Medical Takes a Sick Quarter

Research & Forecast Report LAS VEGAS MEDICAL OFFICE Q3 2015 Medical Takes a Sick Quarter > > After two quarters of growth, the medical real estate sector stalled in the third quarter of 2015 > > Asking rates had been on the rise, but were flat this quarter HEALTHCARE Employment HEALTHCARE Spending +7.4 MEDICAL /Job -0.6% > > Health care employment continued to increase +2.9% Q3 Given the recent performance of Southern Nevada s medical office market, two quarters of positive net absorption just had to be followed by a quarter of negative net absorption. Fortunately, the negative net absorption in the third quarter of 2015 was quite a bit lower than the negative net absorption experienced one year ago in the third quarter of. The third quarter s negative net absorption drove vacancy rates up a notch to 17.5 percent. Asking rates remained at $2.17 per square foot (psf) on a full service gross (FSG) basis. Historical Vacancy Rates and Rental Rates Market Indicators Relative to prior period Market Q3 2015 Market Q4 2015* NET ABSORPTION COMPLETIONS RENTAL *Projected 20.0% 19.0% 18.0% $2.18 $2.17 $2.16 Summary Statistics Q3 2015 Las Vegas Market Q3-2015 Q2-2015 Q3-17.0% $2.15 Vacancy Rate 17.5% 17.4% 19.1 16.0% 15.0% $2.14 $2.13 Asking Rent (P, FSG) $2.17 $2.17 $2.17 14.0% 13.0% $2.12 $2.11 Net Absorption YTD () -6,806 20,478-101,664 12.0% $2.10 New Completions YTD () 0 0 0 11.0% $2.09 10.0% 3 Q 2013 4 Q 2013 1 Q 2 Q 3 Q 4 Q 1 Q 2015 2 Q 2015 3 Q 2015 $2.08 Overall Asking Rents Per Square Foot Previous Quarter Current Quarter Vacancy Rate Rental Rate Class A $2.59 $2.71 While healthcare employment is on the rise, it does not always translate into high (or higher) demand for medical office space. Class B $2.23 $2.22 Class C $1.78 $1.72

According to the Nevada Department of Employment, Training and Rehabilitation, Southern Nevada s medical office job market improved in August 2015 (the latest month of data available) compared with August, adding approximately 2,500 jobs in the past twelve months. This does not include jobs at hospitals. Employment that directly impacted medical office projects increased by 600 jobs. Most of these additional jobs impacted Class C medical office projects. Unemployment in the Las Vegas-Paradise MSA stood at 7.0 percent as of August 2015, down from 7.6 percent in August. Since August, total employment in Southern Nevada has increased by 35,200 jobs. Historical Net Absorption vs. Completions 100,000 50,000 0-50,000 Taxable spending on ambulatory health care services in Clark County in the second quarter of 2015 (the most recent quarter of available data) increased by 7.7 percent over the second quarter of, according to the Nevada Department of Taxation. Compared to the first quarter of 2015, ambulatory health care services spending was down 1.2 percent. Nursing and residential care facilities saw spending rise by 45.9 percent year-over-year, while hospital spending increased by 3.1 percent yearover-year. The last time medical office space was completed in Southern Nevada was during the fourth quarter of 2011, when 57,600 square feet was added to inventory. A new hospital at Union Village is now under construction. When it is completed, development of 150,000 square feet of medical office and 190,000 square feet of retail space will follow, though