Citywide positive net absorption continues to peak

Research & Forecast Report

AUSTIN | OFFICEQ4 2015

Hannah Tysor Senior Marketing & Research Coordinator | Houston & Austin

According to Wallethub’s list of “2016’s Best & Worst Cities to Find a Job”, Austin ranks 3rd in the nation behind Plano, Texas and Overland Park, Kansas. The strong numbers in this report prove that despite low oil prices that are taking a toll on other Texas markets, Austin continues to thrive.

Once again, overall positive net absorption in the Austin market has reached the highest ever recorded. Tenants moving into new office space during Q4 2015 amount to a positive net absorption of 902,046 square feet.

Five buildings totaling 676,904 square feet delivered in the fourth quarter and 1,579,496 square feet of office space is currently under construction. Projects that delivered in Q4 include Lamar Central, a 168,752 SF mixed-use development in the West Central submarket. In the Northwest submarket, Quarry Oaks III delivered and is 100% leased.

The citywide average rental rate increased by only 0.6% from $30.52 to $30.71 over the quarter. Class A rental rates in Austin’s CBD increased by 1.4% over the quarter to $44.36, a small increase in comparison to the 7% increase that occurred in Q3. Suburban submarkets also saw an increase in rental rates as the average Class A suburban rental rate increased from $32.73 per square foot to $33.16 per square foot over the quarter.

Austin’s unemployment rate of 3.3% is now well below the state average of 4.5% and the national average of 4.8%. Job Growth in the city is also remarkably higher than the state and national average with a 3.9% annual increase in job growth.

Vacancy & Availability

Austin’s citywide vacancy rate fell 40 basis points from 11.7% to 11.3% between quarters, continuing its gradual decrease since Q2 of 2009. Vacancy in the CBD remains lower than the average at 6.8%, a decrease of 160 basis points since the end of the third quarter. This drop in vacancy is the most significant drop in the fourth quarter.

Summary Statistics Austin Office Market Q4 2014 Q3 2015 Q4 2015

Vacancy Rate 12.4% 11.7% 11.3%

Net Absorption (Million Square Feet) .388 .899 .902

New Construction (Million Square Feet) .532 .625 .805

Under Construction (Million Square Feet) 3.129 1.996 1.579

Class A Vacancy Rate CBD Suburban

10.5%13.7%

9.8%13.8%

7.6%13.4%

Asking Rents Per Square Foot Per Year

Average $28.88 $30.52 $30.71

CBD Class A $41.06 $43.75 $44.36

Suburban Class A $30.64 $32.73 $33.16

Market IndicatorsRelative to prior period

AnnualChange

Quarterly Change

Quarterly Forecast*

VACANCY

NET ABSORPTION

NEW CONSTRUCTION

UNDER CONSTRUCTION

*Projected

2 Austin Research & Forecast Report | Q4 2015 | Office | Colliers International

Overall suburban vacancy also continues to decrease although it remains higher than the CBD at 12.4% vacancy in Q4. Major submarkets that saw a significant decrease in vacancy over the quarter include Central, North/Domain, Southwest, and Northwest.

Submarkets that experienced increases in vacancy in Q4 include Cedar Park, Far Northwest, and the South submarket. The increase in vacancy in the Cedar Park submarket is due primarily to the delivery of Paloma Ridge Buildings A & B which created 212,400 SF of available office space in the Cedar Park submarket. Both buildings were completely vacant upon delivery in December.

Absorption, New Supply and Vacancy

Absorption & Demand

Austin’s office market posted 902,046 SF of positive net absorption in Q4 2015, the highest positive net absorption ever recorded according to our data service provider, CoStar. Approximately 327,720 square feet of that absorption occurred in Class A office space in the Southwest submarket where Apple, Inc. moved into 217,490 square feet at Capital Ridge. Class A space in the Northwest submarket posted the second highest positive net absorption of 204,809 square feet in the fourth quarter. The CBD posted the third highest gain of 148,599 square feet of Class A positive net absorption. Only the South submarket saw negative net absorption over the quarter of 10,965 square feet.

Total positive net absorption for 2015 reached 2,874,695 square feet, well over double the amount of positive net absorption in 2014.

