colliers north american office report q1 2014

HIGHLIGHTSNORTH AMERICA

WWW.COLLIERS.COM

Q1 2014 | OFFICE

MARKET INDICATORSRelative to prior period

NORTH AMERICAN OFFICE MARKETSummary Statistics, Q1 2014

US Q1

2014

US Q2

2014*

Canada Q1

2014

Canada Q2

2014*

VACANCY NET ABSORPTION

CONSTRUCTION RENTAL RATE**

*Projected | Construction is the change in Under Construction

**Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents.

US CAN NA

VACANCY RATE (%) 13.90 8.05 13.49

Change From Q4 2013 (%) -0.11 0.19 -0.09

ABSORPTION (MSF) 13.2 0.3 13.5

NEW CONSTRUCTION (MSF) 15.6 2.0 17.6

UNDER CONSTRUCTION (MSF) 70.8 21.3 92.1

ASKING RENTS PER SF US CAN

Downtown Class A ($) 44.24 50.13

Change from Q4 2013 (%) 2.64 -0.46

Suburban Class A ($) 27.17 32.24

Change from Q4 2013 (%) 1.18 1.00

The Rise of the Sun Belt

ANDREA CROSS National Office Research Manager | USA

KEY TAKEAWAYS

• North American office vacancy decreased by 9 basis points in Q1 2014 to 13.49%, on par with the rate of recovery during the last few years. Steady job growth is driving demand, but tenants’ more efficient use of space is limiting occupancy gains relative to previous cycles.

• ICEE markets continue to lead office market recovery. Vacancy in the primary ICEE markets decreased by 26 bps this quarter, vs. just 4 bps in the primary FIRE markets.

• Sun Belt markets also are key drivers of the current recovery. Despite accounting for only about 30% of U.S. office inventory tracked by Colliers, the Sun Belt represented nearly 60% of Q1 office absorption.

• Construction activity in the U.S. remains low and is concentrated in markets with the strongest demand, e.g., Boston, San Francisco, Silicon Valley. Space under construction in U.S. and Canadian markets tracked by Colliers totaled 92.1 million square feet in Q1 2014, up from 88.2 million square feet in Q4 2013 and 74.4 million square feet in Q1 2013.

• Domestic and foreign capital continues to target North American office properties: According to Real Capital Analytics, combined transaction volume in the U.S. and Canada increased by 36% year-over-year in Q1 2014. Demand is still strongest for assets in CBDs and major metros, although we anticipate rising activity in suburban and secondary markets due to the broadening economic and office market recoveries, and higher yields on properties in those areas.

P. 2 | COLLIERS INTERNATIONAL

HIGHLIGHTS | Q1 2014 | OFFICE | NORTH AMERICA

U.S. Economic TrendsThe U.S. economy began 2014 on a weak note, with severe weather conditions throughout much of the nation. The term “Frozenomics” was coined to describe the resulting negative economic impact. At the time, we believed the damage from Frozenomics was overblown and would be short-lived, and our prediction has been borne out by recent economic data. According to the Bureau of Labor Statistics (BLS), the U.S. economy added 288,000 jobs in April 2014, the highest monthly total since Janu-ary 2012; also, job creation figures for February and March were revised upward by a total of 36,000. We regularly caution that BLS employment statistics are revised multiple times—often substantially—but, in this case, payroll processing firm ADP’s recent data on actual payroll statistics from 20% of the nation’s private-sector companies mirrors the BLS data. ADP reported steady acceleration in monthly job creation in early 2014, from 121,000 jobs added in January to 220,000 jobs added in April, with the four major geographical regions all exceeding their respective six-month trailing monthly averages.

Looking specifically at office-using employment, the bifurcated recovery continues, with strong growth in professional and business services pro-pelling nearly all of the growth in office demand during the current re-covery. Moreover, professional and business services growth accelerated through early 2014, with 77,000 jobs created in April—the highest total since late 2012, according to ADP data. Technology-related employment was the primary driver of this growth earlier in the cycle, but other com-

CHANGE IN EMPLOYMENT FROM CYCLICAL PEAK | US

Total Employment O�ce-Using Employment Professional & Business Services Financial Activities

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

0 4 8 12 16 20 24 28 32 36 40 44

MONTHS

48 52 56 60 64 68 72 76 80 84 88

Latest data as of April 2014; x-axis indicates number of months elapsed since each sector’s previous cyclical employment peak; office-using employment sectors include professional and business services,

financial activities and information services; information services not displayed separately because sector peaked in 2001 | Sources: Bureau of Labor Statistics, Colliers International

ponents of this sector, such as legal and accounting, have been adding jobs during the last 12 months, albeit at a modest pace. Recent data from Thomson Reuters indicated an increase in law firm transaction activity among 70% of the 150 large firms surveyed in Q1 2014, compared with just 32% one year earlier—a positive sign for this important component of office demand. Financial activities, the other primary component of

Square Feet By Region

Absorption Per Market (SF)Q4 2013 - Q1 2014

2,000,000

1,000,000

200,000

-200,000

-1,000,000

-2,000,000

2 billion

1 billion

200 mil.

Occupied Sq. Ft.

Vacant Sq. Ft.

SUNBELT SUNBELT SUNBELT SUNBELT SUNBELT SUNBELT SUNBELT SUNBELT

SUNBELT SUNBELT SUNBELT

SUNBELT

OFFICE VACANCY, INVENTORY AND ABSORPTION | Q1 2014 | NORTH AMERICA


COLLIERS INTERNATIONAL | P. 3

office-using employment, remains weak, although the sector does appear to have bottomed. Other than a decrease in January, the financial activi-ties sector has not lost jobs on a monthly basis in more than three years, according to ADP.

In 2014, we expect the U.S. economic recovery to occur at a similar rate as in 2013, with steady but unspectacular job creation averaging less than 200,000 per month. However, the economy should gain steam as the year progresses compared with the Frozenomics-driven weakness at the beginning of the year. Given the second estimate of a 1.0% decline in GDP in Q1 2014, we expect GDP growth of less than 2.0% during 1H 2014. However, growth should accelerate during the year, supported by greater business and consumer confidence, the carry-forward effect of purchas-es delayed due to weather conditions earlier in the year, and incremental improvements in state and local government finances. Thus, we expect healthy 3.0% GDP growth in 2H 2014, resulting in annual GDP growth in the 2.5%–2.75% range.

Canada Economic TrendsLike the U.S., Canada was not immune to the bad weather effect in Q1 2014. GDP expanded by 1.7%, well ahead of the U.S. rate, but still a slow-down from 2.9% in Q4 2013. Similar to the U.S., we expect stronger GDP growth through the rest of 2014 as the temporary negative effect of the weather dissipates. For the year, the Canadian economy will likely mirror the trend of the last few years, expanding at a modest rate. The Con-ference Board of Canada projects 2.3% GDP growth, a slight increase from 1.7% in 2013 and lower than our expectations for U.S. economic growth. However, it is important to note that the Canadian economy ex-perienced a shallower and shorter recession than the U.S., and several years ago recovered all of the jobs lost during the downturn. Canada is in the midst of a moderate expansionary period rather than the protracted recovery occurring in the U.S. For 2014, the withdrawal of fiscal stimu-lus measures implemented in response to the recession, coupled with a cautious outlook among private sector firms, will likely prevent faster

economic growth in Canada. The Conference Board expects improved private investment activity in 2014, but relatively low when compared with historical levels.

Office Outlook 2014: Behind the Statistics & Beyond the BasicsScope of Colliers’ Office Outlook Report: Colliers’ office space universe encompasses 87 markets in the U.S. and Canada, totaling more than 6.4 billion square feet. The 75 U.S. markets account for nearly 6.0 billion square feet of tracked inventory, with the remaining 446 million square feet in Canada. Our coverage includes 21 markets with more than 100 million square feet of space, which combined account for 3.8 billion square feet, or nearly 60% of our office market inventory. The largest U.S. markets are New York, Washington, D.C., Chicago, Dallas and At-lanta; Toronto is the only Canadian market with more than 100 million square feet of space.

VACANCYVacancy rate trends in Q1 2014 mirrored those observed during the last few years. The slow but steady economic recovery, coupled with low levels of new supply, supported an 11 basis-point decrease in the U.S. vacancy rate, to 13.9%. Once again, the Canadian vacancy rate increased during the quarter as additional new supply came to market. Although Canada’s vacancy rate rose above 8%, it remains well below the 10% threshold reflective of a healthy market.

