The CoStar Office Report Y E A R - E N D 2 0 1 2 Seattle/Puget Sound Office Market
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......................................................... 1 CoStar Markets & Submarkets......................................................... 4 Inventory & Development Analysis...................................................... 5 Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance................................................................... 9 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............................................................. 16 Select Top Lease Transactions Sales Activity Analysis............................................................... 18 Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters......................................... 20 Downtown Seattle Market Eastside Market Northend Market Southend Market Tacoma Market 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A
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 1-877-7COSTAR, or visit our web site at www.costar.com 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. 1331 L ST NW Washington, DC 20005 (800) 204-5960 www.costar.com NASDAQ: CSGP B THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
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
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.
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 1201 3rd 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 1600 7th Ave; and Amazon also moving into 286,869 square feet at 1918 8th 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 2000- A B C Total Market 20% 18% 16% 14% Rate 12% 10% 8% 6% 4% 2% 0% 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 1
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 1600 7th 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% 2010 2010 4q 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 $19.15. 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 $18.79. 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.
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 $384.06 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 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 0.55 0.35 2010 Source: CoStar Property 0.73 0.18 2010 4q Net Absorption 0.53 1.16 1.77 0.66 2q 0.30 0.19 average price per square foot of $330.41. 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 $333.84. 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 $291.31. 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 $640.59 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. 0.81 0.23 0.15 4q 0.01 Deliveries 1.26 0.17 0.14 0.05 2q 1.18 0.62 4q 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3
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.
Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT YEAR-END SEATTLE/PUGET SOUND Historical Deliveries 1982-10.0 9.0 Deliveries 8.8 Average Delivered SF 8.0 7.7 7.0 6.6 Millions of SF 6.0 5.0 4.0 3.0 2.0 1.0 3.2 4.7 4.0 5.0 4.1 4.4 5.1 2.2 1.7 2.3 1.7 2.9 1.8 2.3 3.5 5.0 5.6 4.6 0.9 1.4 1.7 2.1 2.8 4.6 5.3 2.2 2.2 0.9 0.0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 * 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 5 625,501 392,749 62.8% 44,039 125,100 Tacoma 1 57,350 57,350 100.0% 10,701 57,350 Northend 2 28,000 19,840 70.9% 14,285 14,000 Eastside 1 18,414 0 0.0% 34,058 18,414 Southend 0 0 0 0.0% 19,167 0 Totals 9 729,265 469,939 64.4% 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 5.0 250 Millions of SF 4.0 3.0 2.0 Thousands of SF 200 150 100 T 1.0 50 0.0 2008 2009 2010 0 2013 2013 2q 2013 2013 4q 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5
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 2.07 2.0 Millions of SF 1.5 1.0 0.5 0.0 1.35 1.23 1.15 1.16 0.87 0.64 0.66 0.52 0.57 0.31 0.34 0.34 0.36 0.40 0.30 0.35 0.31 0.21 0.140.18 0.14 0.19 0.15 0.01 0.01 0.62 0.17 0.100.14 0.00 0.00 2009 2009 2q 2009 2009 4q 2010 2010 2q 2010 2010 4q 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 43,736 76.2% $28.01 15,470 41,909 50,000 SF - 99,999 SF 3 185,000 129,200 69.8% $34.83 55,000 130,000 100,000 SF - 249,999 SF 2 365,816 211,156 57.7% $38.59 0 365,816 250,000 SF - 499,999 SF 1 340,563 333,752 98.0% $0.00 0 340,563 >= 500,000 SF 0 0 0 0.0% $0.00 0 0 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.
Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT YEAR-END SEATTLE/PUGET SOUND 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7
SEATTLE/PUGET SOUND YEAR-END Seattle/Puget Sound Office Market INVENTORY & DEVELOPMENT 8 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
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 109 33,715,509 4,573,487 4,878,432 14.5% 1,729,886 836,379 625,501 $31.37 Eastside 107 17,965,882 1,434,156 1,486,951 8.3% 333,854 0 0 $32.88 Northend 15 1,656,031 203,864 211,333 12.8% 5,045 0 0 $25.05 Southend 9 1,289,602 186,482 186,482 14.5% 113,802 0 0 $24.51 Tacoma 9 1,344,106 118,651 337,551 25.1% 62,015 0 0 $28.07 Totals 249 55,971,130 6,516,640 7,100,749 12.7% 2,244,602 836,379 625,501 $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 575 30,121,210 2,402,922 2,522,294 8.4% (29,334) 0 0 $26.51 Eastside 736 25,818,376 2,334,438 2,459,388 9.5% 254,584 23,567 18,414 $25.94 Northend 564 14,049,758 1,536,501 1,622,584 11.5% 151,316 66,529 28,000 $22.52 Southend 420 14,162,600 1,731,409 1,954,882 13.8% (48,346) 0 0 $20.45 Tacoma 615 11,702,621 1,252,839 1,267,638 10.8% 45,078 22,283 57,350 $21.06 Totals 2,910 95,854,565 9,258,109 9,826,786 10.3% 373,298 112,379 103,764 $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 9,885,293 443,079 461,886 4.7% 8,561 0 0 $20.22 Eastside 559 3,965,748 215,280 221,210 5.6% 20,938 0 0 $21.98 Northend 885 5,207,734 399,669 402,208 7.7% 18,287 0 0 $18.39 Southend 596 4,193,799 283,173 284,463 6.8% 13,623 0 0 $17.56 Tacoma 1,252 7,029,007 638,311 642,134 9.1% 37,983 0 0 $17.67 Totals 4,282 30,281,581 1,979,512 2,011,901 6.6% 99,392 0 0 $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 7,862,612 10.7% 1,709,113 836,379 625,501 $28.79 Eastside 1,402 47,750,006 3,983,874 4,167,549 8.7% 609,376 23,567 18,414 $28.21 Northend 1,464 20,913,523 2,140,034 2,236,125 10.7% 174,648 66,529 28,000 $22.11 Southend 1,025 19,646,001 2,201,064 2,425,827 12.3% 79,079 0 0 $20.17 Tacoma 1,876 20,075,734 2,009,801 2,247,323 11.2% 145,076 22,283 57,350 $21.47 Totals 7,441 182,107,276 17,754,261 18,939,436 10.4% 2,717,292 948,758 729,265 $26.08 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9
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 90,725 2.7% (23,002) 0 0 $26.14 Ballard/U Dist 3 211,108 19,766 19,766 9.4% 76,114 70,000 0 $34.70 Bellevue CBD 25 7,517,612 541,636 553,925 7.4% 265,091 0 0 $35.30 Belltown/Denny Regrade 12 2,701,325 394,672 394,672 14.6% (135,253) 0 77,000 $27.16 Bothell/Kenmore 4 346,291 0 0 0.0% 6,333 0 0 $0.00 Capitol Hill/Central Dist 2 257,648 26,983 26,983 10.5% 198,214 0 50,000 $36.10 Coal Creek/Issaquah 6 917,381 0 30,000 3.3% 104,299 0 0 $27.75 Dupont 1 48,000 3,400 3,400 7.1% 21,807 0 0 $28.00 E King County 0 0 0 0 0.0% 0 0 0 $0.00 E Pierce County 0 0 0 0 0.0% 0 0 0 $0.00 Edmonds/Lynnwood 7 751,864 194,741 202,210 26.9% (747) 0 0 $24.97 Everett CBD 1 88,000 0 0 0.0% 0 0 0 $0.00 