The CoStar Office Report. M i d - Y e a r Jacksonville Office Market

Transcription

1 The CoStar Office Report M i d - Y e a r

2 Mid-Year 2016 Jacksonville 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 Under Construction Properties Select Top Deliveries 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 Arlington Market Baker County Market Beaches Market Butler/Baymeadows Market Downtown Northbank Market Downtown Southbank Market Mandarin Market Nassau County Market Northeast Jacksonville Market Northwest Jacksonville Market Orange Park/Clay County Market Riverside Market San Marco Market Southside Market St Johns County Market 2016 CoStar Group, Inc. The CoStar Office Report A

3 Jacksonville Mid-Year 2016 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 2016 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 2016 CoStar Group, Inc.

4 Mid-Year 2016 Jacksonville 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 2016 CoStar Group, Inc. The CoStar Office Report C

5 Jacksonville Mid-Year 2016 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: 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 2016 CoStar Group, Inc.

6 Overview Mid-Year 2016 Jacksonville Jacksonville s Decreases to 9.4% Net Absorption Positive 344,594 SF in the Quarter The Jacksonville Office market ended the second quarter 2016 with a vacancy rate of 9.4%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 344,594 square feet in the second quarter. Vacant sublease space decreased in the quarter, ending the quarter at 86,941 square feet. Rental rates ended the second quarter at $18.41, an increase over the previous quarter. A total of two buildings delivered to the market in the quarter totaling 12,102 square feet, with 111,301 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Jacksonville office market was positive 344,594 square feet in the second quarter That compares to positive 212,219 square feet in the first quarter 2016, negative (165,012) square feet in the fourth quarter 2015, and positive 238,908 square feet in the third quarter Tenants moving into large blocks of space in 2016 include: Southeastern Grocers moving into 159,810 square feet at Prominence Building 200; Deutsche Bank moving into 150,000 square feet at 5201 Gate Pky; and PHH Mortgage Corporation moving into 102,856 square feet at 7777 Baymeadows Way. The Class-A office market recorded net absorption of negative (17,348) square feet in the second quarter 2016, compared to positive 231,019 square feet in the first quarter 2016, negative (162,382) in the fourth quarter 2015, and positive 96,221 in the third quarter The Class-B office market recorded net absorption of positive 381,593 square feet in the second quarter 2016, compared to negative (54,721) square feet in the first quarter 2016, positive 2,452 in the fourth quarter 2015, and positive 173,192 in the third quarter The Class-C office market recorded net absorption of negative (19,651) square feet in the second quarter 2016 compared to positive 35,921 square feet in the first quarter 2016, negative (5,082) in the fourth quarter 2015, and negative (30,505) in the third quarter Net absorption for Jacksonville s central business district was negative (8,067) square feet in the second quarter That compares to positive 85,033 square feet in the first quarter 2016, positive 39,572 in the fourth quarter 2015, and positive 92,167 in the third quarter Net absorption for the suburban markets was positive 352,661 square feet in the second quarter That compares to positive 127,186 square feet in first quarter 2016, negative (204,584) in the fourth quarter 2015, and positive 146,741 in the third quarter The office vacancy rate in the Jacksonville market area decreased to 9.4% at the end of the second quarter The vacancy rate was 10.0% at the end of the first quarter 2016, 10.2% at the end of the fourth quarter 2015, and 10.0% at the end of the third quarter Class-A projects reported a vacancy rate of 8.9% at the end of the second quarter 2016, 8.8% at the end of the first quarter 2016, 9.8% at the end of the fourth quarter 2015, and 8.8% at the end of the third quarter Class-B projects reported a vacancy rate of 10.0% at the Rates by Class A B C Total Market 20% 18% 16% 14% Rate 12% 10% 8% 6% 4% 2% 0% q q q q q q q q q q q q q q q q q 2016 CoStar Group, Inc. The CoStar Office Report 1

