mb real estate's 2012 4th quarter chicago market overview

F O U R T HQ 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

or

SCOTT MASONResearch 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

FOURTH 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

Despite several factors that continue to threaten a full recovery, Chicago’s economy showed marked signs of progress in 2012. Thecity of Chicago has displayed progress in its overall labor market as unemployment dropped from 11.5 percent a year ago to 10.0percent. Much of this improvement can be attributed to significant job gains in office-using industries. Since January 2010 theChicago-Naperville-Joliet MSA Professional and Business Services industry has added over 96,000 jobs, and is nearing its all-timepeak employment level. Total employment within the Financial Activities industry has begun to grow since purging tens of thousandsof jobs following the recession. However jobs are still being lost in the Government, Information, and Construction industries,indicating that the labor market has not fully turned around.

Perhaps the most intriguing factor related to the local economy is Mayor Emanuel’s continued pursuit of attracting and promotingexpansion of companies to Chicago’s Central Business District (CBD). Since taking office in May 2011, Mayor Emanuel hasannounced the relocation or expansion of roughly 70 companies within Chicago. During the 4th quarter, Capital One announcedthat it would bring 350 workers to downtown Chicago from suburban and other Midwest locations. Nokia announced that it wouldrelocate its Mobile Phones Express Internet Services group to Chicago, adding approximately 150 jobs to the city. While minor inscale, the additions create positive sentiment and increase other firms’ confidence.

According to a recent survey conducted by Manpower, Chicago MSA employers plan to hire at a strong pace in the first quarter of2013. Twenty percent of responding employers plan to increase staff levels, while only 9 percent plan to cut staff, with the restmaintaining similar headcounts. The survey concludes that a net 11 percent of employers will grow their workforce. This is up froma 7 percent net employment outlook last quarter, and up from 3 percent one year ago. This survey demonstrates that local companieshave increased confidence, and corporate expansion is eminent.

Despite improved hiring prospects and a significant decline in its unemployment rate, Chicago’s economy continues to be “at risk”according to Moody’s Economy.com. Chicago benefits from being the major business, distribution, and financial hub of the Midwest.It also has a large talent pool, strong educational institutions, and relatively high per capita income. However, Economy.com citesthat the city suffers from high taxes, infrastructure in need of repair, below-average population growth and poor local fiscal health.These concerns have prompted companies to consider relocating their operations. In response, state and local governments havehad to offer lucrative incentive packages to retain such companies.

Considering the factors above, Chicago’s economic outlook continues to be mixed. Total employment in the Chicago MSA fell 7.4percent peak-to-trough and has only rebounded 2.5 percent since its low point in December 2009. Compared to the 2001 recession,total employment fell further and has been markedly slower to recover. If jobs continue to be created at a tepid pace, the Chicagooffice market will experience a slow, drawn-out recovery. MBRE’s baseline forecast expects modest positive absorption over thenext two years, resulting in a slowly declining vacancy rate.

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-4.4% +3.1%

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+2.5%

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

F O U R T H 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-END ABSORPTION SUMMARY

Direct Vacancy4Q2012

AChange from

3Q2012B

Change from 3Q2012

CChange from

3Q2012Total

Change from 3Q2012

Central Loop 9.0% -0.4% 15.8% 0.0% 15.7% -0.7% 13.2% -0.4%East Loop 17.8% -0.7% 24.7% 0.3% 14.2% -0.9% 19.7% -0.3%N. Michigan Ave. 17.8% -1.0% 23.3% -0.7% 19.8% 0.5% 20.5% -0.4%River North 11.2% -0.3% 5.8% -0.6% 9.8% 0.0% 9.1% -0.3%South Loop 29.7% 0.9% 25.2% 1.2% 27.3% 1.1%West Loop 14.5% -0.4% 10.8% 0.0% 15.8% -0.4% 13.9% -0.3%CBD Chicago Total 13.7% -0.4% 16.8% -0.1% 15.2% -0.4% 15.1% -0.3%

Net Absorption4Q2012

A B C Total

Central Loop 62,833 25,916 58,978 1147,727

East Loop 34,516 (21,572) 13,919 226,862

N. Michigan Ave. 33,520 40,909 (39,025) 335,403

River North 8,712 45,876 (28,807) 225,782

South Loop (9,721) (28,787) ((38,508)

West Loop 119,564 12,290 1,285 133,139

CBD Chicago Total 249,424 103,419 (22,437) 330,405

Numbers in parentheses are negative

Following its strongest quarter in the past five years, the CBD experienced over 330,000 square feet of positive absorption duringthe fourth quarter. The increased demand shown in the market during the second half of the year led the CBD to outperform MBRE’sbaseline forecast for 2012.

Key Indicators:• Direct vacancy fell 30 basis points to 15.1 percent. For the second consecutive quarter, each building class saw a decline in

vacancy. The River North, Central Loop, and West Loop submarkets continue to outperform the overall market. Only the SouthLoop experienced negative absorption.

• No new developments were announced this quarter. Hines has delayed its ground breaking on a 45-story, 900,000 square foottower at 444 West Lake until the first quarter of 2013. Completion is still slated for mid-2016. There are 11 sites in total thathave been actively marketed to prospective anchor tenants.

• The trend of suburban-based companies moving downtown continues. Maximus, Presence Health, and Zones are three newly-announced companies that will relocate to at least 20,000 square feet each in the CBD.

• Class A rental rates for new transactions have increased by 1.0 percent on a year-over-year basis. Additionally, concessionsfell, indicating growth in net effective rental rates. Average tenant improvement allowances have fallen 8.5 percent whileaverage rent abatement has declined by 7.1 percent.

• Underutilized space remains the biggest concern to the outlook of the market. Other risks include: increased national tax rates;residual effects of the Eurozone crisis; shrinking space requirement per employee; reduced storage needs due to digitalarchiving; reduced server space needs due to cloud computing; and increased corporate tax rates in Illinois.

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

Solid demand seen in the second half of 2012 has brightened the market’s outlook. However, slow job growth and tenants eliminatingunderutilized space have muted the recovery. As such, MB Real Estate’s baseline forecast predicts modest positive absorption,resulting in a slight decline in vacancy over the next two years.


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LYNEW DEVELOPMENTGroundbreaking pushed back, but 444 West Lake still slated for 2016 completion

• No new developments were formally announced thisquarter. Hines has delayed the groundbreaking of its 45-story, 900,000 square foot building at 444 West Lakeuntil the first quarter of 2013. The developer obtained$300 million to construct the building from Montreal-based Ivanhoe Cambridge and an additional $29.5million from the City of Chicago for a surrounding park.Completion is still slated for mid-2016.

• Prompting the construction at 444 West Lake, andpotentially a smaller development, is the constraint onlarge, contiguous space. There are currently 12 tenantstouring the market for requirements of at least 100,000square feet. Such tenants have limited relocationoptions, as only 10 contiguous blocks of Class A spacegreater than 100,000 square feet are currentlyavailable.

• Just west of the CBD’s official boundaries, Sterling Bayis redeveloping a 545,000 square foot former coldstorage facility at 1000 West Fulton. The project, dubbed1K Fulton, is scheduled to be completed in the firstquarter of 2014. SRAM became the building’s firsttenant by preleasing 77,000 square feet.

• MB Real Estate has identified 11 proposed newdevelopment sites ranging from 350,000 to 1.3 millionsquare feet. Many of these sites will require at least 60percent preleasing, but Hines has demonstrated thatconstruction can move forward without traditionalfinancing.

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


• OUTLOOK: The amount of new construction will be fueled by the number of large tenants seeking space and the constraint of large blocksof Class A space. A smaller development has the potential to be delivered before 444 West Lake. By 2016, demand is expected to begreat enough to warrant new office developments.

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LYSUBLEASE SPACESublease availability increases as two new large blocks are placed on the market

• The amount of total available sublease space increased by 83,000 square feet, or 2.6 percent, since last quarter.

