Metropolitan Chicago. Market Review. Office Market Review. Second Quarter 2013

Transcription

1 Metropolitan Chicago Market Review Office Market Review Second Quarter 213

2 To our valued customers, partners and future clients A powerful storm blew through Chicago on a late afternoon about a month ago called a derecho, it packed some vicious straight-line winds and sheets of rain. From my office window in suburban Oakbrook Terrace, I had a clear view west down I-88. I saw the clouds gather and the sky darken. It rolled quickly down the corridor and enveloped my building. While the storm was in full effect, traffic below slowed to a crawl and windshield wipers couldn t keep up. Almost everyone who was caught outside got off the streets. Those who didn t huddled in doorways, heads down. The storm was gone as quickly as it arrived, traffic picked up and people made their way back outside. The economic derecho that hit commercial real estate in 28 has certainly taken a while longer to blow over, but there are some similarities. As you ll see in the following pages, traffic has picked up and we ve clearly moved from a head-down attitude. National and global economics remain in flux in many cases, but local conditions in Chicago and in many US markets reflect optimism. Our brokers and property managers see it firsthand in the markets we live and work in every day. On the industrial side in particular, we ve seen an impressive stretch of 12 straight quarters of positive absorption. For the first time in five years, new construction is significantly underway. Office growth has been on a steady climb, with suburban and downtown absorption neck-and-neck over the past two years. The second quarter of 213 saw a temporary slow-down in the suburbs, but signs are pointing toward a strong second half across the entire Chicago market. With this edition of our market review, our research team is implementing a new design to deliver even more information in a clear, concise package. We hope you find it to be a valuable resource in the coming months. Please always bear in mind that this document is a representation of our expertise, and our research and brokerage professionals are always willing to assist with any of your real estate needs or inquiries. Regards, John R Picchiotti COO, Brokerage David A Petersen, RPA CEO, NAI Hiffman

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

4 Overall Trend Local Economy Unemployment POPULATION (21 CENSUS) 9,461,15 POPULATION CHANGE (2-21) +4.% MEDIAN HOUSEHOLD INCOME (21) $57,14 GROSS METRO PRODUCT (211) $546 BILLION LABOR FORCE 4,133, % Case-Schiller Home Price Index TOTAL LOCAL JOBS GAINED (5/12-5/13) CHICAGO METRO UNEMPLOYMENT RATE ILLINOIS UNEMPLOYMENT RATE U.S. UNEMPLOYMENT RATE 27, % 9.1% 7.4% Q2 US GDP Change 1.7% 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 We re now entering into the fi fth year of recovery from one of the deepest economic recessions the country has historically seen and while we re still not fl ying high, we ve certainly come a long way. Many economists predicted an even more anemic recovery than what has transpired. The expectations of a double-dip recession didn t come true. When the next recession arrives, and it eventually will, enough time will have passed that it won t be a double-dip. Others predicted delinquencies and defaults in commercial real estate to be the next downfall of the economy. This also didn t happen. Investor demand for core Jobs Lost and Regained by City Unemployment and Work Force Participation Jobs Jobs Percent Unemployment City Lost Regained Regained Rate Houston 117, 283, 241% 6.3% New York City 14, 275, 197% 8.4% Dallas/Fort Worth 153, 257, 168% 6.3% Washington, D.C. 78, 129, 165% 5.3% Boston 15, 135, 128% 5.9% San Francisco 168, 129, 76% 6.7% Atlanta 27, 135, 65% 8.1% Chicago 288, 143, 5% 9.3% Los Angeles 382, 17, 44% 9.9% Overall U.S. 8,736, 6,317, 72.3% 7.6% Source: Bureau of Labor Statistics, Linneman Associates 68% 67% 66% 65% 64% 63% % 1% 8% 6% 4% Metro Chicago Unemployment Rate U.S. Unemployment Rate U.S. Labor Force Participation Rate Source: Bureau of Labor Statistics 13 2% 4 NAI Hiffman

5 assets picked up, returning the commercial real estate world to a more normal state. The housing market was expected to recover much more slowly as well, due to homeowners putting their homes on the market at the fi rst sign of increasing prices, resulting in high inventory levels. Inventories, however, remain well below expectations and the housing market has quickly rebounded, though still has a long way to go. U.S. Business Confidence 7 Local Economy Real GDP continues to grow, rising at a rate of 1.7% during the second quarter, and has returned to record levels 3% higher than before the recession. This suggests that, in terms of GDP, the economy has recovered everything lost in the recession and them some. However, when placed alongside the 4-year GDP trend line, the U.S. economy is still well behind where it should be, and at the current rate of growth, that gap continues to widen every year Source: Tradingeconomics.com, Institute for Supply Management Job growth is still a major conversation, and Chicago continues to lag the rest of the country. Nationwide, more than 72% of the nearly 9 million jobs lost due to the recession have been regained through hiring, but only 5% of the jobs lost in the Chicago metropolitan area have been recovered. The job recovery has been focused in larger cities, with some cities posting a very robust recovery, such as Houston recovering 241% of the jobs lost due to the recession with a relatively healthy 6.3% unemployment rate and New York City regaining 197% of the jobs lost due to recession. Washington, D.C. is experiencing an impressive 5.3% unemployment rate, and has recovered 165% of the jobs lost. Hiring continues to expand, with 65% of industries adding workers, suggesting the job recovery is broad, but still relatively shallow. Until 75% of the jobs lost are recovered, companies are just fi lling offi ce desks that were vacated during the recession. Other positive signs continue to point towards a growing economy. Consumer confi dence recently rose to a fi ve-year high, a signal that consumers are starting to see a brighter future. The housing market continues to recover. The dramatic increase in home prices in some markets has been due to a lack of inventory and fewer housing starts than expected. However, there has recently been a 5% increase in singlefamily housing starts. Despite this good news, growth will still be held back by state and local fi scal woes until some of the deadlock can be resolved. Nationally, government spending now accounts for 23.5% of the economy, while revenue collection accounts for only 15.7%, the largest gap the country has historically seen. Unemployment by Duration Unemployed <15 weeks Unemployed >15 weeks Source: Bureau of Labor Statistics Corporate Profits vs. Job Openings 6 MM 5 MM 4 MM 3 MM 2 MM $2. Trillion $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 13 $ 13 8% 7% 6% 5% 4% 3% 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 213 Office Market Statistics Market/ # Bldgs. Total RBA Direct Sublease Total Total 2Q13 Net YTD 213 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 , , ,332,585 17,318,27 1,85,362 2,928,953 33,746,831 16,635,158 14,96,648 3,15,25 15,263,637 8,81,341 6,169,692 1,12,64 42,83,999 2,9,182 16,844,42 4,996,775 4,19, ,578 2,685, ,73 126,193,37 63,723,529 49,881,718 12,588,6 15.% 15.58% 16.72% 15.35% 21.36% 18.29% 24.98% 21.36% 19.93% 15.25% 25.93% 2.66% 18.62% 15.75% 22.59% 17.27% 12.31% 6.7% 13.97% 11.48% 18.66% 16.2% 22.3% 17.78% 1.68% 2.85%.14%.7% 1.8%.69% 1.75%.12%.55%.6%.57%.% 2.45% 3.24% 2.19%.2%.98%.% 1.46%.% 1.62% 2.1% 1.41%.5% 17.62% 18.44% 16.86% 15.42% 22.44% 18.98% 26.73% 21.47% 2.48% 15.86% 26.5% 2.66% 21.7% 19.% 24.79% 17.29% 13.29% 6.7% 15.43% 11.48% 2.29% 18.31% 23.44% 17.83% 22.22% 25.5% 19.12% 16.24% 28.39% 28.15% 29.77% 23.29% 24.63% 2.54% 3.75% 19.98% 25.33% 26.68% 25.68% 18.51% 15.72% 8.46% 18.42% 12.29% 25.1% 25.64% 25.75% 18.93% -115, ,5 34,779-29,452-1,85 4,732-2,922-2,895-21,752-2,659-2,146-16,7 15,41 55,98-24,25-15, ,957 23,556 86,254 3,147-1,148-4,278 91,76-61,63-2, ,564 12,98 14, ,46 1,112 74,813 11,481-31,53-6,48 22,937-47,96 9,124 44,271-6,725 25,578 18,561 39,799 71,564-2,82 36,41 148,138 21,687 1, , 215, 1, 1, 355, 355, 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 39,137,724 19,661,779 15,7,58 3,685,365 23,842,356 1,864,735 7,588,848 5,388,773 13,141,925 6,22,259 6,131,682 87,984 13,53,272 4,88,938 5,798,248 3,643, % 11.72% 11.86% 6.39% 1.99% 11.3% 11.36% 9.24% 14.44% 14.32% 14.84% 14.12% 16.9% 17.29% 15.46% 11.65% 7.8% 8.79% 6.18% 9.25%.97% 1.5% 1.1%.2% 1.4% 1.8% 1.24%.1%.72% 1.35%.22%.17% 1.1% 1.46%.84%.29% 2.59%.34% 5.81%.% 12.25% 12.76% 12.96% 6.4% 12.4% 12.11% 12.6% 9.25% 15.16% 15.66% 15.7% 14.29% 17.19% 18.75% 16.3% 11.% 1.39% 9.13% 11.99% 9.25% 18.28% 17.43% 24.9% 8.29% 17.18% 15.66% 2.77% 9.% 22.22% 22.62% 25.34% 17.1% 27.33% 27.53% 28.5% 16.99% 14.9% 9.45% 18.89% 11.66% 12,91-1,964 23, ,47 73, ,544 8,1 195, ,921 21,58 1,6-14,976 9,346-28,57 4,248-44,7-28,899-56,27 4,19 148,54 113,913 21,668 12,473 23,843-25, , ,53 185,92 17,644 19,966-8,916 1,599-3,151 1,636 75,524 5,87-19,286 89,3 1,55,67 1,55,67 Downtown Totals Class A Class B Class C ,51,314 71,11,29 46,543,44 17,496, % 12.24% 11.% 1.21% 1.12% 1.1% 1.56%.7% 13.% 13.34% 13.5% 1.28% 19.12% 18.16% 23.1% 12.43% 398,58 216,32 128,71 53, ,35 2, , ,914 1,55,67 1,55,67 Metro Chicago Totals Class A Class B Class C 2, , ,244, ,734,558 96,425,122 3,84, % 14.12% 17.16% 13.38% 1.37% 1.57% 1.48%.6% 16.52% 15.69% 18.64% 13.44% 21.97% 21.7% 24.47% 15.15% 387,91 176,42 219,831-7,963 1,2,76 438, , ,13 1,955,67 1,955,67 7

