Still Transitioning THIRD QUARTER 2012 DOWNTOWN OFFICE

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1 THIRD QUARTER 2012 DOWNTOWN OFFICE CHICAGO OFFICE MARKET OVERVIEW Still Transitioning Relatively stagnant conditions in the Chicago CBD over the past four quarters have given way to a vacancy rate that has experienced little movement. While signs of improvement and increased momentum in some sectors of the market provide hope for recovery, the market is expected to remain fairly anemic through the balance of the year. MARKET INDICATORS Overall Chicago CBD 3Q 3Q 2012 VACANCY RATE 15.0% 14.5% ABSORPTION (SF) 186, ,243 RENTS $31.38 $31.96 INVENTORY 143,810, ,810,052 Encouragingly, some tenants have begun expressing improved business visibility relative to one year ago, but many still remain hyper-sensitive to the broader uncertainties that exist in our economy, particularly with the presidential election around the corner. Economic conditions continue to cause wariness, resulting in lengthier timelines to consummate lease transactions. Corporate tenants are slow to make commitments, particularly as they relate to their real estate needs and are now expending a considerable amount more time and energy evaluating space options than they did a few years ago. The overall CBD vacancy rate of 14.5 percent, although improved from the peak 16.0 percent rate posted two years ago, still remains elevated by nearly 350 basis points relative to the bottom of the market in mid- when rates averaged around 11.0 percent. With the market still in a state of transition and the recovery nearing its mid-point, tenants and landlords find themselves at a bit of a standstill when it comes to agreeing on where market conditions really lie. Most tenants perceive the market to be very sluggish and have expectations of better economic deals than some landlords are willing to provide. On the contrary, some landlords have grown more confident that market fundamentals are tightening and are therefore beginning to push for higher rents than they did one year ago. Landlords, desiring low risk, high credit-worthy tenants in this economic climate, are becoming more selective when it comes to which deals they will aggressively pursue. This divide between tenant and landlord perception of market conditions also contributes to the lengthier transaction times experienced. In reality, market conditions vary based upon the segment of the market being discussed. COLLIERS INTERNATIONAL P. 1

2 A SHRINKING FOOTPRINT The sluggish absorption experienced so far during 2012 can largely be attributed to firms reducing their square footage to improve space efficiency. Cost cutting remains the theme for the majority of tenants as most continue to seek ways to reduce their footprint, including implementation of alternative workplace strategies such as hoteling. Although leasing activity has been fairly steady, tenants are highly cost conscious in this fickle environment and are eager to consolidate and reduce space whenever possible. During the height of the recession, many office tenants were forced to reduce headcount. However, instead of productivity being negatively impacted by a reduction in workforce, employees, lacking in job alternatives, became more efficient, managing more workload with fewer resources. Recognizing that output has not been substantially affected by downsizing, many company leaders are reluctant to prematurely add to their workforce. Although some companies do have real estate growth needs today, they are delaying expansion for as long as possible. The resulting impact on future absorption will be a more gradual improvement as it relates to most of Chicago s tenant base. The exceptions are likely to include Chicago s already booming technology sector which continues to see companies surfacing and growing. Another exception will be continued growth resulting from businesses relocating from the suburbs into the city. The largest lease transaction experienced this year serves as an example of both exceptions. During the third quarter, Motorola Mobility, now owned by Google, committed to relocating 3,000 employees to the CBD next year when it takes occupancy of a 572,000-square-foot space at the Merchandise Mart. The company will be relocating from north suburban Libertyville. Leasing activity has been fairly steady throughout the year, particularly fueled by large tenants seeking to capitalize on the softened market conditions experienced over the last few years. In the past two years, 30 lease transactions greater than 100,000 square feet have been effectuated. Concerns about the lack of sizeable, quality blocks of space have resulted in many large tenants evaluating market options well ahead of their current lease expirations. Although there are still several sizeable tenants pursuing space options, the large majority of active tenants in the market are in the small to mid-sized range. Regardless of a somewhat lethargic year-to-date from a statistical standpoint, Chicago s CBD office market still demonstrates resiliency in a time when other markets across the U.S. are experiencing more grave results. As previously forecasted, the CBD will likely experience continued quarters of alternating demand until some of the macro uncertainties are ironed out. The political gridlock experienced in Washington D.C. coupled with ongoing concerns regarding the European Debt Crisis and its impact locally provide enough uncertainty to make most companies concerned about future growth projections. COLLIERS INTERNATIONAL P. 2

3 VACANCY AND ABSORPTION The overall CBD vacancy rate fell slightly during the third quarter to 14.5 percent, down from 14.7 percent in the prior quarter. has remained relatively stagnant during much of 2012, with minimal change on a quarter-byquarter basis. However, the current rate still resides 0.5 percent less than one year prior, indicating slight improvement. During the third quarter, Class A properties reported a decrease in vacancy, ending the quarter at 14.6 percent, down from 15.0 percent in the prior quarter. In the past year, Class A vacancy has improved 0.2 percent. Despite a slight increase in vacancy during the third quarter, the current Class B vacancy rate of 14.4 percent resides 0.7 percent below the 15.1 percent rate posted one year ago. Positive 297,243 square feet of net absorption posted during the third quarter helped offset slightly negative demand experienced in the first half of the year. Year-to-date net absorption for the Chicago CBD resides at positive 210,298 square feet. LEASE ACTIVITY As it relates to large transactions, leasing volume improved during the third quarter with 15 transactions greater than 50,000 square feet closed, compared to only seven similar transactions during the prior quarter. Square Footage (%) NET ABSORPTION & VACANCY CENTRAL BUSINESS DISTRICT 4,000, % 3,460,997 3,500, % 15.3% 15.5% 3,000, % 14.5% 14.0% 2,500,000 2,000, % 11.7% 12.0% 1,500,000 1,229, % 1,000, % 436, , , % 0 4.0% (500,000) (360,943) (1,000,000) 2.0% (1,012,652) (1,500,000) 0.0% 2012 YTD Source: Costar; Colliers International Research Absorption SUBMARKET VACANCY RATES (YTD) 20.0% 16.0% 16.4% 16.3% 15.5% 14.8% 14.7% 15.1% 14.3% 14.6% 14.7% 14.0% 14.3% 14.3% 15.0% 14.1% 13.4% 10.0% 5.0% 0.0% Central Loop East Loop North Michigan Ave. River North West Loop Source: Costar; Colliers International Research 2012 For the second quarter in a row, the largest lease transaction stemmed from Chicago s growing technology sector. Motorola Mobility, who was recently purchased by Google, announced it will relocate its suburban headquarters in Libertyville to the Merchandise Mart in River North. In the largest lease signing of the year, the company agreed to lease 572,000 square feet at the building and will relocate approximately 3,000 employees to the CBD in the summer of The East Loop successfully retained one of its largest tenants during the quarter as AON Corporation agreed to lease 386,406 square feet at 200 E. Randolph Street. The company was a subtenant at the building for nearly 14 years and will now occupy its space on a direct basis. Also during the quarter, United Continental Holdings committed to a relocation of its headquarters which currently resides at 77 W. Wacker Drive in the Central Loop. The airline is joining its headquarters with its operations center at the Willis Tower (233 S. Wacker Drive) in the West Loop. With the additional 205,000 square feet that the company will be leasing, United will now occupy a total of 830,000 square feet in the tower. In terms of the number of transactions greater than 100,000 square feet completed on a year-to-date basis, 2012 remains exactly on pace with the volume of leasing activity experienced at this time in, with a total of 13 transactions. However, at the end of the third quarter in, the 13 transactions greater than 100,000 square feet totaled 2.1 million square feet in activity. Comparatively, the 13 transactions closed through third quarter of 2012 totaled 2.6 million square feet. If the balance of 2012 mirrors that of, it can be expected that while current leasing activity is slightly elevated, 2012 will be another year of transition in the CBD s recovery. COLLIERS INTERNATIONAL P. 3

