Gaining Traction Gradually in 2018

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1 Research & Forecast Report RENO OFFICE Q Gaining Traction Gradually in 2018 >> Overall vacancy increased slightly to 12.3% >> Negative net absorption of 13,792 square feet >> Rental rates remained constant at $1.67 on average The office market in Northern Nevada remains active, but cannot seem to pull ahead. For each deal that is completed, another space is left vacant, resulting in somewhat stagnant statistics quarter over quarter. Activity remains strong, with high levels of inquiries and tours, but the consummation of deals does not yet reflect this. Another potential reason for this stagnation is that some tenants and landlords appear to be in a correction pattern. An example of this is the US Attorney s office, who will be vacating 100 West Liberty to move into a government-owned building on Booth Street. Despite the tenant remaining in the market, government-owned properties are not tracked, resulting in what appears as negative net absorption. Another example is Holland & Hart s sublease at 5441 Kietzke Lane. While they have their entire 30,000 square foot office listed for sublease, they will remain or relocate in up to 15,000 square feet but statistics do not readily capture these antics; resulting in no net changes. Historical Vacancy Rates and Asking Lease Rates Market Indicators Unemployment Rate Nevada 10-Year Nominal Interest Rate % National Consumer Confidence Market Indicators Relative to prior period Q Q2 2018* Previous Quarter Current Quarter Vacancy Rate 12.1% 12.3% Asking Rent (PSF, FS*) $1.67 $1.67 (17,608) (13,792) Previous Quarter Current Quarter Class A $1.87 $1.88 Class B $1.73 $1.69 Class C $1.44 $1.44 Vacancy Net Absorption Completions Rental Rate *Projected Summary Statistics Q Reno Market Net Absorption (SF) Overall Asking Rents Per Square Foot (FS*) Full service rental rates have remained steady from Q at $1.67 per square foot as the vacancy rate made a slight increase to 12.3 percent. *Full Service (FS)

2 The office market experienced negative 13,792 square feet of net absorption. The largest amount of negative absorption was in Class A office, while Class B and C had positive absorption. The direct vacancy rate for all classes increased from 11.1 percent at the end of 2017 to 11.4 percent this quarter. Average asking rental rates did not change and held steady at $1.67 per square foot per month full service; resulting in landlords feeing bullish on the market, their perspective supported by the high levels of inquiries and touring. The strongest submarket this quarter was Downtown with 15,215 square feet of positive absorption (Note: The US Attorneys space will impact the statistics next quarter, when they vacate the space). With the submarket s positive absorption, the vacancy rate remains a comfortable 12.0 percent. Downtown also has the highest average asking rental rates at $1.87 per square foot per month full service. It is also worth noting that Class A rents currently average $2.03 per square foot per month full service. The rents for B and C Class properties are posted at $1.88 and $1.70, respectively, which is higher than the overall asking rents. South Meadows also posted positive net absorption with 31,880 square feet, due primarily to the State of Nevada Medical Examiners Board leasing 15,672 square feet in the former Laxalt & Nomura office building at 9600 Gateway Drive. Laxalt & Nomura relocated to 9790 Gateway Drive occupying nearly 6,000 square feet, adding to the positive absorption. Vacancy in this market sits at 8.6 percent, which is extremely tight. Average asking rental rates are $1.80 per square foot, meaning South Meadows has some of the best deals for the nicest buildings that can be found in the market. The Meadowood submarket has been the shining star of the office market in the past, but in recent months it has been hit with some large vacancies, increasing the vacancy to 10.0 percent. Ironically, this submarket s vacancy had been so low, developer s contemplated and have started new construction. While there are two active construction projects, a 40,000 square foot speculative office building at the roundabout on Kietzke Lane and a 20,000 square foot office building with leased space constructed by Charles Schwab, both are estimated to be completed before year-end. It is uncertain if we will see new construction on the horizon until some of the big vacancies are back-filled. This quarter, Meadowood ended with 43,316 square feet of negative net absorption. Contributing to the negative absorption was Microsoft returning 20,000 square feet, Wells Fargo returning 14,000 square feet, as well as Holland & Hart listing the 30,000 square foot sublease previously mentioned. The Central/Airport submarket remained relatively static due to small leases and vacancies throughout the quarter. However, 645 E Plumb is one of the few large upcoming vacancies with large blocks of contiguous space available due to AT&T vacating 82,000 square feet. Industry sentiment is that the lack of these big-box spaces is not allowing the market to attract out-of-state companies to relocate here. This space could seriously impact the Reno statistics if not back-filled prior to AT&T s lease expiration in December, however, it also provides a unique opportunity for large office users that may not have alternative options in spaces 20,000 square feet and up. Historical Net Absorption vs. Completions Net Absorption New Completions Leasing Rates by Submarket Total Vacancy vs Direct and Sublease Vacancy Direct Vacancy Sublease Vacancy Total Vacancy 2 Reno Research & Forecast Report Q Office Colliers International