8 Overall Trend Suburban Office Market # OFFICE BUILDINGS 2,31 MARKET SIZE (SF) 126,193, % TOTAL VACANCY 25,63,187 SF (2.29%) DIRECT VACANCY 23,553,32 SF (18.66%) SUBLEASE VACANCY 2,49,885 SF (1.62%) AVAILABLE SPACE 61,563,619 SF (25.1%) Net Absorption -1,148 SF 2Q13 NET ABSORPTION (SF) -1,148 YTD 213 NET ABSORPTION (SF) 36,41 UNDER CONSTRUCTION (SF) 45, 2Q13 NEW SUPPLY (SF) Asking Rents $19.63 Pictured above: Tower I of Continental Towers at 171 Golf Rd in Rolling Meadows, a 4-building campus sold for $58,5, or $64 PSF in May 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. Quarter in Review For the fi rst time in nearly two years, net absorption turned slightly negative in the suburban offi ce market during the second quarter, totaling negative 1,148 SF. While the suburban market absorbed more space than the downtown market for the past year, that trend ended during the second quarter, as demand for space picked up downtown and sizable new vacancies were added to the market in the suburbs. The largest new vacancy introduced during the quarter was caused by ACCO Brands leaving the 175,645 SF building located at 3 Tower Pky in the Lincolnshire Corporate Center for 189,92 SF in the Kemper Lakes Business Center in Long Grove. The suburban offi ce vacancy rate remained unchanged from last quarter at 2.29%. Despite the fl at conditions during the second quarter, leasing activity remain elevated and investment sales activity continued to pick up. Net absorption for the fi rst half of the year remains postive at 36,41 SF of vacant space absorbed, and the current vacancy rate is still more than 1.2% below the rate recorded a year ago and nearly 3.4% the peak rate recorded in late 21. Suburban Vacancy Absorption Suburban Direct & Overall Vacancy, 3, 24% 22% 17.62% 22.44% 21.36% 2.48% 19.93% 21.7% 18.62% 2.29% 18.66% -3, 2% 15.% 13.29% 12.31% -, 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 Construction activity returned to the O Hare market during the second quarter with The American Academy of Orthopaedic Surgeons breaking ground on a new fi ve-story 165, SF build-tosuit headquarters at the corner of River and Higgins Roads, less than two blocks from its current location. Construction continues on Hub Group s new 13, SF build-to-suit offi ce building at 2 Clearwater Dr in Oak Brook. Finally, 6, SF of offi ce space is underway in the new Main Street Promenade development in downtown Naperville. 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 Three Overlook Point 3 Overlook Pt, Lincolnshire 2,143 Meadows Corporate Center 285 W Golf Rd, Rolling Meadows 279,286 Continental Deer Park 2144 Lake Cook Rd, Deer Park 277,2 Oakmont Centre 7 Oakmont Ln, Westmont 256,767 Cantera 421 Winfield Rd, Warrenville 249,996 AT&T Business Park 21 Lakewood Blvd, Hoffman Estates 239,25 24 Cabot 24 Cabot Dr, Lisle 218,152 Tri State International Office Center 25 Tri State International, Lincolnshire 28,88 Suburban Office Buildings On the Market 2nd Quarter 213 Market Building Address Size (SF) Asking 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. New on market East-West Corridor 4225 Naperville & 3333 Warrenville, Lisle 663,687 $121,, $174 White Oak Realty/Angelo Gordon Under contract North Suburban 1 Kraft Ct, Glenview 488,398 S.T.O. S.T.O. Hamilton Partners Under contract Northwest Suburban 1 E Golf Rd, Schaumburg 384,12 $29,, $75 Pearlmark Real Estate Partners On market East-West Corridor 142 & 152 Kensington Rd, Oak Brook 33,51 $34,5, $114 The Davis Companies On market East-West Corridor 215 Shuman Blvd, Naperville 21,774 $3,, $142 TA Associates Realty On market Suburban Office Significant Sale Transactions 2nd Quarter 213 Market Building Address Size (SF) Sale Price Price PSF Buyer Seller 2-building sale, Arlington Heights 1,12,871 $28,, $25. Torburn Partners Nokia Siemens Networks Northwest Suburban 171 Golf Rd, Rolling Meadows (4 bldgs) 91,627 $58,5,* $64.* GlenStar Properties/Walton Street CWCapital Asset Mgmt East-West Corridor 2651 & 2655 Warrenville Rd, Downers Grove 299,792 $22,, + $76. + Transwestern LNR Partners LLC East-West Corridor Roosevelt Rd, Glen Ellyn 23,746 $5,3, $23. Clark Street Development Berkadia Commercial Mortgage East-West Corridor 21 York Rd, Oak Brook 184,17 $34,, $185. Pembroke Capital LLC CWCapital Asset Management East-West Corridor 2 York Rd, Oak Brook 128,498 $8,, $62. Convergent Capital Ptnrs Duke Realty Corporation East-West Corridor 18 Springer Dr, Lombard 6,838 $5,55, $91. CyrusOne The Alter Group North Suburban N Lincoln Ave, Lincolnwood 59,713 $5,, $84. Feiner Investment Corporation Hallmark & Johnson Properties Suburban Office Significant Lease Transactions 2nd Quarter 213 Market Property Address Leased (SF) Tenant Lease Type Northwest Suburban 38 Golf Rd, Rolling Meadows 67,599 Capital One Financial Corp. Lease expansion East-West Corridor 1 E 22nd St, Lombard 67,175 Wells Fargo Home Mortgage Lease expansion/renewal North Suburban 57 Lake Cook Rd, Deerfield 51,988 BigMachines, Inc. Lease expansion North Suburban 75 N Fairway Dr., Vernon Hills 49,173 AbbVie New lease I-55 Corridor 5 Joliet Rd, Willowbrook 48,923 Environmental Technical Institute New lease North Suburban Lehigh Ave, Morton Grove 46,51 Hallmark Data Systems New lease East-West Corridor 71 E 22nd St, Lombard 4,658 Emdeon New lease Northwest Suburban 2 Corporate Dr, Long Grove 39,796 Dovenmuehle Mortgage New lease East-West Corridor 1415 W Diehl Rd, Naperville 36,92 Amerisource New lease *REO sale/high-vacancy property + Auction sale Entries highlighted in red denote NAI Hiffman transactions 9

