Austin s office rental rates continue to grow along with its population

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1 Research & Forecast Report AUSTIN OFFICE Q Austin s office rental rates continue to grow along with its population Kaitlin Holm Research and Marketing Coordinator Austin Austin continues to grow and the office rental rates are going along for the ride. Austin s population is growing faster than any other metro in the U.S., and now the CBD rates are higher than other large metro s including Chicago, Miami, and even Los Angeles. As a result, the vacancy rates are starting to fall, and there s about 350, square feet set to deliver by the end of 2016 and 1,297,228 square feet coming in Q Market Indicators Relative to prior period NET ABSORPTION Annual Change Quarterly Change Quarterly Forecast* Three buildings totaling 259,480 SF delivered in the third quarter, and 216,549 SF of that was preleased. The largest building that delivered was the 179,846 SF 5th & Colorado building, located in the CBD submarket. NEW CONSTRUCTION UNDER CONSTRUCTION *Projected The citywide average rental rate increased by 7.3% from $36.02 per square foot to $38.68 per square foot over the quarter. Class A rental rates in Austin s CBD increased by 12.4% over the quarter to $50.90 per square foot from $49.52 per square foot in Q2. Overall suburban Class A rental rates also increased, from $33.69 per square foot to $35.20 over the quarter. It was announced in October that Austin s population will double in size by 2040, reaching over 4 million people. This makes it America s fastest growing metro. Austin is also expected to climb from the 33rd largest metro in America to the 21st by Though the population continues to increase, Austin s unemployment rate has decreased yet again. According to the Austin Chamber, Austin is ranked first for unemployment rates among the top 50 metros in America, followed closely by San Francisco. Vacancy & Availability Austin s citywide vacancy rate decreased marginally between quarters from 11.9% to 11.7%. The CBD Class A vacancy rate remained the same over the past two quarters at 7.2%. The suburban Class A vacancy rate was also paused at Q2 s rate of 13.6% for this quarter. Overall suburban vacancy decreased over the quarter to 12.9%. Submarkets that saw a decrease in vacancy over the quarter include Cedar Park, East, Far Northwest, Northeast, Northwest, Summary Statistics Austin Office Market Q Q Q Vacancy Rate 11.5% 11.9% 11.7% Net Absorption (Million Square Feet) New Construction (Million Square Feet) Under Construction (Million Square Feet) Class A Vacancy Rate CBD Suburban Gross Asking Rents Per Square Foot Per Year (.015) % 12.8% 7.2% 13.6% 7.2% 13.6% Average $34.89 $36.02 $38.68 CBD Class A $44.21 $45.27 $50.90 Suburban Class A $32.77 $33.69 $35.20

2 Round Rock, Southeast, and West Central. The Round Rock submarket saw the largest decrease in vacancy falling from 18.3% to 8.5% over the quarter, which was due to Houghton Mifflin Harcourt moving into their 85, SF space at 2700 La Frontera Blvd. Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 8/15 8/16 Absorption, New Supply and Vacancy 1,200, 1,, 800, 600, 400, 200, % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% AUSTIN 3.4% 3.5% TEXAS 4.6% 5.0% U.S. 5.0% 5.2% JOB GROWTH Annual Change # of Jobs Added AUSTIN 3.2% 30.9K TEXAS 1.6% 186.9K U.S. 1.7% 2.4M -200, 0.0% CBD vs. Suburban Absorption & Demand Austin s office market posted 326,073 square feet of positive net absorption in Q The three submarkets that experienced the largest increase in net absorption during 2016, so far, include West Central, Far Northwest, and Round Rock. A majority of the positive net absorption in the third quarter can be attributed to the Northwest submarket s Class A office space that saw 142,178 square feet of positive net absorption. The second highest positive net absorption occurred in Class B space in the East submarket, with 101,480 square feet absorbed in the third quarter. The Southwest submarket had eight tenants move into spaces 10, SF or larger, yet still saw 107,883 SF of negative absorption in Class A space. One of the tenants that entered the Southwest submarket was Yeti Coolers, who moved into their 87, SF space at 7601 Southwest Pky. Citywide, Class B space saw 139,660 SF of positive net absorption in the third quarter. Positive net absorption in Cllass B space occurred in the East, Northeast, Round Rock, and Southeast submarkets. Rental Rates Net Absorption New Supply Vacancy According to CoStar, our data provider, Austin s citywide average rental rate increased over the quarter from $36.02 per square foot to $ As expected, the highest rates across the Austin market in the second quarter were in CBD Class A buildings, where rental rates reached $50.90 per square foot. Rental rates were also high in the West Central submarket and Central submarket where Class A rental rates reached $40.18 per square foot and $40.09 per square foot respectively. CLASS A OFFICE 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% CBD Vacancy Suburban Vacancy CLASS A OFFICE RENTS $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 Citywide Class B rental rates rose in Q3 to $27.57 per square foot from $26.03 in Q2. Class B rates in the CBD decreased by 8.7% over the quarter from $36.34 per square foot to $39.51 per square foot. $0.00 CBD Rents Suburban Rents 2 Austin Research & Forecast Report Q Office Colliers International