7 Jacksonville Mid-Year 2016 Overview end of the second quarter 2016, 11.1% at the end of the first quarter 2016, 10.9% at the end of the fourth quarter 2015, and 10.9% at the end of the third quarter Class-C projects reported a vacancy rate of 8.9% at the end of the second quarter 2016, 8.8% at the end of first quarter 2016, 9.0% at the end of the fourth quarter 2015, and 9.6% at the end of the third quarter The overall vacancy rate in Jacksonville s central business district at the end of the second quarter 2016 changed to 10.6%. The vacancy rate was 10.6% at the end of the first quarter 2016, 11.1% at the end of the fourth quarter 2015, and 11.3% at the end of the third quarter The vacancy rate in the suburban markets decreased to 9.0% in the second quarter The vacancy rate was 9.7% at the end of the first quarter 2016, 9.9% at the end of the fourth quarter 2015, and 9.6% at the end of the third quarter Largest Lease Signings The largest lease signings occurring in 2016 included: the 132,270-square-foot lease signed by Aetna US Healthcare at 9000 Southside Blvd - Bldg 100 in the Butler/Baymeadows market; the 17,486-square-foot deal signed by Cypress Insurance at Lakeside Five Flagler Center in the Butler/Baymeadows market; and the 17,103-square-foot lease signed by Covent Bridge USA at North Regency 1 in the Arlington market. Sublease The amount of vacant sublease space in the Jacksonville market decreased to 86,941 square feet by the end of the second quarter 2016, from 89,957 square feet at the end of the first quarter There was 279,514 square feet vacant at the end of the fourth quarter 2015 and 112,451 square feet at the end of the third quarter Jacksonville s Class-A projects reported vacant sublease space of 26,997 square feet at the end of second quarter 2016, down from the 28,554 square feet reported at the end of the U.S. Comparison Past 8 Quarters 14.0% 12.0% Jacksonville (Florida) United States first quarter There was 187,468 square feet of sublease space vacant at the end of the fourth quarter 2015, and 45,449 square feet at the end of the third quarter Class-B projects reported vacant sublease space of 57,796 square feet at the end of the second quarter 2016, down from the 61,403 square feet reported at the end of the first quarter At the end of the fourth quarter 2015 there was 91,046 square feet, and at the end of the third quarter 2015 there was 66,002 square feet vacant. Class-C projects reported increased vacant sublease space from the first quarter 2016 to the second quarter Sublease vacancy went from 0 square feet to 2,148 square feet during that time. There was 1,000 square feet at the end of the fourth quarter 2015, and 1,000 square feet at the end of the third quarter Sublease vacancy in Jacksonville s central business district stood at 23,989 square feet at the end of the second quarter It was 18,489 square feet at the end of the first quarter 2016, 31,879 square feet at the end of the fourth quarter 2015, and 28,727 square feet at the end of the third quarter Sublease vacancy in the suburban markets ended the second quarter 2016 at 62,952 square feet. At the end of the first quarter 2016 sublease vacancy was 71,468 square feet, was 247,635 square feet at the end of the fourth quarter 2015, and was 83,724 square feet at the end of the third quarter Rental Rates The average quoted asking rental rate for available office space, all classes, was $18.41 per square foot per year at the end of the second quarter 2016 in the Jacksonville market area. This represented a 0.2% increase in quoted rental rates from the end of the first quarter 2016, when rents were reported at $18.38 per square foot. The average quoted rate within the Class-A sector was $21.73 at the end of the second quarter 2016, while Class-B rates stood at $17.71, and Class-C rates at $ At the end of the first quarter 2016, Class-A rates were $21.33 per square foot, Class-B rates were $17.69, and Class-C rates were $ The average quoted asking rental rate in Jacksonville s CBD was $19.77 at the end of the second quarter 2016, and $18.08 in the suburban markets. In the first quarter 2016, quoted rates were $19.45 in the CBD and $18.10 in the suburbs. Rate 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% q Deliveries and Construction During the second quarter 2016, two buildings totaling 12,102 square feet were completed in the Jacksonville market area. This compares to three buildings totaling 75,514 square feet that were completed in the first quarter 2016, four buildings totaling 25,910 square feet completed in the fourth quarter 2015, and 20,700 square feet in one building completed in the third quarter The CoStar Office Report 2016 CoStar Group, Inc.

