CoStar Office Statistics. F i r s t Q u a r t e r Colorado Springs Office Market

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1 CoStar Office Statistics F i r s t Q u a r t e r

2 First Quarter 2017 Colorado Springs 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 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 CBD Market Greater CBD Market North Market Northeast Market Northwest Market Southeast Market Southwest Market Teller County Market 2017 CoStar Group, Inc. CoStar Office Statistics A

3 Colorado Springs First Quarter 2017 Methodology The CoStar Office Statistics, 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 global database includes approximately 95.6 billion square feet of coverage in 4.4 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 2017 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 CoStar Office Statistics 2017 CoStar Group, Inc.

4 First Quarter 2017 Colorado Springs 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 2017 CoStar Group, Inc. CoStar Office Statistics C

5 Colorado Springs First Quarter 2017 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 CoStar Office Statistics 2017 CoStar Group, Inc.

6 Overview First Quarter 2017 Colorado Springs Colorado Springs s Falls to 11.6% Net Absorption Positive 84,684 SF in the Quarter The Colorado Springs Office market ended the first quarter 2017 with a vacancy rate of 11.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 84,684 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 24,948 square feet. Rental rates ended the first quarter at $15.87, a decrease over the previous quarter. There was 112,440 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Colorado Springs office market was positive 84,684 square feet in the first quarter That compares to positive 112,315 square feet in the fourth quarter 2016, negative (70,560) square feet in the third quarter 2016, and negative (18,559) square feet in the second quarter The Class-A office market recorded net absorption of positive 9,737 square feet in the first quarter 2017, compared to negative (6,647) square feet in the fourth quarter 2016, positive 49,916 in the third quarter 2016, and positive 28,317 in the second quarter The Class-B office market recorded net absorption of positive 61,299 square feet in the first quarter 2017, compared to positive 139,369 square feet in the fourth quarter 2016, negative (100,841) in the third quarter 2016, and negative (133,230) in the second quarter The Class-C office market recorded net absorption of positive 13,648 square feet in the first quarter 2017 compared to negative (20,407) square feet in the fourth quarter 2016, negative (19,635) in the third quarter 2016, and positive 86,354 in the second quarter Net absorption for Colorado Springs s central business district was positive 973 square feet in the first quarter That compares to positive 25,017 square feet in the fourth quarter 2016, positive 4,510 in the third quarter 2016, and negative (11,807) in the second quarter Net absorption for the suburban markets was positive 83,711 square feet in the first quarter That compares to positive 87,298 square feet in fourth quarter 2016, negative (75,070) in the third quarter 2016, and negative (6,752) in the second quarter The office vacancy rate in the Colorado Springs market area decreased to 11.6% at the end of the first quarter The vacancy rate was 11.9% at the end of the fourth quarter 2016, 12.2% at the end of the third quarter 2016, and 12.0% at the end of the second quarter Class-A projects reported a vacancy rate of 8.5% at the end of the first quarter 2017, 8.7% at the end of the fourth quarter 2016, 8.6% at the end of the third quarter 2016, and 9.5% at the end of the second quarter Class-B projects reported a vacancy rate of 13.7% at the end of the first quarter 2017, 14.1% at the end of the fourth quarter 2016, 14.7% at the end of the third quarter 2016, and 14.1% at the end of the second quarter Class-C projects reported a vacancy rate of 6.4% at the end of the first quarter 2017, 6.7% at the end of fourth quarter 2016, 6.2% at the end of the third quarter 2016, and 5.8% at the end of the second quarter The overall vacancy rate in Colorado Springs s central business district at the end of the first quarter 2017 decreased Rates by Class A B C Total Market 25% 20% Rate 15% 10% 5% 0% q q q q q q q q q q 20171q 2017 CoStar Group, Inc. CoStar Office Statistics 1