3 Leasing Activity Austin s office leasing activity recorded 1,144,532 SF in Q Major transactions this quarter included a new lease for Samsung SARC at 3900 N Capital of Texas Hwy and a renewal for Frensenius. Q Top Office Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE 3900 N Capital of Texas Hwy Southwest 101,596 Samsung SARC Jul Domain Dr North/Domain 80,757 Amazon Sep Research Blvd Northwest 67,955 Cadence Jul-16 Park on Barton Creek Southwest 63,597 Fresenius 1 Sep Ranch Road 620 S Southwest 37,757 TrueCar Jul Plaza on the Lake Dr Southwest 32,625 Amherst Holdings LLC 1 Sep N MoPac Expy Northwest 31,958 Unknown 2 Sep B Riata Trace Pky Northwest 31,715 Bankers Toolbox 1 Aug Las Cimas Parkway Southwest 28,078 PeopleAdmin Inc. 1 Sep Domain Dr North/Domain 24,916 Aristocrat Technologies Inc Aug E 9th St CBD 24,024 NetLine Aug W 2nd Street CBD 22,404 Fish & Richardson Sep W 15th St CBD 17,281 Unknown Jul Burnet Rd North/Domain 17,033 Unknown Aug A Riata Trace Pky Northwest 16,652 Zynga Aug Research Blvd Northwest 16,109 Extellent Professional Development Centers Sep S MoPac Expy Southwest 15,796 Unknown Aug Morado Cir Northwest 11,336 Park University Aug Great Hills Trl Northwest 11,258 E2 Open Jul N Capital of Texas Hwy Southwest 10,858 Merrill Lynch Jul-16 1 Renewal 2 Expansion 3 Sublease 4 Pre-lease/proposed or under construction Sales Activity Austin s office investment sales activity included six sales transactions (including three portfolio sales) with an average sale price of $373 per SF. Q Significant Sales Transactions (100, SF or greater) BUILDING NAME SUBMARKET RBA YEAR BUILT BUYER SELLER SALE PRICE $/SF CLOSED 800 Cesar Chavez St* CBD 126, Clarion Partners Seaholm Power LLC $75,841, $ Sep N MoPac Expy* Northwest 200, KBS Realty Advisors Heitman $63,053, $ Jul N MoPac Expy* Northwest 193, KBS Realty Advisors Heitman $60,946, $ Jul N Champion Grandview Way* 6433 N Champion Grandview Way* Northwest 116, Menlo Equities Endeavor Real Estate Group $48,710, $ Jul-16 Northwest 103, Menlo Equities Endeavor Real Estate Group $43,289, $ Jul N MO Pac Expy Central 119, Eurus Capital Equity Commonwealth $21,500,.00 $ Aug-16 Sources: CoStar and Real Capital Analytics *Part of a portfolio 3 Austin Research & Forecast Report Q Office Colliers International

