state of the u.s. office market- 2017 q1 review and forecastpdf.leeazmail.com/pdfs/coppolacheney/the...

State Of The U.S. Office Market

2017 Q1 Review And Forecast

• Overview

• Economy

• Fundamentals

• Capital Markets

• Opportunity Zone

• Most And Least

Agenda

Deliveries Spike - Absorption & Rent Growth Slows

Summary Of National Office Market Conditions

Source: CoStar Portfolio Strategy As of 17Q1

Under Construction 131M SF 145M SF

Sales Volume $156B (20%) $147B (-6%)

Deliveries 66M SF (42%) 59M SF (-10%) 98M SF (66%)

Net Absorption 104M SF (7%) 83M SF (-20%) 75M SF (-10%)

Vacancy 10.6% 10.2% 10.4%

Rent Growth (Y/Y) 5.0% 2.9% 2.0%

2015 (Actual) 2016 (Actual) 2017 (Forecast) 17Q1 (Actual)

$27B

10M SF

10.3%

2.3%

19M SF

143M SF

Economy

Growth In Profits Generally Results In More Jobs

Corporate Profit, Sales, Employment Trends

Sources: Moody's Analytics; BEA; Barron's; CoStar Portfolio Strategy As of April 2017

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

60%

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Financial Profit Non Financial Profit Foreign Profit Profit Margin as % of GDP

Corporate Profit Growth (Y/Y) Profits As % Of GDP

Less Cash To Fuel Technology Growth

Silicon Valley Venture Capital Investment

Bay Area VC

*Note that the above link is dead as of 2/1/17

Then, scroll down and click "Historical Trend"

Then, below "Historical Trend", click "Explore Historical Trend Data"

Filter for the appropriate time-frame and location

Click "View Table" then "Download this data"

Sources: PWC; CoStar Portfolio Strategy As of 17Q1

0

100

200

300

400

500

600

$0

$2

$4

$6

$8

$10

04 05 06 07 08 09 10 11 12 13 14 15 16 17

VC Investment Number of Deals

VC Investment Volume ($ Billions) Number Of Deals

Office-Using Employment Remains Strong

Total And Office-Using Employment Growth (Y/Y)

Sources: Moody's Analytics; BLS; CoStar Portfolio Strategy As of April 2017

(7%)

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Total Employment Office-Using Employment Net Office Absorption

Employment Growth (Y/Y)

3/31/2016 3/31/2017 3/31/2018

Y/Y 16Q1 17Q1 18Q1

Total Employment 1.9% 1.6% 1.3%

Office Jobs 2.2% 2.5% 1.8%

Net Absorption 1.4% 1.1% 1.0%

Job Growth Slowed In Most Markets

Employment Growth By Metro

123456789

1011121314151617181920

Source: Moody's Analytics; CoStar Group As of 17Q1

0%

1%

2%

3%

4%

5%S

ea

ttle

Da

llas-

FW

San

Jose

De

nver

Ora

ng

e C

ounty

Atlan

ta

East

Bay

Austin

Na

shvill

e

San

Die

go

Washin

gto

n, D

.C.

San

Fra

ncis

co

Bosto

n

Na

tional

Los A

ngele

s

Phila

delp

hia

Ch

icago

Ne

w Y

ork

Ho

usto

n

Pitts

burg

h

Last 4-Quarters 2012Q2- 2016Q1

Annual Employment Growth

East Midwest South West

Generally The Job Picture Is Moderating

Office-Using Employment Y/Y Change By Metro

As of 17Q1 Sources: Moody’s Analytics; CoStar Portfolio Strategy

Fundamentals

Supply Increase To Expand Vacancies

National Index Vacancy And Demand, Supply Percentage Changes

Current Quarter3/31/2017

Current Vacancy:End of ForecastForecast MinHistorical Avg.Recession Max


7%

8%

9%

10%

11%

12%

13%

14%

(50)

