The CoStar Office Report

Transcription

1 The CoStar Office Report T H I R D Q U A R T E R Seattle/Puget Sound Office Market

2 Seattle/Puget Sound Office Market THIRD QUARTER 2012 SEATTLE/PUGET SOUND Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets & Submarkets 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 by Class & Submarket 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 Select Same Building Sales Select Land Sales Analysis of Individual CoStar Markets Downtown Seattle Market Eastside Market Northend Market Southend Market Tacoma Market 2012 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A

3 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market 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 2012 COSTAR GROUP, INC.

4 Seattle/Puget Sound Office Market THIRD QUARTER 2012 SEATTLE/PUGET SOUND 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-of-a-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 buildingtype 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) 2012 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C

5 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market 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 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. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted 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: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construction and until it receives a certificate of occupancy. 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 2012 COSTAR GROUP, INC.

6 Seattle/Puget Sound Office Market OVERVIEW THIRD QUARTER 2012 SEATTLE/PUGET SOUND Seattle/Puget Sound s Stays at 10.8% Net Absorption Positive 309,895 SF in the Quarter While the overall vacancy rate remained static, the Seattle/Puget Sound office market continued its upward trajectory in the third quarter. Net absorption remained positive and rents inched upwards. Amazon continues to grab the headlines - most recently through announcing plans for a 3.3 million square feet new headquarters complex in the Lake Union area of Downtown Seattle. The tech sector in general is helping bolster performance and investor interest. The Seattle/Puget Sound Office market ended the third quarter of 2012 with a vacancy rate of 10.8%. The vacancy rate was unchanged over the previous quarter, with net absorption totaling positive 309,895 square feet in the third quarter. Vacant sublease space decreased in the quarter, ending the quarter at 1,231,984 square feet. Rental rates ended the third quarter at $25.51, an increase of 1% over the previous quarter. A total of five buildings were delivered to the market in the quarter totaling 347,420 square feet, with 831,981 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Seattle/Puget Sound office market was positive 309,895 square feet in the third quarter That compares to positive 1,255,768 square feet in the second quarter 2012, positive 251,456 square feet in the first quarter 2012, and positive 680,582 square feet in the fourth quarter. Tenants moving out of large blocks of space in 2012 include: Philips Health Care moving out of 120,001 square feet at the 5th & Bell Building and Perkins Coie LLP, moving out of 50,800 square feet at rd Ave. Tenants moving into large blocks of space in 2012 include: Amazon moving into 320,704 square feet at West 8th and U.S. Army Corps of Engineers moving into 207,999 square feet at Federal Center South - Bldg 1202 Office. The Class-A office market recorded net absorption of positive 226,339 square feet in the third quarter 2012, compared to positive 950,699 square feet in the second quarter 2012, positive 390,420 in the first quarter 2012, and positive 457,974 in the fourth quarter. The Class-B office market recorded net absorption of positive 24,626 square feet in the third quarter 2012, compared to positive 342,210 square feet in the second quarter 2012, negative (120,778) in the first quarter 2012, and positive 273,597 in the fourth quarter. The Class-C office market recorded net absorption of positive 58,930 square feet in the third quarter 2012 compared to negative (37,141) square feet in the second quarter 2012, negative (18,186) in the first quarter 2012, and negative (50,989) in the fourth quarter. Net absorption for Seattle/Puget Sound s central business district (CBD) was negative (11,329) square feet in the third quarter That compares to positive 293,617 square feet in the second quarter 2012, positive 61,519 in the first quarter 2012, and positive 237,688 in the fourth quarter. Just outside of the CBD the Lake Union area continues to attract tech-oriented tenants. Net absorption for the suburban markets was positive 321,224 square feet in the third quarter That compares to positive 962,151 square feet in second quarter 2012, positive Rates by Class A B C Total Market 20% 18% 16% 14% Rate 12% 10% 8% 6% 4% 2% 0% COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 1