10 173 North Suburban Waukegan Regional Airport # OFFICE BUILDINGS Gurnee Waukegan MARKET SIZE (SF) 3,332,585 Grayslake 12 TOTAL VACANCY 5,344,665 SF (17.62%) 21 DIRECT VACANCY 4,834,563 SF (15.%) SUBLEASE VACANCY 51,12 SF (1.68%) AVAILABLE SPACE 6741,226 SF (22.22%) Vernon Hills Libertyville Lake Forest 2Q13 NET ABSORPTION (SF) -115,678 ke Zurich YTD 213 NET ABSORPTION (SF) -2,547 Buffalo Grove Highland Park UNDER CONSTRUCTION (SF) 21 Deerfield 68 2Q13 NEW SUPPLY (SF) Chicago Executive Airport Northbrook Net Absorption Asking Rents haumburg Arlington Heights 2 Glenview 43 Niles Skokie Evanston 17.6% -115,678 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 Absorption turned negative during the second quarter due to one signifi cant new vacancy despite elevated leasing activity

11 North Suburban Quarter in Review Net absorption turned negative during the second quarter, strongly infl uenced by the departure of ACCO Brands world headquarters from its 175,545 SF building in the Lincolnshire Corporate Center for 189,92 SF in the Kemper Lakes Business Center in Long Grove. While this departure was anticipated, it was signifi cant enough to offset the effects of continued leasing activity, resulting in an absorption tally for the second quarter totaling negative 115,678 SF. Responding accordingly, the North Surburban vacancy rate increased by 38 basis points, to close the second quarter at 17.62%; yet this rate is still more than 1.2% below the rate recorded a year ago. Pharmaceutical company AbbVie, a recent spin-off of Abbott Laboratories, signed the largest new lease of the quarter, taking 49,173 SF at 75 N Fairway Dr in Vernon Hills Continental Executive Park. The lease brings the 189,686 SF building to 1% leased. Cloud-based solutions provider BigMachines, Inc. expanded its lease at 57 Lake Cook Rd in Deerfi eld by an additional 18,177 SF, bring its total in the building to 51,988 SF. Looking Forward Despite a setback during the second quarter, the overall trend in the North Suburban market continues to be positive. There remain plenty of options for tenants large and small in the area, with nine blocks of contiguous space 1, SF or larger currently available. Investment sale activity continues to strengthen and will continue to do so over the coming quarters, as the former Kraft Campus in Glenview went under contract during the second quarter. Illinois Tool Works has agreed to purchase the 5, SF facility from Hamilton Partners. Largest Blocks of Available Space Building Name Building Address Block Size (SF) Motorola Mobility Campus 6 N US Highway 45, Libertyville 1,121,186 Three Overlook Point 3 Overlook Pt, Lincolnshire 2,143 AON Office Building 1 Milwaukee Ave, Glenview 138,33 Tri State International Office Center 25 Tri State International, Lincolnshire 28,88 Tri State International Office Center 75 Tri State International, Lincolnshire 28,88 3 Tower Pky, Linconlshire 175,545 Bannockburn Centre 12 Lakeside Dr, Bannockburn 17,874 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller Lincolnwood Commons N Lincoln Ave, Lincolnwood 59,713 $5,, $84. Feiner Investment Corporation Hallmark & Johnson Properties, Ltd Significant North Suburban Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type Deerbrook Corporate Center 57 Lake Cook Rd, Deerfield 51,988 BigMachines, Inc. Lease expansion Continental Executive Park 75 N Fairway Dr., Vernon Hills 49,173 AbbVie New lease North Grove Corporate Park I Lehigh Ave, Morton Grove 46,51 Hallmark Data Systems New lease Two Marriott Drive 2 Marriott Dr, Lincolnshire 25, irhythm National Clinical Center Lease renewal Hyatt Deerfield Campus 165 Lake Cook Rd, Deerfield 14,5 Bright Horizons Children s Centers, LLC New lease Corporate Center I 111 Skokie Blvd, Northbrook 11,393 JP Morgan Chase New lease Riverwalk Office Plaza I 215 E Lake Cook Rd, Buffalo Grove 8,766 RBC New lease Edens Corporate Center II 65 Dundee Rd, Northbrook 4,369 The Bureaus, Inc. New lease Edens Corporate Center II 65 Dundee Rd, Northbrook 3,451 Open Markets New lease Entries highlighted in red denote NAI Hiffman transactions 11

12 173 Northwest Suburban Fox Lake 45 Wau Region # OFFICE BUILDINGS 584 MARKET SIZE (SF) 33,746,831 McHenry TOTAL VACANCY 7,572,56 SF (22.44%) 176 Libertyville DIRECT VACANCY 7,27,18 SF (21.36%) SUBLEASE VACANCY 365,398 SF (1.8%) AVAILABLE SPACE 9,581,27 SF (28.39%) 2Q13 NET ABSORPTION (SF) -1,85 YTD 213 NET ABSORPTION (SF) 276,46 UNDER CONSTRUCTION (SF) 2Q13 NEW SUPPLY (SF) Net Absorption Asking Rents 22.4% -1,85 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 area had been plagued with overall negative absorption and elevated vacancy rates since 26, in part due to area mortgage companies giving back space in excess of one million SF. However, market conditions have fi nally started to improve in the Northwest Suburban market over the past several quarters. 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 positive trend witnessed over the past fi ve quarters was slowed by new vacancies being introduced to the market

