The CoStar Office Report. T h i r d Q u a r t e r Minneapolis Office Market

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1 The CoStar Office Report T h i r d Q u a r t e r

2 Third Quarter 2014 Minneapolis Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets Inventory & Development Analysis Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance Figures at a Glance by Class & Market Figures at a Glance Grouped by CBD vs Suburban Historical Figures at a Glance Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters Anoka County Outlying Market Burnsville/Eagan/Apple Vy Market Carver County Outlying Market Chisago County Market Dakota County Outlying Market Hennepin County Outlying Market I-394 Corridor Market I-494 Corridor Market Isanti County Market Midway Market Minneapolis CBD Market Northwest Market Pierce County Market Scott County Outlying Market Sherburne County Market St Croix County Market St Paul CBD Market Stearns County Market Suburban St Paul Market Washington Cnty Outlying Market Wright County Market 2014 CoStar Group, Inc. The CoStar Office Report A

3 Minneapolis Third Quarter 2014 Methodology The CoStar Office Report, unless specifically stated otherwise, calculates office statistics using CoStar Group s entire database of existing and under construction office buildings in each metropolitan area. Included are office, office condominium, office loft, office medical, all classes and all sizes, and both multi-tenant and single-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Office Report have been converted to a Full Service equivalent rental rate. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2012 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc L ST NW Washington, DC (800) NASDAQ: CSGP B The CoStar Office Report 2014 CoStar Group, Inc.

4 Third Quarter 2014 Minneapolis Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-ofa-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. : The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different 2014 CoStar Group, Inc. The CoStar Office Report C

5 Minneapolis Third Quarter 2014 tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: Buildings in a state of construction, up until they receive their certificate of occupancy. In order for CoStar to consider a building under construction, the site must have a concrete foundation in place. Abbreviated UC. Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D The CoStar Office Report 2014 CoStar Group, Inc.

6 Overview Third Quarter 2014 Minneapolis Minneapolis s Stays at 9.3% Net Absorption Positive 702,936 SF in the Quarter The Minneapolis Office market ended the third quarter 2014 with a vacancy rate of 9.3%. The vacancy rate was unchanged over the previous quarter, with net absorption totaling positive 702,936 square feet in the third quarter. Vacant sublease space decreased in the quarter, ending the quarter at 476,785 square feet. Rental rates ended the third quarter at $17.60, a decrease over the previous quarter. A total of three buildings delivered to the market in the quarter totaling 704,400 square feet, with 3,080,148 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Minneapolis office market was positive 702,936 square feet in the third quarter That compares to positive 81,555 square feet in the second quarter 2014, positive 528,922 square feet in the first quarter 2014, and positive 199,386 square feet in the fourth quarter Tenants moving out of large blocks of space in 2014 include: North American Membership Group, Inc. moving out of 66,000 square feet at Whitewater Dr; Kroll Ontrack Inc. moving out of 58,145 square feet at 8855 Columbine Rd; and Verifications Inc. moving out of 23,486 square feet at Wayzata Blvd. Tenants moving into large blocks of space in 2014 include: US Bank moving into 70,744 square feet at US Bank Plaza- North Tower; MISO moving into 60,448 square feet at 2985 Ames Crossing Rd; and Redbrick Health Corporation moving into 47,078 square feet at 510 Marquette Building. The Class-A office market recorded net absorption of positive 733,564 square feet in the third quarter 2014, compared to negative (47,885) square feet in the second quarter 2014, positive 755,135 in the first quarter 2014, and negative (109,862) in the fourth quarter The Class-B office market recorded net absorption of positive 28,826 square feet in the third quarter 2014, compared to positive 78,957 square feet in the second quarter 2014, negative (55,506) in the first quarter 2014, and positive 202,112 in the fourth quarter The Class-C office market recorded net absorption of negative (59,454) square feet in the third quarter 2014 compared to positive 50,483 square feet in the second quarter 2014, negative (170,707) in the first quarter 2014, and positive 107,136 in the fourth quarter Net absorption for Minneapolis s central business district was negative (16,467) square feet in the third quarter That compares to positive 25,858 square feet in the second quarter 2014, negative (81,056) in the first quarter 2014, and positive 302,968 in the fourth quarter Net absorption for the suburban markets was positive 719,403 square feet in the third quarter That compares to positive 55,697 square feet in second quarter 2014, positive 609,978 in the first quarter 2014, and negative (103,582) in the fourth quarter The office vacancy rate in the Minneapolis market area remained at 9.3% at the end of the third quarter The vacancy rate was 9.3% at the end of the second quarter 2014, 9.4% at the end of the first quarter 2014, and 9.3% at the end of the fourth quarter Rates by Class A B C Total Market 12% 10% Rate 8% 6% 4% 2% 0% q q q q q q q q q 2014 CoStar Group, Inc. The CoStar Office Report 1