7 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market OVERVIEW 189,937 in the first quarter 2012, and positive 442,894 in the fourth quarter. The office vacancy rate in the Seattle/Puget Sound market area stayed at 10.8% at the end of the third quarter The vacancy rate was 10.8% at the end of the second quarter 2012, 11.4% at the end of the first quarter 2012, and 11.6% at the end of the fourth quarter. Class-A projects reported a vacancy rate of 13.6% at the end of the third quarter 2012, 13.6% at the end of the second quarter 2012, 15.1% at the end of the first quarter 2012, and 15.8% at the end of the fourth quarter. Class-B projects reported a vacancy rate of 10.3% at the end of the third quarter 2012, 10.3% at the end of the second quarter 2012, 10.7% at the end of the first quarter 2012, and 10.5% at the end of the fourth quarter. Class-C projects reported a vacancy rate of 7.1% at the end of the third quarter 2012, 7.3% at the end of second quarter 2012, 7.2% at the end of the first quarter 2012, and fourth quarter. The overall vacancy rate in Seattle/Puget Sound s central business district at the end of the third quarter 2012 remained virtually unchanged at 12.4%. The vacancy rate was 12.3% at the end of the second quarter 2012, 13.1% at the end of the first quarter 2012, and 13.2% at the end of the fourth quarter. The vacancy rate in the suburban markets remained at 10.2% in the third quarter The vacancy rate was 10.9% at the end of the first quarter 2012, and 11.0% at the end of the fourth quarter. Largest Lease Signings The largest lease signings occurring in 2012 included: the 261,618-square-foot lease signed by CenturyLink at th Ave in the Downtown Seattle market; the 158,081-square-foot deal signed by Dendreon Corporation at Russell Investments U.S. Comparison Past 9 Quarters Rate 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 4q Seattle/Puget Sound 2q 4q 2012 United States q 2012 Center in the Downtown Seattle market; and the 122,742-squarefoot lease signed by Concur Technologies, Inc. at Key Center in the Eastside market. Amazon.com inked the third quarter s largest lease, taking 110,000 square feet at 202 Westlake Avenue N in Lake Union. Sublease The amount of vacant sublease space in the Seattle/Puget Sound market decreased marginally to 1,231,984 square feet by the end of the third quarter 2012, from 1,234,753 square feet at the end of the second quarter There was 1,162,147 square feet vacant at the end of the first quarter 2012 and 1,199,304 square feet at the end of the fourth quarter. Seattle/Puget Sound s Class-A projects reported vacant sublease space of 649,592 square feet at the end of third quarter 2012, up from the 632,553 square feet reported at the end of the second quarter There were 626,355 square feet of sublease space vacant at the end of the first quarter 2012, and 641,950 square feet at the end of the fourth quarter. Class-B projects reported vacant sublease space of 549,512 square feet at the end of the third quarter 2012, down from the 552,980 square feet reported at the end of the second quarter At the end of the first quarter 2012 there were 492,555 square feet, and at the end of the fourth quarter there were 519,854 square feet vacant. Class-C projects reported decreased vacant sublease space from the second quarter 2012 to the third quarter Sublease vacancy went from 49,220 square feet to 32,880 square feet during that time. There were 43,237 square feet vacant at the end of the first quarter 2012, and 37,500 square feet at the end of the fourth quarter. Sublease vacancy in Seattle/Puget Sound s CBD stood at 627,197 square feet at the end of the third quarter It was 615,675 square feet at the end of the second quarter 2012, 640,320 square feet at the end of the first quarter 2012, and 656,480 square feet at the end of the fourth quarter. Sublease vacancy in the suburban markets ended the third quarter 2012 at 604,787 square feet. At the end of the second quarter 2012 sublease vacancy was 619,078 square feet, was 521,827 square feet at the end of the first quarter 2012, and was 542,824 square feet at the end of the fourth quarter. Rental Rates The average quoted asking rental rate for available office space, all classes, was $25.51 per square foot per year at the end of the third quarter 2012 in the Seattle/Puget Sound market area. This represented a 1.3% increase in quoted rental rates from the end of the second quarter 2012, when rents were reported at $25.19 per square foot. Growth was strongest in Class A rents. The average quoted rate within the Class-A sector was $30.80 at the end of the third quarter 2012, while Class-B rates stood at $23.76, and Class-C rates at $ At the end of the Source: CoStar Property 2 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

8 Seattle/Puget Sound Office Market OVERVIEW THIRD QUARTER 2012 SEATTLE/PUGET SOUND second quarter 2012, Class-A rates were $30.24 per square foot, Class-B rates were $23.54, and Class-C rates were $ The average quoted asking rental rate in Seattle/Puget Sound s CBD was $28.66 at the end of the third quarter 2012, and $24.39 in the suburban markets. In the second quarter 2012, quoted rates were $28.05 in the CBD and $24.19 in the suburbs. Deliveries and Construction During the third quarter 2012, five buildings totaling 347,420 square feet were completed in the Seattle/Puget Sound market area. This compares to two buildings totaling 167,312 square feet that were completed in the second quarter 2012, two buildings totaling 11,529 square feet completed in the first quarter 2012, and 139,259 square feet in two buildings completed in the fourth quarter. There were 831,981 square feet of office space under construction at the end of the third quarter The vast majority of this space 87.3% - is pre-leased. Some of the notable 2012 deliveries include: Federal Center South - Bldg 1202 Office, a 208,000-square-foot facility that delivered in third quarter 2012 and is now 100% occupied, and Homeplate Center - North Bldg, a 151,842-square-foot building that delivered in second quarter 2012 and which remains 0% occupied. The largest projects underway at the end of third quarter 2012 were Amazon Phase V, a 332,082-square-foot building with 98% of its space pre-leased, and UW Medicine Research, a 173,899-square-foot facility that is 100% pre-leased. Both developments are located in Downtown Seattle. Inventory Total office inventory in the Seattle/Puget Sound market area amounted to 181,269,396 square feet in 7,425 buildings as of the end of the third quarter The Class-A office sector consisted of 55,275,682 square feet in 247 properties. There were 2,897 Class-B buildings totaling 95,573,127 square feet, and the Class- C sector consisted of 30,420,587 square feet in 4,281 buildings. Within the Office market there are 380 owner-occupied buildings accounting for 24,685,975 square feet of office space. Sales Activity Investor interest in Seattle office properties continues to increase, thereby driving prices up and cap rates down. Tallying office building sales of 15,000 square feet or larger, Seattle/Puget Sound office sales figures rose during the second quarter 2012 in terms of dollar volume compared to the first Absorption & Deliveries Past 9 Quarters Millions SF Source: CoStar Property q Net Absorption quarter of In the second quarter, 21 office transactions closed with a total volume of $1,205,531,353. The 21 buildings totaled 3,658,533 square feet and the average price per square foot equated to $ per square foot. That compares to 10 transactions totaling $231,980,000 in the first quarter of The total square footage in the first quarter was 854,874 square feet for an average price per square foot of $ Total office building sales activity in 2012 was up compared to. In the first six months of 2012, the market saw 31 office sales transactions with a total volume of $1,437,511,353. The price per square foot averaged $ In the same first six months of, the market posted 24 transactions with a total volume of $543,871,170. The price per square foot averaged $ Cap rates have been lower in 2012, averaging 6.70% compared to the same period in when they averaged 6.91%. One of the largest transactions that occurred within the last four quarters in the Seattle/Puget Sound market is the sale of Russell Investments Center in Seattle. This 893,109-square-foot office building sold for $480,000,000, or $ per square foot. The property sold on 4/20/2012. Reports compiled by: Research Manager, Michael LaPointe and Researcher, Benjamin Johannes q q Deliveries q COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3