Intellectual capital, energy and education (ICEE) markets remain the lead-ers in the office market recovery. The vacancy rate in the primary ICEE markets decreased by 26 basis points during the quarter, compared with just a 4 basis-point decrease in the vacancy rate of the primary FIRE markets. ICEE markets still top the list of tightest markets, including Ba-kersfield, Pittsburgh, Calgary and San Francisco. However, many mar-kets without significant clusters of ICEE industries are improving as well, mirroring the broader economic recovery. Grand Rapids, Hartford and Downtown Manhattan were among the markets with the largest decrease in vacancy rate. Albuquerque, a laggard in the current recovery due in part to its dependence on federal government spending, also ranked high in terms of quarterly vacancy rate decrease, as did former housing-bust markets Fresno and Stockton. We are also observing an increasing amount of tenant spillover from the leading tech markets and submarkets, in which rents have increased significantly in recent years, to adjacent, lower-cost areas with greater availabilities. Northern California’s East Bay is finally experiencing some tenant spillover from Silicon Valley and San Francisco, where rents have skyrocketed and the number of large blocks of available space has di-minished. Several tenants in the health care, non-profit and gourmet food sectors left San Francisco recently for the lower rents and/or larger spaces available in the East Bay; and both Oakland and Walnut Creek

14.95 14.78 14.73 14.63 14.49 14.45 14.15 14.00 13.90

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2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

0.0

5.0

10.0

15.0

20.0

25.0

Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 Q1 2014

Vaca

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%

Absorption MSF Completions MSF Vac Rate (%)

OFFICE MARKET | Q1 2012–Q1 2014 | US

Source: Colliers International



posted vacancy rate decreases in Q1 2014. In Chicago, mobile market-ing firm Punchkick Interactive will relocate from River North, one of the metro area’s leading tech submarkets, to the nearby East Loop later this year. With technology tenants driving up rents in the hottest tech markets, we will likely see more tenant spillover into other submarkets by both tech and non-tech tenants.

neighborhoods that historically were less desirable than core, central city locations like San Francisco and Manhattan. Etsy, Inc. is expanding its Brooklyn presence, moving its headquarters into 200,000 square feet in the DUMBO neighborhood, and has plans to nearly double the size of its workforce. Vibrant, walkable areas proximate to transit, in core markets as well as in emerging neighborhoods and office markets, will benefit from these trends.

With modest economic growth still occurring in Canada, the increase in the vacancy rate in recent quarters was primarily the result of more ef-ficient space utilization by tenants, as well as the large amount of new supply coming to market. The demand drivers vary by metro area, but— as in the U.S.—ICEE firms continue to boost demand for space in core markets. In Calgary, for example, where nearly 70% of office construc-tion in Canada was delivered in Q1 2014, demand from energy companies seeking large blocks of space remains robust even though the vacancy rate increased slightly during the quarter. In Vancouver, digital media and technology firms remain active, as well as firms entering the Vancou-ver market for the first time. Microsoft and Sony recently signed large deals for high-quality space in downtown Vancouver. Overall, demand has stagnated somewhat, but this is primarily due to tenants delaying leasing decisions until the large amount of supply under construction starts to hit the market. Some concern remains regarding the impact of this new space on vacancy in Class B buildings and older Class A buildings.

ABSORPTIONAlthough a broader range of industries have been adding jobs in recent quarters, the ICEE industries remain the dominant force in the office market. Absorption in the main ICEE markets outpaced absorption in the major FIRE markets by more than four to one in Q1 2014. Houston alone accounted for more than one-quarter of the 8.6 million square feet of ab-sorption in the ICEE markets, posting its highest quarterly absorption total since Q2 2007. Energy companies continue to drive the Houston market, accounting for nearly 80% of leasing activity in Q1 2014, as high oil prices support the industry’s growth.

Housto

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0.0

0.5

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TOP MARKETS FOR METRO OFFICE ABSORPTION | Q1 2014 | NA

MSAVACANCY RATE (%)Q1 2014

VACANCYRATE (%)Q4 2013

BASIS- POINT

CHANGE

Grand Rapids, MI 18.36 20.72 -236

Hartford, CT 12.82 14.49 -167

San Jose – Silicon Valley 10.81 12.44 -163

New York, NY – Downtown Manhattan 14.43 15.55 -112

Ottawa, ON 9.70 10.73 -103

New York, NY – Midtown South Manhattan 8.83 9.74 -91

Albuquerque, NM 18.42 19.28 -86

Fresno, CA 12.74 13.50 -76

Walnut Creek, CA 15.57 16.23 -65

Atlanta, GA 16.07 16.67 -59

NORTH AMERICA 13.49% 13.58% -9

LARGEST Q-o-Q DECREASE IN OVERALL VACANCY RATE | NA


MARKET VACANCY (%) MARKET VACANCY (%)

Toronto, ON 5.92 Winnipeg, MB 8.46

Saskatoon, SK 6.22 Vancouver, BC 8.68

Montréal, QC 7.24 Calgary, AB 8.71

Bakersfield, CA 7.29 New York, NY – Midtown South 8.83

Pittsburgh, PA 8.09 Nashville, TN 9.15

NORTH AMERICA: 13.49%


LOWEST OVERALL VACANCY RATES | Q1 2014 | NA

Also expected to drive the spillover trend is the increased desirability of residential neighborhoods in areas such as Oakland and Brooklyn. Many companies are seeking to locate near where their employees want to live, and many millennials have been priced out of, or prefer to live in,



North American Downtown Markets:Excluding renewals, of the leases signed this quarter in your CBD/downtown, did most tenants...?

Hold Steady70.13%

Expand11.69%

Contract11.69%

North American Downtown Markets:What was the trend in Free Rent (in months) o�ered by CBD landlords this quarter?

Same81.16%

Less13.04%

More5.80%

North American Downtown Markets:What was the trend for tenant improvement allowances o�ered by CBD landlords this quarter?

Same81.16%

Less11.59%

More7.25%

North American Suburban Markets:Excluding renewals, of the leases signed this quarter in your suburban market, did most tenants...?

Hold Steady65.75%

Expand26.03%

Contract8.22%

Charts above reflect % of markets reporting

As the recovery progresses, shortages of space are emerging in certain submarkets, or for some sizes or classes of space in metro areas that have been slow to recover overall. For example, in Sacramento, which still has an 18+ percent vacancy rate, tenants leased half of the blocks of space containing 100,000 square feet or more between mid-2013 and the end of Q1 2014, leaving few con-tiguous options for large users. However, options for smaller and mid-sized users remain abundant.

Although the economy continues to improve, many companies remain highly cost-conscious, as re-flected in their real estate decisions. We continue to see large companies dividing functions into mul-tiple geographical locations in order to reduce operating expenses, affecting office market dynamics across the United States. Within the financial services industry, many major banks have been moving mid-level and back-office functions to lower-cost locations in the South and Midwest. As of April 2014, financial activities employment exceeded pre-recession peak levels in many metro areas within these regions, even in hard-hit housing markets such as Jacksonville, due to financial companies in-cluding Deutsche Bank, Goldman Sachs, Credit Suisse and BNY Mellon expanding operations. We are seeing a similar trend in non-financial industries as well. For example, GE recently announced plans to consolidate 1,400 employees, including human resources, IT, accounting and procurement profes-sionals, into a new Global Operations Center in the Cincinnati area by 2017. Many of the employees will come from outside of Cincinnati, and the facility eventually could house up to 2,000 employees in total, resulting in substantial net job creation in the area from just this company. In KPMG’s most recent Competitive Alternatives study, Cincinnati ranked second among large metro areas in terms of business costs, and indeed we are seeing strong job creation in many of the markets at the top of these rankings. We expect that low costs of doing business, coupled with aggressive company recruitment through tax and other incentives by states such as Texas, will result in continued tenant movement from higher-cost metros.

Consolidations and reconfigurations of space throughout the public and private sectors continue to limit office absorption. The General Services Administration (GSA) remains among the most aggres-sive in terms of downsizing, exemplified by its April renewal for 217,313 square feet in College Park, GA, for the Federal Aviation Administration’s Southern Regional Office. The GSA plans to relocate an additional 330 employees from another space at which its lease is expiring, bringing the College Park location’s headcount from less than 700 to about 1,000. With a federal budget in place, the GSA is be-ginning to deal with the backlog of expiring leases that built up during the last few years; one-quarter of all federal leases are set to expire in 2014. However, the agency will continue to utilize denser configurations and reduce its real estate footprint in order to cut real estate costs. Efficient buildings capable of handling high employee densities are in demand, potentially at the expense of incumbent buildings. The federal government is also looking to better utilize its real estate portfolio, moving some employees out of leased space into owned space. For example, the Department of Veterans Affairs recently announced plans to move 800 employees out of leased space in downtown St. Louis into a GSA-owned building in suburban Overland, MO.

Private-sector firms are attempting to cut costs as well, through more efficient space utilization—although the potential for this varies by industry and the individual tenant’s needs. Firms are using technology to monitor desk utilization rates, with some reporting less than 50% of workspaces used during business hours, indicating significant potential for increasing densities through the use of shared spaces. Many firms are reporting a desire for shorter, more flexible lease terms in order to respond to ever-changing technologies and uncertain business conditions.

