ERI 2018 Effective Rent Index

ERI 2018 Rent Index

ERI 2018 Table Of Contents Statistical Summary 1 Summary of Key Findings 2 National Benchmarks 4 Tenant Rent Trends 11 Landlord Concession Trends 13 Landlord Rent Trends 15 Total Rent Components 19 CBD Rent Trends 25 Suburban Rent Trends 36 Glossary 40 ERI Supplement 41

Methodology Since 1995, the Rent Index (ERI) has been providing the real estate industry s only comprehensive, in-depth study of effective rental rate trends and the real cost of occupancy for tenants in the nation s major Central Business Districts (CBDs) and surrounding suburban markets. The ERI report tracks actual lease terms that reflect negotiated rents and concessions, as well as the key costs of maintaining a building (operating expenses, real estate taxes and electricity costs) that are partially passed through to tenants. The ERI Supplement highlights key economic trends and market fundamentals that underpin each market s performance. Every year, Savills Studley s Research team examines larger long-term direct deals signed in higher-caliber Class A properties. Total (gross) rent is separated into its key components: net (or base) rent and building expenses (operating expenses, real estate taxes and electricity costs). The Tenant Rent Index (the cost of occupancy to the tenant) is derived from total rent less the amortized value of concessions provided by the landlord. The Landlord Rent Index (the landlord s bottom line) is calculated from total rent less costs incurred by the landlord, which include expenses, concessions and commissions. All statistics in this year s ERI report are based on larger long-term leases completed during 2017 in existing or newly constructed Class A buildings.

ERI 2018 Total (Gross) Rent LESS Building Expenses: Operating Expenses Real Estate Taxes Tenant Electric LESS Amortized Concessions LESS Operating Expenses, Real Estate Taxes, Tenant Electric, Amortized Concessions and Commissions Net (Base) Rent Tenant Rent (Average cost of occupancy for tenants) Landlord Rent (Landlord's remaining balance) All numbers are based on negotiated larger long-term direct leases in higher-caliber Class A properties.

Statistical Summary Total (Gross) Rent Operating Expenses Building Expenses Real Estate Taxes Tenant Electric Net (Base) Rent Leasing Costs Concessions Tenant Landlord CBD Markets 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 Atlanta (ATL) 37.84 40.84 8.05 8.15 4.20 4.35 1.50 1.50 24.09 26.84 82.88 79.50 24.40 27.95 7.93 11.00 Austin (AUS) 52.75 55.00 15.00 15.40 5.75 5.90 2.00 2.00 30.00 31.70 65.00 63.33 42.80 45.31 19.25 21.08 Boston (BOS) 65.75 68.90 11.90 12.10 11.65 12.00 2.23 2.25 39.97 42.55 118.00 121.33 50.34 53.05 22.42 24.57 Charlotte (CHA) 33.70 35.70 2.20 2.25 2.48 2.50 1.50 1.50 27.52 29.45 80.50 80.00 23.25 25.25 14.87 16.86 Chicago (CHI) 50.35 50.49 8.92 9.00 8.75 8.90 1.50 1.50 31.18 31.09 121.04 129.00 34.54 33.64 13.81 12.68 Dallas (DFW) 27.05 27.75 7.00 7.25 4.00 3.90 2.00 2.00 14.05 14.60 66.75 68.00 18.33 18.87 3.54 4.27 Denver (DEN) 40.53 41.98 7.00 7.10 7.75 8.00 1.90 1.90 23.88 24.98 90.00 105.00 27.28 26.52 9.57 8.46 Houston (HOU) 43.68 45.15 8.80 8.85 7.05 7.12 2.30 2.33 25.53 26.85 89.00 108.00 32.06 31.04 12.02 10.79 Downtown Los Angeles (DTLA) 42.00 44.69 13.15 13.54 3.74 3.90 2.35 2.40 22.76 24.85 99.00 105.00 29.07 30.98 8.34 9.55 West Los Angeles (WLA) 59.22 62.88 10.05 10.29 4.50 4.77 2.85 2.92 41.82 44.90 85.00 94.25 50.72 53.46 31.21 33.23 Miami (MIA) 44.05 45.15 8.45 8.70 5.35 5.50 3.05 3.05 27.20 27.90 77.25 77.00 33.96 35.09 15.06 15.74 Manhattan - Downtown (DTNY) 56.37 58.46 12.05 12.15 10.24 10.45 2.55 2.60 31.53 33.26 104.00 129.00 42.79 39.47 15.93 12.17 Manhattan - Midtown (MTNY) 103.32 96.09 14.50 14.75 16.75 16.90 3.25 3.30 68.82 61.14 167.41 181.69 81.45 72.36 43.20 33.93 New Jersey (NNJ) 37.69 35.36 9.25 9.35 3.40 3.50 1.92 1.92 23.12 20.59 80.10 81.00 27.23 24.78 9.30 6.88 Philadelphia (PHI) 33.75 32.94 9.00 9.10 2.55 2.63 1.95 1.95 20.25 19.26 81.00 76.85 23.17 22.90 8.08 7.67 Phoenix (PHO) 37.75 42.00 6.80 7.08 3.25 3.35 2.00 2.00 25.70 29.57 81.50 87.50 25.28 28.61 13.25 15.97 San Diego (SDO) 32.87 34.11 7.44 7.70 4.80 4.94 3.05 3.05 17.58 18.42 58.00 60.00 23.92 24.86 7.72 8.22 San Jose (SJO) 46.80 48.50 11.25 11.50 4.25 4.33 3.10 3.10 28.20 29.57 54.00 53.25 38.85 40.66 19.73 21.20 San Francisco (SFO) 78.05 79.90 12.90 13.15 5.75 5.90 3.45 3.45 55.95 57.40 107.00 104.69 63.29 65.45 42.87 45.64 Seattle (SEA) 44.00 47.00 10.25 10.51 3.88 4.00 2.00 2.00 27.87 30.49 65.00 63.00 34.05 37.36 17.60 20.37 Tampa Bay (TAM) 30.50 33.00 5.98 6.05 3.10 3.10 2.50 2.50 18.92 21.35 44.19 43.87 24.73 27.27 10.81 13.08 Washington, DC (WDC) 66.67 70.70 14.15 14.50 13.15 13.30 2.83 2.85 36.54 40.05 165.90 201.88 45.00 44.33 12.48 11.14 CBD Averages 48.51 49.99 9.73 9.93 6.10 6.22 2.34 2.35 30.34 31.48 89.24 94.83 37.00 37.53 16.62 16.96 Suburban Markets 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 Central Perimeter, GA 29.90 32.08 6.22 6.25 2.40 2.43 1.50 1.50 19.78 21.90 53.00 53.00 21.31 23.30 9.06 9.65 Cook County, IL 29.25 29.65 8.05 8.10 4.70 4.75 1.50 1.50 15.00 15.30 70.00 70.00 20.11 20.90 4.61 4.95 DuPage County, IL 26.75 26.36 7.32 7.35 2.13 2.16 1.75 1.75 15.55 15.10 61.00 62.00 18.78 18.50 5.90 5.85 Fairfield County, CT 38.25 36.98 11.25 11.35 4.55 4.63 2.75 1.80 19.70 19.20 55.50 57.00 30.75 30.25 13.10 13.00 Fort Lauderdale, FL 41.15 44.00 9.20 9.30 3.99 4.05 2.99 2.99 24.97 27.66 69.00 67.00 32.14 35.25 14.05 16.86 Long Island, NY 32.95 33.00 8.30 8.35 6.99 7.05 1.36 1.40 16.30 16.20 42.50 43.25 27.00 26.80 10.05 9.85 Main Line/Conshohocken, PA 35.75 37.16 7.65 7.73 3.15 3.20 2.70 2.73 22.25 23.50 31.00 30.50 31.70 32.15 16.55 16.90 West Plano/Frisco, TX 39.20 41.24 8.70 8.78 3.90 3.96 2.60 2.60 24.00 25.90 44.00 43.15 33.45 34.25 18.25 18.90 Northern Virginia 42.93 42.45 8.29 8.50 3.11 3.15 3.00 3.00 28.53 27.80 115.00 115.52 27.91 27.38 13.32 10.76 Orange County, CA 35.16 38.00 8.60 8.88 4.22 4.32 2.25 2.25 20.09 22.55 68.04 73.23 26.11 28.44 10.34 11.64 Sunnyvale/Santa Clara, CA 63.00 64.75 11.60 11.80 4.60 4.68 3.10 3.10 43.70 45.17 63.00 61.00 53.72 55.77 33.72 35.46 Southeast, CO 25.25 25.25 4.05 4.10 4.00 4.05 1.75 1.75 15.45 15.35 58.00 59.00 17.67 17.90 19.73 21.20 Uptown/Turtle Creek, TX 51.00 53.20 9.75 10.00 4.00 3.90 2.00 2.00 35.25 37.30 70.00 68.00 41.86 44.32 23.35 25.54 Waltham (Route 128), MA 47.00 47.50 8.00 8.25 6.55 6.75 1.77 1.80 30.68 30.70 62.75 60.35 38.80 39.62 20.77 21.11 West Loop/Galleria, TX 36.45 34.93 7.15 7.20 3.40 3.43 2.15 2.15 23.75 22.15 51.00 51.75 29.79 29.25 17.09 16.90 West Palm Beach, FL 50.48 51.24 10.58 10.65 8.10 8.19 3.00 3.00 28.80 29.40 61.00 61.50 41.60 41.75 23.20 23.00 Westchester, NY 36.10 35.86 10.00 10.03 6.47 6.53 2.95 2.95 16.68 16.35 52.00 52.75 29.31 29.05 9.89 9.50 Suburban Averages 38.86 39.63 8.51 8.62 4.49 4.54 2.30 2.25 23.56 24.21 60.40 60.53 30.71 31.46 15.42 16.00 1 EFFECTIVE RENT INDEX 2018