9 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market MARKETS CoStar Markets & Submarkets In analyzing metropolitan areas in the U.S., CoStar has developed geographic designations to help group properties together, called Regions, Markets and Submarkets. Regions 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. Regions are then divided into Markets, 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. Markets Submarkets Downtown Seattle Ballard/U Dist Belltown/Denny Regrade Capitol Hill/Central Dist Lake Union Pioneer Sq/Waterfront Queen Anne/Magnolia S Seattle Seattle CBD* Eastside 520 Corridor Bellevue CBD* Coal Creek/Issaquah E King County I-90 Corridor Kirkland Mercer Island Redmond Suburban Bellevue Northend Bothell/Kenmore Edmonds/Lynnwood Everett CBD* Mill Creek/Woodinville N Snohomish County Northgate/N Seattle S Everett/Harbor Point S Snohomish County Southend Federal Way/Auburn Kent Valley Renton/Tukwila Seatac/Burien Tacoma Dupont E Pierce County Fort Lewis Gig Harbor/W Pierce Co Puyallup Spanaway Tacoma CBD* Tacoma Suburban Univ. Place/Lakewood * Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. 4 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

10 Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT THIRD QUARTER 2012 SEATTLE/PUGET SOUND Historical Deliveries Deliveries 8.8 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 Downtown Seattle 6 827, , % 43, ,997 Northend 1 4,000 4, % 14,268 4,000 Tacoma % 10,535 0 Eastside % 33,899 0 Southend % 19,265 0 Totals 7 831, , % 24, ,854 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2008 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 6.0 Leased Un-Leased 600 Preleased Un-Leased Millions of SF Thousands of SF T q q COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5

11 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 2.5 Construction Starts Deliveries Millions of SF q q 2q 4q 2q 4q q 2012 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 5 41,419 35, % $ ,470 25,949 50,000 SF - 99,999 SF 2 125, , % $ ,000 70, ,000 SF - 249,999 SF 2 359, , % $ , ,000 SF - 499,999 SF % $ >= 500,000 SF % $ Recent Development by Tenancy Comparison Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA 2012 Deliveries Currently Under Construction By Class By Space Type 13% 21% 17% 23% 87% 79% 53% 30% 77% Multi Single Multi Single Class A Class B Class C Multi Single 6 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

12 Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT THIRD QUARTER 2012 SEATTLE/PUGET SOUND 2012 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7

13 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT 8 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

14 Seattle/Puget Sound Office Market FIGURES AT A GLANCE THIRD QUARTER 2012 SEATTLE/PUGET SOUND Class A Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle ,022,478 4,710,291 5,071, % 1,271, , ,981 $30.47 Eastside ,963,465 1,534,659 1,594, % 241, $32.61 Northend 15 1,656, , , % 1, $24.97 Southend 9 1,289, , , % 17, $24.56 Tacoma 9 1,344, , , % 36, $28.09 Totals ,275,682 6,878,110 7,527, % 1,567, , ,981 $30.80 Class B Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle ,416,744 2,353,908 2,460, % 37, $25.23 Eastside ,762,852 2,397,584 2,502, % 184,256 7,607 0 $26.22 Northend ,946,765 1,555,161 1,619, % 87,852 66,529 4,000 $22.55 Southend ,199,931 1,748,938 1,980, % (65,133) 0 0 $20.26 Tacoma ,246,835 1,272,344 1,312, % 1,530 22,283 0 $20.80 Totals 2,897 95,573,127 9,327,935 9,877, % 246,058 96,419 4,000 $23.76 Class C Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle 995 9,932, , , % (7,045) 0 0 $19.49 Eastside 568 4,070, , , % 13, $21.94 Northend 883 5,213, , , % 18, $18.19 Southend 594 4,198, , , % 4, $17.20 Tacoma 1,241 7,004, , , % (26,919) 0 0 $17.29 Totals 4,281 30,420,587 2,125,143 2,158, % 3, $18.82 Total Office Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle 1,674 73,371,567 7,551,555 8,035, % 1,301, , ,981 $27.56 Eastside 1,410 47,797,071 4,178,205 4,353, % 439,393 7,607 0 $28.20 Northend 1,459 20,816,692 2,162,615 2,237, % 108,063 66,529 4,000 $22.04 Southend 1,022 19,688,365 2,321,070 2,555, % (43,143) 0 0 $19.95 Tacoma 1,860 19,595,701 2,117,743 2,380, % 11,261 22,283 0 $21.21 Totals 7, ,269,396 18,331,188 19,563, % 1,817, , ,981 $ COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9

