Multifamily. CHICAGO INVESTMENT Fourth Quarter Research & Forecast Report

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1 Research & Forecast Report CHICAGO INVESTMENT Fourth Quarter 2016 Multifamily Tyler Hague Vice President Chicago Downtown Market Fundamentals Remain Strong As Institutional Investors Key In On Suburbs While U.S. investment sales were down 12 percent in 2016, multifamily transactions remained flat, according to NREI. As has been the trend in this elongated real estate cycle, downtown Chicago apartments continued their upward trajectory in As predicted in Colliers 2015 report, institutional capital s search for higher yield led to $1.325 billion in core suburban sales, versus $1.312 billion downtown. Through November, the Chicago MSA saw $3.429 billion in multifamily transactions averaging $197,570/unit at a 6.3 percent cap rate, according to Real Capital Analytics Forecast: Chicago Metro Area Annual Supply (Units) 9,021 Annual Demand (Units) 1,199 Occupancy 95.4% Annual Occupancy Change -0.8% Annual Rent Change 2.5% Annual Revenue Change 1.7% Annual Jobs Change 62,000 Source: MPF Research One explanation for this Flock to the Suburbs is the 1.25 bsp spread between urban and suburban Class A transactions last year. It is safe to say that 2016 was the Year of the Suburbs as occupancy there hit a five-year peak of 97.1 percent at $1.14 psf rents, with west suburban renters seeing 5 to 10 percent increases in several areas. Conversely, Class A occupancy for downtown product hit its lowest level since 2009 at 92.2 percent, according to Appraisal Research Counselors. This can be explained by the 3,830 apartments delivered in 2016, with 4,500 expected in 2017 and another 4,200 in Due to the elevated levels of urban development over the last several years, investors have begun to look toward the neighborhoods as a source of more stable income. One trend that gained traction in 2016 is the condo deconversion. Previously unseen in the Chicago market, several deconversion opportunities were brought to market last year, offering investors a look at assets previously unavailable and creating more investment options for those willing to pioneer the new product type.

2 2016 Core Downtown Chicago Multifamily Investment Sales NAME CITY PRICE UNITS PRICE/UNIT CAP RATE DATE YEAR BUILT Clark Place Chicago $35,000, $263,157-12/ N Jefferson Chicago $96,500, $352, % 12/ Sheridan Court Chicago $18,875, $117, % 12/ S State Chicago $92,500, $332, % 10/ E Delaware Chicago $146,000, $477, % 9/ / 2007 Lake Shore Tower Chicago $37,000, $278,195-8/ Ravenswood Terrace Chicago $33,600, $224,000-8/ Eight O Five Chicago $114,000, $390, % 6/ North Harbor Tower Chicago $237,180, $395, % 4/ E Ohio Chicago $109,000, $414, % 4/ N Lake Shore Chicago $140,000, $707, % 4/ / 2014 Walton on the Park Chicago $134,600, $701,042-3/ Gateway West Loop Chicago $83,700, $501,197-3/ Lux24 Chicago $34,860, $477, % 2/ North Water Chicago $240,312, $603,798-1/ Core Suburban Multifamily Investment Sales NAME CITY PRICE UNITS PRICE/UNIT CAP RATE DATE YEAR BUILT Village Park Palatine $48,000, $107,142-12/ Windbrooke Crossing Buffalo Grove $48,000, $203,389-12/ Fox Valley Village Aurora $53,750, $127, % 12/ /2009 River Run Naperville $47,775, $231, % 12/ Arbor Lake Arlington Heights $60,500, $159,630-12/ Windscape Naperville $53,250, $151,278-11/ Woodlake Gurnee $41,900, $161, % 11/ Convetry Glen Round Lake $30,900, $110, % 11/ Aventine at Oakhurst North Aurora $68,250, $147,090-11/ Westmore Lombard $29,250, $127, % 10/ Woodview Deerfield $82,000, $330, % 10/ Villages of Canterfield West Dundee $56,100, $155,113-10/ Grand Oaks Gurnee $16,990, $113, % 10/ City View at Highlands Lombard $86,150, $213,771-9/ Kingston Pointe Des Plaines $42,000, $291,666-8/ Forest Pointe Lake Bluff $34,000, $144, % 8/ Arbors of Brookdale Naperville $59,693, $212, % 8/ Gates Manor Wilmette $8,500, $166,666-8/ Briarbrook Village Wheaton $50,000, $146, % 8/2 1972/2009 Oak Park Place Oak Park $68,250, $334, % 7/ Tapestry Naperville $73,250, $245, % 7/ Woodbury Place Schaumburg $43,159, $143,865-7/ /2004 Fairways Naperville $30,250, $144, % 4/ Whispering Trails Naperville $11,690, $108, % 4/ /2013 Optima Old Orchard Skokie $44,200, $256, % 3/ Stonebridge Village Arlington Heights $105,000, $179, % 2/ Arbors of Glen Ellyn Glen Ellyn $32,400, $122, % 1/ Research & Forecast Report Fourth Quarter 2016 Chicago / Investment Colliers International