3 Sales Several notable sales transactions occurred in the Reno office market to kick off In January, a 79,552 square foot Class A building at Professional Circle sold for $25,300,000 to Pinecone Holding LLC. This property was 100 percent leased to Employers Insurance and sold for a 5.97 percent cap rate. Also in January, 328 S Wells Avenue, a 39,816 square foot building, sold to S3-300 S Wells, which is S3 Development headed by Blake Smith. The property sold for $4,400,000 and is undergoing major renovations to the exterior, helping with the current revitalization that is happening in Midtown. RCO Investments purchased 5590 Kietzke Lane, a 14,670 square foot professional building set up for executive suites, for $5,500,000 in February. Abruzzo Prototype LLC purchased the 15,672 square foot building at 9222 Prototype Drive, home to Lumos & Associates for $3,400,000. Construction Construction continues in the Meadowood submarket, including the office development at 5520 Kietzke Lane by McKenzie Properties. While construction has been slow, the estimated completion date is fall Just next door to the south, the Urology of NV building is coming along and is slated to be finished in July of this year. Just up the street to the north, Charles Schwab plans to complete their building in August. The market anticipates other office buildings breaking ground on the south commercial parcel of Rancharrah at the roundabout on Kietzke Lane and Del Monte, which is rumored to be trading hands. Other construction is progressing to the east where Tanamera is marketing a medical office park. There is currently one building, a build-to-suit, for an oncology group that is almost completed. It is expected that other medical users will break ground soon, according to the developer. There are also rumors that a hospital group is in contract on 22.0 acres off Longley Lane for a medical campus. This could be the new area for medical users who choose to be located near the center of town. Along with the construction activity in Meadowood, the Central/Airport submarket anticipates new office construction starting the end of JMA Ventures plans to build a four-story, 65,000 square foot Class A office building adjacent to Hyatt Place Reno-Tahoe Airport, in addition to a hotel. Significant Sale Activity Professional Circle 79,552 SF - $25,300,000 $ PSF Sale Date: 1/12/18 Sold To: Pinecone Holding Type: Office 5590 Kietzke Lane 14,670 SF - $5,500,000 $ PSF Sale Date: 2/28/18 Sold To: RCO Investments Type: Professional 328 South Wells Avenue 39,816 SF - $4,400,000 $ PSF Sale Date: 1/23/18 Sold To: S3-300 South Wells Type: Office 3 Reno Research & Forecast Report Q Office Colliers International

4 395 Significant Sale Activity DOWNTOWN SPARKS 328 South Wells Avenue Reno NV ,816 SF - $4,400,000 $ PSF 5590 Kietzke Lane Reno 80 NV ,670 SF - $5,500,000 $ PSF WEST RENO CENTRAL/ AIRPORT 9222 Prototype Drive Reno NV ,672 SF - $3,400,000 $ PSF MEADOWOOD 9565 Prototype Drive Reno NV ,095 SF - $2,836,000 $ PSF SOUTH RENO Professional Circle Reno NV ,552 SF - $25,300,000 $ PSF 395 Significant Lease Activity PROPERTY ADDRESS SIZE TENANT TYPE 5340 Kietzke Lane, Reno 40,225 Wells Fargo Renewal 6995 Sierra Center Parkway, Reno 19,941 Stantec Consulting Expansion & Renewal 9600 Gateway Diver, Reno 15,672 Nevada State Medical Examiners Board New 241 Ridge Street, Suite 400, Reno 9,294 Manhard Consulting New Professional Circle, Suite 202, Reno 7,562 Evegreen Bank Expansion & Renewal 961 Matley Lane, Suite 100 & 105A, Reno 5,912 Hanger Prosthetics and Orthotics Renewal 100 Washington Street, Suite LL10-LL90, Reno 5,885 RIZKNOWS New 9790 Gateway Drive, Suite 240, Reno 5,864 Laxalt & Nomura LTD New 6100 Plumas Street, Suite 100 & 101, Reno 5,740 RCP-LTD LLC New 4 Reno Research & Forecast Report Q Office Colliers International