7 Colorado Springs First Quarter 2017 Overview to 8.5%. The vacancy rate was 8.6% at the end of the fourth quarter 2016, 9.0% at the end of the third quarter 2016, and 9.1% at the end of the second quarter The vacancy rate in the suburban markets decreased to 12.4% in the first quarter The vacancy rate was 12.8% at the end of the fourth quarter 2016, 13.1% at the end of the third quarter 2016, and 12.8% at the end of the second quarter Largest Lease Signings The largest lease signings occurring in 2017 included: the 33,190-square-foot lease signed by Integral Systems at 980 Technology Ct in the Southeast market; the 20,293-square-foot deal signed by R T Logic at 9960 Federal Dr in the Northeast market; and the 20,000-square-foot lease signed by Comcor Inc at 1355 Kelly Johnson Blvd in the Northeast market. Sublease The amount of vacant sublease space in the Colorado Springs market increased to 24,948 square feet by the end of the first quarter 2017, from 10,319 square feet at the end of the fourth quarter There was 6,734 square feet vacant at the end of the third quarter 2016 and 1,589 square feet at the end of the second quarter Colorado Springs s Class-A projects reported vacant sublease space of 6,756 square feet at the end of first quarter 2017, down from the 7,756 square feet reported at the end of the fourth quarter There were 5,145 square feet of sublease space vacant at the end of the third quarter 2016, and 0 square feet at the end of the second quarter Class-B projects reported vacant sublease space of 18,192 square feet at the end of the first quarter 2017, up from the 1,063 square feet reported at the end of the fourth quarter At the end of the third quarter 2016 there were 1,589 square feet, and at the end of the second quarter 2016 there were 1,589 square feet vacant. U.S. Comparison Past 7 Quarters Rate 14.0% 12.0% 1% 8.0% 6.0% 4.0% 2.0% % Colorado Springs United States q Class-C projects reported decreased vacant sublease space from the fourth quarter 2016 to the first quarter Sublease vacancy went from 1,500 square feet to 0 square feet during that time. There was 0 square feet at the end of the third and second quarter Sublease vacancy in Colorado Springs s central business district stood at 10,645 square feet at the end of the first quarter It was 2,645 square feet at the end of the fourth quarter 2016, 4,234 square feet at the end of the third quarter 2016, and 1,589 square feet at the end of the second quarter Sublease vacancy in the suburban markets ended the first quarter 2017 at 14,303 square feet. At the end of the fourth quarter 2016 sublease vacancy was 7,674 square feet, was 2,500 square feet at the end of the third quarter 2016, and was 0 square feet at the end of the second quarter Rental Rates The average quoted asking rental rate for available office space, all classes, was $15.87 per square foot per year at the end of the first quarter 2017 in the Colorado Springs market area. This represented a 4.6% decrease in quoted rental rates from the end of the fourth quarter 2016, when rents were reported at $16.64 per square foot. The average quoted rate within the Class-A sector was $20.80 at the end of the first quarter 2017, while Class-B rates stood at $15.12, and Class-C rates at $ At the end of the fourth quarter 2016, Class-A rates were $22.32 per square foot, Class-B rates were $15.84, and Class-C rates were $ The average quoted asking rental rate in Colorado Springs s CBD was $18.00 at the end of the first quarter 2017, and $15.56 in the suburban markets. In the fourth quarter 2016, quoted rates were $18.86 in the CBD and $16.34 in the suburbs. Deliveries and Construction During the first quarter 2017, no new space was completed in the Colorado Springs market area. This compares to two buildings totaling 20,000 square feet that were completed in the fourth quarter 2016, one building totaling 8,000 square feet completed in the third quarter 2016, and nothing completed in the second quarter There were 112,440 square feet of office space under construction at the end of the first quarter The largest projects underway at the end of first quarter 2017 were 1 Spring Water Point, a 109,800-square-foot building with 0% of its space pre-leased, and 1016 Middle Creek Pky, a 2,640-square-foot facility that is 100% pre-leased. Inventory Total office inventory in the Colorado Springs market area amounted to 28,740,080 square feet in 1,726 buildings as of the end of the first quarter The Class-A office sector consisted of 5,427,406 square feet in 48 projects. There were 2 CoStar Office Statistics 2017 CoStar Group, Inc.