Federal Way/Auburn 1 88,000 15,000 15,000 17.0% 0 0 0 $26.47 Fort Lewis 0 0 0 0 0.0% 0 0 0 $0.00 Gig Harbor/W Pierce Co 1 85,903 28,773 28,773 33.5% (3,202) 0 0 $32.63 I-90 Corridor 19 2,714,382 327,169 327,169 12.1% (25,308) 0 0 $30.16 Kent Valley 1 57,768 0 0 0.0% 0 0 0 $0.00 Kirkland 12 998,484 74,450 84,956 8.5% 12,569 0 0 $33.17 Lake Union 25 5,425,768 149,601 152,658 2.8% 1,114,588 400,563 308,899 $28.02 Mercer Island 1 105,796 22,354 22,354 21.1% 7,203 0 0 $34.06 Mill Creek/Woodinville 0 0 0 0 0.0% 0 0 0 $0.00 N Snohomish County 0 0 0 0 0.0% 0 0 0 $0.00 Northgate/N Seattle 2 205,361 9,123 9,123 4.4% (541) 0 0 $26.00 Pioneer Sq/Waterfront 9 1,793,386 325,325 325,325 18.1% 198,951 0 0 $27.26 Puyallup 1 83,268 17,720 17,720 21.3% 2,108 0 0 $42.50 Queen Anne/Magnolia 11 1,747,648 354,005 360,720 20.6% 18,900 0 0 $32.83 Redmond 19 2,176,602 146,942 146,942 6.8% 5,002 0 0 $29.39 Renton/Tukwila 5 716,242 0 0 0.0% 0 0 0 $0.00 S Everett/Harbor Point 1 264,515 0 0 0.0% 0 0 0 $0.00 S Seattle 5 959,872 457,292 457,292 47.6% 296,836 365,816 189,602 $37.19 S Snohomish County 0 0 0 0 0.0% 0 0 0 $0.00 Seatac/Burien 2 427,592 171,482 171,482 40.1% 113,802 0 0 $24.00 Seattle CBD 42 20,618,754 2,845,843 3,141,016 15.2% (38,464) 0 0 $31.44 Spanaway 0 0 0 0 0.0% 0 0 0 $0.00 Suburban Bellevue 2 234,000 230,880 230,880 98.7% (12,000) 0 0 $46.49 Tacoma CBD 5 1,084,935 68,758 287,658 26.5% 41,302 0 0 $26.68 Tacoma Suburban 0 0 0 0 0.0% 0 0 0 $0.00 Univ. Place/Lakewood 1 42,000 0 0 0.0% 0 0 0 $33.37 Totals 249 55,971,130 6,516,640 7,100,749 12.7% 2,244,602 836,379 625,501 $31.41 10 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
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 5,026,018 168,286 168,286 3.3% 81,642 0 0 $23.04 Ballard/U Dist 104 3,422,471 97,912 130,773 3.8% 22,723 0 0 $24.33 Bellevue CBD 30 1,407,305 189,592 225,521 16.0% 82,690 0 0 $28.78 Belltown/Denny Regrade 45 2,952,093 341,716 383,735 13.0% (12,037) 0 0 $29.16 Bothell/Kenmore 98 4,550,186 592,605 655,093 14.4% (799) 58,329 0 $24.10 Capitol Hill/Central Dist 83 4,127,115 110,440 112,701 2.7% (36,308) 0 0 $34.48 Coal Creek/Issaquah 56 1,365,225 132,109 134,345 9.8% (2,092) 7,607 0 $26.23 Dupont 6 1,065,501 1,280 1,280 0.1% 23,340 0 0 $20.00 E King County 62 873,108 89,864 89,864 10.3% 12,513 0 0 $23.11 E Pierce County 29 382,950 61,431 63,156 16.5% 15,826 6,813 0 $22.83 Edmonds/Lynnwood 129 2,823,476 375,288 378,657 13.4% 36,799 0 4,000 $21.26 Everett CBD 80 1,857,774 132,084 132,084 7.1% 21,437 0 0 $20.33 Federal Way/Auburn 132 3,376,032 519,677 725,397 21.5% 19,462 0 0 $19.75 Fort Lewis 0 0 0 0 0.0% 0 0 0 $0.00 Gig Harbor/W Pierce Co 72 1,209,446 125,073 126,825 10.5% 36,169 0 0 $21.93 I-90 Corridor 44 3,200,106 242,788 288,424 9.0% (55,624) 0 0 $28.61 Kent Valley 67 2,110,147 447,622 457,937 21.7% (43,126) 0 0 $21.48 Kirkland 134 3,506,081 449,679 472,503 13.5% (9,047) 0 0 $26.07 Lake Union 89 5,359,323 358,481 