4 CHICAGO CBD SIGNIFICANT LEASING TRANSACTIONS OF THIRD QUARTER 2012 Tenant Address Class Submarket Size (SF) Deal Type Google 222 Merchandise Mart B River North 572,000 New Lease AON Corporation 200 E. Randolph Street A East Loop 386,000 Renewal United Continental Holdings 233 S. Wacker Drive A West Loop 205,000 Expansion DraftFCB 875 N. Michigan Avenue A North Michigan Ave. 167,000 New Lease Grosvenor Capital Management 900 N. Michigan Avenue A North Michigan Ave. 96,000 Renewal & Expansion Guggenheim Partners 227 W. Monroe Street A West Loop 80,000 Renewal/Expansion Cramer-Krasselt 225 N. Michigan Avenue B East Loop 76,000 Renewal AIG 500 W. Madison Avenue A West Loop 74,000 New Lease Walgreens E-Commerce Institute 33 S. State Street B East Loop 68,000 Expansion GSA - Army Corp of Engineers 231 S. LaSalle Street B Central Loop 64,000 New Lease Northwestern University (Feinberg School of Medicine) 633 N. St. Clair Street A North Michigan Ave. 62,000 New Lease CEDA 208 S. LaSalle Street B Central Loop 58,000 Renewal GE Transportation 500 W. Monroe Street A West Loop 54,000 New Lease ShopperTrak 233 S. Wacker Drive A West Loop 52,000 New Lease Ropes & Gray 191 N. Wacker Drive A West Loop 52,000 Sublease Energy BBDO 225 N. Michigan Avenue A East Loop 51,000 New Lease CBIZ Gibraltar 225 W. Wacker Drive A West Loop 38,000 New Lease Marketing Store Worldwide 55 W. Monroe Street B Central Loop 31,000 New Lease HNTB 1 S. Wacker Drive B West Loop 31,000 New Lease Trisect 130 S. Jefferson Street C West Loop 30,000 New Lease IES Abroad 33 W. Monroe Street A Central Loop 28,000 New Lease Mintel 333 W. Wacker Drive A West Loop 26,000 New Lease ThyssenKrupp 111 W. Jackson Street B Central Loop 25,000 New Lease Walgreens (IT Group) 120 S. Riverside Drive B West Loop 25,000 New Lease Sheppard, Mullin, Richter & Hampton 70 W. Madison Street A Central Loop 25,000 New Lease Hyper Marketing Inc. 104 S. Michigan Avenue C East Loop 23,000 New Lease Illinois CPA Society 550 W. Jackson Street A West Loop 22,000 Renewal Clayco Inc 35 E. Wacker Drive B East Loop 22,000 Renewal/Expansion Comcast Spotlight 444 N. Michigan Avenue B North Michigan Ave. 20,000 Renewal/Expansion InnerWorkings 600 W. Chicago Avenue B River North 20,000 Expansion COLLIERS INTERNATIONAL P. 4

5 LARGE BLOCKS OF AVAILABILITY AND TENANT DEMAND Large blocks of space in the CBD are defined as those containing 100,000 square feet or greater on a contiguous and direct basis. During the third quarter, net large block availability increased by two blocks. Removed during the quarter was a 175,263-square-foot block at 55 E. Monroe Street. Additionally, Salesforce.com s recent signing of a 116,000-square-foot lease at 111 W. Illinois Street removed that block from the market as well. The largest block of space added to the market during the third quarter is DraftFCB s space at 101 E. Erie Street. The 227,000-square-foot block is available for lease in March of 2014, when the advertising company relocates to 875 N. Michigan Avenue. Also added during the quarter was a 159,000-square-foot block at 440 S. LaSalle Street, a 130,380-square-foot block at 350 W. Mart Center and a 125,553-square-foot block at 233 S. Wacker Drive. LARGE BLOCK DIRECT AVAILABILITIES (100,000+ SQUARE FEET) Building Class Size (SF) Floor Submarket 500 W. Monroe St. A 392, West Loop 515 N. State St. A 350, North Michigan Ave. 200 E. Randolph St. A 340, East Loop N. Michigan Ave. B 316, North Michigan Ave. 233 S. Wacker Dr. A 274, West Loop 130 E. Randolph St. A 256, East Loop 77 W. Wacker Dr. A 240, Central Loop 225 W. Randolph St. B 238, West Loop 101 E. Erie St.* A 227, North Michigan Ave W. Monroe B 214, West Loop 410 N. Michigan Ave. B 213, North Michigan Ave E. Illinois C 210, North Michigan Ave. 222 N. LaSalle St. B 199, Central Loop 300 S. Riverside Plz. B 198, West Loop 303 E. Wacker Dr. B 182, East Loop 303 E. Wacker Dr. B 165, East Loop 200 N. LaSalle St. A 164, Central Loop 440 S. LaSalle St* A 159, Central Loop 130 E. Randolph St. A 155, East Loop 11 S. LaSalle St. C 150, Central Loop 333 S. Wabash Ave. B 140, East Loop 227 W. Monroe St. A 139, West Loop 10 S. Dearborn/21 S. Clark A 139, Central Loop 350 W. Mart Center B 138, River North 350 W. Mart Center* B 130, River North 130 E. Randolph St. A 128, East Loop 131 S. Dearborn A 128, Central Loop 233 S. Wacker Dr.* A 125, West Loop 600 W. Chicago Ave. B 117,101 2 River North 161 N. Clark St. A 116, Central Loop 401 S. State St. C 110, East Loop 205/225 N. Michigan Ave. B 108, East Loop 401 N. Michigan Ave. A 104, North Michigan Ave. * Added in the third quarter 28 large direct blocks of CBD Class A space consisting of 5,417,444 square feet 4 large blocks of West Loop Class A space consisting of 932,117 square feet 3 large blocks of West Loop High Rise Class A space consisting of 792,234 square feet Total large block availability now resides at 28 blocks totaling 5.4 million square feet. There are currently ten blocks of space that are sizeable enough to accommodate a tenant requiring 200,000 square feet or greater. When analyzed further, only four of these blocks reside within Class A space. Colliers International is currently tracking 10 tenants actively exploring the market in the 200,000 square foot or more size range, indicating that the options available for the largest tenants in the market remain fairly constrained. Large tenants are finding that the spaces available for their occupancies are dwindling when factors such as asset class, submarket desirability, and view characteristics are considered. Of the 28 large blocks of available space, only 12 reside within Class A buildings. When dissected further, the lack of high view, quality, well-located space becomes even more apparent. Only three of those blocks reside within the highly desired West Loop submarket and are within the building s high-rise section. The constrained conditions for large tenants seeking quality, high-view space have prompted several developers to actively seek anchor tenants in an effort to launch a new building. Many large tenants have effectuated lease transactions well in advance of their lease expirations in order to leverage softened market conditions. Indicative of this trend is the fact that 40 percent of the large blocks listed for lease are not available until 2013 or beyond. COLLIERS INTERNATIONAL P. 5