0

50

100

150

200

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

17Q1 Vacancy: 10.3%

1.3%

3.2%

6.2% 6.7%

0.2%

5.6%

2.2%

0.8%2.5% 3.2%

4.5% 5.0%

2.9%2.0% 2.2%

(10%)

(5%)

0%

5%

10%

Annual Change in Demand & Supply (MSF) Vacancy & Vacancy Average

Annual Rent Growth

13.0%

Top Quality Assets Capture The Most Demand

Net Office Absorption By Building Star Rating

12/31/19993/31/20006/30/20009/30/2000

12/31/20003/31/20016/30/20019/30/2001

12/31/20013/31/20026/30/20029/30/2002

12/31/20023/31/20036/30/20039/30/2003

12/31/20033/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/20063/31/20076/30/2007


2.1%

1.1%

(2%)

(1%)

0%

1%

2%

3%

4%

5%

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

4 & 5 Star 3 Star

Annualized Demand Growth (Two-Quarter Moving Average)

Suburban Space Sees Greater Absorption Than CBD

Annualized U.S. Office Absorption Growth As % Of Total Inventory

Sum Of Absorption During Analysis Period

3/31/20046/30/2013

Inventory As Of The Last Date In The Analysis Period

3/31/20046/30/2013

Chart Data - Absorption as % of Inventory

3/31/2004


0.93%

0.58%

1.81%

1.19%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2004-07 Last 4-Years

CBD Suburban

% Of Total Inventory

Suburban Construction Decreased Over Last 4-Years

Annualized U.S. Office Construction Growth As % Of Total Inventory

Suburban Combines All Districs Besides CBD

3/31/20046/30/2013


3/31/20046/30/2013


Source: CoStar Portfolio Strategy As of 17Q1 Annualized Chart Data: Above % Divided by 4

0.61% 0.62%

2.46%

1.17%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2004-07 Last 4-Years

CBD Suburban

% Of Total Inventory

Most Markets Below 5-Year Average

Annual Net Absorption Last 12-Months And Last 5-Years


Annual Net Absorption (Millions SF)

-2

-1

0

1

2

3

4

5

6

7

Washin

gto

n, D

.C.

Da

llas -

FW

Bosto

n

Pho

enix

Sea

ttle

San

Jose

Ch

icago

Los A

ngele

s

Atlan

ta

Mia

mi

San

Die

go

Austin

San

Fra

ncis

co

Ne

w Y

ork

De

nver

Ho

usto

n

Past 12-Months Average Last 5-Years

Tech Markets Energy Markets Housing Bust Markets Other

Demand Slowing In A Majority Of Major Markets

Demand Momentum Year-Over-Year

2012 2013 2014 2015 2016 2017

Atlanta Atlanta Atlanta Chicago Atlanta Detroit

Chicago Boston Boston Dallas - FW Boston Miami

Detroit Chicago Dallas - FW Denver Chicago New York

East Bay Dallas - FW Denver Miami Denver Orange County

Houston Denver Detroit Minneapolis Detroit Orlando

Los Angeles East Bay Houston Nashville East Bay Philadelphia

Minneapolis Miami Los Angeles New York Los Angeles San Diego

Nashville Northern NJ Minneapolis Northern NJ Minneapolis Washington, D.C.

New York Orange County Orlando Orange County Nashville Atlanta

Orange County Phoenix Philadelphia Orlando Northern NJ Boston

Philadelphia San Diego San Francisco Philadelphia Orlando Chicago

Phoenix San Jose Tampa San Diego Phoenix Dallas - FW

San Francisco Tampa Washington, D.C. San Francisco San Jose Denver

San Jose Detroit Chicago San Jose Seattle East Bay

Seattle Houston East Bay Seattle Tampa Houston

Tampa Los Angeles Miami Tampa Dallas - FW Los Angeles

Boston Minneapolis Nashville Atlanta Houston Minneapolis

Dallas - FW Nashville New York Boston Miami Nashville

Denver New York Northern NJ Detroit New York Northern NJ

Miami Orlando Orange County East Bay Orange County Phoenix

Northern NJ Philadelphia Phoenix Houston Philadelphia San Francisco

Orlando San Francisco San Diego Los Angeles San Diego San Jose

San Diego Seattle San Jose Phoenix San Francisco Seattle

Washington, D.C. Washington, D.C. Seattle Washington, D.C. Washington, D.C. Tampa


