>> South Bay Market Hits 9-Year High in Demand

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1 Research & Forecast Report South Bay OFFICE Q Accelerating success. >> South Bay Market Hits 9-Year High in Demand Key Takeaways > The El Segundo/Beach Cities submarket once again led the South Bay market, recording market high numbers in overall asking rent, absorption and leasing activity. > Average asking rents for the overall market saw a minimal increase, reaching $2.31 per square foot (P) Full Service Gross (FSG) from just $2.30 P FSG. > Class A properties saw the majority of the quarter s absorption gains, posting 238,300 square feet () of positive demand among classes. > There were no new construction deliveries this quarter, but the South Bay market still has 308,300 of inventory under construction, with much of it due to deliver by the end of the year. > Several properties traded hands in second quarter, highlighted by PM Realty Group acquiring the Torrance Technology Campus for $67M ($117 P) from Deutsche Asset and Wealth Management. Market Indicators Relative to prior period Q Forecast Net Absorption Construction Rental Rate Summary Statistics South Bay, Q Class A Class B All Classes 14.1% 21.7% 18.3% Rate Change from Q2 16 (Basis Points) Net Absorption* Construction Completions* Under Construction* Class A Class B All Classes $2.71 $2.17 $2.31 $4 $1 $1 5.0% 5.6% 3.3% *, Thousands Asking Rents South Bay, Q South Bay Office Market The South Bay market saw a minimal increase in rental rates, while vacancy made a modest drop from 19.3% to 18.3%. Construction completions were flat this quarter due to delivery delays, but those properties will come online by year-end. Leasing activity dropped from last quarter to 589,200 but still exceeded the previous 4 quarter average pf 584,900. Investment dollar volume dropped, but the market remained active as investors continue to comb the area for value-add opportunities. The South Bay continues to be a desired destination for tenants seeking alternatives to the higher-priced submarkets to the north, as well as companies that have grown organically within the market. El Segundo has long been the destination of choice in the market, but other submarkets, such as Central Torrance and LAX/Los Angeles/Westchester, are being noticed by tenants and investors alike. Average Asking Rent Change from Q2 16 ($) Y.O.Y. Change (%) Labor Force Los Angeles County, August 2016 Nonfarm Prof. & Business Services Financial Activities 12-mo Employment Growth (%) 1.7% 3.1% 2.4% 12-mo Actual Employment Change 73,900 18,600 5,100

2 > The overall vacancy rate for the South Bay market saw a 100 basis point decrease in the third quarter of > Year-over-year, vacancy has dropped by 230 basis points in the South Bay as robust demand has driven vacancies down. > The Long Beach Airport/Lakewood submarket recorded a 140 basis point decrease, from 13.2% to 11.8%. > Forecast: should continue to decrease through 2016 due to increased demand from companies moving south from West Los Angeles, organic company growth in the South Bay and limited construction deliveries in the near future. Absorption and Leasing Activity > Absorption for the South Bay recorded at 335,500, marking a post-recession high for the market and six straight quarters of absorption in excess of 100,000. Absorption was spread out, with no one market exceeding a quarter of total demand. > Among the major move-ins for the quarter was Guthy Renker moving into 90,700 at Pacific Corporate Towers in El Segundo, while Skeckers and Boston Consulting Group moved in to Manhattan Towers in Manhattan Beach, occupying 38,900 and 27,100 respectively. > Leasing activity in the third quarter was 589,200. Major leases signed included Xerox renewing 69,000 at 2277 E. 220th St. in Long Beach, Kite Pharma expanding by 60,000 at 2382 Utah Ave. in El Segundo and WeWork establishing a South Bay presence with 56,300 at Manhattan Towers in Manhattan Beach. > Forecast: While El Segundo will continue to lead the South Bay market in demand and leasing activity, other submarkets will continue to exhibit momentum going forward. Rental Rates > Class A and C rents drove the rental rate increase in the South Bay market, while Class B rents saw minimal increases for the quarter. This marks 11 straight quarters of rental increases overall. > The overall asking rent of $2.31 P FSG is up 3.3% yearover-year. Class A and B rents recorded 5.0% and 5.6% over the same time period. > Half of the submarkets recorded rent increases: El Segundo/Beach Cities (+$5), 190th Street Corridor (+$3) and Long Beach Airport/Lakewood (+$1). > Forecast: South Bay rental growth was steady throughout 2015 and looks to continue along the same arc in 2016, albeit at a slower pace than what the market saw the past two years. Historical v. Rents South Bay Office Market Q $ P FSG PER MONTH (WEIGHTED) Net Absorption by Submarket South Bay Office Market Q3 16 $2.40 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $ , , , , ,000 50,000 3Q12 3Q13 3Q14 3Q15 3Q ,900 LONG BEACH AIRPORT/LAKEWOOD 70,500 LAX/LOS ANGELES/WESTCHESTER RENTS 22, TH STREET CORRIDOR VACANCY 39,300 46,500 CENTRAL TORRANCE DOWNTOWN LONG BEACH 24% 22% 20% 18% 16% 14% 12% 10% % VACANT (TOTAL) 86,600 EL SEGUNDO/BEACH CITIES Historical Leasing Activity South Bay Office Market Q ,100,000 1,000, , , , , , , , , ,000 3Q12 3Q13 3Q14 3Q15 3Q16 2

