MARKET INDICATORS Q Q TOTAL 2,909,848 IN DEALS

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1 Research & Forecast Report DETROIT & ANN ARBOR OFFICE Q OFFICE ENDS ON A STRONG NOTE Peter McGrath Metro Detroit s office market reported a strong first quarter, carrying over the previous quarter s positive momentum. The market s experienced a 10 basis point decline in vacancy, and reported 441,935 SF of vacancy. While the market posted a small decline in quoted rents, in tier 1 Submarkets like Downtown Detroit and Ann Arbor, rents continue to grow. Overall, it was a quarter that continued most of the positive momentum of Absorption, occupancy, and rents all grew in 2016, and exciting projects are beginning to come on line. Most notably, build-to-suit headquarters projects for Little Caesars and Masco are expected to come online in As large automotive suppliers struggle to find modern office buildings, expect more buildto-suits in markets like Livonia, Auburn Hills, and Novi. Other large announcements include Microsoft moving to Downtown Detroit,. Into the warmer days of 2017, we do expect the market to move in a positive direction. However, it will continue to do so at a slow pace. While specialized requirements can be difficult to fulfill in markets like Birmingham and Ann Arbor, the overall market continues to suffer from a glut of excess office space, much of it 1980s era suburban office product. MARKET INDICATORS NET ABSORPTION CONSTRUCTION RENTAL RATE* 710 Q Q TOTAL OFFICE TRANSACTIONS *Asking Rents 2,909,848 SQUARE FOOTAGE IN DEALS *SALE & LEASE TRANSACTIONS

2 Notes on the Market RENTS ON THE MOVE In the Metro Detroit market area, the average quoted rental rate for available office space, all classes, was $18.94 per SF at the end of the first quarter of This represents a small $.03 decrease over the previous quarter. The average Class A quoted rental rate was $21.62 per SF, a $.17 increase from the previous quarter. Class B rental rates decreased however, falling from $18.59 to $ OVERALL MARKET OCCUPANCY RATE DECREASES The office vacancy rate in the Metro Detroit market decreased by ten basis points, reporting 11.4% at the end of the first quarter. The declining vacancy rate is a success story for Metro Detroit, as the vacancy rate has improved from 15.3% at the end of the first quarter of Across the market, the class A vacancy rate climbed to 11.9%. The north Southfield submarket reports the highest vacancy rate of 21.6%. ABSORPTION QUIETS DOWN Absorption was positive, with 441,935 SF of space absorbed in the quarter. This represents a strong follow up to the previous quarter s 521,321 SF. Right now, given the amount of vacant space on the market, the amount of positive absorption is a positive step giving landlords some sorely needed breathing room, and providing the funding mechanism for sorely needed common area improvements. TOTAL SUBURBAN CBD OVERALL MARKET QUOTED RENTAL RATES LARGE USER FOR DOWNTOWN DETROIT The first quarter was a quiet one for office sales in Metro Detroit. The largest reported deal was a user sale for 5505 Corporate Drive in Troy a 141,464 SF property that was purchased by the Oakland County Community Mental Health Authority. With some multi-tenant properties having a tough time leasing up in markets like Southfield, Farmington Hills, and Troy, expect to see more user sales in these markets in the coming year. LITTLE HEADWAY IN CONSTRUCTION Metro Detroit s office market continues to lack the fundamentals for new speculative construction. Four buildings for a total of 325,870 SF were delivered in the 1st quarter of While the first quarter market is one of the largest quarters for new construction in years, everything delivered and everything in the pipeline is a build-to-suit corporate campus. Given the vacancy rate in key submarkets like Troy and Southfield, it is difficult to see a developer moving forward with a new multi-tenant tower when assets are still available from the special servicers. LEASES PROPERTY CITY SUBMARKET SIZE OF DEAL TENANT NAME Southfield Road Allen Park One Campus Martius Detroit CBD 40, Lahser Road TOTAL SUBURBAN CBD Q NOTABLE OFFICE DEALS Southfield 90,000 Ford Motor Company Michigan Microsoft Technology Center 50,000 J&L America, Inc. 800 Tower Drive Troy 15,627 Guardian Industries Corp. SALES PROPERTY CITY SUBMARKET SIZE OF DEAL BUYER NAME PRICE 5505 Corporate Drive Portfolio Sale 2nd Avenue & York Pauline Plaza Troy 141,464 Oakland County Community Mental Health $70.59 Detroit CBD 70,000 Optima Michigan, Inc. $44.28 Ann Arbor 53,686 WRE1915, LLC $ Research & Forecast Report Q Office Colliers International