5 Market Comparisons - Reno Office Market CLASS BLDGS RBA DIRECT VACANT SF DIRECT SUBLEASE VACANT SF SUBLEASE VACANT SF PRIOR QUARTER NET ABSORPTION CURRENT QTR SF NET ABSORPTION YTD SF COMPLETIONS CURRENT QTR SF UNDER CONSTRUCTION SF AVG ASKING RENTAL DOWNTOWN SUBMARKET A 4 540,478 77, % 2, % 79, % 13.3% (4,195) (4,195) - - $2.03 B ,765 57, % - 0.0% 57, % 9.6% 7,298 7, $1.88 C ,265 20, % - 0.0% 20, % 17.2% 12,112 12, $1.70 Total 31 1,300, , % 2, % 157, % 12.2% 15,215 15, $1.87 SOUTH MEADOWS SUBMARKET A 36 1,224, , % 9, % 133, % 10.9% 9,942 9, $1.83 B 9 252,410 3, % - 0.0% 3, % 4.2% $1.78 C % Total 45 1,476, , % 9, % 136, % 9.8% 9,942 9, $1.80 MEADOWOOD SUBMARKET A 44 1,888, , % 45, % 223, % 8.9% (49,279) (49,279) - - $1.89 B ,735 56, % - 0.0% 56, % 15.6% 5,963 5, $1.41 C % Total 63 2,337, , % 45, % 280, % 10.2% (43,316) (43,316) - - $1.65 CENTRAL/AIRPORT SUBMARKET A 4 106,933 22, % - 0.0% 22, % 19.4% (1,739) (1,739) - - $1.45 B , , % 5, % 133, % 14.0% 7,633 7, $1.34 C , , % - 0.0% 135, % 17.3% (6,939) (6,939) - - $1.14 Total 66 1,871, , % 5, % 291, % 15.7% (1,045) (1,045) - - $1.31 SPARKS SUBMARKET A 1 32, % % 0.0% B 2 32, % - 0.0% - 0.0% 0.0% C 1 14,432 3, % - 0.0% 3, % 22.3% (829) (829) - - $1.00 Total 4 79,932 3, % - 0.0% 3, % 4.0% (829) (829) - - $1.00 WEST RENO SUBMARKET A % B 3 43, % - 0.0% - 0.0% 0.0% C 6 91,975 12, % - 0.0% 12, % 12.9% (170) (170) - - $1.43 Total 9 135,077 12, % - 0.0% 12, % 8.8% (170) (170) - - $1.43 Office Market Totals DOWNTOWN A 4 540,478 77, % 2, % 79, % 13.3% 1,083 1, $2.03 B ,765 57, % - 0.0% 57, % 9.6% 7,298 7, $1.88 C ,265 20, % - 0.0% 20, % 17.2% 12,112 12, $1.70 Total 31 1,300, , % 2, % 157, % 12.2% 20,493 20, $1.87 SUBURBAN A 85 3,252, , % 55, % 378, % 10.4% (41,076) (41,076) - - $1.72 B 62 1,772, , % 5, % 194, % 11.7% 13,596 13,596 - $1.51 C , , % - 0.0% 151, % 16.5% (6,805) (6,805) - - $1.19 Total 187 5,901, , % 61, % 724, % 11.7% (34,285) (34,285) - - $1.47 OVERALL MARKET A 88 3,792, , % 57, % 458, % 11.0% (39,993) (39,993) - - $1.88 B 78 2,341, , % 5, % 252, % 11.7% 20,894 20, $1.69 C 52 1,068, , % - 0.0% 172, % 16.6% 5,307 5, $1.44 Total 219 7,202, , % 63, % 882, % 12.1% (13,792) (13,792) - - $1.67 QUARTERLY COMPARISON AND S Q ,202, , % 63, % 882, % 12.1% (13,792) (13,792) - - $1.67 Q ,202, , % 69, % 868, % 11.8% (17,608) 61, $1.67 Q ,202, , % 39, % 850, % 12.3% 36,041 77, $1.65 Q ,198, , % 31, % 886, % 13.1% 51,475 41, $1.65 Q ,188, , % 54, % 938, % 14.7% (10,468) (10,468) 15,316 - $1.61 Source: NSDC 5 Reno Research & Forecast Report Q Office Colliers International

6 69 countries $2.7 billion in annual revenue* 2.0 billion square feet under management 15,400 professionals and staff COLLIERS INTERNATIONAL RENO 100 West Liberty Street Suite 740 Reno, Nevada USA MARKET CONTACTS: Melissa Molyneaux, SIOR, CCIM Executive Managing Director & Senior Vice President Reno Fay O Neil Research Analyst Fay.Oneil@colliers.com $2.7 billion in annual revenue* $116 billion in total transaction value *All statistics are for 2017, are in U.S. dollars and include affiliates About Colliers International Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is an industry-leading real estate services company with a global brand operating in 69 countries and a workforce of more than 12,000 skilled professionals serving clients in the world s most important markets. Colliers is the fastest-growing publicly listed global real estate services company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers.com/reno Copyright 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.