>> Vacancy Rises For Second Consecutive Quarter

Research &Forecast Report

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Key Takeaways> The overall vacancy rate rose for the second consecutive quarter, recording at 20.4%, up from 19.8%.> Net absorption improved from last quarter’s total of -157,200 square feet (SF), but still ended negative at -97,300 SF.> The overall asking rental rate climbed by $0.19 to $38.70 per square foot (PSF) Full Service Gross (FSG), marking a 0.7% increase since the second quarter of 2016. > The Financial District and Bunker Hill drove leasing velocity for the quarter, accounting for 90% of all transaction activity.> Investors were active for the quarter. 300 S. Grand Ave. traded to a JV of Rising Realty Partners and Colony Northstar for approximately $465.0 million ($448 PSF).

Downtown Los Angeles Office MarketIn second quarter 2017, the Downtown Los Angeles office market recorded negative absorption for the third straight quarter. The delivery of one vacant office building contributed to the uptick in vacancy. Leasing volume recorded 850,600 SF. Asking rents continued to climb, recording growth of 0.7% year-over-year. Class A rents slid by 0.3% from last year, as landlords cope with rightsizing and fewer tenants in the market.

Traditional tenants in the finance, insurance and real estate (FIRE) industries continue to dominate the tenant base in the market, although these sectors have seen a fair amount of rightsizing. This, combined with a wave of deliveries in the next year, will put pressure on the market as more space becomes vacant.

Class A Class B Class C All ClassesAverage Asking Rent $40.91 $37.52 $33.03 $38.70

Change from Q1 ‘17($) -$0.90 +$1.20 +$0.04 +$0.19

Y.O.Y. Change (%) -0.3% +2.7% +11.5% +0.7%

Total Nonfarm

Prof. & Business Services

Financial Activities

12-mo Employment Growth (%) 1.3% 2.7% 0.4%

12-mo Actual Employment Change 55,700 15,900 800

DOWNTOWN L.A. | OFFICEQ2 2017

Q2 2017 ForecastVacancy Net Absorption Construction

Rental Rate

Market Indicators | Relative to prior period

Summary Statistics | DTLA, Q2 2017

Asking Rents | DTLA, Q2 2017

Labor Force | Los Angeles County, May 2017

Class A Class B All ClassesVacancy Rate 15.8% 26.4% 20.4%Change from Q1 ‘17 (Basis Points) +20 +120 +60

Net Absorption* -28.1 -64.1 -97.3

Construction Completions* 0.0 130.0 130.0

Under Construction* 356.1 1,572.9 1,929.0*SF, Thousands

Vacancy> Direct vacancy for the quarter was 19.7%, while sublease vacancy recorded at 0.7%.> Vacancy in the Financial District rose by 130 basis points, while levels in Bunker Hill and South Park fell. These were primarily due to relocations and downsizes.> The Greater Downtown/Arts District vacancy rate rose disproportionately from absorption due to the addition of 963 E. 4th St. to the inventory base. > FOrECAsT: Vacancy is expected to increase as new con-struction deliveries in both the Financial District and Greater Downtown/Arts District submarkets have the potential to surpass demand from tenants.

Absorption and Leasing Activity> Leasing activity in the Downtown market increased by 217% year-over-year. Demand recorded negative for the third straight quarter. > Marsh and McLennan agreed to relocate within the market to 633. W. 5th St for 71,100 SF, thereby downsizing by approx-imately 100,000 SF from 777 S. Figueroa St. Analysis Group agreed to renew and expand at 333. S Hope St to the tune of 45,800 SF.> Among the major move-ins were Tokio Marine HCC moving into 32,200 SF at 801 S. Figueroa St. and Snell and Wilmer LLP occupying 23,900 SF at 350 S. Grand Ave.> FOrECAsT: A concentrated focus on efficient workplace design and new construction deliveries could temper demand from future out of market relocations to Downtown.

