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Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
Colliers North American Office Highlights 2Q 2013
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Colliers North American Office Highlights 2Q 2013

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  • 1. HIGHLIGHTS NORTH AMERICA WWW.COLLIERS.COM Q2 2013 | OFFICE MARKET INDICATORS Relative to prior period NORTH AMERICAN OFFICE MARKET Summary Statistics, Q2 2013 US Q2 2013 US Q3 2013* Canada Q2 2013 Canada Q3 2013* VACANCY    NET ABSORPTION    CONSTRUCTION   RENTAL RATE**   *Projected | **CBD Class A rents Construction is the change in Under Construction US CAN NA VACANCY RATE (%) 14.35 7.24 13.86 Change From Q1 2013 (%) -0.13 0.32 -0.10 ABSORPTION (MSF) 15.7 (0.3) 15.5 NEW CONSTRUCTION (MSF) 8.7 1.1 9.8 UNDER CONSTRUCTION (MSF) 58.7 17.0 75.7 ASKING RENTS PER SF US CAN Downtown Class A ($) 41.56 51.70 Change from Q1 2013 (%) 0.82 1.91 Suburban Class A ($) 26.44 32.29 Change from Q1 2013 (%) 0.41 0.33 Recovery Broadens Despite Headwinds ANDREA B. CROSS Office Research Manager | USA KEY TAKEAWAYS • The North American vacancy rate decreased for the sixth straight quarter, falling by 10 basis points to 13.86%. Improvement was entirely due to the U.S. office market, in which both CBD and suburban vacancy rates decreased. The Canadian vacancy rate increased in both CBD and suburban markets, although the Canadian office markets remained much tighter than the still-recovering U.S. office markets. • Net absorption surged to 15.5 million SF in Q2 2013, up from 4.0 million during Q1 2013. The resilience of the economic recovery despite tax increases and the federal government sequester in early 2013 had a positive psychological impact on tenants during Q2 2013. Sq. Ft. By Region Absorption Per Market (SF) Q1 2013 -Q2 2013 1,000,000 500,000 100,000 -100,000 -500,000 -1,000,000 2 billion 1 billion 200 mil. Occupied Sq. Ft. Vacant Sq. Ft. OFFICE VACANCY, INVENTORY AND ABSORPTION | Q2 2013 | NORTH AMERICA
  • 2. P. 2 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA KEY TAKEAWAYS (continued) • The primary ICEE (intellectual capital, energy and education) markets remained strong through 1H 2013, posting 6.2 million SF of net absorption compared with 3.1 million SF of absorption in the primary FIRE (finance, insurance and real estate) markets. However, after slightly negative absorption in Q1 2013, the FIRE markets recovered significantly in Q2 2013—a key trend to monitor as the economic recovery broadens. FIRE markets absorbed 3.2 million SF in Q2 2013, compared with 4.1 million SF in ICEE markets. • Construction activity remains very low by historical standards, and concentrated in markets with the strongest demand. In the U.S., 75 million SF were under construction as of June 2013, with 27% of this space in the medical office category. This measured supply response will remain a key supply-side driver of the office market recovery. • Transaction volume increased by a robust 36% year-over-year in Q2 2013 to $21.0 billion. Investors are moving further out along the risk spectrum, and the share of cross-border investors is growing amid global economic weakness. Macroeconomic Trends The U.S. economic recovery gained steam through 1H 2013, adding more than 1.2 million jobs. Average monthly job creation accelerated to 202,000, compared with average net monthly job creation of 183,000 in 2012, 175,000 in 2011 and 85,000 in 2010. The acceleration in the rate of job growth underscores the resilience of the recovery, occurring despite sequestration in the U.S. and economic slowdowns in many other countries. As of June 2013, the economy has recovered about 75% of jobs lost during the recession. As the effects of the sequester dissipate into next year, the economic recovery should gain steam, resulting in stronger GDP and employment growth. Total employment is on track to reach the recent peak of about 138.1 million jobs by mid-2014. The recovery in office-using employment has been stronger than the overall employment recovery. As of mid-2013, the primary office-using employment sectors had recovered 90% of jobs lost during the recession. The professional and business services sector has been the main driver of office-using employment growth, and has accounted for about one-quarter of total jobs added during June. Fueled by the rapid expansion of the technology industry and robust hiring of temporary workers, this sector -10% -8% -6% -4% -2% 0% 2% 4% Total Employment Financial activities Professional and Business Services Office-Using Employment MONTHS 0 10 20 30 40 50 