Suburban Maryland. Quarterly Market Report. 3rd Quarter lpcwashingtondc.com

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1 Suburban Maryland Quarterly Market Report

2 Table of Contents Metropolitan D.C. Market Overview...3 Suburban Maryland Quarterly Overview...5 Suburban Maryland Top Leases... 9 Suburban Maryland Top Sales...10 Maryland Leasing & Market Research Market Spotlight, 3Q 2018: Bethesda-Chevy Chase North Bethesda-Potomac Rockville North Rockville Gaithersburg-Germantown...19 Silver Spring Paul Kern Senior Vice President pkern@lpc.com Brent Prossner Vice President bprossner@lpc.com Tim Weitzel Market Research Associate tweitzel@lpc.com Beltsville-Calverton Greenbelt-College Park Landover-Largo-Capitol Heights National Harbor-Oxon Hill Columbia South...30 Prince George s County Industrial Baltimore-Washington Corridor Industrial Frederick Frederick Flex Broker Biographies

3 Metropolitan D.C. Market Overview Overall Market Summary The Washington, DC Metropolitan commercial real estate market is comprised of approximately million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. The total vacancy rate decreased to 14.4% at the end the third quarter 2018, down from 14.6% at the end of the second quarter. The market recorded 434,360 square feet of net absorption in the third quarter, representing an 18.3% increase from the 367,301 square feet absorbed in the second quarter. Leasing activity totaled approximately 6.6 million square feet in transactions signed. The largest lease executed was a renewal by the GSA - FCC for 602,350 square feet at th Street, SW in DC. Two buildings, totaling 362,297 square feet, broke ground; bringing the year-to-date 2018 construction pipeline total to 7,136,779 square feet (62% pre-leased). Two buildings delivered this quarter (0 DC, 2 VA, 0 MD) totaling 1,400,000 square feet, including the new 975,000-squarefoot Capital One headquarters located at Capital One Drive N., in the Tysons submarket. There were twenty sale transactions in the third quarter, totaling $1.81 billion. The largest sale was in the District with 2099 Pennsylvania Avenue, NW trading for $220,000,000 ($1,054 psf). Average asking rental rates increased $0.06 to $37.45 per square foot, Full Service. From August August 2018 the Washington, DC Metropolitan area had a net increase of 64,900 jobs (62,300 private sector, 2,600 government) representing 1.9% growth, however, the unemployment rate increased to 3.5%. DC VA MD Metro Area (YTD) Direct Vacancy (3Q 2018) 9.8% 14.5% 13.5% 13.6% Total Vacancy (3Q 2018) 10.7% 15.4% 14.2% 14.4% Total Net Absorption (YTD 2018) 127, , , M SF Leasing Activity (YTD 2018) 7,082,766 10,002,204 2,472, M SF 3

4 Metropolitan D.C. Market Overview Outlook The Metropolitan Washington, DC market strengthen in the third quarter as market fundamentals continued to improve. Compared to the second quarter; third quarter vacancy rates ticked down, asking rates ticked up, sales volume increased 49.6%, net absorption increased 18.3%, and leasing activity increased 6.5%. Regional employment experienced 1.9% of growth YOY ending August 2018, primarily driven by the private sector, specifically the Professional & Business Services industry. The DC Metro area s unemployment rate increased to 3.5%, however, it still out paces the 3.7% national average. The DC Metro is tied in 15th place in national ranking for unemployment in metro areas with populations over 1 million. Looking ahead, the GSA will continue reducing the federal real estate footprint and begin to execute longer lease terms (15-20 year terms) while minimizing/eliminating shortterm extensions to reduce costs. While market fundamentals appear strong, the region remains a tenant s market. Aggressive landlords will continue to perform significant capital improvements on their buildings to remain competitive, while also offering generous rent concessions (TI Allowance and Free Rent). The Metro should continue be a catalyst for demand (leasing and sales) around Phase II of the Silver Line in Virginia and the Purple Line in Maryland. The DC Metro is rumored to be a strong contender for Amazon s HQ2, with Northern Virginia being the front runner for the region. 4

