The CoStar Office Report

Transcription

1 The CoStar Office Report Y E A R - E N D Seattle/Puget Sound Office Market

2 Seattle/Puget Sound Office Market YEAR-END SEATTLE/PUGET SOUND Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets & Submarkets Inventory & Development Analysis Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance Figures at a Glance by Class & Market Figures at a Glance by Class & Submarket Figures at a Glance Grouped by CBD vs Suburban Historical Figures at a Glance Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters Downtown Seattle Market Eastside Market Northend Market Southend Market Tacoma Market 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A

3 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market Methodology The CoStar Office Report, unless specifically stated otherwise, calculates office statistics using CoStar Group s entire database of existing and under construction office buildings in each metropolitan area. Included are office, office condominium, office loft, office medical, all classes and all sizes, and both multi-tenant and single-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Office Report have been converted to a Full Service equivalent rental rate. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2013 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc L ST NW Washington, DC (800) NASDAQ: CSGP B THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

4 Seattle/Puget Sound Office Market YEAR-END SEATTLE/PUGET SOUND Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-of-a-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. : The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are buildingtype specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C

5 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construction and until it receives a certificate of occupancy. Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

6 Seattle/Puget Sound Office Market OVERVIEW YEAR-END SEATTLE/PUGET SOUND Seattle/Puget Sound s Decreases to 10.4% Net Absorption Positive 1,175,021 SF in the Quarter The Seattle/Puget Sound Office market ended the fourth quarter with a vacancy rate of 10.4%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,175,021 square feet in the fourth quarter. Vacant sublease space decreased in the quarter, ending the quarter at 1,185,175 square feet. Rental rates ended the fourth quarter at $26.08, an increase over the previous quarter. Four buildings delivered to the market in the quarter totaling 624,523 square feet, with 729,265 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Seattle/Puget Sound office market was positive 1,175,021 square feet in the fourth quarter. That compares to positive 46,325 square feet in the third quarter, positive 1,263,568 square feet in the second quarter, and positive 232,378 square feet in the first quarter. Tenants moving out of large blocks of space in include: U.S. Army Corps of Engineers moving out of 212,184 square feet at Federal Center South - Bldg 1201 Office; Philips Health Care moving out of 120,001 square feet at the 5th and Bell Building; and Perkins Cole LLP, moving out of 50,800 square feet at rd Ave. Tenants moving into large blocks of space in include: Amazon moving into 320,704 square feet at West 8th; Nordstrom moving into 300,000 square feet at th Ave; and Amazon also moving into 286,869 square feet at th Bldg. The Class-A office market recorded net absorption of positive 819,738 square feet in the fourth quarter, compared to positive 22,594 square feet in the third quarter, positive 1,013,417 in the second quarter, and positive 388,853 in the first quarter. The Class-B office market recorded net absorption of positive 239,055 square feet in the fourth quarter, compared to negative (8,005) square feet in the third quarter, positive 301,916 in the second quarter, and negative (159,668) in the first quarter. The Class-C office market recorded net absorption of positive 116,228 square feet in the fourth quarter compared to positive 31,736 square feet in the third quarter, negative (51,765) in the second quarter, and positive 3,193 in the first quarter. Net absorption for Seattle/Puget Sound s Central Business District (CBD) was positive 79,676 square feet in the fourth quarter. That compares to negative (40,260) square feet in the third quarter, positive 294,408 in the second quarter, and positive 65,033 in the first quarter. Net absorption for the suburban markets was positive 1,095,345 square feet in the fourth quarter. That compares to positive 86,585 square feet in third quarter, positive 969,160 in the second quarter, and positive 167,345 in the first quarter. The office vacancy rate in the Seattle/Puget Sound market area decreased to 10.4% at the end of the fourth quarter. The vacancy rate was 10.7% at the end of the third quarter, 10.7% at the end of the second quarter, and 11.4% at the end of the first quarter. Class-A projects reported a vacancy rate of 12.7% at the Rates by Class A B C Total Market 20% 18% 16% 14% Rate 12% 10% 8% 6% 4% 2% 0% COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 1