15 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market FIGURES AT A GLANCE Class A Submarket Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor 23 3,301,625 89,120 89, % (21,397) 0 0 $25.97 Ballard/U Dist 3 211,108 24,189 24, % 71,691 70,000 0 $34.62 Bellevue CBD 25 7,531, , , % 136, $34.90 Belltown/Denny Regrade 12 2,701, , , % (169,623) 0 77,000 $26.75 Bothell/Kenmore 4 346, % 6, $0.00 Capitol Hill/Central Dist 2 257,648 26,983 26, % 198, ,000 $36.09 Coal Creek/Issaquah 6 917, , % 104, $27.42 Dupont 1 48,000 25,207 25, % $28.00 E King County % $0.00 E Pierce County % $0.00 Edmonds/Lynnwood 7 751, , , % (4,353) 0 0 $24.93 Everett CBD 1 88, % $0.00 Federal Way/Auburn 1 88,000 15,000 15, % $26.46 Fort Lewis % $0.00 Gig Harbor/W Pierce Co 1 85,903 28,773 28, % (3,202) 0 0 $32.63 I-90 Corridor 19 2,702, , , % 14, $30.15 Kent Valley 1 57, % $0.00 Kirkland ,484 77,930 88, % 9, $33.38 Lake Union 22 4,642,529 95,083 95, % 761, ,981 $28.41 Mercer Island 1 101,617 24,118 24, % 5, $33.91 Mill Creek/Woodinville % $0.00 N Snohomish County % $0.00 Northgate/N Seattle 2 205,361 9,123 9, % (541) 0 0 $26.00 Pioneer Sq/Waterfront 9 1,793, , , % 44, $26.47 Puyallup 1 83,268 19,828 19, % $42.50 Queen Anne/Magnolia 12 1,898, , , % 7, $34.90 Redmond 19 2,176, , , % 5, $29.44 Renton/Tukwila 5 716, % $0.00 S Everett/Harbor Point 1 264, % $0.00 S Seattle 5 923, , , % 297, ,842 0 $24.70 S Snohomish County % $0.00 Seatac/Burien 2 427, , , % 17, $24.00 Seattle CBD 42 20,594,344 2,687,973 3,042, % 59, $31.10 Spanaway % $0.00 Suburban Bellevue 2 234, , , % (12,000) 0 0 $46.49 Tacoma CBD 5 1,084,935 70, , % 39, $26.68 Tacoma Suburban % $0.00 Univ. Place/Lakewood 1 42, % $33.37 Totals ,275,682 6,878,110 7,527, % 1,567, , ,981 $ THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

16 Seattle/Puget Sound Office Market FIGURES AT A GLANCE THIRD QUARTER 2012 SEATTLE/PUGET SOUND Class B Submarket Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor 98 5,026, , , % 74, $23.26 Ballard/U Dist 102 3,321,513 98, , % 17, $24.01 Bellevue CBD 30 1,407, , , % 77, $28.61 Belltown/Denny Regrade 45 2,950, , , % (7,787) 0 0 $22.52 Bothell/Kenmore 96 4,458, , , % (5,685) 58,329 0 $24.35 Capitol Hill/Central Dist 83 4,127, , , % (34,441) 0 0 $35.51 Coal Creek/Issaquah 56 1,365, , , % (19,648) 7,607 0 $26.33 Dupont 5 701,501 1,280 1, % $20.00 E King County , , , % (15,089) 0 0 $23.08 E Pierce County ,285 60,448 61, % 17,014 6,813 0 $21.05 Edmonds/Lynnwood 128 2,819, , , % 20, ,000 $21.22 Everett CBD 80 1,853, , , % 7, $20.16 Federal Way/Auburn 132 3,410, , , % $19.49 Fort Lewis % $0.00 Gig Harbor/W Pierce Co 71 1,173, , , % 38, $21.52 I-90 Corridor 44 3,186, , , % (35,535) 0 0 $28.67 Kent Valley 67 2,114, , , % (38,933) 0 0 $21.44 Kirkland 135 3,488, , , % 12, $25.64 Lake Union 89 5,681, , , % 28, $26.84 Mercer Island ,295 9,878 9, % 7, $26.57 Mill Creek/Woodinville , , , % 42, $24.49 N Snohomish County ,046 93,014 94, % (36,358) 0 0 $16.82 Northgate/N Seattle 56 1,348, , , % 31, $23.28 Pioneer Sq/Waterfront 57 3,526, , , % (7,138) 0 0 $24.11 Puyallup 57 1,127, , , % (39,544) 0 0 $23.29 Queen Anne/Magnolia 61 2,552, , , % 21, $21.53 Redmond 100 5,043, , , % 86, $25.10 Renton/Tukwila 162 7,457, , , % (18,028) 0 0 $20.50 S Everett/Harbor Point 78 1,766, , , % 24,844 8,200 0 $23.20 S Seattle 81 2,237, , , % (1,877) 0 0 $21.10 S Snohomish County ,566 21,420 21, % 3, $22.26 Seatac/Burien 58 1,217, , , % (8,936) 0 0 $19.80 Seattle CBD 54 6,020, , , % 21, $26.12 Spanaway , , , % (12,863) 0 0 $19.65 Suburban Bellevue 194 4,975, , , % (3,506) 0 0 $26.76 Tacoma CBD 85 3,037, , , % (24,025) 0 0 $19.94 Tacoma Suburban 221 3,159, , , % 11,869 15,470 0 $21.68 Univ. Place/Lakewood 90 1,110,648 95,853 95, % 9, $18.75 Totals 2,897 95,573,127 9,327,935 9,877, % 246,058 96,419 4,000 $ COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 11