CONSTRUCTION ACTIVITYConstruction trends reflect where the U.S. and Canada are respectively in the office market cycle. Outside of the strongest metro areas and submarkets, construction activity remains low in the U.S. due to more efficient tenant space usage, elevated vacancy rates and high construction costs. Can-ada’s economic expansion, on the other hand, is driving a large amount of construction activity, and new supply is just starting to hit the market in many metros.



Although still low, development activity has been increasing, albeit slowly. Square footage under construction in the U.S. and Canadian markets tracked by Colliers totaled 92.1 million square feet in Q1 2014, up from 88.2 million square feet in Q4 2013 and 74.4 million square feet in Q1 2013. Driven by voracious demand from energy companies, Houston con-tinues to lead the U.S. both in terms of square footage underway (1 5.1 MSF) and square footage underway as a percentage of existing inventory (7.2%). Most of the other top U.S. markets for construction activity are tech-driven, such as San Francisco, San Jose, Boston and Seattle. Like the energy industry, tech tenant demand remains robust, with large ten-ants pre-leasing significant amounts of space or entire buildings, prompt-ing additional construction. Several of the largest deals in the San Fran-cisco office market’s history were signed in buildings under construction in recent months, including Salesforce.com’s lease for more than half of the 1.4 million square feet of the tower anchoring the Transbay development (now called the Salesforce Tower), and LinkedIn’s lease of the entire 26-floor, 450,000-square-foot tower under construction at 222 Second Street.

Toronto, Calgary and Vancouver are the most active development markets in Canada, accounting for about 83% of office construction underway na-tionwide. In Calgary, total square footage under development accounted for more than 10% of existing inventory as of Q1 2014, the highest share of any U.S. or Canadian market. Like Houston, developers have responded to robust growth among Calgary energy firms, a trend that continued in Q1 2014 with expansions by a number of companies including Athabasca Oil Corp., Progress Energy, TransCanada Pipelines and Total Energy Ser-vices. Higher anticipated natural gas prices and optimism regarding lique-fied natural gas (LNG) projects and pipeline capacity are fueling construc-tion activity and tenant demand.

The measured supply response, particularly in the U.S., should contribute to a continued moderate office market recovery. Given high construction costs and only moderate increases in tenant demand in most markets, we expect development activity to remain low and targeted, with speculative

development focused on the strongest metro areas (e.g., San Francisco, Boston) as well as the strongest submarkets within lagging metro areas (e.g., West Los Angeles, Chandler, AZ).

The Rise of the Sun BeltLooking at both economic and office market indicators, the resurgence of the Sun Belt is evident. The region’s states and metropolitan areas pos-sess unique characteristics, such as the robust energy sector in Texas, strong technology clusters in Austin and North Carolina’s Research Tri-angle, and the expanding health care industry in Nashville. However, a common thread running through most of the region is a low cost of doing business that is proving attractive to expanding or relocating companies in a range of industries.

MSA SQUARE FEET UNDERWAY

% OF EXISTING INVENTORY

Calgary, AB 6,678,741 10.08

Vancouver, BC 4,140,952 7.68

Houston, TX 15,052,344 7.17

San Francisco, CA 5,381,410 6.06

Halifax, NS 647,446 5.78

Toronto, ON 6,799,062 4.83

Regina, SK 200,000 4.53

Edmonton, AB 886,748 4.28

San Jose/Silicon Valley, CA 2,305,928 3.18Seattle/Puget Sound, WA 3,436,907 3.06

NORTH AMERICA 92,063,015 1.43%

CONSTRUCTION AS % OF EXISTING INVENTORY | Q1 2014 | NA

NOTE: Rankings are based on the 87 U.S. and Canadian markets tracked by Colliers International Source: Colliers International

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NOTE: Rankings are based on the 87 U.S. and Canadian markets tracked by Colliers InternationalSource: Colliers International

TOP MARKETS FOR OFFICE SPACE UNDER CONSTRUCTION | Q1 2014 | NA

CANADA COST INDEX

Montréal 92.0

Toronto 93.6Vancouver 94.6UNITED STATES COST INDEX

Atlanta 94.7

Cincinnati 94.9

Orlando 95.1

Charlotte 95.2

San Antonio 95.6

Tampa 95.8Cleveland 96.3

U.S. BASELINE 100.0

LOWEST-COST CITIES WITH POPULATION > 2 MILLION | U.S. & CANADA

Source: 2014 KPMG Competitive Alternatives



Office-using job growth is coming from a range of industries including financial services, with many firms moving operations to or expanding in lower-cost markets such as Jacksonville and Tampa. Charlotte also is in the midst of a remarkable recovery: Its urban yet affordable lifestyle appeals to millennial graduates of Southeastern universities, providing an attractive talent base to companies in a variety of industries.

The strength in the Sun Belt’s job market is spreading to the office mar-ket. Despite accounting for only 30% of U.S. office inventory tracked by Colliers, the Sun Belt markets represented nearly 60% of office absorp-tion during Q1 2014. Houston alone accounted for more than 17% of U.S. absorption during the quarter, with continued robust growth in the energy

CANADA COST INDEX

Edmonton 94.0

UNITED STATES COST INDEX

New Orleans 94.1

Nashville 94.9

Oklahoma City 95.1

Raleigh 95.6

Memphis 95.8

Indianapolis 96.2

Salt Lake City 96.6

Austin 96.8

Buffalo 96.9

U.S. BASELINE 100.0

LOWEST-COST CITIES WITH POPULATION 1-2 MILLION | US & CANADA

Source: 2014 KPMG Competitive Alternatives

Examining office-using employment trends from multiple angles, Sun Belt markets rank high. As noted in previous reports, ICEE markets Austin, Raleigh, Houston and Dallas-Fort Worth, as well as health care center Nashville, all rank among the top ten U.S. markets in terms of the per-centage of office-using jobs recovered. In fact, all of these markets have recovered more than twice the number of office-using jobs that they lost during the recession. However, looking at markets with the strongest year-over-year office-using job growth in April 2014, the list has broad-ened beyond the leading markets to include many previously lagging met-ropolitan areas. Among the top 20 markets for office-using job growth in April are 12 Sun Belt metros, including hard-hit Florida markets Cape Coral-Fort Myers, Jacksonville, Orlando, Tampa and West Palm Beach.

MSA PERCENT CHANGE MSA PERCENT

CHANGE

Reno 9.8 Orlando 4.5

Cape Coral-Fort Myers 8.9 San Jose/Silicon Valley 4.5

Raleigh 8.7 West Palm Beach 4.4

Savannah 7.4 Dallas-Fort Worth 4.0

Nashville 7.0 Harrisburg 3.9

Fresno 6.8 San Francisco 3.8

Austin 6.4 Greenville, SC 3.7

Holland, MI 6.1 Tampa-St. Petersburg 3.6

Jacksonville 4.9 Portsmouth 3.4

Indianapolis 4.9 Charlotte 3.4

UNITED STATES: 2.4%

NOTE: Includes markets tracked by Colliers International; all data are seasonally adjusted as of April 2014.Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Colliers International

FASTEST OFFICE-USING EMPLOYMENT GROWTH | APRIL 2013-2014 | US

MSA% OF JOBS

RECOVEREDMSA

% OF JOBS

RECOVERED

Ann Arbor 800.0 Pittsburgh 231.8

Midland, TX 400.0 Richmond 160.9

St. Louis 385.2 Trenton 137.5

Lincoln, NE 375.0 Phoenix 136.6

Nashville 355.6 Holland, MI 133.3

Dallas-Fort Worth 308.4 Grand Rapids, MI 122.7

Omaha 277.8 Jacksonville 106.6

Austin 234.5

UNITED STATES: 33.5%

NOTE: Includes markets tracked by Colliers International; all data are seasonally adjusted as of April 2014. Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Colliers International

MARKETS WITH FINANCIAL ACTIVITIES EMPLOYMENT AT OR ABOVE PRE-RECESSION PEAK | APRIL 2014 | US

MSA PERCENT RECOVERED MSA PERCENT

RECOVERED

Austin 472.5 Omaha 185.2

Fayetteville, AR 342.9 Grand Rapids 179.6

Raleigh 320.6 Trenton, NJ 176.2

Nashville 317.2 Indianapolis 173.9

Madison, WI 307.9 Columbus 162.8

Pittsburgh 256.6 Harrisburg 162.2

San Francisco 256.3 Baltimore 160.4

San Jose/Silicon Valley 229.2 Holland, MI 160.0

Houston 207.1 Denver 158.4Dallas-Fort Worth 205.1 Greenville, SC 149.1

UNITED STATES: 112.7%

NOTE: Includes markets tracked by Colliers International; all data are seasonally adjusted as of April 2014.Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Colliers International

TOP 20 MARKETS FOR OFFICE-USING JOBS RECOVERED SINCE RECESSION | APRIL 2014 | US



sector. Corporate relocations to the Dallas-Fort Worth region continue at a brisk pace, highlighted this quarter by Toyota’s announcement that it will move its long-time headquarters from Torrance, CA, to Plano. Toyota has already leased 120,000 square feet of space in the region to house workers during construction of its new one-million-square-foot campus. The Toyota deal underscores the success that Texas, in particular—and the Sun Belt generally—has had in attracting companies and its impact on the office market. In another example of this trend, Prince Global Sports recently announced that it will move its headquarters from New Jersey to Atlanta’s Buckhead submarket.