7 Minneapolis Third Quarter 2014 Overview Class-A projects reported a vacancy rate of 7.9% at the end of the third quarter 2014, 8.1% at the end of the second quarter 2014, 8.0% at the end of the first quarter 2014, and 8.1% at the end of the fourth quarter Class-B projects reported a vacancy rate of 10.4% at the end of the third quarter 2014, 10.4% at the end of the second quarter 2014, 10.5% at the end of the first quarter 2014, and 10.4% at the end of the fourth quarter Class-C projects reported a vacancy rate of 8.2% at the end of the third quarter 2014, 8.0% at the end of second quarter 2014, 8.1% at the end of the first quarter 2014, and 7.7% at the end of the fourth quarter The overall vacancy rate in Minneapolis s central business district at the end of the third quarter 2014 increased to 11.3%. The vacancy rate was 11.2% at the end of the second quarter 2014, 11.3% at the end of the first quarter 2014, and 11.1% at the end of the fourth quarter The vacancy rate in the suburban markets changed to 8.5% in the third quarter The vacancy rate was 8.5% at the end of the second quarter 2014, 8.6% at the end of the first quarter 2014, and 8.5% at the end of the fourth quarter Largest Lease Signings The largest lease signings occurring in 2014 included: the 253,414-square-foot lease signed by Dorsey & Whitney LLP at 50 S 6th St in the Minneapolis CBD market; the 138,000- square-foot deal signed by Minneapolis Star & Tribune Co at 225 S 6th St- Capella Tower in the Minneapolis CBD market; and the 62,000-square-foot lease signed by North Memorial Health Care at Highway 7- Minnetonka Medical Center in the I-394 Corridor market. Sublease The amount of vacant sublease space in the Minneapolis market decreased to 476,785 square feet by the end of the third quarter 2014, from 491,940 square feet at the end of the U.S. Comparison Past 9 Quarters Rate 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Minneapolis United States q q q q q second quarter There was 539,108 square feet vacant at the end of the first quarter 2014 and 501,235 square feet at the end of the fourth quarter Minneapolis s Class-A projects reported vacant sublease space of 193,814 square feet at the end of third quarter 2014, down from the 229,373 square feet reported at the end of the second quarter There were 264,987 square feet of sublease space vacant at the end of the first quarter 2014, and 272,867 square feet at the end of the fourth quarter Class-B projects reported vacant sublease space of 106,104 square feet at the end of the third quarter 2014, up from the 96,231 square feet reported at the end of the second quarter At the end of the first quarter 2014 there were 112,647 square feet, and at the end of the fourth quarter 2013 there were 137,335 square feet vacant. Class-C projects reported increased vacant sublease space from the second quarter 2014 to the third quarter Sublease vacancy went from 166,336 square feet to 176,867 square feet during that time. There was 161,474 square feet at the end of the first quarter 2014, and 91,033 square feet at the end of the fourth quarter Sublease vacancy in Minneapolis s central business district stood at 200,930 square feet at the end of the third quarter It was 198,461 square feet at the end of the second quarter 2014, 255,043 square feet at the end of the first quarter 2014, and 265,710 square feet at the end of the fourth quarter Sublease vacancy in the suburban markets ended the third quarter 2014 at 275,855 square feet. At the end of the second quarter 2014 sublease vacancy was 293,479 square feet, was 284,065 square feet at the end of the first quarter 2014, and was 235,525 square feet at the end of the fourth quarter Rental Rates The average quoted asking rental rate for available office space, all classes, was $17.60 per square foot per year at the end of the third quarter 2014 in the Minneapolis market area. This represented a 0.2% decrease in quoted rental rates from the end of the second quarter 2014, when rents were reported at $17.63 per square foot. The average quoted rate within the Class-A sector was $23.88 at the end of the third quarter 2014, while Class-B rates stood at $16.13, and Class-C rates at $ At the end of the second quarter 2014, Class-A rates were $23.44 per square foot, Class-B rates were $15.82, and Class-C rates were $ The average quoted asking rental rate in Minneapolis s CBD was $20.07 at the end of the third quarter 2014, and $16.55 in the suburban markets. In the second quarter 2014, quoted rates were $19.85 in the CBD and $16.76 in the suburbs. 2 The CoStar Office Report 2014 CoStar Group, Inc.