Rental Rates> The overall average asking rate for direct space increased year-over-year by 0.7%.> Asking rental rates increased for Class B and C properties, while Class A Rents retreated to $40.91 PSF FSG.> While rental growth has remained positive in Downtown Los Angeles, there has been a tapering of gains compared to past years. > FOrECAsT: Rents are expected to flatten through 2017 with some minor positive/negative fluctuations. However, rightsizing and fewer tenants in the market could cause rents to slide further.

DTLA | OFFICE Q2 2017

Historical Vacancy v. Rents | DTLA Office Market Q2 ‘13-’17

Net Absorption by Submarket | DTLA Office Market Q2 ’17

10%

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$30

$31

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2Q13 2Q14 2Q15 2Q16 2Q17

% V

ACAN

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OTAL

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$ PS

F FS

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RENTS VACANCY

37,800

(236,500)

22,000

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0

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Historical Leasing Activity | DTLA Office Market Q2 ‘13-‘17

0

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2Q13 2Q14 2Q15 2Q16 2Q17

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Construction> New construction projects remain concentrated in the Greater Downtown/Arts District submarket, with only the office component (356,100 SF) at Korean Air’s Wilshire Grand project slated for a third quarter delivery in the Financial Dis-trict. > Hudson Pacific’s 4th and Traction project delivered to the market, adding approximately 130,000 SF to Greater Down-town/Arts District.> FOrECAsT: Future construction will provide an abundance of high quality creative space to the market, as Downtown Los Angeles accounts for 51% of all new construction in Los Angeles County. Its effect on vacancy will depend on delivery timing and preleasing activity.

Investment Trends> Three properties over 25,000 SF traded in second quarter, totaling $507.9 million. It should be noted that the partial inter-est price of USAA Real Estate’s share in 767 S. Alameda St. to Healthcare of Ontario Pension Plan is still to be determined. > Rising Realty’s purchase of 300 S. Grand from Beacon Partners marks their initial foray into a traditional Class A tow-er. Thus far, the company has focused primarily on value-add and historical projects in the market. > Investment activity in the latter half of 2017 is forthcoming, as 350 S. Grand Ave. and 445 S. Figueroa St., both on the market, figuring prominently. > FOrECAsT: Capitalization rates are expected to continue compressing while sale prices rise as Los Angeles County remains a favorable investment environment for foreign and domestic capital.

OutlookDowntown Los Angeles market vacancy is expected to rise. Continued rightsizing and the delivery of speculative office space both in and on the fringe of the CBD will potentially outweigh interest from out of market tenants. Despite Class A rents retreating this quarter, asking rental rates will remain stable as landlords and investors exercise cautious optimism about the local economy and real estate fundamentals. Investment activity will gain momentum through the end of 2017 as a few properties remain on the market.

DTLA | OFFICE Q2 2017

Historical Net Absorption & Construction CompletionsDTLA Office Market Q2 ‘13-’17

Investment Trends ChartDTLA Office Market ‘11-’17

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NET ABSORPTION CONSTRUCTION COMPLETIONS

Unemployment Rate | U.S., CA & Los Angeles County | May 2017

4.1%

4.7%

4.4%

3.8%

3.9%

4.0%

4.1%

4.2%

4.3%

4.4%

4.5%

4.6%

4.7%

4.8%

United States California Los Angeles County

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2010 2011 2012 2013 2014 2015 2016

Cap

Rate

$/PS

FAverage Price PSF Cap Rate

RECENT TRANSACTIONS & MAJOR DEVELOPMENTSDowntown Los Angeles Office MarketQ2 2017