3 Construction and Development Pipeline As expected, development in the downtown core remained at peak levels as historically busy neighborhoods like the South Loop, River North, and Streeterville continued to add large scale developments. Meanwhile, the West Loop emerged as a hot bed for residential development with 435 units added in For developers looking beyond the CBD, Wicker Park and Logan Square remain the neighborhoods of focus. Looking forward to 2017, developers show no signs of a slowdown from the Affordable Requirement Ordinance, with more development underway in the CBD and neighborhoods as 9,200 units are currently planned in Chicago. In terms of the suburban development, the almost 3,000 units delivered in 2016 were spread across the north, northwest, and western suburbs with little over-concentration in any one market. A trend that continued in 2016 was the suburban-urban properties developers continue to bring to market, offering the convenience of downtown living and the easy of suburban life. With a healthy development pipeline, suburban builders hope that interest remains high from both renters and investors as we inch toward the latter stages of this cycle. Downtown Construction Completed in Last 4 Quarters NEIGHBORHOOD PROPERTY UNITS DEVELOPER South Loop 1001 S State 397 Golub & Company Loop MILA 400 John Buck Company Loop Marquee at Block CIM Group South Loop One CMK Companies South Loop 1000 S Clark 469 JDL Development South Loop 619 S LaSalle 106 Marc Realty South Loop 2001 S State 22 Windy City RE South Loop 1333 S Wabash 305 CMK Companies Streeterville Moment 490 Golub & Company Streeterville Sienna Flats 50 Golub & Company River North The Hensley 43 Akara Partners Streeterville The Lofts at River East 285 Group Fox River North Wolf Point West 509 Hines/Magellan Old Town Xavier 240 Gerding Edlen River North Next 310 Fifield Companies Lakeview Centrum Lakeview 35 Centrum Uptown 4027 N Broadway 20 Akara Partners Uptown Lawrence House 344 Cedar Street Old Town Terrace Holsten Real Estate River West Kenect Chicago 227 Akara Partners West Loop Luxe on Madison II 43 Fifield West Loop The Parker 227 Atlantic Realty Partners West Loop Jackson Throop Place 93 Michigan Avenue Real Estate West Loop Madison Throop Place 72 Michigan Avenue Real Estate Wicker Park 1545 W North Ave 30 Sedgwick Properties Wicker Park 1647 N Milwaukee 36 LG Development Group Wicker Park 1819 Lofts 36 Smithfield Properties Logan Square L 120 Property Markets Group West Town Luxe on Chicago 59 Fifield Companies Wicker Park Wicker Park Lofts 41 Wicker Park Apartment TOTAL 6,110 9 Research & Forecast Report Fourth Quarter 2016 Chicago / Investment Colliers International