Summary of Key Findings ERI 2018 Tenants paid More, but Continued to get More For the seventh consecutive year, tenants faced higher gross rent for premium Class A space in nearly every major Central Business District (CBD). Tenants are paying more for space, but they are getting more as well concessions pushed much higher in 2017. Additionally, many buildings underwent significant enhancements as landlords added shared amenities to either differentiate their assets or catch up to rising standards. The average value of amortized concessions rose by 8.3%. In turn, tenant effective rent rose by only 1.4% to $37.53 and landlord effective rent inched up by only 2.0% to $16.96. Looking ahead to 2018, there is little to suggest any significant change in conditions. KEY CBD FINDINGS* 2016 Unweighted Average 2017 Unweighted Average 2017 Change % 2016 Weighted Average 2017 Weighted Average Total (Gross) Rent $48.51 $49.99 3.1% $68.96 $68.64 Operating Expenses $9.73 $9.93 2.1% $12.18 $12.39 Real Estate Taxes $6.10 $6.22 2.0%.31.42 Tenant Electricity $2.34 $2.35 0.5% $2.67 $2.67 Net Rent $30.34 $31.48 3.8% $43.81 $43.17 Amortized Concessions $11.51 $12.46 8.3% $14.57 $15.82 Tenant Rent Index $37.00 $37.53 1.4% $52.27 $50.34 Landlord Rent Index $16.62 $16.96 2.0% $24.85 $22.62 COMMENTS Total rent rose in nearly all markets. Growth was the strongest in tech centered markets and several Sunbelt metros. Landlords passed through higher operating expenses to tenants during 2017. Property taxes continued their moderate growth; steady sales and re assessments in a few markets contributed to the increase. Energy costs posted negligible growth in 2017, as tenant electric was generally flat. Net rent increased for the seventh consecutive year. Concessions pushed higher into record territory in markets that rely on traditional space occupiers, but fell in space constrained markets and tech centers. Tenant occupancy costs rose in 15 of 23 markets. Rising concessions muted the increase in many markets. Landlord effective rent posted its seventh consecutive year of growth, but the increase was the smallest since 2012. *As of 2017, 22 Central Business Districts are included in the unweighted average. The weighted average includes 17 markets with calculations weighted to reflect inventory in each market. EFFECTIVE RENT INDEX 2018 2

Summary of Key Findings Total (Gross) Rent $49.99 (+3.1%) LESS: Building Expenses ($18.51) Op. Ex. $9.93 (+2.1%) Taxes $6.22 (+2.0%) Tenant Elec. $2.35 (+0.5%) LESS: Amortized Concessions* $12.46 (+8.3%) LESS: Op. Ex., Taxes, Tenant Electric, Amortized Concessions and Commissions ($33.03) Net (Base) Rent $31.48 (+3.8%) ` Tenant Rent $37.53 (+1.4%) Landlord Rent $16.96 (2.0%) 3 EFFECTIVE RENT INDEX 2018

National Benchmarks ERI 2018 Resilient Economy Surprising to the Upside U.S. economy and job market push forward despite gridlock in Nation s Capitol: In contrast to a very divisive and at times ineffectual Congress and White House, the U.S. economy rolled along in 2017. The core drivers of demand for office space - payroll growth and business investment - remain positive. Corporate tax reform and a looser regulatory regime are boosting business expansion and investment. New office development is rising, but remains below historical norms in most markets. In turn, the expansion cycle for the U.S. office market has a bit more room to run. Leasing rises in the second half of the year: Demand for office space in most tech markets (Austin, Boston, Seattle and Northern California) and lower-cost Sunbelt markets (Atlanta, Dallas/Fort Worth and Tampa) surged as 2017 progressed. Even Midtown Manhattan, which posted sporadic activity during the first half of 2017, registered more than 18 msf in leasing during the second half of the year as tenants capitalized on generous lease terms. San Francisco, which seemed to be slowing in 2016, was only briefly pausing 2017 brought a record year for larger leases as top companies absorbed nearly all of the space in new buildings under construction. Convergence: More consistency is evident in terms of tenant expectations. As major tech firms and multi-nationals spread out in multiple markets they are bringing their preferences with them. Owners that spend more on amenities, co-working space and building infrastructure are capturing tenants willing to spend top dollar. Companies will pay a premium for quality product loaded with shared amenities, the latest technology and efficient floorplates. The biggest amenity of all for any asset is a location in a connected walkable vibrant neighborhood. Additionally, soaring tenant improvement allowances align with the increased focus many firms place on redesigning their workplace to create an engaging and productive environment. Divergence: There is still a lot of differentiation in rent and pricing. Urban and gateway markets are achieving rent and pricing that is often twice that in suburban and secondary markets. Similarly, tenant leverage varies widely. The costliest markets that depend on traditional space occupiers such as Midtown New York and Washington, DC have seen the complete abandonment of a sliding scale for concessions. Tenants who spend less (with a rent of $70 or $80) are getting much more in the form of tenant improvement dollars (sometimes 0-plus) than they would have in prior cycles. In prior cycles law firms and banks spent lavishly, now tech firms will spend with a blind eye to costs. EFFECTIVE RENT INDEX 2018 4

National Benchmarks Total Rent Pushes Higher Total or gross rent (first year taking rent) rose for the seventh straight year, increasing by 3.1% from $48.51 to $49.99. Total rent is 13.1% above its 2007 peak. Total Rent Components $50 $45 Net Rent Operating Expenses Real Estate Taxes Tenant Electricity Total rent consists of four components: net (or base) rent and three building expense components operating expenses, real estate taxes and tenant electricity. $35 $30 $25 Total rent rose primarily due to a 3.8% increase in net rent from $30.34 to $31.48. Rising operating expenses and taxes were also a contributing factor. Operating expenses increased by 2.1% from $9.73 to $9.93. Real estate taxes rose by 2.0% from $6.10 to $6.22. Tenant electricity ticked up by 0.5% from $2.34 to $2.35. $15 $5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net Rent $27.96 $26.79 $21.31.69 $22.99 $23.41 $24.25 $27.10 $28.81 $30.34 $31.48 Operating Expenses $8.65 $8.90 $8.93 $9.03 $9.33 $9.49 $9.41 $9.59 $9.54 $9.73 $9.93 Real Estate Taxes $5.47 $5.64 $5.78 $5.63 $5.70 $5.73 $5.73 $5.84 $5.96 $6.10 $6.22 Electricity $2.14 $2.24 $2.28 $2.25 $2.34 $2.31 $2.28 $2.33 $2.34 $2.34 $2.35 Total Rent $44.22 $43.57 $38.30 $37.60.36.94 $41.67 $44.85 $46.65 $48.51 $49.99 5 EFFECTIVE RENT INDEX 2018

ERI 2018 Value of Concessions Rises Relative to Rents Landlord Concessions: 2007-2017 Landlords agreed to more generous concessions in leases negotiated during 2017. 0 30.0% As a percentage of total rent, the average value of concession packages increased to 24.9%, with an average package of $94.83. Rent abatements increased in a few markets, but soaring tenant improvement allowances once again provided the primary impetus for this growth. Triple-digit allowances have become the norm in Midtown Manhattan, for example, where availability rates are at their highest mark in several years. Tenant improvement allowances increased in nearly all markets, but generally not enough to keep pace with the rise in build-out costs. $90 $80 $70 $60 $50 $30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Value of Concessions $61.69 $68.51 $78.05 $74.87 $77.71 $77.60 $79.00 $79.40 $84.90 $89.24 $94.83 Amort. Concessions/Rent 19.1% 20.6% 24.4% 23.8% 25.0% 24.8% 23.7% 23.9% 23.1% 23.7% 24.9% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Low interest rates continue to play a big role in the capacity of landlords to fund generous build-outs. EFFECTIVE RENT INDEX 2018 6

National Benchmarks Expenses Share of Total Rent Falls Total (or gross) rent consists of two main components: net (or base) rent and building expenses (operating expenses, real estate taxes and tenant electricity). As a percentage of total rent, net rent inched up from 62.5% in 2016 to 63.0% in 2017. Building expenses share dipped from 37.5% to 37% as net rent growth outpaced rising expenses. Total Rent Components Net Rent Operating Expenses Real Estate Taxes Tenant Electricity 2010 p14-pie charts Building Expenses: 42.8% 14.0% 5.6% Building Expenses: 37.5% 12.6% 4.8% Building Expenses: 37.0% 12.4% 4.7% 23.2% 2012 57.2% 20.1% 2016 62.5% 19.9% 2017 63.0% 7 EFFECTIVE RENT INDEX 2018

ERI 2018 Operating Margins Up Slightly The net (base) rent/total rent ratio measures how much of net rent is flowing to building expenses. Net rent accounted for 63% of total rent meaning that 37% of total rent was diverted to operating expenses, real estate taxes and electricity. 100% 90% 80% Net Rent/Total Rent Ratio: 2007-2017 It is unlikely that the net rent ratio will attain its peak share of 63.2% in 2007 during the rest of this cycle. 70% 60% 50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Building Expenses 36.8% 38.5% 44.4% 45.0% 43.0% 42.8% 41.8% 39.6% 38.2% 37.5% 37.0% Net Rent Share 63.2% 61.5% 55.6% 55.0% 57.0% 57.2% 58.2% 60.4% 61.8% 62.5% 63.0% EFFECTIVE RENT INDEX 2018 8

National Benchmarks Soaring Concessions and Weaker Rent Growth Lower Rents National Rent Comparison Tenant Landlord During 2017, landlords continued to achieve higher taking rent in nearly every market. However, total rent fell in three markets while posting very minimal gains in many others. At the same time, the spike in concessions was so steep that tenant effective rent posted its weakest increase yet in this cycle. Following a 5.4% increase in 2016, net rent rose by merely 3.8% in 2017. However; the increase in net rent fell short of the 8.3% rise in the average amortized value of concession packages. $35 $30 $25 $15 Consequently, the national Tenant Rent Index rose by only 1.4% to $37.53. Similarly, the national Landlord Rent Index rose by 2.0%, from $16.62 to $16.96. $5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Tenant Rent $35.76 $34.59 $28.97 $28.64 $30.26 $30.80 $31.80 $34.11 $35.87 $37.00 $37.53 Landlord Rent $18.75 $16.79.39.24 $11.16 $11.60 $12.23 $14.09 $15.84 $16.62 $16.96 9 EFFECTIVE RENT INDEX 2018