sALEs ACTIVITYPrOPErTY ADDrEss sIZE sF sALE PrICE PrICE PsF BUYEr sELLEr

300 S. Grand Ave., Los Angeles 1,039,400 SF $465,000,000 $448 PSF Rising Realty/Colony Northstar Beacon Capital Partners

811 W. 7th St., Los Angeles 115,900 SF $42,875,000 $370 PSF Manchester Capital Management, LLC Sorgente Group of America

LEAsING ACTIVITYPrOPErTY ADDrEss LEAsED sF LEAsE TYPE BLDG TYPE LEssEE LEssOr

633 W. 5th St., Los Angeles 71,100 SF Direct-New A Marsh & McLennan OUE

333 S. Hope St., Los Angeles 45,800 SF Renewal/Expansion A Analysis Group Brookfield

900 S. Figueroa St., Los Angeles 35,500 SF Direct-New A Cushman & Wakefield Korean Airlines Corp.

550 S Hope St., Los Angeles 26,700 SF Renewal A Hunton & Williams Morgan Stanley

633 W. 5th St., Los Angeles 23,700 SF Renewal A FTI Consulting Brookfield

MAJOr DEVELOPMENTsPrOJECT DEVELOPEr sIZE sF sUBMArKET sTATUs EsTIMATED COMPLETION

801 S Broadway, Los Angeles Waterbridge Capital LLC 500,000 SF Greater Downtown Under Construction Q1 2018

757 S. Alameda St., Los Angeles Atlas Capital Group, LLC 425,100 SF Greater Downtown Under Construction Q1 2018

900 Wilshire Blvd, Los Angeles Hanjin International Corp 356,100 SF Financial District Under Construction Q3 2017

2060 E 7th St, Los Angeles Shorenstein Properties, LLC 257,000 SF Greater Downtown Under Renovation Q3 2017

555-581 Mateo St., Los Angeles Blatteis & Schnur 183,560 SF Greater Downtown Under Construction Q3 2017

1111 S. Broadway, Los Angeles Broadway Eleventh Owners LLC 116,000 SF Greater Downtown Under Renovation Q4 2017

500 S. Santa Fe Ave., Los Angeles Chalmers-Santa Fe LLC 91,200 SF Greater Downtown Under Construction Q1 2018

747 S. Alameda St., Los Angeles Atlas Capital Group, LLC 389,6700 SF Greater Downtown Proposed TBD

Market DescriptionDowntown LA is a moderately large office market comprised of 32.9 million SF, representing 11% of the total office space ver 25,000 SF in the LA Basin. Approximately 52% of the space in this market was built prior to 1980, and is considered relatively old by Southern California standards. Downtown Los Angeles is the densest market in the region with only one percent of the space contained within low-rise buildings, while 24% and 75% of the space are in mid-rise and high-rise structures, respectively. Downtown includes a large concentration of firms from the legal, utilities, accounting and financial services sectors, and is home to many federal, state, and local government agencies as well.

DTLA | OFFICE Q2 2017

Submarket Map

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DTLA | OFFICE Q2 2017

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EXIsTING PrOPErTIEs VACANCY ACTIVITY ABsOrPTION CONsTrUCTION rENTs

Submarket/ Class Bldgs

Total Inventory

SF

Direct Vacancy

Sublease Vacancy

Total Vacancy

Total Vacancy Prior Qtr

Leasing Activity

Current Qtr SF

Leasing Activity YTD

SF

Net Absorption Current Qtr

SF

Net Absorption

YTD SF

Completions Current Qtr

SF

Under Construction

SF

Weighted Avg Asking Lease Rate

FINANCIAL DIsTrICT

A 9 9,732,700 15.6% 0.6% 16.2% 14.7% 376,800 566,900 (144,600) (92,000) 0 356,100 $40.85

B 25 8,365,200 29.2% 0.4% 29.6% 28.5% 162,000 275,000 (91,300) (250,000) 0 0 $38.47

C 2 326,400 20.0% 1.3% 21.4% 21.2% 13,200 15,100 (600) (1,300) 0 0 $30.56

sUBTOTAL 36 18,424,300 21.9% 0.5% 22.4% 21.1% 552,000 857,000 (236,500) (343,300) 0 356,100 $39.24

BUNKEr HILL

A 6 7,221,100 15.4% 1.3% 16.7% 17.9% 214,500 344,900 84,400 (9,700) 0 0 $41.02

B 4 537,800 10.9% 0.0% 10.9% 10.9% 0 0 0 0 0 0 $43.45

C 1 370,200 28.4% 0.0% 28.4% 27.1% 0 0 (5,000) 12,300 0 0 $32.00

sUBTOTAL 11 8,129,100 15.7% 1.2% 16.9% 17.8% 214,500 344,900 79,400 2,600 0 0 $40.39

sOUTH PArKA 2 1,144,200 6.0% 0.0% 6.0% 8.8% 2,300 66,500 32,100 19,200 0 0 $40.39

