Q Market Report

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Terence Walker
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///////////////L o s A n g e l e s ///////////// ///////////O r a n g e C o u n t y /////////// ////////////V

been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and

1 ///////////////L o s A n g e l e s ///////////// ///////////O r a n g e C o u n t y /////////// ////////////V e n t u r a ///////////////// ////////// I n l a n d E m p i r e //////////// Market Report ///////// Los Angeles Office West/ South / / / / / / / / /////P h o e n i x ///////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental O N C O R INTERNATIONAL

MARKET REPORT Office Los Angeles West/ South MARKET ACTIVITY KEY TAKE AWAYS ECONOMIC OUTLOOK D Direct Vacancy V Net

3% 1,935,682 SF MARKET Vacancy Rate: Declines for 2nd consecutive quarter. Net Absorption: Highest level of.

3 million square feet. Sales: Pricing increased in. Led by two large portfolio sales.

6% (3 year fixed) 2.8% ECONOMIC OUTLOOK Under Construction 1,334,58 SF Sale Price Change 55.% Rental Rates (FSG) $3.

Trade: Tensions remain with China. USMCA still awaiting congressional ratification.

Prices expected to remain low due to over-supply.

2 MARKET REPORT Office Los Angeles West/ South MARKET ACTIVITY KEY TAKE AWAYS ECONOMIC OUTLOOK D Direct Vacancy V Net Absorption 12.1% +496,74 SF Overall Vacancy Gross Absorption 13.3% 1,935,682 SF MARKET Vacancy Rate: Declines for 2nd consecutive quarter. Net Absorption: Highest level of. Office Supply: Over 1.2 million square feet were delivered in. Construction activity increases in to above 1.3 million square feet. Sales: Pricing increased in. Led by two large portfolio sales. Trends: Technology companies leasing large amounts or space. U.S. Employment Interest Rate U6 Rate 3.9% 7.6% Changing GDP 4.6% (3 year fixed) 2.8% ECONOMIC OUTLOOK Under Construction 1,334,58 SF Sale Price Change 55.% Rental Rates (FSG) $3.69 Deal Volume -49.% Interest Rates: The Fed is anticipating two (2) hikes in 219; increasing borrowing costs. Trade: Tensions remain with China. USMCA still awaiting congressional ratification. Stock Market: Increased volatility, but corporate fundamentals remain strong Oil: Crude Oil dropped 39% in. Prices expected to remain low due to over-supply. Reduced transportation costs should benefit markets further away from ports. Port Traffic Y/Y Δ NYSE Performance 1.5% -14.4% Inflation Change 1 Yr. - 2 Yr. Spread +1.9% 15 BPS //////////////////////////////////////// EXPERIENCE IN A CHANGING express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental

3 L.A. West/South Office //// OVERALL VACANCY Overall vacancy falls again for the 2nd straight quarter NET ABSORPTION HIGHEST IN Direct Vacancy Total Vacancy Historical Average Net Absorption SF Direct Overall Vacancy 2 18.% 16.% 14.% 12.% 8.% 6.% 4.% 2.% 1,5, 5, -5, - -1,5, -2,, 2 18.% 16.% 14.% 12.% 8.% 6.% 4.% 2.% GROSS ABORPTION SLIGHTLY BELOW HISTORIC AVERAGE ASKING RENTS AT RECORD HIGHS Gross Absorption SF Total Historical Average Office Gross Rent Direct Overall Vacancy 3,5, 3,, 2,5, 2,, 1,5, 5, $4.2 $3.7 $3.2 $2.7 $2.2 $1.7 $1.2 $.7 $ % 16.% 14.% 12.% 8.% 6.% 4.% 2.%

L.A. West/South Office //// 2ND STRONGEST QUARTER OF LEASING ACTIVITY IN UPTICK IN CONSTRUCTION ACTIVITY 3,5, 3,, 2,5, 2,, 1,5, Leasing Activity SF Direct Leasing Activity SF Sublet

4 L.A. West/South Office //// 2ND STRONGEST QUARTER OF LEASING ACTIVITY IN UPTICK IN CONSTRUCTION ACTIVITY 3,5, 3,, 2,5, 2,, 1,5, Leasing Activity SF Direct Leasing Activity SF Sublet 2,5, 2,, 1,5, Under Construction SF 5, 5, SALE PRICES CONTINUE TO PUSH NEAR HISTORIC LEVELS South Bay Westside Med. Price PSF $2,5,, $2,,, $1,5,, $, $5,, $ $7. $6. $5. $4. $3. $2. $1. $.

