Metropolitan Chicago. Market Review. Office Market Review. Second Quarter 2014

Transcription

1 Metropolitan Chicago Market Review Office Market Review Second Quarter 214 1

2 To our valued customers, partners and future clients I recently returned from a three-day bicycle tour of the Colorado Rocky Mountains a benefit for the Denver Children s Hospital called the Courage Classic. The trip was exhausting yet exhilarating, grueling yet awe-inspiring, draining yet rejuvenating and best of all full of handy metaphors perfectly timed to inspire my quarterly reflection on the status of Chicago s real estate market. The struggles and rewards of sports provide such a clear correlation to the ups and downs of our business and our economy that it s little wonder that we so often turn to athletic terminology. slam dunk, grand slam, marathon the list goes on and on. In my case, I saw that the prepared riders who had trained for the rigors of the mountains anticipated the rises, falls, and curves of the path expertly used their momentum to their advantage. Those less prepared struggled, lost speed and had to expend more energy just to keep up. Chicago s real estate markets both in the industrial and office sectors - have crested a ridge. We ve seen several consecutive quarters of positive absorption; after several years of struggle, we re coasting and picking up speed. Many owners and investors made shrewd moves to position themselves for these events, and they ll use their momentum to carry them forward into the next phase. In almost all cases, it is careful planning and preparation that equips us for that next leg of the trip - whether it s to climb higher or to overcome a dip in the road. The research and analysis in the following pages are invaluable tools, and we hope they will assist you as you look ahead to the second half of 214. Regards, John R Picchiotti COO, Brokerage

3 Table of Contents NAI Hiffman Metropolitan Chicago Office Market Review Second Quarter Local Economy 7 Industrial Statistics 8 Suburban Office Summary 1 North Suburban 12 Northwest Suburban 14 O Hare Area 16 East-West Corridor 18 I-55 Corridor 2 Downtown Office Summary 22 West Loop 24 Central Loop 26 East Loop 28 North Michigan Avenue 3 River North 32 Methodology/NAI Global 34 NAI Hiffman 3

4 Overall Trend Local Economy Unemployment POPULATION (21 CENSUS) 9,461,15 7.2% POPULATION CHANGE (2-21) +4.% MEDIAN HOUSEHOLD INCOME (21) $57,14 GROSS METRO PRODUCT (213) $585.9 BILLION Case-Schiller Home Price Index LABOR FORCE TOTAL NONFARM JOBS GAINED (5/13-5/14) CHICAGO METRO UNEMPLOYMENT RATE ILLINOIS UNEMPLOYMENT RATE U.S. UNEMPLOYMENT RATE 4,133,648 21,3 7.2% 7.5% 6.1% Q1 214 US GDP Change -2.9% The third largest metropolitan area in the U.S. after New York and Los Angeles, Chicago is the most infl uential economic region between the East and West Coasts. Foreign Policy Magazine recently ranked Chicago sixth among world competition, measuring econometrics from the number of Fortune 5 companies to the fl ow of goods and services through airports and ports. Situated at the geographical heart of the nation, Chicago s locational advantages have fostered its development into an international center for banking, securities, high technology, air transportation, business services, wholesale and retail trade, and manufacturing. In addition, Chicago is one of the principal trading centers for commodities, fi nancial, and derivative futures products with the Chicago Mercantile Exchange and Board of Trade. Quarter in Review Following three quarters of GDP annual growth in excess of 2%, the winter hit hard. First quarter GDP fi gures were revised sharply downward to negative 2.9%, the worst quarterly performance for the US economy in fi ve years. The harshest winter conditions the country has witnessed in decades were only part of what caused the fi rst contraction in GDP in three years. Despite this negative news, all economic indicators remained positive, and it appears nearly certain a second consecutive quarter of GDP contraction won't happen. Economists are forecasting an impressive rebound for the second quarter of the Perecent Jobs Recovered Unemployment and Work Force Participation 1% 68% 12% 8% 6% 4% 2% % 67% 66% 65% 64% 63% 62% % 8% 6% 4% 2% % Metro Chicago Unemployment Rate U.S. Unemployment Rate U.S. Labor Force Participation Rate Source: Bureau of Labor Statistics 14 4 NAI Hiffman

5 year at between 3% and 4% growth, and will likely to continue at a 3% pace for the second half of the year. Local Economy The employment picture continues to improve. An average of 231, SF jobs were created per month through the fi rst half of 214, a 13.5% increase when compared to the same period last year. The period between February and June was the fi rst fi ve month stretch to create more than 2, jobs in each month in more than 15 years. The country has now recovered all of the 8.7-million jobs lost as a result of the economic downturn. However, the job recovery took more than six years to surpass the nation's prior employment peak of million workers. The US unemployment rate has dropped to 6.1%, down from 7.5% a year ago, while Illinois' unemployment rate dropped signifi cantly to a preliminary 7.1% in June, down from 9.2% a year ago. The four-week moving average for new unemployment claims recently hit its lowest level since August 27, before the recession took hold. However, the work force participation rate has remained steady at 62.8% for the past three months, a 36-year low. U.S. Business Confidence Source: Tradingeconomics.com, Institute for Supply Management Average Weeks Unemployed 5 Looking Forward Consumer sentiment, one of the most important economic indicators, continues to improve. The Conference Board reported in June that consumer confi dence rose to the highest level in more than six years, refl ecting the recent improvements in the labor market, a stock market that keeps setting records, and a steady, if not slowly improving, housing market. The harsh winter and contraction of the US economy during the fi rst quarter of the year has apparently resulted in pent-up demand, and the economy looks poised to gain momentum through the remainder of the year. Infl ation concerns are expected to remain minimal and monetary policy is expected to remain loose through Average weeks unemployed Source: Bureau of Labor Statistics Corporate Profits vs. Job Openings 6 MM $2. Trillion The housing market continues to be one the largest factors holding the economy back from growing at breakneck speed. New home starts fell by 9.3% to an 893, annualized rate in June. Every time the housing market seems poised to pick up, it fl attens again. While inventory levels have increased, they still remain well below long-term averages, especially for the warmer months of the year, which tend to be an active period for home sales. Household formation remains at a 3-year low and wages have grown at only a 2.1% rate over the past 12 months. These two factors contribute directly the uncertain housing market. 5 MM 4 MM 3 MM 2 MM $1.5 Trillion $1. Trillion $.5 Trillion $ Corporate Profits After Tax ($) U.S. Non-Farm Job Openings (#) Source: Bureau of Labor Statistics & Bureau of Economic Analysis 5

6 Chicago Office Markets Crystal Lake Dundee McHenry Elgin South Elgin Fox Lake Northwest Suburban Lake Zurich Schaumburg Grayslake Vernon Hills Chicago Executive Airport Arlington Heights Gurnee Waukegan Regional Airport Buffalo Grove Ohare Int'l Airport Waukegan Libertyville North Suburban Lake Forest Highland Park Deerfield Northbrook Glenview 2 O Hare Area Niles Skokie Offi ce Market Overviews North Suburban Northwest Suburban O Hare Area East-West Corridor I-55 Corridor West Loop Central Loop East Loop North Michigan Avenue River North Evanston Dupage St CharlesAirport North Aurora Aurora Carol Stream Naperville 55 Bolingbrook Romeoville Addison Lombard East-West Corridor 2 2 Downers Grove Westmont I-55 Darien Corridor Burr Ridge CBD (Central Business District) Franklin Park Chicago Carpenter St Chicago Midway Airport Halsted St Ohio St Kinzie St 12 2 Oak Lawn Chicago Ave Chicago Midway 5 Airport West Loop Wacker Dr Oak St River North Wells St 57 Congress Pky State St 57 Central Loop Harvey East Loop Michigan Ave Michigan Ave North Michigan 12 Avenue 2 Wacker Dr Randolph St 6 41 Gary/Chicago A 6 NAI Hiffman