Rental Rates

The citywide average rental rate increased slightly over the quarter from $30.52 per square foot to $30.71 per square foot. The highest rates across the Austin market are in the CBD where Class A rental rates reached $44.36 per square foot in Q4, a 1.4% increase over last quarter. Rates were also high in the South and West Central submarkets, where Class A rates reached $39.37 per square foot and $38.74 per square foot, respectively.

Citywide Class B rental rates rose slightly in the fourth quarter to $25.19 per square foot from $24.92 per square foot.

Over the year, citywide rental rates rose 3.6%, a significant increase in comparison to years past. In 2014, the citywide average rental rate rose only 0.8% over the year.

Job Growth & Unemployment(not seasonally adjusted)

UNEMPLOYMENT 11/14 11/15

AUSTIN 3.7% 3.3%

TEXAS 4.5% 4.5%

U.S. 5.5% 4.8%

JOB GROWTHAnnual Change

# of Jobs Added

AUSTIN 3.9% 36.1K

TEXAS 1.7% 204.8K

U.S. 1.9% 2.6M

CBD vs. SuburbanCLASS A OFFICE VACANCY

CLASS A OFFICE RENTS

33 Austin Research & Forecast Report | Q4 2015 | Office | Colliers International

Q4 2015 Top Office Lease TransactionsBUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE

Parmer 3.2 Northeast 93,000 Natera Genetics Oct-15

Aspen Lake One Far Northwest 88,000 LDR Spine USA, Inc.2 Oct-15

4516 Seton Center Pky Northwest 62,193 BancVue, Ltd.1 Nov-15

Research Park V Northwest 51,624 Planview Oct-15

One Congress Plaza CBD 46,960 Main Street Hub Oct-15

3800 Quick Hill Rd. North/Domain 46,247 Protect America1 Oct-15

San Jacinto Center CBD 40,207 Outbound Engine Dec-15

823 Congress Ave. CBD 33,000 AllClear ID Dec-15

The Terrace 7 Southwest 25,082 BPL Plasma Dec-15

5th+Colorado CBD 19,087 Industrious Office4 Oct-15

Ben White 6 Southeast 18,990 Tokyo Electron1 Dec-15

1300 Guadalupe St. CBD 18,446 Projekt202 Oct-15

Frost Bank Tower CBD 14,000 Pillsbury Winthrop Shaw Pittman LLP Oct-15

5th+Colorado CBD 12,434 Sheri Hill4 Oct-15

Leasing ActivityAustin’s office leasing activity recorded 898,758 SF in Q4 2015. Major transactions this quarter included a new lease for Natera Genetics, a renewal for LDR Spine, USA, and an expansion for Q2 Holdings, Inc.

1 Renewal 2 Expansion3 Sublease4 Pre-lease/proposed or under construction

Q4 2015 Significant Sales Transactions – (100,000 SF or greater)BUILDING NAME SUBMARKET RBA (SF) YEAR BUILT BUYER SELLER SALE PRICE $/SF CLOSED

7700 W Parmer Ln (4 Properties)*

Far Northwest 911,579 1999 Accesso

Partners, LLC Spear Street Capital $272,250,000 $299 Dec-15

Amber Oaks Corporate Center (10 Properties)*

Far Northwest 667,999 1999-2007 Menlo Equities CBRE Global Investors Ltd. $116,000,000 $173 Dec-15

301 Congress Ave. CBD 418,338 1985Prudential Investment Management, Inc.

Commonwealth Partners Management Services LP N/A N/A Dec-15

6800 Burleson Rd. Southeast 204,346 1986 Capital Commercial DivcoWest N/A N/A Dec-15

Sales ActivityAustin’s office investment sales activity included four sales transactions (including two portfolio sales) with an average sale price of $236 per SF.

