united states skyline review 2013 (2)

7/29/2019 United States Skyline Review 2013 (2)

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United States Skyline Review

2013: The year the recovery takes hold across all Skyline markets


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UnitedStatesSkylineReview

|2013|JonesLangLaSalle|2


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Jones Lang LaSalle is pleased to present our Spring 2013 U.S. Skyline Review. Our

Skyline Review is a building-by-building view of the market-making segments of

urbanized office markets. Skyline buildings comprise approximately 38.0 percent of the

CBD marketplace and 65.0 percent of the CBDs Class A market across the U.S. While

the methodology across our Skyline markets differs slightly, the common thread tying

all of these buildings together is that these assets are the true drivers of leasing supply,

demand and rents, development patterns and investment interest and activity.

This year, we present our most comprehensive look across the Skyline, incorporating 34

major city centers across 851 urban office buildings. In the report, we not only provide

the micro level detail of thefloor-by-floor leasing picture, but we also examine the

macro-level detail related to economic, demographic, leasing andinvestment performance.

From New York to Minneapolis to Bellevue, Jones Lang LaSalles research and market

experts define these segments of the office sector for you.

Our cover image depicts an artistic illustration of the U.S. Skyline. In total, 34 landmark buildings

around the U.S. are represented, one building for each local Skyline we cover in this report.

United States Skyline Review contents 3

Supply 4Demand 5Rents 6Investment 7Demographics 8

Primary Skyline markets 11Boston 12Chicago 14Los Angeles 16New York 18San Francisco 20Seattle 22

Bellevue 23Washington, DC 24

Secondary Skyline markets 22

Atlanta 28Baltimore 30Charlotte 31Cincinnati 32Cleveland 33

Columbus Dallas Denver Detroit Fort Lauderdale Houston Indianapolis Miami Minneapolis NJ Hudson Waterfront Orlando Philadelphia Phoenix Pittsburgh Portland

Raleigh Richmond Sacramento San Diego Stamford Tampa

Skyline appendix


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Supply

12.2%

2012 2013 mid-2014

13.4%U.S. Skyline historical equilibrium direct vacancy: U.S. Skyline direct vacancy as of YE 2012:

Number of Skyline marketswith direct vacancy levelsbelow historical equilibrium

level at the end of 2012:

10

(29.4% of markets)

Estimated number of markets withdirect vacancy levels that will bebelow historical equilibrium level at

the end of 2013:

18

(52.9% of markets)

Expected timing of equilibriumacross U.S. Skyline:

mid-2014

Number of Skyline markets with s

digit vacancy levels as of YE 201

10

Number of Skyline markets with direct

vacancy levels in excess of 20.0%:

7

Percent of markets that

have buildings under

construction currently:

24.2%

Of the eight Skyline markets tha

construction, number that have sp

construction underway:

3Of the Skyline total s.f. of space under construction, percent that is currently preleased:

65.6%, the highest rate of preleasing in the past decade by 16.1

(topping the next highest year2011)

Markets that have the highest percentage of under-construction inventory to existing

inventory (and preleasing in those markets):

New York (54.2%) ; Boston (100.0%) ; Cleveland (57.9%) ;

Washington, DC (79.4%) ; New Jersey Hudson Waterfront (40.4%)

Cincinnati, Dallas, Atlanta, Phoenix,Miami, Fort Lauderdale, Stamford

Pittsburgh, Richmond, Bellevue,

Houston, Portland, New Jersey Waterfront, Raleigh, San FrancisPhiladelphia, Boston

An increasingly short supply of space options due to an extremely thinconstruction pipeline will present tenants increased challenges across most

primary and secondary Skyline markets over the next 12 to 18 months.Already, vacancy levels are within 120 basis points of reaching equilibriumand, with the recovery now expanding beyond a handful of markets,vacancy will likely hit equilibrium by the middle of 2014 at the latest.

In the tightest Skyline markets, such as Pittsburgh, Bellevue, Houston,Portland, Raleigh, San Francisco and Boston, not only large blocks but now

mid-sized blocks are running low, likely causing rents to jump higher overthe short term. In nearly all markets besides a handful, large tenants willhave few existing options to consider and thus will be forced to look at

proposed development options if they desire to explore relocation options,with those options likely not to deliver until 2015-2016at the earliest.




