent levels remaining under upward pressure. Q1 2 0 1 3
Q2
Q1 2 0 1 4
Q2
Q1 2 0 1 5
Q2
Q1 2 0 1 6
Q2
Q1 2 0 1 7
Q2
2013 2014 2015 2016 2017

30
Size

25
1 Hansaallee
22,000 sq. m
HSBC New
20
2 Konrad-Adenauer-Platz 1
20,300 sq. m
City of Duesseldorf New
15
3 Schwannstrasse 10
15,000 sq. m
Bankhaus Lampe New 10
4 Am Seestern 1
7,600 sq. m
Atos 5
New
5,400 sq. m 0
5 Parsevalstrasse 7-9 Sparkasse (RSGV) Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Frankfurt Office Market
For the first time in 15 years, vacancy falls below 9% Take-Up and Vacancy
Frankfurts office market, comprising nearly 12 million square metres (sq. m), recorded one of
its strongest first-half results of recent years during the first six months of 2017. Some 232,000
500 14%
VACANCY RATE (%)

sq. m was taken up an increase from 218,000 sq. m one year earlier. Ironically, the higher
letting volume was achieved without several large-scale deals. Only one involved more than 12%
10,000 sq. m. Leasing activity increased noticeably across all size segments; however, the 400
strongest rise was recorded among deals greater than 5,000 sq. m, which accounted for 27% 10%
of total first-half take-up. 300

8%
Frankfurt is poised to be one of the greatest beneficiaries of the U.K.s Brexit process, and the 6%
200
traditionally strong Frankfurt Banking District submarket was once more the centre of leasing
activity. Almost 25% of take-up was generated in this submarket, which features skyscrapers 4%
and prominent highrise buildings. Tenants favoured the CBD, which accounted for 45% of 100
2%
letting volume.
0 0%
For the first time in 15 years, vacancy fell below 9%. Year-over-year, vacancy decreased 60 Q1 2013
Q2
Q1 2014
Q2
Q1 2015
Q2
Q1 2016
Q2
Q1 2017
Q2
bps to 8.8% at mid-year 2017. Meanwhile, new construction brought 45,000 sq. m of space 2013 2014 2015 2016 2017

New Supply
500

0.2 MSqM 8.8% 0.3 MSqM 45 KSqM 400
300
to the market. A further 114,000 sq. m is scheduled for completion in the second half of the
year, with 92% pre-let as of mid-year 2017. In total, 253,000 sq. m was under construction.
200
Class A asking rental rates in Frankfurts Banking District rose 2.7% year-over-year to 38.50
per sq. m per month. Rent levels are trending upwards across all submarkets.
100
Several large lease deals are expected to close in the second half of the year and demand is
generally high. On the back of a growing economy, a full-year letting volume greater than
0
600,000 sq. m is likely. Office vacancy is expected to decrease further with rent levels rising. Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

45
Size

40
Clifford Chance Deutschland LLP 13,000

1 Junghofstrasse 14-16, Junghof Plaza
sq. m 35
New
30
2 Mainzer Landstrasse 185-189

7,200 sq. m
Deutsche Bahn 25
New
20
3 Mainzer Landstrasse 16
7,000 sq. m
Deutsche Bundesbank New 15
10
Europische Zentralbank (ECB) 6,800
4 Taunustor 2, Japan Tower
sq. m
New 5
5 Speicherstrasse 53, Hafenbogen

6,700 sq. m 0
Dentsu Aegis Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 81
Hamburg Office Market
With several large-scale deals in pipeline, record take-up looms Take-Up and Vacancy
Office take-up reached a record high in Hamburg at mid-year 2017. Approximately 285,000
square metres (sq. m) was taken up in the first half an increase of 26% compared with the
500 14%
VACANCY RATE (%)

same period in 2016. With a market share of 30%, large-scale deals (greater than 5,000 sq. m)
contributed noticeably to the strong result. The largest deal of the first half was the 34,500-sq. 12%
400
m lease by Olympus. Another 20% of activity was generated by medium-sized deals between
10%
1,000 sq. m. and 2,000 sq. m. Driven by the Olympus deal, manufacturing companies were
the most active tenant group in the first half of the year, followed by consultancy and public 300
8%
administration firms.
6%
200
Demand was strongest in Hamburgs CBD and the City Sd submarket. The latter which
is in proximity to the CBD has slowly developed from a clear back-office submarket into a 4%
more vibrant urban area. Overall vacancy decreased 100 bps year-over-year to a 15-year low 100
2%
of 5% at mid-year 2017, representing approximately 750,000 sq. m of a total office inventory
approaching 15 million sq. m. New construction is ongoing as a result of strong demand. 0 0%
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
Nearly 91,000 sq. m was completed in first-half 2017. As of mid-year 2017, a further 307,000 sq. Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
m was under construction with 57% preleased.