8 Overview Third Quarter 2014 Minneapolis Deliveries and Construction During the third quarter 2014, three buildings totaling 704,400 square feet were completed in the Minneapolis market area. This compares to 0 buildings totaling 0 square feet that were completed in the second quarter 2014, six buildings totaling 760,866 square feet completed in the first quarter 2014, and 101,757 square feet in four buildings completed in the fourth quarter There were 3,080,148 square feet of office space under construction at the end of the third quarter Some of the notable 2014 deliveries include: 7200 Target Pky- Target Campus Expansion, a 650,000-square-foot facility that delivered in third quarter 2014 and is now 100% occupied, and Optum Cir - North Tower, a 341,700-square-foot building that delivered in first quarter 2014 and is now 100% occupied. The largest projects underway at the end of third quarter 2014 were 329 Portland Ave - Wells Fargo, a 600,000-squarefoot building with 100% of its space pre-leased, and 500 S 4th St - Wells Fargo, a 600,000-square-foot facility that is 100% pre-leased. Inventory Total office inventory in the Minneapolis market area amounted to 187,626,428 square feet in 6,043 buildings as of the end of the third quarter The Class-A office sector consisted of 49,397,363 square feet in 150 projects. There were 2,038 Class-B buildings totaling 98,324,391 square feet, and the Class-C sector consisted of 39,904,674 square feet in 3,855 buildings. Within the Office market there were 213 owner-occupied buildings accounting for 22,855,812 square feet of office space. Sales Activity Tallying office building sales of 15,000 square feet or larger, Minneapolis office sales figures rose during the second quarter 2014 in terms of dollar volume compared to the first quarter of In the second quarter, 13 office transactions closed with a total volume of $198,693,790. The 13 buildings totaled 1,680,418 square feet and the average price per square foot equated to Absorption & Deliveries Past 9 Quarters (0.2) (0.4) (0.6) (0.26) Net Absorption (0.04) 0.07 (0.23) (0.47) Deliveries q q q q q $ per square foot. That compares to 10 transactions totaling $73,584,186 in the first quarter The total square footage in the first quarter was 637,647 square feet for an average price per square foot of $ Total office building sales activity in 2014 was down compared to In the first six months of 2014, the market saw 23 office sales transactions with a total volume of $272,277,976. The price per square foot averaged $ In the same first six months of 2013, the market posted 29 transactions with a total volume of $457,077,197. The price per square foot averaged $ Cap rates have been lower in 2014, averaging 7.79% compared to the same period in 2013 when they averaged 8.08%. One of the largest transactions that has occurred within the last four quarters in the Minneapolis market is the sale of 50 S 10th St- Retek on the Mall in Minneapolis. This 498,768- square-foot office building sold for $164,500,000, or $ per square foot. The property sold on 9/2/2014, at a 4.77% cap rate. Reports compiled by: Lauren Kraemer, CoStar Research Manager and the Minneapolis Research Team 2014 CoStar Group, Inc. The CoStar Office Report 3

9 Minneapolis Third Quarter 2014 Markets CoStar Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Submarket Clusters Anoka County Outlying Burnsville/Eagan/Apple Vy Carver County Outlying Chisago County Dakota County Outlying Hennepin County Outlying I-394 Corridor I-494 Corridor Isanti County Midway Minneapolis CBD* Northwest Pierce County Scott County Outlying Sherburne County St Croix County St Paul CBD* Stearns County Suburban St Paul Washington Cnty Outlying Wright County * Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. 4 The CoStar Office Report 2014 CoStar Group, Inc.