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Rents

Percent of Skyline markets that

demonstrated rent growth in:

Percent premium for high watermark

rent to overall Skyline average rent across markets:

Regional 2

Skyline rent

Percent currently awayfrom prior market peak

(asking rent):

4.4%

Percent currently awayfrom prior market peak

(net effective rent):

8.7%

Number of markets that posted a

decline of more than 10.0 percentin both free rent and tenant

improvement allowances in 2012:

32.3%of overall markets

Number of Skyline markets that have

exceeded prior cycles peak asking rent:

4(San Francisco; New Jersey

Hudson Waterfront;

Washington, DC; Cincinnati)

Number of market

levels remain at leasbelow prior marke

5(New York Midto

Phoenix, San Dieg

2.8%

2012 U.S. Skyline

asking rent growth

1.6%

37.5%

2011 U.S. Skyline

net effective rent growth

0.6%

2011 U.S. Skyline

asking rent growth

4.5%

2012 U.S. Skyline

net effective rent growth

2010: 32.4%

2011: 41.2%

2012: 67.6%

2013: 85.3%(forecasted)

West

Southwest

0.9% 1.8%

2.1%

4.0%

4.2%

Midwe

st

Southea

st

North ea

st

Skyline rents and pricing have remained a tale of two markets over the pastfew years with rents near or even surpassing previous peak levels acrossthe majority of the super seven markets, whereas in the secondary Skylinemarkets, pricing, on average, remains approximately 18 months from hitting

prior peak levels. Nonetheless, overall pricing across most markets hasindeed turned and will continue to run away from tenants over the next yearand a half with concession packages continuing to decline (already havedecreased by nearly 20.0 percent in the past two years) and face ratescontinuing their upward trajectory (increasing 9.0 percent in the primarymarkets over the past three years) after finally hitting bottom across thesecondary markets in 2012.

Markets where tenants will have the least leverage remain those dominatedby technology (Boston, Portland, San Francisco, Seattle, Seattle-Bellevue)and energy (Denver, Houston and Pittsburgh), but we are forecasting morethan 85.0 percent of Skyline markets we track to see face rent increases in2013 and more than 90.0 percent of markets to also display a compressionin tenant incentives, demonstrating to tenants that a window exists forleverage across higher-quality buildings, but that window is slowly closing.




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$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20

Transactionvolume($Millions)

Cap rate in Greater Boston has returned to pre-recession peakFinancial and Legal Services turning the corner Financial District low-rise vacancy showing great improvement

4.5%

2.2%

-5%-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Dec2000

Dec2001

Dec2002

Dec2003

Dec2004

Dec2005

Dec2006

Dec2007

Dec2008

Dec2009

Dec2010

Dec2011

Dec2012

Year-over-yearemploymentgrowth

Legal services Financial services

20.3%

14.1%

11.4% 11.3%

Spring 2012 Spring 2013

Low rise

High rise

SEAPORT DISTRICTBACK BAY

50 MilkStreet

One PostOffice Square Rowes Wharf

28 StateStreet

53 StateStreet

60 StateStreet

75 StateStreet

200 StateStreet

99 SummerStreet

100SummerStreet

125SummerStreet

200 BerkeleyStreet

222BerkeleyStreet

500BoylstonStreet

800BoylstonStreet

200Clarendon

Street

101HuntingtonAvenue

111 HuntingtonAvenue

10 St. JamesAvenue

One MarinaPark Drive Seaport East Seapo

283,360 836,025 345,815 569,711 1,167,903 819,452 772,558 303,314 265,580 1,042,317 459,804 695,547 516,420 638,878 1,338,166 1,808,855 526,222 891,000 535,840 493,000 457,113 57

100.0% 91.0% 97.7% 76.6% 80.8% 85.8% 68.5% 87.4% 91.2% 77.2% 75.5% 100.0% 97.6% 60.2% 94.1% 97.6% 100.0% 94.6% 100.0% 75.5% 92.7% 92

$43.91 $60.21 $52.07 $51.23 $46.78 $53.45 $46.62 $45.42 $35.86 $48.27 $45.87 $42.00 $72.58 $70.22 $62.71 $58.83 N/A $46.27 N/A $54.88 $50.00 $4

1981 1981 1987 1997 1984 1977 1988 1985 1987 1974 1989 1947 1991 1988 1965 1974 1970 2001 2001 2010 2000 2


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12.8%

10.0% 9.8%

14.4% 14.1% 14.0% 14

$31.76

$34.50

$35.30

$32.08$32.30

$31.25

$3

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

21.0%

23.0%

25.0%

2006 2007 2008 2009 2010 2011 2

Total vacancy

Average asking rent ($ p.s.f.)