7 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market OVERVIEW end of the fourth quarter, 13.2% at the end of the third quarter, 13.1% at the end of the second quarter, and 14.7% at the end of the first quarter. Class-B projects reported a vacancy rate of 10.3% at the end of the fourth quarter, 10.5% at the end of the third quarter, 10.4% at the end of the second quarter, and 10.8% at the end of the first quarter. Class-C projects reported a vacancy rate of 6.6% at the end of the fourth quarter, 7.1% at the end of third quarter, 7.3% at the end of the second quarter, and 7.1% at the end of the first quarter. The overall vacancy rate in Seattle/Puget Sound s CBD at the end of the fourth quarter decreased to 12.3%. The vacancy rate was 12.5% at the end of the third quarter, 12.4% at the end of the second quarter, and 13.1% at the end of the first quarter. The vacancy rate in the suburban markets decreased to 9.7% in the fourth quarter. The vacancy rate was 10.2% at the end of the third quarter, 10.1% at the end of the second quarter, and 10.8% at the end of the first quarter. Largest Lease Signings The largest lease signings occurring in included: the 261,618-square-foot lease signed by CenturyLink at th Ave in the Downtown Seattle market; the 122,742-square-foot deal signed by Concur Technologies, Inc. at Key Center in the Eastside market; and the 122,000-square-foot lease signed by Publicis Groupe at West Harrison-West Tower in the Downtown Seattle market. Sublease The amount of vacant sublease space in the Seattle/Puget Sound market decreased to 1,185,175 square feet by the end of the fourth quarter, from 1,231,204 square feet at the end of the third quarter. There was 1,222,730 square feet vacant at the end of the second quarter and 1,154,624 square feet U.S. Comparison Past 10 Quarters Rate 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% q Seattle/Puget Sound 2q 4q United States 2q 4q at the end of the first quarter. Seattle/Puget Sound s Class-A projects reported vacant sublease space of 584,109 square feet at the end of fourth quarter, down from the 649,649 square feet reported at the end of the third quarter. There were 631,996 square feet of sublease space vacant at the end of the second quarter, and 625,798 square feet at the end of the first quarter. Class-B projects reported vacant sublease space of 568,677 square feet at the end of the fourth quarter, up from the 553,175 square feet reported at the end of the third quarter. At the end of the second quarter there were 546,014 square feet, and at the end of the first quarter there were 485,589 square feet vacant. Class-C projects reported increased vacant sublease space from the third quarter to the fourth quarter. Sublease vacancy went from 28,380 square feet to 32,389 square feet during that time. There was 44,720 square feet at the end of the second quarter, and 43,237 square feet at the end of the first quarter. Sublease vacancy in Seattle/Puget Sound s CBD stood at 587,799 square feet at the end of the fourth quarter. It was 624,197 square feet at the end of the third quarter, 612,061 square feet at the end of the second quarter, and 636,706 square feet at the end of the first quarter. Sublease vacancy in the suburban markets ended the fourth quarter at 597,376 square feet. At the end of the third quarter sublease vacancy was 607,007 square feet, was 610,669 square feet at the end of the second quarter, and was 517,918 square feet at the end of the first quarter. Rental Rates The average quoted asking rental rate for available office space, all classes, was $26.08 per square foot per year at the end of the fourth quarter in the Seattle/Puget Sound market area. This represented a 1.9% increase in quoted rental rates from the end of the third quarter, when rents were reported at $25.60 per square foot. The average quoted rate within the Class-A sector was $31.41 at the end of the fourth quarter, while Class-B rates stood at $24.06, and Class-C rates at $ At the end of the third quarter, Class-A rates were $30.96 per square foot, Class-B rates were $23.70, and Class-C rates were $ The average quoted asking rental rate in Seattle/Puget Sound s CBD was $28.89 at the end of the fourth quarter, and $25.04 in the suburban markets. In the third quarter, quoted rates were $28.66 in the CBD and $24.54 in the suburbs. Deliveries and Construction During the fourth quarter, four buildings totaling 624,523 square feet were completed in the Seattle/Puget Sound market area. This compares to four buildings totaling 139,420 Source: CoStar Property 2 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

8 Seattle/Puget Sound Office Market OVERVIEW YEAR-END SEATTLE/PUGET SOUND square feet that were completed in the third quarter, two buildings totaling 173,286 square feet completed in the second quarter, and 11,529 square feet in two buildings completed in the first quarter. There were 729,265 square feet of office space under construction at the end of the fourth quarter. Some of the notable deliveries include: Amazon Phase V, a 340,563-square-foot facility that delivered in fourth quarter and is now 98% occupied, and Federal Center South, a 208,000-square-foot building that delivered in fourth quarter and is now 100% occupied. The largest projects underway at the end of fourth quarter were Homeplate Center - South Bldg, a 189,602-squarefoot building with 0% of its space pre-leased, and UW Medicine Research, a 173,899-square-foot facility that is 100% pre-leased. Inventory Total office inventory in the Seattle/Puget Sound market area amounted to 182,107,276 square feet in 7,441 buildings as of the end of the fourth quarter. The Class-A office sector consisted of 55,971,130 square feet in 249 projects. There were 2,910 Class-B buildings totaling 95,854,565 square feet, and the Class-C sector consisted of 30,281,581 square feet in 4,282 buildings. Within the Office market there were 381 owner-occupied buildings accounting for 24,911,637 square feet of office space. Sales Activity Tallying office building sales of 15,000 square feet or larger, Seattle/Puget Sound office sales figures fell during the third quarter in terms of dollar volume compared to the second quarter of. In the third quarter, 10 office transactions closed with a total volume of $503,345,000. The 10 buildings totaled 1,310,580 square feet and the average price per square foot equated to $ per square foot. That compares to 21 transactions totaling $1,205,531,353 in the second quarter. The total square footage in the second quarter was 3,648,602 square feet for an Absorption & Deliveries Past 10 Quarters Millions SF Source: CoStar Property q Net Absorption q average price per square foot of $ Total office building sales activity in was up compared to. In the first nine months of, the market saw 41 office sales transactions with a total volume of $1,940,856,353. The price per square foot averaged $ In the same first nine months of, the market posted 39 transactions with a total volume of $1,451,420,684. The price per square foot averaged $ Cap rates have been lower in, averaging 6.61% compared to the same period in when they averaged 6.72%. The largest transaction that occurred within the last four quarters in the Seattle/Puget Sound market was the sale of Amazon Corporate Offices in Seattle. This 1,801,876-square-foot office complex sold for $1,154,269,079 or $ per square foot. The property sold on 12/21/ and will be occupied by Amazon. Reports compiled by: Research Manager, Michael LaPointe and Researcher, Leonard Spencer q 0.01 Deliveries q q 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3