6 CONSTRUCTION The third quarter of the year ended without any new development announcements. However, recognizing the limited availability of quality, large blocks of space, developers are anticipating that demand is sufficient enough in this sector of the market to support the development of one or more new office towers with deliveries anticipated between 2016 and Several projects continue to garner press as developers attempt to lure large tenants. Square Footage NEW CONSTRUCTION DELIVERIES ,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 Hines is anticipated to break ground by year-end 2012 on a 500, new 45-story, 900,000-square-foot office tower at 444 W Lake Street. Known as River Point, the development was Source: Costar; Colliers International Research originally slated for a delivery with significant preleasing, but the project was tabled in as a result of the credit crisis when financing fell through. Hines and Ivanhoe Cambridge are providing equity financing for the project and are said to be developing the newest version of this office tower on a speculative basis, hoping to secure tenants during the construction period. Other projects gaining momentum include the site owned by developer John O Donnell at 150 N. Riverside Plaza, located along the river between Lake Street and Randolph Street, and the site at 301 S. Wacker Drive which is being marketed by Trammell Crow and InSite Real Estate. Both projects are in the 1.0-million-square-foot range. A secondary subset of new developments also exists in a more peripheral West Loop location between the Chicago River and the Kennedy Expressway. The Alter Group and White Oak Realty Partners are marketing a 490,000-square-foot building at 625 W. Adams Street while Fifield Companies is proposing a 640,000-square-foot tower at 601 W. Monroe Street. These developments would be on a smaller scale delivering space in the 400,000- to 600,000-square-foot range. 1,331,436 1,745, ,400 1,504,364 1,892,460 1,897, , ,000 3,652, ,710 PROPOSED CHICAGO CBD OFFICE DEVELOPMENT SITES Address Developer Total RBA 601 W. Monroe Street Fifield Companies 642, N. Jefferson Street Jupiter Realty 450, W. Adams Street The Alter Group/ White Oak Realty Partners 494,601 or 346, N. Riverside Plaza O Donnell Investments 1,471, W. Lake Street Hines/Levy (joint venture) 1,100, S. Wacker Drive InSite/Trammell Crow 1,002,807 Hines/Kennedy (joint venture) 1,500,000 (East) Wolf Point 1,800,000 (South) 130 N. Franklin Street CC Industries/ Tishman Speyer 1,000, W. Madison Street Hines, MR Properties (owner) 500, S. Wacker Drive DRI/Oaktree Capital 863, W. Randolph Street John Buck Company (developer) Interpark (owner) 991,805 Anchor tenants have not yet been secured for any of these projects, although several large tenants are actively engaged in negotiations that could eventually result in signed leases. Responding to the uncertainties that still exist in the economy, large tenants remain very cautious as it relates to their real estate needs, resulting in longer than usual decision timelines, as they evaluate their risk characteristics in a stay versus move outcome. Once commitments are secured, it is likely the Chicago CBD could see, dependent upon size, two or three new developments launched. With the market now trending towards recovery, it is expected that fundamentals will be in place to support the addition of new inventory by New construction has not delivered to the Chicago CBD since when the vertical expansion of the Blue Cross Blue Shield Building at 300 E. Randolph Street added 933,000 square feet to inventory. The last new building additions to inventory occurred in with the deliveries of 353 N. Clark Street, 300 N. LaSalle Street and 155 N. Wacker Drive, which added a combined 3.7 million square feet to inventory. COLLIERS INTERNATIONAL P. 6

7 RENTS AND CONCESSIONS For the fifth consecutive quarter, the average gross asking rental rate increased. The current rate stands at $31.96 per square foot, up from $31.72 per square foot in the prior quarter. Compared to one year ago in the third quarter of, the average rate has increased $0.58 from $31.38 per square foot. The Class A asking rental rate resides at $37.25 per square foot gross, down slightly from $37.34 per square foot in the prior quarter. Class B rental rates increased during the quarter to $30.08 per square foot from $29.76 per square foot. The average Class C asking rental rate is currently at $22.68 per square foot, up from $22.62 per square foot. ASKING GROSS FACE RATE CENTRAL BUSINESS DISTRICT $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research Class A Class B Class C Average 2012 Although the CBD has experienced modest quarterly increases in asking rates for the past year, the current rate still resides $1.91 per square foot less than the $33.87 per square foot rate posted in the fourth quarter of when economic conditions had not yet impacted rates. However, it appears that the upward pressure being placed on rates by some well-positioned landlords is slowly starting to impact the average. Additionally, many landlords have begun pushing for higher annual rent escalations, indicative of the more bullish position some are taking. With future rent decreases unlikely, tenants in the market should continue capitalizing on the the still relatively low asking rates before more substantial increases are realized throughout the CBD. CAPITAL MARKETS The momentum experienced in the investment sales market during the first half of the year continued into the third quarter. Five transactions closed during the quarter totaling $270 million. With 16 transactions closed year-to-date, 2012 is set to slightly outpace in terms of sales volume. The increase in non-core transaction volume experienced during 2012 has begun to influence asking rental rates across the CBD. Recent ownership changes in many buildings have resulted in subsequent upward pressure on rental rates at those buildings, as the new owners attempt to meet their proformas. INVESTMENT SALES ACTIVITY Number of Sales Another prevalent trend includes value-seeking Source: Costar; Colliers International Research investors purchasing and repositioning assets. Sterling Bay Companies, which recently repositioned 400 S. Jefferson Street to accommodate a large lease with Hillshire Brands (the meats division of Sara Lee Corporation), is expected to purchase 111 N. Canal Street, known as River Center, for its latest repositioning project. Five transactions closed during the third quarter and another three remain under contract. The closed transactions were all Class B and C assets. The highest price per square foot paid for an asset during the quarter was the purchase of 300 W. Adams for $51 million ($ per square foot). The building, which was completely renovated by a joint venture between Sterling Bay Companies and Annenberg Investments, was sold to Alliance Partners. The second largest transaction for the quarter was the sale of 230 W. Monroe Street to a joint venture between Lincoln Property Co. and PIMCO by General Electric Pension Fund. The building traded at nearly $93 million ($ per square foot). Additionally General Electric Pension Fund sold 200 W. Monroe to a joint venture between Farbman Group and Lubert Alder Funds for $75 million ($ per square foot). During the quarter, seven properties were added to the market, bringing the total number of properties available for sale to 12. During the quarter, Bank of America Corp. began evaluating bids for its property at 540 W. Madison Street which also includes an adjacent development site that is zoned for an office tower. The bank, which is the largest tenant in the tower, would continue to lease space at the property but also has rights to contract by more than one-third in future years. Also, Deutsche Bank and Northstar Realty began marketing the office and parking component of 875 N. Michigan Avenue, where DraftFCB recently signed a 167,000-square-foot lease YTD Class A Class B Class C COLLIERS INTERNATIONAL P. 7

8 CHICAGO CBD SALES ACTIVITY - THIRD QUARTER 2012 Status Address Sub Mkt Class Size (SF) Sale Price Price/ SF Seller Buyer NM 540 W. Madison Street WL A 1,111,925 TBD TBD Bank of America TBD NM 875 N. Michigan Avenue (Parking/Office Component) NM A 856,000 TBD TBD Deutsche Bank Group & Northstar Realty TBD NM 111 W. Washington Street CL B 579,778 TBD TBD Harbor Group Management TBD NM 125 S. Wacker Drive WL B 564,000 TBD TBD Tishman Speyer Properties L.P. TBD NM 555 W. Monroe Street WL A 418,769 TBD TBD Principal Financial Group TBD NM 205 W. Wacker Drive WL B 263,650 TBD TBD Cape Horn Group TBD NM 123 W. Madison Street CL C 78,100 TBD TBD Canadian Imperial Bank of Commerce TBD FS FS 300 N. LaSalle Street (Partial Stake) 130 E. Randolph Street and 180 N. Stetson Drive* RN A 1,302,901 TBD TBD KBS Reit 2 - EL A 2,204,137 TBD TBD BentleyForbes - FS 20 S. Clark Street CL B 363,657 TBD TBD M&J Wilkow Ltd. - FS 32 W. Randolph Street CL C 226,666 TBD TBD David & Barbara Kalish - FS 540 N. LaSalle Street RN C 65,140 TBD TBD Joseph Lagoa - UC 111 N. Canal Street WL B 924,800 $100,000,000 $ Albert Frank & Co. Sterling Bay Cos. UC 550 W. Washington WL A 372,000 $112,000,000 $ Beacon Capital Partners MetLife Insurance UC 1 S. Wacker Drive WL B 1,195,170 $230,000,000 $ TIAA-CREF Harbor Group International Sold 300 W. Adams Street WL C 252,847 $51,000,000 $ Sterling Bay Cos. JV Annenberg Investments Ldt. Alliance Partners Sold 230 W. Monroe Street WL B 623,524 $92,905,076 $ General Electric Pension Trust Lincoln Property Co. JV PIMCO Sold 200 W. Monroe Street WL B 535,911 $75,000,000 $ General Electric Pension Trust Farbman Group/ Lubert Adler Funds Sold 168 N. Michigan Avenue CL C 80,000 $7,250,000 $90.63 Kimco Realty Corp. CL = Central Loop EL = East Loop NMA = North Michigan Avenue RN = River North WL = West Loop FS = For sale NM = New to Market UC = Under Contract * Partial stake Crown Commercial Real Estate & Development Sold 311 W. Monroe Street WL B 385,000 $44,000,000 $ AREA Property Partners Golub & Co. JV Archon COLLIERS INTERNATIONAL P. 8