ERI 2018 Flat or Declining Rent in Several Higher-Priced Markets Tenant Rent Market Comparison 2016 2017 Despite posting the sharpest decrease in tenant effective rent during 2017 (-11.2%), Midtown Manhattan (with an average tenant effective rent of $72.36), remained the most expensive market for tenants. San Francisco, the second most expensive market for tenants, continued to close the gap, posting a 3.4% year-on-year increase to $65.45. Given the sustained tech demand in San Francisco, and softening in Midtown Manhattan, San Francisco may take over the top spot in 2018. West Los Angeles and Boston benefitted from strong tech and creative sector activity and pushed past Washington, DC, to the third and fourth most expensive markets. $85 $80 $75 $70 $65 $60 $55 $50 $45 $35 $30 $25 $15 Unweighted Average: $37.53 (+1.4%) Of note, three Sunbelt markets Atlanta (+14.5%), Phoenix (+13.2%) and Tampa (+10.3%) posted doubledigit increases in tenant effective rent. $5 MTNY SFO WLA BOS AUS WDC SJO DTNY SEA MIA CHI HOU DTLA PHX ATL TAM DEN CHA SDO NNJ PHI DFW 2016 $81.45 $63.29 $50.72 $50.34 $42.80 $45.00 $38.85 $42.79 $34.05 $33.96 $34.54 $32.06 $29.07 $25.28 $24.40 $24.73 $27.28 $23.25 $23.92 $27.23 $23.17 $18.33 2017 $72.36 $65.45 $53.46 $53.05 $45.31 $44.33.66 $39.47 $37.36 $35.09 $33.64 $31.04 $30.98 $28.61 $27.95 $27.27 $26.52 $25.25 $24.86 $24.78 $22.90 $18.87 Y-o-Y Change -11.2% 3.4% 5.4% 5.4% 5.9% -1.5% 4.7% -7.8% 9.7% 3.3% -2.6% -3.2% 6.6% 13.2% 14.5% 10.3% -2.8% 8.6% 3.9% -9.0% -1.2% 2.9% EFFECTIVE RENT INDEX 2018 10

Tenant Rent Trends Sunbelt and Tech Markets Post Gains Sunbelt markets with sustained demand and controlled construction registered the largest percentage increases in effective rent. This includes the top three markets (Atlanta, Phoenix and Tampa Bay). Of note, all are increasing from effective rents that are well below the national average. Several techfueled markets (Seattle, Austin, West Los Angeles, Boston, San Jose and San Francisco) also registered aboveaverage increases. In contrast, markets that are dependent on cost-conscious traditional space occupiers, such as Manhattan and Washington, DC registered notable decreases. Similar trends were seen in Chicago and Philadelphia, however, fewer leases in newly constructed trophy buildings were also a factor. Seattle and Boston appear likely to post further growth in tenant occupancy costs next year. In contrast, rent in Northern New Jersey is likely to push lower and Washington, DC may struggle to achieve an increase in 2018. Atlanta Phoenix Tampa Bay Seattle Charlotte Downtown LA Austin West LA Boston San Jose San Diego San Francisco Miami Dallas Philadelphia Washington, DC Chicago Denver Houston Downtown NY New Jersey Midtown NY Tenant Rent: Year-on-Year Change by Market -7.8% -9.0% -11.2% -1.2% -1.5% -2.6% -2.8% -3.2% 10.3% 9.7% 8.6% 6.6% 5.9% 5.4% 5.4% 4.7% 3.9% 3.4% 3.3% 2.9% 14.5% 13.2% -15% -10% -5% 0% 5% 10% 15% 11 EFFECTIVE RENT INDEX 2018

ERI 2018 Rent Still Below Peak in Half of the Markets As of 2017, five markets were more than 20% above their peak effective rent attained in the last cycle. Atlanta s office market has attained unprecedented rent levels. Based on a tenant effective rent of $27.95, rent was 26.7% above its prior peak of $22.05 in 2006, exceeding even San Francisco, which was 21.7% above its 2007 peak of $53.76. Of note, San Francisco is still falling short of its 2000 peak ($70.12). West Los Angeles, much like San Francisco, has seen rent push well into record territory due to a surging tech/ creative sector. In contrast, Tampa Bay s 26.7% spike has been driven by steady growth in professional/ business services and health care. The energy sector has stabilized, but the impact still lingers in Houston pushing effective rent 2.8% below its 2008 peak. The biggest gaps (25% or more) occurred in both Manhattan markets and San Diego (-35.2%). All are CBDs that either rely on traditional space occupiers or lack the amenityrich setting that tenants prefer. Tenant Rent Trends: Percentage Above/Below Prior Peak Atlanta (2006) 26.7% Tampa Bay 26.7% West Los Angeles (2008) 23.1% Austin 22.4% San Francisco 21.7% Denver 18.0% Downtown Los Angeles (2008) 12.3% Boston (2008) 7.4% Chicago 6.7% Northern New Jersey (2008) 5.7% Philadelphia 0.8% Houston (2008) -2.8% Miami -10.9% Washington, DC -13.7% Dallas (2008) -17.8% New York City (Midtown) -25.0% New York City (Downtown) -26.6% San Diego -35.2% -40% -30% -20% -10% 0% 10% 20% 30% *Unless otherwise indicated, prior market peak occurred in 2007. EFFECTIVE RENT INDEX 2018 12

Landlord Concession Trends Value of Concession Packages Up in Majority of Markets Landlord Concessions: Market Comparison 2016 2017 The value of concessions rose in 13 markets and fell in nine. The national average rose by 6.3% to $94.83 - its biggest year-on-year increase on record. 0 Landlords in Lower Manhattan (+24%), Washington, DC (+21.7%) and Houston (21.3%) made the biggest adjustments in concessions six other markets posted increases of more than 5% in concessions. $150 Unweighted Average: $94.83 (+6.3%) Concessions fell the most in Philadelphia (-5.1%), Atlanta (-4.1%), Seattle (-3.1%) and San Francisco (-2.2%) and were essentially flat in Tampa Bay (-0.7%), Downtown San Jose (-1.4%) and Miami (-0.3%). In most of these markets, the decline was due to falling rent abatements. 0 $50 WDC MTNY CHI DTNY BOS HOU DTLA DEN SFO WLA PHX NNJ CHA ATL MIA PHI DFW AUS SEA SDO SJO TAM 2016 $165.90 $167.41 $121.04 4.00 $118.00 $89.00 $99.00 $90.00 7.00 $85.00 $81.50 $80.10 $80.50 $82.88 $77.25 $81.00 $66.75 $65.00 $65.00 $58.00 $54.00 $44.19 2017 1.88 $181.69 $129.00 $129.00 $121.33 8.00 5.00 5.00 4.69 $94.25 $87.50 $81.00 $80.00 $79.50 $77.00 $76.85 $68.00 $63.33 $63.00 $60.00 $53.25 $43.87 Y-o-Y Change 21.7% 8.5% 6.6% 24.0% 2.8% 21.3% 6.1% 16.7% -2.2% 10.9% 7.4% 1.1% -0.6% -4.1% -0.3% -5.1% 1.9% -2.6% -3.1% 3.4% -1.4% -0.7% 13 EFFECTIVE RENT INDEX 2018

ERI 2018 Concessions Not Keeping Pace with Rents Amortized Concessions as Percentage of Total Rent The ratio of amortized concessions to total rent (concessions/rent ratio) measures the value of concessions from market to market. The ratio also provides a measure of leasing costs as it increases, it indicates that landlords have conceded more to get leases signed, and that conditions are shifting in tenants favor. 40% 35% 30% Unweighted Average: 24.9% (+1.1 pp) 25% Washington, DC and Downtown Manhattan posted the largest increases in the ratio. Most of the markets with the lowest concessions relative to rent are major tech centers: Boston, Seattle, San Jose and San Francisco. 20% 15% 10% 5% 0% WDC DEN CHI DTNY DFW ATL HOU DTLA PHI NNJ CHA SDO MTNY BOS MIA SEA TAM SJO SFO 2016 32.5% 32.7% 31.4% 24.1% 31.1% 35.5% 26.6% 30.8% 31.3% 27.8% 31.0% 27.2% 21.2% 23.4% 22.9% 22.6% 18.9% 17.0% 15.8% 2017 37.3% 36.8% 33.4% 32.5% 32.0% 31.6% 31.2% 30.7% 30.5% 29.9% 29.3% 27.1% 24.7% 23.0% 22.3% 20.5% 17.4% 16.2% 15.3% EFFECTIVE RENT INDEX 2018 14

Landlord Rent Trends Demand Resilient, but National Rent Growth Slows as Top Markets Cool: Landlord effective rent rose by 2.0% in 2017, a seventh straight year of growth but well short of the 4.8% increase during 2016. Heading into 2017 there was a growing sense that leasing and rent growth might be waning. Some markets displayed weaker activity in early 2017, but most of the tech-fueled markets and a handful of maturing Sunbelts surged as the year progressed. Construction Rising but Still Controlled: Very constrained new construction is also playing a role in markets like Tampa Bay and San Diego. In terms of new construction Manhattan is acting more like Atlanta, and Atlanta is acting more like Manhattan. Atlanta used to be the model of build and poach awash in ample new supply, and competing with one another for tenants - landlords poached tenants by offering record-setting concessions. Landlords in Midtown Manhattan currently face a similar dynamic. Tech Centers and Micro-Districts Present Challenges: In addition to stiff competition for space in Silicon Valley and San Francisco, a widening area of Boston, Downtown Seattle/Bellevue and Suburban San Diego are also seeing strong demand from tech firms. TAMI companies looking for big blocks of quality space are facing shortages in the West Loop as well as the River North areas of Chicago and Midtown South in Manhattan. A handful of suburban submarkets are also facing big block shortages: Orange County, the O Hare Area in Chicago and West Plano/Frisco in North Dallas. Capital Market Activity Down Slightly: Sales volume dipped for the second straight year as investors turned away from some gateway markets and pursued higher yields in secondary markets. Nevertheless, pricing for premier properties did not budge as sellers have no incentive to move off their asking price. In turn, many landlords will not reduce their initial taking rent, but they will pad deals with tenant improvement allowances and other concessions. 15 EFFECTIVE RENT INDEX 2018

