OFFICE MARKET REPORT. Northwest Arkansas. 3rd Quarter Q3 Market Trends 2016 by Xceligent, Inc. All Rights Reserved

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1 OFFICE MARKET REPORT Northwest Arkansas 3rd Quarter 2016

2 Table of Contents/ Methodology of Tracked Set Xceligent is a leading provider of verified commercial real estate information which assists real estate professionals, appraisers, owners, investors and developers that make strategic decisions to lease, sell, buy and develop commercial properties. Table of Contents/Methodology of Tracked Set 2 Office Market Map 3 Northwest Arkansas Office Overview 4-5 Statistics by Market 6 Vacancy Rates & Asking Rates 7-8 Leasing & Absorption 9 New Construction 10 Office Advisory Board Members 11 Xceligent Northwest Arkansas Team 12 The Northwest Arkansas tracked set consists of an inventory of buildings considered to be competitive within the brokerage community. All buildings within the competitive tracked set have been reviewed and verified by members of the Advisory Boards for each market area. Inventory Class A Class B Class C Total Available (sf) Total Vacant (sf) Direct Vacant (sf) The total square feet of all existing single and multi tenant office buildings greater than 10,000 (sf), excluding medical, government and owner occupied buildings. Most prestigious buildings competing for premier office users with rents above the market average. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence. Buildings competing for a wide range of office users with average market rents. Building finishes are fair to good for the area and systems are adequate, but the property does not compete with Class A product. Buildings competing for office users requiring functional office space at rents below the market average for the area. All of the available leasable space within a building, whether it is occupied or vacant, for direct lease or sublease space. Space can be available but not vacant, for example, if the landlord, or his agent, is marketing space that will be coming available at a future date because a tenant is planning to move. The total of all of the vacant square footage within a building, including both direct and sublease space. Whether the tenant is paying rent or not, the space is considered vacant only if it is unoccupied. The total of the vacant square footage in a building that is being marketed by an agent representing the landlord. Sublease (sf) Space that is offered for lease by a current tenant, or his agent, within a property. Net Absorption The net change in occupancy from quarter to quarter, expressed in square feet. Weighted Average Direct Lease Rate The weighted average of all direct asking lease rates expressed as a full service/gross rental rate and weighted on total direct available square feet. Non-full service rates (such as NNN) have been grossed up to reflect a full service/gross rate. 2

3 Office Market Map 3

4 Northwest Arkansas Office Overview Overview Consistent transactions and new preleased offerings in the metro continue to push the vacancy down from 9.7% to 7.9% as the Northwest Arkansas office year-to-date absorption hits 336,399 square feet (sf) in 3Q Office vacancy rates in Fayetteville's CBD dropped 3 percentage points from last quarter to a tight 1.3% largely due to the purchase of the 57,972 sf EJ Ball building whose owners seek to make improvements that will add it to Fayetteville CBD's Class A inventory. The Rogers area experienced the largest absorption and vacancy change reporting 44,765 sf absorption in 3Q 2016 as it hits 217,629 sf year-to -date. Hunt Tower, Vista 21 and the Country Club Plaza are hosting the new tenants Baer, Clorox, Kraft, and Acosta over the course of the year. Only 50,000 sf of activity is expected in Class C space for the upcoming quarter. At a 2.9% vacancy across the market, Class C offerings are tightening up. The size and number of transactions have steadily declined over the year. And the weighted average of rental rates are on par with Class B properties giving little incentive for users to maintain a Class C space. # of Bldgs Inventory (sf) Total Available (sf) Total Vacant (sf) Total Vacancy Rate (%) Quarterly Net YTD Net Absorption (sf) A 79 3,792, , , % 67, ,640 B 206 5,180, , , % 27,154 78,690 C 82 1,867,359 81,271 49, % 4, Overall ,839,467 1,242, , % 99, ,399 # of Bldgs Inventory (sf) Direct Available (sf) Direct Vacant (sf) Direct Vacancy Rate (%) Direct Quarterly YTD Direct Net A 79 3,792, , , % 70, ,937 B 206 5,180, , , % 27,154 78,875 C 82 1,867,359 81,271 49, % 4, Overall ,839,467 1,204, , % 102, ,881 # of Bldgs Inventory (sf) Sublease Available (sf) Sublease Vacant (sf) Sublease Vacancy Rate (%) Sublease Quarterly YTD Sublease Net A 79 3,792,096 10,144 8, % -3,297-3,297 B 206 5,180,012 29,997 2, % C 82 1,867, % - - Overall ,839,467 40,141 10, % -3,297-3,482 4