8 Overview Mid-Year 2016 Jacksonville There was 92,301 square feet of office space under construction at the end of the second quarter Some of the notable 2016 deliveries include: Alta Dr, a 46,014-square-foot facility that delivered in first quarter 2016 and is now 100% occupied, and 7768 Ozark Dr, a 24,000- square-foot building that delivered in first quarter 2016 and is now 50% occupied. The largest projects underway at the end of second quarter 2016 were Fort Wade Office Park - Building III, a 62,751- square-foot building with 0% of its space pre-leased, and Monaco Business Center, a 12,500-square-foot facility that is 100% pre-leased. Inventory Total office inventory in the Jacksonville market area amounted to 62,571,758 square feet in 4,446 buildings as of the end of the second quarter The Class-A office sector consisted of 17,022,757 square feet in 98 projects. There were 1,747 Class-B buildings totaling 31,254,447 square feet, and the Class-C sector consisted of 14,294,554 square feet in 2,601 buildings. Within the Office market there were 188 owneroccupied buildings accounting for 7,909,453 square feet of office space. Sales Activity Tallying office building sales of 15,000 square feet or larger, Jacksonville (Florida) office sales figures fell during the first quarter 2016 in terms of dollar volume compared to the fourth quarter of In the first quarter, seven office transactions closed with a total volume of $28,704,375. The seven buildings totaled 331,657 square feet and the average price per square foot equated to $86.55 per square foot. That compares to seven transactions totaling $52,469,000 in the fourth quarter The total square footage in the fourth quarter was 484,303 square feet for an average price per square foot of $ Absorption & Deliveries Past 8 Quarters (0.1) (0.2) Net Absorption Deliveries (0.17) q Total office building sales activity in 2016 was down compared to In the first three months of 2016, the market saw seven office sales transactions with a total volume of $28,704,375. The price per square foot averaged $ In the same first three months of 2015, the market posted eight transactions with a total volume of $47,376,000. The price per square foot averaged $ Cap rates have been lower in 2016, averaging 8.58% compared to the same period in 2015 when they averaged 9.77%. One of the largest transactions that has occurred within the last four quarters in the Jacksonville (Florida) market is the sale of Dupont Center at Prudential Dr in Jacksonville. The center totals 160,000 square feet and sold for $16,000,000, or $100 per square foot. The property sold on 6/15/2015, at a 7.7% cap rate. Reports compiled by: Andrew Sears, CoStar Research Manager CoStar Group, Inc. The CoStar Office Report 3

9 Jacksonville Mid-Year 2016 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 Arlington Baker County Beaches Butler/Baymeadows Downtown Northbank* Downtown Southbank* Mandarin Nassau County Northeast Jacksonville Northwest Jacksonville Orange Park/Clay County Riverside San Marco Southside St Johns County * Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. 4 The CoStar Office Report 2016 CoStar Group, Inc.

10 Inventory & development Mid-Year 2016 Jacksonville 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 Beaches 2 70, % 8,303 35,150 Southside 1 19,000 19, % 22,231 19,000 Northeast Jacksonville 1 12,500 12, % 8,039 12,500 St Johns County 1 9, % 6,863 9,500 Baker County % 3,633 0 Butler/Baymeadows % 37,825 0 Downtown Northbank % 37,937 0 Downtown Southbank % 21,894 0 Mandarin % 9,182 0 Arlington % 7,644 0 All Other % 6,226 0 Totals 5 111,301 31, % 14,074 22,260 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2012 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 1.2 Leased Un-Leased 90 Preleased Un-Leased Millions of SF Thousands of SF T q q 2016 CoStar Group, Inc. The CoStar Office Report 5

11 Jacksonville Mid-Year 2016 Inventory & development Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 0.3 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 5 87,616 73, % $ ,052 77,564 50,000 SF - 99,999 SF % $ ,000 SF - 249,999 SF % $ ,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 2016 Deliveries Currently Under Construction By Class By Space Type 11% 9% 23% 25% 27% 89% 91% 50% 75% Multi Single Multi Single Class A Class B Class C Multi Single 6 The CoStar Office Report 2016 CoStar Group, Inc.