Demand Accelerating Demand Decelerating

Suburban Office Market Demand Shows Strength

Year Over Year Net Absorption

3

CBD

19

18

17

14

13

11

10

9

7

6

5

3

2

1


CBDs include metros with greater than 100,000 SF or less than 100,000 SF of net absorption

Suburban include metros with greater than 400,000 SF

-0.4 MSF

0.5 MSF

0.6 MSF

1 MSF

0.6 MSF

4.5 MSF

1.2 MSF

3.9 MSF

1.3 MSF

1 MSF

5.2 MSF

2.3 MSF

1.2 MSF

(2%) 0% 2% 4% 6% 8%

Houston

Chicago

Las Vegas

Portland

Orange County

Washington, D.C.

Austin

Boston

Miami

Raleigh

Dallas - FW

San Jose

Ft. Lauderdale

-0.6 MSF

-0.5 MSF

-0.2 MSF

0.3 MSF

0.4 MSF

1.3 MSF

1.8 MSF

0.8 MSF

0.2 MSF

0.2 MSF

0.2 MSF

0.5 MSF

1 MSF

(2%) 0% 2% 4% 6% 8%

Houston

Dallas - FW

San Francisco

New York

Atlanta

Washington, D.C.

Chicago

Los Angeles

Phoenix

San Jose

Las Vegas

San Diego

Nashville

CBD Suburban

West South East Midwest

Office Starts Have Trended Downward Over Time

Quarterly Office Starts For National Index

Base CaseDate

3/31/19826/30/19829/30/1982

12/31/19823/31/19836/30/19839/30/1983

12/31/19833/31/19846/30/19849/30/1984

12/31/19843/31/19856/30/19859/30/1985

12/31/19853/31/19866/30/19869/30/1986

12/31/19863/31/19876/30/19879/30/1987

12/31/19873/31/19886/30/19889/30/1988

12/31/19883/31/19896/30/1989


0

10

20

30

40

50

60

70

80

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Starts Historical Average Quarterly Starts (2000-16)

Millions SF

Secondary Markets Show Supply Constraint

Office Under Construction In Secondary & Gateway Markets

For ChartQuarter

3/31/19956/30/19959/30/1995

12/31/19953/31/19966/30/19969/30/1996

12/31/19963/31/19976/30/19979/30/1997

12/31/19973/31/19986/30/19989/30/1998

12/31/19983/31/19996/30/19999/30/1999

12/31/19993/31/20006/30/20009/30/2000

12/31/20003/31/20016/30/2001


**Gateway Markets: Boston, Los Angeles, New York, San Francisco, San Jose, Seattle, Washington DC

*Secondary Markets: Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Fort Lauderdale, Houston, Miami,

Nashville, Orlando, Orange County, Portland, Philadelphia, Phoenix, San Diego Tampa

5

15

25

35

45

55

65

75

85

9507Q

3

08Q

1

08Q

3

09Q

1

09Q

3

10Q

1

10Q

3

11Q

1

11Q

3

12Q

1

12Q

3

13Q

1

13Q

3

14Q

1

14Q

3

15Q

1

15Q

3

16Q

1

16Q

3

17Q

1

Secondary Gateway

RBA Under Construction (MSF)

Spread 07Q3:

36 MSF

New York And Houston Trending In Opposite Directions

Office Square Feet Under Construction

3/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/20063/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010