9 MARKET INDICATORS Central Loop 3Q 3Q 2012 VACANCY RATE 14.9% 14.0% ABSORPTION (SF) 109, ,269 RENTS $30.04 $30.81 INVENTORY 38,250,296 38,250,296 Central Loop The Central Loop is the second-largest submarket in the Chicago CBD and is best known for its LaSalle Street corridor and its historical reputation as Chicago s core financial district. Although this distinction has dissipated some during the last decade, the submarket still remains home to several large financial institutions, banks and professional services firms. Similar to its submarket counterparts, the Central Loop is still in transition, making up ground that was lost when economic conditions impacted the CBD during the past two years. Given a large banking and financial services presence in the submarket, its rebound had the potential to be quite lengthy. However, although jagged with alternating quarters of positive and negative demand, the Central Loop s recovery remains steady, largely fueled by its healthy Class A inventory. The Class A sector of the submarket boasts an impressive 10.7 percent vacancy rate on a direct basis while its Class B properties have a direct vacancy rate of 15.2 percent. The submarket s largely Class B and C building composition will continue to keep the submarket s recovery at bay while pricing at Class A assets remains at a historic low. As market conditions tightened and became more tenant-favorable, many tenants in the market continue to take advantage of Class A pricing that lies nearly $4.50 per square foot less than it did during pre-recession quarters. Leasing activity fell slightly during the third quarter with only two transactions greater than 50,000 square feet reported. The largest transaction was the Army Corp of Engineers new 64,000-squarefoot lease at 231 S. LaSalle Street. Also during the quarter, CEDA renewed its lease for 58,000 square feet at 208 S. LaSalle Street. During the third quarter, the net change in the number of available large, contiguous blocks of space increased by one bringing the total available blocks to six. A large 159,539-square-foot block of space was placed on the market at 440 S. LaSalle Street. Additionally, although listed on a sublease basis, another large block of Class A space was recently placed on the market. As part of its decision to relocate its headquarters to 233 S. Wacker Drive in the West Loop, United Continental Holdings is marketing its 240,108-square-foot space at 77 W. Wacker Drive for sublease. 440 SOUTH LASALLE Investment sales activity remained active in the Central Loop during the third quarter. Although only one transaction closed during the quarter, two more assets were placed on the market. The Class C property at 168 N. Michigan Avenue was sold by Kimco Realty Co. to Crown Commercial Real Estate & Development for $7.25 mllion ($90 per square foot). Harbor Group Management placed 111 W. Washington Street on the market and Canadian Imperial Bank of Commerce listed 123 W. Madison Street for sale. 111 WEST WASHINGTON 123 WEST MADISON COLLIERS INTERNATIONAL P. 9

10 Square Footage NET ABSORPTION & VACANCY CENTRAL LOOP SUBMARKET 1,400,000 1,224,863 1,200, % 14.8% 14.7% 1,000, % 11.6% 800, , , , , , ,000 (175,725) -400,000 Source: Costar; Colliers International Research Absorption 255, YTD 14.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% VACANCY The average Central Loop vacancy rate posted a significant decrease during the third quarter, falling to 14.0 percent from 14.7 percent in the prior quarter. The submarket s overall vacancy rate has improved 0.9 percent over the past year. The Central Loop s Class A sector remains among the strongest in the CBD with a direct vacancy rate of only 10.7 percent and an overall vacancy rate of 12.0 percent. Class B space currently resides at 16.1 percent vacancy. Although vacancy in the Class B sector remains elevated compared to Class A space, vacancy has fallen substantially over the past year for Class B properties, posting a 2.8 percent decrease over the past four quarters. ASKING GROSS FACE RATES CENTRAL LOOP SUBMARKET ABSORPTION $45.00 $40.00 $35.00 $30.00 $25.00 The Central Loop posted positive 262,269 square feet of net absorption in the third quarter, bringing the submarket s year-to-date total to positive 255,543 square feet. Compared to one year ago when year-to-date absorption totaled negative 67,851 square feet, this is a vast improvement. $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research Class A Class B Class C Average CENTRAL LOOP LEASE ACTIVITY THIRD QUARTER 2012 Tenant Address Class Size (SF) Deal Type GSA - Army Corp of Engineers 231 S. LaSalle Street B 64,000 New Lease CEDA 208 S. LaSalle Street B 58,000 Renewal Marketing Store Worldwide 55 W. Monroe Street B 31,000 New Lease IES Abroad 33 W. Monroe Street A 28,000 New Lease ThyssenKrupp 111 W. Jackson Boulevard B 25,000 New Lease Sheppard, Mullin, Richter & Hampton 70 W. Madison Street A 25,000 New Lease 2012 RENTS The average direct asking rental rate increased slightly for the seventh consecutive quarter to $30.81 per square foot gross, up from $30.71 per square foot in the prior quarter. Over the past year, the average rental rate has increased $0.77 per square foot from the $30.08 per square foot rate posted in the third quarter of. The average Class A asking rate currently stands at $36.45 per square foot gross while the average Class B rate resides at $29.06 per square foot gross. CONSTRUCTION No new construction was delivered to during the third quarter and no new office developments are currently planned in the Central Loop. CENTRAL LOOP SALES ACTIVITY THIRD QUARTER 2012 Status Address Class Size (SF) Sale Price Price/SF Seller Buyer NM 111 W. Washington B 579,778 TBD TBD Harbor Group Management TBD FS 20 S. Clark Street B 363,657 TBD TBD M&J Wilkow Ltd. - FS 32 W. Randolph Street C 226,666 TBD TBD David & Barbara Kalish - Sold 168 N. Michigan Avenue C 80,000 $7,250,000 $90.63 Kimco Realty Corp. Crown Commercial Real Estate & Dev. NM 123 W. Madison Street C 78,100 TBD TBD Canadian Imperial Bank of Commerce TBD NM = New to market FS = For sale COLLIERS INTERNATIONAL P. 10

11 East Loop MARKET INDICATORS East Loop 3Q 3Q 2012 VACANCY RATE 15.7% 16.4% ABSORPTION (SF) -22,184 34,020 RENTS $29.23 $30.36 INVENTORY 27,337,623 27,337,623 The East Loop submarket resides alongside Millennium Park, one of the city s largest tourist attractions. Additionally, it is located amongst numerous residential condominium towers and near a growing retail and entertainment sector, making the submarket appealing to both corporate and non-traditional users that desire the work-life balance offered within its boundaries. In addition to the typical office user, many universities, media and advertising firms, and not-for-profits call the East Loop home. The past couple of years have proven to be a challenge in the East Loop as vacancies spiked following the economic downturn. Several of the submarket s largest tenants had lease expirations that coincided with softening market conditions. Although landlords were successful in retaining several of these key tenants, some committed to leases in alternate submarkets where they could take advantage of historically low rental rates. These deflections negatively impacted the East Loop s occupancy levels as a result, causing the overall rate to spike 540 basis points from pre-recession quarters in to the submarket s peak rate of 16.9 percent in. The East Loop s recovery has been less consistent than the other submarkets as it slowly makes its way towards stabilized conditions. However, as landlords of the submarket continue to retain key tenants, momentum is improving. During the quarter, Aon Corporation committed to remaining at its East Loop location at 200 E. Randolph Street. The company signed a 386,000-square-foot lease, representing a win for the submarket as another large tenant was retained. Aon Corporation s 15- year lease for comes after being a subtenant in the building for nearly 14 years. Also during the quarter, Cramer-Krasselt renewed its 75,735-square-foot headquarters space at 225 N. Michigan Avenue. The next two largest lease transactions during the third quarter included Walgreens E-Commerce Institute expanding its space by 68,000 square feet at 33 S. State Street and Energy BBDO signing a new lease at 225 N. Michigan Avenue for 51,000 square feet. The East Loop currently possesses the largest number of available contiguous direct blocks of space. Nine blocks over 100,000 square feet are currently available. The largest block of space is available at 200 E. Randolph Street. The space became available after law firm Kirkland and Ellis relocated to a new office tower in River North in. There were no investment sales transactions closed during the quarter in the East Loop. However, Bentley Forbes continues to market The Prudential Plaza buildings at 180 N. Stetson Avenue and 130 E. Randolph Street, seeking a joint venture for the properties. 200 E RANDOLPH COLLIERS INTERNATIONAL P. 11