13 Northwest Suburban Quarter in Review Net absorption was effectively fl at for the second quarter, following fi ve quarters of positive absorption. Continued leasing activity was offset by new vacancies being introduced to the market, the largest of which involved APP Pharmaceuticals Inc relocating its operations to Kemper Lakes Business Center in Long Grove and putting its 63,499 SF space in the Schaumburg Corporate Center up for sublease. The vacancy rate was unchanged during the second quarter at 22.44%. A joint venture between GlenStar Properties and Walton Street Capital acquired the 58% leased four-building offi ce complex known as Continental Towers in Rolling Meadows during the second quarter. The transaction was a REO sale, and traded for $58.5 million, or about $64. PSF. The buyers plan to invest in the complex to reposition the buildings as premier class A assets for their market. The largest lease signed during the second quarter involved credit card company Capital One Financial Corp. taking an additional 67,599 SF in the Atrium Corporate Center in Rolling Meadows. Capital One had leased 15, SF in the building last year, and will now occupy 217,599 SF, bringing the building to nearly 1% occupancy. Looking Forward Investment interest in the Northwest Suburban market should continue to pick up, evidenced by the two-building Century Centre offi ce complex being listed for sale during the second quarter. Despite fl at conditions during the second quarter, the overall trend in the Northwest Suburban market will continue to be positive as demand increases due to the economic recovery and blocks of vacant space are 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 Meadows Corporate Center 285 W Golf Rd, Rolling Meadows 279,286 Continental Deer Park 2144 Lake Cook Rd, Deer Park 277,2 AT&T Business Park 21 Lakewood Blvd, Hoffman Estates 239,25 Fischer Corporate Center 177 N Randall Rd, Elgin 196,88 Woodfield Corporate Center 2 N Martingale Rd, Schaumburg 196,26 Two Park Center 555 Prairie Stone Pky, Hoffman Estates 193,61 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 2-building sale, Arlington Heights 1,12,871 $28,, $25. Torburn Partners Nokia Siemens Networks Continental Towers 171 Golf Rd, Rolling Meadows (4 bldgs) 91,627 $58,5,* $64.* GlenStar Properties/Walton Street Capital CWCapital Asset Mgmt Significant Northwest Suburban Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type Atrium Corporate Center 38 Golf Rd, Rolling Meadows 67,599 Capital One Financial Corp. Lease expansion Kemper Lakes Business Center 2 Corporate Dr, Long Grove 39,796 Dovenmuehle Mortgage New lease Kemper Lakes Business Center 1 Corporate Dr, Long Grove 26,689 Intel Americas, Inc. New lease Commerce Point I 38 N Wilke Rd, Arlington Heights 25, ITT New lease Commerce Point I 38 N Wilke Rd, Arlington Heights 21,242 Paylocity Lease expansion/renewal Two Century Centre 17 E Golf Rd, Schaumburg 15,395 Colgate Lease renewal Continental Towers 171 Golf Rd, Rolling Meadows 13,251 ERM Lease renewal Woodfield Corporate Center 425 N Martingale Rd, Schaumburg 11,96 Rittal Corporation New lease Commerce Center 5 E Commerce Dr, Schaumburg 8,857 GN Otometrics Lease expansion *REO sale/high-vacancy property 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) 15,263, TOTAL VACANCY 3,125,65 SF (2.48%) DIRECT VACANCY 3,41,355 SF (19.93%) SUBLEASE VACANCY 84,295 SF (.55%) AVAILABLE SPACE 3,759,881 SF (24.63%) Elk Grove Village Des Plaines Ohare Int'l Airport Park Ridge Rosemont 2Q13 NET ABSORPTION (SF) -21, YTD 213 NET ABSORPTION (SF) -31,53 UNDER CONSTRUCTION (SF) 215, Q13 NEW SUPPLY (SF) Addison 2 Franklin Park 5 Net Absorption Asking Rents Lombard 2 2.5% -21,752 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 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 Area s class A buildings have lead the recovery this activity is beginning to expand into class B buildings

15 O Hare Area Quarter in Review New vacancies pushed net absorption negative during the second quarter, totaling negative 21,752 SF. Although several new leases were signed and tenants took occupancy of recently leased space, these new vacancies outweighed the positive effects of this leasing activity. The largest vacancy introduced to the market during the second quarter was in the east tower of Triangle Plaza, where Verizon moved out of its 72,362 SF space. The O Hare vacancy rate increased by 14 basis points to end the quarter at 2.48%. The American Academy of Orthopaedic Surgeons broke ground on a new fi ve-story 165, SF build-to-suit headquarters during the second quarter, one of two new construction projects in the O Hare Area market since 21. The new building will be located at the corner of River and Higgins Roads, less than two blocks from its current location. The Big Ten Conference is also under construction on a 5, SF headquarters building in Rosemont that will include an interactive sports museum. Leasing activity was limited to spaces smaller than 2, SF during the second quarter. No signifi cant sales activity was recorded during the quarter. Looking Forward Many of the O Hare Area s premier buildings that had languished during the recession have seen lots of new transaction activity during the recovery. These buildings have signifi cantly increased their occupancy levels and have lead the improvement trend witnessed throughout the market. This has resulted in landlords pushing rental rates and reducing concession packages amongst these higher-end properties. This tightening of options among the market s premier buildings is beginning to translate to demand for the area s class B buildings and will continue to do so over the next two years. 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 14, N Harlem Ave, Norridge 93,155 Triangle Plaza - East Tower 875 W Bryn Mawr Ave, Chicago 91,11 81 River Rd, Schiller Park 74,988 O Hare Aerospace Center 4825 N Scott St, Schiller Park 74,656 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller None to report Significant O Hare Area Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type Triangle Plaza - West Tower 877 W Bryn Mawr Ave, Chicago 15,952 Mondelez International New lease Columbia Centre III 9525 W Bryn Mawr Ave, Rosemont 14,135 Foresite Realty Partners, LLC Sublease O Hare Lake Office Park 225 E Devon Ave, Des Plaines 12,24 Choice Group Inc. New lease One O Hare Centre 625 N River Rd, Rosemont 11,917 Prologis New lease Cumberland Centre 544 N Cumberland Ave, Chicago 11,613 BIR Training New lease Touhy Office Plaza at O Hare 14 E Touhy Ave, Des Plaines 6,713 Dynia & Associates New lease Entries highlighted in red denote NAI Hiffman transactions 15

16 Chicago Executive Airport No East-West Corridor Elgin Schaumburg Arlington Heights 2 # OFFICE BUILDINGS 665 Elk Grove Village Ohare Int'l Airport Rose MARKET SIZE (SF) 42,83,999 TOTAL VACANCY 9,26,155 SF (21.7%) DIRECT VACANCY 7,975,312 SF (18.62%) SUBLEASE VACANCY 1,5,843 SF (2.45%) AVAILABLE SPACE 1,849,234 SF (25.33%) 2Q13 NET ABSORPTION (SF) 15,41 YTD 213 NET ABSORPTION (SF) 9, St Charles North Aurora Aurora Dupage Airport Naperville Lombard 38 Oakbrook Terrace Oak Brook 2 Downers Grove Elmhurst Westmont Franklin UNDER CONSTRUCTION (SF) 1, Q13 NEW SUPPLY (SF) Bolingbrook Romeoville Net Absorption Asking Rents 21.1% 15,41 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. 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. The characteristically more stable eastern section is defi ned by more diverse multi-tenant buildings, smaller blocks of space, and older product. Vacancy Absorption Inventory by City 4, 25% Other Suburbs (19%) Oak Brook (16%) 2, 24% 23% Westchester (4%) -2, 22% Aurora (4%) Naperville (15%) -4, 21% Lombard (8%) -6, % Oakbrook Terrace (1%) Downers Grove (13%) (%) Net Absorption (SF) Lisle (11%) 16 NAI Hiffman Several new leases over 4, SF have been signed recently, which has eliminated several of the large block opportunities