• No large sublease blocks were removed during the quarter, and two new short-term subleases are available. Career Education Corporationis seeking a subtenant for 94,000 square feet through January 2016 at 222 Merchandise Mart. In the East Loop, Verizon is marketing65,000 square feet on the fifth through seventh floors at 205 North Michigan.

• Helping to offset the increase in large blocks was Capital One Financial Corp’s sublease of 65,000 square feet from United Airlines. Thefinancial services firm announced plans to bring 350 additional employees downtown to occupy the eighth through tenth floors at 77West Wacker through February 2022.

• OUTLOOK: Historically, the amount of available sublease space is an indicator of corporate confidence. The current amount of availablespace is still well below the historical average of 3.6 million square feet. Companies will continue to reconsider employee headcountand 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 174,624 Negotiable February 2022 11-19 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 Lynch111 S Wacker Dr 55,400 30 Days January 2021 45-46 Locke, Lord, Bissell & Liddell111 S Wacker Dr 54,200 January 2013 May 2015 37-38 R.R. Donnelley100 N Riverside 52,660 Negotiable May 2023 7-8 Hostway Corporation225 W Wacker Dr 51,520 30 Days March 2022 26-27 Edwards Wildman Palmer

TTotal - 8 Spaces 636,588

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 Merchandise Mart Plz 93,799 Negotiable January 2016 5 Career Education Corporation222 N LaSalle St 78,974 Vacant May 2014 17-18 Merrill Lynch205 N Michigan Ave 65,463 30 Days April 2016 5-7 Verizon

Total - 6 Spaces 732,340

Italicized addresses indicate space is new on the market


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LYLARGE BLOCKS OF DIRECT AVAILABILITYAvailability rises, driven by Class C buildings

• The number of directly available, contiguous blocks greater than50,000 square feet increased by three to 68. Large blockavailability was reduced in Class A, but one new Class B andfour new Class C blocks are now marketed.

• The largest block removed during the quarter was Chicago Titleand Trust’s former space at 161 North Clark. Grant Thorntonleased a total of 137,000 square feet, removing the 117,000square foot block from the Class A market.

• The owners of Tribune Tower (435-445 North Michigan) are nowmarketing a 318,000 square foot block that can be madeavailable within 120 days of a lease being signed. There arenow six blocks of at least 250,000 square feet available forlease, compared to just three at the end of last year.

• MB Real Estate has identified 39 tenants actively seeking50,000 square feet or more in the CBD. However, with 68blocks available, a glut of space exists in the market. Coupledwith the ability to renew, large tenants continue to have amultitude of options.

CLASS BBuilding Address Size (sf) Submarket

130 E Randolph St * 256,720 East Loop

410 N Michigan Ave * 214,849 North Michigan Avenue

222 N LaSalle St * 199,132 Central Loop

300 S Riverside Plz * 198,302 West Loop

303 E Wacker Dr 182,782 East Loop

200 N LaSalle St 164,586 Central Loop

130 E Randolph St * 155,829 East Loop

130 E Randolph St 128,948 East Loop

333 S Wabash Ave 112,000 East Loop

401 N Michigan Ave ** 104,990 North Michigan Avenue

1 N Dearborn St 97,261 Central Loop

120 S LaSalle St 94,995 Central Loop


222 Merchandise Mart Plz 68,829 River North

175 W Jackson Blvd 68,539 Central Loop

175 W Jackson Blvd * 67,794 Central Loop

175 W Jackson Blvd 67,725 Central Loop

444 N Michigan Ave * 67,575 North Michigan Avenue


233 N Michigan Ave 67,028 East Loop

175 W Jackson Blvd * 65,930 Central Loop

303 E Wacker Dr ** 59,704 East Loop


303 E Wacker Dr * 52,553 East Loop

24 Blocks 2,709,858

CLASS ABuilding Address Size (sf) Submarket

515 N State St * 350,906 North Michigan Avenue

500 W Monroe St 338,131 West Loop


233 S Wacker Dr 285,910 West Loop

101 E Erie St * 217,569 North Michigan Avenue

540 W Madison St * 166,522 West Loop

440 S LaSalle St * 162,517 South Loop

10 S Dearborn St * 139,165 Central Loop

233 S Wacker Dr * 125,553 West Loop

227 W Monroe St * 117,053 West Loop


455 N Cityfront Plaza Dr 89,854 North Michigan Avenue


540 W Madison St 84,031 West Loop

333 W Wacker Dr 80,736 West Loop

1 S Wacker Dr * 76,114 West Loop


77 W Wacker Dr 67,342 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

227 W Monroe St * 51,423 West Loop

29 Blocks 3,474,098

CLASS CBuilding Address Size (sf) Submarket

435-445 N Michigan Ave * 317,706 North Michigan Avenue

311 W Monroe St 214,490 West Loop

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

11 S LaSalle St 146,313 Central Loop

401 S State St 110,898 East Loop

619 S LaSalle St 89,000 South Loop

350 W Mart Ctr * 87,404 River North

350 W Mart Ctr 87,393 River North


740 N Rush St 71,501 North Michigan Avenue

33 S State St 70,107 East Loop

350 W Mart Ctr 64,661 River North

111 N Canal St 57,800 West Loop

104 S Michigan Ave 56,808 East Loop

211 E Chicago Ave * 53,052 North Michigan Avenue

15 Blocks 1,713,988

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 falls across all classes, leading to an overall yearly decrease

• The direct vacancy rate in the CBD dropped for the second consecutive quarter, falling to 15.1 percent. Vacancy is down 30 basis pointsfrom last quarter as well as on a year-over-year basis.

• Class A buildings experienced the largest quarterly direct vacancy rate reduction of 40 basis points. Class B vacancy remained relativelyflat, but has seen the largest yearly reduction.

• With a 9.1 percent direct vacancy rate, River North is by far the tightest submarket in the CBD. The Central Loop and West Loop alsohave vacancy rates lower than the overall CBD.

• OUTLOOK: MB Real Estate expects some volatility in vacancy rates on a quarterly basis. However, economic trends suggest that vacancywill decline again next year.

HISTORIC YEAR-END DIRECT VACANCY MARKET BY CLASS: CLASS A AND B VACANCY REDUCED IN 2012

HISTORIC DIRECT VACANCY: SLIGHT DECLINE FOR THE SECOND CONSECUTIVE YEAR DE

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LARGE DEALSAON renews at namesake tower

• After 14 years as a subtenant of Amoco, AON signed a 15-year direct lease at its namesake tower (200 East Randolph). The riskmanagement and HR solutions firm will continue to occupy 396,000 square feet on floors three through 15 in the 83-story building.Standard Parking also signed a new lease at the building, and will occupy 41,000 square feet on the 76th and 77th floors.

• The CBD continues to attract suburban tenants. Maximus leased 52,000 square feet at 303 East Wacker and will relocate from 900Skokie Boulevard in Northbrook. Presence Health is consolidating offices on Chicago’s northwest side and in Mokena by leasing 44,000square feet at 200 South Wacker.

• Two tenants signed renewal transactions for more than 100,000 square feet. Greenberg Traurig renewed its lease of 112,000 squarefeet at 77 West Wacker, while Huron Consulting will stay in 110,000 square feet at 550 West Van Buren.