9 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market MARKETS CoStar Submarket Clusters & Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Submarket Clusters Submarkets Downtown Seattle Ballard/U Dist Belltown/Denny Regrade Capitol Hill/Central Dist Lake Union Pioneer Sq/Waterfront Queen Anne/Magnolia S Seattle Seattle CBD* Eastside 520 Corridor Bellevue CBD* Coal Creek/Issaquah E King County I-90 Corridor Kirkland Mercer Island Redmond Suburban Bellevue Northend Bothell/Kenmore Edmonds/Lynnwood Everett CBD* Mill Creek/Woodinville N Snohomish County Northgate/N Seattle S Everett/Harbor Point S Snohomish County Southend Federal Way/Auburn Kent Valley Renton/Tukwila Seatac/Burien Tacoma Dupont E Pierce County Fort Lewis Gig Harbor/W Pierce Co Puyallup Spanaway Tacoma CBD* Tacoma Suburban Univ. Place/Lakewood * Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. 4 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

10 Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT YEAR-END SEATTLE/PUGET SOUND Historical Deliveries Deliveries 8.8 Average Delivered SF Millions of SF * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction Square Footage Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Downtown Seattle 5 625, , % 44, ,100 Tacoma 1 57,350 57, % 10,701 57,350 Northend 2 28,000 19, % 14,285 14,000 Eastside 1 18, % 34,058 18,414 Southend % 19,167 0 Totals 9 729, , % 24,473 81,029 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2008 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 6.0 Leased Un-Leased 300 Preleased Un-Leased Millions of SF Thousands of SF T q q 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5

11 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 2.5 Construction Starts Deliveries Millions of SF q q q q 2q 4q 2q 4q Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 6 57,379 43, % $ ,470 41,909 50,000 SF - 99,999 SF 3 185, , % $ , , ,000 SF - 249,999 SF 2 365, , % $ , ,000 SF - 499,999 SF 1 340, , % $ ,563 >= 500,000 SF % $ Recent Development by Tenancy Comparison Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA Deliveries Currently Under Construction By Class By Space Type 7% 24% 17% 24% 93% 76% 52% 31% 76% Multi Single Multi Single Class A Class B Class C Multi Single 6 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

12 Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT YEAR-END SEATTLE/PUGET SOUND 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7

13 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT 8 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

14 Seattle/Puget Sound Office Market FIGURES AT A GLANCE YEAR-END SEATTLE/PUGET SOUND Class A Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle ,715,509 4,573,487 4,878, % 1,729, , ,501 $31.37 Eastside ,965,882 1,434,156 1,486, % 333, $32.88 Northend 15 1,656, , , % 5, $25.05 Southend 9 1,289, , , % 113, $24.51 Tacoma 9 1,344, , , % 62, $28.07 Totals ,971,130 6,516,640 7,100, % 2,244, , ,501 $31.41 Class B Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle ,121,210 2,402,922 2,522, % (29,334) 0 0 $26.51 Eastside ,818,376 2,334,438 2,459, % 254,584 23,567 18,414 $25.94 Northend ,049,758 1,536,501 1,622, % 151,316 66,529 28,000 $22.52 Southend ,162,600 1,731,409 1,954, % (48,346) 0 0 $20.45 Tacoma ,702,621 1,252,839 1,267, % 45,078 22,283 57,350 $21.06 Totals 2,910 95,854,565 9,258,109 9,826, % 373, , ,764 $24.06 Class C Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle 990 9,885, , , % 8, $20.22 Eastside 559 3,965, , , % 20, $21.98 Northend 885 5,207, , , % 18, $18.39 Southend 596 4,193, , , % 13, $17.56 Tacoma 1,252 7,029, , , % 37, $17.67 Totals 4,282 30,281,581 1,979,512 2,011, % 99, $19.15 Total Office Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Downtown Seattle 1,674 73,722,012 7,419,488 7,862, % 1,709, , ,501 $28.79 Eastside 1,402 47,750,006 3,983,874 4,167, % 609,376 23,567 18,414 $28.21 Northend 1,464 20,913,523 2,140,034 2,236, % 174,648 66,529 28,000 $22.11 Southend 1,025 19,646,001 2,201,064 2,425, % 79, $20.17 Tacoma 1,876 20,075,734 2,009,801 2,247, % 145,076 22,283 57,350 $21.47 Totals 7, ,107,276 17,754,261 18,939, % 2,717, , ,265 $ COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9