7 Second Quarter 214 Office Market Statistics Market/ # Bldgs. Total RBA Direct Sublease Total Total Q2 214 Net YTD 214 Q2 214 Under Submarket (SF) Vacancy Vacancy Vacancy Available Absorption (SF) Absorption (SF) Constr. (SF) North Suburban Class A Class B Class C Northwest Suburban Class A Class B Class C O Hare Area Class A Class B Class C East-West Corridor Class A Class B Class C I-55 Corridor Class A Class B Class C Suburban Totals Class A Class B Class C , , ,321,585 17,318,27 1,85,362 2,917,953 33,762,617 16,65,4 14,96,648 3,15,25 15,25,637 8,131,341 6,16,692 1,12,64 42,96,999 21,12,182 16,844,42 4,996,775 4,19, ,578 2,685, ,73 126,315,93 63,919,315 49,818,718 12,577,6 15.% 15.84% 16.75% 13.77% 19.56% 15.22% 24.4% 2.95% 18.58% 14.83% 23.59% 18.45% 17.71% 15.13% 21.88% 14.59% 11.98% 5.38% 14.% 1.67% 17.7% 15.2% 21.34% 16.4%.76% 1.22%.18%.5% 1.34% 1.45% 1.33%.74%.35%.53%.14%.12% 2.21% 2.24% 2.82%.2% 1.9%.% 1.63%.% 1.37% 1.51% 1.47%.21% 16.7% 17.5% 16.93% 13.83% 2.% 16.67% 25.73% 21.69% 18.93% 15.36% 23.74% 18.57% 19.92% 17.36% 24.7% 14.61% 13.6% 5.38% 15.62% 1.67% 19.7% 16.71% 22.81% 16.25% 23.31% 26.15% 19.96% 18.4% 28.34% 27.7% 3.31% 22.65% 22.39% 18.88% 27.65% 18.92% 25.75% 26.74% 26.91% 17.69% 18.% 7.6% 22.19% 11.73% 25.21% 25.62% 26.3% 18.76% 25,7 26,756 2,21-3, ,5 244,75 6,121 18,34 92,454 1,973 73,193 17, ,613 12,1-11,172 26,775 4,476-14,533 15,25 3,84 76, , ,557 62, , ,738 18,671 11, ,254 35, ,363 13,238 17,253-88, ,334 9,41 215, ,187 5,2 22,462 25,82-3,1 24,124 5,597 1,33,44 597, ,782 62, ,3 753,3 165, 165, 72, 72, 237, 237, West Loop Class A Class B Class C Central Loop Class A Class B Class C East Loop Class A Class B Class C North Michigan Ave. Class A Class B Class C River North Class A Class B Class C ,399,37 3,193,318 11,234,46 3,971,673 38,849,342 19,661,779 15,7,58 3,396,983 23,45,26 1,864,735 7,349,927 5,1,598 13,141,925 6,22,259 6,131,682 87,984 13,53,272 4,88,938 5,798,248 3,643, % 1.28% 8.43% 4.69% 1.65% 1.13% 12.7% 7.6% 15.82% 15.63% 18.44% 12.54% 15.11% 17.39% 13.27% 11.58% 7.89% 7.51% 9.29% 6.9%.88%.54% 2.6%.2%.67%.71%.78%.1%.97% 1.3%.97%.27% 1.4% 1.46%.76%.% 2.21%.22% 4.63%.6% 1.21% 1.81% 1.49% 4.89% 11.32% 1.83% 12.85% 7.6% 16.8% 16.93% 19.41% 12.81% 16.15% 18.85% 14.3% 11.58% 1.1% 7.73% 13.91% 6.68% 18.25% 17.89% 22.61% 8.71% 16.67% 16.5% 19.2% 9.34% 21.36% 22.39% 23.68% 15.% 22.2% 23.45% 21.95% 11.54% 14.15% 12.8% 18.77% 9.13% 154,725 13,673 27,258-3,26 196, ,723 74,735-3,541-48, ,723-5,34 64,35 27,437 41,3-5,35 71,658-1,15 69,21 3, , ,531 68,876 3,154-14,1 67,689 12,62-93,1-526,47 31, ,226-79,53 95,768-1,65 95,495 1,923-19, ,854 1,964 1,55,67 1,55,67 Downtown Totals Class A Class B Class C ,325,836 71,11,29 46,34,483 17,1, % 11.52% 12.1% 8.18%.99%.76% 1.6%.26% 12.25% 12.28% 13.61% 8.44% 18.29% 18.22% 2.98% 11.25% 7,64 281, ,626-58,614-17,48 372, , ,43 1,55,67 1,55,67 Metro Chicago Totals Class A Class B Class C 2, , ,64, ,93,344 96,123,21 29,587, % 13.26% 16.84% 11.52% 1.17% 1.12% 1.53%.24% 15.56% 14.38% 18.38% 11.76% 21.64% 21.72% 23.74% 14.44% 768,437 84,125-76,69 4, ,96 969,783 42,135-85,958 2,54,367 2,54,367 7

8 Overall Trend Suburban Office Market # OFFICE BUILDINGS 2,32 MARKET SIZE (SF) 126,315, % TOTAL VACANCY 24,91,341 SF (19.7%) DIRECT VACANCY 22,362,988 SF (17.7%) SUBLEASE VACANCY 1,728,353 SF (1.37%) AVAILABLE SPACE 32,399,739 SF (27.82%) Net Absorption 76,833 SF Q2 214 NET ABSORPTION (SF) 76,833 TOTAL 214 NET ABSORPTION (SF) 1,33,44 UNDER CONSTRUCTION (SF) 9,3 Q2 214 NEW SUPPLY (SF) 18, Asking Rents $19.56 Pictured above: Woodland Falls II, the 558,859 SF building subleased by AbbVie from Capital One during the second quarter Comprised of several scattered pockets of offi ce developments, corporate parks and high-rise offi ce towers, the suburban offi ce market has experienced historically higher vacancy rates, larger swings in absorption, and lower rents than Chicago s downtown offi ce market. The 15 largest suburban offi ce complexes are at least 1.1 million SF, which is about the average size of an offi ce tower in the Central Business District. Quarter in Review The suburban offi ce market has now absorbed more vacant space than the downtown offi ce market for seven of the past nine quarters. Net absorption totaled 76,833 SF between April and June in the suburban offi ce market, the greatest quarterly tally in two years. As a result, the vacancy rate improved by 6 basis points during the second quarter to 19.7%, a rate 122 basis points below what was recorded a year ago, and nearly 4.6% below the 23.66% peak rate recorded in 21. For the second consecutive quarter, all fi ve suburban offi ce markets witnessed positive net absorption, suggesting that the demand for space has spread throughout the entire offi ce market and the recovery has become increasingly broad. The Northwest Suburban market absorbed the most space for the second quarter in a row, totaling 322,5 SF, the most activity that area has seen in a year-and-a-half. The two largest transactions of the quarter were both subleases. Abbott Laboratories spin-off AbbVie subleased the entire 558,859 SF building known as Woodland Falls II in north suburban Mettawa from Capital One and Zebra Technologies Corporation subleased 23, SF from Aon Hewitt at Three Overlook Point in Lincolnshire. Suburban Vacancy Absorption Suburban Direct & Overall Vacancy, 24% 3, 22% 16.7% 2.% 19.56% 18.93% 18.58% 19.92% 17.71% 19.7% 17.7% -3, 2% 15.% 13.6% 11.98% -, 18% -15, % (%) Net Absorption (SF) North Suburban Northwest Suburban O Hare Area East-West Corridor I-55 Corridor Overall Suburban 8 NAI Hiffman Direct Vacancy Sublease Vacancy

9 Suburban Office Market New Development Three construction projects are underway in the suburban offi ce market. A 753, SF headquarters facility for Zurich North America broke ground during the second quarter in Schaumburg. Construction continues on the American Academy of Orthopaedic Surgeons 165, SF build-to-suit headquarters and the 72, SF imed Medical Offi ce Campus in Naperville. Construction activity will be limited to custom build-to-suit projects in the suburban offi ce market until hiring substantially increases and additional vacant space is absorbed. Largest Blocks of Available Space Building Name Building Address Block Size (SF) AT&T 2 W AT&T Dr, Hoffman Estates 1,27,245 Motorola Mobility Campus 6 N US Highway 45, Libertyville 1,121,186 AON Office Building 1 Milwaukee Ave, Glenview 45,39 AT&T Business Park 21 Lakewood Blvd, Hoffman Estates 287, Oakmont Centre 7 Oakmont Ln, Westmont 256,767 Cantera 421 Winfield Rd, Warrenville 249,996 One Parkway North 1 Parkway Blvd N, Deerfield 218, Cabot 24 Cabot Dr, Lisle 25,633 Fischer Corporate Center 177 N Randall Rd, Elgin 25,54 Woodfield Corporate Center 2 N Martingale Rd, Schaumburg 197,631 Suburban Office Buildings On the Market 2nd Quarter 214 Market Building Address Size (SF) Target Price Price PSF Seller Status North Suburban 6 N US Highway 45, Libertyville 1,121,186 S.T.O. S.T.O. Motorola Mobility Inc On market Northwest Suburban Kemper Lakes Business Center, Long Grove 1,91,214 $135,, $124 Equus Capital Partners, Ltd On market O Hare Area Columbia Centre, Rosemont 62,21 $1,, $161 Angelo, Gordon/Pearlmark/White Oak On market Northwest Suburban 2144 Lake Cook Rd, Deer Park 351,425 $4,, $114 Continental Under contract O Hare Area 855 W Bryn Mawr Ave, Chicago 32,88 $42,1, $139 Lone Star On market North Suburban 75 N Fariway Dr, Vernon Hills 189,686 $25,, $132 Alcion/Janko Group Under contract Suburban Office Significant Sale Transactions 2nd Quarter 214 Market Building Address Size (SF) Sale Price Price PSF Buyer Seller North Suburban 21 E Lake Cook Rd, Buffalo Grove 258,995 $45,, $174 Beacon Investment Properties, LLC Hamilton Partners/JSQ Commercial East-West Corridor 22 & 2222 Kensington Ct, Oak Brook 26,3 $37,, $18 Griffin Capital Inland Real Estate O Hare Area 4-property portfolio, Schiller Park 23,912 1 $5,75, 1 N/A 1 L&R Group of Companies Northside Community Bank East-West Corridor 711 Jorie Blvd, Oak Brook 2,162 $12,225, $61 McDonald s Corp Safeway, Inc Northwest Suburban 555 Prairie Stone Pky, Hoffman Estates 193,7 $8,825, $46 Salvation Army Piedmont/Wells Real Estate North Suburban 17 Church St, Evanston 153,389 $9,6, 2 $63 2 Lubert-Adler Partners/Farbam Group Jamie Larocca North Suburban 9933 Lawler Ave, Skokie 12, $15,, $125 Imperial Realty Company Singerman Real Estate, LLC East-West Corridor 81 & 89 Ogden Ave, Lisle 86,172 $12,, $139 Becker Brothers Westminster Funds/Brennan Inv Suburban Office Significant Lease Transactions 2nd Quarter 214 Market Property Address Leased (SF) Tenant Lease Type North Suburban N Riverwoods Blvd, Mettawa 558,859 AbbVie Sublease North Suburban 3 Overlook Pt, Lincolnshire 23, Zebra Technologies Corporation Sublease East-West Corridor 265 Warrenville Rd, Downers Grove 124,881 PNC Bank Lease renewal Northwest Suburban 1 Pierce Pl, Itasca 16, Houghton Mifflin Harcourt Co New lease O Hare Area 55 Pearl St, Rosemont 89,817 Xerox Corporation Lease renewal Northwest Suburban 3 Park Blvd, Itasca 77, Flexera New lease Northwest Suburban 28 W Higgins Rd, Hoffman Estates 7, Omron New lease Northwest Suburban 425 N Martingale Rd, Schaumburg 5, ATS New lease Northwest Suburban 2349 W Lake St, Addison 45, Insite New lease 1 REO sale, portfolio includes 3 buildings and a.92-acre land parcel, high vacancy buildings 2 Judicial note sale at 47 percent of its face value 9

