Q1 2018 | OFFICE MARKET AT-A-GLANCE*

LEASE RATES

Q1 2018 | GREATER CINCINNATI OFFICE MARKET REPORT

NET ABSORPTION CONSTRUCTIONVACANCY RATES

* Relative to prior quarter. Source: CoStar Group®

S V N | R I C O R E I N V E S T M E N T M A N A G E M E N T , I N C . | 1 1 5 0 0 N O R T H L A K E D R . | C I N C I N N A T I , O H 4 5 2 4 9 | 5 1 3 - 2 7 2 - 6 8 0 0 | W W W. S V N- R I C O R E . C O M

The Cincinnati office market has experienced strong, abundant demand over the last few years. Net absorption reached its peak in2016 at over two million square feet, dropping significantly in 2017. A major portion of the recent leasing activity has been in officesubmarkets outside the Cincinnati CBD, including Butler County and Northern Kentucky. Office development has been steady since2015, with the largest recent developments being build-to-suits for Kroger, General Electric, and Towers in Kenwood, which wasnearly fully occupied just one year after completion.

Vacancy rate compression has been further aided by the conversions of obsolete inventory into primarily multifamily product,particularly in the Cincinnati CBD & CBD Periphery, including the conversion of the Schmidt Building on Sixth Street. TheClifton/Midtown Office Submarket is also home to a large proportion of ongoing development, including numerous speculativeproperties delivered over the last few years. Overall, investors have shown widespread interest in the Cincinnati market since 2014.

A steady stream of companies relocating to the Cincinnati market has kept overall demand for office space strong over the last fewyears; however, 4 and 5-star inventory is currently skewing vacancies upward, and nowhere is that more evident than in the BlueAsh Submarket, where vacancies have surpassed 14%. Premium rent levels and growing competition for tenants from theCincinnati CBD and other submarkets have contributed to this vacancy expansion.

In 2016, construction on GE’s U.S. Global Operations Center was completed, and the company began relocating over 2,000 high-paying jobs to the Banks (downtown Cincinnati). Procter & Gamble is in the process of moving close to 900 employees from itsWinton Hills location to its downtown Cincinnati office. Some of the most recent new leases taking place include P.L. Marketing’sHQ expansion (24,000 SF) at One Riverfront Place in Northern Kentucky, Target Solutions’ 16,000 square foot lease at KeystoneParke in the Midtown Submarket, and Advantage Sales & Marketing’s 21,000 square foot lease at Blue Ash Corporate Center I.

Most of the local employment gains have come from the Healthcare Services sector, and are largelyassociated with the University of Cincinnati Medical Center, Cincinnati Children’s Hospital MedicalCenter, and TriHealth. Cincinnati’s 55 and older population has grown more than 50% over the last 20years, now representing nearly 30% of the total population.

Q1 2018 | ECONOMY & EMPLOYMENT

IAlong with most of the Midwest, the Cincinnati market has dealt with some challenging demographic trends, including chronicoutmigration and shrinking employment opportunities. However, a steadily diversifying economy and a revitalized downtown havehelped the metro retain educated workers, and have accelerated overall economic growth in the region. According to the OhioDepartment of Job and Family Services, Cincinnati added nearly 9,000 jobs in February alone, lowering the unemployment rate tonational levels. In addition, median household income has reached its highest peak as a result of the tight labor market, exceedingthe national average.

Approximately 32% of the Cincinnati population age 25 or older hold a Bachelor’s Degree (or higher), compared to just 25% in therest of Ohio. This educated workforce is finding employment in places like Kroger’s Corporate 84.51° Analytics Division, Procter &Gamble, and other professional, financial, and business services companies throughout the metro. The opening of GE’s U.S. GlobalOperations Center in June 2016 made a particularly big impact, bringing more than 2,000 new jobs in the Finance and InformationTechnology sectors. Nine Fortune 500 companies currently call Cincinnati home, supporting the market’s white-collar identity, andacting as an engine of economic growth. Employment in the Manufacturing sector is also growing, thanks to the region’s status asan aerospace manufacturing hub. As worldwide demand for commercial aviation and travel increases, GE Aviation (headquartered inEvendale), and other manufacturers have benefited.

The Education and Health Services sector, which makes up about 15% of total employment, has also consistently added jobs,mirroring nationwide trends. Most of these employment gains have come from Healthcare Services and Social Assistance, and arelargely associated with the University of Cincinnati Medical Center, Cincinnati Children’s Hospital Medical Center, and TriHealth. The55-and-over population in Cincinnati has increased by more than 50% since 1998, representing nearly 30% of the total population.This high concentration of older residents will create even greater demand for healthcare, setting the stage for further growth inthat sector.

As several redevelopment and renovation projects in the CBD and CBD Peripheral submarkets are reaching completion, tenants inthe market are looking to these newly constructed spaces for relocation. In just the first few months of 2018, we’ve seen leasingactivity concentrate within the urban submarkets. With demand high for rare tenant amenities such as restaurants, hotels, andentertainment, tenant migration will continue to increase into Cincinnati’s urban core throughout 2018. This will keep developersscouring the market for unique redevelopment opportunities.