60 70 NOTE: Latest data as of June 2013. X-axis indicates number of months elapsed since each sector’s previous cyclical employment peak. Information services employment excluded because sector peaked in 2001 Sources: Bureau of Labor Statistics, Colliers International CHANGE IN U.S. EMPLOYMENT FROM CYCLICAL PEAK -270.0 -193.7 -96.0 -57.8 -28.2 -27.5 14.2 18.1 36.1 53.0 202.9 246.3 -300.0 -200.0 -100.0 0.0 100.0 200.0 300.0 Calgary, AB Montréal, QC Vancouver, BC Ottawa, ON Regina, SK Victoria, BC Edmonton, AB Halifax, NS Waterloo Region, ON Saskatoon, SK Winnipeg, MB Toronto, ON SF (Thousands) CBD OFFICE ABSORPTION BY MARKET | Q2 2013 | CANADA 0.00 0.00 0.00 0.04 0.08 0.13 0.19 0.36 0.94 2.20 2.52 4.48 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Edmonton, AB Saskatoon, SK Victoria, BC Waterloo Region, ON Regina, SK Winnipeg, MB Halifax, NS Ottawa, ON Montréal, QC Vancouver, BC Calgary, AB Toronto, ON SF (Millions) CBD OFFICE UNDER CONSTRUCTION BY MARKET | Q2 2013 | CANADA
  • 3. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 3 METROPOLITAN AREA JUNE 2013 (%) JUNE 2012 (%) CHANGE (BPS) 1 Riverside-San Bernardino 12.7 10.2 -250 2 Sacramento 10.7 8.5 -220 3 San Diego 9.3 7.3 -200 4 San Francisco-Oakland 8.5 6.5 -200 5 San Jose 8.9 6.9 -200 6 Seattle-Tacoma 7.9 5.9 -200 7 Orlando 8.8 6.9 -190 8 Tampa 9.1 7.2 -190 9 Jacksonville 8.7 7.0 -170 10 Las Vegas 11.8 10.1 -170 LARGEST YEAR-OVER-YEAR DECREASE IN UNEMPLOYMENT RATE | USA NOTE: Data not seasonally adjusted; rankings are of metro areas with population of 1 mil. or more Sources: Bureau of Labor Statistics, Colliers International 0 10 20 30 40 50 60 70 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: National Associaton of Home Builders NAHB/WELLS FARGO HOUSING MARKET INDEX (HMI) | JULY 2013 100 120 140 160 180 200 220 1990 1995 2000 2005 2010 NAR COMPOSITE HOUSING AFFORDABILITY INDEX | MAY 2013 Source: National Association of Realtors has been one of the fastest-growing since the end of the recession, with the current employment level about 500,000 positions higher than the pre-recession peak. Even excluding temporary employment, job growth has been robust­—a positive sign for office space demand. The financial activities sector has been much slower to recover, having regained only 31% of jobs lost during the recession as of mid-year. Nonetheless, the trend is positive, with year-over-year job growth of more than 1% for 16 consecutive months through June 2013. We expect this sector to continue to recover at a slow rate, driven by ongoing improvement in the housing market. Faster growth in this sector will be prevented by stricter regulation of financial institutions (such as the recent adoption of the Basel III capital rules by the Federal Reserve), as well as rising mortgage rates, which are already dampening refinancing activity. Canada’s economic recovery is well ahead of the U.S.: According to a recent analysis by Economic Modeling Specialists Intl. (EMSI), all but one of Canada’s census metropolitan areas (CMAs) have regained all of the jobs lost from 2008–2009, and the largest eight CMAs have regained between 135% and 700% of jobs shed during that period. The Canadian economy slowed during the first half of the year, averaging a net increase of 14,000 jobs per month compared with a monthly average of 27,000 during the second half of 2012. However, the improving economic outlook in the U.S. is boosting confidence among Canadian firms. The Conference Board of Canada’s Index of Business Confidence, a quarterly survey of 1,500 Canadian firms, increased to 101.5 in the second quarter, its highest level in more than a year; about 37% of respondents anticipated that economic conditions will improve during the next six months. BROADER RECOVERY As noted in our Q1 2013 report, the U.S. economic recovery is broadening to include more markets and employment sectors, a trend reflected in this quarter’s office market data. The housing recovery has been a key element, as increased sales and construction have boosted payrolls in related sectors, and in some of the hardest-hit markets during the recession. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) exceeded 50 in June 2013 for the first time in more than seven years, and jumped to 57 in July, even amid rising mortgage rates. (An HMI reading above 50 indicates that more builders view operating conditions as good rather than poor.) Former housing bubble markets such as the Inland Empire, Sacramento, Las Vegas, San Diego and Tampa were among the major markets posting the largest year-over-year decreases in unemployment rate in June 2013. Although this decrease was partially attributable to workers dropping out of the labor force upon the expiration of their unemployment benefits, improving labor market conditions also contributed to this trend. Despite recent increases in new home sales and construction, the housing market recovery still has significant room to run; single-family housing starts totaled a seasonally-adjusted annual rate (SAAR) of 591,000 in June 2013, only slightly more than half the average SAAR during the last 30 years. Housing completions (both single- and multifamily) totaled a