15 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market FIGURES AT A GLANCE Class A Submarket Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor 23 3,301,625 90,725 90, % (23,002) 0 0 $26.14 Ballard/U Dist 3 211,108 19,766 19, % 76,114 70,000 0 $34.70 Bellevue CBD 25 7,517, , , % 265, $35.30 Belltown/Denny Regrade 12 2,701, , , % (135,253) 0 77,000 $27.16 Bothell/Kenmore 4 346, % 6, $0.00 Capitol Hill/Central Dist 2 257,648 26,983 26, % 198, ,000 $36.10 Coal Creek/Issaquah 6 917, , % 104, $27.75 Dupont 1 48,000 3,400 3, % 21, $28.00 E King County % $0.00 E Pierce County % $0.00 Edmonds/Lynnwood 7 751, , , % (747) 0 0 $24.97 Everett CBD 1 88, % $0.00 Federal Way/Auburn 1 88,000 15,000 15, % $26.47 Fort Lewis % $0.00 Gig Harbor/W Pierce Co 1 85,903 28,773 28, % (3,202) 0 0 $32.63 I-90 Corridor 19 2,714, , , % (25,308) 0 0 $30.16 Kent Valley 1 57, % $0.00 Kirkland ,484 74,450 84, % 12, $33.17 Lake Union 25 5,425, , , % 1,114, , ,899 $28.02 Mercer Island 1 105,796 22,354 22, % 7, $34.06 Mill Creek/Woodinville % $0.00 N Snohomish County % $0.00 Northgate/N Seattle 2 205,361 9,123 9, % (541) 0 0 $26.00 Pioneer Sq/Waterfront 9 1,793, , , % 198, $27.26 Puyallup 1 83,268 17,720 17, % 2, $42.50 Queen Anne/Magnolia 11 1,747, , , % 18, $32.83 Redmond 19 2,176, , , % 5, $29.39 Renton/Tukwila 5 716, % $0.00 S Everett/Harbor Point 1 264, % $0.00 S Seattle 5 959, , , % 296, , ,602 $37.19 S Snohomish County % $0.00 Seatac/Burien 2 427, , , % 113, $24.00 Seattle CBD 42 20,618,754 2,845,843 3,141, % (38,464) 0 0 $31.44 Spanaway % $0.00 Suburban Bellevue 2 234, , , % (12,000) 0 0 $46.49 Tacoma CBD 5 1,084,935 68, , % 41, $26.68 Tacoma Suburban % $0.00 Univ. Place/Lakewood 1 42, % $33.37 Totals ,971,130 6,516,640 7,100, % 2,244, , ,501 $ THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

16 Seattle/Puget Sound Office Market FIGURES AT A GLANCE YEAR-END SEATTLE/PUGET SOUND Class B Submarket Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor 98 5,026, , , % 81, $23.04 Ballard/U Dist 104 3,422,471 97, , % 22, $24.33 Bellevue CBD 30 1,407, , , % 82, $28.78 Belltown/Denny Regrade 45 2,952, , , % (12,037) 0 0 $29.16 Bothell/Kenmore 98 4,550, , , % (799) 58,329 0 $24.10 Capitol Hill/Central Dist 83 4,127, , , % (36,308) 0 0 $34.48 Coal Creek/Issaquah 56 1,365, , , % (2,092) 7,607 0 $26.23 Dupont 6 1,065,501 1,280 1, % 23, $20.00 E King County ,108 89,864 89, % 12, $23.11 E Pierce County ,950 61,431 63, % 15,826 6,813 0 $22.83 Edmonds/Lynnwood 129 2,823, , , % 36, ,000 $21.26 Everett CBD 80 1,857, , , % 21, $20.33 Federal Way/Auburn 132 3,376, , , % 19, $19.75 Fort Lewis % $0.00 Gig Harbor/W Pierce Co 72 1,209, , , % 36, $21.93 I-90 Corridor 44 3,200, , , % (55,624) 0 0 $28.61 Kent Valley 67 2,110, , , % (43,126) 0 0 $21.48 Kirkland 134 3,506, , , % (9,047) 0 0 $26.07 Lake Union 89 5,359, , , % (253) 0 0 $27.62 Mercer Island ,295 7,829 7, % 9, $29.78 Mill Creek/Woodinville ,621 80,582 80, % 85, ,000 $27.44 N Snohomish County ,946 71,798 72, % (19,900) 0 0 $16.10 Northgate/N Seattle 56 1,343, , , % 41, $23.03 Pioneer Sq/Waterfront 57 3,549, , , % (7,147) 0 0 $24.92 Puyallup 59 1,141, , , % (32,914) 0 0 $23.89 Queen Anne/Magnolia 61 2,552, , , % 30, $22.08 Redmond 101 5,058, , , % 122,874 15,960 0 $22.57 Renton/Tukwila 163 7,459, , , % (10,802) 0 0 $20.73 S Everett/Harbor Point 78 1,778, , , % (12,525) 8,200 0 $23.37 S Seattle 82 2,238, , , % (7,559) 0 0 $21.60 S Snohomish County ,421 26,965 26, % (751) 0 0 $22.24 Seatac/Burien 58 1,217, , , % (13,880) 0 0 $19.91 Seattle CBD 54 5,919, , , % (18,818) 0 0 $26.24 Spanaway , , , % (11,863) 0 0 $19.12 Suburban Bellevue 195 4,983, , , % 11, ,414 $26.82 Tacoma CBD 84 3,033, , , % (21,656) 0 57,350 $19.88 Tacoma Suburban 222 3,174, , , % 21,107 15,470 0 $21.65 Univ. Place/Lakewood 90 1,110,648 90,297 90, % 15, $19.44 Totals 2,910 95,854,565 9,258,109 9,826, % 373, , ,764 $ COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 11