The Sun Belt’s strength is unlikely to abate anytime soon, as increas-ingly cost-conscious firms look for low-cost locations for expansion and relocation. ICEE hubs like Austin and Raleigh-Durham will benefit from knowledge industry growth. The Sun Belt also will benefit from the trend of firms dividing functions across regions, with companies moving mid-level and back-office functions to lower-cost areas. Finally, although the Sun Belt has a more suburban profile compared with denser Northeast and West Coast metros, many Sun Belt markets are investing in pub-lic transit and mixed-use, walkable developments, which are particularly popular among millennials. Examples include:

• Raleigh-Durham – Research Triangle Park (RTP): RTP recently acquired 100 additional acres of adjacent land for the development of up to three million square feet of higher-density development in this suburban tech park in the Raleigh-Durham metro area, the first mixed-use space at the 55-year-old park;

• Dallas-Fort Worth – City Line: The location of State Farm’s new two-million-square-foot regional center in Richardson, TX, this $1.5 billion mixed-use project under development by KDC also will contain two hotels, nearly 4,000 apartments, 300,000 square feet of retail and entertainment space, three parks, pedestrian walkways, and open space for concerts and other public gatherings;

• Atlanta – Ponce City Market: This high-profile renovation of the Sears, Roebuck & Company building near Midtown and adjacent to the Atlanta BeltLine will feature 475,000 of Class A, loft office space, 330,000 square feet of retail and restaurants, and 259 residential units in a walkable, creative environment reminiscent of denser tech hubs such as San Francisco;

• Orlando – SunRail and Bike Share: Several development and transit projects more typical of denser urban areas are opening in Orlando. On the heels of the May 2014 opening of SunRail, the region’s new commuter rail system, SunCycles will begin offering rentable bicycles throughout Orlando, including near SunRail stations. Also, several transit-adjacent co-working facilities are in the works.

These types of mixed-use developments are well suited to the prefer-ences of the millennials, who represent an increasing share of the U.S. workforce as they enter the labor force and the baby boomers retire. The millennial cohort could exceed 50% of the workforce by 2020 and reach 75% of the workforce by 2025. As more millennials start families in the coming years, many Sun Belt markets will be well-positioned to offer a variety of living and working environments, including affordable single-family housing as well as the types of walkable, mixed-use developments for which this cohort has demonstrated a preference.

Capital Markets & Transaction ActivityThe office investment market remained active through Q1 2014, particu-larly in CBD markets and major metro areas. Capital from both domestic and international sources for investment in U.S. real estate remains plen-tiful, supporting price increases and transaction volume gains. Accord-ing to Real Capital Analytics (RCA), total transaction volume in the U.S. and Canada increased by 36% year-over-year in Q1 2014, and 12-month trailing investment volume increased by 30%, reaching $114.9 billion, the highest total since Q2 2008. Although investor interest is spreading be-yond gateway cities and CBDs in search of higher yields, demand remains robust in core markets. In the U.S., CBDs posted a much larger gain in year-over-year transaction volume (60%) compared with suburban mar-kets (10%), and investment volume increased the most in major metros, followed by secondary and tertiary markets, respectively. Likewise, cap rate compression was greatest in CBD markets and major metros.

12-Month Trailing Volume (left-axis) Year-Over-Year % Change (right-axis)12-Month Trailing Volume (left-axis) Year-Over-Year % Change (right-axis)

-100%

-50%

0%

50%

100%

150%

200%

2007 2008 2009 2010 2011 2012 2013 2014

0

50

100

150

200

250

300Bil .

OFFICE TRANSACTION VOLUME | Q1 2014 | NA

NOTE: Latest data as of Q1 2014; all data are 12-month trailing.Source: Real Capital Analytics

Nonetheless, investors are responding to broader improvement in job growth and office absorption by moving into secondary submarkets and metropolitan areas, a trend that we expect to continue with the ongoing recovery. Also, investors are anticipating future demand growth in sub-markets proximate to core tech submarkets. For example, despite hav-ing an elevated vacancy rate, the El Segundo submarket in Los Angeles’s South Bay has attracted much investor attention in anticipation of greater tenant spillover demand from tech-driven, high-rent West Los Angeles, similar to what occurred during the last business cycle. DivcoWest, Grif-fin Capital and Montana Avenue Capital, among others, purchased El Se-gundo office properties in early 2014, and many investors continue to circle the market for acquisition and redevelopment opportunities. Given expected increases in interest rates, coupled with broadening economic and office market improvements, we anticipate secondary and tertiary markets, suburban markets and spillover ICEE submarkets to benefit from growing investor demand.



UNITED STATES | DOWNTOWN OFFICE | ALL INVENTORY

MARKETEXISTING

INVENTORY (SF) MAR 31, 2014

NEW SUPPLY Q1 2014

(SF)

UNDER CONSTRUCTION

(SF)

VACANCY RATE (%)

MAR 31, 2014

ABSORPTION Q1 2014

(SF)

NORTHEAST

Baltimore, MD 28,919,710 0 45,000 12.81 -315,134

Boston, MA 62,623,701 1,050,000 1,895,940 12.02 825,333

Hartford, CT 9,971,800 0 0 12.53 112,094

New York, NY – Downtown Manhattan 110,938,458 2,861,402 2,800,000 14.43 1,246,463

New York, NY – Midtown Manhattan 230,068,701 0 0 11.78 -1,270,068

New York, NY – Midtown South Manhattan 162,245,367 894,672 3,600,000 8.83 1,468,753

Philadelphia, PA 42,994,756 0 0 11.05 189,330

Pittsburgh, PA* 32,099,033 0 800,000 10.51 -100,993

Stamford, CT 18,708,865 0 0 20.74 152,473

Washington, DC 144,299,812 575,941 1,673,266 10.40 202,047

White Plains, NY 7,687,431 0 0 14.78 -16,011

Northeast Total 850,557,634 5,382,015 10,814,206 11.53 2,494,287

SOUTH

Atlanta, GA 50,122,707 0 487,034 16.21 277,375

Birmingham, AL 4,985,532 0 0 20.43 453,256

Charleston, SC 2,252,548 0 21,000 9.41 -5,279

Charlotte, NC 22,451,530 0 0 9.39 5,291

Columbia, SC 4,678,427 0 0 12.11 -50,399

Dallas, TX 33,948,045 0 450,000 26.33 112,274

Ft. Lauderdale-Broward, FL 8,130,042 0 0 12.81 60,392

Ft. Worth, TX 10,147,172 0 75,971 15.77 136,152

Greenville, SC 3,293,679 0 85,000 17.87 -9,299

Houston, TX 42,998,330 0 1,050,000 12.39 3,959

Jacksonville, FL 15,572,544 0 0 13.24 14,964

Little Rock, AR 6,477,052 0 0 10.79 -6,365

Louisville, KY 43,267,691 299,483 0 10.94 298,773

Memphis, TN 5,954,989 0 0 18.69 32,512

Miami-Dade, FL 18,575,117 0 128,580 17.31 26,614

Nashville, TN 13,176,826 0 0 12.74 -18,282

Orlando, FL 12,174,413 0 0 12.60 -52,169

Raleigh/Durham/Chapel Hill, NC 14,368,557 388,279 242,969 6.01 262,929

Richmond, VA 16,718,420 106,662 321,500 10.52 88,034

Savannah, GA 803,516 0 0 14.06 -1,236

Tampa Bay, FL 6,779,680 0 0 15.13 18,479

West Palm Beach/Palm Beach County, FL 9,916,338 0 0 15.43 -1,644South Total 346,793,155 794,424 2,862,054 14.38 1,646,331

*Long Island, Pittsburgh and Portland data is from Q4 2013. **Detroit data is from Q3 2013.