10 173 North Suburban Waukegan Regional Airport # OFFICE BUILDINGS Gurnee Waukegan MARKET SIZE (SF) 3,321,585 Grayslake 12 TOTAL VACANCY 5,64,635 SF (16.7%) 21 DIRECT VACANCY 4,833,741 SF (15.%) SUBLEASE VACANCY 23,8 SF (.76%) AVAILABLE SPACE 7,67,448 SF (23.31%) Vernon Hills Libertyville Lake Forest Q2 214 NET ABSORPTION (SF) 25,7 ke Zurich TOTAL 214 NET ABSORPTION (SF) 226,174 Buffalo Grove Highland Park UNDER CONSTRUCTION (SF) 21 Deerfield 68 Q2 214 NEW SUPPLY (SF) Chicago Executive Airport Northbrook Net Absorption Asking Rents haumburg Arlington Heights 2 Glenview 43 Niles Skokie Evanston 16.7% 25,7 SF Ohare Int'l Airport The North Suburban market is diverse in industry, but best known as a headquarters solution to many of Chicagoland s largest employers. With an unparalleled, qualifi ed workforce, the north suburbs also lay claim to Chicago s popular North Shore communities where many of the area s chief executives and advisors choose to reside. In previous years, the market has fallen victim to large reductions in size from companies such as Allstate and Hewitt & Associates, but historically the market has been better served by its pharmaceutical-related staples including Walgreens, Baxter and Abbott Laboratories. Vacancy Absorption Inventory by City 4, 25% Deerfield (14%) 2, 22% Other Suburbs (27%) 19% Northbrook (12%) -2, 16% Vernon Hills (5%) Skokie (1%) -4, 13% Glenview (5%) -6, 1% (%) Net Absorption (SF) Buffalo Grove (5%) Bannockburn (5%) Evanston (8%) Lincolnshire (9%) 1 NAI Hiffman Two signifi cant lease transactions pushed absorption positive during the second quarter, totaling 25,7 SF

11 North Suburban Quarter in Review Leasing activity in the North Suburban market contributed to continued improving conditions during the second quarter as 25,7 SF of vacant space was absorbed, bringing the tally for the fi rst half of the year to 226,174 SF. The area s vacancy rate decreased by 68 basis points during the second quarter to 16.7%, the most signifi cant improvement in nearly two years. The vacancy rate is down over 4% since peaking at 2.71% in 21. Pharmaceutical fi rm AbbVie, a spinoff of Abbott Laboratories, signed the largest lease of the second quarter and the largest suburban offi ce lease transaction since 212, subleasing the 558,859 SF building known as Woodland Falls II at N Riverwoods Blvd in Mettawa from Capital One. AbbVie plans to eventually move up to 2, workers to the building from its current location in North Chicago. Zebra Technologies Corporation also signed a signifi cant lease during the quarter, subleasing 23, SF from Aon PLC at 3 Overlook Point in Lincolnshire.The largest sale of the second quarter involved Florida-based investment fi rm Beacon Investment Properties, LLC purchasing Riverwalk II, a 258,859 SF 12-story offi ce tower at 21 E Lake Cook Rd in Buffalo Grove. Beacon acquired the property for $45 million, or about $174 PSF, from Hamilton Partners and JSQ Commercial. Looking Forward The North Suburban offi ce market can still support new tenants both large and small. There are currently 21 options available throughout the market for contiguous space 1, SF or larger in size. Once some of these larger vacancies are absorbed, the vacancy rate will respond favorably. The improvement trend witnessed over the past several years is expected to continue through the second half of 214 as additional space is leased. Largest Blocks of Available Space Building Name Building Address Block Size (SF) Motorola Mobility Campus 6 N US Highway 45, Libertyville 1,121,186 AON Office Building (SL) 1 Milwaukee Ave, Glenview 45,39 One Parkway North 1 Parkway Blvd N, Deerfield 218,196 Bannockburn Centre at College Park (SL) 12 Lakeside Dr, Bannockburn 17,165 Woodland Falls Corporate Center (SF) N Riverwoods Blvd, Mettawa 156,156 Landmark of Lake Forest II 15 S Saunders Rd, Lake Forest 126,595 One Overlook Point 1 Overlook Pt, Lincolnshire 111,327 (SL) All or partially a sublease listing Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant North Suburban Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller Riverwalk II 21 E Lake Cook Rd, Buffalo Grove 258,995 $45,, $174 Beacon Investment Properties, LLC Hamilton Partners/JSQ Commercial Church Street Office Ctr 17 Church St, Evanston 153,389 $9,6, 1 $63 1 Lubert-Adler Partners/Farbam Group Jamie Larocca Westmoreland Bldg 9933 Lawler Ave, Skokie 12, $15,, $125 Imperial Realty Company Singerman Real Estate, LLC Significant North Suburban Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type Woodland Falls II N Riverwoods Blvd, Mettawa 558,859 AbbVie Sublease Three Overlook Point 3 Overlook Pt, Lincolnshire 23, Zebra Technologies Corporation Sublease Landmark of Lake Forest I 1 S Saunders Rd, Lake Forest 19,1 Packaging Corporation of America New lease Corporate 52 Center 52 Lake Cook Rd, Deerfield 9,987 Consumers Digest Communications LLC Lease renewal The Wi-Fi Professional Building N McCormick Blvd, Skokie 6,62 Worthy Insurance New lease Deer Tech 111 Deer Lake Rd, Deerfield 6,536 Mann, Weitz & Associates LLC Lease renewal Arbor Creek Centre Barclay Blvd, Buffalo Grove 4,936 Lintec of America Lease renewal 1 Judicial note sale at 47 percent of its face value Entries highlighted in red denote NAI Hiffman transactions 11

12 173 Northwest Suburban Fox Lake 45 Wau Region # OFFICE BUILDINGS 585 MARKET SIZE (SF) 33,762,617 McHenry TOTAL VACANCY 7,56,436 SF (2.9%) 176 Libertyville DIRECT VACANCY 6,65,25 SF (19.56%) SUBLEASE VACANCY 451,231 SF (1.34%) AVAILABLE SPACE 9,568,581 SF (28.34%) Q2 214 NET ABSORPTION (SF) 322,5 TOTAL 214 NET ABSORPTION (SF) 458,254 UNDER CONSTRUCTION (SF) 753,3 Q2 214 NEW SUPPLY (SF) Net Absorption Asking Rents 2.9% 322,5 SF 176 Crystal Lake Dundee Elgin 72 2 South Elgin Dupage Airport St Charles 59 Hoffman Estates 14 Lake Zurich 62 Hanover Park Palatine Schaumburg Bloomingdale Wood Dale 2 2 Addison 355 Chicago Executive Airport Arlington Heights Elk Grove Village Buffalo Grove L 29 Ohare R Int'l Airport Frank The Northwest Suburban market is highly infl uenced by activity in the Schaumburg Area submarket, which includes the municipalities of Schaumburg, Hoffman Estates, Rolling Meadows, Arlington Heights and Palatine (65% of total market inventory). Recently, big companies such as Catamaran Corporation and Capital One have leased signifi cant space in the submarket. The vacancy rate in the Northwest Suburban market increased dramatically in 29 and 21 to more than 27%, but has since dropped nearly 5% due to more than 1.6 million SF of net absorption over the past three years. Vacancy Absorption Inventory by City 4, 2, 3% 28% Other Suburbs (22%) Schaumburg (29%) 26% Long Grove (4%) -2, 24% Elgin (7%) -4, 22% Arlington Heights (1%) -6, 2% (%) Net Absorption (SF) Hoffman Estates (8%) Rolling Meadows (1%) Itasca (1%) 12 NAI Hiffman The Northwest Suburban market absorbed more space than any other market during the quarter, at 322,5 SF

13 Northwest Suburban Quarter in Review The Northwest Suburban market has now witnessed improving conditions for more than two years. In that time, the vacancy rate has dropped by 5.25% to 2.9%, which is still the highest among all fi ve suburban offi ce markets. During the second quarter alone, the vacancy rate fell nearly a full percentage point as 322,5 SF of vacant space was absorbed through leasing activity, more than any other offi ce market. This brings the net absorption tally for the fi rst half of the year to 458,254 SF. In the largest sale transaction of the quarter, The Salvation Army purchased the recently vacated 193,7 SF four-story offi ce building located at 555 Prairie Stone Pky in Hoffman Estates for $8.825 million, or about $46 PSF, from a joint-venture between Piedmont Offi ce Realty Trust and Wells Real Estate. The Salvation Army plans to use the building, known as Two Park Center, as its central region headquarters. The largest new lease of the quarter was signed by Boston-based publisher and educational content producer Houghton Miffl in Harcourt Co, leasing 16, SF at One Pierce Place in Itasca. Houghton Miffl in plans to move 34 employees to its new space from Rolling Meadows by October 215. Looking Forward The past two years have seen a signifi cant increase in demand for space and investor interest in the Northwest Suburban offi ce market. Long plagued by vacancy concerns, the area has actually witnessed the most impressive improvement over the past two years. This activity is expected to continue over the coming quarters. Tenants looking for contiguous blocks of space 5, SF or larger currently have 24 options throughout the market, while those looking for 1, SF or larger have 12 options, suggesting that there is plenty of room for improvement and that the market can accommodate larger tenants. Largest Blocks of Available Space Building Name Building Address Block Size (SF) AT&T 2 W AT&T Dr, Hoffman Estates 1,27,245 AT&T Business Park 21 Lakewood Blvd, Hoffman Estates 287, Fischer Corporate Center 177 N Randall Rd, Elgin 25,54 Woodfield Corporate Center 2 N Martingale Rd, Schaumburg 197,631 One Woodfield Lake 1 E Woodfield Rd, Schaumburg 182,6 Continental Towers 171 Golf Rd, Rolling Meadows 159,824 Oakwood Commerce Center III 7 N Wood Dale Rd, Wood Dale 125,323 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant Northwest Suburban Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller Two Park Center 555 Prairie Stone Pky, Hoffman Estates 193,7 $8,825, $46 Salvation Army Piedmont Office Realty Trust/Wells Real Estate Regency Exec Center Regency Pky, Huntley 35,76 $2,35, $67 Janko Group Heartland Bank and Trust Co Significant Northwest Suburban Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type One Pierce Place 1 Pierce Pl, Itasca 16, Houghton Mifflin Harcourt Co New lease Hamilton Lakes Business Park 3 Park Blvd, Itasca 77, Flexera New lease Greenspoint Office Park 28 W Higgins Rd, Hoffman Estates 7, Omron New lease Woodfield Corporate centre 425 N Martingale Rd, Schaumburg 5, ATS New lease Meadows Office Center I 2349 W Lake St, Addison 45, Insite New lease Centennial Center 1 E Golf Rd, Schaumburg 24,81 Pulte Homes New lease Woodfield Corporate Center 15 N Martingale Rd, Schaumburg 2,719 INX International Ink Co Lease renewal 1 REO sale 2 Part of a national 49-property office/retail portfolio sold for a published price of $224 million Entries highlighted in red denote NAI Hiffman transactions 13