ERI 2018 Growth in Most Markets Landlord effective rose by only 2.0% in 2017, its weakest increase in this cycle. Northern New Jersey s 26.1% decrease pushed its landlord effective rent to the second-lowest spot on the list. This decrease, plus sharp drops in Midtown Manhattan (-21.5%) and several other markets nearly offset outsized increases in Atlanta (38.8%), Phoenix (20.5%) and Seattle (15.7%). San Francisco posted the highest landlord effective rent for the third consecutive year. Landlords in Atlanta captured a double-digit increase in landlord effective rent for the fourth straight year. In contrast, high-cost central business districts such as Newark in Northern New Jersey and Philadelphia are still struggling to gain momentum. $50 $45 $35 $30 $25 $15 $5 Landlord Rent Market Comparison 2016 2017 Unweighted Average: $16.96 (+2.0%) SFO MTNY WLA BOS SJO AUS SEA CHA PHX MIA TAM CHI DTNY WDC ATL HOU DTLA DEN SDO PHI NNJ DFW 2016 $42.8 $43.2 $31.2 $22.4 $19.7 $19.2 $17.6 $14.8 $13.2 $15.0.8 $13.8 $15.9 $12.4 $7.93 $12.0 $8.34 $9.57 $7.72 $8.08 $9.30 $3.54 2017 $45.6 $33.9 $33.2 $24.5 $21.2 $21.0.3 $16.8 $15.9 $15.7 $13.0 $12.6 $12.1 $11.1 $11.0.7 $9.55 $8.46 $8.22 $7.67 $6.88 $4.27 Y-o-Y Change 6.5% -21.5% 6.5% 9.6% 7.4% 9.5% 15.7% 13.4% 20.5% 4.5% 21.0% -8.2% -23.6% -10.7% 38.8% -10.2% 14.5% -11.6% 6.4% -5.1% -26.1% 20.5% EFFECTIVE RENT INDEX 2018 16

Landlord Rent Trends Only Five Markets Exceed Their Pre-Recession Peak Landlord Rent Trends: Percentage Above/Below Prior Peak Three markets are well above their prerecession peak: Tampa Bay (+34.8%); San Francisco (+32.0%) and West Los Angeles (+22.7%). Chicago (+18.1%) and Atlanta (+15.5%) have also pushed into much higher territory relative to the last cycle. With Denver falling beneath its prior peak, 12 markets were below their prior peak more than half of these markets remained 20% below peak. Elevated concessions have made a big difference in both Manhattan markets. Landlord effective rent is 48% below its peak in Midtown and 59.6% below its highwater mark Downtown. Tampa Bay (2006) San Francisco West Los Angeles (2008) Chicago Atlanta (2006) Denver Boston Philadelphia Downtown Los Angeles (2008) Northern New Jersey (2006) Miami Dallas (2008) Houston (2008) Midtown NY Washington, DC Downtown NY San Diego 34.8% 32.0% 22.7% 18.1% 15.5% -0.4% -1.3% -9.7% -13.5% -18.6% -25.8% -30.6% -35.8% -48.0% -58.5% -59.6% -64.2% -70% -50% -30% -10% 10% 30% *Unless otherwise indicated, prior market peak occurred in 2007. 17 EFFECTIVE RENT INDEX 2018

ERI 2018 Landlord s Bottom Line Still More Than 10% Below 2007 Peak Landlord Cost Components Landlord effective rent has increased every year since 2011, but rose by merely 2.5% in 2017. Of note, the increase in landlord effective rent during 2017 (.34) was well short of the.81 increase in the value of concessions and commissions. During the last recovery, which lasted from only 2004 to 2007, landlord effective rent spiked by 60.3% rising from $11.67 to $18.75. So far this cycle, landlord effective rent has jumped by 56.4%, but it has taken seven years and still remains below its 2007 peak. Despite record concessions and an effective rent that remains below its prior peak, the longevity of this cycle has benefited landlord s bottom line. Landlord effective rent will probably increase in 2018, but it will take a recovery that carries into 2019 or 2020 for rent to push to 2007 peaks. $50 $30 Landlord Rent Electricity Operating Expenses Real Estate Taxes Amortized Conc & Comm. $14.53 $13.72 $13.01 $8.18 $8.95 $13.10 $11.79 $11.80 $12.06 $5.47 $9.89 $9.54 $5.64 $6.10 $6.22 $5.96 $5.84 $8.65 $5.70 $5.73 $5.73 $5.78 $8.90 $5.63 $9.54 $9.73 $9.93 $9.59 $2.14 $2.24 $9.33 $9.49 $9.41 $2.34 $2.34 $2.35 $8.93 $9.03 $2.33 $2.28 $2.25 $2.34 $2.31 $2.28 $18.75 $16.79.39.24 $11.16 $11.60 $12.23 $14.09 $15.84 $16.62 $16.96 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EFFECTIVE RENT INDEX 2018 18

Total Rent Components By Market Higher Net Rent/Total Rent Ratio in Nearly All Markets Net Rent/Total Rent Ratio by Market 2016 2017 The ratio of net rent to total rent exceeded 60.0% in 12 markets, a decline from 14 markets hitting this threshold in 2016. San Francisco (71.8%) and West Los Angeles (71.4%) had the highest net rent/total rent ratios. 75% The net rent/total rent ratio was significantly lower in San Diego (54.0%) and Dallas (52.6%). 65% 55% 45% 35% 25% SFO WLA PHX DFW ATL SEA TAM MTNY MIA BOS CHI SJO DEN HOU PHI NNJ AUS DTNY WDC DTLA SDO DFW (Up) 2016 71.7% 70.6% 68.1% 69.1% 63.7% 63.3% 62.0% 66.6% 61.7% 60.8% 61.9% 60.3% 58.9% 58.4% 60.0% 61.3% 56.9% 55.9% 54.8% 54.2% 53.5% 52.3% 2017 71.8% 71.4% 70.4% 70.1% 65.7% 64.9% 64.7% 63.6% 61.8% 61.8% 61.6% 61.0% 59.5% 59.5% 58.5% 58.2% 57.6% 56.9% 56.6% 55.6% 54.0% 52.6% 19 EFFECTIVE RENT INDEX 2018

ERI 2018 Total Rent Increases in Most Markets Total (Gross) Rent Market Comparison 2016 2017 The national Total Rent Index rose by 3.1%, from $48.51 to $49.99, with increases in all markets except Midtown Manhattan, Northern New Jersey and Philadelphia. During 2017, Phoenix was the only market to register growth exceeding 10.0%, but seven other markets posted increases of more than 5.0%. Ten markets posted increases of 5.0% or less. Landlord effective rent in Chicago, for example, inched up by merely 0.3% as fewer leases in trophy towers were completed, and landlords kept concessions elevated. Houston s CBD performed better than expected (with a 3.4% gain) as many of the biggest blocks of vacant space were concentrated in West Houston. 5 0 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50 $45 $35 $30 $25 $15 Unweighted Average: $49.99 (+3.1%) In contrast, total rent fell by 7.0% in Midtown Manhattan and decreased $5 by 6.2% in Northern New Jersey. MTNY SFO WDC BOS WLA DTNY AUS CHI SJO SEA HOU MIA DTLA PHX DEN ATL CHA NNJ SDO TAM 2016 3.32 $78.05 $66.67 $65.75 $59.22 $56.37 $52.75 $50.35 $46.80 $44.00 $43.68 $44.05 $42.00 $37.75.53 $37.84 $33.70 $37.69 $32.87 $30.50 2017 $96.09 $79.90 $70.70 $68.90 $62.88 $58.46 $55.00 $50.49 $48.50 $47.00 $45.15 $45.15 $44.69 $42.00 $41.98.84 $35.70 $35.36 $34.11 $33.00 % Change -7.0% 2.4% 6.0% 4.8% 6.2% 3.7% 4.3% 0.3% 3.6% 6.8% 3.4% 2.5% 6.4% 11.3% 3.6% 7.9% 5.9% -6.2% 3.8% 8.2% EFFECTIVE RENT INDEX 2018 20

Total Rent Components By Market Moderate Growth in Operating Expenses Operating Expense Market Comparison 2016 2017 The national Operating Expense Index rose by 2.1% to $9.93 in 2017. Most markets posted moderate increases in operating expenses. Operating expenses in 10 markets exceeded.00, while only three markets had operating expenses of less than $8.00. Increased operating expenses accompany the extensive capital improvement efforts that many landlords are making. Many owners are adding shared amenities that will differentiate their asset. Amenities include rooftop decks, wi-fi enabled seating areas, conference rooms and gyms. Some owners are dedicating an entire floor to tenant amenities and services. $16 $14 $12 $8 $6 $4 Unweighted Average: $9.93 (+2.1%) In addition to influencing how more businesses are designing their workplace, the proliferation of co-working space has also impacted the amenities being added to properties. $2 AUS MTNY WDC DTLA SFO DTNY BOS SJO SEA WLA NNJ PHI CHI HOU MIA ATL SDO DFW DEN 2016 $15.00 $14.50 $14.15 $13.15 $12.90 $12.05 $11.90 $11.25.25.05 $9.25 $9.00 $8.92 $8.80 $8.45 $8.05 $7.44 $7.00 $7.00 2017 $15.40 $14.75 $14.50 $13.54 $13.15 $12.15 $12.10 $11.50.51.29 $9.35 $9.10 $9.00 $8.85 $8.70 $8.15 $7.70 $7.25 $7.10 21 EFFECTIVE RENT INDEX 2018

ERI 2018 Taxes Continue Growth The national Real Estate Tax Index rose by 2.0% to $6.22. Real Estate Tax Market Comparison 2016 2017 Taxes increased by more than 3.0% in six markets. Elevated pricing for prime assets remains a factor. Sales volume slipped a bit in 2017, but pricing and assessments did not. $16 Strong demand for stabilized Class A assets in major CBDs has pushed pricing higher, and will continue to boost valuations and taxes in some markets. $12 $8 Unweighted Average: $6.22 (+2.0%) $4 MTNY WDC BOS DTNY CHI DEN HOU SFO AUS MIA SDO WLA ATL SJO SEA DFW DTLA NNJ PHX 2016 $16.75 $13.15 $11.65.24 $8.75 $7.75 $7.05 $5.75 $5.75 $5.35 $4.80 $4.50 $4.20 $4.25 $3.88 $4.00 $3.74 $3.40 $3.25 2017 $16.90 $13.30 $12.00.45 $8.90 $8.00 $7.12 $5.90 $5.90 $5.50 $4.94 $4.77 $4.35 $4.33 $4.00 $3.90 $3.90 $3.50 $3.35 EFFECTIVE RENT INDEX 2018 22