this could still be 18-24 months away. Vacancy in medical office space increased in the third quarter of 2015 to 17.5 percent, from 17.4 percent in the second quarter of 2015. Vacancy is lower now than in the third quarter of when it stood at 19.1 percent, during the especially weak period of medical net absorption that year. The highest vacancy rates posted in the third quarter of 2015 were in the Southwest (36.4 percent), Airport (33.4 percent), Downtown (24.3 percent) and East Las Vegas (20.5 percent) submarkets. Henderson boasted the lowest vacancy rate in the Valley at 11.7 percent, followed closely by West Central s 12.6 percent. Vacancy increased in the Airport, Downtown, North Las Vegas, Northwest, and Southwest submarkets this quarter, highlighting the precariousness of the current medical recovery. Vacancy decreased in East Las Vegas, Henderson and West Central. Southern Nevada posted negative 6,806 square feet of net absorption in the third quarter of 2015. Net absorption has been falling in the Valley for the past two quarters. Year-to-date, net absorption stood at 88,785 square feet. While this is significantly better than the negative 132,258 square feet of net absorption posted, year-to-date, in the third quarter of, it is not a stellar performance. Higher growth in health care employment would suggest that demand for medical office space should be higher, and that medical office buildings are losing business to other types of property, in particular professional office and retail. The weighted average asking rental rate for medical office space in the third quarter of 2015 was $2.17 per square foot (psf) on a full service gross (FSG) basis. Asking rents are the same as they were one quarter ago, and the same as they were in the third quarter of. In leases we have tracked over the past two years, effective lease rates for medical office leases have averaged 100.4 percent of asking lease rates, which suggests that asking rates are appropriate for the market, and will probably post some growth over the next few quarters. The -100,000-150,000 3 Q 2013 4 Q 2013 1 Q Net Absorption Healthcare Jobs vs. Occupancy Rate 83.5% 83.0% 82.5% 82.0% 81.5% 81.0% 80.5% 80.0% 79.5% 3 Q 2013 4 Q 2013 1 Q 2 Q Healthcare Jobs 2 Q 3 Q 3 Q 4 Q 4 Q 1 Q 2015 Completions 1 Q 2015 2 Q 2015 Occupancy Rate 2 Q 2015 3 Q 2015 3 Q 2015 15,900 15,400 14,900 14,400 13,900 13,400 2 Las Vegas Research & Forecast Report Q3 2015 Medical Office Colliers International

Valley s highest average asking rate was in the Northwest submarket, at $2.48 psf FSG, a reduction for that submarket of $0.09 from one quarter ago. The lowest average asking rate was in the West Central submarket, at $1.74 psf, a reduction of $0.02 from one quarter ago. Lease rates increased this quarter in Downtown, East Las Vegas, North Las Vegas and Southwest. Healthcare Services Taxable Spending $30,000,000 Health Services Taxable Spending Investment sales volume of medical office space in 2015 was $33.5 million in six sales totaling 153,844 square feet. The average sales price of $217.69 per square foot. Cap rates ranged between 7.2 percent and 8.6 percent. Two sales have driven this very high average sales price, the sale of a 60,000 square foot Class A medical office building in the first quarter, which had an average sales price of $341.67, and the sale