14 9% 4% 4% 29% 34% Northbrook O Hare Area # OFFICE BUILDINGS 171 Chicago Executive Airport Arlington Heights 2 MARKET SIZE (SF) 15,25, TOTAL VACANCY 2,886,77 SF (18.93%) DIRECT VACANCY 2,833,478 SF (18.58%) SUBLEASE VACANCY 53,292 SF (.35%) AVAILABLE SPACE 3,414,957 SF (23.39%) Elk Grove Village Des Plaines Ohare Int'l Airport Park Ridge Rosemont Q2 214 NET ABSORPTION (SF) 92, TOTAL 214 NET ABSORPTION (SF) 17,253 UNDER CONSTRUCTION (SF) 165, Q2 214 NEW SUPPLY (SF) Addison 2 Franklin Park 5 Net Absorption Asking Rents Lombard % 92,454 SF At approximately 15.3 million SF, the O Hare submarket is one of the smallest suburban markets. Due to its central location, proximity to O Hare International Airport and access to rich amenities and public transportation, the O Hare submarket has led the suburban offi ce recovery. Many companies have identifi ed the O Hare submarket as the ideal location for a new offi ce or a consolidation of multiple locations. Geographically, O Hare sits in the center of the major suburban submarkets providing the middle ground for employees coming from surrounding locations, not to mention immediate access to the airport for multi-market companies. Additionally, O Hare is the only submarket providing access to the CTA s elevated train lines from the city, allowing convenient public transportation for city-dwelling staff members. Vacancy Absorption Inventory by City 2, 12, 28% 26% Schiller Park, Franklin Park, Norridge, Harwood Heights (4%) Bensenville (4%) 4, 24% Park Ridge (9%) Rosemont (34%) -4, 22% -12, 2% -2, % Des Plaines (21%) (%) Net Absorption (SF) Chicago (O Hare Area) (29%) 14 NAI Hiffman The O Hare vacancy rate has dropped by 6.72% since 21 to 18.93%, one of the lowest among the suburban markets

15 O Hare Area Quarter in Review For the third consecutive quarter the O Hare Area market experienced positive demand as 92,454 SF of vacant space was absorbed through elevated leasing activity. Continuing its improvement trend, the vacancy rate declined 61 basis points from the fi rst quarter to 18.93% and is now 6.72% below the 25.65% peak reached in early 21. Construction continues on the American Academy of Orthopaedic Surgeons 165, SF build-to-suit headquarters at the corner of River and Higgins Roads, less than two blocks from its current location. The only signifi cant sale transaction that occurred during the second quarter involved L&R Group of Companies completing an REO sale of the O Hare Aerospace Center, a 4-property portfolio in Schiller Park consisting of three buildings totaling 23,912 SF and a.92-acre land parcel. L&R Group of Companies paid $5,75, to Northside Community Bank for the portfolio. Xerox Corporation completed the largest lease of the second quarter, signing a 89,817 SF lease renewal in the Balmoral Business Campus at 55 Pearl St in Rosemont. Looking Forward Companies will continue to be drawn to the O Hare Area s central location, transportation options, and excellent labor pool with easy access to Chicago. As the few remaining quality spaces in the market s premier class A buildings are leased, demand will increase for the area s class B product. The ramifi cations of MB Financial s purchase of Cole Taylor Bank and the merger of US Foods with Sysco, both of which lease signifi cant space in the O Hare offi ce market, are still uncertain as the acquisitions have yet to close. It is likely it will be a negative impact on the area, however, this will also create an opportunity for tenants looking for large blocks of space in quality class A buildings. Largest Blocks of Available Space Building Name Building Address Block Size (SF) Cumberland Centre 545 N Cumberland Ave, Chicago 143,525 O Hare Lake Office Park E Devon Ave, Des Plaines 142,596 US Cellular Plaza 842 W Bryn Mawr Ave, Chicago 119,228 O Hare Plaza I 8725 W Higgins Rd, Chicago 78,6 51 River Rd, Schiller Park 74, Touhy 135 E Touhy Ave, Des Plaines 71,367 O hare International Center II 1255 W Higgins Rd, Rosemont 69,285 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant O Hare Area Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller O Hare Aerospace Center 4-property portfolio, Schiller Park 23,912 1 $5,75, 1 N/A 1 L&R Group of Companies Northside Community Bank Significant O Hare Area Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type Balmoral Business Campus 55 Pearl St, Rosemont 89,817 Xerox Corporation Lease renewal O Hare Plaza I 8725 W Higgins Rd, Chicago 25,964 Comcast New lease 621 Busse Rd, Bensenville 16,636 Home Medical Express New lease Touhy Office Plaza at O Hare 14 E Touhy Ave, Des Plaines 12,752 Dynia & Associates Lease expansion/renewal Columbia Centre I 56 N River Rd, Rosemont 12,73 Kantar Media New lease Columbia Centre III 9525 W Bryn Mawr Ave, Rosemont 11,636 Oasis Legal Finance Group, LLC New lease Northwest Plaza 971 W Higgins Rd, Rosemont 1,492 Signature Bank New lease Columbia Centre I 56 N River Rd, Rosemont 8, Foresite Realty New lease 1 REO sale, portfolio includes 3 buildings and a.92-acre land parcel, high vacancy buildings Entries highlighted in red denote NAI Hiffman transactions 15

16 Chicago Executive Airport No East-West Corridor Elgin Schaumburg Arlington Heights 2 # OFFICE BUILDINGS 666 Elk Grove Village Ohare Int'l Airport Rose MARKET SIZE (SF) 42,96,999 TOTAL VACANCY 8,558,524 SF (19.92%) DIRECT VACANCY 7,69,251 SF (17.71%) SUBLEASE VACANCY 9,273 SF (2.21%) AVAILABLE SPACE 11,64,542 SF (25.75%) Q2 214 NET ABSORPTION (SF) 135,613 TOTAL 214 NET ABSORPTION (SF) 215, St Charles North Aurora Aurora Dupage Airport Naperville Lombard 38 Oakbrook Terrace Oak Brook 2 Downers Grove Elmhurst Westmont Franklin UNDER CONSTRUCTION (SF) 72, Q2 214 NEW SUPPLY (SF) Bolingbrook Romeoville Net Absorption Asking Rents 19.92% 135,613 SF Largest of the suburban offi ce markets, the East-West Corridor is diverse in many ways. Split into western and eastern sections by I-355, the western half of the market consists of relatively new product and the majority of the larger blocks of space. The characteristically more stable eastern section is defi ned by more diverse multi-tenant buildings, smaller blocks of space, and older product. Historically home to large technological users including Alcatel-Lucent and Tellabs, Inc and other sizeable corporations such as Navistar and BP Amoco, the western half of the market is more prone to sudden changes in vacancy and absorption. Vacancy Absorption Inventory by City 4, 24% Other Suburbs (19%) Oak Brook (16%) 2, 23% 22% Westchester (4%) -2, 21% Aurora (4%) Naperville (15%) -4, 2% Lombard (8%) -6, % Oakbrook Terrace (1%) Downers Grove (13%) (%) Net Absorption (SF) Lisle (11%) 16 NAI Hiffman The are few options for large contiguous spaces, resulting in landlords increasing rental rates and reducing concessions