UNITED STATES | DOWNTOWN OFFICE | ALL INVENTORY

MARKETEXISTING


NEW SUPPLY Q1 2014

(SF)

UNDER CONSTRUCTION

(SF)

VACANCY RATE (%)

MAR 31, 2014

ABSORPTION Q1 2014

(SF)

MIDWEST

Chicago, IL 158,505,062 0 1,067,400 12.81 -174,544

Cincinnati, OH 18,989,060 0 0 15.13 -18,029

Cleveland, OH 38,028,983 0 0 16.91 -6,541

Columbus, OH 19,452,521 0 490,000 10.96 54,366

Detroit, MI** 25,827,606 0 0 18.38 86,293

Grand Rapids, MI 5,454,500 0 0 17.43 22,655

Indianapolis, IN 22,548,402 0 0 9.49 -67,488

Kansas City, MO 34,862,105 0 0 14.16 91,465

Milwaukee, WI 19,053,201 0 73,100 12.02 148,454

Minneapolis, MN 31,700,971 0 0 13.44 -154,085

Omaha, NE 6,450,653 0 0 7.17 -21,322

St. Louis, MO 23,216,158 0 0 20.37 -526,476

St. Paul, MN 11,730,218 0 0 14.08 -76,515

Midwest Total 415,819,440 0 1,630,500 13.93 -641,767

WEST

Albuquerque, NM 3,191,080 0 0 27.73 17,305

Bakersfield, CA 3,230,466 0 72,233 8.72 -8,212

Boise, ID 4,177,362 252,347 234,687 8.30 6,452

Denver, CO 34,236,601 0 963,676 11.91 101,481

Fresno, CA 3,288,944 0 0 10.83 -42,447

Honolulu, HI 7,164,686 0 0 14.36 -49,832

Las Vegas, NV 4,907,615 49,200 129,000 12.15 98,220

Los Angeles, CA 32,566,100 0 508,200 20.14 -137,400

Oakland, CA 17,255,313 363,800 0 11.49 11,114

Phoenix, AZ 20,351,253 155,000 0 21.73 95,678

Portland, OR* 35,076,079 0 343,000 9.59 -61,426

Reno, NV 3,294,386 0 0 15.14 -23,604

Sacramento, CA 13,570,765 0 0 15.49 49,426

San Diego, CA 10,172,525 0 320,000 19.36 -99,066

San Francisco, CA 88,787,552 768,412 5,381,410 9.45 345,638

San Jose/Silicon Valley, CA 8,058,857 0 0 18.16 33,217

Seattle/Puget Sound, WA 55,560,625 36,600 3,246,507 11.10 243,554

Stockton, CA 8,221,819 0 0 15.87 25,078

Walnut Creek, CA 12,462,061 0 0 15.26 75,749West Total 365,574,089 1,625,359 11,198,713 13.05 680,925

U.S. TOTAL/AVERAGE 1,978,744,318 7,801,798 26,505,473 12.81 4,179,776

(continued)




UNITED STATES | DOWNTOWN OFFICE | CLASS A

MARKETEXISTING


ANNUAL QUOTED RENT

(USD PSF)

ABSORPTION Q1 2014

(SF)

QUARTERLY CHANGE IN RENT (%)

ANNUAL CHANGE IN RENT(%)

NORTHEAST

Baltimore, MD 12,805,993 22.50 209,387 4.7 -6.5

Boston, MA 42,973,537 50.15 739,540 1.2 7.2

Hartford, CT 6,771,455 22.58 73,998 16.2 -0.9

New York, NY – Downtown Manhattan 80,463,304 52.40 981,727 1.5 11.4

New York, NY – Midtown Manhattan 197,217,338 75.02 -1,128,557 5.3 12.8

New York, NY – Midtown South Manhattan 34,311,898 65.88 987,468 2.1 10.7

Philadelphia, PA 30,481,277 27.50 150,186 1.7 2.2

Pittsburgh, PA* 18,513,625 25.07 -119,853 5.3 6.6

Stamford, CT 13,339,184 38.10 65,472 -0.5 -0.5

Washington, DC 89,201,106 52.89 455,534 0.1 -2.6

White Plains, NY 4,887,012 31.62 -17,147 -1.5 0.0

Northeast Total 530,965,729 57.54 2,397,755 3.2 8.3

SOUTH

Atlanta, GA 30,396,533 21.66 206,701 -1.3 -5.0

Birmingham, AL 4,029,421 21.06 459,144 0.5 0.0

Charleston, SC 1,009,994 33.28 299 -1.5 4.0

Charlotte, NC 15,949,770 25.18 32,240 0.0 1.1

Columbia, SC 2,131,068 20.60 -51,906 -0.7 1.6

Dallas, TX 22,659,842 22.80 73,899 -1.3 5.3

Ft. Lauderdale-Broward, FL 4,494,426 33.00 33,142 3.0 4.5

Ft. Worth, TX 5,830,792 28.90 15,930 -1.0 0.3

Greenville, SC 2,021,715 20.88 6,333 2.8 5.7

Houston, TX 30,046,293 38.80 -37,190 1.1 4.5

Jacksonville, FL 6,846,824 19.93 -214,872 0.5 1.9

Little Rock, AR 2,635,440 16.57 3,874 0.0 1.6

Louisville, KY 10,579,669 19.75 250,378 -2.0 -1.8

Memphis, TN 2,009,825 17.10 10,800 -2.6 -1.1

Miami-Dade, FL 9,758,448 39.76 42,669 -1.2 -0.8

Nashville, TN 4,058,652 23.40 258 1.8 8.4

Orlando, FL 5,776,557 25.16 -47,611 2.4 3.7

Raleigh/Durham/Chapel Hill, NC 7,008,939 24.89 17,517 3.7 3.7

Richmond, VA 6,355,704 24.83 8,638 0.6 4.7

Savannah, GA 645,713 20.91 -3,478 2.0 1.6

Tampa Bay, FL 4,999,570 23.79 12,183 2.1 4.3

West Palm Beach/Palm Beach County, FL 3,211,645 36.07 10,751 3.3 2.8South Total 182,456,840 26.83 829,699 0.1 1.6




UNITED STATES | DOWNTOWN OFFICE | CLASS A

MARKETEXISTING


ANNUAL QUOTED RENT

(USD PSF)

ABSORPTION Q1 2014

(SF)


ANNUAL CHANGE IN RENT(%)

MIDWEST

Chicago, IL 61,063,550 37.78 -189,234 0.0 1.2

Cincinnati, OH 8,359,432 22.37 35,095 0.6 2.9

Cleveland, OH 10,828,360 21.24 -15,792 2.5 -2.7

Columbus, OH 8,377,149 19.80 43,970 0.7 2.8

Detroit, MI** 8,175,021 22.74 8,333 -0.9 -0.3

Grand Rapids, MI 1,463,659 18.90 17,645 -0.6 -2.3

Indianapolis, IN 9,501,787 18.95 -52,668 0.0 0.1

Kansas City, MO 10,514,030 18.93 -8,332 0.4 0.1

Milwaukee, WI 5,106,083 19.71 5,931 -2.7 -3.2

Minneapolis, MN 13,618,828 16.73 -153,161 0.7 -0.6

Omaha, NE 3,549,103 20.25 28,055 0.0 0.6

St. Louis, MO 9,558,798 18.09 -536,227 0.4 -0.2

St. Paul, MN 2,773,960 14.45 -82,402 0.7 8.2

Midwest Total 152,889,760 26.79 -898,787 0.4 0.8

WEST

Albuquerque, NM 575,047 20.14 0 1.5 1.9

Bakersfield, CA 729,040 17.40 -11,506 0.0 0.0

Boise, ID 1,895,059 19.22 37,890 -0.8 -1.1

Denver, CO 21,306,446 32.24 82,683 0.4 4.7

Fresno, CA 1,026,046 24.60 -22,921 0.0 2.5

Honolulu, HI 4,966,720 35.52 -64,291 -0.3 1.7

Las Vegas, NV 1,103,341 31.56 4,106 -4.0 1.9

Los Angeles, CA 18,098,100 37.32 -53,000 1.3 3.0

Oakland, CA 10,562,045 33.96 -41,698 3.7 10.5

Phoenix, AZ 9,473,518 22.90 52,232 -0.2 0.7

Portland, OR* 13,101,110 25.92 -75,177 1.7 -0.8

Reno, NV 583,955 23.60 -3,272 -1.9 -1.0

Sacramento, CA 5,945,146 31.32 18,734 -1.1 -2.6

San Diego, CA 7,257,266 29.04 -107,547 2.1 2.5

San Francisco, CA 57,113,693 55.33 282,796 5.7 15.9

San Jose/Silicon Valley, CA 3,493,453 33.96 1,800 2.2 6.8

Seattle/Puget Sound, WA 32,199,750 33.79 202,236 3.3 7.1

Stockton, CA 2,790,574 20.04 18,572 1.2 1.2

Walnut Creek, CA 7,271,861 27.84 41,552 0.4 1.8West Total 199,492,170 38.15 363,189 3.3 8.8

U.S. TOTAL/AVERAGE 1,065,804,499 44.24 2,691,856 2.6 7.1

(continued)




UNITED STATES | SUBURBAN OFFICE | ALL INVENTORY

MARKETEXISTING


NEW SUPPLY Q1 2014

(SF)

UNDER CONSTRUCTION

(SF)

VACANCY RATE (%)

DEC 31, 2013

VACANCY RATE (%)

MAR 31, 2014

ABSORPTION Q1 2014

(SF)