Total Rent Components By Market Tenant Electricity Flat Tenant electricity costs were essentially unchanged, ticking up by 0.5% from $2.34 to $2.35. Tenant electricity was flat in most markets. Rising oil and gas prices are likely to push tenant electric higher in select markets in 2018. $3.50 $3.00 Tenant Electricity Cost Market Comparison 2016 2017 Unweighted Average: $2.35 (+0.5%) $2.50 $2.00 $1.50 $1.00.50.00 SFO MTNY SJO MIA SDO WLA WDC DTNY TAM DTLA HOU BOS AUS DFW PHX SEA PHI NNJ DEN ATL 2016 $3.45 $3.25 $3.10 $3.05 $3.05 $2.85 $2.83 $2.55 $2.50 $2.35 $2.30 $2.23 $2.00 $2.00 $2.00 $2.00 $1.95 $1.92 $1.90 $1.50 2017 $3.45 $3.30 $3.10 $3.05 $3.05 $2.92 $2.85 $2.60 $2.50 $2.40 $2.33 $2.25 $2.00 $2.00 $2.00 $2.00 $1.95 $1.92 $1.90 $1.50 23 EFFECTIVE RENT INDEX 2018

ERI 2018 Net Rent Up Slightly In 2017, the national Net Rent Index increased by 3.8%, rising from $30.34 to $31.48. Net rent rose in all markets except four. Phoenix (+15.1%), Tampa Bay (+12.8%) and Atlanta (+11.4%) posted double-digit increases in rent. Net rent rose in some markets such as Washington, DC (+9.6%) and Houston (+5.2%) despite weaker leasing conditions as landlords provided very generous concessions. $70 $65 $60 $55 $50 $45 $35 $30 Net Rent Market Comparison 2016 2017 Unweighted Average: $31.48 (+3.8%) $25 $15 $5 MTNY SFO WLA BOS WDC DTNY AUS CHI SEA PHX SJO CHA MIA HOU ATL DEN DTLA TAM NNJ PHI 2016 $68.82 $55.95 $41.82 $39.97 $36.54 $31.53 $30.00 $31.18 $27.87 $25.70 $28.20 $27.52 $27.20 $25.53 $24.09 $23.88 $22.76 $18.92 $23.12.25 2017 $61.14 $57.40 $44.90 $42.55.05 $33.26 $31.70 $31.09 $30.49 $29.57 $29.57 $29.45 $27.90 $26.85 $26.84 $24.98 $24.85 $21.35.59 $19.26 % Change -11.2% 2.6% 7.4% 6.5% 9.6% 5.5% 5.7% -0.3% 9.4% 15.1% 4.9% 7.0% 2.6% 5.2% 11.4% 4.6% 9.2% 12.8% -10.9% -4.9% EFFECTIVE RENT INDEX 2018 24

CBD Rent Trends Atlanta Total rent rose for the fifth consecutive year, rising by 7.9% from $37.84 to.84. Net rent spiked by 11.4% from $24.09 to $26.84. Operating expenses (+1.2%) inched up once again and real estate taxes (+3.6%) also rose. Tenant electric was unchanged. Landlords made very minor reductions to concessions. In turn, as a percentage of total rent, the value of concessions fell. Tenant effective rent jumped by 14.5% to $27.95. Landlord effective rent increased from $7.93 to $11.00 a 38.8% jump pushing above the prior peak of $9.53 attained in 2006. $45 $35 $25 $15 Atlanta Rent Trends $5 ($5) 29.90 19.36 6.23 31.09 30.53 30.48 29.62 28.44 28.90 16.68 3.30 13.51 14.56 0.05 1.19 11.79 13.35 14.57 Total Rent Total Rent Tenant Rent Landlord effective Rent 31.33 16.41 (1.51) (0.83) 0.12 0.85 Tenant 35.57 21.79 5.68 37.84 24.40 7.93 Landlord 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 40.84 27.95 11.00 Chicago Total rent increased for the fifth consecutive year, rising by 0.3% to a new peak of $50.49. Net rent ticked down by 0.3% to $31.09. Operating expenses (+0.9%) and real estate taxes (+1.7%) both pushed higher. Concessions continued to mount, jumping by 6.6% to $129.00. Tenant effective rent consequently fell by 2.6% to $33.64. Landlord effective rent also dipped, falling by 8.2% to $12.68. Chicago Rent Trends $60 $50 41.99 40.85 39.00 39.62 40.60 38.07 39.67 31.54 $30 27.24 28.97 26.22 26.48 27.21 24.36 10.74 9.10 6.68 5.48 5.57 6.27 3.62 Total Rent 45.20 Tenant 47.70 32.27 33.09 Landlord 50.35 50.49 34.54 33.64 12.01 12.72 13.81 12.68 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 25 EFFECTIVE RENT INDEX 2018

ERI 2018 Dallas Total rent rose slightly, increasing by 2.6% to $27.75. Net rent jumped by 3.9% yearon-year, increasing from $14.05 to $14.60. Operating expenses increased by 3.6%, but real estate taxes fell and tenant electric were unchanged. Concession packages remain above historical norms, and rose slightly from $66.75 to $68.00, offsetting some of the rental rate growth. Tenant effective rent increased by 2.9% from $18.33 to $18.87. Landlord effective rent posted a 20.5% jump from $3.54 to $4.27. Denver Total rent reversed directions, inching up by 3.6% to $41.98 as energy prices rose and professional/business services firms were active. Net rent rose by 4.6%, from $23.88 to $24.98. Operating expenses (+1.4%) and real estate taxes (+3.2%) increased, but tenant electric was stable. Concessions spiked, pushing to a new record of 5, and pushing tenant effective rent down by 2.8% to $26.52. Landlord effective rent dropped by 11.6% to $8.46. $35 $30 $25 $15 Dallas Rent Trends $5 $50 $45 $35 $30 $25 $15 29.20 21.49 30.15 29.95 22.25 21.95 6.72 6.88 6.32 Denver Rent Trends $5 29.15 28.70 28.15 21.08 20.60 19.93 5.52 5.00 Total Rent Total Rent Tenant 27.25 26.70 26.80 27.05 Tenant Landlord 27.75 18.92 18.28 18.34 18.33 18.87 4.30 3.91 3.23 3.81 3.54 4.27 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 31.75 22.47 8.49 28.54 29.50 17.94 17.72 3.56 2.66 27.45 16.26 28.26 17.36 0.80 1.26 32.00 20.51 4.11 36.25 25.21 38.55 26.33 8.60 9.27 42.23 29.60 12.22 40.53 Landlord 41.98 27.28 26.52 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 9.57 8.46 EFFECTIVE RENT INDEX 2018 26

CBD Rent Trends Houston Total rent rose after two years of declines, rising by 3.4% to $45.15. Net rent increased by 5.2% to $26.85. Operating expenses rose by 0.6% and real estate taxes increased by 1.0%. The value of concession packages pushed well into record territory, spiking by 21.3% to 8.00. Tenant effective rent declined by 3.2% to $31.04, while landlord effective rent dropped sharply by 10.2% to.79, placing it just below 2010 levels. Downtown Los Angeles Total rent rose for the fourth straight year, jumping by 6.4% to $44.69. Net rent also pushed higher, rising by 9.2% from $22.76 to $24.85. Operating expenses (+3.0%) increased, but real estate taxes (+4.3%) posted a sharper increase. Landlords were forced to push concessions further into record territory. The jump in concessions, to 5/sf, offset some of the rental rate increase. Tenant effective rent rose by 6.6% to $30.98. Landlord effective rent increased from $8.34 to $9.55, well short of the 2011 peak of $11.73. $60 $50 $30 Houston Rent Trends $50 $30 31.32 36.83 34.45 32.48 Downtown Los Angeles Rent Trends 27.51 12.55 31.93 16.81 26.97 12.67 25.33 10.98 34.37 27.51 12.79 37.96 31.43 15.62 44.18 35.71 17.85 Total Rent 49.04 40.42 21.07 Total Rent Tenant 45.70 35.25 15.64 Tenant 43.68 Landlord 45.15 32.06 31.04 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 35.47 36.73 26.72 27.59 9.46 9.55 35.44 36.14 25.64 25.69 7.35 7.39 40.82 31.02 11.73 37.90 28.10 9.26 35.85 25.53 6.51 39.92 40.82 12.02 42.00 28.69 28.54 29.07 8.97 8.25 8.34 10.79 Landlord 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 44.69 30.98 9.55 27 EFFECTIVE RENT INDEX 2018

ERI 2018 West Los Angeles Total rent grew for the seventh consecutive year, rising by 6.2% to $62.88. Net rent jumped by 7.4% from $41.82 to $44.90. Real estate taxes (+6.0%), tenant electric (+2.5%) and operating expenses (+2.4%) all increased. The value of concession packages rose to $94.25. Tenant effective rent increased by 5.4% from $50.72 to $53.46. Landlord effective rent rose to a record amount of $33.23. West Los Angeles Rent Trends $70 $60 50.43 46.93 $50 43.43 40.77 40.43 38.85 38.40 33.93 31.35 31.79 27.08 $30 24.24 15.05 15.23 15.51 42.96 35.48 17.95 44.81 Total Rent 37.54 37.17 19.75 18.80 53.80 54.86 Tenant 46.79 27.84 59.22 50.72 31.21 Landlord 62.88 53.46 33.23 Miami Total rent rose for the seventh straight year, posting a 2.5% annual increase from $44.05 to $45.15. Net rent jumped by 2.6% from $27.20 to $27.90. Operating expenses (+3.0%) and real estate taxes (+2.8%) rose, but tenant electric was unchanged. Concessions fell slightly for the second year in a row, dipping to $77.00 and declined as a percentage of total rent. Tenant effective rent averaged $35.09, a 3.3% year-on-year increase. Landlord effective rent jumped by 4.5% to $15.74. $60 $50 $30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Miami Rent Trends 45.00 39.38 44.00 37.99 21.22 18.92 35.75 34.77 36.92 27.15 26.41 25.82 Total Rent 38.66 39.45 40.55 27.43 8.36 8.69 9.28 9.89 29.00 30.10 11.23 11.93 Tenant 42.40 32.21 13.74 Landlord 44.05 45.15 33.96 35.09 15.06 15.74 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EFFECTIVE RENT INDEX 2018 28