17 East-West Corridor Quarter in Review Net absorption was positive in the East-West Corridor for the fi fth consecutive quarter, as 135,613 SF of vacant space was absorbed during the second quarter, bringing the total for the fi rst half of 214 to 215,939 SF. The area s vacancy rate has been improving steadily for the past year, and this trend continued during the second quarter, as the rate declined another 32 basis points to 19.92%. The current rate is nearly 4% below the 23.77% peak recorded during the second half of 21. Construction continues on the 72, SF imed Medical Office Campus located at 1331 W 75th St near the corner of 75th St and Route 59 in Naperville and is scheduled to be completed later this year. The largest sale transaction of the quarter involved Los Angeles-based privately-held real estate investment and management company Griffi n Capital purchasing the Ginger Creek offi ce complex, comprise of two buildings totaling 26,3 SF. The buildings, located at 22 and 2222 Kensington Ct in Oak Brook, were acquired from Inland Real Estate Group of Companies, Inc for $37 million, or about $18 PSF. The largest new lease transaction of the quarter was signed by ComEd, leasing 39,68 SF at One Lincoln Centre in Oakbrook Terrace, expanding from Two Lincoln Centre next door. Looking Forward Options remain tight for tenants looking for large contiguous blocks of space in the East-West Corridor, as only eight spaces 1, SF or larger are currently available. Only four of these spaces can be found in the premier class A buildings in the market. As the departure of Offi cemax nears, its 354, SF space at 263 Shuman Blvd in Naperville will result in an additional opportunity for tenants looking to lease large blocks of space, but may also negatively impact the vacancy rate. Largest Blocks of Available Space Building Name Building Address Block Size (SF) Oakmont Centre 7 Oakmont Ln, Westmont 256,767 Cantera 421 Winfield Rd, Warrenville 249, Cabot 24 Cabot Dr, Lisle 25,633 Corridors Two 2655 Warrenville Rd, Downers Grove 149,211 Westwood of Lisle II 2441 Warrenville Rd, Lisle 148, N Commons Dr, Aurora 112,655 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant East-West Corridor Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller Ginger Creek 22 & 2222 Kensington Ct, Oak Brook 26,3 $37,, $18 Griffin Capital Inland Real Estate Group of Companies, Inc 711 Jorie Blvd, Oak Brook 2,162 $12,225, $61 McDonald s Corp Safeway, Inc Ogden Corp Ctr 81 & 89 Ogden Ave, Lisle 86,172 $12,, $139 Becker Brothers The Westminster Funds/Brennan Investment Group Oak Creek Center Oak Creek Dr, Lombard 79,462 $7,358, 1 $93 1 Private investor The Capital Companies, LLC Significant East-West Corridor Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type Corridors III 265 Warrenville Rd, Downers Grove 124,881 PNC Bank Lease renewal Cornerstone II at Cantera 43 Winfield Rd, Warrenville 146,754 Exelon Corp Lease renewal One Lincoln Centre 18W14 Butterfield Rd, Oakbrook Terrace 39,68 ComEd New lease Oak Brook Regency Towers 1415 W 22nd St, Oak Brook 34,596 Rasmussen College Lease renewal Naperville Woods Office Center 11 E Warrenville Rd, Naperville 32,25 KJWW Lease renewal Corridors I 2651 Warrenville Rd, Downers Grove 31,342 Compu Systems New lease 71 E 22nd St, Lombard 21,297 First Advantage Mortgage Lease renewal Entries highlighted in red denote NAI Hiffman transactions 17

18 Oak Brook I-55 Corridor # OFFICE BUILDINGS Downers Grove Westmont 2 MARKET SIZE (SF) 4,19,255 TOTAL VACANCY 524,976 SF (13.6%) DIRECT VACANCY 481,313 SF (11.98%) SUBLEASE VACANCY 43,663 SF (1.9%) Naperville Darien 55 Burr Ridge 83 AVAILABLE SPACE 723,582 SF (18.%) Q2 214 NET ABSORPTION (SF) 4,476 Bolingbrook TOTAL 214 NET ABSORPTION (SF) 25,82 UNDER CONSTRUCTION (SF) Q2 214 NEW SUPPLY (SF) Romeoville Net Absorption Asking Rents 13.6% 4,476 SF Although small in volume of space, the I-55 Corridor market benefi ts from convenient access to area expressways and tollways including I-55, I-2 and the recently completed I-355 extension. Drawing from an excellent labor pool, the area is an ideal choice for companies who don t want to move as far north as Oak Brook, providing a convenient location for their employees living in the southwest suburbs. Growth in the I-55 Corridor market is tied to the rapid growth of Will County. User types are mixed with a large presence of industrial services, catering to the large industrial base in the area and medical services, supporting the area hospitals in La Grange, Hinsdale, and the Adventist Bolingbrook Hospital. Vacancy Absorption Inventory by City 15, 1, 5, 2% 18% 16% Countryside (4%) Darien (11%) Romeoville, Downers Grove (1%) Bolingbrook (26%) 14% Willowbrook (14%) -5, 12% -1, % (%) Net Absorption (SF) Woodridge (2%) Burr Ridge (24%) 18 NAI Hiffman Absorption has been positive during the past three quarters and vacancy is the lowest among the suburban markets

19 I-55 Corridor Quarter in Review Absorption has been slightly positive for the past three quarters in the I-55 Corridor. During the second quarter 4,476 SF of vacant was absorbed, bringing the tally for the fi rst half of the year to 25,82 SF. The area s vacancy rate decreased by 16 basis points between April and June to 13.6%, the lowest among the fi ve suburban offi ce markets. There were no signifi cant sale transactions that occured during the second quarter in the I-55 Corridor. The largest new lease signed during the second quarter involved Fidelity Information Systems, a global provider dedicated to banking and payments techonlogies, leasing 2,838 SF in the single-story building at 27 Remington Blvd in Bolingbrook s Creekside Corporate Center close to the interchange at Bolingbrook Dr and I-55. Looking Forward Transaction velocity in the small I-55 Corridor market is typically slow when compared to the bustling East-West Corridor, but any signifi cant leases can have a signifi cant impact on the area s vacancy rate. Currently, only three options for contiguous spaces 5, SF or larger and one space for 1, SF or larger are available, suggesting that transactions will primarily be small in size over the coming quarters. The I-55 Corridor remains an affordable alternative to parts of the surrounding submarkets and will continue to attract tenants based on value and its transportation and locational advantages. Largest Blocks of Available Space Building Name Building Address Block Size (SF) Tallgrass Corporate Center 1 Remington Blvd, Bolingbrook 124, Remington Blvd, Bolingbrook 79,832 Waterfall Glen - Phase III 84 S Frontage Rd, Woodridge 77, MidPoint II 7135 Janes Ave, Woodridge 46,624 Waterfall Glen S Frontage Rd, Woodridge 36, W Boughton Rd, Bolingbrook 22, Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant I-55 Corridor Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller None to report Significant I-55 Corridor Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type Creekside Corporate Center 27 Remington Blvd, Bolingbrook 2,838 Fidelity Information Systems New lease Meadows Professional Campus S Route 59, Plainfield 6,861 Harvest Church Plainfield Lease renewal Burr Ridge Office Center 361 S Frontage Rd, Burr Ridge 4,485 ABS Freight Transportation, Inc New lease Meadows Professional Campus S Route 59, Plainfield 3,754 Advanced Physicians, SC Lease renewal Woodland Park 545 Plainfield Rd, Willowbrook 3,368 Power Freight Systems New lease Lakeview Office Center Lakeview Ct, Romeoville 2,82 SecureAlert New lease Entries highlighted in red denote NAI Hiffman transactions 19

20 Overall Trend Downtown Office Market # OFFICE BUILDINGS 449 MARKET SIZE (SF) 134,325, % TOTAL VACANCY 16,456,398 SF (12.25%) DIRECT VACANCY 15,129,588 SF (11.26%) SUBLEASE VACANCY 1,326,81 SF (.99%) AVAILABLE SPACE 24,567,33 SF (18.29%) Net Absorption 7,64 SF Q2 214 NET ABSORPTION (SF) 7,64 TOTAL 214 NET ABSORPTION (SF) -17,48 UNDER CONSTRUCTION (SF) 1,55,67 Q2 214 NEW SUPPLY (SF) Asking Rents $28.56 Pictured above: An artist rendering of 15 N Riverside Dr, a 1.3-million SF offi ce tower expected to break ground during the third quarter, where William Blair & Company, LLC leased 318, SF during the second quarter The Chicago Loop, Wacker Drive, North Michigan Avenue and the South Michigan Avenue Streetwall are all iconic landmarks that give Chicago worldwide recognition. Historic buildings and modern high-rises defi ne Chicago s famous skyline, home to several of the tallest buildings in the country. These landmarks, combined with O Hare International Airport and public transportation including the El, commuter train lines and dozens of bus lines, all make Chicago s 24-hour downtown a world-class business center and tourist destination. Wacker Drive in the West Loop is the most active corridor in the downtown offi ce market, but when it comes to rents companies pay for offi ce space, it isn t as expensive as one would think, ranking 2th most expensive for offi ce tenants, behind cities like San Francisco, New York, Austin and Portland, Oregon. Quarter in Review Net absorption was only slightly positive during the second quarter in the downtown offi ce market, despite the overall vacancy rate improving by 24 basis points to 12.25% by the end of June. A total of 7,64 SF was absorbed, as signifi cant leasing activity was offset by new vacancies, the demolition of the 124,125 SF building located at N Michigan Ave, and the planned conversion of the 238,921 SF offi ce building at 36 N Michigan Ave into a boutique hotel. Both of these buildings are located in the East Loop submarket, where net absorption totaled negative 48,1 SF for the second quarter. All four of the remaining downtown submarkets witnessed positive net absorption for the quarter, with the Central Loop absorbing the most space at 196,917 SF. Tenants continue to sign new leases and expand existing leases through the entire downtown market. Downtown Vacancy Absorption Downtown Direct & Overall Vacancy 1 MM 18% 16% 16.8% 15.82% 16.15% 15.11% 14% 1.21% 11.32% 1.65% 12.25% 1.1% 11.26% -1 MM 12% 9.33% 7.89% -2 MM % NAI Hiffman (%) Net Absorption (SF) West Loop Central Loop East Loop North Michigan Avenue Direct Vacancy River North Overall Downtown Sublease Vacancy