17 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market FIGURES AT A GLANCE Class C Submarket Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor ,925 32,066 32, % (12,036) 0 0 $18.53 Ballard/U Dist 301 1,462,259 29,447 34, % 18, $21.41 Bellevue CBD ,245 11,745 11, % 9, $25.21 Belltown/Denny Regrade ,854 40,349 40, % (2,050) 0 0 $19.48 Bothell/Kenmore ,856 12,113 12, % $22.16 Capitol Hill/Central Dist 134 1,739,237 23,184 23, % 15, $24.18 Coal Creek/Issaquah ,927 10,150 10, % 1, $26.13 Dupont % $0.00 E King County ,593 12,252 12, % 1, $19.13 E Pierce County ,799 6,858 6, % (6,858) 0 0 $18.72 Edmonds/Lynnwood 168 1,116,833 92,025 92, % (688) 0 0 $19.03 Everett CBD 240 1,557, , , % 19, $16.45 Federal Way/Auburn 196 1,687,344 52,126 52, % 15, $18.90 Fort Lewis 8 28, % $0.00 Gig Harbor/W Pierce Co ,692 52,103 52, % 12, $19.04 I-90 Corridor ,475 3,615 3, % (2,500) 0 0 $20.84 Kent Valley ,065 96,014 96, % (28,312) 0 0 $15.27 Kirkland ,149 38,330 38, % 20, $23.32 Lake Union ,928 98,197 98, % (24,002) 0 0 $19.55 Mercer Island ,971 27,415 27, % (919) 0 0 $22.28 Mill Creek/Woodinville ,226 38,092 40, % (10,490) 0 0 $23.14 N Snohomish County ,061 36,171 36, % 5, $15.74 Northgate/N Seattle ,558 32,898 32, % 1, $19.27 Pioneer Sq/Waterfront 46 1,053,937 47,232 47, % 72, $18.09 Puyallup ,578 25,642 25, % 1, $21.06 Queen Anne/Magnolia 126 1,080, , , % (55,398) 0 0 $20.63 Redmond ,184 21,658 21, % (3,397) 0 0 $23.12 Renton/Tukwila 144 1,046,094 90,265 90, % 23, $20.48 S Everett/Harbor Point ,137 26,617 26, % 7, $17.75 S Seattle 208 2,040,078 83,682 89, % (15,146) 0 0 $17.33 S Snohomish County ,362 17,514 17, % (5,014) 0 0 $14.85 Seatac/Burien ,296 44,768 46, % 2, $15.96 Seattle CBD ,683 18,786 18, % (1,988) 0 0 $19.95 Spanaway ,822 23,230 25, % (20,008) 0 0 $16.64 Suburban Bellevue 184 1,560,279 58,049 63, % 6, $21.65 Tacoma CBD 164 1,939, , , % 39, $17.34 Tacoma Suburban 484 2,326, , , % (6,943) 0 0 $16.73 Univ. Place/Lakewood 195 1,069, , , % 17, $18.29 Totals 4,282 30,281,581 1,979,512 2,011, % 99, $ THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