12 NET ABSORPTION & VACANCY EAST LOOP SUBMARKET Square Footage 800, , , % 16.0% 15.5% 400, , % 200, ,516 34, % -200, , , ,000-1,000,000-1,200,000 (1,134,981) -1,400,000 (244,012) 2012 YTD 16.4% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% VACANCY East Loop concluded the third quarter with a total vacancy rate of 16.4 percent, down slightly from the 16.5 percent rate posted in the prior quarter. in the East Loop has climbed 0.7 percent from one year ago at the end of the third quarter of. As KPMG took occupancy of its 260,000 square foot space at 200 E. Randolph Street, vacancy in Class A space decreased substantially to 15.7 percent, down from 20.3 percent in the prior quarter. Contrarily, the space vacated by KPMG at 303 E. Wacker negatively impacted Class B vacancy, resulting in a 2.4 percent increase to 18.5 percent. Source: Costar; Colliers International Research Absorption ABSORPTION ASKING GROSS FACE RATES EAST LOOP SUBMARKET $45.00 $40.00 $35.00 $30.00 $25.00 Positive 34,020 square feet of net absorption was posted in the East Loop during the third quarter. This positive net absorption did little to affect the negative demand experienced so far this year in the submarket. Year-to-date absorption stands at negative 244,012 square feet, compared to positive 88,271 square feet at this time one year ago. Class A space realized noteworthy positive net absorption of 311,382 square feet, while Class B properties posted negative 304,824 square feet. $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research Class A Class B Class C Average EAST LOOP LEASE ACTIVITY THIRD QUARTER 2012 Tenant Address Class Size (SF) Deal Type AON Corporation 200 E. Randolph A 386,000 Renewal Cramer-Krasselt 225 N. Michigan B 76,000 Renewal Walgreens E-Commerce Institute 33 S. State B 68,000 Expansion Energy BBDO 225 N. Michigan A 51,000 New Lease Hyper Marketing Inc. 104 S. Michigan C 23,000 New Lease Clayco Inc 35 E. Wacker B 22,000 Renewal/Expansion 2012 RENTS Even though market fundamentals in the East Loop remained virtually unchanged during the quarter, the submarket did experience an increase in the overall average direct asking rate during the third quarter. The East Loop posted an average gross rate of $30.36 per square foot this quarter, up $0.21 per square foot in the previous quarter and up $1.13 per square foot from one year ago. The Class A average direct asking rate remained stable at $36.61 per square foot gross. Class B and C both contributed to the increase in overall rate posting $29.94 per square foot gross and $23.92 per square foot gross, respectively. CONSTRUCTION No new construction was delivered to the East Loop during the third quarter. Currently, there is no new office tower development planned in the submarket. EAST LOOP SALES ACTIVITY THIRD QUARTER 2012 Status Address Class Size (SF) Sale Price Price/SF Seller Buyer FS 130 E Randolph Street/ 180 N Stetson Avenue* A 2,204,137 TBD TBD BentleyForbes - FS = For sale * Partial stake COLLIERS INTERNATIONAL P. 12

13 MARKET INDICATORS North Michigan Avenue 3Q 3Q 2012 VACANCY RATE 15.1% 14.7% ABSORPTION (SF) -55, ,558 RENTS $30.82 $31.23 INVENTORY 13,543,054 13,543,054 North Michigan Avenue The North Michigan Avenue submarket possesses a diverse inventory base composed of a world-renowned retail corridor, hotels, office buildings, medical facilities, residential properties and entertainment venues. Its unique inventory composition and a peripheral location make it an appealing home for certain office tenants. The submarket s small office tenant base is comprised of primarily advertising firms, media agencies and a growing number of medical office users that desire close proximity to the large hospitals in the area. The North Michigan Avenue submarket is likely to see a move towards improved vacancy and positive absorption, as healthcare companies become even more prevalent in the area. A strong medical presence has protected the submarket from extreme vacancy spikes in the past. With large hospitals relocating and expanding within North Michigan Avenue, it is expected that this trend will aid in the submarket s recovery. Following a 1.2 percent vacancy increase in the first half of the year in the North Michigan Avenue submarket, the third quarter resulted in a decrease in the rate to 14.7 percent, indicating progress as the submarket attempts to regain its pre-recession sub-10 percent vacancy rates. The decrease in vacancy experienced during the quarter is partially the result of healthcare companies relocating to the submarket. The new Children s Hospital recently relocated to 225 E. Chicago Avenue and also began subleasing the old Playboy headquarters for its foundation, finance and legal departments. This, combined with Northwestern Hospital s recent growth, has taken large blocks of space off the market. A reputation as the healthcare hub could lead to individual doctor groups seeking space in North Michigan Avenue in order to be adjacent to the large hospitals. In a submarket that typically goes unnoticed, a surge in demand for this sector will increase the likelihood of a quicker recovery. The largest lease transaction in North Michigan Avenue during the third quarter was DraftFCB s 15-year 167,000-square-foot lease at the John Hancock Center. DraftFBC will consolidate its two current Chicago offices to make 875 N. Michigan Avenue its new 875 NORTH MICHIGAN headquarters in early Another notable lease transaction was Grosvenor Capital Management renewing and expanding into 96,462 square feet at 900 N. Michigan Avenue. Comcast Spotlight also renewed and expanded at its current building, 444 N. Michigan Avenue, signing a 10-year lease for 20,290 square feet. North Michigan Avenue currently has six blocks of contiguous and direct space greater than 100,000 square feet. One large contiguous and direct block of space at 101 E. Erie was added this quarter as an availability when DraftFCB announced its future relocation to the John Hancock Center. Investment sales activity remains uneventful in the submarket. New to the market this quarter is the parking and office component of 875 N. Michigan Avenue, better known as the John Hancock Center. This portion for sale contains 856,000 square feet and is being sold by Deutsche Bank Group & Northstar Realty. COLLIERS INTERNATIONAL P. 13

14 NET ABSORPTION & VACANCY NORTH MICHIGAN SUBMARKET Square Footage 400, , , , , , , , , , , , % 14.6% 14.3% 9.4% 9.6% (27,597) Source: Costar; Colliers International Research (59,757) 10.0% Absorption (582,962) (42,608) ASKING GROSS FACE RATES NORTH MICHIGAN SUBMARKET $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 (13,848) 2012 YTD Source: Costar; Colliers International Research Class A Class B Class C Average NORTH MICHIGAN LEASE ACTIVITY THIRD QUARTER 2012 Tenant Address Class Size (SF) Deal Type DraftFCB 875 N. Michigan A 167,000 New Lease Grosvenor Capital Management 900 N. Michigan A 96,000 Renewal & Expansion Northwestern University 633 N. St. Clair A 62,000 New Lease (Feinberg School of Medicine) Comcast Spotlight 444 N. Michigan B 20,000 Renewal/Expansion % 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% VACANCY North Michigan Avenue s overall vacancy rate decreased significantly in the third quarter to 14.7 percent, down from 15.6 percent in the previous quarter. The current vacancy rate is slightly below the 15.1 percent vacancy rate observed in the third quarter of. Class A buildings have seen progress this quarter with a decrease in total vacancy rate to 13.9 percent, down from 15.6 percent in the prior quarter. Class B vacancy also decreased during the third quarter to 13.6 percent, down forty basis points. ABSORPTION Total net absorption for the third quarter of 2012 was positive 116,558 square feet. This represents a large gain, after many quarters of either small positive gains or, more frequently, negative absorption results. Class A and B properties both posted positive net absorption numbers of 77,341 square feet and 28,564 square feet, respectively. Year-to-date net absorption for North Michigan Avenue remains at negative 13,848 square feet, compared to negative 101,006 square feet one year ago. RENTS The North Michigan Avenue overall average direct gross asking rate increased slightly in the third quarter to $31.23 per square foot, from $31.14 per square foot in the second quarter. The current asking rate is $0.41 per square foot higher than one year ago in the third quarter of. Both Class A and B average direct gross asking rates decreased slightly during the third quarter to $35.57 per square foot and $30.86 per square foot, respectively. However, the Class A rate is up slightly by $0.14, compared to a year ago in the third quarter of. CONSTRUCTION No new construction was delivered to North Michigan Avenue during the third quarter. There are currently no office developments planned in the submarket. NORTH MICHIGAN SALES ACTIVITY THIRD QUARTER 2012 Status Address Class Size (SF) Sale Price Price/SF Seller Buyer NM 875 N. Michigan Avenue (Parking/Office Component) NM = New to market A 856,000 TBD TBD Deutsche Bank Group & Northstar Realty TBD COLLIERS INTERNATIONAL P. 14