4 This Austin is placeholder Office Market text. Place Summary your text (CBD, here. Suburban, & Overall) INVENTORY DIRECT SUBLEASE NET ABSORPTION RENTAL CLASS # OF BLDGS. TOTAL TOTAL Q Q Q Q CBD A 28 6,983, , % 18, % 502, % 7.2% 166,673-18,911 $50.90 B 34 2,806, , % 20, % 186, % 6.2% -12,879-37,059 $39.51 C ,084 22, % 12, % 35, % 6.1% 1, $25.50 Total 72 10,369, , % 51, % 725, % 6.9% 155,241-56,393 $48.51 SUBURBAN A ,774,295 2,308, % 374, % 2,683, % 13.6% 40,814 42,638 $35.20 B ,513,942 2,075, % 138, % 2,213, % 14.2% 152,539 14,110 $26.53 C 59 2,997, , % 1, % 179, % 5.2% -22,521-16,231 $19.12 Total ,286,062 4,562, % 514, % 5,077, % 13.2% 170,832 40,517 $31.08 OVERALL A ,758,151 2,793, % 393, % 3,186, % 11.9% 207,487 23,727 $36.68 B ,320,683 2,241, % 158, % 2,400, % 13.0% -37,761-37,761 $25.91 C 69 3,576, , % 14, % 215, % 5.4% -15,054-15,054 $19.54 Total ,655,743 5,236, % 566, % 5,802, % 11.9% 326,073-15,876 $33.95 AVG ($/SF) Austin Suburban Office Market Summary INVENTORY DIRECT SUBLEASE NET ABSORPTION RENTAL CLASS # OF BLDGS. TOTAL TOTAL Q Q Q Q AVG ($/SF) CEDAR PARK A 4 439, , % 6, % 196, % 44.4% 6,113 15,388 $26.72 B 2 112, 0 0.0% 0 0.0% 0 0.0% 0.0% Total 6 551, , % 6, % 196, % 35.6% 6,113 15,388 $26.72 Chart Title One Line CENTRAL Chart Title A 4 520,288 32, % 0 0.0% 32, % 10.8% 64,467-5,098 $40.09 B 33 1,869, , % 11, % 186, % 9.4% -11,185 14,154 $25.34 C Body ,288 13, % 0 0.0% 13, % 0.8% -5,703 9,460 $20.17 Total 53 3,328, , % 11, % 232, % 7.1% 47,579 18,516 $27.25 EAST A 2 104,821 15, % 0 0.0% 15, % 4.3% -10,958-4,537 $33.97 B 14 1,354, , % 0 0.0% 462, % 41.7% 101,480 3,710 $32.14 C 5 202,765 29, % 0 0.0% 29, % 14.3% 0 0 $19.98 Total 21 1,662, , % 0 0.0% 507, % 36.0% 90, $31.24 FAR NORTHEAST B 1 23, % 0 0.0% 0 0.0% 0.0% Total 1 23, % 0 0.0% 0 0.0% 0.0% FAR NORTHWEST A 13 1,997, , % 33, % 187, % 9.7% 4,923 18,207 $32.85 B 9 347,418 24, % % 24, % 6.6% -1, $26.08 C 1 21, % 0 0.0% 0 0.0% 0.0% Total 23 2,367, , % 33, % 212, % 9.1% 3,109 18,045 $ Austin Research & Forecast Report Q Office Colliers International

5 Austin Suburban Office Market Summary - Continued INVENTORY DIRECT SUBLEASE NET ABSORPTION RENTAL CLASS # OF BLDGS. TOTAL TOTAL Q Q Q Q AVG ($/SF) NORTH/DOMAIN A 14 1,955, , % 8, % 415, % 17.4% -74,434-37,288 $37.03 B 30 1,712, , % 22, % 142, % 7.3% -16,884 20,658 $26.61 C 1 24, % 0 0.0% 0 0.0% 0.0% Total 45 3,693, , % 30, % 557, % 12.6% -91,318-16,628 $32.63 NORTHEAST A 5 414, , % 0 0.0% 117, % 27.0% -5,566 36,518 $24.56 B 19 1,347,629 60, % 14, % 74, % 10.9% 72,055-12,193 $20.75 C 7 214,114 58, % 0 0.0% 58, % 27.2% 0 0 $15.34 Total 31 1,976, , % 14, % 249, % 16.0% 66,489 24,325 $20.66 NORTHWEST A 73 6,964, , % 56, % 588, % 10.5% 142,178-47,301 $35.03 B 96 4,211, , % 45, % 514, % 10.9% -57,092 33,385 $28.25 C 5 428,563 4, % 0 0.0% 4, % 0.4% -3,217-1,214 $25.73 Total ,590,316 1,006, % 101, % 1,107, % 10.3% 81,869-15,130 $31.98 ROUND ROCK A 2 282,721 25, % 0 0.0% 25, % 10.1% 3, $30.13 B ,289 44, % 2, % 47, % 31.0% 108,157-2,191 $28.41 C 3 147, % 0 0.0% 0 0.0% 0.0% Total ,476 70, % 2, % 73, % 18.3% 111,265-2,787 $28.55 SOUTH A 5 395,493 31, % 8, % 40, % 5.8% -17,517-8,440 $34.46 B 23 1,131,499 86, % 0 0.0% 86, % 4.4% -36,216-2,982 $25.58 C ,703 48, % 1, % 49, % 3.9% -22,315-4,530 $24.48 Total 41 2,239, , % 10, % 176, % 4.5% -76,048-15,952 $27.02 SOUTHEAST B 10 1,177, , % 0 0.0% 433, % 37.0% 1,720-6,400 $23.13 C 4 161,933 3, % 0 0.0% 3, % 3.1% 1,371 0 $20.00 Total 14 1,338, , % 0 0.0% 436, % 32.9% 3,091-6,400 $23.02 SOUTHWEST A 49 6,176, , % 261, % 1,043, % 15.3% -101, $37.43 B 70 2,615, , % 39, % 228, % 8.5% -6,705-33,469 $28.77 C 3 94,138 20, % 0 0.0% 20, % 21.9% ,222 $32.98 Total 122 8,885, , % 300, % 1,292, % 13.3% -107,883-49,551 $35.59 WEST CENTRAL A 4 538,030 21, % 0 0.0% 21, % 9.5% 29,588 76,643 $40.18 B 4 182,700 10, % % 12, % 6.4% $29.61 C 1 50, % 0 0.0% 0 0.0% 14.8% 7,433-4,725 - Total 9 770,862 31, % 2, % 34, % 9.1% 36,044 71,518 $ Austin Research & Forecast Report Q Office Colliers International