8 Overview First Quarter 2017 Colorado Springs 943 Class-B buildings totaling 18,962,034 square feet, and the Class-C sector consisted of 4,350,640 square feet in 735 buildings. Within the Office market there were 50 owner-occupied buildings accounting for 2,195,043 square feet of office space. Sales Activity Tallying office building sales of 15,000 square feet or larger, Colorado Springs office sales figures fell during the fourth quarter 2016 in terms of dollar volume compared to the third quarter of In the fourth quarter, four office transactions closed with a total volume of $27,850,000. The four buildings totaled 198,544 square feet and the average price per square foot equated to $ per square foot. That compares to eight transactions totaling $49,700,000 in the third quarter The total square footage in the third quarter was 1,020,161 square feet for an average price per square foot of $ Total office building sales activity in 2016 was up compared to In the twelve months of 2016, the market saw 21 office sales transactions with a total volume of $106,370,600. The price per square foot averaged $ In the same twelve months of 2015, the market posted 19 transactions with a total volume of $91,435,448. The price per square foot averaged $ Cap rates have been higher in 2016, averaging 7.58% compared to the same period in 2015 when they averaged 6.92%. One of the largest transactions that occurred within the last four quarters in the Colorado Springs market is the sale of the Garden of the Gods Verizon Campus portfolio in Colorado Springs. This 799,792-square-foot office park consisting of 6 buildings sold for $31,000,000, or $38.76 per square foot. The property sold on 8/10/2016 with Verizon committing to lease back only 54% of the campus. Absorption & Deliveries Past 7 Quarters Net Absorption Deliveries (2) () (7) () q Reports compiled by: Jeff Miles, Research Manager CoStar Group, Inc. CoStar Office Statistics 3

9 Colorado Springs First Quarter 2017 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 CBD* Greater CBD** North Northeast Northwest Southeast Southwest Teller County * Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. 4 CoStar Office Statistics 2017 CoStar Group, Inc.

10 Inventory & development First Quarter 2017 Colorado Springs Historical Deliveries Deliveries Average Delivered SF 2.0 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 Northeast 2 112,440 2, % 27,080 56,220 Teller County % 4,637 0 Greater CBD % 7,915 0 CBD % 30,806 0 North % 13,861 0 Northwest % 20,908 0 Southeast % 15,636 0 Southwest % 8,745 0 Totals 2 112,440 2, % 16,651 56,220 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2013 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver Leased Un-Leased 120 Preleased Un-Leased 100 Millions of SF Thousands of SF T q 2017 CoStar Group, Inc. CoStar Office Statistics 5

11 Colorado Springs First Quarter 2017 Inventory & development Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction Construction Starts Deliveries 2 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 % $ ,000 SF - 99,999 SF % $ ,000 SF - 249,999 SF % $ ,000 SF - 499,999 SF % $0 0 0 >= 500,000 SF % $0 0 0 Recent Development by Tenancy Comparison Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA No 2017 Deliveries Currently Under Construction By Class By Space Type 2% 15% 22% 19% 98% 66% 78% Multi Single Class A Class B Class C Multi Single 6 CoStar Office Statistics 2017 CoStar Group, Inc.