CBD Rent Trends Manhattan (Downtown) Total rent increased by 3.7% from $56.37 to $58.46. Net rent jumped by 5.5% from $31.53 to $33.26. Operating expenses (+0.8%) real estate taxes and tenant electric both increased by 2.0%. Concession packages spiked by 24% to $129.00. In turn, tenant effective rent dropped by 7.8% to $39.47. Landlord effective rent also declined, falling by 23.6% to $12.17 and less than half its 2007 mark of $30.10. Manhattan (Midtown) Total rent fell for the first time since 2010, dropping by 7.0% to $96.09. Net rent dipped by 11.2% from $68.82 to $61.14. Rising operating expenses (+1.7%) and real estate taxes (+0.9%) continue to erode net rent. Lower gross rent was accompanied by soaring concession packages, which jumped to $181.69. In turn, tenant effective rent ($72.36) and landlord effective rent ($33.93) posted double-digit decreases. $80 $70 $60 $50 $30 Manhattan (Downtown) Rent Trends 63.69 53.76 59.38 49.19 46.42 34.29 37.71 25.56 Manhattan (Midtown) Rent Trends $140 $120 0 $80 $60 30.10 24.90 10.17 1.54 44.09 30.51 6.04 49.22 50.61 36.81 38.49 11.84 13.22 Total Rent Tenant 54.75 55.57 56.37 41.56 42.24 42.79 15.60 15.84 15.93 Landlord 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 105.50 96.49 65.20 97.72 85.44 53.78 66.32 61.24 51.30 19.75 47.14 14.87 77.55 78.33 81.25 62.53 63.24 64.53 28.69 28.33 28.90 Total Rent 89.56 71.22 34.63 Tenant 100.40 103.32 80.56 81.45 42.96 43.20 58.46 39.47 12.17 Landlord 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 96.09 72.36 33.93 29 EFFECTIVE RENT INDEX 2018

ERI 2018 Northern New Jersey Total rent fell for the first time since 2012, dropping by 6.2% to $35.36. Net rent decreased by 10.9%, from $23.12 to.59. Operating expenses (+1.1%) and real estate taxes (+2.9%) increased but tenant electric was unchanged. Concessions inched a bit higher to $81.00. Tenant effective dropped by 9.0% to $24.78. Landlord effective rent also decreased, falling by 26.1% to $6.88. Philadelphia Total rent fell for the first time since 2010 as fewer leases were completed in trophy buildings dropping by 2.4% to $32.94. Net rent decreased by 4.9% to $19.26. Operating expenses (+1.1%) and real estate taxes (+3.1%) posted the biggest increases. Landlords pulled back on concessions, which fell to $76.85. Tenant effective rent inched down by 1.2% to $22.90. Landlord effective rent also fell, dipping by 5.0% to $7.67. $50 $45 $35 $30 $25 $15 $5 $45 $35 $30 $25 New Jersey Rent Trends 28.66 29.32 28.45 28.11 27.72 27.02 27.25 23.18 23.44 8.07 7.65 21.59 20.93 20.34 19.57 19.41 5.86 5.21 4.59 3.86 3.58 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Philadelphia Rent Trends 29.25 28.10 27.70 27.00 27.78 27.88 28.42 22.72 22.61 21.82 20.47 20.07 19.13 19.41 Total Rent 29.95 21.79 5.21 Total Rent 30.62 21.40 Tenant 33.63 24.88 7.51 Tenant 32.69 37.69 27.23 9.30 Landlord 35.36 24.78 6.88 Landlord 33.75 32.94 23.42 23.17 22.90 $15 $5 8.49 8.11 7.14 5.68 4.57 3.55 3.66 6.96 8.63 8.08 7.67 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EFFECTIVE RENT INDEX 2018 30

CBD Rent Trends San Diego Total rent rose for the fourth straight year, and posted its biggest jump yet in this cycle, increasing by 3.8% from $32.87 to $34.11. Net rent rose by 4.8% from $17.58 to $18.42. Operating expenses (+3.5%) and real estate taxes (+2.9%) pushed higher, but tenant electric was flat. The value of concession packages was unchanged. Rising rent and level concessions pushed tenant effective higher, by 3.9% to $24.86. Landlord effective rent registered a 6.4% jump from $7.72 to $8.22. $50 $45 $35 $30 $25 $15 $5 San Diego Rent Trends 43.89 43.42 38.34 22.99 37.25 21.34 33.38 26.13 11.05 32.32 31.39 24.64 9.46 23.53 8.26 Total Rent Tenant 30.04 30.40 31.10 32.00 32.87 34.11 21.17 21.92 22.77 23.06 23.92 24.86 5.80 6.43 7.06 7.07 7.72 8.22 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Landlord San Francisco Total rent rose to $79.90. Net rent increased by 2.6% to $57.40. Operating expenses (+1.9%) and real estate taxes (+2.6%) continued their ascent but tenant electric was flat. Landlords were able to hold the line on concessions, which fell slightly. Tenant effective rent jumped by 3.4% to $65.45. Landlord effective rent rose by 6.5% to $45.64. San Francisco Rent Trends $90 $80 $70 $60 59.79 57.93 $50 53.76 43.78 50.68 $30 36.24 33.11 34.59 53.15 43.46 25.40 55.75 46.16 27.70 58.35 59.80 48.36 48.53 29.55 29.57 Total Rent 68.85 69.95 57.25 58.19 37.58 38.07 Tenant 78.05 79.90 63.29 42.87 Landlord 65.45 45.64 16.92 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 31 EFFECTIVE RENT INDEX 2018

ERI 2018 San Jose (Downtown) Total rent rose for the sixth year in a row, increasing by 3.6% to $48.50. Net rent jumped by 4.9% from $28.20 to $29.57. Operating expenses (+2.2%) and real estate taxes (+1.9%) both increased but tenant electric held steady. Concessions inched down slightly, dipping to $53.25. In turn, tenant effective rent rose by 4.7% to.66. Landlord effective rose by 7.4% to $21.20. $60 $50 $30 San Jose (Downtown) Rent Trends 34.25 34.25 34.25 34.00 28.36 28.21 11.84 11.60 26.89 26.05 36.00 28.34 10.02 9.53 10.35 37.65 29.92 12.08 40.45 32.65 14.42 Total Rent 43.05 35.17 16.57 Tenant 45.00 36.94 18.10 46.80 48.50 38.85 19.73 Landlord 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 40.66 21.20 Seattle Total rent rose to $47.00. Net rent increased by 9.4% to $30.49. Operating expenses (+2.5%) and real estate taxes (+3.1%) continued their ascent but tenant electric was flat. Landlords were able to hold the line on concessions, which fell slightly. Tenant effective rent jumped by 9.7% to $37.36. Landlord effective rent spiked by 15.7% to.37. $50 $45 $35 $30 $25 $15 Seattle Rent Trends $5 38.30 38.20 38.90 27.43 27.18 28.19 12.38 11.94 12.70 40.05 29.64 13.89 41.90 31.72 15.66 Total Rent Tenant 2011 2012 2013 2014 2015 2016 2017 44.00 34.05 17.60 Landlord 47.00 37.36 20.37 EFFECTIVE RENT INDEX 2018 32

CBD Rent Trends Tampa Bay Total rent rose by 8.2% to $33.00, the fifth consecutive annual increase and the strongest increase so far in this cycle. Net rent spiked by 12.8% from $18.92 to $21.35. Operating expenses increased by 1.2% to $6.05 but real estate taxes and tenant electric were both unchanged. Concessions ticked down by 0.7% to $43.87. Tenant effective rent averaged $27.27, a 10.3% increase - the sharpest annual increase in this cycle. Landlord effective rent rose by 20.9% to $13.08. Washington, DC Total rent rose by 6.0% to $70.70 as tenants continued to pursue space in the highest-quality buildings. Net rent increased by 9.6% to.05, pushing just below its mark two years ago. Some of the increase in total rent came via higher operating expenses (+2.5%) and real estate taxes (+1.1%). Record rent was accompanied by record concessions, though. Concessions spiked to a national and local record, rising to 1.88/ sf. Tenant effective rent consequently dropped 1.5% to $44.33 and landlord effective rent dipped by 10.7% to $11.14. $35 $30 $25 $15 $5 $80 $70 $60 $50 $30 Tampa Bay Rent Trends 26.75 27.00 26.50 26.50 26.50 26.50 27.25 28.00 21.53 8.75 19.70 6.41 18.12 18.67 19.02 19.70 5.12 5.67 6.02 6.70 21.31 8.10 22.35 29.04 23.23 9.08 9.66 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Washington, DC Rent Trends 63.75 64.00 51.34 50.29 22.26 18.80 65.75 67.00 68.21 48.64 16.10 53.94 53.65 21.89 21.55 64.45 64.68 65.59 48.78 18.21 46.89 46.87 15.92 15.40 Total Rent Total Rent 63.12 43.39 Tenant 30.50 24.73 10.81 Tenant 66.67 33.00 27.27 13.08 70.70 45.00 44.33 11.60 12.48 11.14 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Landlord Landlord 33 EFFECTIVE RENT INDEX 2018