5 Suburban Maryland Market Summary The Suburban Maryland office market, which encompasses Montgomery and Prince George s Counties, totals approximately 87.9 million square feet of rentable space in 885 office buildings of 25,000 square feet and greater. The market recorded a decrease in net absorption in the third quarter of 2018 with -150,753 square feet absorbed, down from the 51,220 square feet absorbed in the previous quarter. Direct Vacancy Total Vacancy 3Q Q Q % 13.7% 15.0% 14.2% 14.2% 15.5% Direct vacancy decreased to 13.5%, down from 13.7% and total vacancy remained flat at 14.2%. There were four sales transactions in Suburban Maryland this quarter, totaling $173,332,824. The largest sale of the quarter was 1 Discovery Place, in the Silver Spring submarket. The previous headquarters for Discovery Communications sold to Foulger-Pratt Companies for $70,000,000. The price-per-square-foot was $ The largest public sector lease was the State of Maryland singing a 62,623-square-foot pre-lease at 5801 University Research Court in the College Park submarket. Net Absorption (SF) -150,753 51, ,756 Leasing Activity (SF) 1.0 M 869, M Under Construction (SF) 2.1 M 1.9 M 1.1 M Deliveries (SF) The largest private sector lease was Enviva Partners signing a 79,472-square-foot lease at 7272 Wisconsin Avenue in the Bethesda - Chevy Chase submarket. The year-over-year unemployment rate in Suburban Maryland decreased to 3.5% in August 2018, down from 3.8% in August From August 2017 to August 2018 employment in Suburban Maryland had a net increase of 24,735 new jobs, representing 0.8% growth. Sectors with the greatest amount of job growth were Professional & Business Services with 23,200 jobs, Educational & Health Services with 13,000 and Mining, Logging & Construction with 7,300 jobs. The Government increased by 2,600 jobs. Rental Rates (, FS) U/C Percent Pre-Leased $27.29 $27.18 $ % 66% 43% 5

6 Suburban Maryland Vacancy Rate Class Vacancy Rates The direct vacancy rate decreased to 13.5% in the third quarter, down from 13.7%, totaling approximately 11.9 million square feet. Total vacancy remained flat at 14.2%, totaling approximately 12.5 million square feet. The sublease vacancy rate decreased to 0.7% at the end of the third quarter, representing 573,503 square feet of vacant space. The Class A total vacancy rate increased to 15.5% from 15.2% in the third quarter, totaling approximately 7.0 million square feet. The Class B total vacancy rate decreased to 13.3% from 13.6% in the third quarter, totaling approximately 4.9 million square feet. SF (Millions) % A 13.3% B 9.3% C (%) of Building Class Vacant Construction At the end of the third quarter 2018, there were eight buildings under construction, totaling 2,078,173 sf. 251 National Harbor Boulevard (Class A, 95,000 sf, 60% pre-leased) is set to deliver in October Garden City Drive (Class A, 176,000 sf, 100% pre-leased) is set to deliver in November Spring Street (Class A, 121,724 sf, 100% pre-leased) is set to deliver in December University Research Court (Class A, 75,000 sf, 84% pre-leased) is set to deliver in December SF (Millions) Deliveries vs Bethesda Avenue (Class A, 288,000 sf, 85% pre-leased) is set to deliver in August Medical Center - Building F (Class A, 175,840 sf, 0% leased) is set to deliver in '09 '10 '11 Deliveries '12 '13 '15 '16 '17 ' Wisconsin Avenue (Class A, 361,609 sf, 42% pre-leased) is set to deliver in November The Marriott Headquarters at 7750 Wisconsin Avenue (Class A, 785,000 sf, 100% pre-leased) is now under construction and is scheduled to deliver in

7 Suburban Maryland Absorption & Gross Leasing The Suburban Maryland market recorded -150,753 square feet of net absorption in the third quarter 2018, a decrease from the 51,220 square feet absorbed in the second quarter. Seven of the Top Ten leases signed this quarter were in Montgomery County and ranged between 79,472 and 23,054 square feet. Nine of the leases in the Top Ten this quarter were private sector transactions. In the third quarter, total leasing activity totaled 1,038,815 square feet, a 19.5% increase from the 869,084 square feet leased in the second quarter. The total average asking rental rate was $27.29 Full Service in the third quarter, up $0.11 from the previous quarter. The Class A asking rental rate was $29.64 Full Service, a $0.18 increase from the previous quarter. Montgomery County 3Q Q Q 2017 Inventory (SF) 65.5 M 65.5 M 65.5 M Direct Vacancy 12.4% 12.7% 13.1% Total Vacancy 13.2% 13.3% 13.7% Net Absorption (SF) -46,057 65,055 88,360 Leasing Activity (SF) 691, , ,264 (SF) 1.7 M 1.6 M 874,724 Deliveries (SF) Rental Rates (, FS) $29.09 $29.15 $28.77 Prince George s County 3Q Q Q 2017 Inventory (SF) 22.4 M 22.4 M 22.4 M Direct Vacancy 16.8% 16.7% 16.8% Total Vacancy 17.0% 16.8% 16.9% Net Absorption (SF) -104,696-13, ,777 Leasing Activity (SF) 347, , ,642 (SF) 346, , ,000 Deliveries (SF) Rental Rates (, FS) $22.12 $22.06 $