17 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market FIGURES AT A GLANCE Class C Submarket Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor ,925 27,456 27, % (7,426) 0 0 $17.95 Ballard/U Dist 300 1,459,726 41,617 46, % 6, $20.90 Bellevue CBD ,245 18,780 18, % 2, $25.21 Belltown/Denny Regrade ,693 56,458 56, % (18,159) 0 0 $17.73 Bothell/Kenmore ,060 12,113 12, % $23.20 Capitol Hill/Central Dist 135 1,750,237 16,139 16, % 33, $24.25 Coal Creek/Issaquah ,927 12,511 12, % (1,210) 0 0 $25.63 Dupont % $0.00 E King County ,753 10,252 14, % (1,050) 0 0 $19.14 E Pierce County ,799 6,858 6, % (6,858) 0 0 $18.34 Edmonds/Lynnwood 168 1,137,840 92,202 92, % $19.16 Everett CBD 240 1,557, , , % 7, $16.83 Federal Way/Auburn 198 1,697,264 53,834 53, % 14, $18.27 Fort Lewis 8 28, % $0.00 Gig Harbor/W Pierce Co ,588 54,901 54, % 10, $18.62 I-90 Corridor ,823 3,615 3, % (2,500) 0 0 $20.84 Kent Valley ,572 96,849 96, % (30,147) 0 0 $15.29 Kirkland ,373 49,205 49, % 13, $23.67 Lake Union , , , % (29,942) 0 0 $17.02 Mercer Island ,971 27,415 27, % (919) 0 0 $22.89 Mill Creek/Woodinville ,646 28,723 30, % (1,121) 0 0 $20.52 N Snohomish County ,516 30,701 30, % 10, $14.92 Northgate/N Seattle ,558 33,816 33, % $19.69 Pioneer Sq/Waterfront 48 1,079,789 56,905 56, % 71, $19.00 Puyallup ,966 27,933 27, % (1,071) 0 0 $19.19 Queen Anne/Magnolia 127 1,086, , , % (60,701) 0 0 $20.73 Redmond ,184 25,245 25, % (6,984) 0 0 $22.31 Renton/Tukwila 142 1,043,700 97,156 97, % 16, $20.02 S Everett/Harbor Point ,213 28,217 28, % 5, $17.55 S Seattle 208 2,040,078 85,280 87, % (13,921) 0 0 $17.10 S Snohomish County ,362 17,514 17, % (5,014) 0 0 $14.85 Seatac/Burien ,296 42,619 43, % 4, $15.42 Seattle CBD ,683 12,967 12, % 3, $19.93 Spanaway ,220 27,446 29, % (24,224) 0 0 $16.34 Suburban Bellevue 187 1,595,553 71,483 76, % 17, $21.65 Tacoma CBD 153 1,929, , , % 11, $17.65 Tacoma Suburban 484 2,318, , , % (20,764) 0 0 $16.14 Univ. Place/Lakewood 194 1,060, , , % 4, $17.61 Totals 4,281 30,420,587 2,125,143 2,158, % 3, $ THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

