Stronger Office Market Looking Into Future

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1 Research & Forecast Report Long Island OFFICE MARKET Q Stronger Office Market Looking Into Future Rose Liu Research & Financial Analyst Long Island Takeaways Class A & B Long Island economic and job growth improved in Q with warmer weather conditions. Long Island s unemployment rate was down to 4.5%, a 0.4% decrease from a year ago. Gas prices on Long Island kept rising but remained steady by the end of Q2 averaging at $3.00 per gallon which were roughly $1.00 lower than the prior year. The estimate of GDP growth for Q is between 2.0% and 2.5% primarily due to US trade export deficit reported for April. In Q2 2015, the Long Island vacancy rate decreased 40 basis points (bps) to 10.6%. Key factors were the stronger economy and a lower unemployment rate which drove the improvement. Class A buildings were especially strong recording a vacancy rate of 11.5%, down from 12.1% from Q However, the average asking rental prices declined to $26.18 per square foot (psf) in Q2 2015, a 0.95% decrease from $26.43 psf in Q The rental rates for Class A buildings averaged at $30.91 psf, 17 cents lower than Q There was a huge increase in the Long Island net absorption, surging to over of 221,000 square feet (sf) in Q from negative 61,600 sf in Q1 2015; however, that was still below a year ago. Sale and lease activity remained active during Q Lease activity was much higher than the average of 363,000 sf in even quarters in the past five years. Market Indicators Relative to prior period VACANCY NET ABSORPTION Summary Statistics Q Long Island Office Market Nassau Suffolk Long Island* Vacancy Rate 10.7% 10.5% 10.6% Change From Q (basis points) Net Absorption (Thousand Square Feet) Vacancy Rate (Class A) Net Absorption (Class A, Thousand Square Feet) Nassau Q Nassau Q3 2015* Suffolk Q % 11.8% 11.5% Suffolk Q3 2015* CONSTRUCTION RENTAL RATE** Note: *Projected **Rental rates for current quarter are for suburban area. Asking Rents Per Square Foot Per Year Suburban Class A & B $29.02 $23.40 $26.18 Change From Q % -0.38% -0.95% Suburban Class A $33.33 $28.16 $30.91 Change From Q % 0.00% -0.55% *Long Island Office Market refers to Nassau & Suffolk Counties; 10,000 square feet and above

2 Gross Domestic Product (GDP): Percentage Change From Preceding Period Unemployment Trends - Nassau & Suffolk GDP % Change Quarter-over-Quarter Unemployed in Thousands 6.00 Unemployment Rate (1.00) (2.00) % Change % 7.4% 6.1% 4.9% 4.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (3.00) Source: US Department of Commerce Vacancy In Q2 2015, Long Island inventory ending June 30 reached million square feet, while the vacant space reported 6.39 million square feet, resulting in a vacancy rate of 10.6%, a 0.4% decrease from Q The decrease in the Long Island vacancy rate was attributable to the stronger economy and improvement of office employment. The vacancy rate in Nassau County dipped 50 bps into 10.7% and Suffolk County dropped to 10.5%. All of the submarkets experienced improvements in office occupancy with the exception of the Western Nassau and Central Suffolk Submarkets. The Central Nassau and Southern Nassau submarkets still remained the lowest vacancy rates recording 9.0% and 8.9% respectively. For Class A buildings the vacancy rate in Nassau and Suffolk slid to 11.5% in Q from 12.1% in Q1 2015; however, it was still 20 bps higher than a year ago. The availability rate for Class A buildings in Nassau County decreased to 11.2%, a 0.6% lower than Suffolk County. Source: NYS Department of Labor Rental Rate Once again, the dichotomy of higher occupancy rates throughout the Long Island region in Q was produced through lower rental rates. The average asking rental prices dropped to $26.18 per square foot (psf), following 3 consecutive quarters of rentals rates increases averaging 0.31% per quarter since the peak in Q The rental rates dipped into $29.02 psf and $23.40 psf in Nassau and Suffolk Counties respectively. Rental rates vary by submarket, building type and location. The Western Nassau submarket had the highest rental rate averaging $31.60 psf in Q despite a $0.33 decrease from Q The Western Nassau submarket boasts a majority of Class A buildings which helped improve the rental rates. In comparison, the Central Suffolk submarket had the lowest rental rate of $20.24 psf; moreover towns such as Hauppauge, Commack and Ronkonkoma are optimal options for high-tech tenants who are seeking lower rents and larger spaces. Likewise, the average asking rental rates for Class A buildings declined to $30.91 psf, a 0.55% decrease from Q Update Vacancy Rates, Asking Rents, & Absorption Vacancy Rates Average Asking Rents Net Absorption (in Thousands) Class A Class A&B Western Nassau Northern Nassau Central Nassau Eastern Nassau Southern Nassau Western Suffolk Central Suffolk 0.0% 10.0% 20.0% Western Nassau Northern Nassau Central Nassau Eastern Nassau Southern Nassau Western Suffolk Central Suffolk $0 $15 $30 Western Nassau Northern Nassau Central Nassau Eastern Nassau Southern Nassau Western Suffolk Central Suffolk (100) (50) Source: CoStar & Colliers International Research 2 Long Island Research & Forecast Report Q Long Island Colliers International