5 L.A. West/South Office //// SQUARE FOOT BREAKDOWN 89,743,236 SF MARKET SIZE VACANCY BREAKDOWN Direct Vacancy Rate Overall Vacancy Rate 18.% 61% 39% South Bay Westside 16.% 14.% 12.% 8.% 6.% 4.% 14.87% 15.73% 1.32% 11.67% 2.% South Bay Westside AVERAGE RENT PSF VOLUME BREAKDOWN Average Office Rent FSG Sales Volume Price PSF $6. $5. $4. $3. $2. $1. $. $2.8 South Bay $4.92 Westside $4,,. $35,,. $3,,. $25,,. $2,,. $15,,. $1,,. $5,,. $. South Bay Westside $1,. $9. $8. $7. $6. $5. $4. $3. $2. $1. $.

6 ///////////////L o s A n g e l e s ///////////// ///////////O r a n g e C o u n t y /////////// ////////////V e n t u r a ///////////////// ////////// I n l a n d E m p i r e //////////// Market Report ///////// Los Angeles Office South Bay / / / / / / / / /////P h o e n i x ///////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental O N C O R INTERNATIONAL

7 MARKET REPORT Office Los Angeles South Bay MARKET ACTIVITY KEY TAKE AWAYS ECONOMIC OUTLOOK D Direct Vacancy V Net Absorption 14.9% +73,963 SF Overall Vacancy Gross Absorption 15.7% 683,758 SF MARKET Vacancy Rate: Declines for 2nd consecutive quarter. Net Absorption: Remains positive in, but dipped from levels in Q3. Office Supply: No new product under construction. Sales: Pricing decreased in as well as volume. Asking Rents: Climb to new record highs. U.S. Employment Interest Rate U6 Rate 3.9% 7.6% Changing GDP 4.6% (3 year fixed) 2.8% ECONOMIC OUTLOOK Under Construction SF Sale Price Change -12.% Rental Rates (FSG) $2.83 Deal Volume -44.8% Interest Rates: The Fed is anticipating two (2) hikes in 219; increasing borrowing costs. Trade: Tensions remain with China. USMCA still awaiting congressional ratification. Stock Market: Increased volatility, but corporate fundamentals remain strong Oil: Crude Oil dropped 39% in. Prices expected to remain low due to over-supply. Reduced transportation costs should benefit markets further away from ports. Port Traffic Y/Y Δ NYSE Performance 1.5% -14.4% Inflation Change 1 Yr. - 2 Yr. Spread +1.9% 15 BPS //////////////////////////////////////// EXPERIENCE IN A CHANGING express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental

8 South Bay Office //// OVERALL VACANCY Overall vacancy falls again for the 2nd straight quarter NET ABSORPTION POSITIVE BUT DROPS FROM Q3 Direct Vacancy Total Vacancy Historical Average Net Absorption SF Direct Overall Vacancy 25.% 6, 25.% 2 15.% 4, 2, 2 15.% -2, 5.% -4, -6, 5.% -8, GROSS ABORPTION SLIGHTLY BELOW HISTORIC AVERAGE ASKING RENTS RISE TO HISTORIC HIGHS Gross Absorption SF Total Historical Average Office Gross Rent Direct Overall Vacancy 1,8, 1,6, 1,4, 1,2, 8, 6, 4, 2, $3.2 $2.7 $2.2 $1.7 $1.2 $.7 $.2 25.% 2 15.% 5.%