• 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)

AON New East Loop 200 E Randolph 396,406Grant Thornton Relo Central Loop 161 N Clark 136,948Maximus New East Loop 303 E Wacker 70,000Presence Health New West Loop 200 S Wacker 44,000Standard Parking New East Loop 200 E Randolph 40,793XPO Logistics New East Loop 303 E Wacker 30,000Zones New/Sub West Loop 233 S Wacker 29,000United Way New East Loop 333 S Wabash 28,000IES Abroad Relo Central Loop 33 W Monroe 27,816Total - 9 Deals 802,963

RENEWAL/EXPANSION/SUBLEASETenant Type Submarket Building Address Size (sf)

Greenberg Traurig Ren Central Loop 77 W Wacker 112,362Huron Consulting Ren West Loop 550 W Van Buren 110,000Capital One Financial Corp. Sub Central Loop 77 W Wacker 65,484Heitman Ren/Exp West Loop 191 N Wacker 65,000Oracle Ren West Loop 233 S Wacker 60,000Fiserv Ren/Cont River North 350 N Orleans 50,000Advantage Futures Sub Central Loop 231 S LaSalle 41,472Heartland Alliance Ren/Relo Central Loop 208 S LaSalle 36,896Globetrotters Engineering Corporation Ren West Loop 300 S Wacker 27,656Starr Cos. Ren/Exp West Loop 500 W Monroe 26,966Sears Online Exp East Loop 1 N State 26,662Call One Sub West Loop 225 W Wacker 25,505AEP Energy Sub West Loop 225 W Wacker 25,505Hub International Sub River North 300 N LaSalle 24,544TechNexus Ren West Loop 200 S Wacker 22,183Total - 15 Deals 720,235

LARGE LEASE TRANSACTIONS

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


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ABSORPTIONOccupancy increases once again in Class A and B buildings

• Net quarterly absorption totaled 330,000 square feet. The CBD experienced 805,000 square feet of positive absorption in the secondhalf of 2012, leading to 473,000 square feet of net absorption for the year after losing space in the first half.

• Class A buildings saw the greatest increase in occupancy, with 249,000 square feet being absorbed in the fourth quarter. Occupancyincreased by 103,000 square feet in Class B buildings and added to a total of 562,000 square feet for the year.

• For the second consecutive quarter, absorption was positive in each submarket besides the South Loop. The Central Loop led allsubmarkets, experiencing 148,000 square feet of positive absorption.

• OUTLOOK: The past two quarters suggest that space is being absorbed at a more robust pace. Tepid hiring and shrinking workspaceswill continue to combat new demand brought to the CBD. However, MBRE projects yearly positive absorption in 2013.

HISTORIC ABSORPTION: TWO CONSECUTIVE YEARS OF POSITIVE ABSORPTION

HISTORIC ABSORPTION BY SUBMARKET: RIVER NORTH AND CENTRAL LOOP LEAD THE MARKET


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SLEASE COMPARABLESRental rates appear to have bottomed-out

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

1Q2012 - 4Q2012 $20.09 $15.88 $13.47 $33.22 $31.15 $25.24 5.8 6.5 5.5 6.6 6.6 6.3

1Q2011 - 4Q2011 $19.88 $14.71 $13.38 $46.06 $28.00 $21.49 7.9 6.8 5.2 8.4 6.9 5.7

1Q2010 - 4Q2010 $19.68 $15.16 $11.23 $42.77 $24.57 $22.47 8.8 6.5 6.8 8.1 6.3 6.4

1Q2009 - 4Q2009 $20.39 $15.99 $12.63 $40.71 $32.61 $24.67 7.5 5.5 4.1 8.5 7.0 6.6

1Q2008 - 4Q2008 $21.95 $16.86 $14.26 $44.42 $39.54 $29.61 4.7 4.6 4.1 8.2 7.2 7.3

1Q2007 - 4Q2007 $18.72 $14.85 $10.96 $44.55 $38.13 $25.16 4.9 5.2 3.7 7.9 7.0 6.3

1Q2006 - 4Q2006 $17.88 $13.59 $15.75 $45.75 $37.76 $13.49 6.9 4.9 2.1 8.2 7.1 4.6

1Q2005 - 4Q2005 $17.48 $12.41 $10.42 $49.63 $41.20 $29.25 7.2 6.6 4.2 9.5 8.1 7.2

1Q2004 - 4Q2004 $16.70 $12.96 $9.61 $41.21 $41.22 $15.81 6.0 6.6 3.6 10.0 8.6 5.6

1Q2003 - 4Q2003 $18.14 $13.57 $10.12 $38.76 $36.37 $23.34 3.8 4.8 2.7 7.9 8.7 6.6

1Q2002 - 4Q2002 $22.86 $15.60 $11.95 $34.74 $29.98 $26.29 1.4 1.9 1.7 8.3 8.6 6.0

1Q2001 - 4Q2001 $22.59 $16.57 $16.87 $28.71 $26.30 $26.79 1.0 0.2 0.7 7.7 8.0 7.7

1Q2000 - 4Q2000 $21.15 $15.94 $15.73 $25.22 $25.12 $30.75 0.1 0.1 0.3 7.9 6.6 6.0

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

1Q2012 - 4Q2012 $19.10 $14.44 $12.84 $12.74 $10.63 $7.81 4.3 2.9 2.5 5.3 4.1 4.0

1Q2011 - 4Q2011 $18.79 $14.22 $12.33 $14.20 $9.15 $10.36 4.7 4.1 3.0 5.7 4.2 4.3

1Q2010 - 4Q2010 $20.25 $15.57 $10.87 $19.29 $10.44 $6.49 5.7 4.2 5.4 5.9 4.7 5.0

1Q2009 - 4Q2009 $17.74 $16.31 $11.54 $17.21 $12.79 $10.50 4.3 3.4 2.9 5.7 5.4 6.5

1Q2008 - 4Q2008 $22.27 $16.13 $17.31 $20.62 $15.98 $15.33 2.6 2.9 2.3 6.6 5.7 6.2

1Q2007 - 4Q2007 $17.42 $14.43 $11.49 $15.94 $17.04 $18.20 4.2 2.4 2.2 6.6 5.4 8.0

1Q2006 - 4Q2006 $16.32 $13.54 $17.71 $23.76 $17.14 $9.63 4.5 2.9 0.6 6.8 7.0 4.9

1Q2005 - 4Q2005 $16.50 $12.16 $12.86 $23.72 $20.86 $4.66 5.8 2.7 0.6 8.7 8.0 5.0

1Q2004 - 4Q2004 $17.33 $13.17 $9.70 $21.76 $20.28 $9.51 2.5 3.6 0.9 7.6 7.2 6.5

1Q2003 - 4Q2003 $19.15 $14.08 $10.19 $19.75 $16.42 $9.17 1.5 2.8 0.8 8.0 7.2 6.2

1Q2002 - 4Q2002 $22.68 $15.52 $13.55 $17.60 $14.07 $8.99 0.7 0.8 0.2 7.4 6.6 4.8

1Q2001 - 4Q2001 $22.44 $17.52 $11.52 $8.48 $6.04 $2.94 0.0 0.1 0.0 5.2 7.4 3.7

1Q2000 - 4Q2000 $21.92 $15.52 $15.82 $12.34 $12.92 $6.33 0.0 0.0 0.0 5.4 7.8 4.1

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.

• Class A net rental rates grew slightly in 2012. The average initial rate increased by 1.0 percent for new deals and by 1.6 percent forrenewals. More notably, concessions decreased to correspond with rental rate growth. Average tenant improvement allowances fell by8.5 percent for new transactions and by 2.8 percent for renewal transactions. Average rent abatement also fell, which signals that neteffective rents are on the rise.

• Class B initial rates for new transactions are up 7.9 percent and down 1.6 percent for renewals. Concessions are mixed as tenantimprovement allowances have increased but free rent has decreased for new transactions.

• Initial rates for Class C increased by 0.7 percent for new and 4.1 percent for renewal transactions. However, there remains a disconnectwith respect to demand, as 427,000 square feet of occupancy has been lost in 2012.

• OUTLOOK: The Class A and B segments experienced significant positive absorption 2012. In turn, landlords have begun to push askingrates and net effective rental rates are starting to tick up. Class C net effective rents have also increased, but such buildings have lostover one million square feet of occupancy over the eight quarters. As a result, we expect Class C net effective rates to decline inupcoming quarters to compensate. .