6 Office Development Pipeline 2,729,585 square feet of office space was under construction during Q Three buildings totaling 259,480 square feet delivered in Q3 including 411 W Main St, a 33,634 square foot building in the Round Rock submarket. Sixteen proposed buildings were given the green light to begin construction this quarter. BUILDING NAME ADDRESS SUBMARKET SF PRE- LEASED DEVELOPER EST. DELIVERY Presidio I W Parmer Ln Round Rock 25, % Riverside Resources Oct S Congress Ave 3114 S Congress Ave South 32, 100.0% Unknown Oct Vikki 9811 Vikki Ter Southwest 22, 64.10% Unknown Nov-16 Diamond Building Aldrich St & Simond Ave East 57, % Catellus Development Dec-16 Corporation Parmer Sector 3 Bldg 1 Parmer 3.1 Northeast 189, 100.0% Trammel Crow Co Dec-16 Building Southwest Pky Southwest 87, % Lincoln Property Company Jan-17 Building Southwest Pky Southwest 87, % Lincoln Property Company Jan W 2nd St 500 W 2nd St CBD 500, % Trammel Crow Co Jan-17 Domain Alterra Parkway North/Domain 291, % Endeavor Real Estate Group Feb-17 uship 205 E Riverside Dr South 39, % Chioco Designs Mar E Riverside Dr 2301 E Riverside Dr Southeast 29, % Unknown Apr-17 Galleria Oaks I 3297 Ranch Road 620 S Southwest 74, % Unknown May-17 Galleria Oaks II 3297 Ranch Road 620 S Southwest 74, % Unknown May-17 Overlook at Barton Creek 317 Grace Ln Southwest 53, % Harren Interests Jul-17 University of Texas Systems 702 Colorado St CBD 342, 100.0% Unknown Jul-17 Shoal Creek Walk 835 W 6th St CBD 218, % Schlosser Development Jul-17 Building W US HWY 290 SVRD Southwest 27, % Unknown Aug-17 WB Paloma Ridge Building C Ranch Road 620 N Cedar Park 112, % Unknown Oct-17 The Reserve at Oak Hill 6804 Old Bee Caves Rd Southwest 38, % Unknown Dec-17 QUOTED GROSS RENTAL S FOR EXISTING TOP PERFORMING OFFICE BUILDINGS BUILDING NAME ADDRESS SUBMARKET RBA YEAR BUILT % LEASED AVAIL. SF RENT ($/ SF) Frost Bank Tower 401 Congress Ave CBD 535, % 37,299 $63.75 CalSTRS One Eleven 111 Congress Ave CBD 518, % 67,851 $42.00 Cousins Properties Inc One American Center 600 Congress Ave CBD 503, % 10,047 $39.61 CalSTRS 300 West Sixth 300 W 6th St CBD 454, % 40,756 $60.00 CalSTRS 301 Congress 301 Congress Ave CBD 446, % 90,026 $54.55 PGIM Real Estate 100 Congress 100 Congress Ave CBD 411, % 45,454 $52.61 Metlife, Inc W Parmer Ln - Bldg. B 7700 W Parmer Ln - Bldg.B Far Northwest 335, % 31,500 $34.98 Accesso Partners, LLC 7700 W. Parmer Ln - Bldg. C 7700 W Parmer Ln - Bldg.C Far Northwest 287, % 11,540 $34.57 Accesso Partners, LLC Two Barton Skyway 1601 S MoPac Southwest 195, % 24,337 $42.02 Brandywine Realty Trust OWNER Note: Avail. SF includes direct and sublet space as well as any future available space listed. Source: CoStar Property 6 Austin Research & Forecast Report Q Office Colliers International

7 Q Office Highlights FOR MORE INFORMATION Kaitlin Holm Research and Marketing Coordinator Austin Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 7 Colliers International Market Address, Suite # Austin Colliers International Address, Suite # Suite Congress Avenue, +1 0 Austin, Texas colliers.com/<<market>> colliers.com/texas/austin <<region>> North American Research Research & Forecast & Forecast ReportReport Quarter Q4Year 2014or Date Office <<Location Market Outlook / Sector>> Colliers Colliers International International