15 River North In, the addition of over 2.5 million square feet of new Class A Office space breathed new life into the otherwise sleepy River North submarket. Recently, the submarket has been experiencing a second boost provided by growth within Chicago s technology sector. MARKET INDICATORS River North 3Q 3Q 2012 VACANCY RATE 14.6% 13.4% ABSORPTION (SF) -87,291-88,800 RENTS $33.37 $31.91 INVENTORY 16,515,019 16,515,019 The result of these two elements has been a dynamic shift in the submarket s diversity, strength and tenant appeal. River North contains a mix of office options ranging from Class B and C brick and timber, loft-style properties to its newest Class A trophy office towers. The range in office space options captures the interest of both traditional and unconventional office users. This diverse mix has contributed to the submarket s stability and is one of the reasons it boasts the lowest vacancy rate of any submarket in the CBD. River North s peripheral location, which includes a residential component, combined with its distinctive space offerings have resulted in it being the hub of Chicago s technology sector. During the quarter, Motorola Mobility, now owned by Google, made a commitment to lease 572,000 square feet at the Merchandise Mart. Motorola Mobility will relocate 3,000 employees next summer from its current headquarters in suburban Libertyville to the top four floors and rooftop of the Merchandise Mart. This transaction is the largest lease signing in the CBD for the year and reinforces River North s reputation as the core submarket for technology firms. This transaction also serves as evidence of River North landlords working creatively to capture part of the technology tenant base. Historically, the Merchandise Mart has housed predominantly design tenants and their showrooms. In order to accommodate Google s occupancy, over 100 design tenants and showrooms had to be relocated within the building in addition to lease buyouts being negotiated with some of the Mart s office tenants. Salesforce.com s lease signing for 116,000 square feet last quarter at 111 W. Illinois Street along with Google s relocation to the Merchandise Mart will result in nearly 700,000 square feet of positive absorption for River North once occupancies take place. Only one contiguous and direct block of space greater than 100,000 square feet is available in River North. 350 W. Mart Center has a direct block of space consisting of 130,380 square feet, which will be available for lease in There were no investment sales transactions in River North during the third quarter. 300 N. LaSalle remains on the market as current owner, KBS REIT 2, is selling a partial stake in the building. Joseph Lagoa is also selling 540 N. LaSalle Street, a completely vacant property, for an asking price of $8.5 million ($ per square foot). 350 WEST MART CENTER COLLIERS INTERNATIONAL P. 15

16 Square Footage NET ABSORPTION & VACANCY RIVER NORTH SUBMARKET 1,000, , , , , , , , , , , % 161, % Source: Costar; Colliers International Research 938, % Absorption 305, % ASKING GROSS FACE RATES RIVER NORTH SUBMARKET $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $ , % 150, YTD $ Source: Costar; Colliers International Research Class A Class B Class C Average 13.4% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% VACANCY River North s total vacancy rate has remained stable throughout 2012 with the current rate residing at 13.4 percent. Despite a vacancy increase to 13.4 percent during the third quarter, River North has experienced a substantial decrease in vacancy over the past year. River North s vacancy rate was 14.6 percent during the third quarter of. The submarket s health continues to improve and as the large lease signings that were completed in recent quarters result in occupancies, the submarket s vacancy rate will see substantial deceases. Class A vacancy decreased one percentage point during the third quarter to 20.9 percent. Despite this decrease, River North s Class A vacancy rate remains the most elevated for Class A space in the CBD. This elevated rate is largely due to a smaller Class A inventory base and the existence of large blocks of vacancy at 330 N. Wabash Avenue. However, with several large lease signings at the property, vacancy is expected to descend once the tenants take occupancy starting in Class B and C vacancies are extremely healthy at 9.5 percent and 12.1 percent, respectively. ABSORPTION Net absorption totaled negative 88,800 square feet during the third quarter. However, due to strong absorption during the first half of the year, the yearto-date net absorption for the submarket is positive 150,387 square feet, an improvement over the positive 85,772 square feet of year-to-date absorption posted at this time one year ago. RIVER NORTH LEASE ACTIVITY THIRD QUARTER 2012 RENTS Tenant Google InnerWorkings Address 222 Merchandise Mart 600 W. Chicago Avenue Class B B Size (SF) 572,000 20,000 Deal Type New Lease Expansion The average direct gross asking rate increased during the third quarter to $31.91 per square foot, up from $31.85 per square foot during the second quarter. Both Class A and B average asking rates significantly increased during the third quarter to RIVER NORTH SALES ACTIVITY THIRD QUARTER 2012 $40.31 and $30.90, respectively. As vacancy continues to tighten in this Status FS Address 300 N. LaSalle Street* Class A Size (SF) 1,302,901 Sale Price TBD Price/SF TBD Seller KBS Reit 2 Buyer - submarket, landlords are likely to place continued upward pressure on rates. FS 540 N. LaSalle Street C 65,140 TBD TBD Joseph Lagoa - FS = For sale * Partial Stake CONSTRUCTION No new construction was delivered to River North during the second quarter. There are currently no office developments planned in the submarket. COLLIERS INTERNATIONAL P. 16

17 MARKET INDICATORS West Loop 3Q 3Q 2012 VACANCY RATE 14.7% 14.1% ABSORPTION (SF) 241,858-26,804 RENTS $33.63 $34.44 INVENTORY 48,164,060 48,164,060 West Loop During the past decade, the West Loop s reputation as the CBD s leading submarket has grown as a result of its proximity to public transit, the development of multiple trophy assets with plentiful amenities and efficient footprints within the submarket, and the image associated with being located on or near Wacker Drive, an address that has a longstanding positive reputation for office tenants. The West Loop contains over 27 million square feet of Class A inventory exceeding the second largest Class A inventory, which is located in the Central Loop, by 11 million square feet. It s substantial Class A inventory base and it s desirability to more traditional office users make the West Loop somewhat of a barometer as to the health of the CBD. The West Loop was among the first submarkets to begin posting positive gains following the economic downturn, serving as a leading indicator of the start of a recovery. The submarket s recovery speed has leveled out during the past year as other submarkets have begun to post gains. Despite a relatively flat quarter, the West Loop is expected to be the beneficiary of positive absorption in future quarters, particularly with the future 221,000 square foot relocation of Hillshire Brands (the meats division of Sara Lee Corporation) from the suburbs to 400 S. Jefferson Street. Additionally, during the third quarter, United Continental Holdings committed to relocating its headquarters from 77 W. Wacker Drive in the Central Loop to the Willis Tower at 233 S. Wacker in the West Loop. The airline, which recently relocated its operations center to the tower, will be adding to its occupancy by 205,000 square feet, resulting in more positive absorption once the move is complete. Also during the quarter, Guggenheim Partners renewed and expanded at 227 W. Monroe Street for a total of 80,000 square feet. AIG also committed to a relocation from 300 S. Riverside Drive to 500 W. Madison Street where the company will occupy nearly 75,000 square feet. The number of available, direct blocks of space 100,000 square feet or greater increased by one during the quarter, bringing the total available to six. Latham & Watkin s space at 233 S. Wacker Drive created another large block of space during the quarter. The law firm will be relocating in 2014 to 330 N. Wabash Street in River North. Four of the large blocks reside in Class A properties and of those three reside in high-rise space. As market fundamentals slowly tighten and large block availability remains constrained, momentum for potential new development has grown for the first time since. Investment sales activity picked up steam during the third quarter in the West Loop. Four transactions were completed and another three remain under contract. GE Electric Pension Trust sold two of its West Loop Properties during the quarter. 200 W. Monroe Street was sold to Farbman Group and Lubert-Adler Funds for $75 million ($140 per square foot) while 230 W. Monroe Street sold to a joint venture between Lincoln Property and California-based PIMCO for $92.9 million ($149 per square foot). Also sold during the quarter was the newly renovated building at 300 W. Adams Street which was traded by Sterling Bay Companies to Alliance Partners for $51 million ($202 per square foot). Lastly, 311 W. Monroe Street was sold for $44 million ($114 per square foot) by AREA Property Partners to a joint venture between Golub and Archon. During the quarter, 1 S. Wacker Drive, owned by TIAA-CREF, went under contract for a rumored $230 million ($193 per square foot) to Harbor Group International. Also under contract are 550 W. Washington Street and 111 N. Canal Street. 550 W. Washington Street is being sold to MetLife Insurance by Beacon Capital Partners and Sterling Bay Companies is purchasing 111 N. Canal Street from Albert Frank & Co. with intentions of renovating the building. Responding to investor interest in West Loop properties, four owners placed their properties on the market during the third quarter. Bank of America is evaluating bids for its property at 540 W. Madison Street. The bank will continue to lease the majority of space at the building following a sale. Also, 555 W. Monroe Street is being sold by Principal Financial Group, Cape Horn Group listed 205 W. Wacker Drive on the market and Tishman Speyer is seeking a buyer for its asset at 125 S. Wacker Drive. COLLIERS INTERNATIONAL P. 17