Rental rates starting to recover as vacancy remains elevated nearecessionary high

East Loop River North North Michigan Avenue

Citadel Center Insurance ExchangeBuilding190 S

LaSalle 440 S LaSalleThree FirstNationalPlaza

181 WMadison

55 WMonroe

LeoBurnettBuilding

TheUnitedBuilding

MichiganPlaza -205 N

Michigan

MichiganPlaza -225 N

Michigan

TwoIllinoisCenter

OnePrudential

Plaza

TwoPrudential

Plaza

AonCenter

Blue Crossand BlueShield

OneIlinoisCenter

303 EWacker 321 N Clark

MesirowFinancialBuilding

300 NLaSalle

401 NMichigan

The AMABuilding

330 NWabash NBC Tower

HancockTower

1,504,364 1,449,067 798,782 1,019,325 1,439,369 936,683 806,000 1,118,042 959,258 975,895 969,053 980,362 1,228,000 976,137 2,687,814 1,845,460 1,009,940 859,187 896,502 1,173,643 1,302,901 737,308 622,487 1,141,760 850,000 1,000,100

94.6% 84.3% 87.4% 74.1% 88.9% 83.1% 79.2% 100.0% 81.8% 85.1% 84.4% 68.0% 63.3% 87.1% 84.0% 98.3% 79.8% 54.5% 80.6% 90.1% 98.9% 74.4% 94.5% 55.7% 71.0% 86.8%

$27.48 $32.07 $24.06 $19.45 $22.98 $23.00 $19.29 N/A $25.14 $20.00 $20.00 $16.75 $23.25 $23.00 $19.35 $15.00 $16.75 $17.99 $20.38 $26.81 $30.45 $22.70 $19.59 $25.35 $17.00 $19.20

2003 1912/2002 1985 1984 1980 1990 1980/2002 1989 1992 1981/2002

1982/2002

1972/1998

1955/1990 1990 1972 1997/2009

1969/1997 1979 1987 2009 2009

1965/1993 1990

1971/2010 1989

1970/1995

Leasing activity of the Skyline buildings has increased since mid-2010,alongside the economic recovery

Skyline net absorption has been more volatile over the course of theeconomic recovery

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Q22007

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

s.f. leased

743,343

342,153

50,401

697,890

27,158

-666,001

-31,090

-523

,186

319,890

25,378

-254,638

257,237

109,036

148,995

35,051 2

03,534

-62,893

372,215

33,952

-215,376

-132,281

137,913

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Net absorption (s.f.)


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Top three owners control over half of the Downtown SkylineDowntown Skyline rents remainflat, yet Century City Skyline rentsstarting to push up

JPMorgan Chase controls 27 percent of the Century City Skyline

29%

16%

12%

43%

MPG Office Trust, Inc. Brookfield Office Properties, Inc.

Thomas Properties Group, L.P. Other

$46.21 $46.56 $46.73

$49.46 $49.00$50.90 $51.11 $50.75

$37.87 $37.92 $38.17 $38.15 $38.23 $38.61 $38.17 $38.23

$20

$25

$30

$35

$40

$45

$50

$55

$60

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Century City Downtown

27%

8%

7%

7%

51%

JPMorgan Chase & Co Watt Properties, Inc. JMB Re

The Irvine Company Other

60

50

10

20

40

30

Floor

70

Paul Hastings Tower City National Tower 550 South Hope Aon Center The WedbushCenter Tower BuildingSunAmerica

Center Fox Plaza 2000 Avenue of the Stars North Tower South TowerConstellation

PlaceEighteen Eighty

EightWatt PlazaNorth Tower

Watt PlazaSouth Tower

1800 CenturyPark E

1840 CenturyPark E

1,373,245 1,170,416 590,207 1,104,578 476,491 567,861 780,063 710,692 775,541 1,124,719 1,124,719 775,037 483,896 450,000 450,000 225,525 331,500

90.3% 88.1% 72.5% 69.2% 64.2% 94.2% 77.3% 82.4% 100.0% 77.8% 93.0% 77.1% 93.2% 80.6% 88.0% 85.0% 86.2%

