mb real estate's 2012 2nd quarter chicago market overview

S E C O N DQ U A R T E R

2012 CHICAGOMARKET OVERVIEW

The Chicago Market Overv iew is publ ished quar ter ly by MB Real Estate.

To obta in addi t iona l copies or for fur ther in format ion, p lease contact :

JACK GAVINSenior Research Coord inator

181 West Madison Street , Su i te 4700 Chicago, I l l ino is 60602

(312) 726-1700

w w w . m b r e s . c o m

CHICAGO

SECOND QUARTER

2012MARKET OVERVIEW SECTION TWO

CHICAGO CENTRAL BUSINESS DISTRICT

02 Chicago CBD Executive Summary

SUPPLY

03 New Development04 Sublease Space05 Large Blocks of Direct Availability

DEMAND

06 Vacancy Rates07 Large Deals08 Absorption

FEATURES

09 Lease Comparables10 Investment Sales11 Forecast12 Submarket Map13 Market Statistics

TABLE OF CONTENTS

SECTION THREE

SUBURBAN CHICAGO

14 Suburban Chicago Executive Summary

SUPPLY

15 New Developments16 Sublease Space17 Large Blocks of Direct Availability

DEMAND

18 Vacancy Rates19 Large Deals20 Absorption

FEATURES

21 Gross Asking Rents22 Investment Sales23 Forecast24 Submarket Map25 Market Statistics

SECTION FOUR

ADDITIONAL INFORMATION

SECTION ONE

CHICAGO ECONOMY

01 Economic Analysis

26 Glossary27 About MB Real Estate

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SECTION ONE

CHICAGO ECONOMYECONOMIC ANALYSIS

The local economy continues to show signs of improvement. Both the Chicago MSA’s and City of Chicago’s unemployment rate havedropped over the last year. While a definite improvement, both figures are above the national unemployment rate, indicative of agap in hiring compared to the rest of the country.

Despite this, the local hiring outlook continues to slowly improve. In a survey conducted by Manpower in June, a net figure of 19percent of Chicagoland employers plan to increase their workforce during the third quarter. This is compared to 15 percent on anational level and nearly double the local sentiment from last quarter. Job prospects were found to be favorable in office-usingindustries such as information, financial activities, and professional & business services. However, the survey considers the mid-20s percentile to be indicative of a healthy job market, suggesting that job creation is still sluggish.

As Chicago’s hiring outlook slowly improves, both risks and new opportunities can shape the economic recoveryDespite a sustained decline in its unemployment rate, Chicago’s economy continues to be “at risk” according to Moody’sEconomy.com. Chicago benefits from being the major business, distribution, and financial hub of the Midwest. It also has a largetalent pool, strong educational institutions, and relatively high per capita income. However, Economy.com cites that the city suffersfrom high taxes, infrastructure in need of repair, below-average population growth, and poor local fiscal health. These concerns haveprompted companies to consider relocating their operations. In response, state and local governments have offered lucrativeincentive packages to retain such companies.

However, recent events and announcements may lead to Chicago overcoming the aforementioned economic risks. Chicagosuccessfully hosted this year’s NATO Summit, and several foreign leaders expressed interest in increasing business operations inChicago. For example, the German foreign minister believes more German companies will consider moving North Americanheadquarters to the city.

More companies are announcing plans to create jobs downtown. DeVry opened a new downtown office of 200 employees andplans to hire an additional 400 employees over the next nine years. Google is expected to lease 500,000 square feet at theMerchandise Mart. Coinciding with the recent opening of the “1871” tech incubator, Mayor Rahm Emanuel is attempting to establishChicago as a “start-up city.”

Considering these factors, the outlook for the Chicago economy continues to be mixed. Total employment in the Chicago MSA fell7.4 percent peak-to-trough and has only rebounded 2.1 percent since its low point in December 2009. Compared to the 2001recession, total employment fell much further and has been noticeably slower to recover. If jobs continue to be created at theircurrent pace, the Chicago office market is expected to experience a slow, drawn-out recovery. MB Real Estate’s baseline forecastexpects intermittent quarters of positive and negative absorption, resulting in a slight decline in vacancy over the next two years.

CHICAGO EMPLOYMENT WELL BELOW PEAK AND RECOVERING SLOWLY

Sources: MBRE Research, BLS, Chicago Sun-Times, Crain’s Chicago Business, World Business Chicago, Moody’s Economy.com

S E C O N D Q U A R T E R 2 0 1 2 | C H I C A G O M A R K E T O V E R V I E W

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SECTION TWO

CENTRAL BUSINESS DISTRICTEXECUTIVE SUMMARY

CBD VACANCY AND YEAR-TO-DATE ABSORPTION SUMMARY

Direct Vacancy2Q2012

AChange from

1Q2012B

Change from 1Q2012

CChange from

1Q2012Total

Change from 1Q2012

Central Loop 9.6% -0.6% 16.4% 0.5% 17.6% -0.4% 14.2% 0.0%East Loop 18.3% -0.2% 23.8% 0.5% 15.8% 0.8% 19.9% 0.5%N. Michigan Ave. 21.6% -0.5% 24.3% -2.4% 18.6% 3.7% 21.5% 0.2%River North 12.7% 0.0% 7.9% -1.9% 9.1% -1.5% 9.9% -1.2%South Loop 28.8% 8.4% 24.7% 0.0% 26.5% 3.7%West Loop 14.5% -0.2% 12.5% -0.2% 16.3% -0.5% 14.3% -0.3%CBD Chicago Total 14.2% -0.2% 17.5% -0.1% 15.9% 0.2% 15.7% -0.1%

Net Absorption2Q2012

A B C Total

Central Loop 73,072 (45,909) 29,173 56,335

East Loop 9,860 (2,305) (83,181) ((75,626)

N. Michigan Ave. 19,547 120,896 (178,510) ((38,067)

River North (2,484) 95,635 53,994 1147,144

South Loop (84,969) (14,852) ((99,821)

West Loop 77,114 24,061 13,788 1114,963

CBD Chicago Total 92,140 192,377 (179,589) 104,928

Numbers in parentheses are negative

After occupancy fell by 276,000 square feet in the first quarter, the CBD experienced an occupancy increase of 105,000 squarefeet in the second quarter.

Key Indicators:• Direct vacancy decreased slightly, by 10 basis points, to 15.7 percent. Positive absorption in Class A and B buildings was

muted by occupancy losses in Class C buildings.

• Despite no pre-leasing, Hines announced plans to break ground on a 45-story, 900,000 square feet tower at 444 West Lake.The tower is slated for completion in mid-2016.

• The three largest leases on a square footage basis were renewals and did not generate substantial new occupancy. TribecaFlashpoint Media Arts extended and expanded by 19,000 square feet for a total of 104,000 square feet at 111 West Washington.The U.S. Securities and Exchange Commission renewed 103,000 square feet. And Perkins Coie renewed and expanded by14,000 square feet for a total of 101,000 square feet at 131 South Dearborn.

• Sublease availability edged up once again and is now over 3.2 million square feet, largely due to United Airlines marketing a240,000 square foot block at 77 West Wacker. However, total sublease availability is still 10 percent below its historical average.

• The Central Loop, River North, and West Loop continue to be the best performing submarkets, with each experiencing positiveabsorption. Direct vacancy jumped by 3.7 percent in the South Loop.

• Underutilized space remains the biggest concern to the outlook of the market. Other risks include: fear of another recessionand residual effects of the Eurozone crisis; shrinking space requirement per employee; reduced storage and server spaceneeds; increased use of telecommunication; and increased corporate tax rates in Illinois.

• Potential upsides to the outlook include: businesses relocating to the CBD; rapidly expanding tech firms; no new supply expecteduntil at least 2016; and increased corporate confidence.

Despite demand drivers that led the CBD to outperform the forecast in 2011, slow job growth and tenants who will eliminateunderutilized space are expected to mute a recovery.


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LYNEW DEVELOPMENT444 West Lake set to break ground later this year

• Despite no tenants in place, Hines surprised many byannouncing plans to construct a 45-story, 900,000square foot building at 444 West Lake. The developerobtained $300 million to construct the building fromMontreal-based Ivanhoe Cambridge and an additional$29.5 million from the City of Chicago for a surroundingpark. Groundbreaking is set for the fourth quarter of thisyear with completion slated for 2016.

• Prompting the construction at 444 West Lake and apotential smaller development is the constraint on large,contiguous space. There are only eight contiguousblocks of Class A space greater than 100,000 squarefeet on the market. This is compared to sixteen tenantswho are actively evaluating the CBD for at least 100,000square feet.

• Just outside of the CBD’s official boundaries, SterlingBay is redeveloping a 385,000 square foot former coldstorage facility at 1000 West Fulton. SRAM is inadvanced talks to be its first tenant and lease 77,000square feet.

• MB Real Estate has identified 11 proposed newdevelopment sites ranging from 350,000 to 1.3 millionsquare feet. While 60 percent preleasing is a typicalbenchmark, Hines has demonstrated that constructioncan occur with nontraditional financing.

• OUTLOOK: The amount of new construction will befueled by the number of large tenants seeking spaceand the constraint of large blocks of Class A space. Asmaller development has the potential to be deliveredbefore 444 West Lake. By 2016, demand is expected tobe great enough to warrant new supply.