NORTHEAST

Baltimore, MD 88,313,969 733,400 0 12.78 12.24 1,117,891

Boston, MA 112,558,294 0 1,621,398 18.54 18.06 465,723

Fairfield County, CT 41,029,234 0 0 13.83 13.88 -21,780

Hartford, CT 12,784,662 0 0 15.14 13.04 268,458

Long Island, NY* 74,441,967 17,500 83,799 10.37 10.18 59,574

New Jersey – Central 131,315,428 20,525 0 16.12 15.66 630,497

New Jersey – Northern 163,629,090 40,018 0 15.52 15.73 -227,866

Philadelphia, PA 110,589,759 409,768 444,838 15.07 15.25 154,339

Pittsburgh, PA* 89,949,523 72,758 1,358,555 7.47 7.23 313,974

Washington, DC 288,069,589 40,000 4,417,114 16.50 16.85 -992,938

Westchester County, NY 37,475,453 0 382,000 13.07 13.30 441,600

Northeast Total 1,150,156,968 1,333,969 8,307,704 14.77 14.72 2,209,472

SOUTH

Atlanta, GA 171,846,820 0 1,138,554 16.64 16.03 973,919

Birmingham, AL 14,683,132 0 0 14.15 15.02 -128,147

Charleston, SC 9,818,033 114,880 215,000 11.58 11.51 91,032

Charlotte, NC 62,212,257 135,735 284,876 12.41 12.30 166,905

Columbia, SC 4,966,961 0 0 23.69 22.62 52,966

Dallas, TX 240,233,017 321,680 4,699,879 14.91 14.55 1,150,240

Ft. Lauderdale-Broward, FL 42,915,729 0 320,000 14.29 14.50 -89,802

Ft. Worth, TX 20,935,696 0 760,935 10.56 10.47 20,007

Greenville, SC 4,896,690 0 0 18.87 19.60 -35,824

Houston, TX 167,004,638 2,203,414 14,002,344 12.14 11.94 2,270,623

Jacksonville, FL 46,157,943 12,151 219,488 12.43 11.75 315,140

Little Rock, AR 7,521,709 0 0 13.33 12.59 29,076

Memphis, TN 27,125,867 0 241,000 15.03 14.65 123,510

Miami-Dade, FL 65,856,673 0 173,537 11.37 11.18 196,117

Nashville, TN 14,982,680 239,000 731,000 4.65 6.00 25,340

Orlando, FL 54,412,681 86,581 185,428 13.54 13.65 16,518

Raleigh/Durham/Chapel Hill, NC 64,739,388 58,072 1,248,552 13.04 13.00 -8,699

Richmond, VA 34,701,543 15,000 43,000 10.02 10.35 -100,598

Savannah, GA 1,461,838 0 0 19.29 19.88 -8,571

Tampa Bay, FL 57,275,381 0 18,000 17.91 17.66 142,244

West Palm Beach/Palm Beach County, FL 28,494,121 30,000 133,586 18.11 17.66 168,999

South Total 1,142,242,797 3,216,513 24,415,179 14.02 13.78 5,370,995




UNITED STATES | SUBURBAN OFFICE | ALL INVENTORY

MARKETEXISTING


NEW SUPPLY Q1 2014

(SF)

UNDER CONSTRUCTION

(SF)

VACANCY RATE (%)

DEC 31, 2013

VACANCY RATE (%)

MAR 31, 2014

ABSORPTION Q1 2014

(SF)

MIDWEST

Chicago, IL 155,400,746 0 0 16.56 17.00 -674,174

Cincinnati, OH 46,444,317 0 1,000,000 16.13 15.80 153,274

Cleveland, OH 42,798,934 0 217,474 11.14 11.25 -49,060

Columbus, OH 44,027,261 0 396,840 10.57 10.46 47,848

Detroit, MI** 137,895,919 27,666 66,820 18.66 18.22 -877,682

Grand Rapids, MI 12,439,041 0 104,528 21.60 18.77 964

Indianapolis, IN 43,264,183 0 132,991 9.62 9.70 -34,048

Kansas City, MO 58,155,167 0 769,000 11.79 11.50 167,522

Milwaukee, WI 33,235,130 0 160,000 12.73 12.43 98,165

Minneapolis, MN 79,185,563 598,400 870,900 13.85 13.49 802,423

Omaha, NE 21,146,090 112,000 166,189 11.22 10.42 236,488

St. Louis, MO 55,394,777 183,000 435,000 9.04 9.56 -88,297

Midwest Total 729,387,128 921,066 4,319,742 14.35 14.23 -216,577

WEST

Albuquerque, NM 10,877,999 0 0 16.27 15.69 63,242

Bakersfield, CA 6,070,404 8,984 77,984 7.11 6.53 43,325

Boise, ID 17,154,856 0 137,561 10.19 12.42 -247,813

Denver, CO 106,095,670 621,035 709,757 13.05 13.04 304,644

Fairfield, CA 5,008,186 0 30,000 20.40 20.91 -25,659

Fresno, CA 17,562,156 20,000 0 14.08 13.10 189,879

Honolulu, HI 7,730,394 0 0 10.90 11.85 -14,701

Las Vegas, NV 36,591,706 47,000 468,000 22.58 22.41 96,786

Los Angeles, CA 167,879,800 152,300 1,588,000 17.82 17.64 364,700

Los Angeles – Inland Empire, CA 20,588,091 94,891 58,000 19.14 18.90 112,500

Oakland, CA 16,271,372 106,221 0 19.72 19.99 -64,320

Orange County, CA 81,034,800 0 860,000 14.99 15.67 -584,100

Phoenix, AZ 111,009,754 117,710 0 18.84 18.31 677,939

Pleasanton/Tri-Valley, CA 27,748,942 0 0 11.84 12.81 -299,353

Portland, OR* 43,336,020 0 50,644 9.95 9.97 -8,127

Reno, NV 9,625,581 0 0 14.00 14.20 -18,625

Sacramento, CA 52,144,531 68,417 77,000 19.13 18.91 141,121

San Diego, CA 72,053,974 541,135 464,917 13.13 12.81 698,502

San Francisco Peninsula 35,178,978 67,098 216,000 11.37 11.28 -14,561

San Jose/Silicon Valley, CA 64,342,407 465,283 2,305,928 11.40 9.89 261,433

Seattle/Puget Sound, WA 56,697,125 0 190,400 10.09 10.31 -80,643

Walnut Creek, CA 5,513,617 0 0 17.03 16.27 41,687

West Total 970,516,363 2,310,074 7,234,191 15.17 15.01 1,637,856

U.S. TOTAL/AVERAGE 3,992,303,256 7,781,622 44,276,816 14.57 14.43 9,001,746

(continued)




UNITED STATES | SUBURBAN OFFICE | CLASS A

MARKETEXISTING


ANNUAL QUOTED RENT

(USD PSF)

VACANCY RATE (%)

DEC 31, 2013

VACANCY RATE (%)

MAR 31, 2014


ANNUAL CHANGE IN RENT (%)

ABSORPTION Q1 2014

(SF)

NORTHEAST

Baltimore, MD 32,057,456 24.00 14.31 13.25 -3.5 -4.0 877,044

Boston, MA 48,167,313 25.95 16.61 16.52 1.8 2.7 93,065

Fairfield County, CT 17,951,999 39.02 12.90 11.74 0.1 4.8 -74,311

Hartford, CT 7,123,495 21.37 14.95 12.82 0.0 4.7 151,908

Long Island, NY* 25,283,739 30.38 10.43 9.98 0.3 -0.3 -8,666

New Jersey – Central 61,295,100 25.73 16.39 15.42 0.6 -2.7 594,718

New Jersey – Northern 87,786,735 27.94 17.49 18.04 3.7 5.5 -448,224

Philadelphia, PA 67,413,158 25.43 13.59 13.55 1.0 2.6 382,819

Pittsburgh, PA* 16,646,383 21.85 6.16 5.59 -1.6 -0.5 126,967

Washington, DC 137,649,927 32.50 16.49 17.16 0.0 -1.2 -880,154

Westchester County, NY 17,570,629 27.38 15.75 15.60 1.7 2.9 529,976Northeast Total 518,945,934 28.33 15.37 15.31 0.8 0.9 1,345,142