3 Construction > No projects delivered in the third quarter of E. Maple Ave., 2400 Marine Ave. and 2040 E. Mariposa Ave., which were expected to complete this quarter, were pushed back to fourth quarter. > Construction and renovation projects are concentrated in the El Segundo/Beach Cities submarket, with 308,300 of office space remaining in the pipeline. > Most construction in South Bay consists of renovation or conversions of functionally obsolescent industrial inventory and former aerospace/defense office buildings. > Forecast: Construction figures to remain steady although there are no projects slated to break ground in Investment Trends > Investment activity for properties over 25,000 dropped from second quarter, recording over $158.7 million in volume over 5 transactions, down from $430 million. > The largest sale for the quarter on a per square foot basis was Mar Ventures, Inc. selling 1776 E. Grand Ave in El Segundo for $31.4 million ($950 P) to NGP V Management. The property was fully leased to the GSA. > After the success of The Landing and other creative conversion projects in El Segundo, Montana Avenue Capital dipped into Central Torrance, acquiring Hamilton Ave. for $136 P from Latitude Management RE Investors, Inc. They also sold 2040 E. Mariposa Ave to an owner/user for $37.5 million prior to its delivery. > Forecast: Value-add properties still constitute a large portion of investment activity going forward, with sellers looking to trade out of completed projects and buyers acquiring conversion prospects. Outlook The outlook for the South Bay market remains positive. should continue to decrease through the end of 2016 with increased demand from companies both moving south from West Los Angeles and growing organically from within the market. Steady, but flattening, rental growth throughout 2015 will continue along the same arc in In addition to core investment properties, value-add and creative conversion projects will remain part of the investment environment as sellers divest completed projects and buyers seek opportunities to enter the market. Historical Net Absorption & Construction Completions South Bay Office Market Q , , , ,000 0 (100,000) (200,000) (300,000) (400,000) (500,000) (600,000) NET ABSORPTION 3Q12 3Q13 3Q14 3Q15 3Q16 Investment Trends Chart South Bay Office Market $/P $350 $300 $250 $200 $150 $100 $50 CONSTRUCTION COMPLETIONS Unemployment Rate U.S., CA & Los Angeles County August % 5.4% 5.2% 5.0% 4.8% $- 4.9% Average Price P 5.5% Cap Rate % Cap Rate 4.6% 4.4% United States California Los Angeles County 3

4 Market Description The South Bay office market is comprised of 33.2 million, representing 11% of the total office space in buildings 10,000 square feet and greater in the Los Angeles Basin. Most of the space (64%) was built in the 1980s, and only 8% was built 1990 current. Nearly half (49%) of its space is contained within mid-rise buildings (5 13 stories), followed by 32 percent in low-rise buildings and 19% in high-rise. It has a large concentration of firms in aerospace (although much less than in the 1980s), automotive, telecommunications, information technology, healthcare and business services, and is served by a highly educated labor force. Submarket Map RECENT TRANSACTIONS & MAJOR DEVELOPMENTS South Bay Office Market Q SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER Torrance Technology Campus, Torrance (3 Buildings) 573,200 $67,000,000 $117 P PM Realty Group Deutsche Asset & Wealth Mgmt 1776 E. Grand Ave., El Segundo 33,000 $31,340,000 $950 P NGP V Management LLC Mar Ventures, Inc E. Pacific Coast Hwy., Long Beach 119,500 $25,765,000 $216 P Milan Capital Management GJ Property Services Inc Alaska Ave., El Segundo 46,900 $17,350,000 $370 P Ocean West Capital Partners Kurtzman Carson Consultants Hamilton Ave, Torrance 124,900 $17,250,000 $138 P Montana Avenue Capital Partners LLC Latitude Management RE LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG CLASS LESSEE LESSOR 2277 E. 220th St., Long Beach 69,000 Renewal B Xerox Watson Land Company 2382 Utah Ave., El Segundo 60,000 Expansion B Kite Pharma NSB Associates 1240 Rosecrans Blvd., Manhattan Beach 56,300 Direct A WeWork The Onni Group 221 Park Pl., El Segundo 55,000 Direct B Just Fab Sandstone Properties 1700 E. Walnut Ave., El Segundo 20,000 Direct A Consumer Track, Inc. Roxborough Group MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION 2030 E. Maple Ave., El Segundo SteelWave, Inc. 96,000 El Segundo/ Under Construction Q E Mariposa Ave, El Segundo Montana Avenue 88,700 El Segundo/ Under Renovation Q Marine Ave., El Segundo Montana Avenue 50,600 El Segundo/ Under Renovation Q Trisonic-El Segundo Live Oak Properties, 73,000 El Segundo/ Under Construction Q