ERI 2018 Austin Total rent rose for the seventh straight year, increasing by 4.3% from $52.75 to $55.00. Net rent jumped by 5.7% from $30.00 to $31.70. Operating expenses (+2.7%) and real estate taxes (+2.6%) pushed higher, but tenant electric was flat. Landlords pulled back slightly on concessions. Rising rent and reduced concessions pushed tenant effective higher, by 5.9% to $45.31. Landlord effective rent registered a 9.5% spike from $19.25 to $21.08. Austin Rent Trends $60 $50 44.94 45.77 46.80 48.13 $30 37.88 34.38 35.28 36.39 13.12 13.69 14.45 15.57 Total Rent 50.14 51.13 39.96 41.18 Tenant 52.75 42.80 17.25 18.07 19.25 Landlord 55.00 45.31 21.08 Boston Total rent increased by 4.8% to $68.90. Net rent jumped by 6.5% to $42.55. Operating expenses (+1.7%) and real estate taxes (+3.0%) continued their ascent. Landlords achieved higher rent despite a slight uptick in concessions. Tenant effective rent spiked by 5.4% to $53.05. Landlord effective rent jumped by 9.6% to $24.57. $80 $70 $60 $50 $30 2010 2011 2012 2013 2014 2015 2016 2017 Boston Rent Trends 57.00 57.25 58.00 43.94 43.54 43.89 60.00 45.76 62.30 47.80 Total Rent Tenant 65.75 50.34 Landlord 68.90 53.05 17.75 17.05 17.17 18.64 20.41 22.42 24.57 2011 2012 2013 2014 2015 2016 2017 EFFECTIVE RENT INDEX 2018 34

CBD Rent Trends Charlotte Total rent rose by 5.9% to $35.70, the fourth consecutive annual increase and the biggest increase so far in this cycle. Net rent rose by 7.0% from $27.52 to $29.45. Operating expenses jumped by 2.3% to $2.25, but real estate taxes and tenant electric were both unchanged. Landlord concession packages ticked down by 0.6%. Tenant effective rent averaged $25.25, an 8.9% increase - the sharpest annual increase in this cycle. Landlord effective rent jumped by 13.4% to $16.86. Phoenix Total rent rose by 11.3% to $42.00 as demand for the highest-caliber buildings remained brisk. Net rent increased by 15.1% to $29.57. Some of the increase in total rent came via higher operating expenses (+4.1%) and real estate taxes (+3.1%). Record rent was accompanied by record concessions, though. Concessions hit another peak, rising to $87.50. Tenant effective rent nevertheless jumped by 13.2% to $28.61 and landlord effective rent spiked by 20.5% to $15.97. Charlotte Rent Trends $35 $30 $25 $15 $5 Phoenix Rent Trends $45 $35 $30 $25 $15 $5 31.01 31.64 32.76 20.76 21.32 8.73 9.12 22.24 Total Rent Total Rent 33.70 23.25 14.20 14.87 Tenant Tenant Landlord 2013 2014 2015 2016 2017 26.00 26.75 27.25 27.75 30.50 16.28 16.79 16.93 17.22 16.85 6.09 6.43 6.41 6.53 5.87 34.50 22.89 11.54 37.75 25.28 13.25 35.70 25.25 16.86 Landlord 2010 2011 2012 2013 2014 2015 2016 2017 42.00 28.61 15.97 35 EFFECTIVE RENT INDEX 2018

Suburban Rent Trends ERI 2018 Fort Lauderdale Total rent posted its sixth consecutive yearly increase, jumping by 6.9% to $44.00. Net rent jumped by 10.8% from $24.97 to $27.66. Operating expenses (+1.1%) and real estate taxes (+1.5%) pushed higher but tenant electric was flat. The value of concessions fell very slightly. Tenant effective rent increased by 4.4% to $35.25. Landlord effective rent jumped by 20% from $14.05 to $16.86, and is now 9.7% above the peak of $15.37 attained in 2006. Orange County Total rent jumped for the fifth consecutive year, rising by 8.1% to $38.00. Net rent increased by 12.2% from.09 to $22.55. Operating expenses (+3.3%) and real estate taxes (+2.4%) rose. Concession packages pushed higher, increasing to more than $73.00. Nevertheless, tenant effective rent jumped by 6.7% to $28.44. Landlord effective rent rose by 12.6% to $11.64 but was still well below the 2006 peak of $22.43. $50 $45 $35 $30 $25 $15 Fort Lauderdale Rent Trends $5 38.25 32.24 15.17 34.70 28.43 12.12 Orange County Rent Trends $35 $30 $25 $15 $5 33.50 33.47 33.10 33.60 33.88 26.09 25.50 24.61 24.78 25.00 10.05 8.00 8.00 7.90 8.07 36.24 25.98 39.74 41.15 30.79 13.63 13.02 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 36.91 32.99 19.37 33.60 28.38 14.60 28.80 21.62 8.13 27.59 26.97 26.85 27.65 Total Rent Total Rent 28.89 19.75 19.13 19.67 20.32 21.05 6.78 6.08 6.14 6.26 6.43 Tenant Tenant 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 33.75 25.00 9.54 32.14 14.05 35.16 26.11 10.34 Landlord 44.00 35.25 16.86 Landlord 38.00 28.44 11.64 EFFECTIVE RENT INDEX 2018 36

Suburban Rent Trends Sunnyvale/Santa Clara Total rent increased by 2.8% to $64.75. Net rent jumped by 3.4% from $43.70 to $45.17. Operating expenses (+1.7%) and real estate taxes (+1.7%) both increased but tenant electric held steady. Concessions inched down slightly, dipping to $61.00. In turn, tenant effective rent rose by 3.8% to $55.77. Landlord effective rose by 5.2% to $35.46. $70 $60 $50 $30 Sunnyvale/Santa Clara Rent Trends 56.10 57.00 48.15 48.46 30.67 30.87 Total Rent 55.60 54.75 54.99 55.00 54.90 55.25 45.73 44.96 45.27 45.58 45.48 45.68 27.92 27.50 26.35 26.84 26.38 26.24 Tenant 58.00 48.50 28.81 63.00 64.75 53.72 33.72 Landlord 55.77 35.46 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Northern Virginia Total rent dipped slightly, falling to $42.45. Net rent fell by 2.6% from $28.53 to $27.80. Operating expenses (+2.5%) and real estate taxes (+1.3%) pushed higher. Concession packages, which were already elevated, increased by only 0.3%. Tenant effective rent averaged $27.38, a year-onyear decrease of 1.9%. Landlord effective rent fell by 6.5% to.76. $50 $45 $35 $30 $25 $15 Northern Virginia Rent Trends $5 36.25 36.40 35.68 35.82 27.11 14.67 25.95 12.87 24.49 25.37 11.49 12.29 42.55 31.84 18.30 40.25 29.87 16.25 36.85 26.01 12.47 Total Rent 41.27 40.53 29.25 15.07 Tenant 42.93 42.45 27.21 27.91 27.38 12.97 13.32 Landlord 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10.76 37 EFFECTIVE RENT INDEX 2018

ERI 2018 Suburban Tenant and Landlord Rent Tenant effective rent fell in seven markets during 2017, compared to just one in 2016. The West Loop in Houston has become one of the most oversupplied markets nationally, contributing to declining rent. In contrast, strong demand from larger corporate space users in Central Perimeter and Orange County supported substantial increases in occupancy costs. Extremely high rents in Cambridge, coupled with steady expansion in the tech sector has boosted rent in the Route 128 Corridor in suburban Boston as well. Space options have tightened in Fort Lauderdale. Additionally, steady corporate relocation activity in West Plano and Frisco continued to push rent higher. Sunnyvale/Santa Clara s 5.2% jump in effective rents does not fully reflect the extent of demand for space among larger tech companies, in R&D buildings located in Menlo Park, Palo Alto and Mountain View. Suburban Tenant Rent Comparison: Percentage Change 2016-2017 Fort Lauderdale, FL Central Perimeter, GA Orange County, CA Waltham (Route 128), MA Cook County, IL Sunnyvale/Santa Clara, CA West Plano/Frisco, TX Main Line/Conshohocken, PA Southeast, CO West Palm Beach, FL Long Island, NY Westchester, NY DuPage County, IL Fairfield County, CT West Loop/Galleria, TX Northern Virginia Lake County, IL -0.7% -0.9% -1.5% -1.6% -1.8% -1.9% -2.4% 1.4% 1.3% 0.4% 2.4% 4.3% 3.9% 3.8% 9.7% 9.4% 8.9% -3% -1% 2% 5% 7% 10% Suburban Landlord Rent Comparison: Percentage Change 2016-2017 Fort Lauderdale, FL Orange County, CA Cook County, IL Waltham (Route 128), MA Central Perimeter, GA Sunnyvale/Santa Clara, CA West Plano/Frisco, TX Southeast, CO Main Line/Conshohocken, PA Fairfield County, CT DuPage County, IL West Palm Beach, FL West Loop/Galleria, TX Long Island, NY Westchester, NY Lake County, IL Northern Virginia -19.2% -0.8% -0.8% -0.9% -1.1% -2.0% -3.9% -3.9% 7.4% 6.6% 6.5% 5.2% 3.5% 2.6% 2.1% 12.6% 20.0% -20% -15% -10% -5% 0% 5% 10% 15% 20% EFFECTIVE RENT INDEX 2018 38

Suburban Tenant Rent 2008 2009 2008 2009 2016 2017 Suburban Landlord Rent 2016 2017 $60 $50 $55.77 $36 $32 $35.46 $41.75 $39.62 $28 $24 $30 Sunnyvale/Santa Clara, CA West Palm Beach, FL Waltham (Route 128), MA Fort Lauderdale, FL $35.25 West Plano/Frisco, TX $34.25 Main Line/Conshohocken, PA $32.15 Fairfield County, CT $30.25 West Loop/Galleria, TX $29.25 Westchester, NY $29.05 Orange County, CA $28.44 Northern Virginia $27.38 Long Island, NY $26.80 Central Perimeter, GA $23.30 Cook County, IL.90 DuPage County, IL $18.50 Southeast, CO $17.90 $16 $12 $8 $4 Sunnyvale/Santa Clara, CA West Palm Beach, FL $23.00 Waltham (Route 128), MA $21.11 West Plano/Frisco, TX $18.90 Main Line/Conshohocken, PA $16.90 West Loop/Galleria, TX $16.90 Fort Lauderdale, FL $16.86 Fairfield County, CT $13.00 Orange County, CA $11.64 Northern Virginia.76 Long Island, NY $9.85 Central Perimeter, GA $9.65 Westchester, NY $9.50 Southeast, CO $8.90 DuPage County, IL $5.85 Cook County, IL $4.95 39 EFFECTIVE RENT INDEX 2018