NO NEW DELIVERIES EXPECTED UNTIL 2016

2000 - 2012 INVENTORY ADDITIONS % Leased (Avg)

2000 - 5 Properties 2,870,576 sf 95.8%2001 - 2 Properties 904,436 sf 86.9%2002 - 2 Properties 2,236,364 sf 94.6%2003 - 0 Properties 0 sf 0.0%2004 - 1 Property 1,300,000 sf 100.0%2005 - 2 Properties 2,500,143 sf 97.4%2006 - 2 Properties 1,320,498 sf 96.9%2007 - 0 Properties 0 sf 0.0%2008 - 2 Properties 728,254 sf 70.6%2009 - 3 Properties 3,652,913 sf 81.4%2010 - 1 Expansion 933,710 sf 92.9%2011 - 0 Properties 0 sf 0.0%2012 - 0 Properties 0 sf 0.0%

Total - 20 Properties 16,446,894 sf

UNDER CONSTRUCTION/ANNOUNCED % Leased

444 West Lake 900,000 sf 0.0%

Total 900,000 sf

2000-2012 INVENTORY ADDITIONS

Delivered (2000-2011) 16,446,894 sfDelivered (2012) 0 sf

Total 16,446,894 sfUnder Construction/Announced 900,000 sfProposed Inventory 4,922,564 sf

Total 5,822,564 sf


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LYSUBLEASE SPACESublease availability increases as two large blocks hit the market

• Total available sublease space increased by 8.6 percent to more than 3.25 million square feet.

• United Airlines is now marketing the 8th through 19th floors at 77 West Wacker for sublease. The 240,000 square foot block has a termthrough February 2022 and is competitive with the largest direct blocks of Class A space.

• Drinker Biddle & Reath is seeking a subtenant for the 32nd and 33rd floors of 191 North Wacker, totaling 52,000 square feet.

• No large sublease blocks were leased this quarter. AT&T continues to market a total of 377,000 square feet between 225 West Randolphand 350 West Mart Plaza.

• OUTLOOK: Despite the increase, available sublease space is still well below its historical average of 3.6 million square feet. Companiescontinue to reconsider employee headcount and space efficiency, causing sublease availability to fluctuate.

SUBLEASE AVAILABILTY UP FROM LAST YEAR, BUT BELOW LONG-TERM AVERAGE

LARGE BLOCKS (MORE THAN 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE

CLASS ABuilding Address Size (sf) Occupancy Expiration Floor(s) Sublandlord

77 W Wacker Dr 240,108 Negotiable February 2022 8-19 United Airlines131 S Dearborn St 128,622 Vacant October 2017 7-8 Citadel131 S Dearborn St 64,125 Vacant October 2017 10 Citadel1 N Wacker Dr 55,437 Vacant March 2015 19-20 Merrill Lynch100 N Riverside 52,660 90 Days May 2023 7-8 Hostway Corporation191 N Wacker Dr 51,682 120 Days December 2021 32-33 Drinker Biddle & Reath

TTotal - 6 Spaces 592,634

CLASS BBuilding Address Size (sf) Occupancy Expiration Floor(s) Sublandlord

225 W Randolph St 238,778 Vacant December 2022 22-30 AT&T350 W Mart Ctr 138,225 Vacant January 2016 3-5 AT&T600 W Chicago Ave 117,101 Vacant November 2015 2 Level 3 Communications222 N LaSalle St 78,974 Vacant May 2014 17-18 Merrill Lynch180 N LaSalle St 61,011 Vacant July 2015 5-7 Accenture

Total - 5 Spaces 634,089

Italicized addresses indicate space is new on the market


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LYLARGE BLOCKS OF DIRECT AVAILABILITY65 large blocks available, but supply of Class A blocks for largest users is constrained

• The number of direct contiguous blocks of available spacegreater than 50,000 square feet decreased by three to 65.

• The largest block removed this quarter was 97,000 square feetat 111 West Jackson, due to Harris & Harris leasing 75,000square feet. The debt collecting agency is vacating 222 WestMerchandise Mart, whose landlord is buying out leases in orderto accommodate Google’s pending lease that is upwards of500,000 square feet.

• The largest new block this quarter is 156,000 square feet at130 East Randolph Street; the former Integrys space is notavailable until June 2014. Also, four large blocks ranging from52,000 to 67,000 square feet at 440 South LaSalle are alsonew to the market as the building looks to diversify its tenantbase.

• MB Real Estate has identified 34 tenants actively seeking50,000 square feet or more in the CBD. However, with 65blocks available, a glut of space exists in the market. Whenconsidering blocks of 200,000 square feet or more, there areeight spaces compared to six tenants of such size. While thesetenants usually have the option to renew, this segment of themarket remains the most constrained.

CLASS BBuilding Address Size (sf) Submarket

130 E Randolph St * 256,720 East Loop

303 E Wacker Dr ** 217,831 East Loop

222 N LaSalle St 199,132 Central Loop

55 E Monroe St 175,263 East Loop

200 N LaSalle St 164,586 Central Loop

300 S Riverside Plz * 161,708 West Loop

130 E Randolph St * 155,829 East Loop

333 S Wabash Ave 147,500 East Loop


130 E Randolph St 128,948 East Loop

410 N Michigan Ave * 125,817 North Michigan Avenue

205|225 N Michigan Ave 120,446 East Loop

401 N Michigan Ave * 104,726 North Michigan Avenue

1 N Dearborn St 97,261 Central Loop

120 S LaSalle St 94,995 Central Loop

175 W Jackson Blvd 68,539 Central Loop

175 W Jackson Blvd 67,725 Central Loop

233 N Michigan Ave * 67,028 East Loop


222 Merchandise Mart Plz 63,193 River North

303 E Wacker Dr * 59,704 East Loop

55 W Monroe St 55,064 Central Loop


222 Merchandise Mart Plz 50,000 River North

24 Blocks 2,835,483

CLASS ABuilding Address Size (sf) Submarket

500 W Monroe St 392,063 West Loop

515 N State St * 350,906 North Michigan Avenue


233 S Wacker Dr 310,273 West Loop

111 W Illinois St 141,503 River North

227 W Monroe St * 139,883 West Loop

10 S Dearborn St * 139,165 Central Loop

161 N Clark St 116,964 Central Loop


455 N Cityfront Plaza Dr 87,700 North Michigan Avenue


333 W Wacker Dr 80,736 West Loop

1 S Wacker Dr * 76,202 West Loop


77 W Wacker Dr 67,342 Central Loop

440 S LaSalle St * 67,332 Central Loop


980 N Michigan Ave 62,384 North Michigan Avenue

321 N Clark St 61,431 River North


222 W Adams St 59,436 West Loop






525 W Van Buren St * 51,538 West Loop

27 Blocks 3,192,141

CLASS CBuilding Address Size (sf) Submarket

309-311 W Monroe St * 214,484 West Loop

401-465 E Illinois St 210,000 North Michigan Avenue

11 S LaSalle St 150,166 Central Loop

435-445 N Michigan Ave 129,947 North Michigan Avenue

401 S State St 110,898 East Loop

730-740 N Rush St 101,505 North Michigan Avenue

619 S LaSalle St 89,000 South Loop

350 W Mart Ctr 85,000 River North

360 N Michigan Ave 76,855 East Loop



104 S Michigan Ave 63,006 East Loop

111 N Canal St 57,800 West Loop

104 S Michigan Ave 56,352 East Loop

14 Blocks 1,426,446

Italicized addresses indicate space is new on the market* Block of space is for future occupancy**Block of space will be vacated in the upcoming quarter


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VACANCY RATESDirect vacancy rate dips slightly due to increased demand in Class A and B buildings

• The direct vacancy rate in the CBD fell 0.1 percent during the quarter to 15.7 percent. The total vacancy rate (which includes subleasespace) increased by 0.1 percent to 18.2 percent due to the addition of two large blocks available for sublease.

• Class A direct vacancy fell 20 basis points to 14.2 percent, while Class B direct vacancy fell 10 basis points to 17.5 percent.

• Direct vacancy in Class C buildings rose to 15.9 percent as tenants continue to upgrade to higher quality buildings.

• OUTLOOK: MB Real Estate expects direct vacancy to be volatile through the intermediate term, oscillating between slightly positive andnegative changes.

HISTORIC YEAR-END VACANCY MARKET STATISTICS BY BUILDING CLASS: CLASS B STILL HIGHEST

HISTORIC DIRECT VACANCY: ELEVATED SLIGHTLY FROM 2011 DE

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LARGE DEALSSeveral firms bring new offices downtown

• Multiple expansions and relocations to the CBD led to new demand for the CBD. Salesforce brought a new requirement downtown,leasing 50,000 square feet at 111 West Illinois, with plans to lease an additional 50-60,000 square feet in the next couple of years.Trisect Marketing, Braintree Payment Solutions, and commonground all moved from outside the CBD and into the West Loop. SterlingPartners and W.W. Grainger are relocating offices from the suburbs.

• Harris & Harris signed the largest new lease by taking three floors, or 75,000 square feet, at 111 West Jackson. They will vacate 222Merchandise Mart, where Google is close to leasing 500,000 square feet.

• Tribeca Flashpoint Media Arts Academy renewed and expanded their requirement to 104,000 square feet at 111 West Washington. Theschool may increase their footprint to as much as 150,000 square feet.

• OUTLOOK: Tenants have shown increased confidence in real estate decision-making as economic fears slowly ease. Large deal activityshould continue to be robust, but several companies evaluating the market are expected to shed space from their current footprint.