10 Inventory & development Third Quarter 2014 Minneapolis Historical Deliveries Deliveries Average Delivered SF Millions of SF * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction Square Footage Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Minneapolis CBD 4 1,713,000 1,713, % 153, ,250 I-494 Corridor 4 1,210, , % 55, ,695 I-394 Corridor 3 99,000 99, % 27,337 33,000 Suburban St Paul 2 48,114 36, % 18,555 24,057 Dakota County Outlying 1 9,255 9, % 9,769 9,255 St Croix County % 6,922 0 Burnsville/Eagan/Apple Vy % 36,725 0 Chisago County % 3,741 0 Hennepin County Outlying % 8,316 0 Carver County Outlying % 12,409 0 All Other % 23,288 0 Recent Deliveries Leased & Un-Leased SF in Deliveries Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 1.6 Leased Un-Leased 1,000 Preleased Un-Leased Millions of SF Thousands of SF T q q 2014 CoStar Group, Inc. The CoStar Office Report 5

11 Minneapolis Third Quarter 2014 Inventory & development Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 1.4 Construction Starts Deliveries Millions of SF q q q q Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 4 66,866 66, % $ ,165 35,701 50,000 SF - 99,999 SF 1 50,000 33, % $ 0 50, ,000 SF - 249,999 SF 1 100,000 89, % $ , ,000 SF - 499,999 SF 2 598, , % $ 598,400 0 >= 500,000 SF 1 650, , % $ 650,000 0 Recent Development by Tenancy Comparison Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA 2014 Deliveries Currently Under Construction By Class By Space Type 13% 22% 21% 29% 26% 87% 78% 53% 71% Multi Single Multi Single Class A Class B Class C Multi Single 6 The CoStar Office Report 2014 CoStar Group, Inc.

12 Inventory & development Third Quarter 2014 Minneapolis 2014 CoStar Group, Inc. The CoStar Office Report 7

13 Minneapolis Third Quarter 2014 Inventory & development 8 The CoStar Office Report 2014 CoStar Group, Inc.

14 Figures at a Glance Third Quarter 2014 Minneapolis Class A Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Anoka County Outlying % $ Burnsville/Eagan/Apple Vy 9 758,428 40,362 40, % (571) 0 0 $16.72 Carver County Outlying % $ Chisago County % $ Dakota County Outlying % $ Hennepin County Outlying % $ I-394 Corridor 27 5,547, , , % 109,347 81,301 0 $24.87 I-494 Corridor 43 10,784, , , % 587, ,400 1,153,300 $23.90 Isanti County % $ Midway 5 879,112 10,782 10, % 36,192 27,000 0 $26.88 Minneapolis CBD 30 22,960,827 1,806,605 1,962, % 3, ,493,000 $26.66 Northwest 9 1,941,856 62,798 62, % 653, ,000 0 $19.77 Pierce County % $ Scott County Outlying % $ Sherburne County % $ St Croix County 1 40,000 4,969 4, % 5, $ St Paul CBD 11 4,274, , , % (12,874) 0 0 $19.13 Stearns County 4 348,960 85,093 85, % $12.01 Suburban St Paul 11 1,862, , , % 57, ,000 0 $17.33 Washington Cnty Outlying % $ Wright County % $ Totals ,397,363 3,721,382 3,915, % 1,440,814 1,456,701 2,646,300 $23.88 Class B Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Anoka County Outlying ,400 29,529 29, % 10, $16.21 Burnsville/Eagan/Apple Vy 173 9,662, , , % 87, $15.96 Carver County Outlying 43 1,084,798 53,612 53, % 3,628 4,400 0 $12.20 Chisago County 9 72,821 1,599 1, % 2, $ Dakota County Outlying ,510 35,346 35, % 5, ,255 $20.90 Hennepin County Outlying 8 128,091 1,285 1, % 1, $20.02 I-394 Corridor ,042, , , % 8, ,000 $20.71 I-494 Corridor ,824,895 1,793,964 1,830, % (216,601) 0 57,479 $15.81 Isanti County 8 88,156 8,450 8, % (258) 0 0 $15.76 Midway 133 8,438, , , % (24,764) 0 0 $15.42 Minneapolis CBD ,330,528 1,755,456 1,768, % (54,374) 0 220,000 $17.14 Northwest 107 3,428, , , % (34,377) 0 0 $14.86 Pierce County 3 39, % $20.11 Scott County Outlying ,035 54,312 54, % 6,004 4,165 0 $17.10 Sherburne County ,493 9,640 9, % $14.85 St Croix County ,577 59,828 73, % (11,565) 0 0 $17.19 St Paul CBD 43 7,941,154 1,573,430 1,582, % 31, $16.51 Stearns County 95 2,039, , , % 35, $18.05 Suburban St Paul ,884,066 1,904,567 1,920, % 169, ,114 $14.00 Washington Cnty Outlying 56 1,034,649 35,795 35, % 7, $12.64 Wright County ,573 46,979 46, % 24, $12.45 Totals 2,038 98,324,391 10,103,647 10,209, % 52,277 8, ,848 $ CoStar Group, Inc. The CoStar Office Report 9