384,417 7.2% (253) 0 0 $27.62 Mercer Island 16 398,295 7,829 7,829 2.0% 9,824 0 0 $29.78 Mill Creek/Woodinville 43 851,621 80,582 80,582 9.5% 85,235 0 24,000 $27.44 N Snohomish County 58 576,946 71,798 72,854 12.6% (19,900) 0 0 $16.10 Northgate/N Seattle 56 1,343,714 121,463 121,463 9.0% 41,820 0 0 $23.03 Pioneer Sq/Waterfront 57 3,549,487 440,766 442,875 12.5% (7,147) 0 0 $24.92 Puyallup 59 1,141,117 317,483 317,483 27.8% (32,914) 0 0 $23.89 Queen Anne/Magnolia 61 2,552,543 156,661 156,661 6.1% 30,065 0 0 $22.08 Redmond 101 5,058,987 502,515 511,543 10.1% 122,874 15,960 0 $22.57 Renton/Tukwila 163 7,459,367 598,578 606,016 8.1% (10,802) 0 0 $20.73 S Everett/Harbor Point 78 1,778,620 135,716 154,886 8.7% (12,525) 8,200 0 $23.37 S Seattle 82 2,238,959 253,196 253,196 11.3% (7,559) 0 0 $21.60 S Snohomish County 22 267,421 26,965 26,965 10.1% (751) 0 0 $22.24 Seatac/Burien 58 1,217,054 165,532 165,532 13.6% (13,880) 0 0 $19.91 Seattle CBD 54 5,919,219 643,750 657,936 11.1% (18,818) 0 0 $26.24 Spanaway 53 584,554 104,858 104,858 17.9% (11,863) 0 0 $19.12 Suburban Bellevue 195 4,983,251 551,776 561,073 11.3% 11,804 0 18,414 $26.82 Tacoma CBD 84 3,033,790 295,187 306,509 10.1% (21,656) 0 57,350 $19.88 Tacoma Suburban 222 3,174,615 257,230 257,230 8.1% 21,107 15,470 0 $21.65 Univ. Place/Lakewood 90 1,110,648 90,297 90,297 8.1% 15,069 0 0 $19.44 Totals 2,910 95,854,565 9,258,109 9,826,786 10.3% 373,298 112,379 103,764 $24.06 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 11
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 20 321,925 32,066 32,066 10.0% (12,036) 0 0 $18.53 Ballard/U Dist 301 1,462,259 29,447 34,487 2.4% 18,704 0 0 $21.41 Bellevue CBD 32 281,245 11,745 11,745 4.2% 9,939 0 0 $25.21 Belltown/Denny Regrade 54 755,854 40,349 40,349 5.3% (2,050) 0 0 $19.48 Bothell/Kenmore 99 382,856 12,113 12,113 3.2% 454 0 0 $22.16 Capitol Hill/Central Dist 134 1,739,237 23,184 23,184 1.3% 15,787 0 0 $24.18 Coal Creek/Issaquah 38 185,927 10,150 10,150 5.5% 1,151 0 0 $26.13 Dupont 0 0 0 0 0.0% 0 0 0 $0.00 E King County 84 402,593 12,252 12,252 3.0% 1,450 0 0 $19.13 E Pierce County 41 120,799 6,858 6,858 5.7% (6,858) 0 0 $18.72 Edmonds/Lynnwood 168 1,116,833 92,025 92,025 8.2% (688) 0 0 $19.03 Everett CBD 240 1,557,701 144,239 144,239 9.3% 19,635 0 0 $16.45 Federal Way/Auburn 196 1,687,344 52,126 52,126 3.1% 15,978 0 0 $18.90 Fort Lewis 8 28,094 0 0 0.0% 0 0 0 $0.00 Gig Harbor/W Pierce Co 87 462,692 52,103 52,103 11.3% 12,897 0 0 $19.04 I-90 Corridor 17 160,475 3,615 3,615 2.3% (2,500) 0 0 $20.84 Kent Valley 118 688,065 96,014 96,014 14.0% (28,312) 0 0 $15.27 Kirkland 98 623,149 38,330 38,330 6.2% 20,365 0 0 $23.32 Lake Union 102 938,928 98,197 98,197 10.5% (24,002) 0 0 $19.55 Mercer Island 18 146,971 27,415 27,415 18.7% (919) 0 0 $22.28 Mill Creek/Woodinville 40 240,226 38,092 40,151 16.7% (10,490) 0 0 $23.14 N Snohomish County 106 455,061 36,171 36,171 7.9% 5,960 0 0 $15.74 