18 Seattle/Puget Sound Office Market FIGURES AT A GLANCE YEAR-END SEATTLE/PUGET SOUND Total Office Submarket Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates 520 Corridor 141 8,649, , , % 46, $23.39 Ballard/U Dist 408 5,095, , , % 117,541 70,000 0 $24.36 Bellevue CBD 87 9,206, , , % 357, $33.10 Belltown/Denny Regrade 111 6,409, , , % (149,340) 0 77,000 $28.06 Bothell/Kenmore 201 5,279, , , % 5,988 58,329 0 $24.04 Capitol Hill/Central Dist 219 6,124, , , % 177, ,000 $31.93 Coal Creek/Issaquah 100 2,468, , , % 103,358 7,607 0 $27.13 Dupont 7 1,113,501 4,680 4, % 45, $27.67 E King County 146 1,275, , , % 13, $22.49 E Pierce County ,749 68,289 70, % 8,968 6,813 0 $22.38 Edmonds/Lynnwood 304 4,692, , , % 35, ,000 $22.00 Everett CBD 321 3,503, , , % 41, $19.00 Federal Way/Auburn 329 5,151, , , % 35, $19.81 Fort Lewis 8 28, % $0.00 Gig Harbor/W Pierce Co 160 1,758, , , % 45, $22.55 I-90 Corridor 80 6,074, , , % (83,432) 0 0 $29.24 Kent Valley 186 2,855, , , % (71,438) 0 0 $20.03 Kirkland 244 5,127, , , % 23, $26.66 Lake Union ,724, , , % 1,090, , ,899 $27.18 Mercer Island ,062 57,598 57, % 16, $28.14 Mill Creek/Woodinville 83 1,091, , , % 74, ,000 $26.08 N Snohomish County 164 1,032, , , % (13,940) 0 0 $16.04 Northgate/N Seattle 179 2,308, , , % 42, $22.54 Pioneer Sq/Waterfront 112 6,396, , , % 264, $25.21 Puyallup 196 1,765, , , % (29,586) 0 0 $25.77 Queen Anne/Magnolia 198 5,380, , , % (6,433) 0 0 $27.22 Redmond 188 7,518, , , % 124,479 15,960 0 $24.35 Renton/Tukwila 312 9,221, , , % 12, $20.70 S Everett/Harbor Point 154 2,527, , , % (5,148) 8,200 0 $22.85 S Seattle 295 5,238, , , % 274, , ,602 $29.59 S Snohomish County ,783 44,479 44, % (5,765) 0 0 $20.75 Seatac/Burien 198 2,416, , , % 102, $19.96 Seattle CBD ,352,656 3,508,379 3,817, % (59,270) 0 0 $30.25 Spanaway 190 1,125, , , % (31,871) 0 0 $18.37 Suburban Bellevue 381 6,777, , , % 6, ,414 $29.70 Tacoma CBD 253 6,058, , , % 59, ,350 $22.02 Tacoma Suburban 706 5,500, , , % 14,164 15,470 0 $19.84 Univ. Place/Lakewood 286 2,221, , , % 33, $19.30 Totals 7, ,107,276 17,754,261 18,939, % 2,717, , ,265 $ COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13

19 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market FIGURES AT A GLANCE Class A Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 73 29,309,301 3,456,237 3,982, % 267, $31.82 Suburban ,661,829 3,060,403 3,118, % 1,976, , ,501 $30.98 Totals ,971,130 6,516,640 7,100, % 2,244, , ,501 $31.41 Class B Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,218,088 1,260,613 1,322, % 63, ,350 $24.51 Suburban 2,662 83,636,477 7,997,496 8,504, % 309, ,379 46,414 $23.99 Totals 2,910 95,854,565 9,258,109 9,826, % 373, , ,764 $24.06 Class C Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 455 4,593, , , % 67, $17.63 Suburban 3,827 25,688,232 1,595,761 1,628, % 32, $19.40 Totals 4,282 30,281,581 1,979,512 2,011, % 99, $19.15 Class A & B Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,527,389 4,716,850 5,304, % 331, ,350 $29.54 Suburban 2, ,298,306 11,057,899 11,622, % 2,286, , ,915 $25.81 Totals 3, ,825,695 15,774,749 16,927, % 2,617, , ,265 $26.88 Total Office Market Statistics Year-End YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD ,120,738 5,100,601 5,688, % 398, ,350 $28.89 Suburban 6, ,986,538 12,653,660 13,251, % 2,318, , ,915 $25.04 Totals 7, ,107,276 17,754,261 18,939, % 2,717, , ,265 $ THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