12 Inventory & development Mid-Year 2016 Jacksonville 2016 CoStar Group, Inc. The CoStar Office Report 7

13 Jacksonville Mid-Year 2016 Figures at a Glance Class A Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Arlington % $0.00 Baker County % $0.00 Beaches 7 411,000 37,383 37, % 9, ,751 $24.36 Butler/Baymeadows 15 1,920, , , % 117,920 24,000 0 $22.47 Downtown Northbank 13 5,533, , , % (2,921) 0 0 $21.18 Downtown Southbank 6 1,991, , , % 67, $21.86 Mandarin % $0.00 Nassau County % $0.00 Northeast Jacksonville 1 46, % 46,014 46,014 0 $0.00 Northwest Jacksonville % $0.00 Orange Park/Clay County 2 201, % $0.00 Riverside % $0.00 San Marco % $0.00 Southside 50 6,613, , , % (23,031) 0 0 $21.74 St Johns County 4 306,840 52,239 52, % (1,191) 0 0 $18.07 Totals 98 17,022,757 1,485,682 1,512, % 213,671 70,014 62,751 $21.73 Class B Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Arlington ,468 95,938 98, % 7, $15.63 Baker County 8 25, % $0.00 Beaches 163 1,661,353 75,549 78, % (1,357) 12,102 7,550 $25.27 Butler/Baymeadows 174 7,272, , , % 292, $17.86 Downtown Northbank 108 6,045, , , % (3,042) 0 0 $17.37 Downtown Southbank ,472 3,038 3, % 8, $18.20 Mandarin 153 1,756,644 99,622 99, % 30,329 5,500 0 $16.78 Nassau County ,827 49,798 51, % 7, $21.88 Northeast Jacksonville ,031 40,684 40, % (5,718) 0 12,500 $17.56 Northwest Jacksonville ,866 25,060 25, % 7, $14.71 Orange Park/Clay County 171 1,606, , , % (2,356) 0 0 $20.90 Riverside 137 1,005,062 46,458 46, % 20, $17.16 San Marco 59 1,067, , , % 8, $16.77 Southside 269 5,847, , , % (66,831) 0 19,000 $16.23 St Johns County 307 2,246, , , % 23, ,500 $19.40 Totals 1,747 31,254,447 3,052,077 3,109, % 326,872 17,602 48,550 $ The CoStar Office Report 2016 CoStar Group, Inc.

14 Figures at a Glance Mid-Year 2016 Jacksonville Class C Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Arlington ,478 42,379 42, % 5, $13.00 Baker County 23 86,670 24,091 24, % 2, $14.81 Beaches ,785 35,117 35, % (10,842) 0 0 $23.17 Butler/Baymeadows , , , % 2, $15.40 Downtown Northbank 223 1,471, , , % 8, $14.38 Downtown Southbank ,782 50,791 50, % (815) 0 0 $20.88 Mandarin ,560 41,542 41, % (3,551) 0 0 $16.73 Nassau County ,550 30,146 30, % (3,518) 0 0 $19.69 Northeast Jacksonville ,666 56,284 56, % 1, $11.12 Northwest Jacksonville ,267 20,724 20, % $12.38 Orange Park/Clay County 205 1,124, , , % (12,460) 0 0 $17.14 Riverside 462 1,843, , , % 30, $17.20 San Marco ,583 76,559 76, % (7,156) 0 0 $15.29 Southside 390 3,301, , , % 1, $14.33 St Johns County ,954 9,211 9, % 1, $22.10 Totals 2,601 14,294,554 1,270,449 1,272, % 16, $15.67 Total Office Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Arlington 205 1,566, , , % 13, $14.72 Baker County ,612 24,091 24, % 2, $14.81 Beaches 363 3,014, , , % (2,652) 12,102 70,301 $24.58 Butler/Baymeadows 263 9,948,080 1,045,933 1,064, % 413,257 24,000 0 $18.82 Downtown Northbank ,050,304 1,516,900 1,540, % 2, $19.38 Downtown Southbank 139 3,043, , , % 74, $21.42 Mandarin 265 2,433, , , % 26,778 5,500 0 $16.77 Nassau County 230 1,159,377 79,944 81, % 3, $20.99 Northeast Jacksonville ,711 96,968 96, % 41,453 46,014 12,500 $14.10 Northwest Jacksonville 179 1,191,133 45,784 45, % 7, $13.24 Orange Park/Clay County 378 2,932, , , % (14,816) 0 0 $19.77 Riverside 599 2,848, , , % 51, $17.19 San Marco 244 2,017, , , % 1, $16.11 Southside ,761,920 1,457,416 1,491, % (87,951) 0 19,000 $17.40 St Johns County 427 2,930, , , % 24, ,500 $19.39 Totals 4,446 62,571,758 5,808,208 5,895, % 556,813 87, ,301 $ CoStar Group, Inc. The CoStar Office Report 9