18 NET ABSORPTION & VACANCY WEST LOOP SUBMARKET Square Footage West Loop Submarket 1,500,000 1,363,754 1,000, ,000 0 (500,000) (1,000,000) 11.7% (478,616) 12.7% Source: Costar; Colliers International Research (756,451) 16.4% Absorption 56, % ASKING GROSS FACE RATES WEST LOOP SUBMARKET $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $ , % 62, YTD Source: Costar; Colliers International Research Class A Class B Class C Average 14.1% % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% VACANCY For the third quarter in a row, overall vacancy remained unchanged at 14.1 percent in the West Loop. The submarket s vacancy rate has fallen 1.2 percent over the past year. Despite a relatively flat year to date, the West Loop witnessed one of the more speedy recoveries in the CBD. has fallen 2.5 percent in the past two years. Whereas Class A space rebounded more quickly from the recent downturn, Class B and C space lagged a bit with their recoveries becoming more evident recently. ABSORPTION Net absorption during the third quarter was relatively flat with negative 26,804 square feet posted. Prior to this quarter, the West Loop had witnessed nine consecutive quarters of positive demand, totaling an aggregate of 1.73 million square feet. Year-to-date absorption for the West Loop resides at positive 62,228 square feet, compared to positive 730,974 square feet one year ago. RENTS The average direct gross asking rate increased slightly for the third consecutive quarter to $34.44 per square foot, up from $33.92 per square foot in the prior quarter. The last time the West Loop s average asking rate surpassed $34.00 per square foot was in early-. Since the third quarter of, the average direct gross asking rate has increased $0.81 per square foot. The average asking Class A rate for the second quarter was $38.06 per square foot, a slight decrease from $38.20 per square foot in the prior quarter. Class B rates increased $0.43 per square foot during the quarter to $30.95 per square foot. CONSTRUCTION No new construction was delivered to the West Loop during the third quarter. However, Hines plans to break ground on a new 45-story, 900,000-square-foot office tower at 444 W. Lake Street on a speculative basis before yearend. The developer obtained $300 million in financing from Ivanhoe Cambridge and the building is anticipated to be delivered in Another new development that has garnered substantial tenant interest is 150 N. Riverside Plaza which is currently owned by developer John O Donnell. The project could also potentially launch later this year or next year and anchor tenants seeking a 2016 or 2017 lease commencement are actively being pursued. COLLIERS INTERNATIONAL P. 18

19 WEST LOOP LEASE ACTIVITY THIRD QUARTER 2012 Tenant Address Class Size (SF) Deal Type United Continental Holdings 233 S. Wacker Drive A 205,000 Expansion Guggenheim Partners 227 W. Monroe Street A 80,000 Renewal/Expansion AIG 500 W. Madison Street A 74,000 New Lease GE Transportation 500 W. Monroe Street A 54,000 New Lease ShopperTrak 233 S. Wacker Drive A 52,000 New Lease Ropes & Gray 191 N. Wacker Drive A 52,000 Sublease CBIZ Gibraltar 225 W. Wacker Drive A 38,000 New Lease HNTB 1 S. Wacker Drive B 31,000 New Lease Trisect 130 S. Jefferson Street C 30,000 New Lease Mintel 333 W. Wacker Drive A 26,000 New Lease Walgreens (IT Group) 120 S. Riverside Drive B 25,000 New Lease Illinois CPA SocietyUC = Under Contract 550 W. Jackson Boulevard A 22,000 Renewal WEST LOOP LEASE ACTIVITY THIRD QUARTER 2012 Status Address Class Size (SF) Sale Price Price/SF Seller Buyer UC 1 S. Wacker Drive B 1,195,170 $230,000,000 $ TIAA-CREF Harbor Group International NM 540 W. Madison Street A 1,111,925 TBD TBD Bank of America TBD UC 111 N. Canal Street B 924,800 $100,000,000 $ Albert Frank & Co. Sterling Bay Cos. Sold 230 W. Monroe Street B 623,524 $92,905,076 $ General Electric Pension Trust Lincoln Property Co. JV PIMCO NM 125 S. Wacker Drive B 564,000 TBD TBD Tishman Speyer Properties L.P. TBD Sold 200 W. Monroe Street B 535,911 $75,000,000 $ General Electric Pension Trust Farbman Group/Lubert Adler Funds NM 555 W. Monroe Street A 418,769 TBD TBD Principal Financial Group TBD Sold 311 W. Monroe Street B 385,000 $44,000,000 $ AREA Property Partners Golub & Co. JV Archon UC 550 W. Washington A 372,000 $112,000,000 $ Beacon Capital Partners MetLife Insurance NM 205 W. Wacker Drive B 263,650 TBD TBD Cape Horn Group TBD Sold 300 W. Adams Street C 252,847 $51,000,000 $ Sterling Bay Cos. JV Annenberg Investments Ldt. Alliance Partners NM = New to Market UC = Under Contract COLLIERS INTERNATIONAL P. 19

20 THIRD QUARTER 2012 OFFICE MARKET STATISTICS LOCAL STANDARDS (Includes competitve owner-occupied properties) VACANCY ABSORPTION RENTS Class Total Inventory SF Direct SF Vacant Sublease SF Vacant Total Vacant SF Direct Rate Sublease Rate Total Rate Total Direct Net Absorption Total Sublease Net Absorption Total Net Absorption Net Absorption YTD SF Asking Full Service Average Direct Rent Per SF Central Loop Class A 16,006,619 1,706, ,217 1,914, % 1.3% 12.0% ,395 60,209 (293,093) $36.45 Class B 17,920,756 2,717, ,322 2,879, % 0.9% 16.1% 107,718 1, , ,164 $29.06 Class C 4,322, ,830 7, , % 0.2% 13.0% 63,870 29,325 93, ,472 $21.83 Subtotal 38,250,296 4,980, ,700 5,358, % 1.0% 14.0% 172,402 89, , ,543 $30.81 East Loop Class A 6,699, ,587 76,030 1,051, % 1.1% 15.7% 251,193 60, , ,606 $36.61 Class B 12,811,828 2,289,421 84,049 2,373, % 0.7% 18.5% (343,288) 38,464 (304,824) (277,509) $29.94 Class C 7,826,198 1,029,201 16,926 1,046, % 0.2% 13.4% 25,735 1,727 27,462 (228,109) $23.92 Subtotal 27,337,623 4,227, ,385 4,505, % 1.0% 16.5% (220,923) 26,568 (194,355) (278,032) $30.15 North Michigan Avenue Class A 4,676, ,239 40, , % 0.9% 13.9% 77, ,341 63,361 $35.57 Class B 6,078, ,440 42, , % 0.7% 13.6% 18,788 9,776 28,564 (85,301) $30.86 Class C 2,788, , , % 0.0% 18.6% 10, ,653 8,092 $21.75 Subtotal 13,543,054 1,912,568 83,381 1,995, % 0.6% 14.7% 106,782 9, ,558 (13,848) $31.23 River North Class A 5,124,846 1,069, ,069, % 0.0% 20.9% 50, , ,132 $40.31 Class B 9,114, , , , % 4.0% 9.5% (127,557) (8,609) (136,166) (88,633) $30.90 Class C 2,275, , , % 0.0% 12.1% (6,103) 2,988 (3,115) 42,888 $21.73 Subtotal 16,515,019 1,849, ,549 2,212, % 2.2% 13.4% (83,179) (5,621) (88,800) 150,387 $31.91 West Loop Class A 27,488,177 3,743, ,783 4,090, % 1.3% 14.9% (267,136) 4,873 (262,263) (392,667) $38.06 Class B 16,399,575 1,962,270 67,742 2,030, % 0.4% 12.4% 104,277 3, , ,149 $30.95 Class C 4,276, ,796 24, , % 0.6% 16.2% 123,492 4, , ,746 $22.83 Subtotal 48,164,060 6,374, ,046 6,813, % 0.9% 14.1% (39,367) 12,563 (26,804) 62,228 $34.44 CBD Total Class A 59,995,984 8,106, ,474 8,777, % 1.1% 14.6% 112, , ,150 (164,661) $37.25 Class B 62,325,057 8,256, ,599 8,976, % 1.2% 14.4% (240,062) 43,932 (196,130) 266,870 $30.08 Class C 21,489,011 3,049,264 48,608 3,097, % 0.2% 14.4% 217,647 38, , ,089 $22.68 Subtotal 143,810,052 19,412,262 1,439,681 20,851, % 1.0% 14.5% 90, , , ,298 $31.96 The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports COLLIERS INTERNATIONAL P. 20