New Supply
500

0.3 MSqM 5% 0.3 MSqM 91 KSqM 400
300
Class A rents rose 4% year-over-year to 26 per sq. m per month at mid-year 2017. The
noticeable supply decrease puts upward pressure on rental rates in all submarkets especially
200
the centrally located ones. With several large-scale deals in the pipeline, take-up is likely to
reach 600,000 sq. m by year-end 2017. This total would be a local record. Although speculative
construction increased in first-half 2017, available space is expected to decrease further. This 100
reduction will, in turn, lead to rental-rate growth.

0
Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

45
Size
Address / Complex Tenant Lease Type 40
1 Wendenstrasse 14-18
34,500 sq. m 35
Olympus New
30
2 Ueberseering 35
19,700 sq. m
University of Hamburg 25
New
20
3 Amsinckstrasse 28
8,400 sq. m
Supervisory School Authority New 15
10
4 Axel-Springer-Platz 3
7,800 sq. m
WeWork New 5
6,400 sq. m 0
5 Amsinckstrasse 35 Supervisory School Authority Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

Munich Office Market
Major corporations and startups alike contribute to strong Take-Up and Vacancy
letting activity TAKE-UP (12 MOS) VACANCY
Munichs office market is on its way to recording another very strong year. In the second 800 8%
VACANCY RATE (%)

quarter of 2017, a total of 155,000 square metres (sq. m) was let, pushing the first-half 2017
700 7%
total to 400,000 sq. m. a 6% year-over-year increase that has already surpassed the 10-
year annual average. Leasing activity was high across all size segments in first-half 2017 600 6%
as 14 deals larger than 5,000 sq. m represented almost 30% of take-up. A further 25% was
500 5%
generated by deals between 2,000 sq. m. and 5,000 sq. m, underscoring the strength and
growth of Munichs medium-sized companies. The most active tenant group was the IT/ 400 4%
telecommunications sector with take-up of almost 100,000 sq. m. Major corporations as well
300 3%
as small startups contributed to this very strong leasing activity.
200 2%
As the office supply within Munichs city boundaries is limited, the number of tenants
100 1%
looking for alternative locations has risen noticeably. Almost 30% of take-up was generated
in Munichs fringe locations outside the city itself. At mid-year 2017, overall vacancy was 0
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
0%
3.9% down 70 bps year-over-year and representing 795,000 sq. m of a total office stock of Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017

New Supply
500

450
0.4 MSqM 3.9% 0.4 MSqM 0.1 MSqM 400
350
300
20.5 million sq. m. Construction activity increased in first-half 2017. Approximately 439,000
250
sq. m was under construction at mid-year 2017 with 54% preleased. However, completed
200
construction (99,000 sq. m) was comparable to that of the previous year.
150
Driven by strong leasing activity and the noticeable decrease in supply, CBD class A rents 100
rose 1.50 per sq. m per month year-over-year to 36 per sq. m per month at mid-year 2017.
50
However, rent levels are facing upward pressure across all submarkets. Backed by solid
0
economic growth, office leasing activity is forecasted to remain high. A full-year result of Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
750,000 sq. m is likely, with limited office supply hindering an even stronger result. Rent 2013 2014 2015 2016 2017
levels are expected to continue to rise.

40
Size

35
1 Neue Hopfenpost
20,000 sq. m
Equinix 30
New
25
2 Werksviertel, Atlas
13,000 sq. m
Publicis Group New
20
3 Dennisstrasse 2
12,900 sq. m 15
City of Munich New
10
4 Werksviertel, Atlas
8,300 sq. m
Design Offices GmbH New 5
5 Leuchtenbergring Office
8,000 sq. m 0
Scout24 GMbH Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
avisonyoung.com 83
Romania
85 Bucharest

Bucharest Office Market
High absorption spells low vacancy in Barbu Vacarescu / Take-Up and Vacancy
Floreasca area TAKE-UP (12 MOS) VACANCY
Backed by strong demand for new, high-quality space, Bucharest's office market registered 450 16%
VACANCY RATE (%)

almost 170,000 square metres (sq. m) in total leasing activity during the first half of 2017.
400 14%
More than 100 relevant transactions were recorded, with an average of approximately 1,600
350
sq. m. Of the total activity, 43% comprised medium-sized transactions between 1,000 and 12%
5,000 sq. m and another 43% involved transactions greater than 5,000 sq. m. Affirming strong 300
10%
demand for high-quality buildings, 88% of transactions took place in class A office stock. The 250
8%
main driver of leasing activity continues to be the growth of the information technology and 200
communications sector, which accounted for almost half of the total area leased in the first 6%
150
half of 2017. The North area attracted 45% of the demand and confirmed tenants' interest in
4%
100
the region.
50 2%
The supply and demand fundamentals indicate a transition towards a landlords market in
0 0%
certain areas of the city, particularly in the Barbu Vacarescu / Floreasca submarket, where Q1 2013
Q2
Q1 2014
Q2
Q1 2015
Q2
Q1 2016
Q2
Q1 2017
Q2
high net absorption of 31,000 sq. m in first-half 2017 pulled the class A vacancy rate below 2013 2014 2015 2016 2017