20 Seattle/Puget Sound Office Market FIGURES AT A GLANCE YEAR-END SEATTLE/PUGET SOUND Class A Market Statistics Year-End Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 4q ,971,130 6,516,640 7,100, % 819, , ,501 $ ,362,567 6,662,275 7,311, % 22, , ,234,064 $ q ,292,567 6,632,522 7,264, % 1,013, , ,304,064 $ ,134,751 7,494,321 8,120, % 388, ,461,880 $ q ,134,751 7,867,022 8,508, % 476, , ,152,981 $ ,051,483 8,167,684 8,901, % 294, , ,647 $ q ,861,483 8,329,942 9,006, % 1,267, , ,647 $ ,203,715 8,810,449 9,616, % 257, , ,637,415 $ ,356,019 8,182,992 9,025, % 1,394, ,768, ,144,548 $ ,587,896 7,883,541 8,652, % (156,325) 14 3,938, ,132,311 $ ,649,630 3,850,037 4,557, % 402, ,751, ,625,561 $ ,897,905 2,708,721 3,209, % 1,440, ,470, ,011,206 $ ,426,928 2,409,709 3,178, % 2,011, ,084, ,483,581 $ ,342,928 2,794,892 4,106, % 1,166, , ,676,500 $ ,300,928 4,314,216 5,231, % 449, , ,666,000 $ ,856,708 3,874,897 5,236, % 883, ,220 $25.83 Quoted Class B Market Statistics Year-End Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 4q 2,910 95,854,565 9,258,109 9,826, % 239, , ,764 $ ,909 95,838,605 9,496,706 10,049, % (8,005) 3 69, ,724 $ q 2,906 95,769,185 9,426,442 9,972, % 301, , ,380 $ ,906 95,802,330 9,821,928 10,307, % (159,668) 2 11, ,850 $ q 2,904 95,790,801 9,620,375 10,136, % 386, , ,379 $ ,902 95,720,024 9,825,769 10,451, % (5,124) 1 3, ,383 $ q 2,902 95,728,084 9,730,759 10,454, % 383, ,906 $ ,902 95,728,084 10,114,048 10,838, % 222, , ,377 $ ,896 95,411,972 9,856,724 10,744, % 1,036, , ,703 $ ,875 94,993,991 10,349,744 11,362, % (316,406) 38 1,368, ,428 $ ,840 93,683,385 8,908,553 9,735, % 1,440, ,774, ,327,657 $ ,779 90,932,281 7,875,839 8,424, % 1,359, ,297, ,122,734 $ ,729 90,001,217 8,299,054 8,852, % 2,395, , ,726,199 $ ,683 89,390,351 10,084,512 10,636, % 2,924, ,601, ,594 $ ,636 87,840,670 11,249,499 12,011, % 239, , ,451,434 $ ,601 87,459,664 10,969,868 11,870, % 669, , ,169 $20.02 Quoted Total Office Market Statistics Year-End Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 4q 7, ,107,276 17,754,261 18,939, % 1,175, , ,265 $ , ,503,802 18,279,779 19,510, % 46, , ,353,788 $ q 7, ,383,830 18,214,606 19,437, % 1,263, , ,393,444 $ , ,259,159 19,421,609 20,576, % 232, , ,562,730 $ q 7, ,263,978 19,618,035 20,813, % 808, , ,265,360 $ , ,113,010 20,077,811 21,471, % 297, , ,015,030 $ q 7, ,931,070 20,173,308 21,586, % 1,768, , ,065,553 $ , ,277,002 21,151,958 22,701, % 533, ,163, ,711,792 $ , ,116,088 20,308,565 22,074, % 2,275, ,186, ,520,251 $ , ,999,238 20,430,296 22,233, % (1,025,506) 54 5,317, ,453,739 $ , ,774,092 14,385,151 15,982, % 1,669, ,587, ,963,998 $ , ,262,075 12,025,570 13,139, % 2,951, ,791, ,187,971 $ , ,056,008 12,537,745 13,884, % 4,596, ,068, ,225,953 $ , ,332,673 14,838,212 16,757, % 4,029, ,682, ,628,578 $ , ,728,881 17,466,578 19,183, % 981, ,368, ,153,228 $ , ,945,654 17,060,451 19,382, % 1,290, , ,004,121 $21.86 Quoted 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15

21 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market LEASING ACTIVITY Historical Rental Rates Based on Full-Service Equivalent Rental Rates A B C Total Market Dollars/SF/Year $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $ by Available Space Type by Class Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Class Seattle/Puget Sound United States Seattle/Puget Sound United States 6% 4% 11% 17% 52% 37% 49% 34% 94% 96% Direct Sublet Direct Sublet Class A Class B Class C Class A Class B Class C U.S. Rental Rate Comparison Based on Full-Service Equivalent Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* $30.00 $25.00 Seattle/Puget Sound United States Dollars/SF/Year $20.00 $15.00 $10.00 $5.00 $ q 2q 4q 2q 4q Millions q q q * Includes Under Construction Spaces 16 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