12 Inventory & development First Quarter 2017 Colorado Springs 2017 CoStar Group, Inc. CoStar Office Statistics 7

13 Colorado Springs First Quarter 2017 Figures at a Glance Class A Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 6 861,394 55,167 57, % (4,450) 0 0 $26.17 Greater CBD 1 71, % 5, $30.84 North 4 252,890 34,101 34, % 1, $25.67 Northeast 20 2,395, , , % (3,630) 0 0 $19.73 Northwest 8 841,324 83,683 83, % 25, $20.62 Southeast 9 1,004, , , % (14,660) 0 0 $18.62 Southwest % $0 Teller County % $0 Totals 48 5,427, , , % 9, $20.80 Class B Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 60 2,190, , , % (16,546) 0 0 $18.51 Greater CBD 151 1,831, , , % 15, $16.03 North 117 1,879, , , % 13, $12.54 Northeast 229 5,321, , , % 17, ,440 $16.58 Northwest 125 3,565, , , % (2,003) 0 0 $15.29 Southeast 149 2,987, , , % 17, $14.19 Southwest ,985 33,238 33, % 16, $12.82 Teller County ,146 15,726 15, % 1, $17.60 Totals ,962,034 2,584,844 2,603, % 61, ,440 $15.12 Class C Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,276 14,735 14, % 2, $16.57 Greater CBD ,712 88,798 88, % (1,391) 0 0 $11.90 North ,722 21,728 21, % (1,157) 0 0 $11.41 Northeast ,587 33,464 33, % 4, $13.25 Northwest ,741 16,866 16, % 6, $12.49 Southeast 168 1,105,272 67,901 67, % (1,663) 0 0 $9.82 Southwest ,784 27,756 27, % 4, $12.81 Teller County ,546 6,000 6, % $0 Totals 735 4,350, , , % 13, $11.64 Total Office Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 112 3,450, , , % (18,796) 0 0 $19.67 Greater CBD 330 2,611, , , % 19, $15.42 North 187 2,591, , , % 13, $14.42 Northeast 310 8,394, , , % 17, ,440 $17.27 Northwest 237 4,955, , , % 29, $15.90 Southeast 326 5,097, , , % $14.75 Southwest 146 1,276,769 60,994 60, % 20, $12.82 Teller County ,692 21,726 21, % 2, $17.60 Totals 1,726 28,740,080 3,316,531 3,341, % 84, ,440 $ CoStar Office Statistics 2017 CoStar Group, Inc.

14 Figures at a Glance First Quarter 2017 Colorado Springs Class A Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 7 932,394 55,167 57, % 1, $26.57 Suburban 41 4,495, , , % 8, $20.28 Totals 48 5,427, , , % 9, $20.80 Class B Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 211 4,021, , , % (1,376) 0 0 $17.56 Suburban ,940,300 2,235,943 2,246, % 62, ,440 $14.76 Totals ,962,034 2,584,844 2,603, % 61, ,440 $15.12 Class C Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 224 1,107, , , % $13.19 Suburban 511 3,242, , , % 12, $11.08 Totals 735 4,350, , , % 13, $11.64 Class A & B Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 218 4,954, , , % $18.70 Suburban ,435,312 2,635,215 2,649, % 70, ,440 $15.81 Totals ,389,440 3,039,283 3,064, % 71, ,440 $16.15 Total Office Market Statistics First Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 442 6,062, , , % $18.00 Suburban 1,284 22,677,964 2,808,930 2,823, % 83, ,440 $15.56 Totals 1,726 28,740,080 3,316,531 3,341, % 84, ,440 $ CoStar Group, Inc. CoStar Office Statistics 9

15 Colorado Springs First Quarter 2017 Figures at a Glance 10 CoStar Office Statistics 2017 CoStar Group, Inc.

16 Leasing Activity First Quarter 2017 Colorado Springs Historical Rental Rates Based on Full-Service Equivalent Rental Rates A B C Total Market $25.00 $20 $15.00 $10 $5.00 $ 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 Colorado Springs United States Colorado Springs United States 1% 5% 8% 13% 14% 47% 99% 95% 78% 40% 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 Colorado Springs United States $ $20 $15.00 $10 5 $5.00 $ q q q q q * Includes Under Construction Spaces 2017 CoStar Group, Inc. CoStar Office Statistics 11