Northgate/N Seattle 121 759,558 32,898 32,898 4.3% 1,053 0 0 $19.27 Pioneer Sq/Waterfront 46 1,053,937 47,232 47,232 4.5% 72,654 0 0 $18.09 Puyallup 136 541,578 25,642 25,642 4.7% 1,220 0 0 $21.06 Queen Anne/Magnolia 126 1,080,317 102,202 110,493 10.2% (55,398) 0 0 $20.63 Redmond 68 283,184 21,658 21,658 7.6% (3,397) 0 0 $23.12 Renton/Tukwila 144 1,046,094 90,265 90,265 8.6% 23,522 0 0 $20.48 S Everett/Harbor Point 75 484,137 26,617 26,617 5.5% 7,377 0 0 $17.75 S Seattle 208 2,040,078 83,682 89,158 4.4% (15,146) 0 0 $17.33 S Snohomish County 36 211,362 17,514 17,994 8.5% (5,014) 0 0 $14.85 Seatac/Burien 138 772,296 44,768 46,058 6.0% 2,435 0 0 $15.96 Seattle CBD 19 814,683 18,786 18,786 2.3% (1,988) 0 0 $19.95 Spanaway 137 540,822 23,230 25,508 4.7% (20,008) 0 0 $16.64 Suburban Bellevue 184 1,560,279 58,049 63,979 4.1% 6,885 0 0 $21.65 Tacoma CBD 164 1,939,720 208,981 208,981 10.8% 39,689 0 0 $17.34 Tacoma Suburban 484 2,326,165 218,999 218,999 9.4% (6,943) 0 0 $16.73 Univ. Place/Lakewood 195 1,069,137 102,498 104,043 9.7% 17,986 0 0 $18.29 Totals 4,282 30,281,581 1,979,512 2,011,901 6.6% 99,392 0 0 $19.15 12 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
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 8,649,568 291,077 291,077 3.4% 46,604 0 0 $23.39 Ballard/U Dist 408 5,095,838 147,125 185,026 3.6% 117,541 70,000 0 $24.36 Bellevue CBD 87 9,206,162 742,973 791,191 8.6% 357,720 0 0 $33.10 Belltown/Denny Regrade 111 6,409,272 776,737 818,756 12.8% (149,340) 0 77,000 $28.06 Bothell/Kenmore 201 5,279,333 604,718 667,206 12.6% 5,988 58,329 0 $24.04 Capitol Hill/Central Dist 219 6,124,000 160,607 162,868 2.7% 177,693 0 50,000 $31.93 Coal Creek/Issaquah 100 2,468,533 142,259 174,495 7.1% 103,358 7,607 0 $27.13 Dupont 7 1,113,501 4,680 4,680 0.4% 45,147 0 0 $27.67 E King County 146 1,275,701 102,116 102,116 8.0% 13,963 0 0 $22.49 E Pierce County 70 503,749 68,289 70,014 13.9% 8,968 6,813 0 $22.38 Edmonds/Lynnwood 304 4,692,173 662,054 672,892 14.3% 35,364 0 4,000 $22.00 Everett CBD 321 3,503,475 276,323 276,323 7.9% 41,072 0 0 $19.00 Federal Way/Auburn 329 5,151,376 586,803 792,523 15.4% 35,440 0 0 $19.81 Fort Lewis 8 28,094 0 0 0.0% 0 0 0 $0.00 Gig Harbor/W Pierce Co 160 1,758,041 205,949 207,701 11.8% 45,864 0 0 $22.55 I-90 Corridor 80 6,074,963 573,572 619,208 10.2% (83,432) 0 0 $29.24 Kent Valley 186 2,855,980 543,636 553,951 19.4% (71,438) 0 0 $20.03 Kirkland 244 5,127,714 562,459 595,789 11.6% 23,887 0 0 $26.66 Lake Union 216 11,724,019 606,279 635,272 5.4% 1,090,333 400,563 308,899 $27.18 Mercer Island 35 651,062 57,598 57,598 8.8% 16,108 0 0 $28.14 Mill Creek/Woodinville 83 1,091,847 118,674 120,733 11.1% 74,745 0 24,000 $26.08 N Snohomish County 164 1,032,007 107,969 109,025 10.6% (13,940) 0 0 $16.04 Northgate/N Seattle 179 2,308,633 163,484 163,484 7.1% 42,332 0 0 $22.54 Pioneer Sq/Waterfront 112 6,396,810 813,323 815,432 12.7% 264,458 0 0 $25.21 Puyallup 196 1,765,963 