8 Suburban Maryland Market Outlook There is reason for continued optimism in the Suburban Maryland office market, particularly along the I-270 corridor. s in the market activity has been strong and it is expected that there will be multiple announcements regarding these company s commitments in the 4th quarter. In Montgomery County, absorption in the submarkets from Bethesda to Rockville remained flat, but there was positive absorption up-county in North Rockville and Gaithersburg. Silver Spring also showed positive absorption and despite a large pending vacancy (Discovery Communications), this submarket remains tight with rental rates increasing. In Prince George s County, the office market remains fairly flat. Most office demand and activity is centered around existing tenants searching for better deals with many renewing in place. A couple large GSA requirements currently in the market will help the market. Industrial/Flex activity in Prince George s County remains strong with multiple large requirements in the market. Look for multiple announcements of completed deals before the end of the year. Rental rates in the industrial/flex sector will push higher. 8

9 Suburban Maryland Top Ten Leases In the third quarter 2018, six of the Top Ten leases were in Montgomery County and four were in Prince George s County, with three of the top leases being pre-leases. Nine of the leases in the Top Ten this quarter were private sector transactions. The largest lease executed in Montgomery County was a pre-lease totaling 79,472 square feet signed by Enviva Partners at 7272 Wisconsin Avenue in the Bethesda - Chevy Chase submarket. There were three substantial pre-leases signed this quarter in the Suburban Maryland market. Enviva Partners signed a 79,472-square-foot pre-lease at 7272 Wisconsin Avenue, Fox 5 also indicated their intention to move into 7272 Wisconsin Avenue, signing a 59,178-square-foot pre-lease, and the State of Maryland signed a pre-lease for 62,623 square feet at 5801 University Research Court. In Prince George s County, Leidos signed the largest lease of the quarter, renewing 65,668 square feet at 4701 Forbes Boulevard in the Lanham submarket. The Suburban Maryland market totaled 1,038,815 square feet of leasing activity in the third quarter 2018, an increase from the 869,084 square feet leased in the second quarter. This represents a 19.5% increase in leasing activity Wisconsin Ave Colesville Rd. Enviva Partners ULLICO 79,472 SF 60,00 Pre-lease Renewal Plum Orchard Dr. 3M 71, Wisconsin Ave. Fox 5 59,178 Renewal Pre-lease 4701 Forbes Blvd Colesville Rd. Leidos 65,668 SF Renewal Discovery Communications 45,186 SF New 5801 University Research Ct. State of Maryland 6116 Executive Blvd. Dembo, Jones & Healy 62,623 SF 24,00 Pre-lease New 8300 Professional Pl. Northrop Grumman 60,86 Renewal 7501 Greenway Center Dr The Retina Group 23,054 SF Renewal / Expansion 9

10 Suburban Maryland Suburban Maryland Sales 1 Discovery Place Submarket Silver Spring Date Sold September 2018 Price Buyer Seller RBA Class $70,000,000 ($ ) Foulger-Pratt Companies Discovery Communications, Inc. 490,062 SF A Occupancy 100% Comments Discovery moving headquarters to NYC Research Boulevard Submarket North Rockville Date Sold August 2018 Price Buyer Seller RBA Class $38,000,000 ($ ) Rubenstein Partners, L.P. TA Realty 227,456 SF A Occupancy 76.9% Comments 7.11% Cap Rate 7316 Wisconsin Avenue Submarket Bethesda / Chevy Chase Date Sold September 2018 Price Buyer Seller RBA Class $35,500,000 ($ ) Saul Centers, Inc. Chevy Chase Land Company 69,601 SF B Occupancy 100% 401 N. Washington Street Submarket Rockville Date Sold August 2018 Price Buyer Seller RBA Class $29,832,824 ($130.28) Normandy Real Estate Partners C-III Asset Management 228,989 SF A Occupancy 78.7% Comments Portfolio sale including retail portion at 301 N. Washington St. 10

11 Bethesda-Chevy Chase SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 0 '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Highlights The direct vacancy rate increased to 10.3% in the third quarter 2018, up from 10.0% in the second quarter. Total vacancy increased in the third quarter to 12.0%, up from 11.2% in the second quarter. Class A total vacancy increased to 10.3% in the third quarter, up from 9.8% in the second quarter, while the asking rental rate average increased to $42.26 Full Service in the third quarter, up $0.28 from the previous quarter. Total net absorption was -41,601 square feet in the third quarter, down from the -123,332 square feet absorbed in the second quarter Total leasing activity increased in the third quarter to 262,062 square feet, up from 159,531 square feet leased in the previous quarter. Contributing tenants included Enviva Partners and Fox 5 signing 79,472-square-foot and 59,178-square-foot pre-leases at 7272 Wisconsin Avenue, respectively. 10 Year Averages ( ) Total Absorption 33,452 SF / Year Deliveries (SF) 58,55 / Year Leasing Activity 867,443 SF / Year Market Stats Inventory 10.9 M SF Direct Vacancy 10.3 % Total Vacancy 12.0 % YTD 2018 Absorption -161,505 SF 1.4 M SF Percent Pre-Leased 82.2 % YTD 2018 Deliveries There are currently three buildings under construction in the Bethesda/Chevy Chase submarket: 4747 Bethesda Avenue, a 288,000- square-foot, Class A Office building, 7272 Wisconsin Avenue, a 361,609-square-foot, Class A office building and 7750 Wisconsin Avenue, Marriott s 785,000-square-foot headquarters. Asking Rental Rates (Full Service) 2008: $ : $36.73 YTD 2018: $