17 East-West Corridor Quarter in Review The East-West Corridor vacancy rate was largely unchanged during the second quarter, decreasing slightly to 21.7% from last quarter s 21.11%. While this is signifi cantly below the 23.77% peak vacancy rate witnessed in mid-21, vacancy has leveled off over the past year, experiencing only minor fl uctuations. Net absorption for the second quarter totaled 15,41 SF, as new vacancies offset the effects of continued leasing activity. The largest new vacancy is the result of Waste Management leaving 46,382 SF in the Executive Towers West II building at 1411 Opus Pl in Downers Grove, relocating into its recently expanded space at Butterfi eld Centre in Lombard. The largest investment sale transaction involved Transwestern Investment Management LLC acquiring the 299,792 SF twobuilding offi ce campus in Downers Grove known as The Corridors in an auction sale for only $22.9 million, or about $76 PSF. Adding the buyer s premium pushes the total price to just over $8 PSF. At the time of sale, the buildings were only 51 percent leased and had been through multiple ownership changes. However, the fully-leased 184,17 SF building located at 21 York Rd in Oak Brook, sold for $34 million, or about $185 PSF, showing that investors are willing to pay a premium for well-leased buildings. The largest lease of the second quarter involved Wells Fargo Home Mortgage expanding into 67,175 SF at One Imperial Place in Lombard. Looking Forward Large blocks of vacant space are getting more scarce, especially on the eastern side of the East-West Corridor and rental rates have already begun to increase in the area s best buildings. Several companies have signed leases over 4, SF over the past two years, helping to accelerate the recovery in the East-West Corridor. This trend is expected to moderately continue, further diminishing the inventory of quality available space. 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 218,152 Corridors Two 2655 Warrenville Rd, Downers Grove 149,896 Westwood of Lisle II 2441 Warrenville Rd, Lisle 148,423 Esplanade II 35 Lacey Rd, Downers Grove 112,834 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller Corridors One & Two 2651 & 2655 Warrenville Rd, Downers Grove 299,792 $22,,* $76.* Transwestern LNR Partners LLC Roosevelt Glen Corp Ctr Roosevelt Rd, Glen Ellyn 23,746 $5,3, $23. Clark Street Development Berkadia Commercial Mortgage 21 York Center 21 York Rd, Oak Brook 184,17 $34,, $185. Pembroke Capital LLC CWCapital Asset Management LLC Oak Brook Business Ctr 2 York Rd, Oak Brook 128,498 $8,, $62. Convergent Capital Ptnrs Duke Realty Corporation 18 Springer Dr, Lombard 6,838 $5,55, $91. CyrusOne The Alter Group 12 W 22nd St, Oak Brook 34,992 $3,6, $13. Juno Partners, LLC 12 West LLC Significant East-West Corridor Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type One Imperial Place 1 E 22nd St, Lombard 67,175 Wells Fargo Home Mortgage Lease expansion/renewal 71 E 22nd St, Lombard 4,658 Emdeon New lease One Tellabs Center 1415 W Diehl Rd, Naperville 36,92 Amerisource New lease Oakbrook Terrace Medical Center II 1S26 Summit Ave, Oakbrook Terrace 34,634 Loyola University Medical Center Lease renewal Corporetum Office Campus VI Warrenville Rd, Lisle 19,11 Primera Engineers, Ltd. Lease renewal/expansion *Auction sale 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 534,211 SF (13.29%) DIRECT VACANCY 4,964 SF (12.31%) SUBLEASE VACANCY 39,247 SF (.98%) Naperville Darien 55 Burr Ridge 83 AVAILABLE SPACE 632,8 SF (15.72%) 2Q13 NET ABSORPTION (SF) 112,957 Bolingbrook YTD 213 NET ABSORPTION (SF) 18,561 UNDER CONSTRUCTION (SF) 2Q13 NEW SUPPLY (SF) Romeoville Net Absorption Asking Rents 13.3% 112,957 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 new 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 The vacancy rate experienced a signifi cant adjustment due to multiple sizeable leases resulting in positive absorption

19 I-55 Corridor Quarter in Review The I-55 Corridor vacancy rate experienced a signifi cant adjustment during the second quarter due to 112,957 SF being absorbed through new leases being signed. While in most larger offi ce markets, that amount of absorption would result in a less signifi cant correction, due to the small size of the I-55 Corridor, it was enough to drop the vacancy rate by 2.81% to 13.29% by the end of the quarter. Two leases were signed at 5 Joliet Rd in Willowbrook, resulting in 78,4 SF of vacant space being removed from the market. HVAC, refrigeration and welding technical school Environmental Technical Institute leased 48,923 SF, while structural engineering and architecture fi rm Raths, Raths & Johnson, Inc. leased the remaining 29,477 SF, bringing the building to 1% occupied. The largest sale of the second quarter involved Deutsch Bank & Wealth Management, formerly known as RREEF Real Estate, buying the two-story,,233 SF offi ce building at 22 Heritage Pky in Woodridge for $13.3 million. The building is fully-leased to Allstate Corp. and last sold in 23 for $17.1 million. Looking Forward The I-55 Corridor will continue to be dictated by tenants leasing space and new vacancies being introduced to the market. Due to the small size of the I-55 Corridor market, these new vacancies and new leases can have a signifi cant impact on the area s vacancy rate, as demonstrated during the second quarter. The area remains an affordable alternative to parts of the East-West Corridor and will continue to attract tenants based on value and its transportational and locational advantages. Largest Blocks of Available Space Building Name Building Address Block Size (SF) 22 Remington Blvd, Bolingbrook 79,832 Waterfall Glen - Phase III 84 S Frontage Rd, Woodridge 77, Tallgrass Corporate center 1 Remington Blvd, Bolingbrook 74,558 Creekside Corporate Center 27 Remington Blvd, Bolingbrook 38,115 Woodland Park 535 Plainfield Rd, Willowbrook 2, 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 22 Heritage Pky, Woodridge,233 $13,3, $141. Deutsche Asset & Wealth Management Oak Realty Group, Inc. MidPoint I 7125 Janes Ave, Woodridge 51,579 $6,1, $118. Atni Management LLC McShane Development Company Significant I-55 Corridor Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type 5 Joliet Rd, Willowbrook 48,923 Environmental Technical Institute New lease 5 Joliet Rd, Willowbrook 29,477 Raths, Raths & Johnson, Inc. New lease The Offices of Waterfall Glen S Frontage Rd, Woodridge 15,2 Walgreens Lease renewal 1333 Burr Ridge Pky, Burr Ridge 14,26 Regus New lease Entries highlighted in red denote NAI Hiffman transactions 19

20 Overall Trend Downtown Office Market # OFFICE BUILDINGS 454 MARKET SIZE (SF) 135,51, % TOTAL VACANCY 17,554,44 SF (13.%) DIRECT VACANCY 16,38,167 SF (11.88%) SUBLEASE VACANCY 1,516,273 SF (1.12%) AVAILABLE SPACE 25,819,81 SF (19.12%) Net Absorption 398,58 SF 2Q13 NET ABSORPTION (SF) 398,58 YTD 213 NET ABSORPTION (SF) 642,35 UNDER CONSTRUCTION (SF) 1,55,67 2Q13 NEW SUPPLY (SF) Asking Rents $29.4 Pictured above: 1K Fulton, the 689,67 SF under construction offi ce building, where Google leased 223,67 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. Quarter in Review The recovery of the downtown offi ce market continued unabated during the second quarter, as 398,58 SF of vacant space was absorbed through new leases and tenants expanding. This activity pushed the overall vacancy rate down 29 basis points to 13.%, the lowest level witnessed in the downtown offi ce market since the end of 28, and a rate 14 basis points better than a year ago, and more than 4% the peak rate recorded in mid-21. The Central Loop and East Loop submarkets posted the greatest demand during the second quarter, absorbing 249,47 SF and 195,561 SF respectively. Net absorption turned negative and the vacancy rate rose slightly in both the North Michigan Avenue and River North submarkets, while the West Loop saw relatively fl at conditions due to new vacancies reducing the positive effects of continued leasing activity. The largest new lease signed during the second quarter involved Google leasing 223,67 SF in the 689,67 SF building to be known as 1KFulton, which is currently under construction in the Fulton Market area of the West Loop. Downtown Vacancy Absorption Downtown Direct & Overall Vacancy 2 MM 18% 17.19% 1 MM 16% 15.16% 16.9% 14% 12.25% 11.29% 12.4% 1.99% 14.44% 1.39% 13.% 11.88% -1 MM 12% 7.8% -2 MM % (%) Net Absorption (SF) West Loop Central Loop East Loop North Michigan Avenue River North Overall Downtown 2 NAI Hiffman Direct Vacancy Sublease Vacancy