$24.00 $24.00 $22.00 $22.00 $21.00 $20.00 $65.16 $52.32 N/A $45.00 $45.00 $55.20 $42.00 $36.60 $36.60 $38.40 $36.12

1971 1971 1990 1974 1987 1963 1990 1986 2007 1975/20081974/2008 2003 1970 1980 1980 1970/1989 1971

Downtown (Rents NNN) Century City (Rents FSG)


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19/60

$44

$84

$66

$120

$74

$90

741

1,469

880

1,468

903

1,4

$30

$50

$70

$90

$110

$130

$150

$170

$190

$210

$230

19961997199819992000200120022003200420052006200720082009201020112

Midtown Trophy

S&P

Stock market has historically been a leading indicator of Trophy Midtown Trophy vacancy rises after initial recovery Financial and legal services dominate Trophy leasing activity in 2012

8.8%

2.2%1.7%

7.3%

1.9%

9.8%

13.1%

9.3%

12.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Jan-13

7%

8%

20%

20%

45%

Insurance Business Services Other

Legal Services Financial Services

Floor

60

70

80

90

100

50

10

20

40

30

745 FifthAvenue

767 FifthAvenue

OneBryantPark

1095Avenue

of theAmericas

1114Avenue

of theAmericas

1177Avenue

of theAmericas

1221Avenue

of theAmericas

1251Avenue

of theAmericas

1285Avenue

of theAmericas

51 West52nd Street

1301Avenue ofthe Americas

1330Avenue

of theAmericas

1345Avenue

of theAmericas

7 TimesSquare

152 West57th Street

787SeventhAvenue

11 TimesSquare

140Broadway

85 BroadStreet

32 OldSlip

17 StateStreet

180MaidenLane

1 WorldFinancialCenter




1 LibertyPlaza

1 WorldTradeCenter

150Greenwi

Street

565,064 2,000,000 2,118,441 1,200,000 1,577,112 921,637 2,550,000 2,291,317 1,710,000 872,593 1,800,000 534,000 1,896,140 1,238,797 547,000 1,743,413 1,109,028 1,170,000 1,190,000 1,132,340 531,521 1,090,000 1,655,000 2,591,244 2,263,855 1,903,800 2,300,000 3,020,630 2,845,00

85.9% 97.5% 98.1% 94.8% 92.9% 79.3% 98.1% 97.9% 100.0% 100.0% 87.7% 82.3% 100.0% 99.1% 97.4% 100.0% 61.5% 90.7% 42.0% 79.8% 82.8% 100.0% 90.1% 99.3% 98.1% 99.8% 99.5% 57.0% 59.9%

1929/1989 1968 2009

1972/2008

1971/2001 1991 1972 1970 1960 1963

1963/1989

1965/2007

1969/1988 2004 1990 1985 2010 1967 1983 1987 1987

1984/2000 1986 1987 1986 1986

1973/2007 2014 2013


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21/60

$80.63

$59.04$63.25

$51.56$52.17

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

Trophy Skyline asking rent Class A Skyline askin

High tier Mid tier Low tier

Average asking rates in most tiers higher than market average ofsome as high as $100 p.s.f.

Skyline losing out on tech absorption, capturing smaller share of totalabsorption this cycle

Skyline assets consistently achieve highest asking rates in the city,offering unrivaled views and amenities

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

Q199

Q499

Q300

Q201

Q102

Q402

Q303

Q204

Q105

Q405

Q306

Q207

Q108

Q408

Q309

Q210

Q111

Q411

Q312

Net absorption (s.f.)

$43.63$45.69 $45.99

$47.32$48.28

$51.27

$53.72$55.89 56.34

$35.99$37.69

$40.06$41.57

$43.39

$46.59$48.71

$50.36$51.56

$20

$25

$30

$35

$40

$45

$50

$55

$60

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Skyline City-wide

Average asking rent ($ p.s.f.)