15 Minneapolis Third Quarter 2014 Figures at a Glance Class C Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Anoka County Outlying ,433 28,297 28, % (2,979) 0 0 $13.51 Burnsville/Eagan/Apple Vy 203 3,717, , , % (30,831) 0 0 $13.96 Carver County Outlying ,058 65,057 65, % (6,403) 0 0 $15.81 Chisago County ,724 16,716 16, % (4,338) 0 0 $9.96 Dakota County Outlying ,411 31,433 31, % (127) 0 0 $15.51 Hennepin County Outlying ,074 18,556 18, % (5,010) 0 0 $15.47 I-394 Corridor 675 7,970, , , % 17, $16.16 I-494 Corridor 310 5,836, ,117 1,056, % (169,275) 0 0 $14.37 Isanti County ,418 3,000 3, % (1,500) 0 0 $13.00 Midway 171 3,517, , , % 5, $13.95 Minneapolis CBD 136 3,127, , , % (41,915) 0 0 $18.57 Northwest , , , % 3, $14.01 Pierce County ,714 3,390 3, % 1, $11.80 Scott County Outlying ,338 37,392 37, % 15, $13.45 Sherburne County ,196 41,734 41, % 10, $12.56 St Croix County ,569 22,667 22, % 5, $13.78 St Paul CBD ,500 30,190 35, % 2, $10.84 Stearns County 228 1,623, , , % (812) 0 0 $11.21 Suburban St Paul 920 7,438, , , % 5, $14.74 Washington Cnty Outlying ,467 42,565 42, % 6, $10.99 Wright County ,445 24,317 24, % 8, $12.36 Totals 3,855 39,904,674 3,075,426 3,252, % (179,678) 0 0 $14.79 Total Office Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Anoka County Outlying ,833 57,826 57, % 7, $14.61 Burnsville/Eagan/Apple Vy ,139, , , % 55, $15.60 Carver County Outlying 134 1,662, , , % (2,775) 4,400 0 $14.22 Chisago County ,545 18,315 18, % (2,016) 0 0 $9.96 Dakota County Outlying 117 1,142,921 66,779 66, % 5, ,255 $18.58 Hennepin County Outlying ,165 19,841 19, % (3,782) 0 0 $18.65 I-394 Corridor ,559,955 1,687,566 1,742, % 135,530 81,301 99,000 $20.67 I-494 Corridor ,445,706 3,399,697 3,568, % 202, ,400 1,210,779 $17.37 Isanti County ,574 11,450 11, % (1,758) 0 0 $14.66 Midway ,834, , , % 16,748 27,000 0 $16.60 Minneapolis CBD ,419,306 3,891,446 4,077, % (93,166) 0 1,713,000 $21.08 Northwest 261 6,172, , , % 623, ,000 0 $15.50 Pierce County ,328 3,942 3, % 1, $12.54 Scott County Outlying 144 1,382,373 91,704 91, % 21,694 4,165 0 $15.26 Sherburne County ,689 51,374 51, % 10, $12.94 St Croix County 177 1,225,146 87, , % $16.02 St Paul CBD 65 12,611,275 1,988,349 2,003, % 21, $17.17 Stearns County 327 4,012, , , % 34, $15.23 Suburban St Paul 1,519 28,184,599 2,558,253 2,580, % 232, ,000 48,114 $14.33 Washington Cnty Outlying 182 1,833,116 78,360 78, % 13, $12.04 Wright County 213 1,089,018 71,296 71, % 33, $12.42 Totals 6, ,626,428 16,900,455 17,377, % 1,313,413 1,465,266 3,080,148 $ The CoStar Office Report 2014 CoStar Group, Inc.