21 Downtown Office Market New Development Construction is underway in the West Loop submarket for the fi rst time in several years. The construction of 1 W Fulton St, to be known as 1K Fulton when complete, began during the second quarter once Google signed onto 223,67 SF in the building. Construction continues on an 861, SF offi ce tower underway at 444 W Lake St, known as River Point. Several additional buildings have been proposed, including a 1.5 million SF offi ce tower at 4 W Randolph St and a 4, SF building at 2 W Randolph St. Largest Blocks of Available Space Submarket Building Name Building Address Block Size (SF) West Loop River Point 444 W Lake St 861, West Loop 311 W Monroe St 354,17 North Michigan The AMA Building 515 N State St 35,6 North Michigan Tribune Tower N Michigan Ave 317,76 West Loop 5 W Monroe St 311,49 East Loop AON Center 2 E Randolph St 36,163 West Loop Willis Tower 233 S Wacker Dr 285,421 East Loop One Prudential Plaza 13 E Randolph St 256,72 West Loop Bank of America Plaza 54 W Madison St 25,533 West Loop AT&T Building 225 W Randolph St 238,788 Downtown Office Buildings On the Market 2nd Quarter 213 Submarket Building Name Building Address Size (SF) Asking Price Price PSF Seller Status West Loop Citigroup Center 5 W Madison St 1,47, $46,, $313 General Electric Co. New on market West Loop 311 S Wacker Dr 1,276,85 $2,, $227 Shorestein Realty & Fremont Group On market Central Loop 161 N Clark St 1,1, $337,, $319 Tishman Speyer Under contract Central Loop 181 West Madison Street 181 W Madison St 1,163 $33,, $322 GE Assett Management Under contract West Loop AT&T Building 225 W Randolph St 853,25 $275,, $322 Kushner Companies On market Central Loop 1 South LaSalle 1 S LaSalle St 798,782 $21,, $263 CBRE Investors Under contract Downtown Office Significant Sale Transactions 2nd Quarter 213 Submarket Building Address Size (SF) Sale Price Price PSF Buyer Seller East Loop 13 E Randolph St & 18 N Stetson Ave 2,24,137 $41,,* $186.* Michael Sillberberg/Mark Karasick BentleyForbes Central Loop 181 W Madison St 936,683 $3,, $32. CBRE Global Investors General Electric Co. North Mich Ave 875 N Michigan Ave 856, $14,, + $ Hearn Co./Mount Kellet/Lynd Comm. Deutsch Bank/Northstar Central Loop 1 S LaSalle St 798,782 $211,, $264. Tishman Speyer Properties L.P. CBRE Global Investors West Loop 225 W Wacker Dr 65,812 $218,, $335. Mirae Asset Global Investments LLC JP Morgan Chase & Co West Loop 25 W Wacker Dr 263,65 $22,75, $86. Ameritus Corporate Real Estate Services Cape Horn Group LLC West Loop 4 S Jefferson St 253,869 $97,5, $384. Cole Corporate Income Trust, Inc. Sterling Bay Companies River North 357 & 363 W Erie St 112,6 $8,5, $75. Brijus Capital, LLC Aspen Capital Downtown Office Significant Lease Transactions 2nd Quarter 213 Submarket Building Name Property Address Leased (SF) Tenant Lease Type West Loop 1KFulton 1 W Fulton St 223,67 Google New lease North Michigan Avenue NBC Tower 455 N Cityfront Plaza 128,381 ComPsych Corporation Lease expansion/renewal Central Loop 77 W Wacker Dr 114,76 McGuireWoods LLP Lease reduction/extension West Loop One Eleven South Wacker 111 S Wacker Dr 55, Harris Associates New lease West Loop USG Building 55 W Adams St 54, Lewis Brisbois Bisgaard & Smith LLP Lease expansion East Loop 33 E Wacker Dr 5, American Management Association New lease West Loop 311 S Wacker Dr 48, Faegre Baker Daniels New lease Central Loop U.S. Bank Building 1 S LaSalle St 43,37 U.S. Bank Lease expansion Central Loop 77 W Wacker Dr 43, DTZ Sublease *Building recapitalization + REO sale, involved floors 4-41 only, including office space and parking 21

22 West Loop # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 45,399,37 TOTAL VACANCY 5,563,61 SF (12.25%) DIRECT VACANCY 5,123,799 SF (11.29%) SUBLEASE VACANCY 439,82 SF (.97%) AVAILABLE SPACE 8,298,793 SF (18.28%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr Q13 NET ABSORPTION (SF) 12,91 Randolph St YTD 213 NET ABSORPTION (SF) 148,54 UNDER CONSTRUCTION (SF) 1,55,67 2Q13 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 12.3% 12,91 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 4, SF building at 2 W Randolph St close to being approved. Several additional offi ce buildings have been proposed in the West Loop submarket, including a nearly 1.5 million SF offi ce tower at 4 W Randolph St. Vacancy Absorption 4, 2, 2% 18% Vacancy by Class Type 12.76% 12.96% -2, 16% 14% 6.4% -4, 12% -6, (%) % Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 22 NAI Hiffman Two buildings are currently underway in the West Loop, with another soon to break ground, the most activity seen in years

23 West Loop Quarter in Review The West Loop vacancy rate was fl at during the second quarter when compared to last quarter, dipping only 3 basis points to 12.25% as net absorption totaled 12,91 SF for the three month period. While leasing activity continued unabated, several new vacancies combined to negate the positive effects of the elevated demand that has been commonplace in the submarket for the past three years. Investment sale activity continued through the second quarter, with the largest sale involving the 65,812 class A offi ce tower located at 225 W Wacker Dr being purchased by South Korean investment fi rm Mirae Asset Global Investments LLC for $218 million, or about $335. PSF. Foreign investment fi rms are becoming increasingly interested in Chicago buildings as prices soar in premier offi ce markets like New York and San Francisco. The largest new lease signed during the second quarter involved technology giant Google leasing 223,67 SF in the under construction offi ce redevelopment project being called 1K Fulton at 1 W Fulton St. The company will be moving more than 5 employees from River North to the new offi ces once they are complete. Looking Forward Construction continues on the downtown market s newest offi ce tower known as River Point at 444 W Lake St. The building will be 45 stories and will offer 861, SF of space. However, prominent developer J. Paul Beitler is pushing hard to start construction on a 23-story offi ce building at 2 W Randolph offering 4, SF of offi ce space that he hopes will be delivered in 215, before River Point is completed. The West Loop will continue to experience elevated demand due to its proximity to various transportation options and class A product. Largest Blocks of Available Space Building Name Building Address Block Size (SF) River Point 444 W Lake St 861, 311 W Monroe St 354,17 5 W Monroe St 311,49 Willis Tower 233 S Wacker Dr 285,421 Bank of America Plaza 54 W Madison St 25,533 AT&T Building 225 W Randolph St 238, North Canal 111 N Canal St 176,52 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 225 Wacker 225 W Wacker Dr 65,812 $218,, $335. Mirae Asset Global Investments LLC JP Morgan Chase & Co Engineer s Building 25 W Wacker Dr 263,65 $22,75, $86. Ameritus Corporate Real Estate Services Cape Horn Group LLC 4 S Jefferson St 253,869 $97,5, $384. Cole Corporate Income Trust, Inc. Sterling Bay Companies Significant West Loop Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type 1KFulton 1 W Fulton St 223,67 Google New lease Riverside Plaza 222 S Riverside Plz 73, Trading Technologies International Lease renewal 1 S Wacker Dr 57,83 NYSE Lease renewal One Eleven South Wacker 111 S Wacker Dr 55, Harris Associates New lease USG Building 55 W Adams St 54, Lewis Brisbois Bisgaard & Smith LLP Lease expansion 311 S Wacker Dr 48, Faegre Baker Daniels New lease Riverside Plaza 222 S Riverside Plz 34,376 I Tech New lease 23

24 Central Loop # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 39,137,724 TOTAL VACANCY 4,711,36 SF (12.4%) DIRECT VACANCY 4,32,371 SF (1.99%) SUBLEASE VACANCY 48,665 SF (1.4%) AVAILABLE SPACE 6,724,973 (17.18%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr Q13 NET ABSORPTION (SF) 249,47 Randolph St YTD 213 NET ABSORPTION (SF) 23,843 UNDER CONSTRUCTION (SF) 2Q13 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 12.% 249,47 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,, 18% Vacancy by Class Type 12.11% 12.6% 7, 16% 9.25% 4, 14% 1, 12% -2, 1% -5, (%) % Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 24 NAI Hiffman Investment sales activity looks to remain elevated as two buildings are currently under contract in the Central Loop