  • 4. P. 4 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA METROPOLITAN AREA Q2 2013 VACANCY RATE (%) Q1 2013 VACANCY RATE (%) CHANGE (BPS) 1 Fairfield, CA 24.20 25.54 -134 2 San Francisco Peninsula 12.91 14.10 -119 3 Albuquerque 20.22 21.17 -96 4 Columbia, SC 19.39 20.35 -95 5 Oakland 15.17 16.07 -90 6 Cincinnati 17.72 18.61 -89 7 Orlando 13.47 14.27 -81 8 Jacksonville 12.78 13.57 -79 9 Grand Rapids 23.38 24.13 -74 10 Orange County 15.19 15.92 -73 LARGEST QUARTERLY VACANCY RATE DECREASE | NORTH AMERICA Sources: Colliers International VACANCY The trend was positive in Q2 2013, with the North American vacancy rate decreasing by 10 basis points to 13.86% from the previous quarter. The U.S. vacancy rate decreased by 14 basis points during the period but remained nearly double the Canadian vacancy rate, which increased by 33 basis points during the quarter to a still-low 7.24%. Among the markets tracked by Colliers, 56 registered quarterly decreases in vacancy rate, 30 registered increases, and one was unchanged. Of the markets with increases in vacancy rate, eight were in Canada, all of which still posted sub-9% vacancy rates as of Q2 2013. SAAR of just 755,000 in July, well below IHS Global Insight’s projection of 1.4 million new housing units required annually to accommodate current growth in the number of primary households, demand from second-home buyers, and demolitions. Even with recent mortgage rate and price increases, affordability remains elevated relative to historical levels. Thus, the market should be able to withstand additional increases in financing costs, supporting further direct and indirect job creation and demand for office space. We will continue to monitor risk factors, such as the increasing use of adjustable-rate mortgages by buyers on the margin and price spikes in select markets, for signs of overheating, but currently we maintain a positive outlook on housing and its effect on office market demand. Behind the Statistics & Beyond the Basics Scope of Colliers’ Office Outlook Report: Colliers tracks office space in 87 markets in the U.S. and Canada totaling nearly 6.4 billion square feet. The 75 U.S. markets account for the lion’s share of this space, with about 5.9 billion square feet of tracked inventory. Our coverage includes 22 markets with more than 100 million square feet of space, which combined account for 3.8 billion square feet, or about 60% of our office market inventory. The largest U.S. markets are New York, Washington, D.C., Chicago, Dallas and Atlanta; Toronto is the only Canadian market with more than 100 million square feet of space. North American Downtown Markets: Excluding renewals, of the leases signed this quarter in your CBD/downtown, did most tenants...? Hold Steady 62.0% Expand 18.3% Contract 19.7% North American Downtown Markets: What was the trend in Free Rent (in months) offered by CBD landlords this quarter? Same 80.9% Less 8.8% More 10.3% North American Downtown Markets: What was the trend for tenant improvement allowances offered by CBD landlords this quarter? Same 79.4% Less 7.4% More 13.2% North American Suburban Markets: Excluding renewals, of the leases signed this quarter, did most tenants...? Hold Steady 64.8% Expand 28.2% Contract 7.0%
  • 5. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 5 MARKET SQUARE FEET 1 Boston 1,656,001 2 Boise 1,384,937 3 Chicago 1,110,774 4 San Jose/Silicon Valley 1,078,743 5 Orange County 1,034,700 6 San Francisco 1,011,487 7 Denver 987,871 8 Minneapolis 911,539 9 Atlanta 870,958 10 Kansas City 842,288 11 San Diego 817,506 12 St. Louis 816,212 HIGHEST ABSORPTION | 1H 2013 | NORTH AMERICA Source: Colliers International functions is also critical. Thus, markets such as Raleigh-Durham and Atlanta, which combine a high concentration of top-tier research universities and a relatively low cost of doing business, are well positioned to accommodate additional growth in office demand from manufacturing. Although the overall trend in absorption is positive, tenant densification will continue to temper improvement in the office