15 Jacksonville Mid-Year 2016 Figures at a Glance Class A Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 19 7,524, , , % 64, $21.34 Suburban 79 9,498, , , % 149,259 70,014 62,751 $22.03 Totals 98 17,022,757 1,485,682 1,512, % 213,671 70,014 62,751 $21.73 Class B Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 124 6,650, , , % 5, $17.41 Suburban 1,623 24,604,358 2,343,552 2,380, % 321,725 17,602 48,550 $17.74 Totals 1,747 31,254,447 3,052,077 3,109, % 326,872 17,602 48,550 $17.71 Class C Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 340 1,919, , , % 7, $16.68 Suburban 2,261 12,375,554 1,051,815 1,053, % 8, $15.58 Totals 2,601 14,294,554 1,270,449 1,272, % 16, $15.67 Class A & B Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,174,619 1,466,105 1,490, % 69, $20.07 Suburban 1,702 34,102,585 3,071,654 3,132, % 470,984 87, ,301 $18.82 Totals 1,845 48,277,204 4,537,759 4,622, % 540,543 87, ,301 $19.09 Total Office Market Statistics Mid-Year 2016 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,093,619 1,684,739 1,708, % 76, $19.77 Suburban 3,963 46,478,139 4,123,469 4,186, % 479,847 87, ,301 $18.08 Totals 4,446 62,571,758 5,808,208 5,895, % 556,813 87, ,301 $ The CoStar Office Report 2016 CoStar Group, Inc.

16 Figures at a Glance Mid-Year 2016 Jacksonville 2016 CoStar Group, Inc. The CoStar Office Report 11

17 Jacksonville Mid-Year 2016 Leasing Activity Historical Rental Rates Based on Full-Service Equivalent Rental Rates A B C Total Market $25.00 $20.00 $15.00 $10.00 $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 Jacksonville (Florida) United States Jacksonville (Florida) United States 1% 4% 22% 15% 99% 96% 52% 26% 47% 38% 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 Jacksonville (Florida) United States $ $15.00 $ $ $ q q q q q * Includes Under Construction Spaces 12 The CoStar Office Report 2016 CoStar Group, Inc.