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 SALESInvestment activity greatest since 2007

• The fourth quarter capped an active year for investment sales. Six buildings transacted while another seven remain under contract.

• The largest transaction during the quarter was Harbor Group International’s purchase of 1 South Wacker for $221 million, or $185 persquare foot. TIAA-CREF, the seller, previously purchased the asset in 2002 for $209 million. The average term remaining for the buildings’tenants at the time of purchase was 5.5 years. The building was estimated to have an in-place net operating income of $14.3 million,which would equate to an in-place capitalization rate of 6.5 percent.

• Berkley Properties, one of the most active buyers in recent years, purchased the 88 percent leased building at 231 South LaSalle for$97 million, or $104 per square foot. Michael Silberberg, principal of Berkley Properties, is also under contract with Mark Karasick torecapitalize Prudential Plaza (130 East Randolph & 180 North Stetson).

• Yearly sales volume was up 56.4 percent on a per square foot basis and 34.5 percent on a dollar amount basis, making 2012 the mostactive sales year since the financial downturn.

INVESTMENT SALES: SQUARE FOOTAGE AND TRANSACTION VALUE EXCEED 2011 TOTALS

Building Address Sale Date Size (sf) PricePrice

per sf * Class Seller Status (Buyer or Listing Agent)

225 W Randolph New On Market 853,250 $275,000,000 $322 B Kushner Companies Marketing (HFF)225 W Wacker New On Market 650,812 $175,000,000 $269 A J.P. Morgan Chase & Co. Marketing (Jones Lang LaSalle)208 S LaSalle (Office/Retail)

New On Market 355,411 $70,000,000 $197 C Michael Reschke Marketing (HFF)

625 N Michigan Ave New On Market 349,409 $83,500,000 $239 BLone Star Funds / Anglo Irish Bank

Marketing (HFF)

55 E Washington (Floors 1-12)

New On Market 192,000 C Morgan Reed Group Marketing / CBRE

73 W Monroe St New On Market 52,021 $6,500,000 $125 C Marketing (Terra Nova Group)300 N LaSalle (Up to 49% Stake)

On Market 1,302,901 $600 A KBS REIT 2 Marketing (HFF)

875 N Michigan (office, parking

On Market 856,000 $214,000,000 $250 AJV Deutsche Bank & NorthStar Realty

Marketing (CBRE)

122 S Michigan On Market 512,369 C Ivor Braka Marketing (Jones Lang LaSalle)555 W Monroe On Market 419,000 $150,000,000 $358 A Principal Global Marketing (CBRE)20 S Clark On Market 363,657 $60,000,000 $165 B M & J Wilkow Marketing (Jones Lang LaSalle)332 S Michigan On Market 319,401 C Ivor Braka Marketing (Jones Lang LaSalle)123 W Madison On Market 79,039 $5,400,000 $68 C Canadian Imperial Bank Marketing (CBRE)540 N LaSalle On Market 65,100 $8,500,000 $131 C Joseph Lagoa Marketing (CBRE)130 E Randolph 1,192,357 B180 N Stetson (Partial Stake)

976,137 A

540 W Madison Under Contract 1,111,925 $345,000,000 $310 A Bank of AmericaDavid Werner & Joseph Mizrachi / JLL

111 W Washington Under Contract 580,000 $79,500,000 $137 C Harbor Group Shidler Group550 W Washington Under Contract 372,000 $112,000,000 $301 A Beacon Capital Partners MetLife / Eastdil Secured205 W Wacker Under Contract 263,650 $29,000,000 $110 C 205 Chicago Partners Undisclosed / HFF32 W Randolph Under Contract 226,666 $13,250,000 $58 C David & Barbara Kalish Undisclosed / CBRE1 S Wacker 4th Qtr 2012 1,195,170 $221,000,000 $185 A TIAA-CREF Harbor Group International / Eastdil231 S LaSalle 4th Qtr 2012 936,800 $97,000,000 $104 B Gramercy Capital Corp. Berkley Properties111 N Canal 4th Qtr 2012 924,800 $100,000,000 $108 C Albert Frank & Co. Sterling Bay Cos.

525 W Van Buren 4th Qtr 2012 524,800 $95,000,000 $181 A Daymark Realty AdvisorsAmerican Recovery Property Trust JV Northwood Investors

125 S Wacker 4th Qtr 2012 517,293 $109,000,000 $211 B Tishman Speyer MetLife / Eastdil Secured303 W Erie 4th Qtr 2012 62,000 $7,000,000 $113 C 303 Erie Partners ABC Realty JV Cedar Street Capital

All Sales 4th Qtr 2012 4,160,863 $629,000,000 $151

$100,000,000 - BentleyForbesMichael Silberberg & Mark Karasick / CBRE

Under Contract

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


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SFORECASTRecovery will continue at a modest pace

The CBD outperformed MBRE’s 2012 baseline forecast. Itwas predicted that the CBD would experience intermittentquarters of positive and negative absorption, resulting inslightly higher vacancy. This trend held true through thefirst two quarters, but strong demand seen in the secondhalf of the year led vacancy to decline 30 basis pointsfrom last year.

The performance of the office market is directly affectedby the labor market. During past recessions, there was astrong correlation between occupancy and totalemployment. However, the market has reacted differentlythan past years as occupancy is currently less than 0.1percent below its 2007 peak, while employment is 5.2percent below peak. Many firms still have more spacethan their headcounts warrant, but new firms are enteringthe market and existing firms are consolidating officesdowntown from other locations. The CBD has strongdemand drivers, which prompted several companies toexpand or relocate operations downtown to takeadvantage of public transportation and the growing pool ofyoung talent. Tech companies will continue to expand theirpresence. Most notably, Google last quarter signed a 15-year, 572,000 square foot lease at the Merchandise Mart.

In spite of the new demand generated in the CBD, multipleobstacles are working to mute the recovery. Many tenantsare reducing their square footage upon lease expirations.Such firms seek to be more efficient with workspaces and

HISTORIC & PROJECTED VACANCY: OCCUPANCY TO INCREASE MODESTLY OVER THE NEXT TWO YEARS

YearTotal Historic and

Forecasted Inventory (sf)

Total Historic & Forecasted

Occupancy (sf)

Direct Vacancy %

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 131,044,641 111,238,394 15.1%2013 131,044,641 111,846,988 14.6%2014 131,044,641 112,635,414 14.0%

606,481

472,780

1996-2012 Absorption Avg:

2012 Absorption:

Total projected inventory based on addition of projects currently under constructionOccupancy 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.

have adopted alternative workplace strategies such as hotelling. Tenants have also been able to reduce space with the digitalization ofarchives and the replacement of server rooms by cloud technology. Chicago’s unemployment rate is currently 10.0 percent, and remainselevated compared to the 8.1 percent national average. Considering these factors, MBRE forecasts modest positive absorption over the nexttwo years, causing direct vacancy to fall to 110 basis points by the end of 2014.