of a Veterans Administration medical building in the Northwest submarket with an average sales price of $711.44. While healthcare employment is on the rise, it does not always translate into more demand for medical office space. The majority of healthcare workers do not work in medical office buildings. Considering this, the positive net absorption we are seeing in medical office space in 2015 is actually pretty good. It seems likely that medical employment, which is almost always growing and which only suffered a minor setback in the run-up to the implementation of the ACA, will continue to grow over the next twelve months. This growth will probably be steady and not spectacular, and thus growth in medical office occupancy will probably also remain steady and not spectacular. Medical office is a workhorse, not a racehorse. $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Source: Nevada Department of Taxation 1 Q 4 Q 2013 3 Q 2013 2 Q 2013 Source: Nevada Department of Taxation 2 Q 3 Q 4 Q 1 Q 2015 2 Q 2015 Medical office is a workhorse, not a racehorse. - John Stater, Research & GIS Manager Summerlin Surgery Center & MOB 3 Las Vegas Research & Forecast Report Q3 2015 Medical Office Colliers International

215 NORTH LAS VEGAS Significant Medical Office Sales Activity North Rancho Drive 95 38,000 - $26,750,000 $711.44/ March 2015 NORTHWEST 15 Class B Pinto Lane SUMMERLIN WEST CENTRAL DOWN TOWN EAST LAS VEGAS 10,000 - $1,388,000 $138.80/ April 2015 Class C Casa Vegas Street 28,000 - $5,500,000 95 $194.15/ August 2015 Class C AIRPORT Wigwam Parkway 215 60,000 - $20,500,000 $341.67/ February 2015 SOUTHWEST HENDERSON Class A Horizon Ridge Medical Corporate 28,000 - $4,420,000 $155.94/ October Class C Significant Lease Activity Property Name Lease Date Lease Term Size Lease Rate Tenant MacFarlane Medical Center May 2015 120 months 13,000 $1.55 NNN Physicians Nevada Cancer Institute Campus Mar 2015 91 months 8,000 $2.40 MG Non-Medical The Parkway Mar 2015 132 months 20,000 $0.93 NNN Laboratory Thomas & Mack Medical Plaza Dec 84 months 15,000 $2.97 NNN Physicians The Parkway Dec 72 months 6,000 $1.99 NNN Prosthetics 4 Las Vegas Research & Forecast Report Q3 2015 Medical Office Colliers International

Market Comparisons - Las Vegas Medical Office Market TYPE TOTAL INVENTORY DIRECT VACANT DIRECT SUBLEASE SUBLEASE VACANT TOTAL VACANT CURRENT QUARTER PRIOR QUARTER NET ABSORPTION CURRENT QTR NET ABSORPTION YTD COMPLETIONS CURRENT QTR COMPLETIONS YTD UNDER CONSTRUCTION PLANNED CONSTRUCTION WEIGHTED AVG ASKING RENTAL AIRPORT SUBMARKET B - - n/a - n/a - n/a n/a - - - - - - $- C 38,000 12,690 33.4% - 0.0% 12,690 33.4% 28.7% (1,790) (1,790) - - - - $2.07 Total 38,000 12,690 33.4% - 0.0% 12,690 33.4% 28.7% (1,790) (1,790) - - - - $2.07 DOWNTOWN SUBMARKET A 65,000-0.0% - 0.0% - 0.0% 0.0% - - - - - - $- B 227,301 84,251 37.1% - 0.0% 84,251 37.1% 36.4% (1,608) (53,672) - - - - $1.97 C 75,531 5,018 6.6% - 0.0% 5,018 6.6% 7.1% 380 4,982 - - - - $2.17 Total 367,832 89,269 24.3% - 0.0% 89,269 24.3% 23.9% (1,228) (48,690) - - - - $1.99 EAST LAS VEGAS SUBMARKET B 669,264 153,681 23.0% 2,000 0.3% 155,681 23.3% 22.5% (2,810) (2,277) - - - - $2.12 C 574,080 101,440 17.7% 5,192 0.9% 106,632 18.6% 20.7% 11,974 (691) - - - - $1.63 Total 1,243,344 255,121 20.5% 7,192 0.6% 262,313 21.1% 21.7% 9,164 (2,968) - - - - $1.92 HENDERSON