market during the economic recovery and expansion—and not just in the most expensive MSAs. In Kansas City for example, the GSA is relocating 800 employees into a 150,000 square-foot space downtown, about half the size of the space currently occupied by those employees in South Kansas City. In addition to federal government downsizing, technological advances are reducing the need for some support staff and equipment. New technologies also allow companies to monitor workstation usage during the day, helping them to become more efficient in their space usage. As employers’ support of mobile devices such as tablets and smartphones enables more employees to work remotely, these monitoring systems will assist companies in maximizing their desk utilization rates, resulting in a net decrease in required office space relative to historic levels. ABSORPTION Absorption accelerated this quarter, bringing the YTD total to 19.4 million square feet. Among the markets tracked by Colliers, 63 posted positive absorption in 1H 2013, and just 24 posted negative absorption, including 6 of the 12 Canadian markets. ICEE markets continued to lead, including Boston, San Jose, Orange County, San Francisco and Denver. However, it is noteworthy that several markets that have been lagging during the re- covery were among the top markets for net absorption in 1H 2013, includ- ing Chicago, Orange County and Atlanta. Another notable trend we’re seeing is that technology and energy companies—unable to find employees with the desired skill sets in their typical industry hubs—are relocating to or expanding into other metropolitan areas. This should result in a broader recovery in office market conditions going forward. A less obvious benefit of the onshoring of manufacturing activities is its positive impact on office demand. Today’s increasingly automated and efficient supply chain requires a skilled workforce to handle highly complex engineering, design and other production functions. Firms often prefer to locate these workers near production facilities in order to facilitate communication and improve efficiency. Thus, we expect growth in office demand near returning and expanding manufacturing facilities to accommodate their white-collar employees. Markets (such as Phoenix, Houston and Dallas) in low-cost, right-to-work states will likely be the primary beneficiaries of this trend going forward. Proximity to educational institutions that provide the skilled workforce to handle these complex The housing market recovery was apparent in the vacancy rate statistics. Several markets with the largest decrease in vacancy rate saw particularly significant housing corrections during the recession and rebounding housing markets in recent quarters. Orlando, Jacksonville, Orange County, Miami, Fort Lauderdale, San Diego, the Inland Empire and Sacramento all posted quarter-over-quarter vacancy rate decreases of at least 35 basis points. These markets also have posted double-digit year-over-year price appreciation in recent quarters, spurring construction activity. Further increases in housing construction should drive growth in office market demand in these markets. 15.36 15.14 15.03 14.96 14.88 14.83 14.63 14.49 14.35 - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 Q2 2011 2012 2013 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Vacancy% Absorption MSF Completions MSF Vacancy % U.S. OFFICE MARKET | Q2 2011–Q2 2013 Source: Colliers International CONSTRUCTION ACTIVITY According to Dodge Pipeline data, U.S. office construction activity totaled 75 million square feet as of mid-year 2013, with 27% of this space composed of medical office properties. Construction remains highly concentrated in markets with the strongest economic growth and tenant demand in recent years, including Houston, Boston, Dallas-Fort Worth, San Francisco and San Jose. Texas alone accounts for nearly 20% of construction under way, followed by California at about 11%, more than half of which is in San Francisco and San Jose. Unsurprisingly, construction activity in the primary North American ICEE markets tracked by Colliers is more than double that of the primary FIRE markets: 28.7 million square feet and 14.5 million square feet, respectively. Looking at the 87 markets that Colliers covers, supply-side pressure remains low, with the amount of square footage under construction in Q2 2013 representing just 1.2% of existing inventory. Because of the relatively slow recovery in the U.S., space under construction represented less than 1% of existing stock, compared with 3.9% in Canada where the economic expansion is further along.