NEW

Tenant Type Submarket Building Address Size (sf)

Harris & Harris New Central Loop 111 W Jackson 75,000Salesforce New River North 111 W Illinois 50,000Navteq New West Loop 500 W Madison 37,414BDO USA New North Michigan Ave 330 N Wabash 33,267Trisect Marketing New West Loop 130 S Jefferson 30,490Kelly, Scott, & Madison Relo East Loop 303 E Wacker 29,852Braintree Payment Solutions New West Loop 111 N Canal 26,350Motorola Solutions New East Loop 224 S Michigan 24,000commonground New West Loop 600 W Fulton 23,597Sterling Partners New North Michigan Ave 401 N Michigan 22,358Intouch Solutions New East Loop 205 N Michigan 22,015W.W. Grainger New West Loop 500 W Madison 21,136Total - 12 Deals 395,479

RENEWAL/EXPANSION/SUBLEASE


Tribeca Flashpoint Media Arts Academy Ren/Exp Central Loop 111 W Washington 104,000U.S. Securities and Exchange Commission Ren Central Loop 175 W Jackson 102,613Perkins Coie Ren/Exp Central Loop 131 S Dearborn 101,305GSA Secret Service Ren West Loop 525 W Van Buren 76,200AECOM Ren East Loop 303 E Wacker 58,424Sears Holdings Ren/Exp East Loop 1 N State 51,000Compass Lexecon Ren East Loop 332 S Michigan 47,114Gannett/Shop Local Ren/Exp East Loop 225 N Michigan 45,297Susquehanna International Group Ren Central Loop 175 W Jackson 35,777Ocean Tomo Ren West Loop 200 W Madison 36,000American Health Information Assocation Ren East Loop 233 N Michigan 34,780Ulmer & Berne Ren/Exp West Loop 500 W Madison 26,473Red Frog Events Ren River North 320 W Ohio 25,000SXC Health Solutions Sub River North 300 N LaSalle 24,544Legacy Marketing Ren River North 640 N LaSalle 24,000Patton & Ryan Ren/Exp North Michigan Ave 330 N Wabash 23,252Wiedner & McAuliffe Ren West Loop 1 N Franklin 23,178Coleman Law Ren Central Loop 77 W Wacker 22,906Navteq Exp West Loop 100 N Riverside 22,000Nisen & Elliot Ren West Loop 200 W Adams 21,728Pierce & Associates Exp Central Loop 1 N Dearborn 21,434Total - 21 Deals 927,025

LARGE LEASE TRANSACTIONS


Abbreviations: Cont - Contraction Exp - Expansion Relo - Relocation Ren - Renewal Sub - Sublease

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ABSORPTIONClass A and B experience modest positive absorption as Class C again sees negative absorption

• After experiencing 276,000 square feet of negative absorption last quarter, the CBD absorbed a modest 105,000 square feet.

• Absorption was slightly positive in Class A and B buildings. However, Class C buildings experienced 180,000 square feet of negativeabsorption.

• Absorption was positive in the Central Loop, River North, and West Loop submarkets. Accordingly, these submarkets have the lowestvacancy rates in the CBD.

• OUTLOOK: Modest positive absorption is reflective of tepid hiring and shrinking workspaces combating new demand brought to the CBD.MB Real Estate expects intermittent quarters of positive and negative absorption throughout 2012.

HISTORIC ABSORPTION: MODEST NEGATIVE ABSORPTION SEEN YEAR-TO-DATE

HISTORIC ABSORPTION BY SUBMARKET: RIVER NORTH LEADING THE WAY THUS FAR IN 2012


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SLEASE COMPARABLESMixed metrics across building classes suggest varying deal structures

NEW DEALSA B C A B C A B C A B C

3Q2011 - 2Q2012 $19.47 $15.19 $13.25 $38.66 $31.00 $24.16 6.0 6.1 5.6 7.1 6.7 6.0

3Q2010 - 2Q2011 $20.69 $14.58 $11.28 $47.86 $27.95 $20.03 8.9 7.4 6.2 8.6 7.1 5.9

3Q2009 - 2Q2010 $19.57 $15.31 $11.74 $38.42 $28.25 $18.90 8.3 6.8 5.3 7.9 6.6 5.8

3Q2008 - 2Q2009 $21.76 $16.45 $13.38 $42.61 $35.15 $33.84 6.0 4.4 4.4 8.6 7.0 7.9

3Q2007 - 2Q2008 $20.66 $16.71 $14.40 $42.65 $36.95 $25.37 4.7 3.7 3.7 7.9 6.6 6.9

3Q2006 - 2Q2007 $18.63 $14.22 $14.10 $50.16 $41.59 $17.83 5.8 5.6 2.8 8.7 7.3 5.1

3Q2005 - 2Q2006 $17.85 $13.18 $12.72 $46.60 $36.29 $20.77 6.7 5.0 2.5 8.4 7.1 5.8

3Q2004 - 2Q2005 $16.86 $12.76 $9.68 $42.68 $44.48 $25.75 7.1 7.3 4.4 10.0 8.8 6.4

3Q2003 - 2Q2004 $17.16 $12.45 $8.88 $42.32 $37.40 $17.71 5.2 5.8 3.9 8.9 8.3 6.7

3Q2002 - 2Q2003 $20.75 $15.12 $11.92 $36.88 $36.22 $22.46 1.3 4.3 1.7 8.0 9.2 6.0

3Q2001 - 2Q2002 $22.92 $16.19 $15.16 $26.31 $26.50 $28.49 1.1 0.7 1.4 7.0 8.4 7.6

3Q2000 - 2Q2001 $21.94 $16.12 $15.37 $28.21 $25.20 $29.10 0.8 0.1 0.0 7.6 7.3 5.8

3Q1999 - 2Q2000 $20.77 $15.82 $12.66 $25.76 $26.78 $22.75 0.1 0.0 0.1 8.3 7.3 6.7

RENEWAL DEALSA B C A B C A B C A B C

3Q2011 - 2Q2012 $19.33 $14.10 $13.90 $11.99 $8.83 $13.90 4.6 3.6 3.7 5.0 4.2 4.5

3Q2010 - 2Q2011 $19.63 $14.62 $11.36 $20.00 $10.80 $8.32 5.8 4.2 4.2 6.4 4.5 5.3

3Q2009 - 2Q2010 $18.46 $15.56 $11.01 $13.92 $9.61 $5.49 4.4 3.3 4.3 5.4 4.7 4.8

3Q2008 - 2Q2009 $20.23 $17.15 $15.33 $19.21 $16.69 $15.69 3.0 2.9 3.1 5.9 5.6 7.0

3Q2007 - 2Q2008 $22.72 $15.73 $14.77 $22.75 $15.42 $16.69 3.6 2.7 2.6 7.2 5.4 6.7

3Q2006 - 2Q2007 $16.26 $14.02 $15.42 $16.19 $16.94 $9.22 4.5 3.6 0.8 6.2 6.5 5.4

3Q2005 - 2Q2006 $16.64 $13.33 $15.76 $25.84 $16.58 $8.99 5.2 2.0 0.0 7.8 6.5 5.2

3Q2004 - 2Q2005 $15.97 $12.47 $11.57 $21.54 $22.76 $5.31 3.5 3.8 0.5 7.5 7.9 5.0

3Q2003 - 2Q2004 $18.28 $13.43 $9.71 $23.96 $17.21 $10.78 2.0 3.1 1.5 8.9 6.9 6.7

3Q2002 - 2Q2003 $20.76 $14.26 $10.68 $14.49 $13.31 $7.78 0.9 1.5 0.4 6.8 7.1 6.6

3Q2001 - 2Q2002 $22.68 $16.32 $13.10 $16.94 $13.68 $7.38 0.2 0.1 0.0 7.1 6.6 4.6

3Q2000 - 2Q2001 $22.58 $16.47 $14.11 $8.42 $8.94 $4.75 0.0 0.0 0.0 4.6 7.3 3.3

3Q1999 - 2Q2000 $20.72 $15.03 $13.77 $13.78 $14.19 $10.38 0.1 0.0 0.0 6.1 6.9 6.6

AVERAGE NET INITIAL RATE

AVERAGE NET INITIAL RATE

AVERAGE ABATEMENT(MONTHS)

AVERAGE TERM(YEARS)

AVERAGE ABATEMENT(MONTHS)

AVERAGE TERM(YEARS)

AVERAGE TENANT IMPROVEMENT

AVERAGE TENANT IMPROVEMENT

• Lease metrics are compared on a four-quarter basis instead of calendar year, allowing full years of data comparison.

• Average rental rates for Class A buildings fell 5.9 percent for new transactions and 1.5 percent for renewals from the previous year.However, gross rent abatement has fallen from 1.03 months per lease year to 0.85 months for new deals. This signals that net effectiverents may grow in the near term as concessions taper off.

• Class B initial rates for new transactions are up 4.1 percent and down 3.5 percent for renewals. Average abatement and tenantimprovement allowances have decreased slightly.

• Initial rates for Class C increased greatly for both new and renewal transactions, which is at odds with its occupancy losses this quarter.Average abatement also decreased, suggesting that effective rates have increased.

• OUTLOOK: The Class A segment experienced significant positive absorption in 2011. Also, concession packages have begun to trenddownward in this segment. Thus, Class A net effective rents should slowly increase throughout the year. Despite rent growth in Class Cbuildings, occupancy continues to fall, which could prompt future rent reduction.

AVERAGE LEASE TERMS ON NEW AND RENEWAL DEALS

All rates are shown as net and do not include tax and operating costs for building. Numbers will be revised as new data are reported in subsequent quarters


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SINVESTMENT SALESThree Central Loop buildings trade as a flurry of listings hit the market

• Five buildings sold and three were placed under contract during the second quarter. For the first quarter in over two years no Class Abuildings traded.