21 Downtown Office Market Signifi cant investment sale activity included four buildings in excess of 4, SF trading during the second quarter, the largest transaction involving the sale of the 1.3-million SF offi ce tower located at 3 N LaSalle St in the River North submarket. KBS Realty Advisors acquired the building for $88 million. New Development Construction continues on two offi ce buildings in the downtown offi ce market. A 689,67 SF building known as 1K Fulton is underway at 1 W Fulton St, where Google has signed leases to occupy more than 275, SF. Construction also continues on River Point, a new 861, SF offi ce tower at Lake St and Canal St along the Chicago River. Largest Blocks of Available Space Submarket Building Name Building Address Block Size (SF) West Loop River Point 444 W Lake St 616,2 West Loop 311 W Monroe St 354,17 North Michigan Avenue The AMA Building 515 N State St 35,6 East Loop AON Center 2 E Randolph St 339,761 West Loop 5 W Monroe St 311,49 Central Loop Citadel Center 131 S Dearborn St 37, West Loop 227 W Monroe St 272,11 East Loop One Prudential Plaza 13 E Randolph St 256,72 West Loop Bank of America Plaza 54 W Madison St 241,2 West Loop AT&T Building 225 W Randolph St 238,788 Downtown Office Buildings On the Market 2nd Quarter 214 Submarket Building Name Building Address Size (SF) Target Price Price PSF Seller Status Central Loop Three First National Plaza 7 W Madison St 1,42,21 $375,, $264 Gaw Capital Partners/Korean Teacher s Under contract River North 3 N LaSalle St 1,32,1 $88,, $675 KBS Realty Advisors Under contract West Loop Riverside Plaza 3 S Riverside Plz 1,4,75 $33,, $317 Means-Knaus Partners, LP On market Central Loop 55 W Monroe St 84,214 $22,, $274 Hearn Companies On market West Loop 23 W Monroe St 623,524 $122,, $196 Lincoln Property Company/PIMCO Under contract West Loop 11 N Wacker Dr 614,161 $21,, $342 Hines Under contract Downtown Office Significant Sale Transactions 2nd Quarter 214 Submarket Building Address Size (SF) Sale Price Price PSF Buyer Seller Central Loop 3 N LaSalle St 982,576 $237,5, $242 Amtrust Realty Corp USA Inc Tishman Speyer Central Loop 23 N LaSalle St 1 581,17 1 $111,5, $192 Sumitomo Corporation of America M&J Wilkow Ltd West Loop 2 W Monroe St 2 535,911 2 $1,, $186 Beacon Investment Properties/Harel Insurance Lubert-Adler Partners/Farbman Group Central Loop 33 N LaSalle St 42,1 $32,75, 3 $81 3 John Buck Company Golub & Company River North 415 W Huron St 27, $3,2, $119 Speedwagon Properties/Sterling Partners MCZ Development Corporation Downtown Office Significant Lease Transactions 2nd Quarter 214 Submarket Building Name Property Address Leased (SF) Tenant Lease Type West Loop 15 N Riverside Dr 4 318, 4 William Blair & Company, LLC New lease 4 West Loop Willis Tower 233 S Wacker Dr 2,5 Seyfarth Shaw LLP New lease West Loop Schwab Center 15 S Wacker Dr 15, Charles Schwab Lease expansion/renewal Central Loop Bank of America Building 231 S LaSalle St 133,69 kcura Lease expansion/renewal North Michigan Avenue 541 N Fairbanks Ct 116,346 Chicago Park District Lease renewal Central Loop Insurance Exchange Building 175 W Jackson Blvd 87,978 Wolverine Trading LLC Lease expansion/renewal North Michigan Avenue 36 E Grand Ave 8,644 Havas Worldwide Chicago Lease renewal West Loop Franklin Center 227 W Monroe St 76,561 Retail Finance International Holdings Inc New lease Central Loop 77 W Wacker Dr 65,484 Sublease River North The Merchandise Mart 222 Merchandise Mart Plz 58,871 Braintree Payment Solutions New lease West Loop 111 North Canal 111 N Canal St 58,317 Fieldglass, Inc New lease North Michigan Avenue John Hancock Center 875 N Michigan Ave 57,684 SMS Assist, LLC New lease 1 Includes 581,17 SF office portion of building only, does not include parking garage or retail space 2 The sale included only the 535,911 SF high-rise portion of the subdivided building 3 Non-market transaction, deed-in-lieu of foreclosure 4 Planned building, expected to start construction Q

22 West Loop # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 45,399,37 TOTAL VACANCY 4,637,428 SF (1.21%) DIRECT VACANCY 4,235,718 SF (9.33%) SUBLEASE VACANCY 41,71 SF (.88%) AVAILABLE SPACE 8,285,649 SF (18.25%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr 12 2 Q2 214 NET ABSORPTION (SF) 154,725 Randolph St TOTAL 214 NET ABSORPTION (SF) 356,561 UNDER CONSTRUCTION (SF) 1,55,67 Q2 214 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 1.21% 154,725 SF The last decade s development cycle in Downtown Chicago transformed the West Loop into the premier offi ce submarket due to its proximity to multiple transportation options. Wacker Drive lies at the heart of the submarket and has been the corridor of the most signifi cant offi ce developments. After several years of no construction cranes in the submarket, new development activity has begun again, with two buildings under construction at 444 W Lake St and 1 W Fulton St totaling 1,55,67 SF and a 1.2 million SF building about to begin construction at 15 N Riverside Dr. Vacancy Absorption 4, 2, 2% 18% Vacancy by Class Type 1.81% 1.49% 16% 4.89% -2, 14% -4, 12% -6, % Class A Class B Class C (%) Net Absorption (SF) Direct Vacancy Sublease Vacancy 22 NAI Hiffman Demand has been positive for the past 17 quarters in the West Loop, with the vacancy rate improving by 8% to 1.21%

23 West Loop Quarter in Review For the 17th consecutive quarter positive demand was witnessed in the West Loop, as 154,725 SF of vacant space was absorbed through new leases and tenants expanding, bringing the net absorption tally for the fi rst half of the year to 356,561 SF. The West Loop has one of the lowest vacancy rates among the downtown offi ce submarkets at 1.21%, and continued to improve during the second quarter, decreasing by 35 basis points between April and June. The current vacancy rate is now nearly 8% below the 18.13% peak rate recorded at the beginning of 21. The only signifi cant sale completed during the second quarter in the West Loop involved a joint-venture between Beacon Investment Properties and Harel Insurance acquiring the 535,911 SF high-rise portion of the of the 649,265 SF building located at 2 W Monroe St. The building was purchased for $1 million from Lubert-Adler Partners and Farbman Group. Global investment fi rm William Blair & Company, LLC signed the largest new lease of the quarter, and will eventually occupy 318, SF at 15 N Riverside Dr, a planned 1.2 million SF offi ce tower expected to start construction during the third quarter and is scheduled to be completed by the end of 216. William Blair will be the highly-effi cient, modern building s anchor tenant. Looking Forward The West Loop submarket has staged the most impressive recovery of the downtown offi ce submarkets, but there is room for additional improvement. There are currently 11 options to tenants looking for contiguous blocks of space 1, SF or larger and 24 options for 5, SF or larger, suggesting that the submarket is capable of additional signifi cant absorption. The largest available space can accommodate a tenant up to 616,2 SF in size in the building known as River Point currently under construction at the corner of Canal St and Lake St along the Chicago River. Largest Blocks of Available Space Building Name Building Address Block Size (SF) River Point 444 W Lake St 616,2 311 W Monroe St 354,17 5 W Monroe St 311, W Monroe St 272,11 Bank of America Plaza 54 W Madison St 241,2 AT&T Building 225 W Randolph St 238,788 Willis Tower 233 S Wacker Dr 189,73 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant West Loop Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 2 W Monroe St 1 535,911 1 $1,, $186 Beacon Investment Properties/Harel Insurance Lubert-Adler Partners/Farbman Group Significant West Loop Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type 15 N Riverside Dr 2 318, 2 William Blair & Company, LLC New lease 2 Willis Tower 233 S Wacker Dr 2,5 Seyfarth Shaw LLP New lease Schwab Center 15 S Wacker Dr 15, Charles Schwab Lease expansion/renewal Franklin Center 227 W Monroe St 76,561 Retail Finance International Holdings Inc New lease 111 North Canal 111 N Canal St 58,317 Fieldglass, Inc New lease 5 W Madison St 47, Lincoln International Lease expansion/relocation Bank of America Plaza 54 W Madison St 4,33 Apartments.com New lease 3 W Adams St 4, Ifbyphone Lease expansion/renewal 111 North Canal 111 N Canal St 3,951 Vivid Seats New lease 1 The sale included only the 535,911 SF high-rise portion of the subdivided building 2 Planned building, expected to start construction Q

24 Central Loop # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 38,849,342 TOTAL VACANCY 4,398,881 SF (11.32%) DIRECT VACANCY 4,136,899 SF (1.65%) SUBLEASE VACANCY 261,982 SF (.67%) AVAILABLE SPACE 6,474,659 (16.67%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr 12 2 Q2 214 NET ABSORPTION (SF) 196,917 Randolph St TOTAL 214 NET ABSORPTION (SF) -14,1 UNDER CONSTRUCTION (SF) Q2 214 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 11.32% 196,917 SF Historically, the Central Loop submarket had been Chicago s core fi nancial district. While this distinction has faded over the decades, several banks still remain and it has become a central hub for many local and national law fi rms. Chicago s El train serves the submarket well, as the area is surrounded by the trains loop. Unlike many of the West Loop s more modern and well-equipped structures, buildings in the Central Loop tend to be older with smaller fl oor plates and less in-building parking. Vacancy Absorption 1,, 7, 18% 16% Vacancy by Class Type 1.83% 12.85% 4, 14% 7.6% 1, 12% -2, 1% -5, 8% (%) Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 24 NAI Hiffman The Central Loop submarket absorbed more space than any other downtown submarket during the second quarter