  • 6. P. 6 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA Much of the space under way is build-to-suit in response to a lack of suitable space available in the market. Increasingly, new and renovated office space is being used as a recruiting tool as the competition for skilled workers in the technology and energy industries intensifies. For example, energy firms in Houston are seeking out newly constructed, LEED- certified buildings to attract talent from both within and outside the metropolitan area. The market for highly skilled energy industry workers will likely tighten further as horizontal drilling and fracking enable continued growth in natural resource production. Also, with fewer students pursuing energy-related degrees in the 1980s and 1990s following the oil bust, the energy industry faces an even greater challenge than most other industries in replacing its aging workforce, which will maintain tight labor market conditions going forward. These factors place even greater importance on the workspace as a recruitment tool. The technology industry faces a similar challenge in attracting employees to support further growth, illustrated by fierce competition for the engineers, designers and other skilled workers that were recently laid off by Zynga. The result of this trend will likely be a bifurcation in market conditions. As tenants in industries with tight labor markets favor newer buildings constructed to meet the specific demands of their talent, space in properties less suited to the demands of these workers will languish. Although still low in most markets, speculative construction is picking up in markets with the strongest demand. Developers recently announced planned groundbreakings on the 22 Waugh and Two Hughes Landing projects in Houston. Also, Hines recently broke ground on 1601 Wewatta, a speculative Class A building in the LoDo area of Denver. With vacancy rates still elevated in many office markets, we expect speculative construction activity to continue to be focused on the strongest submarkets in select metropolitan areas. We also expect construction to commence on more projects that were put on hold during the recession as rising rents and demand for high-quality space support development activity. For example, Oliver McMillan recently announced that it will build 86,000 square feet of office space for growing apparel company Spanx at the former site of the Streets of Buckhead project, a large mixed-use development in Atlanta that stalled during the recession. Rising construction costs also continue to restrain development activity. As noted in Colliers’ previous quarterly reports, costs increased throughout the recession, and this trend has continued during the current recovery. According to Engineering News-Record’s Construction Cost Index, construction costs were up 2.5% year-over-year in July 2013 and more than 20% from July 2007. Wages for both common and skilled labor as well as materials costs increased on a year-over-year basis, making upward cost pressures an ongoing concern for investors and developers. Capital Markets & Transaction Activity U.S. office transaction volume surged by 21% quarter-over-quarter and 36% year-over-year to $20.2 billion in Q2 2013, as fears regarding sequestration and other factors that constrained investment activity in Q1 2013 were alleviated. This total was the highest second-quartertransaction volume since 2007. The large amount of available capital supported several high-dollar transactions, including several $1 billion+ deals, mostly in Manhattan, after just one between the fall of 2008 and year-end 2012, according to Real Capital Analytics. Also, Texas is attracting a growing PROPERTY TYPE SQUARE FOOTAGE (THOU.) TOTAL (%) High Rise 4,764 6.3 Mid Rise 20,634 27.5 Low Rise 29,405 39.2 Medical Office 20,231 27.0 TOTAL 75,034 OFFICE SPACE UNDER CONSTRUCTION BY TYPE | USA Sources: Dodge Pipeline, Colliers International U.S. Office Space Under Construction by census division 7.5% West North Central 