Sources: CoStar and Real Capital Analytics*Part of a portfolio

4 Austin Research & Forecast Report | Q4 2015 | Office | Colliers International

Austin Office Market Summary (CBD, Suburban, & Overall)

INVENTORY DIRECT VACANCY SUBLEASE VACANCY VACANCY VACANCY RATE (%) NET ABSORPTION

(SF)RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q4-2015 Q3-2015 Q4-2015 Q3-2015 AVG

($/SF)

CBD

A 26 6,741,601 471,319 7.0% 39,189 0.6% 510,508 7.6% 9.8% 148,599 141,732 $44.36

B 32 2,382,745 98,289 4.1% 2,670 0.1% 100,959 4.2% 3.8% -11,255 -20,590 $36.57

C 9 470,243 39,269 8.4% 0 0.0% 39,269 8.4% 9.9% 7,231 8,045 $27.55

Total 67 9,594,589 608,877 6.3% 41,859 0.4% 650,736 6.8% 8.3% 144,575 129,187 $41.84

SUBURBAN

A 170 19,840,831 2,322,588 11.7% 330,978 1.7% 2,653,566 13.4% 13.8% 784,266 394,343 $33.16

B 322 17,386,138 1,935,607 11.1% 234,575 1.3% 2,170,182 12.5% 12.4% -21,629 353,127 $24.44

C 57 3,025,382 180,904 6.0% 1,800 0.1% 182,704 6.0% 5.9% -5,166 20,415 $16.42

Total 549 40,252,351 4,439,099 11.0% 567,353 1.4% 5,006,452 12.4% 12.6% 757,471 767,885 $29.04

OVERALL

A 195 26,386,711 2,770,238 10.5% 370,167 1.4% 3,140,405 11.9% 12.8% 932,865 538,744 $35.04

B 354 19,768,883 2,033,896 10.3% 237,245 1.2% 2,271,141 11.5% 11.3% -32,884 332,537 $25.19

C 66 3,495,625 220,173 6.3% 1,800 0.1% 221,973 6.4% 6.4% 2,065 28,460 $18.35

Total 615 49,651,219 5,024,307 10.1% 609,212 1.2% 5,633,519 11.3% 11.7% 902,046 899,741 $30.71

INVENTORY DIRECT VACANCY

SUBLEASE VACANCY VACANCY VACANCY RATE (%) NET ABSORPTION (SF) RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q4-2015 Q3-2015 Q4-2015 Q3-2015 AVG

($/SF)

CEDAR PARK

A 4 444,674 223,357 50.2% 0 0.0% 223,357 50.2% 6.3% 3,766 0 $26.48

B 3 142,622 0 0.0% 0 0.0% 0 0.0% 0.0% 0 1,800 $27.20

Total 7 587,296 223,357 38.0% 0 0.0% 223,357 38.0% 3.9% 3,766 1,800 $26.49

CENTRAL

A 3 474,288 74,057 15.6% 0 0.0% 74,057 15.6% 17.2% 7,678 0 $34.01

B 35 1,932,024 180,656 9.4% 17,690 0.9% 198,346 10.3% 10.9% 12,890 27,922 $23.72

C 16 939,288 26,125 2.8% 0 0.0% 26,125 2.8% 2.9% 875 5,679 $16.51

Total 54 3,345,600 280,838 8.4% 17,690 0.5% 298,528 8.9% 9.6% 21,443 33,601 $24.93

EAST

A 2 104,821 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 -

B 13 1,980,452 451,945 22.8% 0 0.0% 451,945 22.8% 22.8% 292 2,802 $19.44

C 4 149,025 29,050 19.5% 0 0.0% 29,050 19.5% 19.5% 0 0 $19.98

Total 19 2,234,298 480,995 21.5% 0 0.0% 480,995 21.5% 21.5% 292 2,802 $19.47

FAR NORTHEAST

B 1 23,408 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 -

Total 1 23,408 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 -

FAR NORTHWEST

A 13 2,046,751 274,904 13.4% 51,094 2.5% 325,998 15.9% 14.6% 82,979 89,839 $28.72

B 8 327,418 26,191 8.0% 0 0.0% 26,191 8.0% 8.7% 2,163 -2,854 $21.53

C 1 21,964 2,600 11.8% 1,800 8.2% 4,400 20.0% 0.0% -4,400 0 $20.48

Total 22 2,396,133 303,695 12.7% 52,894 2.2% 356,589 14.9% 13.6% 80,742 86,985 $27.50

Austin Suburban Office Market Summary

5 Austin Research & Forecast Report | Q4 2015 | Office | Colliers International

Austin Suburban Office Market Summary - Continued

INVENTORY DIRECT VACANCY SUBLEASE VACANCY VACANCY VACANCY RATE (%) NET ABSORPTION

(SF)RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q4-2015 Q3-2015 Q4-2015 Q3-2015 AVG