12 Bethesda-Chevy Chase Major Leases 7272 Wisconsin Ave 4401 East-West Hwy Enviva Partners Datawatch Systems 79,472 SF 25,00 Pre-lease Renewal/Expansion 7272 Wisconsin Ave 3 Bethesda Metro Ctr Fox 5 Trow & Rahal 59,178 SF 6,186 SF Pre-lease New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate 7316 Wisconsin Ave Bethesda/ Chevy Chase 9/2018 $35.5 M Saul Centers, Inc. Chevy Chase Land Co. B 100% N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s 7272 Wisconsin Ave Bethesda/ Chevy Chase 361,609 SF 211,323 SF 42% 11/2020 Carr Properties Fox 5; Enviva Partners 4747 Bethesda Ave Bethesda/ Chevy Chase 288,00 43,483 SF 85% 8/2019 JBG Smith Booz Allen; Host Hotels & Resorts; JBG Smith; Orano Marriott Headquarters 7750 Wisconsin Ave Bethesda/ Chevy Chase 785,00 100% 2022 Bernstein Co. / Boston Properties Marriott International 12

13 North Bethesda-Potomac SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate decreased to 17.8% in the third quarter 2018, down from 18.0% in the second quarter Total vacancy increased to 18.4% in the third quarter, up from 18.3% in the previous quarter. Class A total vacancy decreased to 18.8% in the third quarter, down from 18.9% in the second quarter, while the average asking rental rate increased to $30.38 Full Service in the third quarter, up $1.27 from the previous quarter. Total net absorption was -4,270 square feet in the third quarter, down from the 153,441 square feet absorbed in the second quarter. Contributing to the negative net absorption was H. Beck vacating 28,496 square feet at 6600 Rockledge Drive. Total leasing activity decreased in the third quarter to 59,204 square feet, down from 233,786 square feet leased in the previous quarter. Contributing tenants included the Dembo, Jones & Healy signing a 24,000-square-foot lease at 6116 Executive Blvd and Associa renewing a 5,048-squarefoot lease at Rockville Pike. 10 Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory -40,337 SF / Year 76,794 SF / Year 775,065 SF / Year 10.7 M SF Direct Vacancy 17.8 % Total Vacancy 18.4 % YTD 2018 Absorption 234,615 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $28.59 YTD 2018: $

14 North Bethesda-Potomac Major Leases 6116 Executive Blvd Rockville Pike Dembo, Jones & Healy 24,00 New Associa 5,048 SF Renewal Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter North Bethesda - Potomac N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s No new construction during this quarter. North Bethesda - Potomac N/A N/A N/A N/A N/A N/A 14

15 Rockville SF (Millions) Vacancy Rate (%) '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 3 0 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate increased to 11.5% in the third quarter, up from 11.0% in the second quarter The total vacancy rate increased to 11.7%, up from 11.0% in the second quarter. Class A total vacancy increased to 19.7% in the third quarter, up from 18.6% in the second quarter, while the asking rental rate average increased to $32.86 Full Service in third quarter, up $0.04 from the previous quarter. Total net absorption was -142,389 square feet in the third quarter, down from 34,093 square feet absorbed in the second quarter. Contributing to the negative net absorption was NIAAA vacating 118,161 square feet at 5635 Fishers Lane. Total leasing activity decreased in the third quarter to 124,596 square feet, down from the 163,459 square feet leased in the previous quarter. Contributing tenants included Winchester Homes signing a 20,598-squarefoot lease at Park Potomac Avenue and Bronfman Rothschild signing a 14,601-squarefoot lease also at Park Potomac Avenue. 10 Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory 136,588 SF / Year 179,037 SF / Year 745,521 SF / Year 9.7 M SF Direct Vacancy 11.5 % Total Vacancy 11.7 % YTD 2018 Absorption -107,796 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $31.06 YTD 2018: $

16 Rockville Major Leases Park Potomac Ave Winchester Homes 5635 Fishers Ln Regulatory Affairs Professional Society 20,598 SF 14,09 New Renewal Park Potomac Ave Bronfman Rothschild 14,601 SF New 7811 Montrose Rd Region Orthopedics 9,035 New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter Rockville N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s No new construction during this quarter Rockville N/A N/A N/A N/A N/A N/A 16