B 7 1,850,500 14.5% 0.3% 14.8% 15.1% 48,100 100,300 4,200 58,600 0 0 $36.71

C 2 266,400 15.4% 1.5% 16.8% 11.4% 7,000 22,100 (14,300) (8,000) 0 0 $33.36

sUBTOTAL 11 3,261,100 11.6% 0.3% 11.9% 12.6% 57,400 188,900 22,000 69,800 0 0 $37.02

GrEATEr DOWNTOWN / ArTs DIsTrICT

B 9 2,463,900 27.7% 0.0% 27.7% 24.7% 900 68,900 23,000 39,100 130,000 1,572,860 $33.93

C 8 592,300 21.0% 3.2% 24.2% 26.7% 25,800 32,200 14,800 (22,700) 0 0 $35.09

sUBTOTAL 17 3,056,200 26.4% 0.6% 27.1% 25.1% 26,700 101,100 37,800 16,400 0 1,572,860 $34.11

MArKET TOTAL

A 17 18,098,000 14.9% 0.8% 15.8% 15.6% 593,600 978,300 (28,100) (82,500) 0 356,100 $40.91

B 45 13,217,400 26.1% 0.3% 26.4% 25.2% 211,000 444,200 (64,100) (152,300) 130,000 1,572,860 $37.52

C 13 1,555,300 21.6% 1.7% 23.4% 23.0% 46,000 69,400 (5,100) (19,700) 0 0 $33.03

TOTAL 75 32,870,700 19.7% 0.7% 20.4% 19.8% 850,600 1,491,900 (97,300) (254,500) 130,000 1,928,960 $38.70Note: revisions to the inventory base were made effective Q2 2017, historical data reported here reflect these revisions and may not match data reported in previous quarters.

OFFICE OVERVIEWDowntown Los Angeles Office MarketQ2 2017

Definitions of key terms in this reportTotal Rentable Square Feet: Office space in buildings with 25,000 square feet or more of speculative office space. Includes competitive space in Class A, B and C single-tenant and multi-tenant buildings. Excludes non-competitive owner-occupied buildings, buildings that include 30 percent or greater of medical or retail space, and space that is under-construction, under-renovation or off-market.Class A Space: Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market.Class B Space: Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates.Class C Space: Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates.Low-Rise: Buildings with a total of 4 floors or less.Mid-Rise: Buildings with a total of 5 to 13 floors.High-Rise: Buildings with 14 or more floors.Direct Vacancy:Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment).Total Vacancy:Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease.Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease).Leasing Activity:Square feet leased from all known transactions completed during the quarter. Excludes lease renewals.Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per SF basis.

Space Added (Net): Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions.

Under Construction:Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy

Technical Note:Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database.

This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www.colliers.com/greaterlosangeles.

DTLA | OFFICE Q2 2017

396 offices in 68 countries on 6 continentsUnited States: 153Canada: 29Latin America: 24Asia Pacific: 79EMEA: 111

> $2.6 billion in annual revenue> 2.0 billion square feet under management

> Over 15,000 professionals

UNITED STATES:Downtown LA OfficeLicense No. 01908231865 S. Figueroa St., Ste. 3500Los Angeles, CA 90017

HANS MUMPERExecutive Managing DirectorGreater Los Angeles

CHRIS WONGRegional Research AnalystResearch Services

CAITLIN MATTESONResearch DirectorResearch Services

TEL: +1 213 627 1214

FAX: +1 213 327 3200

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