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SSUBMARKET MAP


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SMARKET STATISTICS

CENTRAL LOOPRBA(sf)

YTDAbsorption (sf)

4th QuarterAbsorption (sf)

Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)

Total Vacancy Rate (Direct + Sublease) %

Class A 13,573,287 94,785 62,833 1,219,741 9.0% 12,353,546 542,554 13.0%

Class B 14,242,003 (36,526) 25,916 2,250,137 15.8% 11,991,866 333,714 18.1%

Class C 8,628,797 105,661 58,978 1,356,452 15.7% 7,272,345 42,875 16.2%

Total 36,444,087 325,211 147,727 4,826,330 13.2% 31,617,757 919,143 15.8%

EAST LOOPRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 4,044,233 119,587 34,516 718,696 17.8% 3,325,537 145,837 21.4%

Class B 10,537,769 55,356 (21,572) 2,607,274 24.7% 7,930,496 144,384 26.1%

Class C 8,370,899 (124,914) 13,919 1,191,542 14.2% 7,179,357 50,383 14.8%

Total 22,952,901 50,029 26,862 4,517,511 19.7% 18,435,390 340,604 21.2%

N. MICHIGAN AVE.RBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 3,949,554 128,641 33,520 704,753 17.8% 3,244,801 113,027 20.7%

Class B 4,704,471 71,533 40,909 1,096,891 23.3% 3,607,580 37,462 24.1%

Class C 4,316,814 (348,556) (39,025) 852,742 19.8% 3,464,072 52,780 21.0%

Total 12,970,840 (148,382) 35,403 2,654,386 20.5% 10,316,453 203,269 22.0%

RIVER NORTHRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 3,995,586 171,194 8,712 448,428 11.2% 3,547,158 48,892 12.4%

Class B 3,708,444 169,672 45,876 215,593 5.8% 3,492,851 425,206 17.3%

Class C 5,568,184 (22,129) (28,807) 547,086 9.8% 5,021,097 208,350 13.6%

Total 13,272,214 318,737 25,782 1,211,108 9.1% 12,061,107 682,448 14.3%

SOUTH LOOPRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 1,019,325 (92,006) (9,721) 302,918 29.7% 716,407 10,830 30.8%

Class C 1,166,135 (67,287) (28,787) 293,856 25.2% 872,279 2,005 25.4%

Total 2,185,460 (159,293) (38,508) 596,774 27.3% 1,588,686 12,835 27.9%

WEST LOOPRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 27,129,650 (26,220) 119,564 3,941,556 14.5% 23,188,094 820,449 17.6%

Class B 9,739,144 302,265 12,290 1,056,265 10.8% 8,682,879 146,405 12.3%

Class C 6,350,345 (28,277) 1,285 1,002,318 15.8% 5,348,027 89,212 17.2%

Total 43,219,139 247,768 133,139 6,000,139 13.9% 37,219,000 1,056,066 16.3%

TOTALSRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Class A 53,711,635 395,981 249,424 7,336,092 13.7% 46,375,543 1,681,589 16.8%

Class B 42,931,832 562,300 103,419 7,226,160 16.8% 35,705,672 1,087,171 19.4%

Class C 34,401,175 (485,501) (22,437) 5,243,996 15.2% 29,157,179 445,605 16.5%

Total CBD 131,044,641 472,780 330,405 19,806,248 15.1% 111,238,394 3,214,365 17.6%



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SECTION THREE

SUBURBAN CHICAGOEXECUTIVE SUMMARY

Market conditions have been historically soft following the economic downturn. From 2008 to 2011, Suburban Chicago lost more than sixmillion square feet of occupancy, and its direct vacancy rate peaked at a record 23.6 percent. The contraction stopped although demandwas essentially flat in 2012. In turn, vacancy is still extremely high and numerous factors weigh against a sustainable recovery.

Key Indicators: • Quarterly net absorption totaled a positive 115,000 square feet, but the overall market experienced slight negative absorption year-to-

date. O’Hare was the best performing submarket, experiencing 117,000 square feet of positive absorption.

• Occupancy changes across building classes were counterintuitive in respect to a typical market recovery. Class A experienced 258,000square feet of negative absorption, but Class B and Class C combined to account for 373,000 square feet of positive absorption.

• 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 weighson Suburban Chicago. Kraft and Motorola are among the other firms who are seeking tenants or buyers for suburban campuses.

• Large deal activity was quiet compared to last quarter. Additionally, the suburbs have struggled to attract new users from outside themarket with many large tenants relocating within the same submarket. This “musical chairs” trend, where companies lease a largeblock of space and leave behind another large block in the same submarket, has hindered the recovery.

• Class A asking rental rates are down 4.1 percent year-over-year as vacancy continued to rise. This suggests that rents may still haveroom to fall before demand for this segment accelerates.

• 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 at a standstill. Construction has been limited to build-to-suit projects, such as the recently completedheadquarters for Astellas Pharma US in Glenview. The Hub Group and the Big Ten recently broke ground on build-to-suit headquarters.

Occupancy is 6.9 percent below peak in Suburban Chicago compared to a 5.1 percent peak-to-current total employment loss. While thelabor market is a key determinant of office space demand, occupancy statistics suggest that other factors are working against the Suburbanmarket. Corporate relocations, as well as underutilized space, remain the biggest risks to the market; companies have leased more spacethan they need and will reduce square footage upon lease expirations.

SUBURBAN VACANCY AND YEAR-TO-DATE ABSORPTION SUMMARY

Direct Vacancy4Q2012

AChange from

3Q2012B

Change from 3Q2012

CChange from

3Q2012Total

Change from 3Q2012

East-West 21.1% 1.4% 23.0% -1.4% 25.7% 3.1% 22.4% 0.7%North 21.6% 0.7% 17.9% -1.7% 22.9% -1.0% 20.7% -0.1%Northwest 21.1% -0.4% 33.6% 0.8% 30.0% -1.1% 25.8% 0.0%O'Hare 18.2% -0.9% 30.2% -0.8% 36.9% -0.2% 24.9% -0.8%Suburban Chicago Total 20.9% 0.4% 25.7% -0.8% 28.2% 0.7% 23.2% 0.0%

Net Absorption4Q2012

A B C Total

East-West (300,083) 198,792 50,620 ((50,671)

North (105,550) 122,702 18,046 335,198

Northwest 72,328 (90,807) 31,825 13,347

O'Hare 75,411 36,825 5,134 1117,370

Suburban Chicago Total (257,893) 267,511 105,626 115,244



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LYNEW DEVELOPMENTSpeculative construction remains at a standstill

• As has been the case for the past several quarters, no new speculative office developments were announced. New construction has beenlimited to a select number of build-to-suit projects. With Class A direct vacancy at nearly 21 percent, there is simply not enough demandto justify new, multitenant product.

• Earlier this year, Astellas Pharma US occupied its new build-to-suit 440,000 square foot headquarters in Glenview. A large portion oftheir former space in Deerfield will be backfilled by Mondelez International during the first quarter of 2013.

• The Hub Group broke ground on its build-to-suit headquarters in August. The 130,000 square foot building located at 200 ClearwaterDrive in Oak Brook is expected to be completed in November 2013.

• The only other build-to-suit underway is the Big Ten Conference’s 50,000 square foot headquarters at 5440 Park Place in Rosemont.Construction commenced in August and the building is expected to be delivered in September 2013.

• The Suburban market currently has over 26 million square feet of vacant space. This figure only accounts for competitive, multi-tenantproperties. There are several corporate headquarter facilities that are vacant, including properties formerly occupied by United Airlines,Kraft, and Allstate. Thus the oversupply of available space in the market has made speculative construction unfeasible.

• OUTLOOK: Suburban Chicago has an overabundance of vacant space. Numerous proposed developments are ready to break groundonce demand is strong enough. Between historically high market vacancy and constrained financing, speculative development is notlikely for the next 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.

Total - 1 Property

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

2000 Clearwater Dr, Oak Brook 130,000 100.0% East-West Broke ground August 2012 and expected to be completed in November 2013. Build-to-suit headquarters

for the Hub Group.5440 Park Pl, Rosemont 50,000 100.0% O'Hare Broke ground August 2012 and expected to be

completed in September 2013. Build-to-suit headquarters for the Big Ten Conference.

Total - 2 Properties

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

Numerous multi-tenant properties, but none set to break ground

NEW DEVELOPMENT PIPELINE


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LYSUBLEASE SPACESublease availability rising, especially in Class A buildings

• The amount of available sublease space rose 3.9 percent compared to last quarter. Sublease availability continues to weigh heavily onthe direct market for Class A space. Over 4.0 percent of total Class A inventory is available for sublease. More notably, the amount ofavailable sublease space in Class A buildings has risen by 14.3 percent since the end of 2011.