SOUTH

Atlanta, GA 81,389,815 22.68 14.57 14.09 0.7 2.3 397,015

Birmingham, AL 9,276,993 20.69 10.67 11.88 0.0 -0.7 -112,014

Charleston, SC 3,689,350 24.41 6.36 6.04 2.3 -0.2 54,717

Charlotte, NC 20,105,237 23.16 13.81 13.89 0.9 1.6 -16,697

Columbia, SC 1,001,769 17.12 17.46 18.42 0.2 4.1 -9,607

Dallas, TX 96,558,826 24.70 13.77 13.30 2.9 6.5 622,193

Ft. Lauderdale-Broward, FL 10,570,258 27.18 16.57 14.79 0.1 -0.7 188,660

Ft. Worth, TX 3,462,446 24.95 1.75 1.55 0.2 1.8 7,040

Greenville, SC 2,458,553 19.09 13.54 14.46 4.7 7.2 -22,758

Houston, TX 73,524,938 31.83 9.10 8.48 4.9 7.8 2,148,853

Jacksonville, FL 9,183,187 19.46 9.90 9.31 -2.7 -1.6 53,959

Little Rock, AR 2,842,952 18.45 18.26 17.26 1.2 -4.1 19,425

Memphis, TN 8,135,106 21.02 8.19 8.01 -0.8 0.2 15,041

Miami-Dade, FL 16,163,894 32.51 15.53 15.20 0.8 1.9 53,384

Nashville, TN 7,539,146 25.00 3.26 6.75 1.8 4.6 -21,207

Orlando, FL 16,829,913 21.17 16.71 17.05 -0.1 1.5 -56,721

Raleigh/Durham/Chapel Hill, NC 25,186,477 21.31 11.64 11.64 1.0 4.4 666

Richmond, VA 13,775,329 17.91 8.69 9.55 -0.8 -0.7 -118,929

Savannah, GA 490,035 23.33 15.89 15.96 6.2 3.2 -320

Tampa Bay, FL 18,368,902 23.50 17.22 17.19 0.3 1.9 4,193

West Palm Beach/Palm Beach County, FL 9,008,923 31.39 17.79 18.32 2.5 4.3 -47,311South Total 429,562,049 25.00 12.78 12.52 2.1 4.4 3,159,582




UNITED STATES | SUBURBAN OFFICE | CLASS A

MARKETEXISTING


ANNUAL QUOTED RENT

(USD PSF)

VACANCY RATE (%)

DEC 31, 2013

VACANCY RATE (%)

MAR 31, 2014



ABSORPTION Q1 2014

(SF)

MIDWEST

Chicago, IL 77,370,162 27.32 17.33 18.44 -0.4 0.2 -854,605

Cincinnati, OH 18,130,644 19.61 17.96 17.79 2.5 -2.0 30,960

Cleveland, OH 9,063,399 21.34 12.29 11.75 0.6 -0.1 48,422

Columbus, OH 18,337,079 19.31 9.33 9.00 -0.4 0.7 60,883

Detroit, MI** 34,571,052 20.16 16.43 15.30 4.2 -1.8 850,872

Grand Rapids, MI 796,522 17.50 26.07 17.14 0.0 0.0 8,139

Indianapolis, IN 12,456,333 18.45 12.64 12.52 0.5 1.1 15,123

Kansas City, MO 16,231,344 20.54 10.80 11.09 -0.5 0.7 -47,088

Milwaukee, WI 6,116,590 19.45 12.65 11.05 -4.4 -5.4 97,491

Minneapolis, MN 26,701,091 14.23 16.95 15.92 2.2 3.1 780,200

Omaha, NE 5,056,660 25.49 3.74 2.87 2.8 -2.9 131,081

St. Louis, MO 26,374,431 21.85 8.81 9.15 -0.7 -1.6 72,637

Midwest Total 251,205,307 21.87 14.52 14.52 0.4 -0.4 1,194,115

WEST

Albuquerque, NM 811,008 22.10 6.40 4.31 5.5 6.0 16,981

Bakersfield, CA 2,776,404 24.00 5.84 5.84 0.0 0.0 -191

Boise, ID 5,826,036 15.51 14.71 15.38 0.9 8.5 -39,131

Denver, CO 34,959,680 25.12 11.24 12.17 1.9 4.4 -22,087

Fairfield, CA 1,927,371 26.26 20.65 21.10 1.9 1.8 -8,681

Fresno, CA 3,973,324 25.80 18.51 16.99 0.0 2.4 14,450

Las Vegas, NV 4,849,993 29.76 33.46 33.45 0.4 0.8 328

Los Angeles, CA 102,218,200 35.04 16.72 16.37 0.0 2.8 365,600

Los Angeles – Inland Empire, CA 4,999,200 25.44 21.07 21.01 2.4 5.5 63,200

Oakland, CA 3,682,927 29.64 22.39 23.83 7.4 8.3 -11,269

Orange County, CA 32,704,300 26.40 15.20 16.21 1.4 2.8 -330,100

Phoenix, AZ 30,714,482 24.05 18.47 17.56 1.2 3.1 278,628

Pleasanton/Tri-Valley, CA 15,526,039 28.92 9.81 10.07 3.0 10.0 -70,476

Portland, OR* 11,003,028 23.50 11.58 11.62 -0.3 0.3 -4,046

Reno, NV 912,364 20.79 15.93 14.93 0.8 9.0 9,129

Sacramento, CA 14,682,299 22.32 17.78 17.39 0.5 1.1 56,858

San Diego, CA 24,414,511 35.28 12.16 12.38 3.2 4.6 422,616

San Francisco Peninsula 22,523,111 43.68 11.07 10.33 1.1 3.1 141,107

San Jose/Silicon Valley, CA 33,287,282 42.72 13.74 12.45 -1.7 9.2 284,624

Seattle/Puget Sound, WA 20,754,950 33.14 9.27 9.42 0.9 -0.5 -42,629

Walnut Creek, CA 737,964 28.68 18.18 19.13 0.0 4.7 -6,979West Total 373,284,473 31.61 14.77 14.61 1.1 4.2 1,117,932

U.S. TOTAL/AVERAGE 1,572,997,763 27.17 14.38 14.26 1.2 2.5 6,816,771

(continued)




CANADA | DOWNTOWN OFFICE | ALL INVENTORY

MARKETEXISTING


NEW SUPPLY Q1 2014

(SF)

UNDER CONSTRUCTION

(SF)

VACANCY RATE (%)

MAR 31, 2014

ABSORPTION Q1 2014

(SF)

Calgary, AB 40,447,480 841,064 4,200,000 8.13 429,195Edmonton, AB 11,332,244 0 629,348 8.91 13,035

Halifax, NS* 4,679,727 0 475,900 11.46 0

Montréal, QC 49,331,103 0 870,892 5.14 93,499

Ottawa, ON** 15,995,156 0 0 8.78 370,338

Regina, SK 3,739,664 0 160,000 10.95 0

Saskatoon, SK 2,402,872 13,000 0 6.22 -3,566

Toronto, ON 70,532,020 0 5,190,400 3.78 227,482

Vancouver, BC 24,474,251 45,770 2,150,490 5.56 -50,863

Victoria, BC* 4,902,931 0 29,000 8.69 0

Waterloo Region, ON 3,912,918 0 0 12.93 -23,312Winnipeg, MB* 11,365,771 0 130,375 8.43 0

CANADA TOTAL 243,116,137 899,834 13,836,405 6.28 1,055,808

CANADA | DOWNTOWN OFFICE | CLASS A

MARKETEXISTING


ANNUAL QUOTED RENT

(CAD PSF)

ABSORPTION Q1 2014

(SF)



Calgary, AB 27,568,453 58.00 486,154 0.0 -2.6Edmonton, AB 6,690,855 22.00 27,965 -4.3 -47.2

Halifax, NS* 1,934,103 32.58 0 0.0 0.2

Montréal, QC 22,794,332 45.00 -5,008 0.0 0.0

Ottawa, ON** 10,004,044 45.54 271,708 -1.2 -7.3

Regina, SK 1,392,816 44.00 0 0.0 4.8

Saskatoon, SK 570,571 43.00 0 0.0 7.5

Toronto, ON 41,006,585 56.17 126,878 -1.1 7.2

Vancouver, BC 10,094,997 52.53 -15,406 0.0 -4.5

Victoria, BC* 513,808 34.00 0 0.0 -2.9

Waterloo Region, ON 1,561,288 24.10 1,906 -4.9 -7.4Winnipeg, MB* 2,619,428 33.75 0 0.0 0.7

CANADA TOTAL 126,751,280 50.13 894,197 -0.5 -0.7

*Halifax, Victoria and Winnipeg report semi-annually. Q4 data displayed.**Ottawa data is from Q1 2013.