• The highest price paid on a per square foot basis was Onni Group’s purchase of 200 North LaSalle for $157 per square foot. The newowner will look to fill the building, which is currently 66 percent leased, and capitalize on a lower basis.

• A joint venture of GlenStar Properties and USAA Real Estate Company purchased the North and South buildings at 141 West Jackson(Chicago Board of Trade Building) for just over $151 million, equating to $111 per square foot. The CME Group, which previously ownedthe buildings, plans to lease back 150,000 square feet for the next 15 years.

• After being placed on the market during the first quarter, three buildings located in the West Loop on Monroe Street are under contract.

• KBS REIT 2 is selling up to a 49 percent stake in 300 North LaSalle. After purchasing the building in 2010 for a record $504 per squarefoot, KBS hopes to fetch as much as $600 per square foot for a minority stake.

INVESTMENT SALES: APPETITE EXPANDS TO ALL ASSET CLASSES

Building Address Sale Date Size (sf) PricePrice per sf * Class Seller Status (Buyer or Listing Agent)

300 N LaSalle (Up to 49% Stake)

New On Market 1,302,901 - $600 A KBS REIT 2 Marketing (Holiday Fenoglio Fowler)

181 W Madison New On Market 936,683 $300,000,000 $320 A GE Pension Trust Marketing (Eastdil Secured)

122 S Michigan New On Market 512,369 - C Ivor Braka Marketing (Jones Lang LaSalle)

550 W Washington New On Market 372,000 $112,000,000 $301 A Beacon Capital Partners Marketing (Eastdil Secured)

332 S Michigan New On Market 319,401 - C Ivor Braka Marketing (Jones Lang LaSalle)

300 W Adams New On Market 252,847 $57,000,000 $225 C Sterling Bay Cos. Marketing (CBRE)

540 N LaSalle New On Market 65,100 $10,000,000 $154 C Joseph Lagoa Marketing (CBRE)

130 E Randolph 1,192,357 B180 N Stetson(Partial Stake)

976,137 A

32 W Randolph On Market 226,666 $13,250,000 $58 C David & Barbara Kalish Marketing (CB Richard Ellis)

230 W Monroe Under Contract 623,524 $93,500,000 $150 B GE Pension Trust Lincon Property JV PIMCO (HFF)

200 W Monroe Under Contract 538,890 $75,000,000 $139 B GE Pension TrustFarbman Group JV LubertAdler Funds (HFF)

311 W Monroe Under Contract 384,885 $45,000,000 $117 C AREA PartnersArchon Group JV Golub & Co. (Eastdil Secured)

141 W Jackson 2nd Qtr 2012 1,365,182 $151,500,000 $111 B CME GroupGlenStar Properties JV USAA Real Estate Co. / JLL & Holly Duran R.E.

150 N Michigan 2nd Qtr 2012 661,477 $102,000,000 $154 B SEB Asset ManagementJohn Hancock Real Estate / Jones Lang LaSalle

200 N LaSalle 2nd Qtr 2012 645,170 $101,000,000 $157 B Younan Properties Onni Group / Eastdil Secured

100 W Monroe 2nd Qtr 2012 130,976 $12,500,000 $95 C Thomas Horwich Integrated Clark Monroe

900-920 N Franklin

2nd Qtr 2012 116,984 $6,500,000 $56 C Franklin Square South Street Capital

On Market $500,000,000 $231 BentleyForbes Marketing (CBRE)

*Price per square foot - based off estimated selling price for new to market buildings


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SFORECASTAn uneven, slow recovery is expected

As expected, the CBD has experienced one quarter ofnegative and one quarter of positive absorption in 2012.Jobs are slowly growing and new demand has beenbuilding in the CBD. However, companies continue to‘right-size’ upon lease expirations.

Occupancy is currently 0.5 percent below its 2007 peak,while employment is 5.5 percent below peak. During pastrecessions, there was a strong correlation between thetwo metrics. Thus, MB Real Estate continues to forecast aslow rebound.

The CBD has strong demand drivers, which promptedseveral companies to expand or relocate operationsdowntown to take advantage of public transportation andthe growing pool of young talent. Tech companies haveand will continue to expand their presence. Google isexpected to lease 500,000 square feet at theMerchandise Mart, while Salesforce will open a new50,000 square foot sales office at 111 West Illinois, withplans to expand over the next two years.

In spite of the new demand generated in the CBD, multipleobstacles are likely to mute the recovery. Many tenantsare reducing their square footage upon lease expirations.Such firms seek to be more efficient with workspaces andhave adopted alternative workplace strategies such ashotelling, which refers to employees sharing unassignedworkstations as they alternate working from the office, at

HISTORIC & PROJECTED VACANCY: OCCUPANCY WILL FLATTEN OVER THE NEXT TWO YEARS

YearTotal Historic and

Forecasted Inventory (sf)

Total Historic & Forecasted

Occupancy (sf)

Direct Vacancy %

1996 120,244,884 101,285,488 15.8%1997 120,434,748 104,939,294 12.9%1998 119,972,770 106,058,995 11.6%1999 118,691,577 106,744,585 10.1%2000 121,440,276 109,533,759 9.8%2001 122,776,164 108,743,284 11.4%2002 124,713,268 107,598,500 13.7%2003 125,037,423 106,754,119 14.6%2004 126,452,643 106,568,104 15.7%2005 128,385,650 105,737,728 17.6%2006 126,478,575 108,402,912 14.3%2007 125,626,639 110,969,808 11.7%2008 125,269,078 110,833,045 11.5%2009 130,038,076 110,112,891 15.3%2010 130,539,796 109,602,891 16.0%2011 130,649,210 110,516,410 15.4%2012 131,038,774 110,841,929 15.4%2013 131,038,774 111,004,688 15.3%

624,814

(171,571)

1996-2011 Absorption Avg:

YTD 2012 Absorption:

Total projected inventory based on addition of projects currently under construction

Occupancy is forecast based on proprietary assumptions regarding the Chicago MSA’s total employment

change and the office industry’s historical performance which trails the overall economy.

home, or at other locations. Also archives are going digital, and server rooms are being replaced by cloud technology. Chicago’s (city)unemployment rate has fallen from 11.3 percent a year ago to 9.6 percent, but remains elevated compared to state and national figures.Collectively, these factors will mute the effects of new demand.


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SSUBMARKET MAP


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SMARKET STATISTICS

CENTRAL LOOPRBA(sf)

YTDAbsorption (sf)

2nd QuarterAbsorption (sf)

Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)

Total Vacancy Rate (Direct + Sublease) %

Class A 13,569,153 2,596 73,072 1,307,797 9.6% 12,261,356 680,585 14.7%

Class B 14,182,005 (10,845) (45,909) 2,325,749 16.4% 11,856,256 370,893 19.0%

Class C 8,625,080 (63,221) 29,173 1,521,616 17.6% 7,103,464 78,591 18.6%

TTotal 36,376,238 (71,470) 56,335 5,155,162 14.2% 31,221,076 1,130,069 17.3%

EAST LOOPRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 4,040,431 95,494 9,860 738,987 18.3% 3,301,444 143,337 21.8%

Class B 10,444,188 79,236 (2,305) 2,489,812 23.8% 7,954,376 124,746 25.0%

Class C 8,457,866 (183,354) (83,181) 1,336,950 15.8% 7,120,917 65,573 16.6%

Total 22,942,485 (8,625) (75,626) 4,565,749 19.9% 18,376,736 333,656 21.4%

N. MICHIGAN AVE.RBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 3,952,669 (16,614) 19,547 853,123 21.6% 3,099,546 124,991 24.7%

Class B 4,675,545 3,646 120,896 1,135,852 24.3% 3,539,693 46,192 25.3%

Class C 4,359,098 (263,116) (178,510) 809,586 18.6% 3,549,512 43,042 19.6%

Total 12,987,312 (276,084) (38,067) 2,798,561 21.5% 10,188,751 214,225 23.2%

RIVER NORTHRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 4,001,836 116,232 (2,484) 509,640 12.7% 3,492,196 70,926 14.5%

Class B 3,654,431 43,368 95,635 287,885 7.9% 3,366,547 239,039 14.4%

Class C 5,631,354 73,512 53,994 514,616 9.1% 5,116,738 192,726 12.6%

Total 13,287,622 233,112 147,144 1,312,141 9.9% 11,975,481 502,691 13.7%

SOUTH LOOPRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 1,019,325 (82,288) (84,969) 293,200 28.8% 726,125 10,830 29.8%

Class C 1,212,404 (26,404) (14,852) 299,243 24.7% 913,162 2,005 24.8%

Total 2,231,729 (108,692) (99,821) 592,443 26.5% 1,639,287 12,835 27.1%

WEST LOOPRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 27,085,397 (52,053) 77,114 3,923,137 14.5% 23,162,261 819,289 17.5%

Class B 9,725,602 132,292 24,061 1,212,697 12.5% 8,512,906 156,985 14.1%

Class C 6,402,388 (20,051) 13,788 1,046,135 16.3% 5,356,253 96,256 17.8%

Total 43,213,388 60,188 114,963 6,181,968 14.3% 37,031,420 1,072,530 16.8%

TOTALSRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 53,668,812 63,367 92,140 7,625,884 14.2% 46,042,928 1,849,958 17.7%

Class B 42,681,771 247,696 192,377 7,451,994 17.5% 35,229,777 937,855 19.7%

Class C 34,688,191 (482,634) (179,589) 5,528,145 15.9% 29,160,046 478,193 17.3%

Total CBD 131,038,774 (171,571) 104,928 20,606,023 15.7% 110,432,751 3,266,006 18.2%



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SECTION THREE

SUBURBAN CHICAGOEXECUTIVE SUMMARY

From 2008 to 2011, Suburban Chicago lost more than 6 million square feet of occupancy. As a result, its direct vacancy rate reached a recordhigh of 23.6 percent. Thus far, 2012 has been a different story. Demand has accelerated in Class A and B buildings and has pushed directvacancy back down to 23.0 percent. Despite this occupancy increase, vacancy is still extremely high and numerous factors weigh againsta sustainable recovery.