3 Absorption Long Island net absorption improved dramatically from negative 61,600 square feet (sf) in Q to positive 221,900 sf in Q2 2015, with a net change of 300,000 sf. Nassau County continued its upward trend reaching 167,700 sf and Suffolk County surged to 54,100 sf from negative 121,600 sf from the prior quarter in net absorption. Net absorption for Class A buildings also saw a major improvement, to 151,900 sf throughout the Long Island region. However, submarkets such as Western Nassau and Central Suffolk experienced negative absorption while the Western Suffolk submarket reported the highest net absorption in excess of 105,000 sf. Even though net absorption improved compared to Q1 2015, it still fell behind minus 27,500 sf from a year ago. Net absorption peaked at more than 650,000 sf in Q in even quarters in the past five years. Sale & Lease Activity Long Island lease activity during Q picked up and almost doubled Q but was on par with Q The average lease activity in even quarters in the past five years averaged 363,000 square feet, and lease activity in Q was much above the average. One of the major lease signings included a 20,000 square foot office space at 999 Stewart Avenue in Bethpage by Exclusive Group Travel. Sale activity remained active during Q Two Class B Office Medical Buildings with a total of 61,238 square feet located at 77 & 100 N Centre Avenue in Rockville Center was sold for $8.1 million, or $ psf. Long Island Absorption (Square Feet, in Thousands) Leasing Activity (SF) Square Feet 800, , , , , ,000 Long Island Office Net Absorption (400) (200) Nassau VS. Suffolk Office Leasing Activity Nassau Suffolk Average Source: CoStar & Colliers International Research Update Transaction Highlights office SALE ACTIVITY Property Address Town Submarket Size SF Sale Price 77 & 100 N Centre Avenue Rockville Centre Nassau Southern 61,238 $8,100, E Sunrise Highway Valley Stream Nassau Southern 30,462 $5,345, Franklin Avenue Garden City Nassau Central 17,480 $4,500, Jericho Turnpike Jericho Nassau Eastern 11,000 $3,150, office LEASE ACTIVITY Outlook Property Address Town Submarket Size SF Lease Type 1981 Marcus Avenue Lake Success Nassau Western 24,017 Lease 999 Stewart Avenue Bethpage Nassau Eastern 20,000 Lease 14 Brooklyn Avenue Valley Stream Nassau Southern 15,500 Lease 1225 RXR Plaza Uniondale Nassau Central 11,220 Lease Although the market is tightening due to a limited number of large blocks of space in Nassau County, small units are still ample. With the limited product and stronger demand for office spaces, the occupancy rate and rental prices are expected to continue the upward trend. Another noticeable trend is that offices are moving from Queens to Nassau and further east to Suffolk County for those tenants especially in high-tech industry who are seeking lower rents, larger space with enhanced amenities. However, with the summer vacation season in full swing, the market traditionally slows and occupancy and net absorption are expected to decline in Q Nevertheless, in the long run, with the continued improvements in economy, the Long Island office market is expected to continue its momentum for the remainder of Long Island Research & Forecast Report Q Long Island Colliers International