50California

Street

100California

Street

150California

Street

Pine StreetCenter

One FrontStreet

EmbarcaderoCenter West

345 CaliforniaStreet

1 BushStreet

OneSansome

Street

44Montgomery

Street

333 BushStreet

OneMontgomery

Tower

OneElevenSutter

1 PostStreet

88 KearnyStreet

FourEmbarcadero

Center

ThreeEmbarcadero

Center

TwoEmbarcadero

Center

OneEmbarcadero

Center

555 CaliforniaStreet

601California

Street

580California

Street

TheHartfordBuilding

505Montgomery

Street

OneMaritimePlaza

T

690,333 259,156 208,786 399,298 615,933 474,858 598,997 289,748 652,463 610,308 540,020 693,933 275,307 418,729 228,935 861,690 723,888 712,094 889,746 1,436,719 246,281 312,451 467,677 316,384 531,07398.2% 72.4% 100.0% 90.1% 99.1% 86.8% 95.0% 94.3% 82.6% 95.9% 88.0% 89.9% 100.0% 89.8% 85.5% 90.8% 96.4% 98.7% 96.1% 94.9% 97.3% 89.2% 95.4% 94.4% 99.4%

$60.00 $50.00 $52.00 $54.00 $50.00 $46.50 $42.00 $55.00 $55.00 $49.50 $59.00 N/A $43.00 $45.00 $45.00 $76.50 $67.00 $55.00 $57.00 N/A $45.00 $49.00 N/A N/A $63.50

1972/1997

1959/1999 2000 1972 1981 1988 1986

1959/1988 1984

1966/1996 1986 1982

1926/2001 1969 1986 1979 1976 1974 1971

1969/1971

1962/1994 1984

1963/2007 1988

1967/1990


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23/60


24/60


25/60

$578

$709 $715

$834

$702

$831$862

$300

$400

$500

$600

$700

$800

$900

$1,000

2005 2006 2007 2008 2009 2010 2011

Average sales price (p.s.f.) Average cap rate

Cap rates remain near record lows as investors scoop up core-plTrophy tenant base driven by lawfirms and lobbyists Despite rents stagnating, large blocks of space are slowly dwindling

55.1%

17.5%

12.1%

10.5%

4.8%

Law firms Government affairs/Lobbying Consulting/PR/Media Banking/Finance/Real estateNon-profit/Government/Other

-

2

4

6

8

10

12

14

2005

2006

2007

2008

2009

2010

2011

2012

Avai lab le Trophy bl ock s of spac e greater than 50,000 s .f.

Under Construction

Existing

Under constructWest to East

InvestmentBuilding

600 13thStreet, NW Homer Building Columbia Square Warner Building

1101 New YorkAvenue, NW

1155 F Street,NW Thurman Arnold Building

1050 KStreet, NW

1099New YorkAvenue,

NW

Lincoln Square 733 10thStreet, NW901 K Street,

NWGallup

Building 505 9th Street, NWMarket Square

WestMarket Square

East Liberty Place1700 New YorkAvenue, NW

CityCenter -850 10th

Street, NW

381,068 256,702 441,187 601,003 644,000 393,568 250,000 781,963 136,574 174,705 368,880 165,133 218,582 113,000 321,943 346,855 357,142 174,200 121,987 249,200

98.4% 15.6% 69.7% 100.0% 67.2% 94.4% 98.5% 91.5% 93.8% 100.0% 96.6% 96.4% 77.1% 100.0% 100.0% 90.9% 99.0% 100.0% 77.7% 100.0%

$43.50 $50.00 $52.00 N/A $50.00 $50.00 N/A $45.00 $45.00 N/A N/A $42.00 $45.00 $45.00 N/A $57.00 $50.00 N/A $55.00 $57.00

2001 1997 1990 1987 1992 2006 2009 1995 2008 2008 2001 2011 2009 2000 2007 1990 1990 1991 2014 2013


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43.8%

30.4%

18.4%

5.7%1.7%

Institutional

REIT

Private

Receivers

Foreign

Secondary Skyline market direct vacancy moving at the same speed of the overall U.S. CBD in its recovery

11.6% 11.5% 11.4%

13.6%

15.2%

14.9% 14.2%

8%

9%

10%

11%

12%

13%14%

15%

16%

2006 2007 2008 2009 2010 2011 2012

Domestic institutional and REIT buyers account for the vast majority of sales activity in secondary Skyline markets in 2012

$191$212 $221

$175 $173

$192$206

0.0%

2.0%

4.0%

6.0%

8.0%

10.0

$0

$100

$200

$300

2006 2007 2008 2009 2010 2011 2012

Average $ p.s.f. pricing sold Average cap rate

Rentsfinally bounced off of the bottom in secondary Skyline markets in 2012, while free rent has declined by 15.0 percent over the past 24 months