360,845 360,845 20.4% (29,586) 0 0 $25.77 Queen Anne/Magnolia 198 5,380,508 612,868 627,874 11.7% (6,433) 0 0 $27.22 Redmond 188 7,518,773 671,115 680,143 9.0% 124,479 15,960 0 $24.35 Renton/Tukwila 312 9,221,703 688,843 696,281 7.6% 12,720 0 0 $20.70 S Everett/Harbor Point 154 2,527,272 162,333 181,503 7.2% (5,148) 8,200 0 $22.85 S Seattle 295 5,238,909 794,170 799,646 15.3% 274,131 365,816 189,602 $29.59 S Snohomish County 58 478,783 44,479 44,959 9.4% (5,765) 0 0 $20.75 Seatac/Burien 198 2,416,942 381,782 383,072 15.8% 102,357 0 0 $19.96 Seattle CBD 115 27,352,656 3,508,379 3,817,738 14.0% (59,270) 0 0 $30.25 Spanaway 190 1,125,376 128,088 130,366 11.6% (31,871) 0 0 $18.37 Suburban Bellevue 381 6,777,530 840,705 855,932 12.6% 6,689 0 18,414 $29.70 Tacoma CBD 253 6,058,445 572,926 803,148 13.3% 59,335 0 57,350 $22.02 Tacoma Suburban 706 5,500,780 476,229 476,229 8.7% 14,164 15,470 0 $19.84 Univ. Place/Lakewood 286 2,221,785 192,795 194,340 8.7% 33,055 0 0 $19.30 Totals 7,441 182,107,276 17,754,261 18,939,436 10.4% 2,717,292 948,758 729,265 $26.08 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13
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 3,982,599 13.6% 267,929 0 0 $31.82 Suburban 176 26,661,829 3,060,403 3,118,150 11.7% 1,976,673 836,379 625,501 $30.98 Totals 249 55,971,130 6,516,640 7,100,749 12.7% 2,244,602 836,379 625,501 $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 248 12,218,088 1,260,613 1,322,050 10.8% 63,653 0 57,350 $24.51 Suburban 2,662 83,636,477 7,997,496 8,504,736 10.2% 309,645 112,379 46,414 $23.99 Totals 2,910 95,854,565 9,258,109 9,826,786 10.3% 373,298 112,379 103,764 $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 4,593,349 383,751 383,751 8.4% 67,275 0 0 $17.63 Suburban 3,827 25,688,232 1,595,761 1,628,150 6.3% 32,117 0 0 $19.40 Totals 4,282 30,281,581 1,979,512 2,011,901 6.6% 99,392 0 0 $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 321 41,527,389 4,716,850 5,304,649 12.8% 331,582 0 57,350 $29.54 Suburban 2,838 110,298,306 11,057,899 11,622,886 10.5% 2,286,318 948,758 671,915 $25.81 Totals 3,159 151,825,695 15,774,749 16,927,535 11.1% 2,617,900 948,758 729,265 $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 776 46,120,738 5,100,601 5,688,400 12.3% 398,857 0 57,350 $28.89 Suburban 6,665 135,986,538 12,653,660 13,251,036 9.7% 2,318,435 948,758 671,915 $25.04 Totals 7,441 182,107,276 17,754,261 18,939,436 10.4% 2,717,292 948,758 729,265 $26.08 14 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