• The merger of two healthcare companies resulted in two new large sublease blocks being placed on the market. Catalyst Rx is marketing106,000 square feet for sublease at 1200 Lakeside Drive in Bannockburn while SXC Health Solutions is seeking a subtenant for 91,000square feet at 2441 Warrenville Road in Lisle. The two groups combined to form Catamaran, who will occupy 301,000 square feet at1600 McConnor Parkway in Schaumburg in early 2013.

• OUTLOOK: The amount of available sublease space continued to rise above its historical average of 3.4 million square feet. With weakdemand and no large blocks rolling over until June 2013, sublease availability is expected to remain elevated.

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 Negotiable August 2016 Northwest AT&T3 Overlook Pt, Lincolnshire 290,143 Vacant February 2017 North Hewitt Associates4201 Winfield Rd, Warrenville 249,996 Vacant Negotiable East-West Navistar3500 Lacey Rd, Downers Grove 156,855 March 2013 May 2014 East-West Hillshire Brands1000 Milwaukee Ave, Glenview 121,502 30 Days April 2017 North AON Warranty Group1200 Lakeside Dr, Bannockburn 106,016 Vacant May 2023 North Catalyst Rx2441 Warrenville Rd, Lisle 91,268 June 2013 January 2016 East-West SXC Health Solutions Corp425 N Martingale Rd, Schaumburg 58,091 30 Days December 2015 Northwest Navistar3 Parkway Blvd N, Deerfield 53,970 Vacant December 2014 North Astellas Pharma US701 E 22nd St, Lombard 52,079 120 Days June 2013 East-West The Marketing Store5202 Old Orchard Rd, Skokie 50,766 Negotiable June 2021 North National Lewis University

Total - 11 Spaces 2,437,931

Class BBuilding Address Size (sf) Occupancy Expiration Submarket Sublandlord

2001 Lakewood Blvd, Hoffman Estates 239,250 Negotiable Negotiable Northwest AT&T750 N Commons Dr, Aurora 112,605 30 Days September 2017 East-West Westell Technologies850-950 Warrenville Rd, Lisle 85,530 Negotiable January 2019 East-West National Lewis University3333 Finley Rd, Downers Grove 46,969 September 2013 Negotiable East-West Acxiom Corporation

Total - 4 Spaces 484,354

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 AVAILABILITYA glut of space remains as 81 contiguous blocks greater than 50,000 square feet are available

• The total number of direct, available large blocks rose to 81, buttotal square footage within large blocks was reduced by 3.5percent, or 273,000 square feet. Several large blocks werereduced in size but still remain above the 50,000 square footthreshold.

• The largest block removed during the quarter was a 101,000square foot space at 1 Corporate Drive in Long Grove. FreseniusKabi signed a 15-year lease and will occupy its new location earlynext year.

• The largest new block is a 144,000 square foot building at 5450North Cumberland Avenue in Chicago. Oce-USA Holding hadpreviously attempted to sublease the space but the direct leasehas now expired. The 101,000 square foot building at 2250 WestPinehurst Boulevard in Addison is also newly available as Ricohand Kraft have vacated the two-story structure.

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

3890 Salem Lake Dr Long Grove 150,000 Northwest5450 N Cumberland Ave Chicago 143,525 O'Hare2350-2360 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 Northwest2250 W Pinehurst Blvd Addison 100,904 Northwest1000 E Woodfield Rd Schaumburg 98,555 Northwest703-709 W Algonquin Rd Arlington Heights 96,213 Northwest4242 N Harlem Ave Norridge 93,155 O'Hare544 Lakeview Pky Vernon Hills 84,237 North500 Joliet Rd Willowbrook 78,400 East-West2000 S Finley Rd Lombard 78,300 East-West1350 E Touhy Ave Des Plaines 71,367 O'Hare9801 W Higgins Rd Rosemont 70,926 O'Hare333 E Butterfield Rd Lombard 70,897 East-West3800 Golf Rd Rolling Meadows 67,599 Northwest8550 W Bryn Mawr Ave Chicago 66,895 O'Hare814 Commerce Dr Oak Brook 66,882 East-West1245 Corporate Blvd Aurora 64,960 East-West27545 Diehl Rd Warrenville 62,440 East-West999 E Touhy Ave Des Plaines 59,710 O'Hare2211 Butterfield Rd Downers Grove 52,891 East-West2400 E Devon Ave Des Plaines 51,053 O'Hare23 Blocks of Space 2,007,774

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 Northwest700 Oakmont Ln Westmont 256,767 East-West3075 Highland Pky * Downers Grove 241,519 East-West2400 Cabot Dr Lisle 217,718 East-West5550 Prairie Stone Pky ** Hoffman Estates 193,601 Northwest1701 Golf Rd Rolling Meadows 183,506 Northwest3333 Beverly Rd Hoffman Estates 129,000 Northwest2895 Greenspoint Pky Hoffman Estates 127,941 Northwest1 Overlook Pt Lincolnshire 117,798 North1707 N Randall Rd Elgin 109,076 Northwest1 Pierce Pl Itasca 106,766 Northwest2355 Waukegan Rd Bannockburn 106,495 North8420 W Bryn Mawr Ave Chicago 104,164 O'Hare1707 N Randall Rd Elgin 87,076 Northwest425 N Martingale Rd Schaumburg 81,862 Northwest2550 W Golf Rd Rolling Meadows 81,222 Northwest28100 Torch Pky Warrenville 79,830 East-West75 Tri State International ** Lincolnshire 79,449 North200 N Martingale Rd Schaumburg 77,024 Northwest2655 Warrenville Rd Downers Grove 76,691 East-West2245 Sequoia Dr * Aurora 76,126 East-West200 N Martingale Rd Schaumburg 75,713 Northwest5100 River Rd * Schiller Park 74,988 O'Hare4343 Commerce Ct * Lisle 74,855 East-West333 Knightsbridge Pky Lincolnshire 74,728 North2135 CityGate Ln Naperville 70,537 East-West1333 Butterfield Rd Downers Grove 70,251 East-West1000 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-West2100 Sanders Rd Northbrook 67,681 North701 Warrenville Rd Lisle 67,233 East-West4201 Lake Cook Rd Northbrook 66,000 North300 Park Blvd Itasca 64,123 Northwest1200 Lakeside Dr Bannockburn 63,738 North540 Lake Cook Rd ** Deerfield 63,298 North2 Pierce Pl Itasca 60,904 Northwest1000 Milwaukee Ave Glenview 60,843 North410 Warrenville Rd Lisle 60,434 East-West18W140 Butterfield Rd Oakbrook Terrace 60,401 East-West1701 Golf Rd * Rolling Meadows 60,122 Northwest1 Parkview Plz * Oakbrook Terrace 59,892 East-West3000 Lakeside Dr Bannockburn 56,416 North2100 Enterprise Ave Geneva 55,584 East-West25 Tri State International ** Lincolnshire 54,974 North3800 N Wilke Rd Arlington Heights 54,867 Northwest1222 Hamilton Pky Itasca 54,150 Northwest7400 N Caldwell Ave Niles 54,000 North3 Parkway Blvd N Deerfield 53,578 North701 E 22nd St * Lombard 52,079 East-West1520 Kensington Rd Oak Brook 52,054 East-West3500 Lacey Rd Downers Grove 51,601 East-West1701 Golf Rd Rolling Meadows 51,538 Northwest54 Blocks of Space 4,948,765


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VACANCY RATESMarket vacancy holds steady, but rises in Class A buildings

• While varying within the submarkets, the direct vacancy rate of the overall market remained at 23.2 percent. The total vacancy rate, whichincludes sublease space, also remained unchanged at 26.2 percent.

• For the second consecutive quarter, the direct vacancy rate in the East-West submarket increased by 70 basis points. The East-Westoutperformed the other Suburban submarkets in 2011, but has seen demand falter throughout 2012. Occupancy has improvedsignificantly in the Northwest and O’Hare submarkets, but direct vacancy remains near 25 percent in each.