18 Leasing Activity Mid-Year 2016 Jacksonville Select Top O ce Leases Based on Leased Square Footage For Deals Signed in 2016 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company Southside Blvd - Bldg 100 Butler/Baymeadows 132,270 2nd Aetna US Healthcare N/A Colliers International Northeast Fl Southside Blvd - Bldg 700 Butler/Baymeadows 24,459 2nd N/A N/A Colliers International Northeast Fl Southside Blvd - Bldg 700 Butler/Baymeadows 24,459 2nd N/A N/A Colliers International Northeast Fl Southside Blvd - Bldg 700 Butler/Baymeadows 24,459 2nd N/A N/A Colliers International Northeast Fl 5 Belfort One Butler/Baymeadows 19,980 2nd N/A N/A CBRE 6 Lakeside Five - Flagler Center Butler/Baymeadows 17,486 1st Cypress Insurance N/A Avison Young 7 North Regency 1 Arlington 17,103 2nd Covent Bridge USA N/A Garnett Commercial Real Estate Inc Cypress Plaza Dr Butler/Baymeadows 17,100 1st City Refrigerated N/A Graham & Company, LLC 9 Prominence Building 300 Butler/Baymeadows 15,414 1st Humana Medical Plan N/A JLL 10 Baymeadows Way Business Center - Building 6 Butler/Baymeadows 15,000 2nd N/A N/A CBRE Kori Rd Mandarin 14,400 1st N/A N/A Paradigm Mandarin, Inc. 12 Bank of America Tower Downtown Northbank 12,555 1st Burr & Forman LLP N/A JLL 13 Quadrant at Southpoint II Southside 11,737 1st N/A N/A Cushman & Wake eld of Florida, Inc 14 Summit at Southpoint 2 Southside 11,574 1st N/A N/A Foundry Commercial 15 The Metropolitan O ce Downtown Northbank 10,332 2nd N/A N/A Michaelson - Metropolitan Lofts Herschel St Riverside 10,000 2nd Century Ambulance N/A RJP Partners LLC 17 Suntrust Tower Downtown Northbank 9,940 1st N/A N/A Cushman & Wake eld of Florida, Inc 18 Baymeadows Way Business Center - Building 6 Butler/Baymeadows 9,500 2nd N/A N/A CBRE 19 Summit at Southpoint 1 Southside 8,975 2nd N/A N/A Foundry Commercial Centurion Pky Southside 8,300 1st N/A N/A Meadows & Ohly, LLC Arlington Expy Southside 8,295 2nd N/A N/A H.S. Turner, Inc Water St* Downtown Northbank 7,078 1st Paperless Pay Corp Colliers International Northeast Fl N/A 23 The Hitchcock Building San Marco 7,000 2nd Suncoast N/A SunCoast Property Management Philips Hwy Butler/Baymeadows 7,000 2nd Little Stars N/A CBRE 25 Belfort Oaks Place Southside 6,895 1st Full Circle Women s Care Cross Regions Real Estate Colliers International Northeast Fl 26 Westland One Riverside 6,853 2nd N/A N/A Cushman & Wake eld of Florida, Inc 27 6 E Bay St Downtown Northbank 6,652 1st N/A N/A Colliers International Northeast Fl Southside Blvd - Bldg 100 Butler/Baymeadows 6,552 2nd N/A N/A Colliers International Northeast Fl 29 Butler Pointe Southside 6,525 1st N/A Strategic Sites Cli ord Commercial Corvus Commercial Realty 30 Ponte Vedra Lakes Professional Park - Overloo Beaches 6,405 1st N/A N/A Strategic Sites Cli ord Commercial 31 Midtown Centre Bldg Southside 6,194 2nd N/A N/A Midtown Centre O ce Park 32 Gateway Commons St Johns County 5,903 2nd N/A N/A Corvus Commercial Realty Gazebo Park Plz Mandarin 5,700 2nd N/A N/A Oxford Property Group S Ponce De Leon Blvd St Johns County 5,600 2nd N/A N/A R & B Management Group Inc 35 Gran Park at Avenues Building 3 Butler/Baymeadows 5,380 1st N/A N/A Avison Young Edgewood Ave S Riverside 5,322 2nd N/A N/A Dennis M Wolfson Atlantic Blvd Southside 5,300 1st Impact Learning Center Direct Deal Colliers International Northeast Fl 38 Liberty Center Butler/Baymeadows 5,208 1st Hakimian Holdings N/A Hakimian Holdings 39 Carlton Bldg 100 Southside 5,153 1st Investors Consulting Group, LLC Colliers International Northeast Fl Colliers International Northeast Fl 40 Butler Pointe Southside 5,100 1st McConnaughhay, Coonrod, Pope Weaver, Stern, & Thom Colliers International Northeast Fl Colliers International Northeast Fl * Renewal 2016 CoStar Group, Inc. The CoStar Office Report 13

19 Jacksonville Mid-Year 2016 Sales Activity The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 14.0% Cap Rate Price/SF $ % $370 Cap Rate Percentage 10.0% 8.0% 6.0% 4.0% $320 $270 $220 $170 Dollars/SF 2.0% $ % q q q $70 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 April March 2016 $180 Sales Volume Price/SF $140 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $160 $140 $120 $100 $80 $60 $40 $120 $100 $80 $60 $40 Price/SF < 50,000 SF ,461 $102,690,126 $ % 50K-249K SF 250K-499K SF 13 1,342,863 $141,349,427 $ % $ - - $20 $20 $ q q q q $0 >500K SF $ - - 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 $300 Jacksonville (Florida) US 14.0% Jacksonville (Florida) US Dollars per SF $250 $200 $150 Cap Rate Percentage 12.0% 10.0% 8.0% 6.0% 4.0% $ % $50 0.0% q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 14 The CoStar Office Report 2016 CoStar Group, Inc.