16 Figures at a Glance Third Quarter 2014 Minneapolis Class A Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 41 27,235,448 2,191,334 2,346, % (9,751) 0 1,493,000 $25.07 Suburban ,161,915 1,530,048 1,568, % 1,450,565 1,456,701 1,153,300 $22.64 Totals ,397,363 3,721,382 3,915, % 1,440,814 1,456,701 2,646,300 $23.88 Class B Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,271,682 3,328,886 3,351, % (22,401) 0 220,000 $16.95 Suburban 1,892 75,052,709 6,774,761 6,858, % 74,678 8, ,848 $15.81 Totals 2,038 98,324,391 10,103,647 10,209, % 52,277 8, ,848 $16.13 Class C Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 147 3,523, , , % (39,513) 0 0 $17.74 Suburban 3,708 36,381,223 2,715,851 2,869, % (140,165) 0 0 $14.44 Totals 3,855 39,904,674 3,075,426 3,252, % (179,678) 0 0 $14.79 Class A & B Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,507,130 5,520,220 5,698, % (32,152) 0 1,713,000 $20.23 Suburban 2,001 97,214,624 8,304,809 8,426, % 1,525,243 1,465,266 1,367,148 $17.19 Totals 2, ,721,754 13,825,029 14,124, % 1,493,091 1,465,266 3,080,148 $18.23 Total Office Market Statistics Third Quarter 2014 YTD Net YTD Under Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,030,581 5,879,795 6,080, % (71,665) 0 1,713,000 $20.07 Suburban 5, ,595,847 11,020,660 11,296, % 1,385,078 1,465,266 1,367,148 $16.55 Totals 6, ,626,428 16,900,455 17,377, % 1,313,413 1,465,266 3,080,148 $ CoStar Group, Inc. The CoStar Office Report 11

17 Minneapolis Third Quarter 2014 Figures at a Glance Class A Market Statistics Third Quarter 2014 Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates q ,397,363 3,721,382 3,915, % 733, , ,646,300 $ q ,697,363 3,719,387 3,948, % (47,885) ,053,300 $ q ,697,363 3,635,888 3,900, % 755, , ,853,300 $ q ,940,662 3,626,442 3,899, % (109,862) 1 40, ,610,001 $ q ,900,662 3,480,510 3,749, % 60, , ,600,001 $ q ,840,214 3,442,203 3,749, % (177,745) ,675,848 $ q ,840,214 3,377,181 3,571, % 56, ,348,848 $ q ,840,214 3,431,431 3,627, % (58,144) ,348,848 $ q ,840,214 3,373,229 3,569, % 457, , ,348,848 $ q ,527,714 3,525,416 3,715, % 209, , ,219,200 $ q ,449,714 3,646,698 3,846, % 230, ,500 $ ,449,714 3,878,291 4,077, % 331, , ,500 $ ,287,184 3,937,626 4,245, % 163, , ,030 $ ,972,968 3,864,988 4,095, % 296, , ,216 $ ,250,133 3,440,785 3,668, % 692, , ,835 $ ,586,367 3,360,654 3,697, % 1,108, , ,101 $19.26 Class B Market Statistics Third Quarter 2014 Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates q 2,038 98,324,391 10,103,647 10,209, % 28, , ,848 $ q 2,037 98,319,991 10,137,946 10,234, % 78, ,069 $ q 2,037 98,319,991 10,200,487 10,313, % (55,506) 1 4, ,069 $ q 2,036 98,315,826 10,116,128 10,253, % 202, , ,420 $ q 2,034 98,499,139 10,508,929 10,638, % (552,629) 2 116, ,012 $ q 2,034 98,405,239 9,865,775 9,992, % (100,454) 4 72, ,457 $ q 2,031 98,391,734 9,711,783 9,878, % (20) 2 8, ,154 $ q 2,030 98,455,924 9,830,244 9,942, % (211,252) 4 61, ,834 $ q 2,027 98,439,947 9,593,021 9,715, % 39, , ,510 $ q 2,026 98,363,947 9,539,988 9,678, % 56, , ,810 $ q 2,025 98,301,947 9,578,647 9,672, % (511,884) 2 56, ,810 $ ,023 98,245,668 8,996,233 9,104, % 635, , ,471 $ ,010 97,792,454 9,133,459 9,286, % 904, , ,714 $ ,000 97,506,217 9,714,034 9,905, % 284, , ,637 $ ,985 96,922,607 9,311,587 9,606, % 419, ,354, ,181 $ ,942 95,820,405 8,682,060 8,923, % 2,007, ,057, ,235,642 $15.03 Total Office Market Statistics Third Quarter 2014 Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates q 6, ,626,428 16,900,455 17,377, % 702, , ,080,148 $ q 6, ,923,048 16,884,856 17,376, % 81, ,147,369 $ q 6, ,923,048 16,919,243 17,458, % 528, , ,947,369 $ q 6, ,174,819 16,737,809 17,239, % 199, , ,685,421 $ q 6, ,318,132 17,069,308 17,581, % (468,108) 3 177, ,733,013 $ q 6, ,193,335 16,445,734 16,988, % (228,105) 4 72, ,854,305 $ q 6, ,179,830 16,272,592 16,747, % (41,954) 2 8, ,589,002 $ q 6, ,244,020 16,351,571 16,769, % (255,294) 4 61, ,476,682 $ q 6, ,228,043 16,072,121 16,498, % 529, , ,494,358 $ q 6, ,859,656 16,223,615 16,658, % 309, , ,366,010 $ q 6, ,732,656 16,437,995 16,840, % (649,035) 2 56, ,310 $ , ,676,377 15,719,510 16,135, % 734, , ,971 $ , ,100,171 15,725,329 16,294, % 1,326, , ,744 $ , ,483,604 16,457,552 17,004, % 604, ,346, ,878 $ , ,174,788 15,579,371 16,299, % 1,126, ,046, ,289,216 $ , ,383,144 14,876,600 15,635, % 3,231, ,954, ,201,897 $ The CoStar Office Report 2014 CoStar Group, Inc.