• Vacancy rose in Class A and C buildings, but fell in Class B buildings. The net result was essentially no change to overall market vacancy,but the recent performance in Class A is indicative of weakness in the market.

• OUTLOOK: Major corporate relocations and downsizing will continue to hamper a recovery, with vacancy rates continuing to be above20 percent.

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

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


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LARGE DEALSActivity muted as no new 20,000 SF+ tenants enter the Suburban market

• After four lease transactions over 100,000 square feet were signed in the third quarter, only one lease of that size transacted in the fourthquarter. Frensius Kabi signed a 15-year lease for 150,000 square feet at 1 Corporate Drive in Long Grove. The pharmaceutical companywill vacate its current building at 1501 East Woodfield Road in Schaumburg in mid-2013.

• Brunswick Corp. will relocate offices within the O’Hare submarket in 2014. The company leased 70,000 square feet at Columbia CentreIII (9525 West Bryn Mawr) in Rosemont and will vacate space at 5100 River Road in Schiller Park.

• Brightstar is expanding their footprint in the North submarket by signing a 5-year, 49,000 square foot lease at 850-60 Technology Wayin Libertyville. Brightstar currently leases 45,000 square feet in a neighboring building.

• With an abundance of vacant space in the marketplace, many tenants have been able to consolidate multiple offices into one location.Waste Management is expanding its office at 700 East Butterfield Road in Oak Brook by absorbing its current 40,000 square footrequirement at 1431 Opus Place in Downers Grove.

• OUTLOOK: Most new large deals involve companies who are already based in the suburbs, resulting in a “musical chairs” effect wherelarge blocks are filled at the expense of creating new ones. For sustained occupancy increases, tenants must expand or new tenantsmust enter the Suburban market in order to offset companies like Sara Lee who are exiting the market. Unfortunately, the market hasnot displayed the new demand necessary for this to happen quickly.

NEW


Fresenius Kabi New North 1 Corporate Dr, Long Grove 101,000Brunswick Corp. Relo O'Hare 9525 W Bryn Mawr, Rosemont 70,000Brightstar New North 850-60 Technology Way, Libertyville 48,700Mercer New North 544 Lakeview Pky, Vernon Hills 48,333Lewis University New East-West 1111 W 22nd St, Oak Brook 28,360Lemko Relo Northwest 1 Pierce Pl, Itasca 22,347Styrolution Relo East-West 4245 Meridian Pky, Aurora 22,000Total - 7 Deals 340,740

RENEWAL/EXPANSION/SUBLEASE


US Foodservice Exp O'Hare 9500 W Bryn Mawr, Rosemont 56,554Waste Management Exp/Relo East-West 700 E Butterfield Rd, Oakbrook 40,030Society of Actuaries Ren/Exp Northwest 475 N Martingale Rd, Schaumburg 39,000Codilis & Associates Sub East-West 150 Harvester Dr, Burr Ridge 38,341Colliers International Ren O'Hare 6250 N River Rd, Rosemont 34,012Big Machines Ren/Exp North 570 Lake Cook Rd, Deerfield 33,000APICS Ren O'Hare 8430 W Bryn Mawr, Chicago 32,295Total - 7 Deals 273,232

LARGE LEASE TRANSACTIONS

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


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ABSORPTIONDemand flat overall, but varying by class

• After experiencing 185,000 square feet of negative absorption last quarter, occupancy increased by 115,000 square feet in the fourthquarter. This suggests that overall demand was essentially flat, but Class A properties had 258,000 square feet of negative net absorptioncompared to 268,000 square feet of positive absorption in Class B. This disconnect was exemplified by the East-West and Northsubmarkets.

• OUTLOOK: Flat demand in a market with high vacancy suggests that there are few significant demand drivers in Suburban Chicago.Companies have mulled relocation to other states to avoid increased corporate income taxes; others, like Sara Lee, are relocating tothe CBD. Without significant job creation, absorption will continue to be weak.

SUBURBAN CHICAGO ABSORPTION BY CLASS: CLASS A CONTINUES TO BE NEGATIVE

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

Class A 1,080,332 102,299 366,688 542,281 (259,973) (595,372) (219,164) 299,247 (457,450)

Class B (25,541) 389,014 484,869 (203,072) (2,062) (259,196) 67,827 (152,069) 92,876

Class C 76,936 85,269 (125,850) (108,813) (87,441) (179,177) 7,017 55,114 (5,912)

Total 1,131,727 576,582 725,707 230,396 (349,476) (1,033,744) (144,319) 202,292 (370,486)

NORTH 2004 2005 2006 2007 2008 2009 2010 2011 2012

Class A (10,452) 196,403 (100,049) 615,115 (240,617) (207,914) (312,238) (261,008) (365,450)

Class B 62,026 164,357 316,207 355,510 (60,982) (38,575) (319,078) 33,814 131,363

Class C (39,173) 12,697 (39,440) 26,935 (2,048) (104,195) (40,044) (90,151) 8,074

Total 12,401 373,457 176,718 997,560 (303,647) (350,684) (671,360) (317,345) (226,013)

NORTHWEST 2004 2005 2006 2007 2008 2009 2010 2011 2012

Class A 902,901 225,865 (488,651) 10,333 (302,930) (388,945) (21,262) (632,282) 379,728

Class B 233,613 (234,681) 12,266 (164,112) (261,498) (310,263) (295,928) (383,730) (19,395)

Class C (13,282) (216,898) (15,371) (51,429) (28,362) (35,167) (192,091) (48,617) 41,909

Total 1,123,232 (225,714) (491,756) (205,208) (592,790) (734,375) (509,280) (1,064,629) 402,242

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

Class A 402,561 (55,786) 189,235 11,636 (256,325) (134,526) 209,180 40,666 81,456

Class B (306,424) 53,945 7,915 (81,167) (51,601) (80,925) 70,376 14,041 26,266

Class C (15,002) (204,597) 90,170 (50,022) (35,696) 62,815 (10,855) (14,567) 17,442

Total 81,135 (206,438) 287,320 (119,553) (343,622) (152,637) 268,701 40,140 125,164

TOTALS 2004 2005 2006 2007 2008 2009 2010 2011 2012

Class A 2,375,342 468,781 (32,777) 1,179,365 (1,059,845) (1,326,757) (343,484) (553,378) (361,716)

Class B (36,326) 372,635 821,257 (92,841) (376,143) (688,960) (476,802) (487,944) 231,110

Class C 9,479 (323,529) (90,491) (183,329) (153,547) (255,724) (235,972) (98,221) 61,512

Total 2,348,495 517,887 697,989 903,195 (1,589,535) (2,271,441) (1,056,259) (1,139,542) (69,094)



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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 4.1 percent, Class B rentsare down 1.8 percent, and Class C rents are down 0.9 percent on a year-over-year basis.

• Class C buildings in the O’Hare submarket have posted 8.3 percent growth in asking rents over the past 12 months. However thissegment is composed of just 2.5 million square feet and is 37.6 percent vacant, so the rent increase may be a result of the low samplesize.

• Asking rental rates in the O’Hare Class A segment have fallen 5.8 percent on a year-over-year basis. Accordingly, its direct vacancyrate has continued to fall and is currently at 18.2 percent.

• Class C gross asking rental rates once again reached new historical lows in the East-West and Northwest submarkets.

• Compared to peak levels, overall gross asking rents have fallen 17.8 percent and are at their lowest levels in MBRE’s tracked history.