Key Indicators: • Every submarket saw an uptick in demand. The East-West was the best performing submarket, experiencing 282,000 square feet ofpositive absorption. Class A buildings in the East-West submarket have the lowest direct vacancy rate of any segment.

• Occupancy increased across each building class. Direct vacancy rates fell 40 basis points in Class A, 60 basis points in Class B, and30 basis points in Class C.

• AT&T continues to bog down the sublease market with its 1.2 million square foot corporate campus and a separate 239,000 squarefoot building listed as available. The potential for formerly single-tenant corporate campuses to enter the multi-tenant market weighs onSuburban Chicago. Kraft is now listing its 488,000 square foot building in Glenview.

• Leasing activity improved, but most large transactions are not generating new demand. This “musical chairs” trend is evidenced bycompanies leasing blocks in their current submarkets while creating new vacant blocks by leaving behind their former spaces.

• Class A asking rental rates are down 3.1 percent year-over-year, which likely has contributed to recent positive absorption. However,disparity exists among the submarkets: Class A asking rental rates are up 5.1 percent in the O’Hare submarket, but are down 7.2 percentin the North submarket.

• While the CBD earns enough demand from its labor pool to counteract an increased tax burden, Suburban Chicago lacks similar drivers.

• Outdated product plagues the suburbs and fuels the glut of vacant space. Allstate is considering tearing down its former headquartersbuilding in South Barrington. However, other obsolete buildings are still listing space and driving down market economics.

• Speculative construction is, and will remain, at a standstill. Construction was completed on the build-to-suit headquarters for AstellasPharma US in Glenview, and The Hub Group is set to break ground on its 130,000 square foot headquarters in August.

Occupancy is 6.7 percent below peak in Suburban Chicago compared to a 5.5 percent peak-to-current total employment loss. Corporaterelocations, as well as underutilized space, remain the biggest risks to the market; companies have leased more space than they need andwill reduce square footage upon lease expirations.

SUBURBAN VACANCY AND YEAR-TO-DATE ABSORPTION SUMMARY

Direct Vacancy2Q2012

AChange from

1Q2012B

Change from 1Q2012

CChange from

1Q2012Total

Change from 1Q2012

East-West 18.8% -0.9% 23.8% -0.3% 21.5% -1.1% 21.0% -0.6%North 19.4% -0.3% 19.6% -0.6% 23.7% 0.4% 19.8% -0.3%Northwest 23.2% -0.1% 33.7% -0.9% 31.3% 0.0% 27.1% -0.4%O'Hare 19.1% -0.6% 30.6% -0.7% 37.6% 0.3% 25.7% -0.5%Suburban Chicago Total 20.3% -0.4% 26.4% -0.6% 27.1% -0.3% 23.0% -0.5%

Net Absorption2Q2012

A B C Total

East-West 179,930 48,657 53,683 2282,269

North 41,614 41,511 (15,422) 667,702

Northwest 10,128 69,944 5,707 885,779

O'Hare 52,948 30,324 (10,496) 772,775

Suburban Chicago Total 284,619 190,435 33,472 508,526



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LYNEW DEVELOPMENTBuild-to-suits, medical office account for all new development

• Of the 112 million square feet of suburban inventory that MB Real Estate tracks, over 25 million square feet is currently vacant. Thisdoes not include former owner-occupied facilities, such as Allstate’s former corporate headquarters, a vacant 516,000 square footbuilding in South Barrington. United Airlines’ 1 million square foot campus in Elk Grove Village and Kraft’s 488,000 square foot buildingin Glenview are available for sale.

• With so much available space, speculative construction is not feasible. Even the largest tenants in the Suburban market have multipleoptions to choose from in each submarket and class. It is extremely unlikely that any lender would fund a speculative development untilmillions of square feet are absorbed.

• The Hub Group announced plans to construct a new 130,000 square foot headquarters at the site located at 2000 Clearwater Drive inOak Brook. The Hub Group purchased the former 200,000 square foot Reed Elsevier headquarters building and plans to demolish theexisting building and break ground on their build-to-suit in August. Construction is expected be completed by November 2013.

• The only office construction underway is limited to noncompetitive medical office developments. The build-to-suit North Americanheadquarters for Astellas Pharma US in Glenview, for which MB Real Estate managed the construction, officially opened in June.

• OUTLOOK: Suburban Chicago has an overabundance of vacant space. Numerous proposed developments are ready to break groundonce demand warrants it, which will always cap rent growth at inflationary levels. Between historically high market vacancy andconstrained financing, speculative development is unlikely for several years.

2012 DeliveriesBuilding Address Size (sf) % Leased Submarket Comments

1 Astellas Pky, Glenview 440,000 100.0% North Broke ground April 2010 with construction completed June 2012. Build-to-suit North American Headquarters for Astellas Pharma US. Construction managed by MB

Real Estate. TTotal - 1 Proppertyy

Under ConstructionBuilding Address Size (sf) % Pre-leased Due Date Comments

TTotal - 00 PropertiesTTotal 00 PProperties

ProposedBuilding Address Size (sf) % Pre-leased Due Date Comments

2000 Clearwater Drive, Oak Brook 130,000 100.0% November 2013 Ground breaking set for August 2012. Build-to-suit headquarters for The Hub Group. Replaces 200,000

square foot building formerly owned by Reed Elseviersquare foot building formerly owned by Reed Elsevier.

Total - 1 Property

NEW DEVELOPMENT PIPELINE


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LYSUBLEASE SPACESublease availability increasing, remaining elevated on a historical basis

• The amount of available sublease space increased by 1.5 percent and is now more than 3.6 million square feet. Over 2.6 million squarefeet is available for sublease in Class A buildings, which equates to 4.2 percent of the total Suburban inventory. Sublease availabilityincreased in each submarket except for O’Hare. The glut of sublease space weighs heavily on a market that already suffers from highdirect vacancy.

• The number of available sublease blocks greater than 50,000 square feet remained unchanged at 13. Kaufman Hall signed a lease toreduce the size of National Lewis University’s block at 5202 Old Orchard Road in Skokie by 50,000 square feet.

• OUTLOOK: The amount of available sublease space is well above its historical average of 3.4 million square feet. This figure is expectedto decline next quarter when Telcordia Technologies’ 360,000 square foot lease at 5200 South Route 53 in Lisle will expire. As a result,a large influx of space will hit the direct market.

HISTORIC YEAR-END SUBLEASE AVAILABILITY: CLASS A SPACE SPIKES AGAIN

Class ABuilding Address Size (sf) Occupancy Expiration Submarket Sublandlord

2000 W AT&T Dr, Hoffman Estates 1,207,245 Vacant August 2016 Northwest AT&T3 Overlook Pt, Lincolnshire 290,143 Vacant February 2017 North Hewitt Associates4201 Winfield Rd, Warrenville 249,996 Vacant January 2016 East-West Navistar3 Parkway Blvd N, Deerfield 232,836 Vacant December 2014 North Astellas Pharma US1000 Milwaukee Ave, Glenview 130,403 Vacant April 2017 North AON Warranty Group410 Warrenville Rd, Lisle 60,434 Vacant May 2013 East-West IKON Office Solutions9500 W Bryn Mawr Ave, Rosemont 56,554 Vacant August 2014 O'Hare Matria Healthcare701 E 22nd St, Lombard 52,079 Vacant June 2013 East-West The Marketing Store5202 Old Orchard Rd, Skokie 50,766 Negotiable June 2021 North National Lewis University

Total - 9 Spaces 2,330,456

Class BBuilding Address Size (sf) Occupancy Expiration Submarket Sublandlord

6200 S Route 53, Lisle 360,000 Vacant July 2012 East-West Telcordia Technologies2001 Lakewood Blvd, Hoffman Estates 239,250 Negotiable August 2016 Northwest AT&T750 N Commons Dr, Aurora 115,000 Negotiable September 2017 East-West Westell Technologies850-950 Warrenville Rd, Lisle 85,530 Negotiable January 2019 East-West National Lewis University

Total - 4 Spaces 799,780

LARGE BLOCKS (MORE THAN 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE

Italicized addresses indicate space is new on the market


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LYLARGE BLOCKS OF DIRECT AVAILABILITY78 contiguous blocks greater than 50,000 square feet remain directly available

• The total number of large blocks held steady at 78, while totalsquare footage within large blocks was reduced by 3.3 percent,or 284,000 square feet.

• The largest block removed during the quarter was a 200,000square foot contiguous block at 75 North Fairway Drive in VernonHills. CareFusion leased 151,000 square feet, reducing the blockto below the 50,000 square foot large block threshold.

• The largest new block is an 81,000 square foot contiguous blockat 4343 Commerce Court in Lisle. Porsche is set to vacate thethird floor by July 2013, creating a contiguous block from thesecond through fourth floors.