18 Leasing Activity Third Quarter 2014 Minneapolis Historical Rental Rates Based on Full-Service Equivalent Rental Rates A B C Total Market $3 $25.00 $2 $15.00 $1 $5.00 $ q q q q q q q q q by Available Space Type by Class Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Class Minneapolis United States Minneapolis United States 3% 4% 19% 16% 23% 49% 35% 97% 96% 58% Direct Sublet Direct Sublet Class A Class B Class C Class A Class B Class C U.S. Rental Rate Comparison Based on Full-Service Equivalent Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* $25.00 Minneapolis United States $2 $15.00 $1 $5.00 $ q q q q q q * Includes Under Construction Spaces 2014 CoStar Group, Inc. The CoStar Office Report 13

19 Minneapolis Third Quarter 2014 Leasing Activity Select Top Oce Leases Based on Leased Square Footage For Deals Signed in 2014 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 Fifty South Sixth* Minneapolis CBD 253,414 1st Dorsey & Whitney LLP Colliers International Hines Property Management; Hines Gl 2 Capella Tower Minneapolis CBD 138,000 2nd Minneapolis Star & Tribune Co Nelson, Tietz & Hoye, Inc. CBRE 3 Minnetonka Medical Center I-394 Corridor 62,000 2nd North Memorial Health Care N/A The Davis Group Tower I-494 Corridor 47,381 2nd Larkin Homan Colliers International Northmarq 5 Grand Oak Oce VII* Burnsville/Eagan/Apple Vy 42,053 3rd Silicon Graphics International N/A N/A Golden Hills Dr I-394 Corridor 32,000 3rd N/A N/A Cresa Minneapolis Marquette Building Minneapolis CBD 31,200 1st Augsburg Fortress N/A Swervo Development Corporation 8 Norman Pointe I I-494 Corridor 30,895 2nd MAC Foundation N/A CBRE 9 IDS Center Minneapolis CBD 30,071 1st UBS Financial Services Inc. Cushman & Wakeeld/Northmarq JLL 10 DC Building Expansion I-394 Corridor 27,000 3rd DC Group N/A DC Group, Inc. 11 Spruce Tree Center* Midway 26,775 1st Image Sensing Systems, Inc. N/A N/A Vandalia St Midway 26,667 2nd N/A N/A First & First LLC Vandalia St Midway 26,667 2nd N/A N/A First & First LLC Vandalia St Midway 26,667 2nd N/A N/A First & First LLC 15 Flying Cloud Corporate Campus Building B2 I-494 Corridor 23,322 3rd DIRECTV JLL Liberty Property Trust 16 Minnetonka Corporate Campus III I-494 Corridor 23,016 2nd Sambatek, Inc N/A CBRE 17 Minnetonka Corporate Campus II I-494 Corridor 22,815 2nd XRS Corporation Direct Deal CBRE 18 Grand Oak Oce VII Burnsville/Eagan/Apple Vy 22,000 3rd AudaExplore Carlson Commercial Cassidy Turley 19 Mendota Oce Center - Building III Burnsville/Eagan/Apple Vy 21,097 1st Flint Hills Carlson Commercial Cushman & Wakeeld/NorthMarq 20 Ford Center Minneapolis CBD 20,000 2nd SEED Partners JLL Cassidy Turley South Minneapolis CBD 19,577 1st N/A N/A Zeller Realty Group South Minneapolis CBD 19,574 2nd N/A N/A Zeller Realty Group 23 One Main Oces Midway 18,939 1st Code 42 Software, Inc. N/A Sentinel Property Management 24 