$26.19

$28.46$29.34

$28.57 $27.99 $27.77$28.27

0.0

2.0

4.0

6.0

8.0

10.0

$24.00

$25.00

$26.00

$27.00

$28.00

$29.00

$30.00

$31.00$32.00

2006 2007 2008 2009 2010 2011 2012

Average asking direct rent Average free rent (months)

Cap rates for secondary Skyline cities have compressed, but remain about 200 basis point above the averages of the super seven primary Skyline markets


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6.0 6.0

7.0

8.0

7.06.0

6

$35.0

0

$35.0

0

$40.0

0$45.0

0$45.0

0

$40.0

0

$ 3 0 0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2006 2007 2008 2009 2010 2011 20

Average rent abatement (months)

Average tenant improvement allowance

Tenant concessions decreasing as landlords gain leverageMore anomaly than marketwide trend net absorption negative due to1801 California and CenturyLink

Leasing activity dynamic; however, less than previous years

-1.8%

2.1%

0.6%

-0.5%

5.2%

2.1%

-1.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2006 2007 2008 2009 2010 2011 2012

Net absorption as percent of inventory

1,424,239

1,369,748

1,759,583

1,004,923

2,170,156

2,532,982

1,458,314

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000

2006

2007

2008

2009

2010

2011

2012

U.S. BankTower

GraniteTower 1001 17th Street Independence Plaza

1125Seventeenth

StreetPark Central

GuarantyBank

BuildingAlamo Plaza 16 MarketSquare

1755 BlakeStreet SugarCube

1899Wynkoop 1515 Wynkoop

1401Wynkoop

Street

1400 WewattaStreet 16M

One UnionStation

Union StationNorth Wing

499,471 561,691 655,565 567,287 499,975 557,064 218,906 191,151 207,243 112,928 68,000 165,727 306,791 107,677 210,185 145,158 105,974 112,000

92.2% 95.8% 95.7% 93.9% 87.3% 96.6% 85.1% 81.0% 89.1% 88.5% 79.5% 97.7% 96.0% 89.8% 94.4% - - -

$29.50 $30.50 $31.00 $28.50 $30.00 $32.00 $31.00 $29.25 $36.50 $35.00 $39.50 $33.00 $35.00 $37.00 $37.00 $42.50 N/A N/A

1974 1984 1980/20071972/1995 1980

1973/2006

1983/1997 2004 2001 2008 2008 2000 2009 2008 2008

Delivers5/2014

Delivers8/2013

Delivers5/2013


38/60


39/60


40/60


41/60


42/60


43/60


44/60


45/60


46/60


47/60

48%

22%

15%

9%

3%3%

REIT PrivateEqu

Other Institutional Off-Shore/F

Other Tenants in

Despite recent acquisitions, REITs persist as dominant ownersPositive net absorption driving market tightening Stabilized Trophy product to spur Class A gains

531,432

174,988 5

43,688

775,470

396,425

945,462

-716,54

0 -247,554

515,895

335,0057

29,897

1,253,876

154,352

862,692

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net absorption New deliveries

Square feet

8.6%9.0%

9.3% 9.1%8.7%

6.9%

5.6% 5.5%6.0% 6.1%

12.6% 12.6% 12.4%

11.4%11.1% 11.1%

11.5% 11.2% 11.4%11.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Trophy Class A

Total vacancy

Market Street East

Ten Penn 1818 MarketStreet Six Penn1760

MarketStreet

1700MarketStreet

UnitedPlaza

ThreeFranklinPlaza

ThreeParkway

1650 ArchStreet

OnePenn

FourPenn

SevenPenn

1601MarketStreet

PNC BankBldg

TwoPenn

1515MarketStreet

CentreSquareWest

CentreSquareEast

GrahamBldg

1525LocustStreet

TheBellevue

1 SBroadStreet

WanamakerBuilding

AramarkTower

190 NIndependence

Mall W

100 SIndependence

Mall WPublic Ledger Curtis Center

667,825 981,743 305,170 128,128 841,172 617,476 226,890 561,351 564,125 645,057 522,600 296,000 658,852 826,731 502,531 514,000 1,000,000 801,389 240,634 101,479 272,793 464,800 13,767,838 636,146 270,210 404,118 533,945 885,786

65.2% 80.8% 98.3% 85.9% 88.4% 96.5% 100.0% 94.8% 80.5% 91.0% 92.3% 84.0% 91.1% 93.4% 89.4% 80.9% 60.7% 85.5% 85.5% 91.6% 95.9% 92.9% 98.4% 95.9% 100.0% 93.5% 93.8% 89.6%