($/SF)

NORTH/DOMAINA 11 1,526,977 111,453 7.3% 5,162 0.3% 116,615 7.6% 12.5% 73,665 69,343 $33.37B 31 1,983,536 110,721 5.6% 88,282 4.5% 199,003 10.0% 8.5% -29,566 3,930 $22.96C 2 102,925 0 0.0% 0 0.0% 0 0.0% 0.0% 0 24,759 $18.98Total 44 3,613,438 222,174 6.1% 93,444 2.6% 315,618 8.7% 10.0% 44,099 98,032 $29.07NORTHEASTA 4 375,146 200,598 53.5% 0 0.0% 200,598 53.5% 54.1% 2,296 1,359 $24.12B 18 1,280,754 136,153 10.6% 12,657 1.0% 148,810 11.6% 12.0% 4,723 25,017 $18.67C 8 305,114 96,461 31.6% 0 0.0% 96,461 31.6% 31.6% 0 -12,807 $11.70Total 30 1,961,014 433,212 22.1% 12,657 0.6% 445,869 22.7% 23.1% 7,019 13,569 $19.55NORTHWESTA 72 6,789,939 496,816 7.3% 70,208 1.0% 567,024 8.4% 9.5% 204,809 17,559 $33.07B 97 4,309,631 347,042 8.1% 102,787 2.4% 449,829 10.4% 9.2% -53,392 287,686 $28.18C 4 401,563 386 0.1% 0 0.0% 386 0.1% 0.4% 1,313 -209 $33.00Total 173 11,501,133 844,244 7.3% 172,995 1.5% 1,017,239 8.8% 9.1% 152,730 305,036 $30.75ROUND ROCKA 1 87,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $29.13B 11 434,646 27,860 6.4% 0 0.0% 27,860 6.4% 8.7% 9,865 6,867 $20.42C 3 147,466 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0Total 15 669,112 27,860 4.2% 0 0.0% 27,860 4.2% 5.6% 9,865 6,867 $21.10SOUTHA 4 372,497 11,648 3.1% 2,798 0.8% 14,446 3.9% 3.4% -1,887 -1,635 $39.37B 23 1,216,351 63,977 5.3% 2,389 0.2% 66,366 5.5% 5.4% -913 6,607 $29.73C 11 651,834 22,234 3.4% 0 0.0% 22,234 3.4% 2.2% -8,165 2,281 $22.81Total 38 2,240,682 97,859 4.4% 5,187 0.2% 103,046 4.6% 4.1% -10,965 7,253 $30.55SOUTHEAST

B 9 989,009 432,366 43.7% 0 0.0% 432,366 43.7% 44.8% 10,678 -1,860 $22.17C 4 161,933 0 0.0% 0 0.0% 0 0.0% 2.2% 3,502 561 $15.50Total 13 1,150,942 432,366 37.6% 0 0.0% 432,366 37.6% 38.8% 14,180 -1,299 $21.45SOUTHWESTA 51 6,785,262 732,744 10.8% 199,365 2.9% 932,109 13.7% 16.6% 327,720 194,909 $35.29B 69 2,583,587 143,376 5.5% 10,770 0.4% 154,146 6.0% 6.8% 21,631 -8,207 $27.94C 3 94,138 1,340 1.4% 0 0.0% 1,340 1.4% 6.1% 4,417 -896 $27.54Total 123 9,462,987 877,460 9.3% 210,135 2.2% 1,087,595 11.5% 13.8% 353,768 185,806 $34.15WEST CENTRALA 4 637,755 173,342 27.2% 2,351 0.4% 175,693 27.5% 19.2% 83,240 25,638 $38.74B 4 182,700 15,320 8.4% 0 0.0% 15,320 8.4% 8.4% 0 3,417 $33.82C 1 50,132 2,708 5.4% 0 0.0% 2,708 5.4% 0.0% -2,708 1,047 $28.25Total 9 870,587 191,370 22.0% 2,351 0.3% 193,721 22.3% 15.0% 80,532 30,102 $38.19

6 Austin Research & Forecast Report | Q4 2015 | Office | Colliers International

Office Development Pipeline1.6 million square feet of office space was under construction during Q4 2015. Five buildings totaling 676,904 square feet delivered in Q4 including Lamar Central, a mixed-use development with 132,000 square feet of office space.