18 Seattle/Puget Sound Office Market FIGURES AT A GLANCE THIRD QUARTER 2012 SEATTLE/PUGET SOUND Total Office Submarket Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor 141 8,649, , , % 45, $23.38 Ballard/U Dist 405 4,992, , , % 95,076 70,000 0 $23.90 Bellevue CBD 87 9,219, , , % 216, $32.64 Belltown/Denny Regrade 113 6,433, , , % (195,569) 0 77,000 $24.16 Bothell/Kenmore 199 5,184, , , % 1,102 58,329 0 $24.30 Capitol Hill/Central Dist 220 6,135, , , % 197, ,000 $32.82 Coal Creek/Issaquah 100 2,468, , , % 83,441 7,607 0 $26.95 Dupont 6 749,501 26,487 26, % $27.67 E King County 145 1,274, , , % (16,139) 0 0 $22.43 E Pierce County ,084 67,306 68, % 10,156 6,813 0 $20.61 Edmonds/Lynnwood 303 4,709, , , % 16, ,000 $21.95 Everett CBD 321 3,499, , , % 14, $18.41 Federal Way/Auburn 331 5,195, , , % 15, $19.51 Fort Lewis 8 28, % $0.00 Gig Harbor/W Pierce Co 159 1,721, , , % 45, $22.01 I-90 Corridor 81 6,067, , , % (24,000) 0 0 $29.33 Kent Valley 184 2,858, , , % (69,080) 0 0 $20.06 Kirkland 251 5,162, , , % 34, $26.36 Lake Union ,243, , , % 759, ,981 $26.18 Mercer Island ,883 61,411 61, % 12, $28.54 Mill Creek/Woodinville 83 1,093, , , % 40, $23.57 N Snohomish County 163 1,031, , , % (25,428) 0 0 $16.53 Northgate/N Seattle 179 2,311, , , % 31, $22.68 Pioneer Sq/Waterfront 114 6,399, , , % 109, $24.39 Puyallup 195 1,755, , , % (40,615) 0 0 $24.93 Queen Anne/Magnolia 200 5,537, , , % (31,805) 0 0 $27.66 Redmond 187 7,502, , , % 84, $26.04 Renton/Tukwila 309 9,217, , , % (1,897) 0 0 $20.45 S Everett/Harbor Point 154 2,510, , , % 30,621 8,200 0 $22.63 S Seattle 294 5,201, , , % 281, ,842 0 $20.80 S Snohomish County ,928 38,934 39, % (1,420) 0 0 $20.74 Seatac/Burien 198 2,416, , , % 12, $19.46 Seattle CBD ,429,048 3,296,043 3,673, % 85, $29.99 Spanaway 189 1,096, , , % (37,087) 0 0 $18.71 Suburban Bellevue 383 6,804, , , % 2, $29.64 Tacoma CBD 243 6,051, , , % 26, $22.15 Tacoma Suburban 705 5,478, , , % (8,895) 15,470 0 $19.53 Univ. Place/Lakewood 285 2,212, , , % 14, $18.64 Totals 7, ,269,396 18,331,188 19,563, % 1,817, , ,981 $ COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13

19 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market FIGURES AT A GLANCE Class A Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 73 29,298,467 3,429,070 4,022, % 236, $31.43 Suburban ,977,215 3,449,040 3,505, % 1,331, , ,981 $30.12 Totals ,275,682 6,878,110 7,527, % 1,567, , ,981 $30.80 Class B Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,318,180 1,269,504 1,303, % 82, $24.67 Suburban 2,648 83,254,947 8,058,431 8,574, % 163,593 96,419 4,000 $23.62 Totals 2,897 95,573,127 9,327,935 9,877, % 246,058 96,419 4,000 $23.76 Class C Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 444 4,583, , , % 24, $17.79 Suburban 3,837 25,837,344 1,701,258 1,734, % (21,338) 0 0 $18.99 Totals 4,281 30,420,587 2,125,143 2,158, % 3, $18.82 Class A & B Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,616,647 4,698,574 5,325, % 318, $29.39 Suburban 2, ,232,162 11,507,471 12,079, % 1,494, , ,981 $25.22 Totals 3, ,848,809 16,206,045 17,405, % 1,813, , ,981 $26.37 Total Office Market Statistics Third Quarter 2012 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,199,890 5,122,459 5,749, % 343, $28.66 Suburban 6, ,069,506 13,208,729 13,813, % 1,473, , ,981 $24.39 Totals 7, ,269,396 18,331,188 19,563, % 1,817, , ,981 $ THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