5,609 SF (Mil.) 14.6% Mid Atlantic 10,978 SF (Mil.) 6.2% New England 4,625 SF (Mil.) 20.7% South Atlantic 15,532 SF (Mil.) 3.5% East South Central 2,485 SF (Mil.) 22.0% West South Central 16,501 SF (Mil.) 5.2% Mountain 3,870 SF (Mil.) 12.7% Pacific 9,558 SF (Mil.) 7.8% East North Central 5,876 SF (Mil.) 7.8% East North Central 5,876 SF (Mil.) 20 15 10 5 SF (mil.) SF (mil.) SF (mil.) SF (mil.) OFFICE SPACE UNDER CONSTRUCTION BY U.S. CENSUS DIVISION Sources: Dodge Pipeline, Colliers International -100% -50% 0% 50% 100% 150% 200% 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 2008 2009 2010 2011 2012 2013 U.S. (left axis) Canada (left axis) Year-Over-Year Change (right axis) OFFICE TRANSACTION VOLUME | Q2 2013 | NORTH AMERICA Source: Real Capital Analytics
  • 7. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 7 PEAK-T0-TROUGH LOSS RECOVERED | MAY 2013 INDEX CBD Office – Major 89.8% CBD Office – All 77.5% Total Office 49.6% Suburban Office – Major 43.9% CBD Office – Non-Major 38.8% Suburban Office – All 22.1% Suburban Office – Non-Major 4.2% Source: Moody’s/RCA CPPI 6.4% 6.4% 7.1% 7.3% 7.5% 7.5% 7.7% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% CBD M ajorM etros TotalOffi ce Single Tenant Suburban M edicalOffi ceNon-M ajorM etros OFFICE CAP RATES BY LOCATION AND PROPERTY TYPE | Q2 2013 Source: Real Capital Analytics amount of investor interest due to its robust economic growth, as indicated by Cousins Properties’ recent acquisition of a 10-building office complex in Houston and an office tower in Fort Worth for a total of more than $1 billion. Investors are moving further out on the risk spectrum in terms of property location and asset type in search of higher yields, a trend that we expect to continue as the economic recovery broadens to include more markets and industries. Greater risk tolerance and sustained economic growth should fuel increased transaction activity during 2H 2013. The office CMBS delinquency rate continues to trend downward amid improving market fundamentals and an increase in resolutions. According to Trepp, the percentage of office CMBS that were 30 or more days delinquent decreased to 9.97% in June, down almost 50 basis points from one year earlier. However, we believe that significant risk lies in 10-year CMBS issued between 2005 and 2007 at peak pricing. Although overall CMBS delinquency rates have been trending down, delinquency rates on CMBS from the 2005–2007 vintages remain much higher than for the preceding years as well as for more recent vintages. According to Wells Fargo, the overall CMBS 30+ day delinquency rate in May 2013 was 14.59% for the 2007 vintage, compared with 4.16% for the 2004 vintage and 0.01% for the 2012 vintage. Approximately $400 billion in CMBS is set to mature between 2015 and 2017, and rising interest rates and limited or no NOI growth pose a major challenge to borrowers seeking to refinance loans issued in 2005–2007, most of which were interest-only. Signs of a likely reduction in the Fed’s bond-buying programs later this year led to an interest-rate spike in May and June, fostering considerable fears regarding future commercial real estate values. However, we believe that the reduction in bond purchases is positive, as it signals that the economy is healthy enough to grow without artificial stimulus from the Fed. Even with the recent interest rate spike, the spread between average office cap rates and the 10-year Treasury is still historically wide, at 400–500 basis points, meaning that there is a cushion to absorb higher interest rates. Office investment still offers an attractive risk-adjusted return and continues to draw investors from the multifamily sector as well as other asset classes. Also, we expect continued economic improvement and recovery in office market fundamentals to support higher NOI, helping to offset the increase in interest rates.