5 EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS Submarket/ Class Bldgs Inventory Direct Sublease Prior Qtr Leasing Activity Current Qtr Leasing Activity YTD Net Absorption Current Qtr Net Absorption YTD Completions Current Qtr Under Construction Weighted Avg Asking Lease Rate BUILDING CLASS/SIZE A 10,000-24, , ,522, % 1.1% 14.1% 16.0% 247, , , , $2.71 Subtotal 60 12,522, % 1.1% 14.1% 16.0% 247, , , , $2.71 B 10,000-24, ,376, % % 8.4% 7.6% 5,600 40,300 (10,700) 11, $ , ,855, % 0.2% 22.8% 23.1% 298, ,400 49, , ,300 $2.17 Subtotal ,231, % 0.1% 21.7% 21.9% 304, ,700 38, , ,300 $2.17 c 10,000-24, ,202, % % 7.0% 9.2% 19,200 38,600 26,400 11, $ , ,277, % % 22.5% 23.9% 18,600 90,100 31,900 30, $1.95 Subtotal 112 3,479, % % 17.1% 18.8% 37, ,700 58,300 41, $1.94 SUBMARKET/BUILDING SIZE LAX/LOS ANGELES/WESTCHESTER 10,000-24, , % % 18.4% 19.2% 3,600 4,800 1,400 (3,300) 0 0 $ , ,190, % % 36.9% 38.6% 66, ,600 69,100 99, $1.67 Subtotal 35 4,353, % % 36.3% 37.9% 70, ,400 70,500 96, $1.67 EL SEGUNDO/BEACH CITIES 10,000-24, , % % 2.3% 2.5% 1,000 5,000 1,100 4, $ , ,735, % 0.4% 16.3% 17.1% 185, ,500 85, , ,300 $3.09 Subtotal ,306, % 0.4% 15.6% 16.4% 186, ,500 86, , ,300 $3.09 CENTRAL TORRANCE 10,000-24, ,030, % % 10.1% 9.8% 7,400 33,800 (3,100) (4,000) 0 0 $ , ,239, % % 10.3% 11.6% 49, ,000 42,400 84, $2.58 Subtotal 112 4,269, % % 10.2% 11.2% 56, ,800 39,300 80, $ TH STREET CORRIDOR 10,000-24, , % % 3.1% 2.1% 1,500 15,000 (1,700) 6, $ , ,374, % 3.0% 25.9% 26.6% 85, ,200 24,400 (130,100) 0 0 $2.08 Subtotal 47 3,552, % 2.9% 24.7% 25.4% 87, ,200 22,700 (124,000) 0 0 $2.08 LONG BEACH AIRPORT/LAKEWOOD 10,000-24, , % % 8.8% 13.7% 9,100 17,000 18,900 21, $ , ,409, % % 12.0% 13.2% 61, ,500 51, , $2.08 Subtotal 77 4,796, % % 11.8% 13.2% 70, ,500 69, , $2.06 DOWNTOWN LONG BEACH 10,000-24, , % % 5.3% 5.0% 2,200 3,300 (900) (2,200) 0 0 $ , ,706, % 0.2% 18.1% 19.1% 115, ,200 47, , $2.27 Subtotal 48 4,955, % 0.2% 17.4% 18.4% 118, ,500 46, , $2.26 MARKET TOTAL ,233, % 0.5% 18.3% 19.3% 589,200 1,940, , , ,300 $2.31 Note: revisions to the inventory base were made effective Q3 2016, historical data reported here reflect these revisions and may not match data reported in previous quarters. 5

6 Definitions of key terms in this report Rentable Square Feet: Office space in buildings with 25,000 square feet or more of speculative office space. Includes competitive space in Class A, B and C single-tenant and multi-tenant buildings. Excludes non-competitive owner-occupied buildings, buildings that include 30 percent or greater of medical or retail space, and space that is under-construction, underrenovation or off-market. Class A Space: Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market. Class B Space: Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates. Class C Space: Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates. Low-Rise: Buildings with a total of 4 floors or less. Mid-Rise: Buildings with a total of 5 to 13 floors. High-Rise: Buildings with 14 or more floors. Direct : Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). : Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Leasing Activity: Square feet leased from all known transactions completed during the quarter. Excludes lease renewals. Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per basis. Space Added (Net): square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy Technical Note: Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 UNITED STATES: South Bay Office License No Rosecrans Ave, Ste 3301 El Segundo, CA JOHN HOLLINGSWORTH Executive Managing Director CHRIS WONG Regional Research Analyst Research Services > $2.5 billion in annual revenue > 2.0 billion square feet under management > Over 16,100 professionals TEL: FAX: CAITLIN MATTESON Research Director Research Services 6