0

20

40

60

80

100

120

140

160

180

200

0

5

10

15

20

25

05 06 07 08 09 10 11 12 13 14 15 16

Houston New York National

Under Construction Millions SF (Houston & New York)

Houston

New York

National

Under Construction Millions SF(National)

Most Major Metros Have Above Average Construction

Office Construction Vs. Historical Norms

3

Rank123456789

10111213141516171819


11 MSF22 MSF

5 MSF 12 MSF

8 MSF4 MSF

8 MSF

10 MSF

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%T

am

pa

Min

ne

ap

olis

Ho

usto

n

Sa

n D

ieg

o

Ch

arl

ott

e

Ch

ica

go

Ea

st

Ba

y

Lo

s A

ng

ele

s

Bo

sto

n

Atla

nta

Mia

mi

Wa

sh

ing

ton

D.C

.

Ne

w Y

ork

De

nve

r

Da

lla

s F

W

Se

att

le

Au

stin

Sa

n F

ran

cis

co

Sa

n J

ose

Current Construction Average Annual Office Supply Growth

SF As % Of Market RBA

Limited Development/ Supply Cooling

Supply Ramping Up

New Construction Activity

Select Office Starts - 17Q1

Frost Tower- 111 W Houston St CBD

Metro: San Antonio

SF: 462,000

Submarket Vacancy: 9.5%

Leased: 67.5%

Owner: City of San Antonio

Delivery Date: March 2019


First Street Tower- 50 1st St South Financial District

Metro: San Francisco

1,100,000 SF Office

109 Residential Units

Submarket Vacancy: 7.4%

Leased: 23.4%

Owner: Oceanwide Holdings

Co. Ltd.

Delivery Date: November 2021

Third + Shoal- 607 W 3rd St CBD

Metro: Austin

347,534 SF Office

Submarket Vacancy: 7%

Leased: 0.1%

Owner: Cielo Realty Partners

Delivery Date: July 2018

314 Main St E Cambridge/Kendal Sq

Metro: Boston

SF: 425,000

Submarket Vacancy:

8.2%

Leased: 18.8%

Delivery Date: December

2019

Turing Point In Office Occupancy Gains?

Market And Submarket Relative Vacancies

49%

69%

12/31/2003

3/31/2004

6/30/2004

9/30/2004

12/31/2004

3/31/2005

6/30/2005

9/30/2005

12/31/2005

3/31/2006

6/30/2006

9/30/2006

12/31/2006

3/31/2007

6/30/2007

9/30/2007


0%

10%

20%

30%

40%

50%

60%

70%

80%

08 09 10 11 12 13 14 15 16 17

Submarkets With Declining Vacancies

Markets With Vacancies Lower Than 2006-07 Peak

Percentage of Markets/Submarkets

49%

69%

Sublease Availability May Have Peaked In Houston

Sublet Available SF As A Percent Of Inventory

3/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/20063/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010


0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

05 06 07 08 09 10 11 12 13 14 15 16

Seattle Houston San Francisco New York National San Jose

Sublet Available As A % Of Inventory

Houston

San Francisco

Seattle

New York

National

San Jose

Vacancies Continue To Increase In Houston

Vacancy Rates For Metros, Current Vs. Last Year

Rank

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20


5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

Ho

usto

n

Da

llas-

FW

Ch

icago

Atlan

ta

De

troit

De

nver

Los A

ngele

s

Na

tional

San

Die

go

Phila

delp

hia

Ne

w Y

ork

Mia

mi

Ora

ng

e C

ounty

Washin

gto

n D

.C.

Bosto

n

Sea

ttle

San

Jose

Port

land O

R

Min

nea

polis

San

Fra

ncis

co

17Q1 Vacancy 16Q1 Vacancy


Vacancy Rate

Many Office Markets Have Sub 9% Vacancy!