Source: CoStar Group®

SUBMARKET VACANCY RATES (CLASS A, B & C):

Q1 2018 | OFFICE SUBMARKET SNAPSHOT

S V N | R I C O R E I N V E S T M E N T M A N A G E M E N T , I N C . | 1 1 5 0 0 N O R T H L A K E D R . # 1 0 0 | C I N C I N N A T I , O H 4 5 2 4 9 | 5 1 3 - 2 7 2 - 6 8 0 0 | W W W. S V N- R I C O R E . C O M

SUBMARKET # BUILDINGS TOTAL RBA AVAILABLE SF VAC % ABSORPTION DELIVERIES CONST. SF RATES/SF

Blue Ash 245 7,004,818 973,456 14.0% 21,467 0 9,000 $16.96

Cincinnati CBD 216 21,811,588 3,771 1.4% 19,000 0 0 $10.23

Cincinnati Intl Airport 453 6,654,681 972,423 9.3% 9,170 0 0 $14.17

Clifton/Midtown 558 11,138,636 1,660,679 7.6% 169,039 0 0 $17.38

Covington/Newport 323 5,005,403 765,159 11.4% 67,206 40,593 0 $16.60

Eastgate/Anderson Twp. 277 2,977,297 868,256 7.8% (98,398) 0 55,000 $18.69

Fairfax/Mt. Lookout 215 3,020,982 606,276 12.1% 12,808 0 0 $18.70

Forest Park/West 612 5,360,157 24,476 6.6% 500 0 0 $13.14

Kenwood 225 3,422,886 157,279 5.1% 11,061 0 0 $19.12

Mason/Montgomery 224 7,205,598 85,247 2.8% 20,758 0 13,200 $18.47

Milford/Wards Corner 179 2,134,967 294,267 5.4% (32,773) 0 0 $16.61

Queensgate 169 2,612,763 143,193 4.2% 12,377 0 0 $18.91

Reading/Roselawn 134 1,761,141 652,353 8.8% 52,405 10,560 53,000 $16.33

Tri-County I-275 171 4,289,595 264,539 12.4% (104,953) 0 0 $13.48

Source: CoStar Group®

0%2%4%6%8%

10%12%14%16%

S V N | R I C O R E I N V E S T M E N T M A N A G E M E N T , I N C . | 1 1 5 0 0 N O R T H L A K E D R . # 1 0 0 | C I N C I N N A T I , O H 4 5 2 4 9 | 5 1 3 - 2 7 2 - 6 8 0 0 | W W W. S V N- R I C O R E . C O M

Q1 2018 | CONSTRUCTION & DEVELOPMENT

Q4 2017 | SALE & INVESTMENT ACTIVITY

There is roughly 102 million square feet of office space in the Cincinnati market, largely concentrated in the Cincinnati CBDSubmarket. As of early 2018, about 220,000 square feet is under construction and over 75% of those developments are preleased.Development in the Clifton/Midtown Submarket has dominated the construction pipeline over the last few years, including the newheadquarters for Empower Media Marketing and for Messer Construction that were delivered in 2017.

Along with strong demand for office space, numerous conversions and renovations are helping to compress vacancies and phase outobsolete inventory. The largest of these projects is the redevelopment of the 113,000 square foot historic Sears department store onReading Road with $16 million in financing from the University of Cincinnati. The completed building will serve as a researchaccelerator, a home for startup companies launched from technologies developed at the University, and is estimated to be completeby the end of 2018.

Source: CoStar Group®

Average sale prices in the office market have reached a cyclical high at close to $140 per square foot, due in large part to theacquisitions of both TriHealth and Mercy Health. In April 2017, TriHealth acquired ten buildings in Cincinnati proper and Hamilton, OHfor $155 million ($406/SF). TriHealth was in the midst of corporate recapitalization and wanted to redeploy capital into the real estateit already occupied on its hospital campuses. Most of the buildings were fully occupied at the time of sale, and the portfolioreportedly had a 5% cap rate. The Mercy Health Headquarters in the Reading/Roselawn Submarket was purchased in early 2017, bySaudi Arabian firm, Sidra Capital, for $84.5 million($229/SF).

Sale volume is nearing $38 million with the average office property selling for close to $1.3 million. One of the most notable trades todate is the sale of 25 Atlantic Avenue in the Cincinnati/Northern Kentucky International Airport Submarket. This 200,000 square footoffice building was purchased by Corporex in February 2018 for $9.25 million ($46/SF). Toyota previously owned and occupied thebuilding before consolidating this location and moving to a facility in Texas.

PROPERTY SIZE (SF) YEAR BUILT PRICE PRICE/SF SALE DATE CAP RATE

1701 Mercy Health Place 368,447 2016 $84,500,000 $229 5/4/2017 N/A

6949 Good Samaritan Drive 49,699 2010 $25,650,000 $516 4/13/2017 5%

8040 Princeton-Glendale Road 48,910 2014 $20,330,000 $416 4/13/2017 5%

3075 Vandercar Way 80,644 2017 $18,191,850 $226 7/12/2017 6.9%

4393 Digital Way 85,336 1999 $14,500,000 $170 12/19/2017 N/A

8700 Governor’s Hill Drive 58,617 1985 $10,260,000 $175 6/30/2017 7%

Q1 2018 | OFFICE SALES & INVESTMENT ACTIVITY