$25.50 FS $25.50 + E $23.00+ E$27.00

FS $26.50 + E $29.00 + E $24.50 + E $25.50 + E$22.00

FS$24.75

+ E$23.50

+ E$26.50

+ E $26.00 + E$22.50

+ E$25.25

+ E $25.00 FS$25.00

FS$20.00

+ E$23.50

+ E $24.00 FS$23.00

FS $25.50 + E$25.00

+ E $26.00 + E $24.00 + E $26.50 + E

1981 1971 /19911957 /1998 1980

1968 /1989

1975 /2005 1989

1970 /1997

1974 /2001

1929 /1987

1964 /2001

1964 /1989

1968 /1988

1980 /1997

1958 /1988

1960 /1991

1974 /1991

1974 /1991 1985 1983

1904 /1988 1932

1902 /1991 1984

1998 /2002 1965

1927 /2007

1909 /2007


48/60


49/60


50/60


51/60


52/60


53/60


54/60


55/60


56/60


57/60


58/60


59/60

Direct vacancy rates Average asking direct rent ($ p.s.f.)Total net absorption as percent of inventory (2012) Annual percent change in average asking direct rent

0% 5% 10% 15% 20% 25%

Dallas

Atlanta

Phoenix

Miami

Fort Lauderdale

Cincinnati

Stamford

Cleveland

Detroit

Los Angeles

San Diego

Indianapolis

Orlando

Baltimore

Chicago

Columbus

Sacramento

Seattle

Denver

Washington, DC

Tampa

New York

Minneapolis

Charlotte

Boston

Philadelphia

San Francisco

Raleigh

NJ Hudson Waterfront

Portland

Houston

Seattle-Bellevue

Richmond

Pittsburgh

-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

Seattle

Charlotte

Seattle-Bellevue

Boston

Houston

Miami

Orlando

Baltimore

Stamford

Atlanta

Sacramento

San Francisco

Fort Lauderdale

San Diego

Columbus

Washington, DC

Cleveland

Philadelphia

Pittsburgh

Minneapolis

Portland

Dallas

Indianapolis

Tampa

Chicago

Detroit

Richmond

Phoenix

Denver

Raleigh


Los Angeles

Cincinnati

New York

$0.00 $20.00 $40.00 $60.00 $80.00 $100.00

Indianapolis

Columbus

Cleveland

Detroit

Phoenix

Dallas

Tampa

Cincinnati

Raleigh

Orlando

Baltimore

Atlanta

Charlotte

Richmond

Pittsburgh

Philadelphia

San DiegoMinneapolis

Portland

Denver

Fort Lauderdale

Sacramento

Chicago

Seattle

NJ Hudson WaterfrontSeattle-Bellevue

Los Angeles

Miami

Houston

Boston

Stamford

San Francisco

New York Downtown

Washington, DC

New York Midtown

-5.0% 0.0% 5.0% 10.0% 15.0%

Detroit

Miami

Phoenix

Dallas

Orlando

Stamford

Sacramento

Cleveland

San Diego

Fort Lauderdale

Richmond

Columbus

Indianapolis

Atlanta

Seattle

Cincinnati

Los AngelesPhiladelphia

Minneapolis

Washington, DC

Chicago

Boston

New York Midtown

Portland

TampaCharlotte


Baltimore

Pittsburgh

Denver

Seattle-Bellevue

Raleigh

Houston

San Francisco

New York Downtown


60/60

Tom GriffinPresident, Client Services

+1 202 719 6120

[email protected]

Jay KosterPresident, Capital Markets

+1 212 418 2685

[email protected]

www.jll.com/Skyline

2013 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Licensed Real Estate Broker.

For more information, please contact:

Jones Lang LaSalle

200 East Randolph Drive

Chicago, Illinois 60601

Tel: +1 312 782 5800

Fax: +1 312 782 4339

Ben BreslauDirector of Research, Americas

+1 617 531 4233

[email protected]

John SikaitisDirector of Office Research, Americas

+1 202 719 5839

[email protected]

Steve CollinsManaging Director, International Capital Group

+1 202 719 5626

[email protected]

Greg GreenPresident, Agency Leasing

+1 212 418 2639

[email protected]

Dan PufuntPresident, Prop

+1 312 228 255

dan.pufunt@a

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