25 Central Loop Quarter in Review The Central Loop vacancy rate decreased by 63 basis points, as 249,47 SF of vacant space was absorbed through new leases being signed and tenants taking occupancy of recently leased space. New vacancies were few during the second quarter when compared to the fi rst quarter, when the City of Chicago departed 124,875 SF at 33 N La Salle St, resulting in a period of negative net absorption for the submarket. The absorption tally for the fi rst half of the year totals 23,843 SF, and the area s vacancy rate has improved to a level nearly 1.5% a year ago. Two offi ce towers sold during the second quarter, the larger of which involved CBRE Global Investors buying the 5-story, 936,683 SF building located at 181 W Madison St for about $3 million, which last sold for $2 million in 26. CBRE Global Investors also agreed to sell the 798,782 SF offi ce tower at 1 S LaSalle St for about $211 million. Both sales are indicative of a downtown offi ce investment sales market that has strongly rebounded. Minneapolis-based U.S. Bank expanded its lease at 1 S LaSalle St by an additional 43,37 SF and secured naming rights during the second quarter, bringing its total space in the building to about 11, SF. Looking Forward Investment sales look to remain active in the Central Loop submarket over the coming quarter, as two buildings are currently under contract including a joint venture between John Buck Co. and Korean investors planning to buy the 1.1 million SF offi ce tower at 161 N Clark and a private investor under contract to buy the 226,666 SF building at 32 W Randolph. Leasing activity has been consistently elevated and has pushed the vacancy rate back to 28 levels. This trend is also expected to continue as 4 contiguous blocks 2, SF or larger in size remain available. Largest Blocks of Available Space Building Name Building Address Block Size (SF) 222 North LaSalle 222 N LaSalle St 199,132 Chase Tower 1 S Dearborn St 193,319 One Financial Place 44 S LaSalle St 154,2 11 S LaSalle St 146, W Wacker Dr 13,968 Citadel Center 131 S Dearborn St 128,622 One North Dearborn 1 N Dearborn St 97,261 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 181 West Madison 181 W Madison St 936,683 $3,, $32. CBRE Global Investors General Electric Co. 1 South LaSalle 1 S LaSalle St 798,782 $211,, $264. Tishman Speyer Properties L.P. CBRE Global Investors Significant Central Loop Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type 77 W Wacker Dr 114,76 McGuireWoods LLP Lease reduction/extension U.S. Bank Building 1 S LaSalle St 43,37 U.S. Bank Lease expansion 77 W Wacker Dr 43, DTZ Sublease Bank of America Building 23 S Clark St 41,5 Advantage Futures New lease 1 S LaSalle St 18,292 Wiss, Janney, Elstner Assocations, Inc. Lease renewal/expansion 2 North LaSalle 2 N LaSalle St 13,185 NetSuite New lease Two North LaSalle 2 N LaSalle St 11, Grind, LLC New lease 3 N LaSalle St 1,315 Insureon New lease 25

26 East Loop # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 23,842,356 TOTAL VACANCY 3,615,49 SF (15.16%) DIRECT VACANCY 3,442,565 SF (14.44%) SUBLEASE VACANCY 172,844 SF (.72%) AVAILABLE SPACE 5,297,654 SF (22.22%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr Q13 NET ABSORPTION (SF) 195,561 Randolph St YTD 213 NET ABSORPTION (SF) 223,53 UNDER CONSTRUCTION (SF) 2Q13 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 15.2% 195,561 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 Vacancy by Class Type 6, 4, 2% 18% 15.66% 15.7% 14.29% 2, 16% 14% -2, 12% -4, (%) % Net Absorption (SF) Class A Direct Vacancy Class B Sublease Vacancy Class C 26 NAI Hiffman The East Loop is fi naly seeing a steady improvement trend, as conditions have improved for three quarters in a row

27 East Loop Quarter in Review Several new leases were signed during the second quarter, resulting in 195,561 SF of vacant space being absorbed and an 82 basis point drop in the East Loop vacancy rate to end the quarter at 15.16%. This is the lowest vacancy rate witnessed in the East Loop submarket since late 28 when the economic recession was taking hold. Through the fi rst half of the year, net absorption has totaled 223,53 SF. Although no buildings sold during the second quarter, an investment group led by Mark Karasick of 61W Companies and Michael Silberberg or Berkley Properties, in partnership with long-term owner BentleyForbes, are investing more than $1 million to re-capitalize the two Prudential Plaza offi ce towers. New York-based Am Trust Realty Corp. is under contract to buy the 526,158 SF offi ce building at 1 E Wacker Dr in a sale-leaseback transaction expected to close this fall. The building has never changed ownership since it was built in The largest lease was signed by the American Management Association, taking 5, SF at 33 E Wacker Dr. Looking Forward The East Loop has now witnessed three consecutive quarters of improving conditions, suggesting that demand is picking up in the submarket and a steady improvement trend may fi nally be establishing itself. The recovery has been uneven due to periods of large vacancies, such as Groupon leaving 22, SF at 33 E Wacker Dr, have been followed by periods of signifi cant leasing activity, resulting in large swings in absorption. Only four blocks of space 1, SF remain available, suggesting that there are fewer opportunity for these big swings going forward. Largest Blocks of Available Space Building Name Building Address Block Size (SF) AON Center 2 E Randolph St 36,163 One Prudential Plaza 13 E Randolph St 256,72 33 E Wacker Dr 188,9 One Congress Center 41 S State St 11,898 CNA Center 333 S Wabash Ave 92, North Michigan Avenue 36 N Michigan Ave 76,855 The Sullivan Center 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller Prudential Plaza (2 bldgs) 13 E Randolph St & 18 N Stetson Ave 2,24,137 $41,,* $186.* Michael Sillberberg/Mark Karasick BentleyForbes Significant East Loop Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type 225 Wacker 225 W Wacker Dr 112, Omnicom Group Inc. Lease renewal 33 E Wacker Dr 5, American Management Association New lease Two Prudential Plaza 18 N Stetson Ave 37, Schuyler, Roche & Crisham, P.C. Lease expansion/consolidation Monroe Building 14 S Michigan Ave 29,66 Coeur d Alene Mines Corp. New lease One Illinois Center 111 E Wacker Dr 28, Live Nation Entertainment New lease CNA Center 333 S Wabash Ave 19,456 Meridian Health Plan of Illinois New lease One Illinois Center 111 E Wacker Dr 6,29 Mathematic Policy Research Lease expansion *Building recapitalization 27

28 North Michigan Avenue # OFFICE BUILDINGS 62 MARKET SIZE (SF) 13,141,925 TOTAL VACANCY 2,258,938 SF (17.19%) DIRECT VACANCY 2,114,589 SF (16.9%) SUBLEASE VACANCY 144,349 SF (1.1%) AVAILABLE SPACE 3,592,25 SF (27.33%) 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 2Q13 NET ABSORPTION (SF) -14,976 Randolph St YTD 213 NET ABSORPTION (SF) -8,916 UNDER CONSTRUCTION (SF) 2Q13 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 17.2% -14,976 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 4, 2, 2% 17% Vacancy by Class Type 18.75% 16.3% 14% 11.% -2, 11% -4, 8% -6, (%) % Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 28 NAI Hiffman Signifi cant improvement is unlikely until some of the submarket s large blocks of available space are absorbed