17 Colorado Springs First Quarter 2017 Leasing Activity Select Top O ce Leases Based on Leased Square Footage For Deals Signed in 2017 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company Technology Ct* Southeast 33,190 1st Integral Systems N/A Colorado Springs Commercial - Cushm Mark Dabling Blvd Northwest 25,927 1st N/A N/A Transwestern Federal Dr* Northeast 20,293 1st R T Logic N/A Colorado Springs Commercial - Cushm Kelly Johnson Blvd* Northeast 20,000 1st Comcor Inc N/A N/A North Gate Blvd Northeast 7,500 1st N/A N/A Cameron Butcher Company North Gate Blvd Northeast 7,500 1st N/A N/A Cameron Butcher Company N Academy Blvd North 6,164 1st N/A N/A MC Commercial Real Estate Tech Center Dr Northwest 5,905 1st Interior Tools RE/MAX Properties, Inc Newmark Grubb Knight Frank Montebello Dr* Northeast 5,650 1st Mercy s Gate N/A RE/MAX Properties, Inc S Tejon St Greater CBD 5,140 1st Honey Salon & Spa, LLC N/A Olive Real Estate Group E Fillmore St Greater CBD 4,875 1st Surveying Co N/A Peak Commercial Properties N Nevada Ave Greater CBD 4,600 1st N/A N/A Palmer McAllister Delmonico Dr Northwest 4,485 1st MSEC N/A CBRE Fountain Mesa Rd* Southeast 4,200 1st Fountain Dental Center N/A N/A S Tejon St CBD 4,131 1st N/A N/A Newmark Grubb Knight Frank S Tejon St Greater CBD 4,100 1st N/A N/A HB&A S Cascade Ave CBD 3,736 1st N/A N/A Colorado Springs Commercial - Cushm Mark Dabling Blvd* Northwest 3,500 1st Firstsource Solutions Ltd. N/A Transwestern International Cir* Southeast 3,500 1st Dermatology Clinic PC N/A Cascade Commercial Group Mark Dabling Blvd North 3,179 1st N/A N/A Ecovest Properties, LLC Kelly Johnson Blvd Northeast 3,091 1st N/A N/A NAI Highland Commercial Group Kelly Johnson Blvd Northeast 2,980 1st Cons and Solutions N/A RE/MAX Properties, Inc Printers Pky Southeast 2,967 1st N/A N/A Westward Properties McLaughlin Rd Northeast 2,912 1st N/A N/A State Bank Kelly Johnson Blvd Northeast 2,850 1st Air Academy School District N/A RE/MAX Properties, Inc Lehman Dr Northeast 2,814 1st N/A N/A Mountain Management and Real Estate Corporate Dr Northwest 2,786 1st Optimus Law Center N/A Ho & Leigh, Inc Kelly Johnson Blvd Northeast 2,500 1st N/A N/A Ho & Leigh, Inc N Academy Blvd North 2,500 1st N/A N/A MC Commercial Real Estate Telstar Dr Northeast 2,429 1st UIC Nappairit, LLC N/A Colorado Springs Commercial - Cushm Elkton Dr Northwest 2,422 1st N/A N/A Newmark Grubb Knight Frank Quail Lake Loop Southwest 2,359 1st N/A N/A RE/MAX Properties, Inc Kelly Johnson Blvd Northeast 2,283 1st N/A N/A NAI Highland Commercial Group E Vermijo Ave CBD 2,200 1st N/A N/A Ho & Leigh, Inc Kelly Johnson Blvd Northeast 2,173 1st National Reserve Insurance N/A RE/MAX Properties, Inc N Union Blvd Northeast 2,002 1st N/A N/A Westward Properties N Union Blvd Northeast 1,459 1st Farmers Insurance N/A Westward Properties N Union Blvd Northeast 1,459 1st Wiebe Farmers Insurance Agency Direct Deal John Propp Commercial Group Mark Dabling Blvd Northwest 1,431 1st Transwestern N/A Transwestern Lehman Dr Northeast 1,400 1st PCI Systems N/A Quantum Commercial Group * Renewal 12 CoStar Office Statistics 2017 CoStar Group, Inc.