Glossary ERI 2018 Concessions: Includes the tenant improvement allowance plus the value of the rental rate abatement. Concessions are amortized over the average market lease term, using beginning-of-period payments. Landlord Rent: An estimate of rent received from a tenant less related expenses. Net Rent: The gross rental rate exclusive of the tenant s proportionate share of real estate taxes, operating expenses and tenant electricity. Operating Expenses: Includes (1) heating, ventilation and air conditioning (HVAC); (2) maintenance; (3) common area utilities and electricity; (4) cleaning; and (5) all other non-capital costs associated with the operation of a building. Real Estate Taxes: Local real estate taxes exclusive of special assessments and other one-time charges. Tenant Rent: An estimate of the actual cost of occupancy for the tenant. The calculation is the total rent minus amortized lease concessions. Tenant Electricity: Payments made by the tenant, whether to the landlord or public utility for the electrical power utilized within a tenant s premises, exclusive of building HVAC. Total Rent: The sum of the four rental rate components: net rent, operating expenses, real estate taxes and electricity. EFFECTIVE RENT INDEX 2018 40

ERI Supplement - U.S. Economy Dow Jones Industrial Average (1990-2017) Equity markets have veered sharply upwards since late 2016. After some initial shock following the presidential election in November, investors seem to have reacted positively. The Dow has displayed some volatility in recent months due to multiple concerns, including rising interest rates and potential trade conflicts with China and the EU. Equity prices always seems to rebound more quickly than in prior years when standoffs in Washington, the Eurodebt crisis, the taper tantrum and collapsing energy prices created some dips. 41 EFFECTIVE RENT INDEX 2018

ERI 2018 U. S. GDP - Post WWII GDP growth has improved slightly in 2017, but still averaged less than 2.8% in the first three quarters of the year. Global and U.S. GDP growth forecasts were reduced in early 2016, due to additional slowing in China as well as commodity-fueled countries such as Australia, Brazil, Russia and Canada. Economists revised GDP growth forecasts for 2017 and 2018 slightly higher due to tax reform and in anticipation of increased federal spending. EFFECTIVE RENT INDEX 2018 42

ERI Supplement - U.S. Economy Home Prices, Case-Shiller 20-City Composite Index (2000-2017) Home prices, a key determinant of household wealth, have been increasing since early 2012. Based on the Case-Shiller 20-City Composite Index, pricing has increased by 35.9% since it hit a low point in late 2011, about half the increase in the prior cycle when prices rose by 70.4% between 2000 and 2006. Price growth fell slightly in the summer of 2014 and early 2015 - the first decline since early 2012 - but prices have rebounded since then. Limited new construction has kept the inventory of homes for sale at very low levels, helping to boost pricing. 43 EFFECTIVE RENT INDEX 2018

ERI 2018 New and Existing Home Sales (1968-2017) The housing market started to recover by the second half of 2011. Existing home sales averaged 4.9 million units in the last twelve months and new home sales rose to 612,000 units (well below the 1.0 million in 2006). Mortgage transparency regulations implemented in late 2015 hampered sales. The high hurdle of saving for a down payment is still the biggest impediment to stronger volume. Sales have improved slightly in recent months due to increased household income growth and consumer confidence. EFFECTIVE RENT INDEX 2018 44

ERI Supplement - U.S. Economy U.S. Auto Sales, Monthly (1980-2017) Auto sales have increased steadily from the low point reached in 2009. By August of 2015 sales had pushed nearly even with pre-recession trends. Attractive auto financing deals and improving household finances pushed annual sales to just under 18.0 million annually by year-end 2016, a new peak level. Auto sales appeared to hit a plateau at some point in early 2017. 45 EFFECTIVE RENT INDEX 2018

ERI 2018 U.S. Real Median Household Income (1990-2016) On an inflation-adjusted basis (using 1990 dollars), median household income has made some gains in the last several years. Income has posted modest increases over the last three years with stronger gains in the Northeast and West than in the South and Midwest. Overall, on an inflation-adjusted basis, household income is slightly above its pre-recession levels. $60,000 Median Houshold Income (Inflation-Ajdusted) $50,000,000 $30,000,000 $49,067 $46,657 $46,497 $44,112 $42,246 $41,451 U.S. Northeast West South Midwest Source: U.S. Census Bureau EFFECTIVE RENT INDEX 2018 46

ERI Supplement - U.S. Economy Total Outstanding Consumer Installment Credit (1980-2017) Consumer installment credit such as credit cards, bank cards and other revolving debt has risen steadily over the last few decades. Until the most recent recession, households supplemented income with gains from higher home prices and home equity loans. They also padded spending power with credit card debt. Households lowered this debt slightly between 2008 and 2010 (in part through default), but outstanding credit has started to rise again along with the recovery. $4,500 Source: U.S. Board of Governors of the Federal Reserve System Total Outstanding Consumer Installment Credit (Billions $) $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 June 2008: $2.65 trillion July 2010: $2.39 trillion Year-end 2017: $3.84 trillion 47 EFFECTIVE RENT INDEX 2018

ERI 2018 Mortgage Delinquency Rates (1981-2017) Another area of improvement for the U.S. housing market has been the steady decline in delinquency rates from a range of 9.0% to 10.0% in early 2010 to less than 6.0% in all regions currently. Delinquency has remained much higher in the Northeast and South. In contrast, the West has gone from a delinquency rate of nearly 10.0% in 2010, one of the highest nationally, to around 3.0%, by far the lowest among the four regions. Delinquency rates have increased slightly in the last few months. EFFECTIVE RENT INDEX 2018 48

ERI Supplement - U.S. Economy Financial Accounts, Nonfinancial Corporations - Net Worth (1970-2017) One of the steadier features of the U.S. economy, virtually right out of the gates of the recovery, has been the strong balance sheets of corporations. The net worth (assets less liabilities) of nonfinancial corporations took a big hit in the recession, falling to $14 trillion, but has pushed steadily higher, rising to nearly $24 trillion as of year-end 2017. Companies have deployed the funds for mergers and acquisitions, dividend payouts, stock buybacks, and equipment and software. However, most businesses did not start to aggressively expand payroll until 2014. $30.00 Source: Federal Reserve Net Worth, Nonfinancial (Trillions $) $25.00.00 $15.00.00 $18.13 $14.27 $23.85 $5.00.00 49 EFFECTIVE RENT INDEX 2018

ERI 2018 U.S. Overall Monthly Employment Trends (2007-2017) Monthly job growth averaged only 186,667 in 2016, less than the 226,083 averaged in the prior 12 months. Job growth was even weaker in 2017 with 171,250 average in the twelve month period. The average monthly gain since the recovery started (196,000) is still well below the average monthly loss (282,000) in the recession. EFFECTIVE RENT INDEX 2018 50

ERI Supplement - Office Market U.S. Office-Using Monthly Employment Trends (2007-2017) Office-using employment has been increasing steadily in the last seven years. Employers have added 5.3 million office-using jobs since the start of 2010, more than twice the 2.6 million shed in the recession. Office-using sectors posted an average monthly gain of 51,769 jobs in the last 12 months, compared to 53,923 in the prior 12 months. In some markets, and in select industries, hiring goals have been hampered by a shortage of qualified employees, but the labor force has also been growing. 51 EFFECTIVE RENT INDEX 2018

ERI 2018 Office-Using Employment and Change in Occupancy (Current Cycle vs. Prior Peak) Tech-centric markets have registered the strongest employment growth. Austin, San Francisco and Silicon Valley are more than 30.0% above their prior peaks. In the last two years, hiring has also intensified in lower-cost markets such as Atlanta, Denver and Dallas/Fort Worth. Employment in Dallas/Fort Worth (28.2% above its prior peak) is benefitting from the relocation of companies from higher cost markets. In contrast, markets with a strong connection to the energy sector such as Houston have posted recent losses. Despite recent gains, several markets that still depend on a mix of real estate/finance and legal sectors (Orange County and LA) barely exceed their prior peaks. Source: BLS Source: BLS EFFECTIVE RENT INDEX 2018 52

ERI Supplement - Office Market National Office-Using Employment and Vacancy Rates (2000-2022) The U.S. has added an average of 437,773 office-using jobs per year in this recovery, exceeding the annual average of 326,000 jobs gained in the last expansion. Despite this, vacancy has fallen more slowly in this cycle, due largely to a widespread effort by companies to consolidate multiple locations and lease less space per employee. Seven years after peaking at 17.5%, the vacancy rate fell to 15.7% by year-end 2017, a decrease of only 1.8 pp, a fraction of the 4.7 pp decline in the last recovery Source: Savills Studley/BLS 53 EFFECTIVE RENT INDEX 2018

ERI 2018 Leasing Volume as a Percentage of Historical Average (2017) Annual leasing volume in the top U.S. office markets fell short of its long-term historical average by 11.2% in 2017. Chicago s CBD (+13.4%), Washington, DC (+11%), and Northern Virginia (+10.4%) registered strong activity during the year. In contrast, leasing fell well short of its historical pace in New Jersey (-38.9%) and Raleigh/Durham (-38.1%). Seattle, 60.5% New Jersey, 61.1% Raleigh/Durham, 61.9% Boston (Suburban), 63.9% San Diego, 73.1% Boston (Suffolk County), 73.8% Phoenix, 74.5% Baltimore, 77.4% Los Angeles Region, 77.6% Austin, 80.0% Tampa Bay, 86.9% Chicago Suburbs, 87.1% U.S., 88.8% Houston, 89.1% Orange County, 90.9% San Francisco, 96.0% Philadelphia, 96.2% Dallas/Fort Worth, 98.6% Suburban Philadelphia, 98.6% Suburban Maryland, 100.7% South Florida, 101.6% Atlanta, 102.6% Denver, 105.4% New York City, 106.2% Northern Virginia, 110.4% Washington, D.C., 111.0% Chicago CBD, 113.4% 0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% EFFECTIVE RENT INDEX 2018 54

ERI Supplement - Office Market Unleased & Pre-Leased New Construction (Year-End 2017) New construction has been very restrained in this cycle but it is starting to gain momentum in more markets. Eight markets now have more than 5.0 msf underway, 21 now have more than 1.0 msf under construction. Even with the increased development, un-leased new construction is still less than 1.0% of current inventory in most markets. 55 EFFECTIVE RENT INDEX 2018