29 North Michigan Avenue Quarter in Review Net absorption was slightly negative during the second quarter, totaling negative 14,976 SF due to several new vacancies, the largest of which involved long-term tenant Energy BBDO leaving 58,298 SF behind with its move to 225 N Michigan Ave in the nearby East Loop submarket. The vacancy rate increase by 12 basis points to 17.19% at the end of the second quarter, a level slightly above the 16.4% rate recorded a year ago, but still below the peak 18.3% reached in late-211. A group of investors including The Hearn Co., The Lynd Co. and Mount Kellett Capital Management L.P. purchased the offi ce and parking portions of the landmark John Hancock Center in June for $14 million as part of an REO sale. The purchase included fl oors 4-41 of the 1-story building, with the offi ce sector comprising 856, SF in addition to building s parking facilities and several common areas. The largest lease signed during the second quarter involved employee assistance program-provider ComPsych Corporation renewing its existing lease and expanding by an additional 23,471 SF in the NBC Tower. Looking Forward Six options for 1, SF of contiguous space remain available in the North Michigan Avenue submarket. Until some of these large blocks of space begin to lease, signifi cant improvement is unlikely. While the small size of the submarket suggests that appreciable fl uctuations in the vacancy rate can occur, transaction velocity is also typically slow in the area. Two new medical offi ce buildings are planned near Northwestern Memorial Hospital. The hospital plans to construct a 24-story, 993, SF outpatient pavilion that is anticipated to be completed in fall 214. A new hospital for the Rehabilitation Institute of Chicago is planned for the vacant site at the northwest corner of Ontario St and McClurg St, with completion anticipated for 216. Largest Blocks of Available Space Building Name Building Address Block Size (SF) The AMA Building 515 N State St 35,6 Tribune Tower N Michigan Ave 317,76 11 E Erie St 227,569 Wrigley Building-North Tower 41 N Michigan Ave 214,831 River East Arts Center E Illinois St 21, 41 North Michigan Center 41 N Michigan Ave 14,9 36 E Grand Ave 92,568 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller John Hancock Center 875 N Michigan Ave 856, $14,,* $164.* Hearn Co./Mount Kellet Capital Mgmt/Lynd Commercial Deutsch Bank/Northstar 11 E Illinois St 3, $5,, $167. DKF Properties, LLC InStep Ventures, LLC Significant North Michigan Avenue Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type NBC Tower 455 N Cityfront Plaza 128,381 ComPsych Corporation Lease expansion/renewal 33 North Wabash 33 N Wabash Ave 3,8 The Thornton-Tomasetti Group Inc. Lease renewal 41 North Michigan Center 41 N Michigan Ave 23,7 A. Eicoff & Co. Lease renewal *REO sale, involved floors 4-41 only, including office space and parking 29

30 River North # OFFICE BUILDINGS Chicago Midway Airport Chicago Ave Chicago Oak St MARKET SIZE (SF) 13,53,272 TOTAL VACANCY 1,45,456 SF (1.39%) DIRECT VACANCY 1,54,843 SF (7.8%) SUBLEASE VACANCY 35,613 SF (2.59%) AVAILABLE SPACE 1,6,356 SF (14.9%) Ohio St Kinzie St 12 2 Oak Lawn 5 State St 57 Wacker Dr Q13 NET ABSORPTION (SF) -44,7 Randolph St YTD 213 NET ABSORPTION (SF) 75,524 UNDER CONSTRUCTION (SF) 2Q13 NEW SUPPLY (SF) Carpenter St Halsted St Wacker Dr Wells St Harvey Michigan Ave 6 2 Congress Pky 2 8 Net Absorption Asking Rents 1.4% -44,7 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% 11.99% 8, 17% 9.13% 9.25% 4, 14% 11% -4, 8% -8, (%) % Net Absorption (SF) Class A Class B Class C Direct Vacancy Sublease Vacancy 3 NAI Hiffman The improvement trend should continue but at a slower pace, as few large contiguous blocks of space are available

31 River North Quarter in Review The River North vacancy rate increased by 33 basis points during the second quarter due to several new vacancies and limited new leasing activity resulting in negative 44,7 SF of net absorption. Although transaction velocity was relatively quiet during the second quarter, the fi rst quarter witnessed several new leases and lease expansions signed, resulting in signifi cant positive absorption. Therefore, the tally for the fi rst half of the year remains positive, totaling 75,524 SF of vacant space absorbed. The largest sale of the second quarter involved Chicago-based investment and real estate development fi rm Brijus Capital, LLC buying the 112,6 SF offi ce loft buildings at 357 & 363 W Erie St for $8.5 million. At the time of the sale, the buildings were about half empty, but the buyer plans to invest $4 million to $5 million to upgrade the buildings and draw new creative and technology-oriented tenants. Google s recent acquisition of Motorola Mobility, leasing 572, SF in the Merchandise Mart last year, signed a lease during the second quarter to expand into an additional 32, SF in the iconic 4 million SF building. Looking Forward The River North submarket has been ground zero for the recent surge of tech companies moving into Chicago. The hope is that this trend continues. However, few large contiguous spaces remain available for these companies to move into. The signifi cant improvement trend witnessed over the past year should continue, but at a slower pace as smaller spaces are leased. Largest Blocks of Available Space Building Name Building Address Block Size (SF) 6 West Chicago 6 W Chicago Ave 117,11 The Merchandise Mart 222 Merchandise Mart Plz 93,799 River North Point 35 W Mart Ctr 87, North Clark at Riverfront Plaza 321 N Clark St 61, W Erie St 4,43 Mesirow Financial Building 353 N Clark St 28, N LaSalle St 25, 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 213 Building Name Building Address Size (SF) Sale Price Price PSF Buyer Seller 357 & 363 W Erie St 112,6 $8,5, $75. Brijus Capital, LLC Aspen Capital 833 W Jackson Blvd 62,84 $5,6,* $.* Urvan innovations Wells Fargo Bank 52 W Erie St 4,3 $6,1, $151. Gamla Cedron Erie, LLC Erie Players LLC Significant River North Lease Transactions 2nd Quarter 213 Building Name Property Address Leased (SF) Tenant Lease Type The Merchandise Mart 222 Merchandise Mart Plz 32, Google Lease expansion 358 W Ontario St 6,346 Spartz, Inc. New lease 321 North Clark at Riverfront Plaza 321 N Clark St 6,272 Romanucci & Blandin New lease *REO sale 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 Jud Henry Senior Associate jhenry@hiffman.com Matt Novak Associate mnovak@hiffman.com Aubrey Van Reken Vice President avanreken@hiffman.com James Adler Executive Vice President jadler@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 Brian Edgerton Vice President bedgerton@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 Linda Garske Senior Vice President lgarske@hiffman.com Kyle Kreminski Associate kkreminski@hiffman.com Jason Streepy Senior Vice President jstreepy@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 Brian Colson Executive Vice President Chris Gary Vice President cgary@hiffman.com Lawrence Much, SIOR Executive Vice President lmuch@hiffman.com Casey Baird Associate cbaird@hiffman.com Steve Connolly, SIOR Executive Vice President sconnolly@hiffman.com Bruce Granger Senior Vice President bgranger@hiffman.com Michael Robbins Vice President mrobbins@hiffman.com Kyle Barrett Associate kbarrett@hiffman.com Benjamin Cremer Senior Vice President bcremer@hiffman.com David Haigh Vice President dhaigh@hiffman.com Adam Roth, CCIM, SIOR Executive Vice President aroth@hiffman.com Howard Bergdoll Associate hbergdoll@hiffman.com Kelly Disser Vice President kdisser@hiffman.com Daniel Leahy, SIOR Executive Vice President dleahy@hiffman.com Stephen Sullivan Vice President ssullivan@hiffman.com Duke Botthof Executive Vice President botthof@hiffman.com Eric Fischer Vice President efischer@hiffman.com Adam Marshall, CCIM Vice President amarshall@hiffman.com Eric Tresslar Executive Vice President etresslar@hiffman.com Joe Bronson, SIOR Vice President jbronson@hiffman.com Jeff Fischer Executive Vice President jfischer@hiffman.com Mark Moran Executive Vice President mmoran@hiffman.com John Whitehead Vice President jwhitehead@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 Alison O Connell Melody Lawrence Cindy Nickell Denise Racana Tammi Sowinski 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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