3 OFFICE MARKET > Q1 > 2017 BY THE NUMBERS CLASS A OFFICE MARKET STATISTICS SUBURBAN CBD TOTALS NUMBER OF BUILDINGS TOTAL 39,227,028 7,276,182 46,503,210 DIRECT SF 4,950, ,732 5,665,894 TOTAL SF 5,130, ,604 5,859,897 % 13.1% 10.0% 12.6% YTD NET ABSORPTION 325,241 43, ,203 YTD DELIVERIES UNDER CONSTRUCTION SF 110, ,334 QUOTED RATES $21.38 $23.56 $21.61 CLASS B OFFICE MARKET STATISTICS SUBURBAN CBD TOTALS NUMBER OF BUILDINGS 3, ,110 TOTAL GLA 87,532,333 15,539, ,072,291 DIRECT SF 14,695,849 1,887,473 16,583,322 TOTAL SF 14,762,857 1,892,578 16,655,435 % 16.9% 12.2% 16.2% YTD NET ABSORPTION 57,333 (54,275) 3,058 YTD DELIVERIES 187, ,167 UNDER CONSTRUCTION SF 561, ,140 QUOTED RATES $18.43 $20.31 $18.59 CLASS C OFFICE MARKET STATISTICS SUBURBAN CBD TOTALS NUMBER OF BUILDINGS 5, ,019 TOTAL GLA 43,869,717 3,406,809 47,303,526 DIRECT SF 3,939,104 1,037,054 4,976,158 TOTAL SF 3,950,451 1,037,054 4,987,505 % 9.0% 30.4% 10.5% YTD NET ABSORPTION 241,538 3, ,211 YTD DELIVERIES UNDER CONSTRUCTION SF QUOTED RATES $14.66 $22.70 $15.36 TOTAL OFFICE MARKET STATISTICS SUBURBAN CBD TOTALS NUMBER OF BUILDINGS 9, ,342 TOTAL GLA 170,656,078 26,222, ,879,027 DIRECT SF 23,585,115 3,640,259 27,225,374 TOTAL SF 23,843,601 3,659,236 27,502,837 % 14.0% 14.0% 14.0% YTD NET ABSORPTION 624,112 (6,640) 617,472 YTD DELIVERIES 187, ,167 UNDER CONSTRUCTION SF 671, ,474 QUOTED RATES $18.53 $21.66 $ Research & Forecast Report Q Office Colliers International

4 TREND TO WATCH Conference Room, Shmonference Room Across the United States, despite advances in energy efficient lighting and systems, the number one way for tenants to save money is to simply lease less space. For tenants large and small, every square foot is under a microscope. One of the chief victims of this trend is the in-suite conference room. Not too long ago, the conference room was a trophy a place to spend a little extra and impress clients. For many multi-floor tenants, a conference room on each floor was quite common. Today, this is no longer the case. For large tenants, conference room usage has gone from an afterthought to key design component. For instance, a large law firm in Chicago placed all the conference rooms on one floor. Rooms can be checked out on an as needed basis, and more importantly the size of certain rooms can be altered with dividers to fit the size of the meeting. Now the firm can host meetings and events for hundreds of people, which simply was not possible the old configuration. The benefits are clear a more efficient layout on the office floors, more efficient use of square footage throughout the suite, and greater flexibility for meetings throughout the firm. For smaller tenants in larger buildings, the trend takes on a different flavor the building simply provides conference space that can be checked out on a first-come, first-served basis. The idea here is simple spread the cost of rent, furniture, IT, and other expenses between multiple tenants. After all, why should tenants pay full freight for a room that is used sparingly. For office landlords, the trend is a knife that cuts both ways. The conference room trend is part of a broader trend of smaller workspaces per employee, which is making life for office landlords all the more difficult. The other side, however, is that landlords know what amenities to provide to stay competitive. COLLIERS INTERNATIONAL 2017 STATISTICS FOR MORE INFORMATION Paul Choukourian, CCIM Executive Managing Director Ext Amber Goodwin Senior Research Analyst Ext Peter McGrath, MA, MUP Ext Copyright 2017 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. Colliers International Detroit 2 Corporate Drive, Suite 300 Southfield, MI colliers.com/detroit 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

5 COLLIERS INTERNATIONAL DETROIT > OFFICE SPECIALISTS ROBERT BADGERO STEVEN BADGERO Vice President BRYAN BARNAS MICHAEL BENNETT BRENT BESHEARS GREG BOCKART RANDALL BOOK Executive Vice President JIM CHACONAS JEFFREY FENLEY JUSTIN FRANCEK GARY P. GROCHOWSKI Director of Agency Leasing ROBERT HAVER Vice President JOHN IDESON PATRICH JETT PETER MCGRATH GERALD O CONNOR Senior gerald.o connor@colliers.com ANDREW SADLER andrew.sadler@colliers.com BARRY SWATSENBARG Investment & Loan Sale Advisory barry.swatsenbarg@colliers.com MICHAEL YAMADA Principal michael.yamada@colliers.com Research & Forecast Report Q Industrial Colliers International