4 UPDATE - MARKET STATISTICS SNAPSHOT LONG ISLAND CLASS A & B COUNTY VACANCY RATE AVERAGE ASKING RENTS 2Q15 1Q15 4Q14 3Q14 2Q15 1Q15 4Q14 3Q14 Nassau Total 10.7% 11.2% 11.3% 11.9% $29.02 $29.26 $29.02 $ Bldgs Lease 10.4% 10.9% 11.1% 11.6% $29.01 $29.25 $29.03 $28.97 Sublease 0.3% 0.2% 0.2% 0.3% $29.91 $29.98 $27.84 $28.26 Suffolk Total 10.5% 10.7% 10.2% 10.4% $23.40 $23.49 $23.38 $ Bldgs Lease 9.9% 10.1% 9.8% 10.0% $23.39 $23.50 $23.41 $23.49 Sublease 0.6% 0.6% 0.5% 0.4% $23.64 $23.15 $21.77 $20.40 Long Island Total 10.6% 11.0% 10.9% 11.3% $26.18 $26.43 $26.25 $ ,005 Bldgs Lease 10.2% 10.6% 10.5% 10.9% $26.20 $26.45 $26.28 $26.21 Sublease 0.4% 0.4% 0.3% 0.3% $25.43 $24.93 $23.97 $22.83 Nassau Total 11.2% 12.1% 11.9% 11.8% $33.33 $33.47 $33.25 $ Class A Bldgs Lease 10.5% 11.6% 11.5% 11.3% $33.34 $33.47 $33.24 $33.39 Sublease 0.7% 0.5% 0.4% 0.5% $32.52 $32.56 $34.42 $28.88 Suffolk Total 11.8% 12.1% 11.8% 12.1% $28.16 $28.16 $28.13 $ Class A Bldgs Lease 10.6% 11.0% 10.9% 11.3% $28.16 $28.10 $28.10 $28.17 Sublease 1.2% 1.1% 0.9% 0.7% $28.12 $29.26 $32.31 $20.46 Long Island Total 11.5% 12.1% 11.8% 11.9% $30.91 $31.08 $30.81 $ Class A Bldgs Lease 10.6% 11.3% 11.2% 11.3% $30.95 $31.09 $30.80 $30.79 Sublease 0.9% 0.8% 0.6% 0.6% $29.53 $30.36 $33.24 $23.04 LONG ISLAND CLASS A & B -Q MARKET EXISTING INVENTORY (SF) JUNE 30, 2015 VACANCY RATE OVERALL AVERAGE ASKING RENT rental rate (Class a) rental rate (Class b) net absorption (sf) net absorption (sf) current quarter YTD NASSAU Western Nassau 10,229, % $31.60 $32.37 $30.47 (7,095) 18,781 Northern Nassau 376, % $25.75 $28.00 $ ,897 (9,248) Central Nassau 10,844, % $27.74 $34.66 $ , ,675 Eastern Nassau 9,952, % $28.14 $33.98 $ ,239 66,257 Southern Nassau 2,378, % $27.59 $0.00 $ ,324 13,343 NASSAU TOTAL* 34,082, % $29.02 $33.33 $ , ,710 SUFFOLK Western Suffolk 18,937, % $24.57 $28.22 $ ,344 (9,359) Central Suffolk 5,144, % $20.24 $23.17 $20.16 (60,943) (68,240) SUFFOLK TOTAL** 26,134, % $23.40 $28.16 $ ,166 (67,449) LONG ISLAND TOTAL 60,217, % $26.18 $30.91 $ , ,261 *Totals include all Nassau Submarkets **Totals include all Suffolk Submarkets Source: CoStar and Colliers International Research 4 Long Island Research & Forecast Report Q Long Island Colliers International

5 Featured Listings 125 baylis road, melville +/- 15,000 SF office building for lease On-site Coffee Shop Parking - 7:1000 Route 110 Corridor New lobby and corridors 125 michael drive, syosset +/- 30,000 SF office building for Lease Available space: +/- 9,500 SF Signage available Close proximity to banks, restaurants, shops Common Area renovations have been completed Parking ratio: 4.5/1,000 SF 1981/1983 marcus ave, lake success 350,000 SF Building for Lease/Sale Beautiful campus setting Cafeteria in Building Convenient access to major highways Underground parking 1581 franklin avenue, garden city +/- 15,000 SF office building for sale/lease Upgraded finishes throughout Highly visible signage is available 5 cars parking per 1,000 SF Prominent address with prominent exposure Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 5 Colliers International Long Island 1981 Marcus Avenue, Suite E104 Lake Success, New York colliers.com/long Island North American Research & Forecast Report Q Office Market Outlook Colliers International

6 502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 Market Contact: Rose Liu Research & Financial Analyst Long Island Main Ext. 555 Dir $2.3 billion in annual revenue 1.7 billion square feet under management 16,300 professionals and staff About Colliers International Colliers International is a global leader in commercial real estate services, with more than 16,300 professionals operating out of 502 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate occupiers, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. Colliers International has been recognized and ranked by the International Association of Outsourcing Professionals Global Outsourcing 100 for 10 consecutive years, more than any other real estate services firm. colliers.com Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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