18 Sales Activity First Quarter 2017 Colorado Springs The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 13.0% Cap Rate Price/SF $230 Cap Rate Percentage 11.0% 9.0% 7.0% 5.0% 3.0% $210 $190 $170 $150 $130 $110 $90 $70 $50 Dollars/SF 1.0% q q q $30 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 Jan Dec $250 Sales Volume Price/SF $160 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $200 $150 $100 $50 $140 $120 $100 $80 $60 $40 Price/SF < 50,000 SF ,648 $61,325,064 $ % 50K-249K SF 250K-499K SF 4 367,303 $34,560,600 $ % $ - - $20 $0 $0 >500K SF 1 799,792 $31,000,000 $ q q q q Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Office Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Office Building Sales of 15,000 SF and Larger $330 Colorado Springs US 14.0% Colorado Springs US $ % Dollars per SF $230 $180 $130 Cap Rate Percentage 1% 8.0% 6.0% $80 4.0% $30 2.0% q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 2017 CoStar Group, Inc. CoStar Office Statistics 13

19 14 CoStar Office Statistics 2017 CoStar Group, Inc. Colorado Springs First Quarter 2017 Sales Activity

20 Deliveries, Absorption & C B D M a r k e t Market Highlights Class A, B & C First Quarter 2017 Colorado Springs 40 Delivered SF Absorption SF 12.0% 20 1% 00 (20) (40) 8.0% 6.0% 4.0% Percent Vacant (60) 2.0% (80) q q q q q q q q q q q q q % Vacant Space Quoted Rental Rates 0.30 Direct SF Sublet SF $ $ Dollars/SF/Year $21.50 $21.00 $20.50 $ $ $ $18.50 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 112 3,450, , % (18,796) $ q 112 3,450, , % 29, $ q 112 3,450, , % (19,366) $ q 112 3,450, , % 27, $ q 112 3,450, , % 5, $ q 112 3,450, , % 15, $ q 112 3,450, , % (9,297) $ q 112 3,450, , % 3, $ q 112 3,450, , % 31, $ q 112 3,450, , % (15,436) $ q 112 3,450, , % (10,096) $ q 112 3,450, , % (69,670) $ q 112 3,450, , % (22,074) $ q 113 3,461, , % 12, $ q 113 3,461, , % 14, $ q 113 3,461, , % 1, $ CoStar Group, Inc. CoStar Office Statistics 15

21 Colorado Springs First Quarter 2017 Deliveries, Absorption & G r e a t e r C B D M a r k e t Market Highlights Class A, B & C (10) (20) (30) (40) (50) Delivered SF Absorption SF q q q q q q q q q q q q q 14.0% 12.0% 1% 8.0% 6.0% 4.0% 2.0% % Percent Vacant Vacant Space Quoted Rental Rates 0.29 Direct SF Sublet SF $16.60 $ $ Dollars/SF/Year $16.00 $15.80 $15.60 $15.40 $ $ $14.80 $ $14.40 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 330 2,611, , % 19, $ q 330 2,611, , % (4,633) $ q 330 2,611, ,545 1% 23, $ q 330 2,611, , % (39,679) $ q 330 2,611, , % 12, $ q 330 2,611, , % (8,131) $ q 330 2,611, , % 8, $ q 330 2,611, , % (2,488) $ q 330 2,611, , % 18, $ q 330 2,611, , % 7, $ q 330 2,611, , % 16, , $ q 329 2,596, , % 28, ,165 $ q 329 2,596, , % (18,877) ,165 $ q 329 2,596, , % (48,757) $ q 329 2,596, , % 14, , $ q 328 2,554, , % 40, ,600 $ CoStar Office Statistics 2017 CoStar Group, Inc.