CANADA | SUBURBAN OFFICE | ALL INVENTORY

MARKETEXISTING


NEW SUPPLY Q1 2014

(SF)

UNDER CONSTRUCTION

(SF)

VACANCY RATE (%)

DEC 31, 2013

VACANCY RATE (%)

MAR 31, 2014

ABSORPTION Q1 2014

(SF)

Calgary, AB 25,818,920 534,606 2,478,741 9.49 9.62 153,225Edmonton, AB 9,365,692 100,000 257,400 11.08 12.37 4,152

Halifax, NS* 6,522,447 0 171,546 10.68 10.68 0

Montréal, QC 25,078,227 70,908 484,970 10.99 11.38 -34,017

Ottawa, ON** 21,083,170 0 0 10.45 10.39 14,575

Regina, SK 675,313 0 40,000 3.26 3.26 0

Toronto, ON 70,367,959 353,768 1,608,662 8.15 8.05 -7,806

Vancouver, BC 29,429,814 60,000 1,990,462 10.38 11.27 -140,171

Victoria, BC* 3,717,151 0 99,600 9.87 9.87 0

Waterloo Region, ON 7,499,773 0 242,940 12.48 21.55 -702,924Winnipeg, MB* 3,386,471 0 70,000 8.54 8.54 0

CANADA TOTAL 202,944,937 1,119,282 7,444,321 9.64 10.18 -712,966

CANADA | SUBURBAN OFFICE | CLASS A

MARKETEXISTING


ANNUAL QUOTED RENT

(CAD PSF)

VACANCY RATE (%)

DEC 31, 2013

VACANCY RATE (%)

MAR 31, 2014



ABSORPTION Q1 2014

(SF)

Calgary, AB 12,727,120 43.00 9.49 8.44 -2.3 -2.3 201,410

Halifax, NS* 2,852,545 28.50 8.70 8.70 0.0 0.5 0

Montréal, QC 13,904,646 29.00 9.56 10.02 3.6 7.4 -880

Ottawa, ON** 12,037,326 29.39 10.46 10.45 -0.4 -3.9 2,255

Toronto, ON 32,225,597 31.17 9.37 9.07 1.8 1.3 52,147

Vancouver, BC 14,776,892 33.43 11.30 12.06 2.3 -1.7 -59,165

Victoria, BC* 808,145 40.00 16.53 16.53 0.0 5.3 0Waterloo Region, ON 3,735,759 22.41 12.87 15.18 0.9 -7.4 -86,371

CANADA TOTAL 93,068,030 32.24 10.05 10.08 1.0 0.1 109,396

*Halifax, Victoria and Winnipeg report semi-annually. Q4 data displayed. | **Ottawa data is from Q1 2013.

0.0

0.0

0.0

0.1

0.2

0.5

0.6

0.9

2.2

4.2

5.2

0.0 1.0 2.0 3.0 4.0 5.0 6.0

Saskatoon, SK

Waterloo Region, ON

Victoria, BC*

Winnipeg, MB

Regina, SK

Halifax, NS*

Edmonton, AB

Montréal, QC

Vancouver, BC

Calgary, AB

Toronto, ON

SF (Millions)

CBD OFFICE UNDER CONSTRUCTION BY MARKET | Q1 2014 | CANADA

*Victoria, Halifax and Winnipeg report data semi-annually (Q2 and Q4). | Source: Colliers International

-50.9

-23.3

-3.6

0.0

0.0

0.0

0.0

13.0

93.5

227.5

429.2

-100.0 0.0 100.0 200.0 300.0 400.0 500.0

Vancouver, BC

Waterloo Region, ON

Saskatoon, SK

Halifax, NS*

Regina, SK

Victoria, BC*

Winnipeg, MB*

Edmonton, AB

Montréal, QC

Toronto, ON

Calgary, AB

SF (Thousands)

CBD OFFICE ABSORPTION BY MARKET | Q1 2014 | CANADA

*Victoria, Halifax and Winnipeg report data semi-annually (Q2 and Q4). | Source: Colliers International



UNITED STATES | OFFICE INVESTMENT

MARKETCBD

SALES PRICE (USD PSF)

CBD CAP RATE

(%)

SUBURBAN SALES PRICE

(USD PSF)

SUBURBAN CAP RATE

(%)

Albuquerque, NM 145.00 9.00 175.00 8.00Atlanta, GA 125.00 7.90 165.00 7.80

Bakersfield, CA 205.00

Baltimore, MD 164.99 6.50 135.83 10.45

Boston, MA 319.00 6.60 235.00

Charleston, SC 400.00 6.50 240.00 7.50

Chicago, IL 375.00 6.25 225.00 7.50

Cincinnati, OH 125.00 9.75 135.00 9.25

Dallas, TX 62.00 110.00 7.00

Denver, CO 512.46 5.90 133.36 6.82

Detroit, MI** 27.00 41.00 11.60

Fairfield County, CT 139.00 9.00

Fresno, CA 125.00 8.50 160.00 8.00

Ft. Lauderdale-Broward, FL 246.00 154.00

Ft. Worth, TX 125.00 8.00

Houston, TX 335.00 5.30 214.00 7.30

Indianapolis, IN 165.00 8.50 150.00 7.25

Jacksonville, FL 112.00 9.00 125.00 9.76

Las Vegas, NV 127.94

Little Rock, AR 88.00 9.00 117.00 9.00

Long Island, NY* 176.00 8.00

Los Angeles, CA 276.00 6.44

Los Angeles – Inland Empire, CA 200.00 7.50

Miami-Dade, FL 269.00 287.00

Milwaukee, WI 120.00 8.75 110.00 9.00

Minneapolis, MN 149.00 7.50 110.00 6.90

Nashville, TN 250.00 7.10 150.00 7.00

New Jersey – Central 190.02 7.90

New Jersey – Northern 113.18 7.90

New York, NY - Downtown Manhattan 315.00 4.75

New York, NY – Midtown Manhattan 861.00 5.50

New York, NY – Midtown South Manhattan 693.00 4.50

Oakland, CA 270.00 7.00 175.00 8.00

Orange County, CA 217.00 6.14

Orlando, FL 175.00 7.50 136.00 6.00

Philadelphia, PA 162.00 7.80 171.89 7.56

Phoenix, AZ 84.00 7.50 112.00 7.00

Pittsburgh, PA* 85.00 9.00 113.00 8.40

Pleasanton/Tri-Valley, CA 175.62 6.00

Portland, OR* 166.86 6.00

Sacramento, CA 85.24 6.50 70.00 8.20

Pittsburgh, PA 85.00 9.00 113.00 8.40

Portland, OR 166.86 6.00 - -Sacramento, CA 88.56 7.50 113.47 6.74




Glossary

UNITED STATES | OFFICE INVESTMENT

MARKETCBD SALES

PRICE (USD PSF)

CBD CAP RATE

(%)


(USD PSF)

SUBURBAN CAP RATE

(%)

San Diego, CA 170.19 5.90 171.04 6.50San Francisco, CA 560.00 4.80

San Francisco Peninsula 275.00 7.20

San Jose/Silicon Valley 6.00

Savannah, GA 160.00 9.25 120.00 9.50

Seattle/Puget Sound, WA 389.61 6.38 251.01 7.88

St. Louis, MO 90.00 9.50 135.00 8.50

Stamford, CT 186.00 8.00

Tampa Bay, FL 110.58 7.50 98.41 8.00

Walnut Creek, CA 269.00 5.50 180.00 8.00

Washington, DC 600.00 5.44 300.00 6.23

Westchester County, NY 83.00 8.00

West Palm Beach/Palm Beach County, FL 150.00 187.00White Plains, NY 93.00 8.00

U.S. AVERAGE* 238.78 7.18 163.73 7.81 *Straight averages used.

CANADA | OFFICE INVESTMENT

MARKETCBD SALES

PRICE (CAD PSF)

CBD CAP RATE

(%)


(CAD PSF)

SUBURBAN CAP RATE

(%)

Edmonton, AB 275.23 5.75Montréal, QC 265.00 6.75 185.00 7.25

Regina, SK 280.00 6.75 200.00 7.25

Saskatoon, SK 306.00 6.75

Vancouver, BC 500.00 5.00 375.00 6.25

Victoria, BC* 325.00 6.20 280.00 6.25

Waterloo Region, ON 111.00 9.18 141.00 7.50Winnipeg, MB* 150.00 7.25 140.00 7.25

CANADA AVERAGE** 276.53 6.70 220.17 6.96

*Victoria and Winnipeg report semi-annually. Q4 data displayed. **Straight averages used.

Inventory — Includes all existing multi- or single-tenant leased and owner-occupied office properties greater than or equal to 10,000 square feet (net rentable area). In some larger markets this minimum size threshold may vary up to 50,000 square feet. Does not include medical or government buildings.

Vacancy Rate — Percentage of total inventory physically vacant as of the survey date, including direct vacant and sublease space.

Absorption — Net change in physically occupied space over a given period of time.

New Supply — Includes completed speculative and build-to-suit construction. New supply quoted on a net basis after any demolitions or conversions.

Annual Quoted Rent — Includes all costs associated with occupying a full floor in the mid-rise portion of a Class A building, inclusive of taxes, insurance, maintenance, janitorial and utilities (electricity surcharges added where applicable). All office rents in this report are quoted on an annual, gross per square foot basis. Rent calculations do not include sublease space.

Cap Rate — (Or going-in cap rate) Capitalization rates in this survey are based on multi-tenant institutional grade buildings fully leased at market rents. Cap rates are calculated by dividing net operating income (NOI) by purchase price.

NOTE: SF = square feet

MSF = million square feet

PSF = per square foot

CBD = central business district

(continued)

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FOR MORE INFORMATION

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CONTRIBUTORS

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Copyright © 2014 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.

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colliers north american office report q1 2014

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