17 North Rockville SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate 17 Highlights The direct vacancy rate increased to 14.4% in the third quarter 2018, up from 13.8% in the second quarter. Total vacancy increased to 16.1% in the third quarter 2018, up from 15.0% in the previous quarter. Class A total vacancy increased to 15.4% in the third quarter, up from 14.5% in the second quarter, while the asking rental rate average increased to $28.62 Full Service in third quarter, up $0.07 from the previous quarter. Total net absorption was 69,889 square feet in the third quarter, up from the 11,761 square feet absorbed in the second quarter. Contributing to the positive net absorption was H. Beck moving into 23,448 square feet at 2440 Research Boulevard. Total leasing activity decreased in the third quarter to 115,851 square feet, down from 240,508 square feet leased in the previous quarter. Contributing tenants included Steptoe & Johnson LLP renewing a 23,013-squarefoot lease at 400 E. Gude Drive and Dan Ryan Builders signing a 17,194-square-foot lease at 2099 Gaither Road. One building is now under construction in the North Rockville submarket Medical Center - Building F (Class A, 175,840 sf, 0% leased) is set to deliver in Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory 50,116 SF / Year 134,977 SF / Year 972,594 SF / Year 13.2 M SF Direct Vacancy 14.4 % Total Vacancy 16.1 % YTD 2018 Absorption 147,59 175,84 Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $26.02 YTD 2018: $25.49

18 North Rockville Major Leases 400 E. Gude Dr 2099 Gaither Rd Steptoe & Johnson, LLP 23,013 SF Renewal Dan Ryan Builders 17,194 SF New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter N. Rockville N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s 9800 Medical Center Dr Building F N. Rockville 175,84 175,84 0% 2019 Alexandria Real Estate Equities N/A 18

19 Gaithersburg-Germantown SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate decreased to 9.3% in the third quarter 2018, down from 9.7% in the second quarter. Total vacancy also decreased to 9.3% in the third quarter, down from 10.0% in the second quarter. Class A total vacancy decreased to 10.4% in the third quarter, down from 10.7% in the second quarter, while the asking rental rate average increased to $25.60 Full Service in third quarter, up $0.59 from the previous quarter. Total net absorption was 22,858 square feet in the third quarter, up from the -79,896 square feet absorbed in the second quarter. Contributing to the positive net absorption was Columbia Bank moving into 5,711 square feet at 481 N. Frederick Avenue. Total leasing activity decreased in the third quarter to 18,443 square feet, down from 51,022 square feet leased in the previous quarter. Contributing tenants included AECOM signing a 3,318-square-foot lease at Seneca Meadows Parkway and Cleaning Up, Inc. singing a 2,307-square-foot lease at Doctors Drive. 10 Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory 62,022 SF / Year 39,892 SF / Year 398,348 SF / Year 9.1 M SF Direct Vacancy 9.3 % Total Vacancy 9.3 % YTD 2018 Absorption -545 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $23.63 YTD 2018: $

20 Gaithersburg-Germantown Major Leases Seneca Meadows Pky AECOM 3,318 SF New Doctors Dr Cleaning Up, Inc. 2,307 SF New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter Gaithersburg - Germantown N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s No new construction during the quarter Gaithersburg - Germantown N/A N/A N/A N/A N/A N/A 20

21 Silver Spring SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 0 '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Highlights The direct vacancy rate decreased to 8.9% in the third quarter, down from 10.1% in the second quarter Total vacancy decreased to 9.1% in the third quarter, down from 10.4% in the second quarter. Class A total vacancy decreased to 10.0% in the third quarter, down from 11.0% in the previous quarter. The Class A asking rental rate average increased to $31.21 Full Service in third quarter, up $0.60 from the previous quarter. Total net absorption was 50,759 square feet in the third quarter, up from 25,719 square feet absorbed in the second quarter. Contributing to the positive net absorption was Ashcraft & Gerel, LLP moving into 11,587 square feet at 8403 Colesville Road. Total leasing activity increased in the third quarter to 113,050 square feet, up from 65,528 square feet leased in the previous quarter. Contributing tenants included Discovery Communications signing a 45,186-squarefoot lease at 8403 Colesville Road, Discovery Education signing a 14,064-square-foot lease also at 8403 Colesville Rd, and Launch Workplaces signing a 20,000-square-foot lease at 8070 Georgia Avenue. 10 Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory -30,812 SF / Year 5,00 / Year 432,949 SF / Year 6.3 M SF Direct Vacancy 8.9 % Total Vacancy 9.1 % YTD 2018 Absorption 79,02 121,724 SF Percent Pre-Leased 100 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $29.33 YTD 2018: $ Spring Street (Class A, 121,724 sf, 100% preleased) is currently under construction, set to deliver in Octotber2018.