Office Vacancy Rates By Metro

As of 17Q1 Source: CoStar Portfolio Strategy

Rent Growth Decelerating In Most Markets

Rent Growth Momentum Year-Over-Year

2012 2013 2014 2015 2016 2017

Atlanta Atlanta Atlanta Atlanta Atlanta Detroit

Boston Boston Boston Boston Chicago Minneapolis

Chicago Chicago Chicago Chicago East Bay Northern NJ

Dallas - FW Dallas - FW Dallas - FW Dallas - FW Los Angeles Tampa

Denver Denver Denver Denver Miami Atlanta

Detroit Detroit Detroit Detroit Nashville Boston

East Bay East Bay East Bay East Bay Orange County Chicago

Houston Houston Los Angeles Los Angeles Orlando Dallas - FW

Los Angeles Los Angeles Minneapolis Miami Philadelphia Denver

Miami Miami Nashville Minneapolis Phoenix East Bay

Minneapolis Minneapolis New York Nashville Seattle Houston

New York Nashville Northern NJ New York Tampa Los Angeles

Orange County New York Orange County Northern NJ Washington, D.C. Miami

Orlando Northern NJ Orlando Orange County Boston Nashville

Philadelphia Orange County Phoenix Orlando Dallas - FW New York

Phoenix Orlando San Diego Philadelphia Denver Orange County

San Diego Philadelphia San Francisco Phoenix Detroit Orlando

San Francisco Phoenix San Jose San Diego Houston Philadelphia

San Jose San Diego Tampa San Jose Minneapolis Phoenix

Seattle San Jose Houston Seattle New York San Diego

Tampa Seattle Miami Tampa Northern NJ San Francisco

Nashville Tampa Philadelphia Washington, D.C. San Diego San Jose

Northern NJ San Francisco Seattle Houston San Francisco Seattle

Washington, D.C. Washington, D.C. Washington, D.C. San Francisco San Jose Washington, D.C.


Rent Growth Accelerating Rent Growth Decelerating

Rent Growth Slowing In CBDs

Rent Growth For Last 12-Months

3

SCROLL RIGHT FOR UPDATE INSTRUCTIONS

CBD

11

10

9

8

7

6

5

4

3

2

1


(1.4%)

(1.2%)

(0.2%)

0.4%

0.7%

3.6%

3.9%

4.5%

6.0%

6.6%

13.7%

(4%) 1% 6% 11% 16% 21% 26%

Denver

Los Angeles

San Francisco

New York

Washington, D.C.

Boston

Dallas - FW

Miami

Seattle

Atlanta

East Bay

0.0%

0.1%

2.8%

3.2%

3.3%

3.7%

4.3%

5.1%

5.4%

5.7%

7.9%

(4%) 1% 6% 11% 16% 21% 26%

New York

Washington, D.C.

Boston

Dallas - FW

Denver

Miami

Los Angeles

Seattle

Atlanta

San Francisco

East Bay

CBD Prime Suburban


Rent Growth Slowing In CBDs

Rent Growth For Last 12-Months Versus Previous 12-Months

3

SCROLL RIGHT FOR UPDATE INSTRUCTIONS

CBD

11

10

9

8

7

6

5

4

3

2

1


4.8%

9.6%

9.4%

6.3%

1.8%

5.8%

5.9%

8.0%

8.5%

7.1%

25.3%

(4%) 1% 6% 11% 16% 21% 26%

Denver

Los Angeles

San Francisco

New York

Washington, D.C.

Boston

Dallas - FW

Miami

Seattle

Atlanta

East Bay

2.9%

1.2%

3.6%

3.4%

4.3%

6.2%

5.5%

4.0%

4.7%

12.2%

8.7%

(4%) 1% 6% 11% 16% 21% 26%

New York

Washington, D.C.