• OUTLOOK: In general, segments with larger rent decreases have experienced positive absorption this year. With an overall market directvacancy rate of 23.2 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 $22.16 -2.3% $17.84 -3.9% $15.34 -2.6% $19.81 -2.7%North $20.10 -4.6% $19.58 1.9% $15.67 -2.7% $19.54 -2.7%Northwest $21.53 -5.0% $16.41 -2.7% $12.87 -6.2% $19.22 -4.6%O'Hare $22.63 -5.8% $19.99 0.9% $15.86 8.3% $20.68 -2.2%Suburban Chicago Total $21.50 -4.1% $18.07 -1.8% $15.03 -0.9% $19.70 -3.1%

AVERAGE GROSS ASKING RATES BY CLASS AND SUBMARKET

ASKING RATES AT LOWEST LEVEL IN 12 YEARS


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SINVESTMENT SALESLarge headquarters sale overshadows otherwise quiet quarter

On the Market: 4th Quarter 2012Building Address Submarket Size (sf) Price PSF * Class Seller Status (Buyer or Listing Agent)

Greenspoint Office Park, Hoffman Estates (3 properties)

Northwest 498,000 $28,000,000 $56 A Multi Employer Property Trust On Market (HFF)

2707, 2803, 2805, & 2809 Butterfield Rd, Oak Brook

East-West 312,262 - - BInland Oak Brook International Office Ctr

On Market (HFF)

2349 W Lake St, 2250 W Pinehurst Blvd, Addison Northwest 216,858 - - B Multi Employer Property TrustOn Market (Jones Lang LaSalle)

800-810 Jorie Blvd, Oak Brook (2 properties) East-West 193,689 $15,000,000 $77 B LNR PartnersNew on Market (NAI Hiffman)

1717-1755 Park St, Naperville (2 properties) East-West 151,708 - - A/B Tetrad Holdings Corporation On Market (NAI Hiffman)

3030 Warrenville Rd, Lisle East-West 150,036 $18,960,000 $126 B Great Lakes REITNew on Market (Marcus & Millichap)

Investment Sales: 4th Quarter 2012Building Address Submarket Size (sf) Price PSF * Class Seller Buyer

4 Overlook Pt, Lincolnshire North 818,686 $148,000,000 $181 A Retail Properties of AmericaAmerican Realty Capital Trust

2050-2080 Finley Rd (11 Properties), Lombard East-West 427,290 $39,500,000 $92 B KBS Realty AdvisorsInvestcorp International JV Golub & Company

40 Shuman Blvd, Naperville East-West 162,560 $12,975,000 $80 BKBS Real Estate Investment Trust

Arthur Goldner & Associates

2600 S River Rd, Des Plaines O'Hare 65,000 $3,800,000 $58 CProperty Casualty Insurers Association of America

Americaneagle.com

899 Skokie Blvd, Northbrook North 37,938 $3,015,000 $79 B 899 Skokie Blvd 899 Building

3030 W Salt Creek Ln, Arlington Heights Northwest 100,952 $2,300,000 $23 B Equity Office 3030 Salt Creek Atrium

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

• The 819,000 square foot building at 4 Overlook Point in Lincolnshire marked the largest single-building sale in the Suburban marketsince the economic downturn. American Realty Capital Trust purchased the Aon Hewitt Headquarters from Retail Properties of Americafor $148 million, or $181 per square foot. Last quarter Aon extended its lease through 2024, establishing a steady cash flow for its newowner.

• A joint venture of Investcorp International and Golub & Company acquired the eleven building Oak Creek Center in Lombard for $92 persquare foot. The Class B portfolio, previously owned by KBS Realty Advisors, was 87.5 percent leased.

• The Multi Employer Property Trust is marketing two sizable portfolios: the three building Greenspoint Office Park in Hoffman Estates andtwo buildings located at 2349 West Lake Street and 2250 West Pinehurst Boulevard in Addison. Great Lakes REIT has listed 3030Warrenville Road in Lisle for sale and hopes to receive bids near $126 per square foot.

• OUTLOOK: Suburban Chicago has not generated the premier investor interest that characterizes the CBD. However, well leased and welllocated Class A properties as well as stabilized Class B properties continue to be in demand.

INVESTMENT SALES: INVESTORS CAPITALIZE ON SOFT MARKET CONDITIONS


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SFORECASTVacancy expected to decline but remain well above 20 percent

Suburban Chicago has experienced severe occupancylosses surpassing the jobs lost since the economicdownturn. Since occupancy reached its peak in 2007,net absorption from 2008 through 2012 has totaleda negative 6.1 million square feet. Total employmentdeclined 7.4 percent peak-to-trough, but hasrebounded to now stand at 5.1 percent below itspeak.

Occupancy is still more reduced from its peak thantotal employment, which highlights the trend ofcompanies relocating to the CBD. Suburban Chicagolacks the dynamic demand drivers that have recentlycharacterized the CBD. With a waning ability to attracttop workers to the suburbs, the market is seeing long-time tenants seek relocation options. Also, largesublease blocks continue to weigh heavily on thedirect market.

For the factors mentioned above, the Suburbanmarket will face several headwinds on its way torecovery. No speculative construction and, therefore,no new inventory will help aid the market, but thedemand to sustain a robust recovery simply does notexist at this time.

MB Real Estate expects a slight vacancy decrease in2013. The large losses from 2009 are not expectedagain, but neither is a rapid recovery. Positiveabsorption will occur in 2013, but will likely be dueto incremental 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 112,311,826 86,203,123 23.2%2013 112,311,826 86,374,011 23.1%2014 112,311,826 86,986,292 22.5%

304,268

(69,094)

1997-2012 Absorption Avg:

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 20,627,288 (457,450) (300,083) 4,361,998 21.1% 16,265,290 1,202,762 23.7%

Class B 14,510,194 92,876 198,792 3,342,263 23.0% 11,167,931 538,017 27.8%

Class C 5,180,619 (5,912) 50,620 1,333,065 25.7% 3,847,554 7,210 21.8%

Total 40,318,101 (370,486) (50,671) 9,037,326 22.4% 31,280,775 1,747,989 24.9%

NORTHRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 16,858,000 (365,450) (105,550) 3,639,667 21.6% 13,218,333 1,019,011 26.1%

Class B 7,374,024 131,363 122,702 1,320,833 17.9% 6,053,191 114,616 21.1%

Class C 2,518,166 8,074 18,046 576,805 22.9% 1,941,361 24,018 24.6%

Total 26,750,189 (226,013) 35,198 5,537,305 20.7% 21,212,884 1,157,645 24.6%

NORTHWESTRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 18,500,654 379,728 72,328 3,905,239 21.1% 14,595,415 375,198 25.3%

Class B 9,669,129 (19,395) (90,807) 3,252,387 33.6% 6,416,742 147,921 35.5%

Class C 2,348,148 41,909 31,825 703,780 30.0% 1,644,367 21,771 32.2%

Total 30,517,931 402,242 13,347 7,861,406 25.8% 22,656,525 544,890 29.0%

O'HARERBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 7,863,219 81,456 75,411 1,431,431 18.2% 6,431,788 129,901 21.1%

Class B 4,328,987 26,266 36,825 1,307,585 30.2% 3,021,402 35,225 31.5%

Class C 2,533,399 17,442 5,134 933,650 36.9% 1,599,749 500 37.6%

Total 14,725,605 125,164 117,370 3,672,666 24.9% 11,052,939 165,626 27.0%

TOTALSRBA(sf)

YTDAbsorption (sf)


Direct Vacancy(sf)

Direct Vacancy

%

Occupancy(sf)

Sublease Vacancy

(sf)


Sublease) %

Class A 63,849,161 (361,716) (257,893) 13,338,335 20.9% 50,510,826 2,726,872 24.5%

Class B 35,882,334 231,110 267,511 9,223,068 25.7% 26,659,266 835,779 28.9%

Class C 12,580,331 61,512 105,626 3,547,300 28.2% 9,033,031 53,499 27.6%

Total Suburban 112,311,826 (69,094) 115,244 26,108,703 23.2% 86,203,123 3,616,150 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 Executive Vice President & Chief Administrative Officer/General Counsel

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.


mb real estate's 2012 4th quarter chicago market overview

Documents

downtown chicago

thecity of chicago

percent plan

percent of employers

chicago msa employers

percent net employment

overall labor market

business services industry