22 Silver Spring Major Leases 8403 Colesville Rd 8403 Colesville Rd ULLICO Discovery Education 60,00 14,064 SF Renewal New 8403 Colesville Rd 8403 Colesville Rd Discovery Communications 45,186 SF New AAIDD 5,755 SF New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter Silver Spring N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s 1000 Spring St. Silver Spring 121,724 SF 100% 10/2018 United Therapeutics Corporation United Therapeutics Corporation 22

23 Beltsville-Calverton SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 5 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct and total vacancy rates increased to 27.9% in the third quarter 2018, up from 27.4% in the second quarter. Class A total vacancy increased to 41.9% in the third quarter, up from 41.2% in the second quarter, while the asking rental rate average increased to $22.19 Full Service in third quarter, up $0.05 from the previous quarter. Total net absorption was -6,960 square feet in the third quarter, down from -6,527 square feet absorbed in the second quarter. Total leasing activity decreased in the third quarter to 8,403 square feet, down from 29,457 square feet leased in the previous quarter. 10 Year Averages ( ) Total Absorption -34,511 SF / Year Deliveries (SF) / Year Leasing Activity 98,052 SF / Year Market Stats Inventory 1.6 M SF Direct Vacancy 27.9 % Total Vacancy 27.9 % YTD 2018 Absorption 1,554 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $21.43 YTD 2018: $

24 Greenbelt-College Park SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 4 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate remained flat at 19.6% in the third quarter The total vacancy rate increased to 19.8% in the third quarter, up from 19.7% in the second quarter. Class A total vacancy increased to 19.1% in the third quarter, up from 18.6% in the previous quarter. The Class A asking rental rate average increased to $23.63 Full Service in third quarter, up $0.03 from the previous quarter. Total net absorption was 5,349 square feet in the third quarter, down from 9,824 square feet absorbed in the second quarter. Total leasing activity increased in the third quarter to 155,437 square feet, up from 90,359 square feet leased in the previous quarter. Contributing tenants include The State of Maryland signing a 62,623-squarefoot pre-lease at 5801 University Research Court and Lancaster Bible College signing a 18,575-square-foot lease at 7852 Walker Drive. 10 Year Averages ( ) Total Absorption 33,677 SF / Year Deliveries (SF) 66,092 SF / Year Leasing Activity 449,587 SF / Year Market Stats Inventory 7.3 M SF Direct Vacancy 19.6 % Total Vacancy 19.8 % YTD 2018 Absorption -4,107 SF 75,00 Percent Pre-Leased 84 % YTD 2018 Deliveries 5801 University Research Court (Class A, 75,000 sf, 84% pre-leased) is currently under construction and set to deliver in December Asking Rental Rates (Full Service) 2008: $ : $22.24 YTD 2018: $

25 Greenbelt-College Park Major Leases 5801 University Research Ct The State of Maryland 62,623 SF Pre-lease 7850 Walker Dr The Aerospace Corp. 11,97 New 7852 Walker Dr 5700 Rivertech Ct Lancaster Bible College 18,575 SF New Fraunhofer USA, Inc. 8,441 SF New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter Greenbelt- College Park N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s 5801 University Research Ct. Greenbelt- College Park 75,00 12,377 SF 84% 12/2018 Corporate Office Properties Trust State of Maryland 25

26 Landover-Largo-Capitol Heights SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 4 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate remained flat at 19.4% in the third quarter The total vacancy rate also remained flat at 19.7%. Class A total vacancy increased to 20.2% in the third quarter, up from 18.3% in the previous quarter. The Class A asking rental rate average remained flat at $25.95 Full Service in the third quarter. Total net absorption was -18,961 square feet in the third quarter, down from -16,941 square feet absorbed in the second quarter. Total leasing activity increased in the third quarter to 83,773 square feet, up from 21,657 square feet leased in the previous quarter. Contributing tenants included Northrop Grumman renewing 60,860 square feet at 8300 Professional Place and Corvias signing a 10,172-square-foot lease at 9475 Lottsford Road. 10 Year Averages ( ) Total Absorption 10,126 SF / Year Deliveries (SF) 2,50 / Year Leasing Activity 191,668 SF / Year Market Stats Inventory 3.1 M SF Direct Vacancy 19.4 % Total Vacancy 19.7 % YTD 2018 Absorption -65,573 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2008: $ : $22.65 YTD 2018: $

27 Landover-Largo-Capitol Heights Major Leases 8300 Professional Pl 9475 Lottsford Rd Northrop Grumman Corvias 60,86 10,172 SF Renewal New Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter Landover - Largo - Capitol Heights N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s No new construction during the quarter Landover - Largo - Capitol Heights N/A N/A N/A N/A N/A N/A 27