25 Central Loop Quarter in Review The Central Loop absorbed the most space of the fi ve downtown offi ce submarkets during the second quarter, with net absorption totaling 196,917 SF, following a period of negative net absorption during the fi rst quarter. For the fi rst half of the year, absorption is still slightly negative, totaling negative 14,1 SF. Over the past year, the Central Loop s vacancy rate has improved by 72 basis points to 11.32%. During the second quarter alone this rate decreased by 51 basis points. New York-based AmTrust Realty Corp USA Inc acquired the 43-story, 982,576 SF offi ce tower located at 3 N LaSalle St in the largest sale transaction completed during the second quarter. AmTrust paid $237.5 million, or about $242 PSF, to Tishman Speyer for the building. Tishman Speyer had acquired the building as part of portfolio sale in 27. The largest lease transaction completed during the second quarter involved web-based e-discovery applications developer kcura expanding its headquarters to 133,69 SF in the Bank of America Building located at 231 S LaSalle St. kcura originally moved into 8, SF in the building in 29 and has expanded four times since. Looking Forward The Central Loop vacancy rate has improved by nearly 3.7% over the past three years, but there remain many options for tenants to locate in the submarket in spaces both small and large in size. Currently there are 28 options for contiguous blocks of space 2, SF or larger and 16 options for 5, SF or larger available, with more than half of that space in the submarket s desirable class A buildings. Largest Blocks of Available Space Building Name Building Address Block Size (SF) Citadel Center 131 S Dearborn St 37, 222 North LaSalle 222 N LaSalle St 2,711 Board of Trade North Building 141 W Jackson Blvd 198,291 Chase Tower 1 S Dearborn St 193, S LaSalle St 146,313 Bank of America Building 231 S LaSalle St 132,336 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant Central Loop Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 3 N LaSalle St 982,576 $237,5, $242 Amtrust Realty Corp USA Inc Tishman Speyer 23 N LaSalle St 1 581,17 1 $111,5, $192 Sumitomo Corporation of America M&J Wilkow Ltd 33 N LaSalle St 42,1 $32,75, 2 $81 2 John Buck Company Golub & Company Significant Central Loop Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type Bank of America Building 231 S LaSalle St 133,69 kcura Lease expansion/renewal Insurance Exchange Building 175 W Jackson Blvd 87,978 Wolverine Trading LLC Lease expansion/renewal 77 W Wacker Dr 65,484 Sublease 44 S LaSalle St 33, Chicago Stock Exchange, Inc Lease renewal/downsize The LaSalle Wacker 221 N LaSalle Dr 26,214 Knight Engineering Lease renewal 2 North LaSalle 2 N LaSalle St 22,61 Transco New lease 55 W Monroe St 2,565 Channel IQ New lease 1 Includes 581,17 SF office portion of building only, does not include parking garage or retail space 2 Non-market transaction, deed-in-lieu of foreclosure 25

26 East Loop # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 23,45,26 TOTAL VACANCY 3,93,952 SF (16.8%) DIRECT VACANCY 3,73,687 SF (15.82%) SUBLEASE VACANCY 227,265 SF (.97%) AVAILABLE SPACE 4,998,784 SF (21.36%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr 12 2 Q2 214 NET ABSORPTION (SF) -48,1 Randolph St TOTAL 214 NET ABSORPTION (SF) -526,47 UNDER CONSTRUCTION (SF) Q2 214 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 16.8% -48,1 SF Unlike neighboring submarkets such as the West Loop or Central Loop, the East Loop submarket is far more diverse due to the presence of several universities, not-for-profi ts, condominium conversions and a growing retail component. Over the past several years, the submarket has benefi ted from a plethora of condo conversion projects that have rejuvenated the area and its aging buildings. However, since the economic downturn, the market for condo conversions has been greatly diminished. The area does not benefi t from the easy access to highways or commuter lines that neighboring submarkets enjoy, but it is still within walking distance of the El trains, Millennium Park and close to Lake Shore Drive. Vacancy Absorption 6, 4, 2% 18% Vacancy by Class Type 16.93% 19.41% 2, -2, 16% 14% 12.81% -4, 12% -6, 1% (%) Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 26 NAI Hiffman Net absorption was negative for the fourth consecutive quarter, adding an additional 48,1 SF of vacant space to the market

27 East Loop Quarter in Review For the fourth consecutive quarter leasing activity was unable to outweigh new vacancies coming online as 48,1 SF of vacant space was introduced to the market. In turn, the area s vacancy rate continued to climb, up 75 basis points during the second quarter to 16.8%, but still nearly three full percentage points below its peak at 19.73% recorded at the end of 29. For the fi rst half of 214, net absorption in the East Loop totals negative 526,47 SF. No signifi cant sale transactions were recorded in the East Loop during the second quarter. National Tax Search, LLC completed the largest lease of the quarter, renewing its 29,852 SF space within the 859,187 SF class A offi ce building located at 33 E Wacker. The largest new lease of the quarter was signed by mobile marketing expert Punchkick Interactive, Inc. The company will make the move from its current space at 22 W Ontario St to its new 23,41 SF space at 55 E Monroe St, a hopeful sign that the East Loop is beginning to attract tech companies. Looking Forward Over the past four quarters, the East Loop has introduced an additional 752,639 SF of vacant space to the market, a contrasting trend to the overall market. Option for large contiguous blocks of space are limited in submarket, with only fi ve blocks of space 1, SF or larger and 11 options for 5, SF or larger currently available. The largest contiguous block of available space totals 339,761 SF in the AON Center at 2 E Randolph St and is comprised largely of space vacated by law fi rm Kirkland & Ellis LLP in 29 when they relocated to 3 N LaSalle St. Largest Blocks of Available Space Building Name Building Address Block Size (SF) AON Center 2 E Randolph St 339,761 One Prudential Plaza 13 E Randolph St 256,72 33 E Wacker Dr 145,14 Two Illinois Center 233 N Michigan Ave 133,639 One Congress Center 41 S State St 11,898 CNA Center 333 S Wabash Ave,824 The Sullivan Center 1-33 S State St 7,17 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant East Loop Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller None to report Significant East Loop Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type 33 E Wacker Dr 29,852 National Tax Search, LLC Lease renewal S Michigan Ave 27,288 Abundant Venture Partners Holdings, LLC Sublease 55 E Monroe St 23,41 Punchkick Interactive, Inc New lease 33 E Wacker Dr 13,759 First Services Residential New lease Two Prudential Plaza 18 N Stetson Ave 1,4 Slalom Consulting New lease The Jewelers Building 35 E Wacker Dr 9,212 Eshots, Inc Sublease 55 E Monroe St 9, Turner Construction New lease 33 E Wacker Dr 7,363 Smithfield Foods New lease Two Prudential Plaza 18 N Stetson Ave 4,156 Schuyler Roche & Zwimer New lease One Illinois Center 111 E Wacker Dr 4,18 Readers Digest New lease 27

28 North Michigan Avenue # OFFICE BUILDINGS 62 MARKET SIZE (SF) 13,141,925 TOTAL VACANCY 2,122,8 SF (16.15%) DIRECT VACANCY 1,985,918 SF (15.11%) SUBLEASE VACANCY 136,882 SF (1.4%) AVAILABLE SPACE 2,893,345 SF (22.2%) Chicago Midway Airport 43 Ohio St Kinzie St 12 2 Oak Lawn Chicago Ave 5 Chicago Oak St State St 57 Michigan Ave Wacker Dr 41 Q2 214 NET ABSORPTION (SF) 64,35 Randolph St TOTAL 214 NET ABSORPTION (SF) 95,768 UNDER CONSTRUCTION (SF) Q2 214 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 16.15% 64,35 SF One of the smallest offi ce submarkets in Chicago s Central Business District, the North Michigan Avenue submarket is diverse, similar to the East Loop submarket which borders it to the south. A distinguished retail corridor interspersed with posh residential towers, North Michigan Avenue is a Chicago icon renowned throughout the world. The offi ce submarket consists of primarily smaller-sized spaces. The submarket is home to Northwestern Memorial Hospital and the new home of the Lurie Children s Hospital of Chicago. The presence of these large healthcare institutions should benefi t the submarket for years to come. Vacancy Absorption Vacancy by Class Type 4, 2% 18.85% 2, 17% 14% 14.3% 11.58% -2, 11% -4, 8% -6, 5% (%) Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 28 NAI Hiffman Elevated leasing activity has resulted in four consecutive quarters of positive net absorption totaling 136,138 SF

29 North Michigan Avenue Quarter in Review Net absorption was positive in the North Michigan Avenue submarket for the fourth consecutive quarter, totaling 64,35 SF for the period between April and June, bringing the tally for the fi rst half of the year to 95,768 SF of vacant space absorbed. This activity has pushed the area s vacancy rate down 73 basis points to 16.15%, the lowest vacancy rate the North Michigan Avenue submarket has witnessed since early-21. While the recovery was uneven in the East Loop between 211 and 213, the past few quarters has seen a more steady improvement trend. There were no signifi cant sale transactions completed in the North Michigan Avenue submarket during the second quarter. The Chicago Park District signed the largest lease of the quarter, renewing its 116,346 SF lease within the 541,637 SF class B offi ce building at 541 N Fairbanks Ct. The Chicago Park District has been in building since 21. The largest new lease of the quarter was completed by SMS Assist, LLC, leasing 57,684 SF of offi ce space in the over 1 million SF class A John Hancock Center located at 875 N Michigan Ave. Looking Forward With one of the highest vacancy rates among the downtown offi ce submarkets, North Michigan Avenue still has several challenges ahead. Only fi ve options for tenants looking for 1, SF of contiguous space or larger remain, and eight spaces 5, SF or larger are currently available. Until some of these large blocks are occupied, signifi cant improvement is unlikely to occur. Transaction velocity in the North Michigan Avenue submarket is often slower than what is typically witnessed in surrounding markets due to its location and the limited presence of traditional offi ce users. Largest Blocks of Available Space Building Name Building Address Block Size (SF) The AMA Building 515 N State St 35,6 11 E Erie St 227,569 River East Arts Center E Illinois St 21, Wrigley Building-North Tower 41 N Michigan Ave 124, North Michigan Center 41 N Michigan Ave 82, N Rush St 76,51 NBC Tower 455 N Cityfront Plaza Dr 68,73 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant North Michigan Avenue Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller None to report Significant North Michigan Avenue Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type 541 N Fairbanks Ct 116,346 Chicago Park District Lease renewal 36 E Grand Ave 8,644 Havas Worldwide Chicago Lease renewal John Hancock Center 875 N Michigan Ave 57,684 SMS Assist, LLC New lease Wrigley Building - North Tower 41 N Michigan Ave 13,13 Gyro, LLC New lease Wrigley Building - South Tower 4 N Michigan Ave 9,379 Brainlab New lease 29