Boston

Dallas - FW

Denver

Miami

Los Angeles

Seattle

Atlanta

San Francisco

East Bay

15Q1-16Q1 Rent Growth

CBD Prime Suburban


Capital Markets

Sales Volume Slowing

Annual Sales Volume By Property Type

Date200520062007200820092010201120122013201420152016

16Q2 to 17Q1

Date20152016


0

50

100

150

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 16Q2to

17Q1Office Industrial Multi-Family Retail Hospitality

Annual Sales Volume $B

Multi-Family: -9%

Office: -8%

Retail: -13%

Industrial: -13%

Last 4-Qtr vs

Previous 4-Qtr

Hospitality: 1%

Share Of Foreign Investment In Office Steadily Increasing

% Of Foreign Investment In Office Over Time

04

05

06

07

08

09

10

11

12

13

14

15

16

17 YTD


$0

$5

$10

$15

$20

$25

4%

6%

8%

10%

12%

14%

16%

18%

05 06 07 08 09 10 11 12 13 14 15 16 17YTD

Foreign % Of Total Volume (2-Year Avg.) Foreign Investment ($B)

Significant Price/SF Premium For Walkable Buildings

Average Sale Price Per Square Foot By Walk Score

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17 YTD

Source: Walk Score; CoStar Portfolio Strategy As of 17Q1

Note: Portfolio sales excluded, only sales over $5 Million

$100

$150

$200

$250

$300

$350

$400

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17YTD

Over 90: Walker's Paradise 70-89: Very Walkable

50-69: Somewhat Walkable Under 49: Car Dependent

Average Sale Price/SF

Daily errands do not require a car Most errands can be accomplished on foot

Some errands can be accomplished on foot Most errands require a car

Sales Volume Declining In Most Major Markets

Annual Change In Office Sales Volume For Major Metros

MiamiLos AngelesDallas - FWSan FranciscoAtlantaAustinSeattleMinneapolisNew YorkHoustonPhoenixOrange CountyPhiladelphia


(60%)

(40%)

(20%)

0%

20%

40%

60%

$0

$5

$10

$15

$20

$25

$30

Mia

mi

Los A

ngele

s

Da

llas -

FW

San

Fra

ncis

co

Atlan

ta

Austin

Sea

ttle

Min

nea

polis

Ne

w Y

ork

Ho

usto

n

Pho

enix

Ora

ng

e C

ounty

Phila

delp

hia

Washin

gto

n, D

.C.

De

nver

Bosto

n

San

Jose

Ch

icago

San

Die

go

Last 4-Quarters Previous 4-Quarters Percent Change Y/Y

Sales Volume ($ Billions) Percent Change Y/Y

National: (8%)

CBD Cap Rates Appear To Be Moving Up

Rolling 4 Quarter Average Office Cap Rate CBD Vs. Suburban

################################################################################################################################################################################################################################################


5.7%

7.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

5%

6%

7%

8%

9%

06 07 08 09 10 11 12 13 14 15 16

CBD % Premium Just Due To Cap Rate CBD Cap Rate Suburban Cap Rate

Cap Rate CBD Premium Due To Cap Rate

Suburban Office Gaining Favor With Investors

Sales Volume Of CBD And Suburban Office

12/31/20063/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010

12/31/20103/31/20116/30/20119/30/2011

12/31/20113/31/20126/30/20129/30/2012

12/31/20123/31/20136/30/20139/30/2013

12/31/2013


25%

30%

35%

40%

45%

50%

55%

$0

$20

$40

$60

$80

$100

$120

06 07 08 09 10 11 12 13 14 15 16

CBD % Share CBD Volume Billions Suburban Volume Billions

Rolling 4-Quarter Sales Volume $Billions % Share Of CBD Sales Volume

High End Of Office Market Shows Liquidity

Top Office Deals of 17Q1


Property Name Market

Bldg SF

(000s)

Sale

Price (M)

Price

Per SF

Cap

Rate Buyer / Seller

Deutsche Bank New York 1,625 $1,040 $640 GIC Real Estate / Paramount Group, Inc.