CLASS CBuilding Address City Size (sf) Submarket

1299 Algonquin Rd Schaumburg 195,393 Northwest3501 Algonquin Rd Rolling Meadows 186,432 Northwest2-4-6 Genesee St Waukegan 75,996 North1950 S Batavia Ave Geneva 51,845 East-West4 Blocks of Space 509,666

CLASS BBuilding Address City Size (sf) Submarket

747 E 22nd St Lombard 209,557 East-West1 Salem Lake Dr Long Grove 150,000 Northwest544 Lakeview Pky Vernon Hills 144,999 North2350-2360 E Devon Ave Des Plaines 142,596 O'Hare700 N Wood Dale Rd Wood Dale 125,328 Northwest2850 W Golf Rd * Rolling Meadows 110,941 Northwest1000 E Woodfield Rd Schaumburg 99,453 Northwest703-709 W Algonquin Rd Arlington Heights 96,213 Northwest4242 N Harlem Ave Norridge 93,155 O'Hare500 Joliet Rd ** Willowbrook 78,400 East-West2000 S Finley Rd * Lombard 78,300 East-West814 Commerce Dr Oak Brook 66,882 East-West1245 Corporate Blvd Aurora 64,960 East-West333 E Butterfield Rd Lombard 64,809 East-West27545 Diehl Rd Warrenville 62,440 East-West999 E Touhy Ave Des Plaines 59,710 O'Hare244 Knollwood Dr Bloomingdale 55,000 Northwest2211 Butterfield Rd Downers Grove 52,891 East-West2400 E Devon Ave Des Plaines 51,000 O'Hare19 Blocks of Space 1,806,634

Italicized addresses indicate space is new on the market* Block of space is for future occupancy** Block of space will be vacated during the upcoming quarter

CLASS ABuilding Address City Size (sf) Submarket

21440 Lake Cook Rd Deer Park 351,425 Northwest1600 McConnor Pky Schaumburg 300,686 Northwest700 Oakmont Ln Westmont 256,767 East-West1701 Golf Rd Rolling Meadows 234,164 Northwest3075 Highland Pky * Downers Grove 228,764 East-West2400 Cabot Dr Lisle 217,718 East-West28100 Torch Pky Warrenville 203,842 East-West5550 Prairie Stone Pky * Hoffman Estates 193,601 Northwest425 N Martingale Rd Schaumburg 156,560 Northwest1 Overlook Pt Lincolnshire 148,686 North3500 Lacey Rd * Downers Grove 132,045 East-West3333 Beverly Rd Hoffman Estates 129,000 Northwest2895 Greenspoint Pky Hoffman Estates 127,941 Northwest1701 Golf Rd Rolling Meadows 125,993 Northwest200 N Martingale Rd Schaumburg 109,716 Northwest1707 N Randall Rd Elgin 109,076 Northwest2355 Waukegan Rd Bannockburn 106,495 North1 Corporate Dr Long Grove 104,637 North8420 W Bryn Mawr Ave Chicago 104,164 O'Hare1333 Butterfield Rd Downers Grove 98,520 East-West1 Pierce Pl Itasca 97,517 Northwest6 Parkway Blvd N ** Deerfield 95,854 North1707 N Randall Rd Elgin 87,076 Northwest200 N Martingale Rd Schaumburg 86,310 Northwest3800 N Wilke Rd Arlington Heights 81,243 Northwest2550 W Golf Rd Rolling Meadows 81,222 Northwest4343 Commerce Ct * Lisle 81,097 East-West75 Tri State International * Lincolnshire 79,449 North1 Corporate Dr Long Grove 77,628 North2655 Warrenville Rd Downers Grove 76,691 East-West2245 Sequoia Dr * Aurora 76,126 East-West333 Knightsbridge Pky Lincolnshire 74,728 North2100 Sanders Rd Northbrook 72,565 North150 E Pierce Rd Itasca 70,590 Northwest2333 Waukegan Rd Bannockburn 70,000 North1000 Royce Blvd Oakbrook Terrace 70,000 East-West9500 W Bryn Mawr Ave Rosemont 69,701 O'Hare10255 W Higgins Rd Rosemont 69,695 O'Hare535 E Diehl Rd Naperville 67,731 East-West300 Park Blvd Itasca 67,307 Northwest701 Warrenville Rd Lisle 67,233 East-West4201 Lake Cook Rd Northbrook 66,000 North2 Corporate Dr Long Grove 64,871 North1200 Lakeside Dr Bannockburn 63,738 North540 Lake Cook Rd * Deerfield 63,298 North1001 Warrenville Rd Lisle 61,350 East-West2 Pierce Pl Itasca 60,904 Northwest18W140 Butterfield Rd Oakbrook Terrace 60,401 East-West2100 Enterprise Ave Geneva 55,584 East-West9525 W Bryn Mawr Ave Rosemont 55,040 O'Hare25 Tri State International * Lincolnshire 54,974 North7400 N Caldwell Ave Niles 54,000 North3000 Lakeside Dr Bannockburn 53,316 North701 E 22nd St * Lombard 52,079 East-West3500 Lacey Rd Downers Grove 51,601 East-West55 Blocks of Space 5,876,719


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VACANCY RATESVacancy rates fall, but are still extremely high

• After two relatively flat quarters, the direct vacancy rate fell 50 basis points to 23.0 percent. Including sublease space, the total vacancyrate dropped 40 basis points to 26.2 percent. Class A direct vacancy fell by 0.4 percent, while Class B saw a 0.6 percent decrease andClass C experienced a 0.3 percent vacancy decrease.

• Class B buildings in the Northwest submarket experienced the largest vacancy decrease of any segment. However, its direct vacancyrate remains at an elevated 33.7 percent. Only O’Hare’s Class C segment is more distressed, as direct vacancy increased to 37.6percent.

• Class A buildings in the East-West and O’Hare submarkets are outperforming the rest of the market, with direct vacancy rates of 18.8percent and 19.1 percent, respectively.

• OUTLOOK: Despite the relatively strong quarter, pervasive weakness continues in Suburban Chicago. Major corporate relocations anddownsizing continue to threaten a recovery, as vacancy rates continue to be near historically high levels.

HISTORIC YEAR-END VACANCY RATES BY SUBMARKET: NORTHWEST AND O’HARE LAG

HISTORIC YEAR-END VACANCY RATES BY CLASS: B AND C PROPERTIES MORE THAN 1/4 VACANT


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LARGE DEALSLarge renewal activity increases

• The number of large deals tracked increased to 18. This was due to more large tenants renewing compared to last quarter.

• CareFusion signed the largest new transaction and will occupy 151,000 square feet at 75 North Fairway Drive in Vernon Hills. Aetnaalso signed a new 150,000 square foot lease and will occupy three floors at 3800 Golf Road in Rolling Meadows.

• World Kitchen signed the largest lease in the O’Hare submarket, taking 55,000 square feet at 9525 West Bryn Mawr in Rosemont. Thenearby building at 8700 West Bryn Mawr completed two large deals: Property Casualty Insurers Association of America signed for40,000 square feet while Lafarge S.A. will lease 31,000 square feet.

• Allstate signed the largest renewal of the quarter, extending its lease of 94,000 square feet at 9022 Heritage Parkway in Woodridge.

• Reyes Holdings will expand their requirement at 6250 North River Road in Rosemont by 38,000 square feet, which represents newdemand for the O’Hare submarket.

• OUTLOOK: For sustained occupancy increases, large deal activity must pick up in order to offset companies like Sara Lee who areexiting the market. Unfortunately, the market has not displayed the new demand necessary for this to happen quickly.

NEW


CareFusion Relo North 75 N Fairway Dr, Vernon Hills 150,258Aetna New Northwest 3800 Golf Rd, Rolling Meadows 149,595World Kitchen Relo O'Hare 9525 W Bryn Mawr, Rosemont 55,000Bright Star Relo North 850-860 Technology Way, Libertyville 47,543Property Casualty Insurers Association of America Relo O'Hare 8700 W Bryn Mawr, Rosemont 40,000Reed Elsevier Relo/Cont East-West 333 E Butterfield Rd, Lombard 37,000Lafarge S.A. New O'Hare 8700 W Bryn Mawr, Rosemont 31,000Mueller & Co. Relo Northwest 1707 N Randal Rd, Elgin 22,000Benefit Express Services Relo Northwest 1700 E Golf Rd, Schaumburg 21,295Total - 9 Deals 553,691

RENEWAL/EXPANSION/SUBLEASE


Allstate Ren East-West 9022 Heritage Pky, Woodridge 94,233Crowe Horwath Ren East-West 1 Mid America Plaza, Oakbrook Terrace 82,759United HealthCare Ren Northwest 1900 E Golf Rd, Schaumburg 60,572Kaufman Hall Ren/Exp North 5202 Old Orchard Rd, Skokie 50,653Reyes Holdings Exp O'Hare 6250 N River Rd, Rosemont 38,000The University of Chicago Medical Center Ren East-West 180 Harvestor Dr, Burr Ridge 27,789HDR Inc. Ren O'Hare 8550 W Bryn Mawr, Chicago 27,484Automated Health Systems Ren Northwest 1375 E Woodfield Rd, Schaumburg 25,000Cosi Ren North 1751 Lake Cook Rd, Deerfield 22,514Total - 9 Deals 429,004

LARGE LEASE TRANSACTIONS: MOST NEW LARGE DEALS ARE NOT GENERATING NEW DEMAND

Abbreviations: Cont - Contraction Exp - Expansion Relo - Relocation Ren - Renewal


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ABSORPTIONLargest quarterly absorption since 2005

• The suburban market saw 509,000 square feet of net positive absorption, marking the largest quarterly absorption since the fourth quarterof 2005. However, negative absorption totaled more than 6.1 million square feet from 2008 to 2011.