28 National Harbor-Oxon Hill SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 0 '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Highlights The direct vacancy rate increased to 17.6% in the third quarter 2018, up from 14.9% in the second quarter. The total vacancy rate increased to 19.5%, up from 14.9% in the previous quarter. Class A total vacancy increased to 18.6% in the third quarter, up from 14.6% in the second quarter, while the asking rental rate average decreased to $32.91 Full Service in third quarter, down $0.76 from the previous quarter. Total net absorption was -13,179 square feet in the third quarter, down from -13,087 square feet absorbed in the second quarter. Contributing to the negative net absorption was Fisher Law Group vacating 15,204 square feet at 174 Waterfront Street and putting the space up for sublease. Total leasing activity increased in the third quarter to 8,801 square feet, down from 3,700 square feet leased in the previous quarter. A contributing tenant was JHC Technology signing a 2,801-square-foot lease at 163 Waterfront Street. 251 National Harbor Boulevard (Class A, 95,000 sf, 60% pre-leased) is currently under construction and set to deliver in October Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory 18,364 SF / Year 21,209 SF / Year 59,652 SF / Year 1.0 M SF Direct Vacancy 17.6 % Total Vacancy 19.5 % YTD 2018 Absorption -23,883 SF 95,00 Percent Pre-Leased 60 % YTD 2018 Deliveries Asking Rental Rates (Full Service) 2007: $ : $29.21 YTD 2018: $

29 National Harbor-Oxon Hill Major Leases No major leases this quarter Sales Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate No sales this quarter National Harbor - Oxon Hill N/A N/A N/A N/A N/A N/A N/A Property Submarket Building Available Pre-leased Delivery Date Developer Major s 251 National Harbor Blvd. National Harbor - Oxon Hill 95,00 38,00 60% October 2018 Peterson Companies / CBRE Bariatric Medicine, Willpower Wellness 29

30 Columbia South SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate increased to 8.5% in the third quarter 2018, up from 7.6% in the second quarter. Total vacancy increased to 8.7% in the third quarter, up from 7.9% in the second quarter. Class A total vacancy increased to 8.8% in the third quarter, up from 7.8% in the second quarter. Class A asking rental rate average increased to $28.36 Full Service in the third quarter, up $0.13 from the previous quarter. Total net absorption was -62,843 square feet in the third quarter, down from the 114,073 square feet absorbed in the second quarter. Contributing to the negative net absorption was Tri-Ed vacating 6,666 square feet at 9730 Patuxent Woods Drive. Total leasing activity decreased in the third quarter to 68,880 square feet, down from 117,300 square feet leased in the previous quarter. 10 Year Averages ( ) Total Absorption 225,096 SF / Year Deliveries (SF) 209,152 SF / Year Leasing Activity 776,806 SF / Year Market Stats Inventory 9.2 M SF Direct Vacancy 8.5 % Total Vacancy 8.7 % YTD 2018 Absorption -65,013 SF 135,256 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Two buildings were under construction at the end of the quarter: W. Market Place (Class A, 29,700 sf, 0% pre-leased), set to deliver in November 2018 and 8120 Maple Lawn Boulevard (Class A, 105,556 sf, 0% pre-leased), set to deliver in December Asking Rental Rates (Full Service) 2008: $ : $25.12 YTD 2018: $

31 Prince George s County Industrial SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate decreased to 10.8% in the third quarter 2018, down from 10.9% in the second quarter. Total vacancy decreased to 11.2% in the third quarter, down from 11.3% in the second quarter. Total net absorption was 224,213 square feet in the third quarter, up from 134,158 square feet absorbed in the second quarter. Contributing to the large positive net absorption was La-Z- Boy moving into 220,800 square feet at Queens Court. Total leasing activity increased in the third quarter to 337,413 square feet, up from 172,577 square feet leased in the previous quarter. A contributing tenant included Urban Air signing a 66,000 square-foot lease at Baltimore Avenue in the Laurel submarket. There is currently one building under construction in Prince George s County Alaking Court (now 20,000 sf, 100% preleased) downsized and is scheduled to deliver in February Frito-Lay will be the sole tenant. One building delivered this quarter: 7501 Andrews Federal Campus Drive (167,033 sf, now 67%% leased) delivered in September. 10 Year Averages ( ) Total Absorption Deliveries (SF) Leasing Activity Market Stats Inventory 264,917 SF / Year 334,198 SF / Year 1.2M SF / Year 21.2 M SF Direct Vacancy 10.8 % Total Vacancy 11.2 % YTD 2018 Absorption 215,507 SF 20,00 Percent Pre-Leased 100 % YTD 2018 Deliveries Asking Rental Rates (Triple Net) 2008: $ : $ ,033 SF YTD 2018: $