75-81 Arlington St (2 Bldgs) Boston 825 $673 $816 Mori Trust Co., Ltd. / Liberty Mutual Group, Inc.

One Vanderbilt New York 1,733 $525 $1,045Hines & Nat'l Pension Service of Korea / SL Green

Realty Corp.

100 Northern Ave Boston 515 $447 $868PFA Pension & Deutsche / The Fallon Co. & Barings RE

Advisors

117 Adams St (4 Bldgs) New York 770 $408 $703 RFR Realty, LLC & Kushner Companies / Invesco, Ltd.

Lafayette Centre (3 Bldgs) Washington, DC 789 $404 $512 5.0%GIC Real Estate & Korea Investment Corp / Beacon

Capital

Pentagon Center (2 Bldgs) Washington, DC 912 $380 $416 6.6%GIC Real Estate & Korea Investment Corp / Beacon

Capital

HBO Building New York 349 $370 $1,060Brookfield & The Swig Co. / Eugene Hoffman

Management

1 Giralda Farms (6 Bldgs) Northern NJ 1,056 $368 $348 Mack-Cali Realty Corporation / RXR Realty

181 Madison Chicago 953 $359 $377 5.9%HNA Property Holding Group of China / CBRE Global

Investors

Charles Schwab Plaza San Francisco 417 $293 $702 3.3%The Blackstone Group, LP / CIM Commercial Trust

Corp.

Crossroads Courtyard Center San Jose 350 $291 $831 5.2% Tristar Capital / Rockwood Capital, LLC

Pine Street Center San Francisco 403 $288 $714 Rockpoint Group, LLC / Alaska Permanent Fund Corp.

Terrell Place (Condo) Washington, DC 428 $275 $642 GIC Real Estate / Beacon Capital

N Dairy Ashford Rd (3 Bldgs) Houston 1,187 $272 $229 10.2% Spear Street Capital / Columbia Property Trust

75-81 Arlington St & 10 St. James Ave Boston, MA Liberty Mutual Group, Inc. sold 2 office properties totaling 824,772 SF to Mori Trust Co., Ltd for $673 Million ($815.98/SF). Conditions associated with the sale were Sale Leaseback.

211 Main Street – Charles Schwab Plaza San Francisco, CA CIM Commercial Trust Corporation sold the 417,266 SF Office property to The Blackstone Group, LP for $292.882 Million or $701.91/SF. 3.34% Cap Rate

RXR Realty – Mack Cali NJ

Office Portfolio

New Jersey RXR Realty sold the 6-property Office portfolio totaling 1.056 million SF to Mack-Cali Realty Corporation for $368 Million ($348.47/SF).

CPT/Spear Street Portfolio Houston, TX Columbia Property Trust sold the 1.187 Million SF Office portfolio to Spear Street Capital for $272 Million ($229.06/SF). 10.2% Cap Rate

181 W Madison St Chicago, IL CBRE Global Investors Ltd. sold the 952,559 SF Office property to HNA Property Holding Group of China for $359 Million ($376.88/SF). 5.9% Cap Rate

60 Wall St New York, NY Paramount Group, Inc./ Morgan Stanley sold the 1.625 Million SF property to GIC Real Estate, for $1.04 Billion ($640/SF).

Selected Top Office Deals – 2017Q1


Opportunity Zone

Limited Construction In Tampa And San Diego

Office Under Construction Square Feet As A % Of Stock

3/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/20063/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010


0%

1%

2%

3%

4%

5%

05 06 07 08 09 10 11 12 13 14 15 16

National Tampa San Diego

Under Construction SF As % Of Stock

San Diego

Tampa

National

Occupancies Now Above The National Average

Office Occupancy Rate

3/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/20063/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010


84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

05 06 07 08 09 10 11 12 13 14 15 16


Occupancy

San Diego

Tampa

National

Higher Yields In Tampa And San Diego

Office Cap Rates

3/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/20063/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010