• OUTLOOK: Despite the relatively strong quarter, there are few significant demand drivers in Suburban Chicago. Companies have mulledrelocation to other states to avoid increased corporate income taxes; others, like Sara Lee, are relocating to the CBD. Without significantjob creation, the future of the market is weak.

SUBURBAN CHICAGO ABSORPTION BY CLASS: CLASS A AND B POSITIVE THUS FAR

EAST-WEST 2004 2005 2006 2007 2008 2009 2010 2011 YTTD 2012

Class A 1,080,332 102,299 366,688 542,281 (259,973) (595,372) (219,164) 299,247 118,619

Class B (25,541) 389,014 484,869 (203,072) (2,062) (259,196) 67,827 (152,069) 84,524

Class C 76,936 85,269 (125,850) (108,813) (87,441) (179,177) 7,017 55,114 47,748

Total 1,131,727 576,582 725,707 230,396 (349,476) (1,033,744) (144,319) 202,292 250,891

NORTH 2004 2005 2006 2007 2008 2009 2010 2011 YYTD 2012

Class A (10,452) 196,403 (100,049) 615,115 (240,617) (207,914) (312,238) (261,008) 164,375

Class B 62,026 164,357 316,207 355,510 (60,982) (38,575) (319,078) 33,814 58,168

Class C (39,173) 12,697 (39,440) 26,935 (2,048) (104,195) (40,044) (90,151) (37,080)

Total 12,401 373,457 176,718 997,560 (303,647) (350,684) (671,360) (317,345) 185,464

NORTHWEST 2004 2005 2006 2007 2008 2009 2010 2011 YYTD 2012

Class A 902,901 225,865 (488,651) 10,333 (302,930) (388,945) (21,262) (632,282) 25,886

Class B 233,613 (234,681) 12,266 (164,112) (261,498) (310,263) (295,928) (383,730) 114,875

Class C (13,282) (216,898) (15,371) (51,429) (28,362) (35,167) (192,091) (48,617) 10,432

Total 1,123,232 (225,714) (491,756) (205,208) (592,790) (734,375) (509,280) (1,064,629) 151,193

O'HARE 2004 2005 2006 2007 2008 2009 2010 2011 YYTD 2012

Class A 402,561 (55,786) 189,235 11,636 (256,325) (134,526) 209,180 40,666 89,022

Class B (306,424) 53,945 7,915 (81,167) (51,601) (80,925) 70,376 14,041 (16,366)

Class C (15,002) (204,597) 90,170 (50,022) (35,696) 62,815 (10,855) (14,567) (38,303)

Total 81,135 (206,438) 287,320 (119,553) (343,622) (152,637) 268,701 40,140 34,353

TOTALS 2004 2005 2006 2007 2008 2009 2010 2011 YYTD 2012

Class A 2,375,342 468,781 (32,777) 1,179,365 (1,059,845) (1,326,757) (343,484) (553,378) 397,902

Class B (36,326) 372,635 821,257 (92,841) (376,143) (688,960) (476,802) (487,944) 241,202

Class C 9,479 (323,529) (90,491) (183,329) (153,547) (255,724) (235,972) (98,221) (17,202)

Total 2,348,495 517,887 697,989 903,195 (1,589,535) (2,271,441) (1,056,259) (1,139,542) 621,901



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SGROSS ASKING RENTSAsking rental rates down across all submarkets, building classes

• Over the last four quarters, gross asking rents have fallen across all building classes. Class A rents are down 3.1 percent, Class B rentsare down 1.5 percent, and Class C rents are down 0.3 percent on a year-over-year basis.

• Class A buildings in the O’Hare submarket were the best performing segment, posting 5.1 percent growth in asking rents over the past12 months.

• Asking rental rates in the North submarket’s Class A buildings have fallen 7.2 percent on a year-over-year basis. This has led to positiveabsorption during the last two quarters.

• O’Hare is the lone submarket to post growth in asking rental rates. At 3.9 percent year-over-year growth, the submarket is beginningto show signs of recovery.

• Class C gross asking rental rates are at their lowest historical levels in the East-West and Northwest submarkets.

• Compared to peak levels, overall gross asking rents have fallen 15.3 percent.

• OUTLOOK: As asking rental rates have continued to decline, the Suburban market is starting to experience positive absorption. With directvacancy at 23.0 percent, rents will have to continue to decline to reach pre-recession occupancy.

Average Direct Gross Asking Rent

AChange over

last yearB

Change over last year

CChange over

last yearTotal

Change over last year

East-West $22.24 -2.4% $18.08 -2.7% $15.46 -0.6% $19.92 -2.2%North $19.89 -7.2% $19.64 -0.7% $15.63 -0.6% $19.43 -5.2%Northwest $21.82 -3.7% $16.88 -0.6% $13.04 -3.8% $19.55 -3.1%O'Hare $23.76 5.1% $19.93 -0.1% $16.19 6.9% $21.34 3.9%Suburban Chicago Total $21.68 -3.1% $18.30 -1.5% $15.17 -0.3% $19.89 -2.4%

AVERAGE GROSS ASKING RATES BY CLASS AND SUBMARKET

ASKING RATES REMAIN DOWN FROM ONE YEAR AGO


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SINVESTMENT SALESInvestors capitalize on distressed properties

On the Market/Under Contract: 2nd Quarter 2012Building Address Submarket Size (sf) Price PSF * Class Seller Status (Buyer or Listing Agent)

500-540 Lake Cook Rd, Deerfield, 1 Parkway Blvd N, Deerfield, 9550 W Higgins Rd, Rosemont (6 Properties)

North / Northwest

1,214,470 - - AGeneral Electric Capital Corporation

On Market (JLL)

9811-9977 Woods Dr, Skokie (8 Properties) North 356,958 - - BDevelopment Resources, Inc.

On Market (Colliers)

6250 N River Rd, Rosemont O'Hare 380,360 - - A GLL Real Estate Partners On Market (Colliers)

Central Park of Lisle II, 3333 Warrenville Rd, Lisle East-West 311,912 - - A White Oak Realty Partners On Market (CBRE)

Central Park of Lisle I, 4225 Naperville Rd, Lisle East-West 310,375 - - A White Oak Realty Partners On Market (CBRE)

747 E 22nd St, Lombard East-West 209,557 $12,000,000 $57 A Vectren Utility HoldingsOn Market (Jones Lang LaSalle)

25 NW Point Blvd, Elk Grove Village Northwest 207,136 A The John Buck CompanyNew on Market (Transwestern)

75 N Fairway Dr, Vernon Hills North 189,686 - - A Janko Group On Market (CBRE)

4101 Winfield Rd, Warrenville East-West 167,215 - - ARR Donnelley & Sons Company

New on Market (CBRE)

555 Aptakisic Rd, Lincolnshire North 162,739 $50,000,000 $307 ABridge Development Partners

Under Contract (Cole Capital)

Investment Sales: 2nd Quarter 2012Building Address Submarket Size (sf) Price PSF * Class Seller Buyer

6400 Shafer Ct, Rosemont O'Hare 179,000 $10,770,000 $60 A Ruben YbarraCrossroads Development Partners

150 NW Point Blvd, Elk Grove Village Northwest 176,844 $13,975,000 $79 A Atlas Financial Holdings Topco Associates

850 E Algonquin Rd (4 Properties), Schaumburg Northwest 156,040 $1,600,000 $10 B AEGON USA Realty Advisors RMS Properties

1155 W Dundee Rd (3 Properties), Arlington Heights

Northwest 130,673 $6,400,000 $49 B Ronald BenachNorth American Real Estate Management

2220-2240 Hicks Rd (4 Properties), Rolling Meadows

Northwest 68,500 $2,500,000 $36 BNorth Star Trust Company, T# 7218

FCBT Holdings

* Price per square foot - based off estimated selling price for new to market buildings

• The largest property sold was the 179,000 square foot building at 6400 Shafer Court in Rosemont. Crossroads Development Partnerspaid just over $10.7 million or $60 per square foot for the 68 percent leased building. The same asset was purchased for $21.5 millionin 2007, demonstrating a major loss of value from the height of the market.

• Cole Capital is under contract to purchase 555 Aptakisic Road in Lincolnshire for $50.0 million, or $307 per square foot. The propertyis fully leased to Sysmex through November 2026.

• Two Class A buildings were placed on the market. The John Buck Company is looking to sell the 207,000 square foot building at 25Northwest Point Boulevard in Elk Grove Village. R.R. Donnelley & Sons is marketing 4101 Winfield Road in Warrenville.

• OUTLOOK: Suburban Chicago has not generated the premier investor interest that characterizes the CBD. However, certain core assetshave generated investor attention in previous quarters.

INVESTMENT SALES: INVESTORS CAPITALIZE ON SOFT MARKET CONDITIONS


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SFORECASTVacancy is expected to remain elevated

Suburban Chicago has experienced severe occupancylosses to match the jobs lost since the economicdownturn. Since reaching its peak in 2007,occupancy is down 6.7 percent. Total employmentdeclined 7.4 percent peak-to-trough but hasrebounded to now stand at 5.5 percent below itspeak.

Occupancy is still reduced more from its peak thantotal employment, and this quarter’s positiveabsorption may suggest that 2012 will be a year ofrecovery. However, Suburban Chicago lacks thedynamic demand drivers of the CBD. With a waningability to attract top workers to the suburbs, themarket is seeing long-time tenants seek relocationoptions. Also, large sublease blocks continue to weighheavily on the direct market.

For the factors mentioned above, total occupancy lossis expected to be greater than the employment losson a percentage basis. No speculative constructionand, therefore, no new inventory will help aid themarket, but the demand to sustain a recovery simplydoes not exist at this time.