20 Seattle/Puget Sound Office Market FIGURES AT A GLANCE THIRD QUARTER 2012 SEATTLE/PUGET SOUND Class A Market Statistics Third Quarter 2012 Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates ,275,682 6,878,110 7,527, % 226, , ,981 $ q ,997,682 6,843,488 7,476, % 950, , ,105,981 $ ,845,840 7,648,543 8,274, % 390, ,257,823 $ q ,845,840 8,023,368 8,665, % 457, , ,924 $ ,762,572 8,305,883 9,040, % 302, , ,192 $ q ,572,572 8,476,019 9,152, % 1,267, , ,192 $ ,914,804 8,956,528 9,762, % 259, , ,622,960 $ ,068,273 8,332,509 9,175, % 1,389, ,768, ,137,409 $ ,300,150 8,027,906 8,796, % (166,395) 14 3,938, ,131,146 $ ,361,884 4,001,292 4,692, % 279, ,751, ,625,561 $ ,610,159 2,701,355 3,219, % 1,433, ,470, ,011,206 $ ,139,182 2,391,132 3,181, % 2,014, ,091, ,483,581 $ ,048,073 2,764,145 4,105, % 1,161, , ,683,609 $ ,006,073 4,278,845 5,225, % 400, , ,673,109 $ ,561,853 3,800,947 5,181, % 940, ,220 $ ,561,853 3,993,711 6,121, % 875, ,301, ,605 $26.68 Quoted Class B Market Statistics Third Quarter 2012 Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates ,897 95,573,127 9,327,935 9,877, % 24, , ,000 $ q 2,894 95,503,707 9,279,673 9,832, % 342, , ,420 $ ,894 95,536,852 9,715,453 10,208, % (120,778) 2 11, ,890 $ q 2,892 95,525,323 9,555,847 10,075, % 273, , ,419 $ ,891 95,469,332 9,663,221 10,293, % (21,197) 1 3, ,597 $ q 2,891 95,477,392 9,556,047 10,280, % 381, ,120 $ ,891 95,477,392 9,937,834 10,661, % 197, , ,591 $ ,885 95,161,280 9,655,640 10,542, % 1,154, , ,703 $ ,864 94,743,299 10,267,436 11,279, % (276,203) 38 1,366, ,428 $ ,829 93,434,358 8,851,153 9,694, % 1,415, ,774, ,325,992 $ ,768 90,683,254 7,810,505 8,358, % 1,356, ,297, ,122,734 $ ,718 89,752,126 8,231,431 8,784, % 2,453, , ,726,199 $ ,672 89,141,260 10,074,526 10,627, % 2,918, ,598, ,594 $ ,625 87,594,847 11,236,137 11,998, % 248, , ,448,166 $ ,590 87,213,841 10,966,297 11,866, % 695, , ,169 $ ,552 86,404,980 10,001,040 11,753, % (193,222) 55 2,205, ,050,823 $20.90 Quoted Total Office Market Statistics Third Quarter 2012 Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates , ,269,396 18,331,188 19,563, % 309, , ,981 $ q 7, ,921,976 18,290,894 19,525, % 1,255, , ,179,401 $ , ,803,279 19,500,571 20,662, % 251, , ,342,713 $ q 7, ,808,098 19,719,689 20,918, % 680, , ,045,343 $ , ,671,916 20,065,855 21,463, % 283, , ,789 $ q 7, ,489,976 20,151,763 21,565, % 1,767, , ,036,312 $ , ,835,908 21,128,813 22,678, % 510, ,162, ,682,551 $ , ,676,159 20,263,988 22,029, % 2,375, ,186, ,513,112 $ , ,559,309 20,485,753 22,288, % (997,453) 53 5,308, ,452,574 $ , ,342,828 14,477,326 16,074, % 1,524, ,587, ,955,333 $ , ,830,811 11,954,529 13,086, % 2,938, ,791, ,187,971 $ , ,624,680 12,450,504 13,819, % 4,656, ,075, ,225,953 $ , ,894,236 14,796,237 16,745, % 4,018, ,679, ,635,687 $ , ,293,712 17,416,303 19,163, % 948, ,368, ,157,069 $ , ,510,485 16,987,832 19,328, % 1,382, , ,004,121 $ , ,664,562 15,903,653 19,865, % 406, ,605, ,300,137 $22.76 Quoted 2012 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15

21 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market LEASING ACTIVITY Historical Rental Rates Based on Full-Service Equivalent Rental Rates A B C Total Market Dollars/SF/Year $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $ by Available Space Type by Class Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Class Seattle/Puget Sound United States Seattle/Puget Sound United States 6% 4% 11% 17% 51% 38% 49% 34% 94% 96% 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* $30.00 $25.00 Seattle/Puget Sound United States Dollars/SF/Year $20.00 $15.00 $10.00 Millions $ $0.00 4q 2q 4q q q q q 2015 * Includes Under Construction Spaces 16 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