New Supply
350

0.4 MSqM 10.2% 0.3 MSqM 0.2 MSqM 300

250
200
3%. Demand is at a high level, with tenants drawn to the excellent property quality and
diverse products as well as the proximity of a successful shopping mall, metro station and 150
the airport. The area is ripe for new developments as tenants of more than 1,000 sq. m lack
alternatives and net effective rental rates are expected to increase significantly, both for new 100
leases and renewal/renegotiation deals.

50
A relatively modest 150,000 sq. m pipeline of deliveries scheduled for the remainder of 0
2017, paired with strong leasing activity, is expected to bring the overall vacancy rate down
Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
further, to less than 10% by year's end, closing 2017 with a total stock of class A and B office
space of around 2.8 million sq. m.
20
Size
Address / Complex Tenant Lease Type 18
1 North Center
20,000 sq. m 16
Renault Renewal
14
2 The Bridge
12,000 sq. m 12
IBM New
10
3 City Gate
10,000 sq. m 8
Rompetrol Renewal
6
4 Europe House
8,300 sq. m 4
Orange Renewal
2
5 Globalworth Tower
6,700 sq. m 0
Huawei Q1 2 0 1 3 Q1 2 0 1 4 Q1 2 0 1 5 Q1 2 0 1 6 Q1 2 0 1 7
New Q2 Q2 Q2 Q2 Q2
2013 2014 2015 2016 2017
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Mid-Year 2017

Avison Young Office Market Report

2 Avison Young Mid-Year 2017 Office Market Report

35 Cleveland 65 San Diego County

36 Columbus, OH 66 San Francisco

37 Dallas 67 San Mateo

Evolving trends and varying fundamentals challenge

The prevailing trends include urban intensification, transit-oriented development,

These trends will challenge owners and occupiers to adapt to evolving

6 Avison Young Mid-Year 2017 Office Market Report

3.3% VACANT 527 MILLION SF

OFFICE NEW SUPPLY

9.4 MSF HALIFAX

$31 PSF 12.8 MILLION SF

Canada Downtown & Suburban Office Vacancy Rates

Canada Office Absorption

8 Avison Young Mid-Year 2017 Office Market Report

Canada Suburban Class A Average Asking Gross Rental Rates*

*RENTAL RATES SHOWN IN CAN$

Mid-year results positive

The trends shaping the Canadian office market are mirrored in

Building renovations and repurposing continue as class B buildings

The U.S. office market tracked by Avison Young comprised 5 bsf

12 Avison Young Mid-Year 2017 Office Market Report

12% U.S. VACANCY 5 BILLION SF

OFFICE NEW SUPPLY

OAKLAND 1.3 MSF WASHINGTON, DC 15 MSF

SAN MATEO 2.5 MSF NASHVILLE RALEIGH-DURHAM 2.8 MSF

$83.77 PSF 91 MILLION SF

U.S. Downtown & Suburban Office Vacancy Rates

U.S. Office Absorption

14 Avison Young Mid-Year 2017 Office Market Report

U.S. Suburban Class A Average Asking Gross Rental Rates*

*RENTAL RATES SHOWN IN US$

16 Avison Young Mid-Year 2017 Office Market Report

ABSORPTION (THOUSANDS SF)

VACANCY RATE (%)

ARROWS INDICATE YEAR-OVER-YEAR CHANGE

SUBURBAN COMPLETIONS (12 MOS) UNDER CONST.

SQUARE FEET (THOUSANDS)

Avg. Gross Asking Rent - Class A

Address / Complex Tenant Lease Type

2 150 - 9th Avenue S.W.

3 Eighth Avenue Place East

4 Eau Claire Tower

5 Gulf Canada Square

ABSORPTION (THOUSANDS SF)

VACANCY RATE (%)

ARROWS INDICATE YEAR-OVER-YEAR CHANGE

SUBURBAN COMPLETIONS (12 MOS) UNDER CONST.

SQUARE FEET (THOUSANDS)

cope with the fallout from weak energy markets.

Avg. Gross Asking Rent - Class A

Address / Complex Tenant Lease Type $40

1 Telus Plaza North

2 Commerce Office Park Building D

18 Avison Young Mid-Year 2017 Office Market Report

ABSORPTION (THOUSANDS SF)

VACANCY RATE (%)

ARROWS INDICATE YEAR-OVER-YEAR CHANGE

SUBURBAN COMPLETIONS (12 MOS) UNDER CONST.

SQUARE FEET (THOUSANDS)

ABSORPTION VACANCY RATE UNDER CONSTRUCTION COMPLETIONS