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 249 55,971,130 6,516,640 7,100,749 12.7% 819,738 3 608,563 5 625,501 $31.41 246 55,362,567 6,662,275 7,311,924 13.2% 22,594 1 70,000 8 1,234,064 $30.96 2q 245 55,292,567 6,632,522 7,264,518 13.1% 1,013,417 1 157,816 9 1,304,064 $30.43 244 55,134,751 7,494,321 8,120,119 14.7% 388,853 0 0 10 1,461,880 $30.04 4q 244 55,134,751 7,867,022 8,508,972 15.4% 476,121 1 83,268 8 1,152,981 $30.27 243 55,051,483 8,167,684 8,901,825 16.2% 294,854 1 190,000 6 909,647 $29.85 2q 242 54,861,483 8,329,942 9,006,679 16.4% 1,267,155 3 657,768 5 979,647 $30.59 239 54,203,715 8,810,449 9,616,066 17.7% 257,506 3 847,696 8 1,637,415 $30.47 2010 236 53,356,019 8,182,992 9,025,876 16.9% 1,394,741 10 1,768,123 10 2,144,548 $30.87 2009 226 51,587,896 7,883,541 8,652,494 16.8% (156,325) 14 3,938,266 14 3,132,311 $30.26 2008 212 47,649,630 3,850,037 4,557,903 9.6% 402,974 10 1,751,725 21 5,625,561 $36.10 2007 202 45,897,905 2,708,721 3,209,152 7.0% 1,440,729 7 1,470,977 18 5,011,206 $35.93 2006 195 44,426,928 2,409,709 3,178,904 7.2% 2,011,663 2 1,084,000 13 3,483,581 $29.64 2005 193 43,342,928 2,794,892 4,106,567 9.5% 1,166,999 1 42,000 4 1,676,500 $25.81 2004 192 43,300,928 4,314,216 5,231,566 12.1% 449,285 3 444,220 4 1,666,000 $26.03 2003 189 42,856,708 3,874,897 5,236,631 12.2% 883,684 0 0 4 984,220 $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 9,826,786 10.3% 239,055 1 15,960 4 103,764 $24.06 2,909 95,838,605 9,496,706 10,049,881 10.5% (8,005) 3 69,420 5 119,724 $23.70 2q 2,906 95,769,185 9,426,442 9,972,456 10.4% 301,916 1 15,470 5 89,380 $23.48 2,906 95,802,330 9,821,928 10,307,517 10.8% (159,668) 2 11,529 5 100,850 $23.41 4q 2,904 95,790,801 9,620,375 10,136,320 10.6% 386,403 2 70,777 7 112,379 $23.25 2,902 95,720,024 9,825,769 10,451,946 10.9% (5,124) 1 3,600 6 105,383 $22.93 2q 2,902 95,728,084 9,730,759 10,454,882 10.9% 383,191 0 0 5 85,906 $22.56 2,902 95,728,084 10,114,048 10,838,073 11.3% 222,044 6 316,112 3 74,377 $22.59 2010 2,896 95,411,972 9,856,724 10,744,005 11.3% 1,036,059 21 417,981 8 375,703 $22.86 2009 2,875 94,993,991 10,349,744 11,362,083 12.0% (316,406) 38 1,368,601 19 321,428 $23.23 2008 2,840 93,683,385 8,908,553 9,735,071 10.4% 1,440,063 64 2,774,156 36 1,327,657 $25.36 2007 2,779 90,932,281 7,875,839 8,424,030 9.3% 1,359,185 60 1,297,684 59 3,122,734 $25.69 2006 2,729 90,001,217 8,299,054 8,852,151 9.8% 2,395,714 52 852,354 72 2,726,199 $23.30 2005 2,683 89,390,351 10,084,512 10,636,999 11.9% 2,924,156 48 1,601,681 47 827,594 $21.02 2004 2,636 87,840,670 11,249,499 12,011,474 13.7% 239,772 41 902,020 42 1,451,434 $20.27 2003 2,601 87,459,664 10,969,868 11,870,240 13.6% 669,429 38 802,392 34 997,169 $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 7,441 182,107,276 17,754,261 18,939,436 10.4% 1,175,021 4 624,523 9 729,265 $26.08 7,439 181,503,802 18,279,779 19,510,983 10.7% 46,325 4 139,420 13 1,353,788 $25.60 2q 7,437 181,383,830 18,214,606 19,437,336 10.7% 1,263,568 2 173,286 14 1,393,444 $25.29 7,436 181,259,159 19,421,609 20,576,233 11.4% 232,378 2 11,529 15 1,562,730 $24.97 4q 7,435 181,263,978 19,618,035 20,813,430 11.5% 808,978 3 154,045 15 1,265,360 $25.36 7,433 181,113,010 20,077,811 21,471,440 11.9% 297,458 2 193,600 12 1,015,030 $24.90 2q 7,432 180,931,070 20,173,308 21,586,958 11.9% 1,768,699 3 657,768 10 