30 River North # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 13,53,272 TOTAL VACANCY 1,366,337 SF (1.1%) DIRECT VACANCY 1,67,366 SF (7.89%) SUBLEASE VACANCY 298,971 SF (2.21%) AVAILABLE SPACE 1,914,866 SF (14.15%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr 12 2 Q2 214 NET ABSORPTION (SF) 71,658 Randolph St TOTAL 214 NET ABSORPTION (SF) -19,212 UNDER CONSTRUCTION (SF) Q2 214 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 1.1% 71,658 SF Comprised of predominantly class C timber-loft style offi ce buildings, the River North submarket is also home to several modern glass and steel class A offi ce towers. The recent construction in the neighborhood of high-end residential developments, retail and up-scale restaurants has also been of note, but only one available development site remains at Wolf Point where the Chicago river splits, so major new offi ce developments will be rare. The submarket is the least accessible to transportation of all the downtown offi ce submarkets, but offers sensational views along the Chicago River. Several highprofi le, quickly-growing companies have decided to call River North home, including tech giant Google, Inc and deal-of-theday website company Groupon. Vacancy Absorption Vacancy by Class Type 1,2, 2% 15.11% 8, 17% 4, 14% 11% 7.71% 6.78% -4, 8% -8, 5% (%) Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 3 NAI Hiffman Net absorption turned positive during the second quarter and the vacancy rate decreased by 53 basis points to 1.1%

31 River North Quarter in Review Positive demand returned to River North following a minor setback during the fi rst quarter. The 71,658 SF of vacant space absorbed between April through June, however, was unable to outpace the amount of vacant space introduced during the fi rst quarter, as net absorption for the fi rst half of the year totaled negative 19,212 SF. The vacancy rate improved 53 basis points from the fi rst quarter, decreasing to 1.1%. This rate is 29 basis points below the rate recorded a year ago, and more than 8% below the 18.13% peak recorded four years ago. Speedwagon Properties and Sterling Partners purchased the 27, SF offi ce building located at 415 W Huron St in June. Originally constructed in 192, the building sold for $3.2 million or about $119 PSF. The largest new lease signed during the second quarter was completed by Chicago-based credit-card software company Braintree, Inc. The company more than doubled its headquarters space in a move from 27, SF at 111 N Canal St in the West Loop to the Merchandise Mart. They signed a long-term lease for 6, SF at 222 Merchandise Mart Plz. Looking Forward The anticipated departure of Google from 2 W Kinzie St for its new offi ces at 1 W Fulton St in 215 will leave a rare large block of vacant space behind. Currently, only two contiguous spaces 1, SF or larger in size and seven options for 5, SF are available. The largest available space can accommodate a user up to 231,2 SF at 6 W Chicago Ave. When Google vacates this space it could negatively impact the vacancy rate or it may be quickly be leased by a tenant. Largest Blocks of Available Space Building Name Building Address Block Size (SF) 6 West Chicago 6 W Chicago Ave 231,2 River North Point 35 N Orleans St 145,114 Dearborn Plaza 2 W Kinzie St 95,5 678 N Kingsbury St 83, 363 W Erie St 57,45 Mesirow Financial Building 353 N Clark St 56,86 Contiguous Block Analysis 2,+ SF 5,+ SF 1,+ SF Class A Blocks Class B Blocks Class C Blocks Significant River North Sale Transactions 2nd Quarter 214 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 415 W Huron St 27, $3,2, $119 Speedwagon Properties/Sterling Partners MCZ Development Corporation Significant River North Lease Transactions 2nd Quarter 214 Building Name Property Address Leased (SF) Tenant Lease Type The Merchandise Mart 222 Merchandise Mart Plz 58,871 Braintree Payment Solutions New lease River North Point 35 W Mart Ctr 45, Chicago Sun Times Lease downsize 321 North Clark at Riverfront Plaza 321 N Clark St 1,5 Catapult Chicago Lease renewal 31

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33 Methodology & Definitions Methodology The information included in this review is the result of a compilation and analysis of data from various sources on class "A", class "B", and class "C" industrial properties located in the metropolitan Chicago area defined by the submarket map on the previous page. NAI Hiffman obtained the information from property representatives, CoStar Group, RealCapital Analytics, industry periodicals and magazines, our in-house property database, and other sources. NAI Hiffman greatly appreciates the participation of each of these individuals, companies and resources, without whose help this report would not have been possible. All of the information detailed throughout this report is saved and organized in our own in-house database and is regularly updated. Utilizing this database, we can analyze, calculate and report demographic information, inventory, vacancy, availability, net absorption, and transactional information. Definitions The NAI Hiffman Market Reviews track several measures of market conditions. This information is collected for individual properties then consolidated, organized and analyzed for submarket and market totals. These terms, used throughout the reports, are defined below according to NAIOP Terms & Definitions. Net Absorption The net change in occupied space in a given market between the current measurement period and the last measurement period. Net absorption can be either positive or negative and must include decreases as well as increases in inventory levels. For the purpose of this report, sublease space is included in the calculation of net absorption. New Supply The total inventory delivered to the market since the last measurement period. Delivered is defined as total square footage and/or number of buildings that has completed construction and received a certificate of occupancy during a stated period. Under Construction Buildings where either: a) actual ground breaking has occurred (site excavation or foundation work) and construction is ongoing (not abandoned or discontinued) but for which a certificate of occupancy has not yet been issued; or b) properties undergoing conversion to office from another use or c) properties undergoing a major renovation where 75 percent or more of the building is not available for lease and building generally requires a certificate of occupancy to be made available for lease. Total Inventory (Market Size) The total square footage of gross rentable area in a specific market. It includes the gross rentable area in buildings that have received a certificate of occupancy. Total inventory increases when a new building is delivered and decreases when an existing building is destroyed, demolished or its use changes. Available Space The total amount of space that is currently being marketed as available for lease in a given time period. It includes space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Available space excludes shadow space. A measurement expressed as a percentage of the total amount of vacant space divided by the total amount of inventory. Vacant space is inventory that is not currently occupied. Shadow Space That portion of leased space which is vacant but not available space. Shadow space is difficult to measure. (Synonym: phantom space) 33

34 Executive Leadership Dennis Hiffman Chairman David Petersen, RPA CEO John Picchiotti COO - Brokerage jpicchiotti@hiffman.com Bob Assoian Managing Director bassoian@hiffman.com Office Services Michael Flynn, CCIM, SIOR Executive Vice President mflynn@hiffman.com Adam Johnson Vice President ajohnson@hiffman.com Daniel O Neill Executive Vice President doneill@hiffman.com Michael Van Zandt Executive Vice President mvanzandt@hiffman.com James Adler Executive Vice President jadler@hiffman.com Patrick Kiefer Executive Vice President pkiefer@hiffman.com Jack Reardon Senior Vice President jreardon@hiffman.com Jason Wurtz Vice President jwurtz@hiffman.com Brian Edgerton Vice President bedgerton@hiffman.com Kyle Kreminski Associate kkreminski@hiffman.com Jason Streepy Senior Vice President jstreepy@hiffman.com Linda Garske Senior Vice President lgarske@hiffman.com Matt Novak Associate mnovak@hiffman.com Aubrey Van Reken Vice President avanreken@hiffman.com Investment Services Arthur Burrows Senior Vice President aburrows@hiffman.com Shawn Frick Financial Analyst sfrick@hiffman.com Patrick Sullivan HFF, L.P. Managing Director psullivan@hfflp.com Mark Katz HFF, L.P. Director mkatz@hfflp.com Retail Services Mike Meksto Senior Vice President mmeksto@hiffman.com Jim Tsevis Vice President jtsevis@hiffman.com Dan Hiffman Senior Sales Associate dan@hiffman.com Jennifer Hopkins Senior Retail Associate jhopkins@hiffman.com 34

35 NAI Hiffman Industrial Services John Cash, SIOR Executive Vice President Steve Connolly, SIOR Executive Vice President Bruce Granger Senior Vice President Adam Roth, CCIM, SIOR Executive Vice President Casey Baird Associate Benjamin Cremer Senior Vice President David Haigh Vice President Stephen Sullivan Vice President Kyle Barrett Associate Kelly Disser Vice President Daniel Leahy, SIOR Executive Vice President Brett Tomfohrde Associate Howard Bergdoll Associate Packy Doyle Associate Mark Moran Executive Vice President Eric Tresslar Executive Vice President Duke Botthof Executive Vice President Eric Fischer Vice President Lawrence Much, SIOR Executive Vice President John Whitehead Vice President Joe Bronson, SIOR Vice President Jeff Fischer Executive Vice President Adam Naparsteck Vice President Brian Colson Executive Vice President Chris Gary Vice President cgary@hiffman.com Michael Robbins Vice President mrobbins@hiffman.com Marketing Whitney Kannaka Director of Marketing wkannaka@hiffman.com Matt Hronick Senior Designer mhronick@hiffman.com Lauren Fishbune Marketing Specialist lfishbune@hiffman.com Catherine DeBoer Elsa Gaztambide Karen Kirian Melody Lawrence Cindy Nickell Alison O Connell Denise Racana Tammi Sowinski Erin Thill Lynn Zbierski Research For further information regarding the content of this market review, or for specialty reports, please contact your local broker or: Craig Hurvitz Director of Research churvitz@hiffman.com Brian Chandler Research Associate bchandler@hiffman.com 35

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