South Bay Office //// LEASING ACTIVITY INCREASES IN 4TH QUARTER SLOWDOWN IN CONSTRUCTION ACTIVITY Leasing Activity SF Direct Leasing Activity SF Sublet Under Construction SF 1,4, 1,2, 8, 6, 4, 2, 4,

9 South Bay Office //// LEASING ACTIVITY INCREASES IN 4TH QUARTER SLOWDOWN IN CONSTRUCTION ACTIVITY Leasing Activity SF Direct Leasing Activity SF Sublet Under Construction SF 1,4, 1,2, 8, 6, 4, 2, 4, 35, 3, 25, 2, 15, 1, 5, SALE PRICES DECLINE IN BUT VOLUME INCREASED $1,2,, $, $8,, $6,, $4,, $2,, 19th Corridor El Segundo LAX Long Beach: Suburban Med. Price PSF $ Beach Cities Hawthorne/Gardena Long Beach: Downtown Torrance $45. $4. $35. $3. $25. $2. $15. $1. $5. $.

10 19th St. Corridor Beach Cities El Segundo Hawthorne/ Gardena LAX Long Beach: Downtown Long Beach: Suburban Torrance 19th St. Corridor Beach Cities El Segundo Hawthorne/ Gardena LAX Long Beach: Downtown Long Beach: Suburban Torrance 19th St. Corridor Beach Cities El Segundo Hawthorne/ Gardena LAX Long Beach: Downtown Long Beach: Suburban Torrance South Bay Office //// SQUARE FOOT BREAKDOWN 34,923,23 SF MARKET SIZE VACANCY BREAKDOWN 19th St. Corridor Direct Vacancy Rate Overall Vacancy Rate 14% 13% 16% 12% 8% 3% 5% 29% Beach Cities El Segundo Hawthorne/ Gardena LAX Long Beach: Downtown Long Beach: Suburban Torrance 3 25.% 2 15.% 5.% 27.79% 26.26% 27.47% 15.69% 14.58% 14.27% 15.4% 14.44% 12.91% 14.11% 7.65% 8.2% 1.28% 1.44% AVERAGE RENT PSF VOLUME BREAKDOWN Average Office Rent FSG Sales Volume Price PSF $4.5 $4. $3.5 $3. $2.5 $2. $1.5 $1. $.5 $. $2.39 $2.52 $3.85 $1.98 $2.1 $2.44 $2.42 $2.79 $1,,. $9,,. $8,,. $7,,. $6,,. $5,,. $4,,. $3,,. $2,,. $1,,. $. $35. $3. $25. $2. $15. $1. $5. $.

11 ///////////////L o s A n g e l e s ///////////// ///////////O r a n g e C o u n t y /////////// ////////////V e n t u r a ///////////////// ////////// I n l a n d E m p i r e //////////// Market Report ///////// Los Angeles Office Westside / / / / / / / / /////P h o e n i x ///////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental O N C O R INTERNATIONAL

12 MARKET REPORT Office Los Angeles Westside MARKET ACTIVITY KEY TAKE AWAYS ECONOMIC OUTLOOK D Direct Vacancy V Net Absorption 1.3% +347,71 SF Overall Vacancy Gross Absorption 11.7% 1,242,859 SF MARKET Vacancy Rate: Substantial drop of almost 1% from Q3. Net Absorption: Highest level of. Office Supply: Slightly under one million square feet were delivered in. Construction activity increases in to above 1.3 million square feet. Sales: Pricing increased in. Led by two large portfolio sales. Trends: Technology companies leasing large amounts or space. U.S. Employment Interest Rate U6 Rate 3.9% 7.6% Changing GDP 4.6% (3 year fixed) 2.8% ECONOMIC OUTLOOK Under Construction 1,334,58 SF Sale Price Change 89.6% Rental Rates (FSG) $4.94 Deal Volume -34.2% Interest Rates: The Fed is anticipating two (2) hikes in 219; increasing borrowing costs. Trade: Tensions remain with China. USMCA still awaiting congressional ratification. Stock Market: Increased volatility, but corporate fundamentals remain strong Oil: Crude Oil dropped 39% in. Prices expected to remain low due to over-supply. Reduced transportation costs should benefit markets further away from ports. Port Traffic Y/Y Δ NYSE Performance 1.5% -14.4% Inflation Change 1 Yr. - 2 Yr. Spread +1.9% 15 BPS //////////////////////////////////////// EXPERIENCE IN A CHANGING express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental

13 Westside Office //// OVERALL VACANCY Overall vacancy falls in the 4th quarter NET ABSORPTION HIGHEST IN Direct Vacancy Total Vacancy Historical Average Net Absorption SF Direct Overall Vacancy 18.% 16.% 14.% 12.% 8.% 6.% 4.% 2.% 1,5, 5, -5, - -1,5, 18.% 16.% 14.% 12.% 8.% 6.% 4.% 2.% GROSS ABORPTION SLIGHTLY BELOW HISTORIC AVERAGE ASKING RENTS TAPPER OFF SLIGHTLY Gross Absorption SF Total Historical Average Office Gross Rent Direct Overall Vacancy 3,, 2,5, 2,, 1,5, 5, $6.2 $5.2 $4.2 $3.2 $2.2 $1.2 $.2 18.% 16.% 14.% 12.% 8.% 6.% 4.% 2.%

Westside Office //// LEASING ACTIVITY INCREASED WITH STRONG SUBLET ACTIVITY CONSTRUCTION ACTIVITY REMAINS STRONG Leasing Activity SF Direct Leasing Activity SF Sublet Under Construction SF 2,5, 2,,

14 Westside Office //// LEASING ACTIVITY INCREASED WITH STRONG SUBLET ACTIVITY CONSTRUCTION ACTIVITY REMAINS STRONG Leasing Activity SF Direct Leasing Activity SF Sublet Under Construction SF 2,5, 2,, 2,5, 2,, 1,5, 5, 1,5, 5, SALE PRICES BOUNCE BACK Beverly Hills Brentwood Century City Culver City Marina Del Rey Olympic Corridor Palisades/Malibu Santa Monica West LA Westwood Med. Price PSF $2,,, $1,8,, $1,6,, $1,4,, $1,2,, $, $8,, $6,, $4,, $2,, $ $1,4. $1,2. $1,. $8. $6. $4. $2. $.

15 Beverly Hills Brentwood Century City Culver City Marina Del Rey Olympic Corridor Palisades/ Malibu Santa Monica West Los Angeles Westwood Beverly Hills Brentwood Century City Culver City Marina Olympic Palisades/ Santa Monica West Westwood Beverly Hills Brentwood Century City Culver City Marina Del Rey Olympic Corridor Palisades/ Malibu Santa Monica West Los Angeles Westwood Westside Office //// SQUARE FOOT BREAKDOWN 54,255,566 SF MARKET SIZE VACANCY BREAKDOWN Beverly Hills Direct Vacancy Rate Overall Vacancy Rate 2% 1% 16% Brentwood Century City 25.% % 23.18% 22.61% 22.93% 19% 1% 5% 7% 19% Culver City Marina Del Rey Olympic Corridor Palisades/ Malibu Santa Monica 15.% 15.82% 15.79% 15.77% 1.7% 11.35% 13.2% 11.3% 9.72% 9.99% 7.14% 7.49% 9.57% 5.% 5.87% 6.96% 13.42% 11.21% 13% 8% West Los Angeles Westwood AVERAGE RENT PSF VOLUME BREAKDOWN Average Office Rent FSG Sales Volume Price PSF $6. $5. $4. $3. $2. $1. $. $5.48 $5.69 $5.53 $5.12 $4.73 $4.43 $3.96 $4.25 $4.57 $3.65 $4,,. $35,,. $3,,. $25,,. $2,,. $15,,. $1,,. $5,,. $. $1,2. $1,. $8. $6. $4. $2. $.