20 Mid-Year 2016 Jacksonville 2016 CoStar Group, Inc. The CoStar Office Report 15 Sales Activity

21 Jacksonville Mid-Year 2016 Deliveries, Absorption & A r l i n g t o n M a r k e t Market Highlights Class A, B & C (0.010) (0.020) Delivered SF Absorption SF q q q q q q q q q q q q q q 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Percent Vacant Vacant Space Quoted Rental Rates 0.17 Direct SF Sublet SF $ $ Dollars/SF/Year $14.80 $14.70 $14.60 $ $ $14.30 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 205 1,566, , % 11, $ q 205 1,566, , % 2, $ q 205 1,566, , % (11,761) $ q 205 1,566, , % 19, $ q 205 1,566, , % (5,348) $ q 205 1,566, , % (8,578) $ q 205 1,566, , % 25, $ q 205 1,566, , % 16, $ q 205 1,566, , % 12, $ q 205 1,566, , % 2, $ q 205 1,566, , % (830) $ q 205 1,566, , % $ q 205 1,566, , % 35, $ q 205 1,566, , % 3, $ q 205 1,566, , % (17,981) 1 4, $ q 204 1,562, , % (28,537) ,443 $ The CoStar Office Report 2016 CoStar Group, Inc.

22 Deliveries, Absorption & B a k e r C o u n t y M a r k e t Market Highlights Class A, B & C Mid-Year 2016 Jacksonville Delivered SF Absorption SF 30.0% % (0.005) (0.010) 20.0% 15.0% 10.0% Percent Vacant (0.015) 5.0% (0.020) q q q q q q q q q q q q q q 0.0% Vacant Space Quoted Rental Rates 0.03 Direct SF Sublet SF $ Dollars/SF/Year $14.00 $12.00 $10.00 $8.00 $ $ $ $0.00 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q ,612 24, % $ q ,612 24, % 1, $ q ,612 26, % $ q ,612 26, % (800) $ q ,612 25, % $ q ,612 25, % 2, $ q ,612 27, % (2,095) $ q ,612 25, % (16,721) $ q ,612 8, % (1,200) $ q ,612 7, % 5, $ q ,612 12, % $ q ,612 13, % (200) $ q ,612 13, % (3,988) $ q ,612 9, % (7,348) $ q ,612 1, % $ q ,612 1, % $ CoStar Group, Inc. The CoStar Office Report 17

23 Jacksonville Mid-Year 2016 Deliveries, Absorption & B e a c h e s M a r k e t Market Highlights Class A, B & C Delivered SF Absorption SF 8.0% (0.010) (0.020) q q q q q q q q q q q q q q 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Percent Vacant Vacant Space Quoted Rental Rates 0.20 Direct SF Sublet SF $ $ Dollars/SF/Year $24.40 $24.20 $ $ $23.60 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 363 3,014, , % 5, , ,301 $ q 361 3,002, , % (8,642) ,853 $ q 361 3,002, , % 6, , ,303 $ q 358 2,981, , % 32, ,270 $ q 360 2,998, , % (4,763) ,270 $ q 361 3,005, , % (10,517) ,270 $ q 361 3,005, , % 10, $ q 361 3,005, , % 13, $ q 361 3,005, , % 7, $ q 361 3,005, , % (11,286) $ q 361 3,005, , % 35, , $ q 360 3,002, , % (3,394) 1 6, ,730 $ q 359 2,996, , % 16, ,562 $ q 359 2,996, , % 17, ,562 $ q 359 2,996, , % 10, ,832 $ q 359 2,996, , % (6,123) $ The CoStar Office Report 2016 CoStar Group, Inc.