1,065,553 $25.11 7,430 180,277,002 21,151,958 22,701,589 12.6% 533,437 9 1,163,808 11 1,711,792 $25.23 2010 7,422 179,116,088 20,308,565 22,074,112 12.3% 2,275,742 31 2,186,104 18 2,520,251 $25.62 2009 7,394 176,999,238 20,430,296 22,233,004 12.6% (1,025,506) 54 5,317,647 33 3,453,739 $25.55 2008 7,345 171,774,092 14,385,151 15,982,352 9.3% 1,669,347 81 4,587,540 59 6,963,998 $28.34 2007 7,272 167,262,075 12,025,570 13,139,682 7.9% 2,951,159 72 2,791,732 83 8,187,971 $28.51 2006 7,221 165,056,008 12,537,745 13,884,774 8.4% 4,596,378 65 2,068,214 89 6,225,953 $24.63 2005 7,172 163,332,673 14,838,212 16,757,817 10.3% 4,029,877 59 1,682,341 61 2,628,578 $22.42 2004 7,119 161,728,881 17,466,578 19,183,902 11.9% 981,414 48 1,368,972 55 3,153,228 $21.93 2003 7,085 160,945,654 17,060,451 19,382,089 12.0% 1,290,622 50 918,439 42 2,004,121 $21.86 Quoted 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15
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 $0.00 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 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 3.0 2.5 2.47 Dollars/SF/Year $20.00 $15.00 $10.00 $5.00 $0.00 2010 2010 4q 2q 4q 2q 4q Millions 2.0 1.5 1.0 0.5 0.0 0.67 0.24 0.02 0.00 0.00 2013 2013 2q 2013 2013 4q 2014 2014 2q * Includes Under Construction Spaces 16 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
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 1 1600 7th 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 4 202 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 7 705 Union Station Pioneer Sq/Waterfront 72,816 3rd Attachmate Corporation N/A CBRE 8 3101 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 19 425 Pontius* Lake Union 38,148 3rd Providence Health & Services N/A Urbis Partners 20 907 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 23 1000 Dexter Bldg Lake Union 33,684 2nd The Omni Group Century Pacific LP Kidder Mathews 24 3100 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 29 605 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. 32 901 5th 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 36 705 Union Station Pioneer Sq/Waterfront 24,446 4th Avvo N/A CBRE 37 705 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
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% 2009 4q 2010 2010 2q 2010 2010 4q 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 $ 173.85 6.41% 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 $ 214.69 6.86% 250K-499K SF 5 1,828,293 $ 759,045,000 $ 415.17 8.00% $0 2009 2009 2010 2010 $0 >500K SF 4 2,692,840 $ 1,017,000,000 $ 377.67 5.22% 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% $20 2009 2009 2010 2010 3.0% 2009 2009 2010 2010 Source: CoStar COMPS Source: CoStar COMPS 18 THE COSTAR OFFICE REPORT 2013 COSTAR GROUP, INC.
Seattle/Puget Sound Office Market SALES ACTIVITY YEAR-END SEATTLE/PUGET SOUND 2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 19