HealthEast Care System Suburban St Paul 18,414 1st Health East Care System N/A HJ Development 25 International Centre Minneapolis CBD 18,244 3rd Lommen, Abdo, Cole, King & Stageberg, P.A. N/A Colliers International 26 Northland Plaza I-494 Corridor 17,729 3rd Logic N/A Cushman & Wakeeld/Northmarq 27 Eagle Point Medical Building Suburban St Paul 17,700 3rd Noran Neurological N/A N/A 28 Lawson Commons St Paul CBD 17,611 3rd N/A N/A Frauenshuh Inc Waterford Park I-394 Corridor 17,001 2nd N/A N/A CBRE 30 Mendota Heights Oce Park - Building II Burnsville/Eagan/Apple Vy 17,000 2nd Springleaf Direct Deal Cushman & Wakeeld/NorthMarq st Ave N Minneapolis CBD 16,768 1st Optimine N/A Cresa Minneapolis 32 Rice Creek Business Center III* Suburban St Paul 16,324 3rd Siemens Product Lifecycle Management Software Inc. N/A Colliers International 33 Plymouth Woods I I-394 Corridor 16,000 2nd Silver Bay Companies N/A Paramount Real Estate Corporation Tower at West End I-394 Corridor 15,539 2nd N/A N/A CBRE 35 Butler North Minneapolis CBD 15,000 1st Jack Link s Beef Jerky N/A Swervo Development Corporation 36 AT&T Tower Minneapolis CBD 14,880 1st N/A N/A JLL 37 Southdale Medical Center Phase III I-494 Corridor 14,369 3rd Fertility Lab Sciences N/A The Davis Group 38 France Place I-494 Corridor 14,355 3rd N/A N/A Frauenshuh Inc. 39 McKesson Building Minneapolis CBD 14,191 3rd Lead Pages Burton Real Estate Advisors, Inc. The Ackerberg Group 40 Wells Fargo Place* St Paul CBD 12,000 1st Microsoft Corporation NorthMarq; Cushman & Wakefield/Nort Zeller Realty Group * Renewal 14 The CoStar Office Report 2014 CoStar Group, Inc.

20 Sales Activity Third Quarter 2014 Minneapolis The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 10.0% Cap Rate Price/SF $350 Cap Rate Percentage 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% $300 $250 $200 $150 $100 $50 Dollars/SF 0.0% q q q $0 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Office Building Sales of 15,000 SF and Larger Based on Office Building Sales From July June 2014 $500 Sales Volume Price/SF $140 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $450 $400 $350 $300 $250 $200 $150 $100 $50 $120 $100 $80 $60 $40 $20 Price/SF < 50,000 SF 86 1,432,659 $134,540,241 $ % 50K-249K SF 250K-499K SF 18 1,938,557 $187,604,697 $ % 7 2,189,178 $274,584,593 $ % $0 $0 >500K SF 2 1,123,776 $195,250,000 $ % q q q q Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Office Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Office Building Sales of 15,000 SF and Larger $270 Minneapolis US 10.0% Minneapolis US $ % Dollars per SF $170 $120 $70 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% $20 3.0% q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 2014 CoStar Group, Inc. The CoStar Office Report 15

21 16 The CoStar Office Report 2014 CoStar Group, Inc. Minneapolis Third Quarter 2014 Sales Activity