SUBMARKET A 421,834 57,147 13.5% - 0.0% 57,147 13.5% 15.0% 6,197 26,843 - - - 150,000 $2.93 B 309,703 55,174 17.8% 2,515 0.8% 57,689 18.6% 17.0% -5,066 31,675 - - - - $2.12 C 588,808 41,910 7.1% - 0.0% 41,910 7.1% 8.8% 9,699 (86) - - - - $2.02 Total 1,320,345 154,231 11.7% 2,515 0.2% 156,746 11.9% 12.7% 10,830 58,432 - - - 150,000 $2.39 NORTH LAS VEGAS SUBMARKET B 43,921 5,800 13.2% - 0.0% 5,800 13.2% 10.9% (1,024) 3,413 - - - - $2.15 C 110,668 17,900 16.2% - 0.0% 17,900 16.2% 16.2% - - - - - - $2.00 Total 154,589 23,700 15.3% - 0.0% 23,700 15.3% 14.7% (1,024) 3,413 - - - - $2.04 NORTHWEST SUBMARKET A 807,173 160,084 19.8% - 0.0% 160,084 19.8% 21.8% 15,997 35,836 - - - 80,251 $2.56 B 1,031,717 108,261 10.5% - 0.0% 108,261 10.5% 7.7% (28,976) (68,859) - - - - $2.40 C 199,215 6,516 3.3% - 0.0% 6,516 3.3% 2.8% (867) 1,354 - - - - $1.78 Total 2,038,105 274,861 13.5% - 0.0% 274,861 13.5% 12.8% (13,846) (31,669) - - - 80,251 $2.48 SOUTHWEST SUBMARKET A 115,300 47,744 41.4% - 0.0% 47,744 41.4% 38.1% (3,800) 7,800 - - - - $2.30 B 380,926 170,413 44.7% 4,440 1.2% 174,853 45.9% 40.8% (19,319) 2,612 - - - 131,680 $2.35 C 275,170 62,750 22.8% 1,284 0.5% 64,034 23.3% 22.3% (1,399) 7,485-16,000 - - $2.00 Total 771,396 280,907 36.4% 5,724 0.7% 286,631 37.2% 33.8% (24,518) 17,897-16,000-131,680 $2.27 WEST CENTRAL SUBMARKET B 291,027 21,290 7.3% - 0.0% 21,290 7.3% 9.6% 6,543 18,796 - - - - $2.40 C 852,482 123,260 14.5% 7,005 0.8% 130,265 15.3% 16.5% 9,063 75,364 - - - - $1.63 Total 1,143,509 144,550 12.6% 7,005 0.6% 151,555 13.3% 14.7% 15,606 94,160 - - - - $1.74 MARKET TOTAL A 1,409,307 264,975 18.8% - 0.0% 264,975 18.8% 20.1% 18,394 70,479 - - - 230,251 $2.59 B 2,953,859 598,870 20.3% 8,955 0.3% 607,825 20.6% 18.7% (52,260) (68,312) - - - 131,680 $2.23 C 2,713,954 371,484 13.7% 13,481 0.5% 384,965 14.2% 15.2% 27,060 86,618-16,000 - - $1.78 Total 7,077,120 1,235,329 17.5% 22,436 0.3% 1,257,765 17.8% 17.6% (6,806) 88,785-16,000-361,931 $2.17 QUARTERLY COMPARISON AND TOTALS Q3-15 7,077,120 1,235,329 17.5% 22,436 0.3% 1,257,765 17.8% 17.6% (6,806) 88,785-16,000-361,931 $2.17 Q2-15 7,077,120 1,228,523 17.4% 20,245 0.3% 1,248,768 17.6% 17.7% 20,478 95,591 16,000 16,000-131,680 $2.17 Q1-15 7,061,120 1,233,001 17.5% 15,002 0.2% 1,248,003 17.7% 18.7% 75,113 75,113 - - - 131,680 $2.16 Q4-14 7,061,120 1,308,114 18.5% 15,002 0.2% 1,323,116 18.7% 19.3% 37,975 (94,283) - - - 131,680 $2.16 Q3-14 7,061,120 1,346,089 19.1% 15,002 0.2% 1,361,091 19.3% 17.8% (101,664) (132,258) - - - - $2.17 Q2-14 7,061,120 1,244,425 17.6% 12,611 0.2% 1,257,036 17.8% 16.9% (61,189) (30,594) - - - - $2.17 Q1-14 7,061,120 1,183,236 16.8% 9,711 0.1% 1,192,947 16.9% 17.6% 55,393 55,393 - - - - $2.12 5 Las Vegas Research & Forecast Report Q2 2015 Medical Office Colliers International

502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 $2.3 billion in annual revenue COLLIERS INTERNATIONAL LAS VEGAS 3960 Howard Hughes Parkway Suite 150 Las Vegas, Nevada 89169 USA +1 702 735 5700 www.colliers.com/lasvegas MARKET CONTACT: Mike Mixer Executive Managing Director Las Vegas +1 702 735 5700 mike.mixer@colliers.com John Stater Research & GIS Manager Las Vegas +1 702 836 3781 john.stater@colliers.com 1.7 billion square feet under management 16,300 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 2015 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.