32 Baltimore-Washington Corridor Industrial SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate increased to 10.8% in the third quarter 2018, up from 10.3% in the second quarter. The total vacancy rate increased to 11.6%, up from 11.1% in the previous quarter. Total net absorption was 331,755 square feet in the third quarter, up from the -40,495 square feet absorbed in the second quarter. Total leasing activity increased in the third quarter to 1,278,643 square feet, up from 1,013,789 square feet leased in the previous quarter. A contributing tenant included Classic Brands signing a 317,490-square-foot lease at 8901 Snowden River Parkway. There are currently three buildings under construction Ridge Road (220,000 sf, 100% pre-leased) is set to deliver in October nd Street (94,130 sf, 0% preleased) is set to deliver March Solley Road (340,000 sf, 0% pre-leased) is set to deliver July Year Averages ( ) Total Absorption 5419,76 / Year Deliveries (SF) 510,182 SF / Year Leasing Activity 4.1 M SF / Year Market Stats Inventory 50.4 M SF Direct Vacancy 10.8 % Total Vacancy 11.6 % YTD 2018 Absorption 312,348 SF 654,13 Percent Pre-Leased 33.6 % YTD 2018 Deliveries 860,30 Three buildings delivered this quarter Dorsey Run Road (93,500 sf, 0% pre-leased) delivered in August Dorsey Run Road (126,000 sf, 0% pre-leased) delivered in August Perryman Court (500,400 sf, now 100% leased by Best Buy) also delivered in August. Asking Rental Rates (Triple Net) 2008: $ : $5.15 YTD 2018: $

33 Frederick Office SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 4 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate increased to 18.4% in the third quarter 2018, up from 17.0% in the second quarter. Total vacancy increased to 19.0% in the third quarter, up from 17.1% in the second quarter. Total net absorption was -97,413 square feet in the third quarter, down from -255,234 square feet absorbed in the second quarter. Contributing to the negative net absorption was First Guaranty Mortgage Corporation vacating 28,200 square feet at 5280 Corporate Drive. Total leasing activity increased in the third quarter to 77,168 square feet, up from the 28,630 square feet leased in the previous quarter. Contributing tenants included the Veterans Administration signing a 19,592-square-foot lease at 5202 Presidents Court and Leidos renewing a 16,490-squarefoot lease also at 5202 Presidents Court. 10 Year Averages ( ) Total Absorption 46,873 SF / Year Deliveries (SF) 56,631 SF / Year Leasing Activity 267,133 SF / Year Market Stats Inventory 4.4 M SF Direct Vacancy 18.4 % Total Vacancy 19.0 % YTD 2018 Absorption -336,946 SF Percent Pre-Leased 0% YTD 2018 Deliveries 47,727 SF Asking Rental Rates (Full Service) 2008: $ : $20.08 YTD 2018: $

34 Frederick Flex SF (Millions) Vacancy Rate (%) '09 '10 '11 '12 '13 '15 '16 '17 '18 Deliveries Total Net Absorption 4 0 '09 '10 '11 '12 '13 Direct Vacancy Rate '15 '16 '17 '18 Total Vacancy Rate Highlights The direct vacancy rate decreased to 8.3% in the third quarter 2018, down from 8.5% in the second quarter. Total vacancy decreased to 8.4% in the third quarter, down from 8.6% in the second quarter. Total net absorption was 6,429 square feet in the third quarter, down from 41,987 square feet absorbed in the second quarter. Total leasing activity increased in the third quarter to 47,882 square feet, down from the 26,780 square feet leased in the previous quarter. A contributing tenant was Crucible Performance singing a 7,425-square-foot lease at 5330 Spectrum Drive. 10 Year Averages ( ) Total Absorption 111,315 SF / Year Deliveries (SF) 89,001 SF / Year Leasing Activity 193,153 SF / Year Market Stats Inventory 3.8 M SF Direct Vacancy 8.3 % Total Vacancy 8.4 % YTD 2018 Absorption 72,133 SF Percent Pre-Leased 0 % YTD 2018 Deliveries Asking Rental Rates (Triple Net) 2008: $ : $10.38 YTD 2018: $

35 Broker Biographies 35

36 Broker Biographies About Brent Brent joined Lincoln in 2011 as the Leasing Vice President for the Baltimore and the Suburban Maryland Region. His focus will be leasing for both Landlords and s, office, industrial, and flex product in Baltimore City, Howard, Anne Arundel, Prince Georges County, and Montgomery Counties. Prior to joining Lincoln, Brent was a Vice President for EDGE Commercial, LLC where he started at the inception to help transition, maintain, and grow Edge s Landlord Representation. Prior to EDGE Commercial, he was an Associate at Scheer Partners where he assisted in the leasing of over 3.5 million square feet of office, industrial, and flex product throughout Prince George s County. Brent Prossner Vice President Maryland Brokerage Services Brent represents NASA contractors, technology firms, government contractors, medical practices, and non-profit agencies, as well as some of Maryland s largest landlords. His team s current landlord portfolio consists of over 3.5 million square feet stretching from Baltimore to the suburbs of DC with some of the representative landlord s including Morgan Stanley, JP Morgan, Meritage Properties, Ruppert Properties, etc. A resident of Annapolis, outside of Real Estate he enjoys spending time on the Chesapeake Bay fishing and hunting. Experience 13 Years, including 7 years with Lincoln Property Company Education Lehigh University Bachelor of Arts, International Business 36