22 Deliveries, Absorption & N o r t h M a r k e t Market Highlights Class A, B & C First Quarter 2017 Colorado Springs (20) (40) (60) (80) (00) (20) Delivered SF Absorption SF q q q q q q q q q q q q q 18.0% 16.0% 14.0% 12.0% 1% 8.0% 6.0% 4.0% 2.0% % Percent Vacant Vacant Space Quoted Rental Rates Direct SF Sublet SF Dollars/SF/Year $17.00 $16.50 $16.00 $15.50 $15.00 $14.50 $ $ $ $12.50 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 187 2,591, , % 13, $ q 187 2,591, , % 22, $ q 187 2,591, , % (96,026) $ q 187 2,591, , % 6, $ q 187 2,591, , % 6, $ q 188 2,628, , % (24,151) $ q 188 2,628, , % (6,768) $ q 188 2,628, , % 29, $ q 188 2,628, , % 38, $ q 188 2,628, , % (32,174) $ q 188 2,628, , % (28,762) $ q 188 2,628, , % $ q 188 2,628, , % 44, $ q 189 2,630, , % 10, $ q 189 2,630, , % (3,299) $ q 189 2,630, , % 42, $ CoStar Group, Inc. CoStar Office Statistics 17

23 Colorado Springs First Quarter 2017 Deliveries, Absorption & N o r t h e a s t M a r k e t Market Highlights Class A, B & C 00 Delivered SF Absorption SF 14.0% % % 8.0% 6.0% 4.0% Percent Vacant (20) 2.0% (40) q q q q q q q q q q q q q % Vacant Space Quoted Rental Rates Direct SF Sublet SF Dollars/SF/Year $17.40 $17.20 $17.00 $16.80 $16.60 $16.40 $16.20 $ $ $ $15.40 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 310 8,394, , % 17, ,440 $ q 310 8,394, , % 12, , ,440 $ q 308 8,374, , % 39, ,440 $ q 308 8,374, , % 53, ,440 $ q 308 8,374, , % 12, ,800 $ q 308 8,374, , % 33, , ,800 $ q 307 8,362, , % (4,389) ,600 $ q 307 8,362, , % 30, ,600 $ q 307 8,362, , % 74, ,600 $ q 307 8,362, , % (7,587) ,600 $ q 307 8,362, , % 80, , $ q 306 8,354,593 1,064, % 25, ,755 $ q 306 8,354,593 1,090, % (33,862) 2 23, ,755 $ q 304 8,331,491 1,033, % (30,831) ,102 $ q 304 8,331,491 1,002, % (34,024) ,102 $ q 304 8,331, , % 235, ,102 $ CoStar Office Statistics 2017 CoStar Group, Inc.

24 Deliveries, Absorption & N o r t h w e s t M a r k e t Market Highlights Class A, B & C First Quarter 2017 Colorado Springs 00 Delivered SF Absorption SF 20.5% (20) (40) 2% 19.5% 19.0% 18.5% 18.0% 17.5% Percent Vacant (60) q q q q q q q q q q q q q 17.0% Vacant Space Quoted Rental Rates 0.94 Direct SF Sublet SF $ Dollars/SF/Year $18.00 $17.50 $17.00 $16.50 $ $ $ $14.50 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 237 4,955, , % 29, $ q 237 4,955, , % (2,198) $ q 237 4,955, , % (226) 1 8, $ q 236 4,947, , % (22,607) ,000 $ q 236 4,947, , % 78, ,000 $ q 236 4,947, , % (645) ,000 $ q 236 4,947, , % 9, $ q 236 4,947, , % 12, $ q 236 4,947, ,744 2% (53,278) $ q 236 4,947, , % (11,436) $ q 236 4,947, , % (21,233) $ q 236 4,947, , % (8,802) $ q 236 4,947, , % (22,161) $ q 236 4,947, , % 46, $ q 236 4,947, , % (30,673) $ q 236 4,947, , % (33,783) $ CoStar Group, Inc. CoStar Office Statistics 19