5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

05 06 07 08 09 10 11 12 13 14 15 16


Cap Rate

San Diego

Tampa

National

Most And Least

Occupancy Gains are Strong And Widespread

Change In Office Occupancy (Y/Y)

10987654321

Postive Occupancy TrendNegative Occupancy Trend


2.7%

2.7%

2.8%

2.8%

2.9%

2.9%

3.0%

4.2%

4.3%

5.2%

0% 1% 2% 3% 4% 5% 6%

Outlying SacramentoAreas

West Essex NorthernNew Jersey

South SuburbanMaryland

Kansas City CBD

Scottsdale/East Valley

New Hampshire

Richmond CBD

Central St. Louis County

San Mateo North

Sunnyvale/Cupertino

Strongest Occupancy Trends

(1.9%)

(2.0%)

(2.6%)

(2.7%)

(2.7%)

(2.7%)

(3.0%)

(3.1%)

(3.2%)

(4.2%)

(5%) (4%) (3%) (2%) (1%) 0%

Near North BeltwayHouston

South Charlotte

Denver CBD

Santa Clara San Jose

North/East Hartford

Northwest Chicago

South/West SuburbanNashville

Near West Loop Houston

Stamford

West Suburban Houston

Weakest Occupancy Trends


Demand Growth Dominates

Office Net Absorption (Y/Y)

Get Data from Rob

Postive Absorption TrendNegative Absorption Trend


1.0 MSF

0.8 MSF

0.7 MSF

1.6 MSF

1.3 MSF

2.6 MSF

1.8 MSF

1.9 MSF

1.0 MSF

1.9 MSF

0% 2% 4% 6% 8% 10%

Central St. Louis County

Baltimore City

San Mateo North

South/East SuburbanKansas City

East Valley Salt Lake City

Scottsdale/East Valley

Legacy/Frisco Dallas

Close-In Urban Boston Area

Memphis CBD

Sunnyvale/Cupertino

Strongest Net Absorption

(0.7) MSF

(0.9) MSF

(0.5) MSF

(0.5) MSF

(0.9) MSF

(0.4) MSF

(0.7) MSF

(0.5) MSF

(0.4) MSF

(0.6) MSF

(5%) (4%) (3%) (2%) (1%) 0%

Houston CBD

West Los Angeles

Queens New York

Dallas CBD

Northwest Chicago

South End Seattle

Near North BeltwayHouston

Santa Clara San Jose

North/East Hartford

Stamford

Weakest Net Absorption


East Bay & Nashville Dominate Rent Growth

Office Rent Growth (Y/Y)

10987654321

Postive Rent TrendNegative Rent Trend


7.2%

7.4%

7.4%

7.7%

7.7%

7.7%

8.0%

8.0%

9.3%

14.0%

0% 5% 10% 15%

Nashville CBD

Nashville South/WestSuburban

Easy Bay 680 CorridorSouth

North Charlotte

Palm BeachBoca/Delray

Nashville EastSuburban

East Bay 880 Corridor

East Bay 680 CorridorNorth

East Bay I-80/Hwy 4Corridors

East Bay Oakland

Strongest Rent Trends

(1.8%)

(1.8%)

(1.9%)

(2.1%)

(2.1%)

(2.1%)

(2.4%)

(2.6%)

(3.5%)

(5.1%)

(6%) (4%) (2%) 0%

Denver CBD

Houston Near West Loop

North/East Hartford

Stamford Upper FairfieldCounty

Stamford Lower FairfieldCounty

Las Vegas CBD

North Suburban Houston

South/West Hartford

Houston CBD

West Suburban Houston

Weakest Rent Trends


© Copyright 2017 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, the following information includes projections that are

based on various assumptions by CoStar concerning future events and circumstances, as well as historical and current data maintained in CoStar’s database. Actual results may vary from the projections presented.

The information in this presentation is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of merchantability and fitness for a particular purpose.

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