5 Northwest Arkansas Office Overview Historical Vacancy Rate & Net Absorption 200, % 150, % 100, % 50, % 0 4.0% -50, % -100,000 3Q Q Q Q Q % Historical Vacancy Rates by Class 15.0% 12.0% 9.0% 6.0% 3.0% 0.0% A B C 3Q Q Q Q Q 2016 Historical Net Absorption by Class 120, ,000 80,000 60,000 40,000 20, ,000-40,000-60,000 A B C 106,538 80,715 84,041 77,973 67,061 27,154 1,230 2,810 6,789 4,800-8,258-11,520-18,268-26,437-33,214 3Q Q Q Q Q

6 Statistics by Market # of Bldgs Inventory (sf) Total Vacant (sf) Sublease Vacant (sf) Total Vacancy Rate (%) Total Qtrly Net YTD Total Net Fayetteville 64 1,438, , % ,425 Rogers 77 2,689, ,945 8, % 44, ,629 Fayetteville CBD ,608 7, % 20,434 19,421 Bentonville 146 3,246, ,716 2, % 31,103 65,341 Bentonville CBD 24 1,694,216 39, % 1,863 12,165 Lowell ,763 21, % East Springdale ,242 20, % - - West Springdale 4 64, % - - Springdale CBD 4 120, % - - Overall ,839, ,930 10, % 99, ,399 6

7 Vacancy Rates & Asking Rates Vacancy Rate % Weighted Average Asking Rate (FSG) 3Q Q Q Q Q Q Q Q Q Q 2016 Bentonville 10.2% 11.5% 10.0% 10.9% 10.8% $16.63 $16.38 $16.32 $16.14 $16.36 Bentonville CBD 2.0% 2.0% 2.5% 2.5% 2.4% $17.68 $17.22 $18.36 $22.10 $22.26 East Springdale 3.7% 3.5% 3.5% 3.5% 3.5% $15.22 $15.81 $14.86 $14.86 $14.38 Fayetteville 9.2% 8.9% 7.7% 7.5% 7.5% $16.47 $17.28 $17.55 $18.91 $18.79 Fayetteville CBD 5.3% 4.7% 4.9% 4.9% 1.3% $13.35 $14.71 $14.52 $12.84 $12.19 Lowell 5.0% 5.0% 5.6% 4.9% 4.9% $18.96 $18.96 $19.01 $19.05 $19.50 Rogers 9.3% 16.9% 13.7% 13.1% 11.4% $20.48 $23.26 $23.05 $22.90 $22.70 Overall 7.7% 9.9% 8.6% 8.7% 8.0% $17.97 $19.72 $19.16 $19.37 $

8 Vacancy Rates & Asking Rates Vacancy Rate by Market 10.8% 11.4% 7.5% 2.4% 3.5% 1.3% 4.9% Bentonville Bentonville CBD East Springdale Fayetteville Fayetteville CBD Lowell Rogers Weighted Average Asking Rent by Market (FSG) $22.26 $22.70 $16.36 $14.38 $18.79 $12.19 $19.50 Bentonville Bentonville CBD East Springdale Fayetteville Fayetteville CBD Lowell Rogers $37.00 $32.00 $27.00 $22.00 $17.00 $12.00 $7.00 Asking Rent Range by Class (FSG) $32.00 $28.00 $22.55 $14.75 $16.50 $16.21 $13.04 $10.00 $10.00 A B C 8

9 Leasing & Absorption Property Name Largest Absorption Changes Occupied or Vacated (sf) Tenant Name Submarket Building Class Vista 21 32,000 Clorox Bentonville A One Lakeside Center -25,600 Acosta Bentonville A Property Name Top Transactions Sale Price Sold (sf) Buyer Seller Market Building Class Crossmark $6,450,000 18,562 Chester CM Bentonville DST NL Ventures IX F Street LLC Bentonville CBD A EJ Ball Building $3,125,000 57,972 Tower Square Fayetteville LLC et al Ball Plaza Holdings LLC Fayetteville CBD B 9

10 New Construction 400,000 New Construction by Quarter 350, , , , , ,000 50,000-3Q Q Q Q Q

11 Office Advisory Board Members Northwest Arkansas Colliers Butch Gurganus Commercial Realty, LLC Jeff Kemp Lindsey & Associates Bob Hopmann CBRE David Erstine Flake & Kelley Jessica Dearnley Marshall Saviers Sage Partners Grady Mathews Tom Allen 11

12 Xceligent Northwest Arkansas Team This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy. For more information, please contact : Dannelle Allen Director of Analytics (660) Dallen@xceligent.com Jeff Hays Director of Client Services (417) Jhays@xceligent.com 12