22 Seattle/Puget Sound Office Market LEASING ACTIVITY YEAR-END SEATTLE/PUGET SOUND Select Top Office Leases Based on Leased Square Footage For Deals Signed in Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company th Ave Seattle CBD 261,618 1st CenturyLink Newmark Knight Frank Frederick Ross Newmark Knight Frank Frederick Ross 2 Key Center Bellevue CBD 122,742 2nd Concur Technologies, Inc. Washington Partners Corporate Real Broderick Group, Inc. 3 West Harrison-West Tower* Queen Anne/Magnolia 122,000 1st Publicis Groupe Washington Partners Corporate Real Martin Selig Real Estate Westlake Ave N Lake Union 110,000 3rd Amazon.com, Inc. Washington Partners Corporate Real Urbis Partners 5 SeaTac Office Center - North Tower Seatac/Burien 94,247 3rd GSA N/A Urbis Partners 6 6th & Wall Bldg Belltown/Denny Regrade 87,575 1st City University N/A Sabey Corporation Union Station Pioneer Sq/Waterfront 72,816 3rd Attachmate Corporation N/A CBRE Western Building Queen Anne/Magnolia 66,045 1st Cell Therapeutics, Inc. CBRE Martin Selig Real Estate 9 Plaza East Bellevue CBD 61,491 2nd Apptio Broderick Group, Inc. The CAC Group 10 City Center Bellevue Bellevue CBD 57,639 2nd Caradigm USA N/A Broderick Group, Inc. 11 East Building* Bellevue CBD 57,003 4th Overlake s Outpatient Rehabilitation Center N/A Broderick Group, Inc. 12 Fourth & Battery* Belltown/Denny Regrade 56,939 3rd Emergent BioSolutions Inc. N/A N/A 13 Safeco Plaza Seattle CBD 54,348 4th Federal Home Loan Bank Kinzer Real Estate Services Broderick Group, Inc. 14 One Bellevue Center Bellevue CBD 53,130 4th N/A N/A Broderick Group, Inc. 15 WestPark - Bldg E Redmond 51,303 3rd Intel N/A CBRE 16 Pioneer Square Pioneer Sq/Waterfront 46,222 2nd Isilon Systems N/A Urbis Partners 17 Stadium Innovation Center S Seattle 44,903 1st The Garden City Group, Inc. Washington Partners Corporate Real Kidder Mathews 18 Columbia Center Seattle CBD 39,617 3rd Karr Tuttle Campbell Washington Partners Corporate Real The CAC Group Pontius* Lake Union 38,148 3rd Providence Health & Services N/A Urbis Partners NW Ballard Way Ballard/U Dist 37,448 3rd Trupanion Direct Deal Kidder Mathews 21 Plaza Center Bellevue CBD 36,763 3rd Blucora, Inc. Kidder, Matthews & Segner The CAC Group 22 West Seattle Corporate Center S Seattle 35,493 2nd Bartell s CBRE Colliers International Dexter Bldg Lake Union 33,684 2nd The Omni Group Century Pacific LP Kidder Mathews Northup Bldg Kirkland 33,492 4th University of Washington C&W Commerce Legacy Commercial 25 Roosevelt Commons - Bldg A Ballard/U Dist 32,861 2nd N/A N/A CBRE 26 Puget Sound Energy Bldg Bellevue CBD 31,905 1st New York Life N/A Bentall 27 City Center Bellevue Bellevue CBD 31,324 1st N/A N/A Broderick Group, Inc. 28 East Building Bellevue CBD 29,803 1st Overlake Medical Wallace Properties, Inc. Jones Lang LaSalle Union Station Pioneer Sq/Waterfront 29,636 3rd N/A N/A CBRE 30 Waterfront Place Bldg* Pioneer Sq/Waterfront 29,232 2nd Cequint, Inc N/A N/A 31 Zetron Headquarters Redmond 28,199 2nd WDS Global N/A Broderick Group, Inc th Avenue Building Seattle CBD 26,864 1st Ogden Murphy Washington Partners Corporate Real Jones Lang LaSalle 33 Columbia Center Seattle CBD 26,192 2nd Davidson Companies N/A The CAC Group 34 Trans-Pacific Trade Center Tacoma Suburban 26,000 3rd N/A N/A Washington Partners Corporate Real 35 The Tower at Fourth & Madison Seattle CBD 24,525 3rd N/A N/A Washington Partners Corporate Real Union Station Pioneer Sq/Waterfront 24,446 4th Avvo N/A CBRE Union Station Pioneer Sq/Waterfront 24,389 2nd Globys, Inc. N/A CBRE 38 Kirkland 405 Corporate Center - Bldg B Kirkland 23,992 1st Talyst N/A Kidder Mathews 39 Plaza Yarrow Bay - Bldg 3 Kirkland 23,902 4th INRIX, Inc. C&W Commerce CBRE 40 Century Square Seattle CBD 23,683 4th DNV Renewables N/A Jones Lang LaSalle * Renewal 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 17

23 SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market SALES ACTIVITY The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 9.0% Cap Rate Price/SF $600 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% $500 $400 $300 $200 $100 Dollars/SF 0.0% q q q 2q 4q 2q $0 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Office Building Sales of 15,000 SF and Larger Based on Office Building Sales From Oct. - Sept. Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate $1,400 $450 $1,200 $400 < 50,000 SF 125 1,344,915 $ 233,807,124 $ % Millions of Sales Volume Dollars $1,000 $800 $600 $400 $200 $350 $300 $250 $200 $150 $100 $50 Price/SF 50K-249K SF 17 1,683,854 $ 361,510,607 $ % 250K-499K SF 5 1,828,293 $ 759,045,000 $ % $ $0 >500K SF 4 2,692,840 $ 1,017,000,000 $ % Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Office Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Office Building Sales of 15,000 SF and Larger $470 Seattle/Puget Sound US 10.0% Seattle/Puget Sound US Dollars per SF $420 $370 $320 $270 $220 $170 $120 $70 Cap Rate Percentage 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% $ % Source: CoStar COMPS Source: CoStar COMPS 18 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.

24 Seattle/Puget Sound Office Market SALES ACTIVITY YEAR-END SEATTLE/PUGET SOUND 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 19