21 THIRD QUARTER 2012 OFFICE MARKET STATISTICS COLLIERS INTERNATIONAL STANDARDS (Includes all owner-occupied properties) VACANCY ABSORPTION RENTS Class Total Inventory SF Direct SF Vacant Sublease SF Vacant Total Vacant SF Direct Rate Sublease Rate Total Rate Total Direct Net Absorption Total Sublease Net Absorption Total Net Absorption Net Absorption YTD SF Asking Full Service Average Direct Rent Per SF Central Loop Class A 16,006,619 1,706, ,217 1,914, % 1.3% 12.0% 0 59,395 60,209 (293,093) $36.45 Class B 22,613,839 2,722, ,322 2,884, % 0.7% 12.8% 107,718 1, , ,246 $29.06 Class C 6,228, ,150 9, , % 0.2% 10.3% 84,744 37, , ,962 $21.83 Subtotal 44,848,758 5,057, ,332 5,437, % 0.8% 12.1% 193,276 97, , ,115 $30.81 East Loop Class A 6,699, ,587 76,030 1,051, % 1.1% 15.7% 251,193 60, , ,606 $36.61 Class B 13,035,095 2,298,731 84,049 2,382, % 0.6% 18.3% (343,288) 38,464 (304,824) (277,509) $29.94 Class C 8,410,394 1,146,500 16,926 1,163, % 0.2% 13.8% 25,735 1,727 27,462 (216,355) $23.92 Subtotal 28,145,086 4,420, ,005 4,597, % 0.6% 16.3% (66,360) 100,380 34,020 (232,258) $30.36 North Michigan Avenue Class A 4,910, ,239 40, , % 0.8% 13.3% 77, ,341 63,361 $35.57 Class B 7,803, ,686 42, , % 0.6% 10.8% 21,638 9,776 31,414 (77,316) $30.86 Class C 3,515, , , % 0.0% 15.4% 8, ,782 20,920 $21.75 Subtotal 16,229,748 1,956,193 83,381 2,039, % 0.5% 12.6% 107,761 9, ,537 6,965 $31.23 River North Class A 5,124,846 1,069, ,069, % 0.0% 20.9% 50, , ,132 $40.31 Class B 10,008, , , , % 3.8% 9.4% (124,667) (15,809) (140,476) (111,912) $30.90 Class C 4,011, ,224 49, , % 1.2% 13.4% (12,233) 2,757-9, ,889 $21.73 Subtotal 19,145,436 2,123, ,402 2,552, % 2.2% 13.3% (86,419) (13,052) (99,471) 194,109 $31.91 West Loop Class A 28,169,177 3,778, ,783 4,125, % 1.2% 14.6% (267,136) 4,873 (262,263) (392,667) $38.06 Class B 18,000,383 1,965,610 67,742 2,033, % 0.4% 11.3% 112,239 3, , ,149 $30.95 Class C 5,245, ,138 24, , % 0.5% 16.0% 117,696 4, , ,912 $22.83 Subtotal 51,414,616 6,557, ,046 6,996, % 0.9% 13.6% (37,201) 12,563 (24,638) 66,394 $34.44 CBD Total Class A 60,911,020 8,141, ,474 8,812, % 1.1% 14.5% 112, , ,150 (164,661) $37.25 Class B 71,461,791 8,354, ,978 9,090, % 1.0% 12.7% (226,360) 36,732 (189,628) 253,658 $30.08 Class C 27,410,833 3,620, ,714 3,720, % 0.4% 13.6% 224,724 46, , ,328 $22.68 Subtotal 159,783,644 20,115,818 1,508,166 21,623, % 0.9% 13.5% 111, , , ,325 $31.96 The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports COLLIERS INTERNATIONAL P. 21

22 D a n R ya n E x p w y DOWNTOWN CHICAGO SUBMARKET MAP OHIO WELLS LA SALLE OHIO ILLINOIS HUBBARD KINZIE CLARK CLARK CLARK CLARK DEARBORN FEDERAL DEARBORN PLYMOUTH PARK TERR FEDERAL L HALSTED HALSTED GRAND KINZIE WASHINGTON MONROE 12TH PL O BRIEN 13TH MAXWELL LIBERTY 14TH 14TH PL 15TH PL 16TH 17TH ELM HUBBARD HOBBIE DESPLAINES INES LARRABEE FULTON LAKE RANDOLPH JEFFERSON JACKSON VAN BUREN HARRISON SON JEFFERSON TAYLOR ROOSEVELT SCOTT CLINTON N DIVISION OAK KINGSBURY HUDSON WEST LOOP POLK MADISON CABRINI MAXWELL CANAL SEDGWICK ELM VAN BUREN CABRINI ORLEANS WACKER SCOTT HILL OAK WALTON LOCUST CHESTNUT INSTITUTE PL. FRANKLIN FRANKLIN WENDELL CHICAGO RIVER NORTH RANDOLPH WASHINGTON MADISON MONROE ADAMS WELLS WELLS LAKE LA SALLE FINANCIAL LA SALLE MAPLE ERIE ONTARIO GRAND WACKER SUPERIOR HURON WALTON CENTRAL LOOP JACKSON POLK DEARBORN RN PLYMOUTH STATE STATE RUSH STATE SCOTT DIVISION ELM CEDAR DELAWARE PEARSON 14TH PL OAK WABASH WABASH WABASH STONE BELLEVUE 13TH 14TH CHESTNUT RUSH MICHIGAN HARRISON 8TH 9TH 11TH 16TH MICHIGAN MICHIGAN T H E M A G N I F I C E N T M I L E WACKER ST. CLAIR STETSON PRAIRIE MIES VAN DER ROHE NORTH CITY FRONT PLAZA DRIVE SOUTH WATER CONGRESS ROOSEVELT BALBO COLUMBUS COLUMBUS FAIRBANKS DE WITT PARK CHICAGO NORTH MICHIGAN AVENUE NEW NORTH WATER LAKE SHO McCLURG EAST LOOP LAKE SHORE DRIVE McFETRIDGE HARBOR LAKE SHO RE DRIVE offices in 62 countries on 6 continents United States: 147 Canada: 37 Asia: 36 Australia/New Zealand: 165 Latin Ameria: 19 EMEA: 118 > $1.8 billion in annual revenue > 1,250,000 square feet under management* > More than 12,300 professionals * The combination of Colliers International and FirstService results in 2.2 billion under management (2nd largest in the world) RESEARCHER: Downtown Chicago Michelle Tenuta Vice President Research & Analytics Colliers International 200 S Wacker Drive, Suite 700 Chicago, IL TEL michelle.tenuta@colliers.com Accelerating success COLLIERS INTERNATIONAL P. 22