4 Downtown Pipeline NEIGHBORHOOD PROPERTY UNITS DEVELOPER DELIVERY West Loop 1035 W Van Buren 308 The Related Companies 1/18 West Loop 1050 W Monroe 70 Michigan Avenue Real Estate 11/17 South Loop 1333 S Wabash 305 CMK Companies 1/17 Loop 165 N Des Plaines 199 Gerding Edlen 9/17 West Loop 171 N Aberdeen 75 MCZ Development 11/17 South Loop Alta Roosevelt 496 Wood Partners 6/18 Loop Building O 350 Magellan Development 1/17 Loop Elevate 402 Thomas Roszak 12/14 West Loop 1 S Halsted 492 F&F Realty 9/18 South Loop Riverline CMK/Lendlease 6/18 West Town 1001 W Chicago 363 Bond Companies 2/18 Old Town 1325 N Wells 60 Sedgwick Properties 6/17 Old Town 301 W North 69 Sedgwick Properties 7/17 River North 3Eleven 245 John Buck Company 5/18 Streeterville 465 N Park 444 Jupiter Realty 9/18 River North 851 W Grand 36 Monroe Residential 2/17 Old Town Atrium Village 405 Onni Group 1/18 River North Aurelien 373 Ryan Co/Lincoln Property Co 6/17 River North Flats Cedar Street 10/17 River North Gallery on Wells 450 Magellan Development 8/17 River North HoJo Tower 298 Magellan Development 4/17 River North The Hudson 240 Onni Group 9/17 River North Huron Tower 102 CA Ventures 12/17 River West LINKNT 47 Akara Partners 3/17 River North Niche Ascend Real Estate 8/17 Streeterville Optima II 325 Optima 6/17 Gold Coast The Sinclair 390 Fifield Companies 2/18 River North 640 N Wells 251 JDL Development 9/17 Lakeview 2790 N Sheridan 82 Wirtz Realty 7/17 Lakeview 3200 N Clark 90 Blitzlake Partners 4/17 Lakeview Addison & Clark 148 M&R Development/Bucksbaum 6/18 Lincoln Park Elevate Lincoln Park 191 Baker Development 10/17 Lakeview Fletcher Lofts 80 BJB Partners 4/17 Lincoln Park Lincoln Common 540 McCaffery/Hines 10/19 Wicker Park 1237 N Milwaukee 58 LG Development 3/17 Bucktown 1920 N Milwaukee 44 Vequity 9/17 Logan Square Mode Spearhead Properties 8/17 Wicker Park Centrum Centrum Partners 9/17 Logan Square MiCa 216 Henry Street Partners 7/17 TOTAL 9, Research & Forecast Report Fourth Quarter 2016 Chicago / Investment Colliers International

5 2016 Suburban Construction Completed SUBMARKET PROPERTY UNITS DEVELOPER Aurora 500 Station 417 Evercore Companies Lombard Apex GlenStar Aurora Metro Next Generation Development Orland Park Orland Park Crossing 231 REVA Development Romeoville Springs at Weber Road 292 Continental Properties Elmhurst Elmhurst Morningside Equities Oak Park Vantage 269 Golub/Wood Partners Evanston The Main 112 Riverside Development Wheeling Northgate Crossing 288 REVA Development Northbrook Northshore Morningside Equities Vernon Hills The Oaks 336 REVA Development Evanston 1620 Central 47 Real Capital Solutions TOTAL 2,944 Suburban Development Pipeline SUBMARKET PROPERTY UNITS DEVELOPER DELIVERY Wilmette The Wilshore 75 M&R Development 8/17 Oak Park Oak Park Station 271 Lennar Corp 8/17 LaGrange Uptown 254 Opus Group 7/17 Schaumburg North UrbanStreet 2/17 Itasca Residences at Hamilton Lakes 297 M&R Development/Hamilton Partners 3/18 Lisle Main Street Village 201 Marquette Companies 8/17 Aurora Springs at Orchard Road 300 Continental Properties 3/18 Elgin Elgin Tower 45 Capstone Development 7/17 Elgin Watermark at the Grove 258 Interstate Partners 1/18 Highland Park McGovern House 73 Private 8/17 Kenosha Springs at Kenosha 280 Continental Properties 10/17 TOTAL 2, Forecast Looking forward to 2017, several key factors will dictate the direction in which the multifamily sector will head. First, with the expected increase in interest rates, will cap rates remain at the record lows we experienced in 2016? As uncertainty creeps into investors minds, there is concern that the market will begin to soften as this real estate cycle goes into its eighth year. Additionally, with the continued supply push, will the demand for Class A product remain or will the occupancy loss seen in 2016 continue for urban core owners? Meanwhile, value-add investors will continue to search for properties as the lack of supply in comparison to the capital looking to be deployed pushes B and C pricing upward. Much remains uncertain headed into 2017, with everyone wondering if the demand for apartments from both renters and investors has further room to grow. 11 Research & Forecast Report Fourth Quarter 2016 Chicago / Investment Colliers International

6 554 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 MARKET CONTACTS: Multifamily Tyler Hague Vice President Chicago tyler.hague@colliers.com $2.5 billion in annual revenue 2.0 billion square feet under management 16,000 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ and TSX: CIGI) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. colliers.com 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.