BUILDING NAME ADDRESS SUBMARKET SF PRE-LEASED DEVELOPER EST.

DELIVERY

NorthShore 110 San Antonio St CBD 23,592 100.0% Trammel Crow Co Jan-16

Research Park Plaza Bldg V 12301 Research Blvd Northwest 172,854 29.9% Cousins Properties Incorporated

Feb-16

5th & Colorado 201 W 5th St CBD 179,846 26.8% Lincoln Property Company Mar-16

Domain 1 11801 Domain Blvd North/Domain 124,578 0.0% Endeavor Real Estate Group Mar-16

Domain 5 2901 Esperanza Crossing North 74,804 0.0% Endeavor Real Estate Group Mar-16

411 W Main St 411 W Main St Round Rock 26,563 0.0% 411 Partners, LLC Jun-16

2700 La Frontera Blvd 2700 La Frontera Blvd Round Rock 97,941 89.3% Jul-16

317 Grace Ln 317 Grace Ln Southwest 87,748 2.5% Equitable Commercial Realty Dec-16

Green Water Treament Plant 500 W 2nd St CBD 500,512 41.2% Trammel Crow Co Jan-17

Domain 8 11601 Alterra Parkway North/Domain 291,058 0.0% Endeavor Real Estate Group Jan-17

QUOTED GROSS RENTAL RATES FOR EXISTING TOP PERFORMING OFFICE BUILDINGS

BUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR BUILT

% LEASED

AVAIL. SF

RENT ($/SF) OWNER

Frost Bank Tower 401 Congress Ave. CBD 535,078 2003 98.50% 7,944 $55.97 CalSTRS

One Congress Plaza 111 Congress Ave. CBD 518,385 1985 93.70% 119,441 $56.49 Parkway Properties, Inc

One American Center 600 Congress Ave. CBD 503,951 1984 97.40% 13,187 $48.91 CalSTRS

300 West Sixth 300 W. 6th Street CBD 454,225 2001 99.70% 8,502 $56.57 CalSTRS

301 Congress 301 Congress Ave. CBD 418,338 1986 88.60% 75,877 $52.46 National Office Partners, LP

100 Congress 100 Congress Ave. CBD 411,536 1987 97.70% 27,991 $55.52 Metlife, Inc.

7700 W Parmer Ln - Bldg. B

7700 W Parmer Ln - Bldg. B Far Northwest 350,000 1999 90.60% 31,500 $35.20 Unknown

7700 W. Parmer Ln - Bldg. C

7700 W. Parmer Ln. - Bldg. C

Far Northwest 282,000 1999 91.80% 23,693 $35.33 Unknown

Two Barton Skyway 1601 S MoPac Southwest 195,639 2000 97.10% 5,639 $32.1 University Federal Credit Union

Note: Avail. SF includes direct and sublet space as well as any future available space listed. Source: CoStar Property

7 <<region>> Research & Forecast Report | Quarter Year or Date | <<Location / Sector>> | Colliers International7 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International

Copyright © 2015 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International | Market000 Address, Suite # 000 Address, Suite #+1 000 000 0000colliers.com/<<market>>

7 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International

Copyright © 2015 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International | Austin515 Congress Avenue, Suite 1700 Austin, Texas 78701+1 512 539 3000colliers.com/texas/austin

FOR MORE INFORMATIONHannah TysorSenior Marketing & Research Coordinator | Houston & Austin+1 713 830 2192hannah.tysor@colliers.com

Q4 2015 Highlights

Class A (53%) Class B (40%) Class C (7%)

26.4M SF 19.8M SF

3.5M SF

1.6M SF

11.7%Current Vacancy

676,904 SFDelivered Inventory

49.9 Million SF

LEADING THE NATIONAustin is ranked No. 1 for real estate development across all 75 markets surveyed in Emerging Trends in Real Estate, an annual report published by the Urban Land Institute and PwC LLP. Austin ranked second in the nation for overall real estate prospects.

902K

674K433K

899K

Square Feet

Q4

Q1Q2Q3 2015

388KQ3

2014

Highest Positive Net Absorption Ever Recorded

CITYWIDE POSITIVE NET ABSORPTION

TOTAL OFFICE INVENTORY