MB Real Estate expects a slight decline in occupancyfor the remainder of 2012. The large losses from2009 are not expected again, but tenants still need toshed excess space when their leases expire. Positiveabsorption will occur in 2013 but will be due toincremental growth within existing companies.

HISTORIC & PROJECTED VACANCY: OVERALL VACANCY RATE WILL HOVER NEAR 23 PERCENT

YearTotal Historic and

Forecasted Inventory (sf)

Total Historic & Forecasted

Occupancy (sf)

Direct Vacancy %

1996 90,601,193 82,039,636 9.4%1997 91,989,948 85,388,879 7.2%1998 95,078,215 88,016,285 7.4%1999 98,744,696 90,321,332 8.5%2000 103,270,399 93,033,912 9.9%2001 108,254,000 92,247,968 14.8%2002 109,769,838 91,258,173 16.9%2003 110,090,266 88,104,389 20.0%2004 110,423,452 90,452,884 18.1%2005 111,030,084 90,970,771 18.1%2006 110,806,221 91,668,760 17.3%2007 111,175,875 92,571,955 16.7%2008 112,080,944 90,982,420 18.8%2009 112,218,212 87,973,132 21.6%2010 112,374,614 86,916,873 22.7%2011 112,250,112 85,761,730 23.6%2012 112,176,835 86,028,513 23.3%2013 112,176,835 86,295,297 23.1%

327,603

621,901

1997-2011 Absorption Avg:

YTD 2012 Absorption:

Total projected inventory based on addition of projects currently under construction

Occupancy is forecast based on proprietary assumptions regarding the Chicago MSA’s total employment

change and the office industry’s historical performance which trails the overall economy.


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SSUBMARKET MAP


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SMARKET STATISTICS

EAST-WESTRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)

Total Vacancy Rate (Vacancy +

Sublease) %

Class A 20,602,774 118,619 179,930 3,880,034 18.8% 16,722,740 995,445 23.7%

Class B 14,578,629 84,524 48,657 3,468,159 23.8% 11,110,469 575,139 27.7%

Class C 4,909,603 47,748 53,683 1,056,136 21.5% 3,853,467 12,491 21.8%

TTotal 40,091,005 250,891 282,269 8,404,329 21.0% 31,686,676 1,583,075 24.9%

NORTHRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 16,843,609 164,375 41,614 3,259,827 19.4% 13,583,782 1,137,805 26.1%

Class B 7,447,313 58,168 41,511 1,460,485 19.6% 5,986,828 100,822 21.0%

Class C 2,533,832 (37,080) (15,422) 600,545 23.7% 1,933,287 24,018 24.6%

Total 26,824,754 185,464 67,702 5,320,857 19.8% 21,503,897 1,262,645 24.5%

NORTHWESTRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 18,507,257 25,886 10,128 4,291,570 23.2% 14,215,687 382,158 25.3%

Class B 9,706,427 114,875 69,944 3,270,290 33.7% 6,436,137 172,760 35.5%

Class C 2,331,858 10,432 5,707 729,399 31.3% 1,602,459 20,764 32.2%

Total 30,545,543 151,193 85,779 8,291,259 27.1% 22,254,283 575,682 29.0%

O'HARERBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 7,850,738 89,022 52,948 1,500,406 19.1% 6,350,332 154,617 21.1%

Class B 4,328,714 (16,366) 30,324 1,322,578 30.6% 3,006,136 36,485 31.4%

Class C 2,536,081 (38,303) (10,496) 953,774 37.6% 1,582,307 0 37.6%

Total 14,715,533 34,353 72,775 3,776,758 25.7% 10,938,775 191,102 27.0%

TOTALSRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 63,804,379 397,902 284,619 12,931,837 20.3% 50,872,541 2,670,025 24.5%

Class B 36,061,083 241,202 190,435 9,521,512 26.4% 26,539,571 885,206 28.9%

Class C 12,311,373 (17,202) 33,472 3,339,854 27.1% 8,971,519 57,273 27.6%

Total Suburban 112,176,835 621,901 508,526 25,793,203 23.0% 86,383,631 3,612,504 26.2%



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SECTION FOUR

ADDITIONAL INFORMATIONGLOSSARY

Absorption: The net change in occupied space over a given period of time. Unless otherwise noted, Net Absorption includes direct and sublease space.

Asking Rent: The published rental rate for a space in a building, which mayvary from the rent which is negotiated upon by the tenant and landlord.

Central Business District: The designations of Central Business District (CBD)and Suburban refer to a particular geographic area within a metropolitanstatistical area (MSA) describing the level of real estate development foundthere. The CBD is characterized by a high density, well organized core withinthe largest city of a given MSA.

Class: A classification used to describe buildings, with Class A reflectingthe highest quality and Class C reflecting the lowest quality.

Direct Vacant Space: Space that is being offered for lease directly from thelandlord or owner of a building, as opposed to space being offered in abuilding by another tenant (or broker of a tenant) trying to sublet a space thathas already been leased.

Initial Rate: The contracted starting rental rate for the first term of a lease.

Inventory: The square footage of buildings that have received a certificateof occupancy and are able to be occupied by tenants. Calculated by addingthe Rentable Building Area (RBA) of all properties in a market or submarket.

Large Block: The amount of contiguous space available in a building interms of square footage. Contiguous spaces over 50,000 square feet areconsidered large by MB Real Estate.

Lease Comparable: Comparables are properties with characteristics thatare similar in nature. Their signing lease rates and other contracted elements are aggregated to analyze contracted market conditions as opposed to asking market conditions.

Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primarycompetitive set of areas. Markets are building type specific and are non-overlapping contiguous geographic designations. Markets can be furthersubdivided into Submarkets.

Net Rental Rate: A rental rate that excludes certain expenses that a tenantcould incur in occupying office space. Such expenses are expected to bepaid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs.

Preleased Space: The amount of space in a building that has been leasedprior to its construction completion date, or certificate of occupancy date.

Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA).

Rentable Building Area (RBA): The total building square footage that can beoccupied by or assigned to a tenant for the purpose of determining atenant’s rental obligation. Generally, RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets.

Rental Rates: The annual costs of occupancy for a particular space quotedon a per square foot basis.

Sales Price: The total dollar amount paid for a particular property at a particular point in time.

SF: Abbreviation for Square Feet.

Sublease Space: Space that has been leased by a tenant and is beingoffered for lease back to the market by the tenant with the lease obligation.Sublease space is sometimes referred to as sublet space.

Submarkets: Specific geographic boundaries that serve to delineate a coregroup of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets arebuilding type specific (office, industrial, retail, etc.), with distinct boundariesdependent on different factors relevant to each building type. Submarketsare non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they arelocated within.

Suburban: The Suburban and Central Business District (CBD) designationsrefer to a particular geographic area within a metropolitan statistical area(MSA). Suburban is defined as including all office inventory not located inthe CBD.

Tenant Improvement: Those changes to property to accommodate specificneeds of a tenant. TIs include installation or relocation of interior walls orpartitions, carpeting or other floor covering, shelves, windows, toilets, etc.The cost of these is negotiated in the lease.

Total Vacant Space: Direct plus sublease vacant space.

Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to beunder construction after it has begun construction and until it receives a certificate of occupancy.

Vacancy Rate: A measurement expressed as a percentage of the totalamount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacancy rate can be based on direct, sublease, or total vacantspace.

Vacant Space: Space that is not currently occupied by a tenant, regardlessof any lease obligation that may be on the space. Vacant space could bespace that is either available or not available. For example, sublease spacethat is currently being paid for by a tenant but not occupied by that tenant,would be considered vacant space. Likewise, space that has been leasedbut not yet occupied because of finish work being done, would also be considered vacant space.

YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulativefrom the beginning of a calendar year through whatever time period is beingstudied.


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ABOUT MB REAL ESTATEOur mission is to provide clients and investors with extraordinary real estate value and unlimited support

MB REAL ESTATE HEADQUARTERS181 West Madison, Suite 4700Chicago, Illinois 60602phone: 312.726.1700fax: 312.807.3853

EAST COAST REGIONAL HEADQUARTERS335 Madison Avenue, 14th FloorNew York, New York 10017phone: 212.350.2300fax: 212.350.2301

COMPANY LEADERSHIPPETER E. RICKERChairman & CEO

JOHN T. MURPHYPresident

DEPARTMENT LEADERSHIP

PATRICIA ALUISI Chief Administrative Officer

MARK A. BUTH Executive Vice President & Managing Director of Leasing Services

ANDREW J. DAVIDSON Executive Vice President & Managing Director of Corporate Services & Tenant Advisory

GARY A. DENENBERG Executive Vice President & Managing Director of Leasing Services

DAVID R. GRAFF Senior Vice President of Project Services

MAUREEN G. GROVE Vice President & Managing Director of Accounting Services

DANIEL J. NIKITAS Executive Vice President of Corporate Services & Tenant Advisory Services

KEV IN M. PURCELL Executive Vice President & Chief Operating Officer

PETER J. WESTMEYER Senior Vice President & Managing Director of Investment Services

At MB Real Estate, our corporate mission is to maximize the value of our clients’real estate by creating timely and innovative solutions that meet their unique needsand objectives.

We offer the highest level of real estate support with our team of committed, results-driven experts in asset and facilities management, leasing, tenant representation,development, project management, and investment services.

Supported by dedicated accounting, marketing, human resources, and informationtechnology teams, our unique full-service firm is an industry leader in local and national corporate real estate.


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