22 Seattle/Puget Sound Office Market LEASING ACTIVITY THIRD QUARTER 2012 SEATTLE/PUGET SOUND Select Top Office Leases Based on Leased Square Footage For Deals Signed in 2012 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company th Ave Seattle CBD 261,618 1st CenturyLink Newmark Knight Frank Frederick Ross Newmark Knight Frank Frederick Ross 2 Russell Investments Center* Seattle CBD 158,081 2nd Dendreon Corporation N/A N/A 3 Key Center Bellevue CBD 122,742 2nd Concur Technologies, Inc. Washington Partners Corporate Real Broderick Group, Inc. 4 West Harrison-West Tower* Queen Anne/Magnolia 122,000 1st Publicis Groupe Washington Partners Corporate Real Martin Selig Real Estate Westlake Ave N Lake Union 110,000 3rd Amazon.com, Inc. Washington Partners Corporate Real Urbis Partners 6 6th & Wall Bldg Belltown/Denny Regrade 87,575 1st City University N/A Sabey Corporation Union Station Pioneer Sq/Waterfront 72,816 3rd Attachmate Corporation N/A CBRE Western Building Queen Anne/Magnolia 66,045 1st Cell Therapeutics, Inc. CBRE Martin Selig Real Estate 9 Plaza East Bellevue CBD 61,491 2nd Apptio Broderick Group, Inc. The CAC Group 10 Fourth & Battery* Belltown/Denny Regrade 56,939 3rd Emergent BioSolutions Inc. N/A N/A 11 The Omeros Building Queen Anne/Magnolia 51,732 1st Omeros Corporation Pallis Properties, Inc. CBRE 12 WestPark - Bldg E Redmond 51,303 2nd N/A N/A CBRE 13 Pioneer Square Pioneer Sq/Waterfront 46,222 2nd Isilon Systems N/A Urbis Partners 14 Stadium Innovation Center S Seattle 44,903 1st The Garden City Group, Inc. Washington Partners Corporate Real Kidder Mathews 15 Plaza Center Bellevue CBD 36,763 3rd Blucora, Inc. N/A The CAC Group 16 West Seattle Corporate Center S Seattle 35,493 2nd Bartell s CBRE Colliers International Dexter Bldg Lake Union 33,684 2nd The Omni Group Century Pacific LP Kidder Mathews 18 Roosevelt Commons - Bldg A Ballard/U Dist 32,861 2nd N/A N/A CBRE 19 Puget Sound Energy Bldg Bellevue CBD 31,905 1st New York Life N/A Bentall 20 City Center Bellevue Bellevue CBD 31,324 1st N/A N/A Broderick Group, Inc. 21 East Building Bellevue CBD 29,803 1st Overlake Medical Wallace Properties, Inc. Jones Lang LaSalle Union Station Pioneer Sq/Waterfront 29,636 3rd N/A N/A CBRE 23 Waterfront Place Bldg* Pioneer Sq/Waterfront 29,232 2nd Cequint, Inc N/A N/A 24 Zetron Headquarters Redmond 28,199 2nd WDS Global N/A Broderick Group, Inc th Avenue Building Seattle CBD 26,864 1st Ogden Murphy Washington Partners Corporate Real Jones Lang LaSalle 26 Columbia Center Seattle CBD 26,192 2nd Davidson Companies N/A The CAC Group Union Station Pioneer Sq/Waterfront 24,389 2nd Globys, Inc. N/A CBRE 28 Kirkland 405 Corporate Center - Bldg B Kirkland 23,992 1st Talyst N/A Kidder Mathews 29 Columbia Center Seattle CBD 23,028 1st Tamarac CBRE The CAC Group Western Building Queen Anne/Magnolia 23,023 1st Digital Fortress Direct Deal Jones Lang LaSalle 31 Columbia Center Seattle CBD 22,863 2nd Davidson Companies N/A The CAC Group 32 Wright Group Bldg Bothell/Kenmore 22,500 3rd McGraw-Hill Companies N/A Royal Asset Management, LLC 33 Smith Tower Seattle CBD 22,156 3rd N/A N/A CBRE 34 WestPark - Bldg D Redmond 22,009 3rd N/A N/A CBRE 35 U.S. Bank Centre Seattle CBD 21,926 1st Omeros Corporation N/A Bentall 36 Russell Investments Center Seattle CBD 21,575 2nd Zillow, Inc. N/A N/A 37 U.S. Bank Centre Seattle CBD 21,516 1st Stokes Lawrence N/A Bentall 38 Kendall Lake Building E King County 21,430 3rd N/A N/A C&W Commerce Carillon Point Kirkland 21,356 1st Southern Wine and Spirites N/A Jones Lang LaSalle Carillon Point* Kirkland 21,039 2nd Clearwire Corporation N/A Jones Lang LaSalle * Renewal 2012 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 17

23 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market SALES ACTIVITY The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 12.0% Cap Rate Price/SF $ % $500 Cap Rate Percentage 8.0% 6.0% 4.0% $400 $300 $200 Dollars/SF 2.0% $ % q 2q 4q 2q 4q 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 2012 Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate $1,400 $450 $1,200 $400 < 50,000 SF 115 1,309,997 $ 218,248,202 $ % Millions of Sales Volume Dollars $1,000 $800 $600 $400 $200 $350 $300 $250 $200 $150 $100 $50 Price/SF 50K-249K SF 19 2,248,674 $ 542,622,067 $ % 250K-499K SF 5 1,759,914 $ 587,515,000 $ % $ $0 >500K SF 5 3,368,282 $ 1,367,108,054 $ % 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 $470 Seattle/Puget Sound US 10.0% Seattle/Puget Sound US Dollars per SF $420 $370 $320 $270 $220 $170 $120 $70 Cap Rate Percentage 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% $ q q 2q 4q 2q 4q q 3.0% q q 2q 4q 2q 4q q Source: CoStar COMPS Source: CoStar COMPS 18 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.

24 Seattle/Puget Sound Office Market SALES ACTIVITY THIRD QUARTER 2012 SEATTLE/PUGET SOUND 2012 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 19

25 SEATTLE/PUGET SOUND THIRD QUARTER 2012 Seattle/Puget Sound Office Market SALES ACTIVITY Select Land Sales Based on Commercially Zoned Land Sales Occurring From July - Sept State St, Kirkland th Ave E, Bonney Lake th Ave S, Seatac Sale Price: $2,860,000 Sale Price: $2,170,000 Sale Price: $1,300,000 Acres: 1.03 Acres: 3.20 Acres: 3.05 Price/SF: $63.56 Price/SF: $15.57 Price/SF: $9.78 Closing Date: 12/15/ Closing Date: 06/14/2012 Closing Date: 01/25/2012 Zoning: PLA 6B Zoning: BLK Zoning: BP, SeaTac Intended Use: Office Intended Use: Office Intended Use: Office Park Buyer: CamWest Development Buyer: Fmp Bonney Lake Llc Buyer: Jagpal Singh Basra Seller: SRM Development LLC Seller: Franciscan Health System Seller: Waclaw & Anna L Szymula Source: CoStar COMPS 20 THE COSTAR OFFICE REPORT 2012 COSTAR GROUP, INC.