16 National Economic Overview //// GDP PORT ACTIVITY Real GDP Average Real GDP Imports Exports Empties 1% 8% 6% 4% 2% % -2% -4% -6% -8% -1% ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 *2.8% for 4Q18 based on Fed Reserve Bank of Atlanta "GDP Now" Forecast 5,, 4,5, 4,, 3,5, 3,, 2,5, 2,, 1,5, 5, 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q UNEMPLOYMENT EMPLOYMENT BY INDUSTRY 18% 16% 14% 12% 1% 8% 6% 4% 2% Recession U6 Rate Official Rate % ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 Government Other Services Leisure and Hospitality Education and Health Services Professional and Business Services Financial Activities Information Utilities Transportation and Warehousing Retail Trade Wholesale Trade Manufacturing Construction Mining and Logging

17 National Economic Overview //// CPI Recession CPI All Item Less Food & Energy Fed Inflation Target 6% 5% 4% 3% 2% 1% % -1% -2% '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 Recessions Federal Funds Rate INTEREST RATES 1-Yr Treasury Rates 3-Yr. Fixed Rate Mortgage 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 STOCK MARKET PREFORMANCE YIELD CURVE Recession DOW Jones S&P 5 NASDAQ 15% 1% 5% % -5% -1% -15% ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 Recession Bond Spread 3.% 2.5% 2.% 1.5% 1.%.5%.% -.5% -1.% ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18

Total Vacant W/ Sublet SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale by the landlord or for sublease by the current tenant.

18 L.A. West/South Office //// METHODOLOGY & TERMINOLOGY Methodology Non-Owner occupied, multitenant office buildings that are 3, square feet & greater. Direct Vacant SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale directly from the landlord. Total Vacant W/ Sublet SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale by the landlord or for sublease by the current tenant. Direct Vacancy Rate Total vacant direct space (vacant space for lease or sale from the landlord or owner) divided by the total rentable square footage for existing buildings only. Vacancy W/ Sublet Rate Total vacant direct space and sublease space divided by the total rentable square footage for existing buildings only. 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. Net Absorption The net change in occupied space over a given period of time, calculated by summing all the positive changes in occupancy (move ins) and subtracting all the negative changes in occupancy (move outs). Under Construction Planned buildings for which construction has started but have not yet been granted a Certificate of Occupancy. Planned buildings are not included. Completed in New buildings with original construction completed in the year and granted a Certificate of Occupancy. Renovated buildings are not included DAUM OFFICES LOS ANGELES, CALIFORNIA 81 S. Figueroa Street, Suite 6 Los Angeles, CA LOS ANGELES NORTH, CALIFORNIA 2182 Burbank Boulevard, Suite 21 Woodland Hills, CA SANTA CLARITA VALLEY, CALIFORNIA Westinghouse Place, Suite 312 Valencia, CA SAN GABRIEL VALLEY, CALIFORNIA Crossroads Pkwy. N, Suite 1 City of Industry, CA SOUTH BAY, CALIFORNIA 125 W. 19th Street, Suite 42 Gardena, CA MID-COUNTIES, CALIFORNIA 1381 Cerritos Corporate Drive, Suite C Cerritos, CA ORANGE COUNTY, CALIFORNIA 44 MacArthur Boulevard, Suite 95 Newport Beach, CA VENTURA & SANTA BARBARA, CALIFORNIA 751 Daily Drive, Suite 15 Camarillo, CA INLAND EMPIRE, CALIFORNIA 3595 E. Inland Empire Boulevard, Bldg. 5 Ontario, CA PHOENIX ARIZONA 172 E. Highland Avenue, Suite 12 Phoenix, AZ

Market Report Q ///////// Orange County Industrial. ///////////////L o s A n g e l e s /////////////

Market Report Q ///////// Orange County Industrial. ///////////////L o s A n g e l e s ///////////// ///////////////L o s A n g e l e s ///////////// ///////////O r a n g e C o u n t y /////////// ////////////V e n t u r a ///////////////// ////////// I n l a n d E m p i r e //////////// Market Report