  • 8. P. 8 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA UNITED STATES | DOWNTOWN OFFICE | ALL INVENTORY MARKET EXISTING INVENTORY (SF) JUN 30, 2013 NEW SUPPLY Q2 2013 (SF) YEAR-TO-DATE NEW SUPPLY (SF) UNDER CONSTRUCTION (SF) VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) NORTHEAST Baltimore, MD 28,438,076 - - - 12.81 93,458 64,357 Boston, MA 60,897,211 - 111,224 3,298,000 12.42 138,299 434,833 Hartford, CT 9,769,060 - - - 20.47 7,164 24,136 New York, NY – Downtown Manhattan 109,940,493 - - 5,035,850 15.93 (646,702) (353,608) New York, NY – Midtown Manhattan 228,738,768 - - - 12.31 756,367 186,096 New York, NY – Midtown South Manhattan 160,771,982 - - 4,491,000 9.24 (533,244) (1,033,898) Philadelphia, PA 42,977,061 - - - 11.99 (527,736) (459,838) Pittsburgh, PA 32,425,158 - - 800,000 10.37 27,253 (43,121) Stamford, CT 18,642,434 - - - 21.37 (38,872) 38,912 Washington, DC 142,257,834 450,000 492,685 1,894,691 10.00 520,949 (113,029) White Plains, NY 7,705,456 - - - 17.18 21,958 (103,089) Northeast Total 842,563,533 450,000 603,909 15,519,541 12.08 (181,106) (1,358,249) SOUTH Atlanta, GA 50,230,076 - - 450,000 17.41 85,856 47,896 Birmingham, AL 4,281,964 - - - 18.15 62,081 24,661 Charleston, SC 2,132,469 - - 52,000 7.41 (14,911) (12,434) Charlotte, NC 22,420,730 - - - 8.37 (31,875) (30,364) Columbia, SC 4,471,273 - - - 12.39 41,366 81,548 Dallas, TX 34,363,467 - - - 27.17 139,856 (48,951) Ft. Lauderdale-Broward, FL 8,126,178 - - - 15.05 40,488 115,488 Ft. Worth, TX 10,008,250 - - 132,029 14.16 (33,247) (81,649) Greenville, SC 3,143,679 - - 235,000 16.02 (51,523) (10,599) Houston, TX 40,241,247 - - - 14.12 (129,286) (551,739) Jacksonville, FL 15,994,027 - - - 14.53 (7,026) (17,705) Little Rock, AR 6,371,039 - - - 11.61 46,976 38,526 Louisville, KY 43,929,128 - - 479,483 11.47 87,121 (25,975) Memphis, TN 6,075,773 26,000 26,000 - 19.33 (121,924) (144,522) Miami-Dade, FL 18,509,277 - - - 17.56 59,370 158,757 Nashville, TN 11,615,337 - 20,000 - 13.60 (59,831) 102,946 Orlando, FL 12,801,183 - - - 11.81 36,146 (17,511) Raleigh/Durham/Chapel Hill, NC 13,622,634 38,122 38,122 579,279 5.83 (3,684) 46,395 Richmond, VA 17,060,794 - - 112,000 11.04 (24,264) (149,963) Savannah, GA 802,240 - - - 14.29 (7,672) (6,940) Tampa Bay, FL 8,530,939 - - - 13.62 48,023 (12,002) West Palm Beach/Palm Beach County, FL 10,066,100 - - - 17.15 (6,852) (32,051) South Total 344,797,804 64,122 84,122 2,039,791 14.96 155,188 (526,188)
  • 9. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 9 UNITED STATES | DOWNTOWN OFFICE | ALL INVENTORY MARKET EXISTING INVENTORY (SF) JUN 30, 2013 NEW SUPPLY Q2 2013 (SF) YEAR-TO-DATE NEW SUPPLY (SF) UNDER CONSTRUCTION (SF) VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) MIDWEST Chicago, IL 159,396,601 - - 861,000 12.96 307,408 360,994 Cincinnati, OH 18,117,227 - - - 16.93 178,373 201,717 Cleveland, OH 34,195,860 550,000 550,000 - 19.48 395,217 119 Columbus, OH 19,452,521 - 342,000 280,000 11.28 (184) 154,919 Detroit, MI 25,830,715 - - - 19.41 3,557 86,607 Grand Rapids, MI 5,157,140 - - - 20.28 57,895 69,276 Indianapolis, IN 23,395,488 - - - 9.08 (9,028) (27,224) Kansas City, MO 34,370,304 - - 215,000 13.94 34,981 118,159 Milwaukee, WI 19,031,024 - - 93,035 12.92 49,923 90,965 Minneapolis, MN 32,104,268 - - - 14.66 (123,315) (156,198) Omaha, NE 6,358,954 - - - 7.47 44,617 23,162 St. Louis, MO 24,122,626 - - - 17.21 208,056 307,247 St. Paul, MN 12,058,673 - - - 13.33 20,874 75,507 Midwest Total 413,591,401 550,000 892,000 1,449,035 14.25 1,168,374 1,305,250 WEST Albuquerque, NM 3,241,080 - - - 31.48 (4) (328,725) Bakersfield, CA 3,225,019 - 60,000 - 8.38 (13,044) 24,755 Boise, ID 3,995,022 - - 260,000 11.37 330,964 252,392 Denver, CO 34,416,272 - - 363,132 11.51 196,175 223,598 Fresno, CA 3,338,268 - - - 11.34 (2,224) 4,199 Honolulu, HI 7,119,083 - - - 13.81 (11,242) (42,723) Las Vegas, NV 4,203,128 10,000 10,000 473,953 14.10 (108,806) (84,303) Los Angeles, CA 32,566,100 - - 648,700 19.20 (46,500) 10,700 Oakland, CA 16,891,513 - - - 11.46 196,426 336,416 Phoenix, AZ 20,882,750 - - - 22.70 (60,371) (246,854) Portland, OR 33,368,679 - - 55,527 9.21 153,884 253,217 Reno, NV 3,224,337 - - - 15.50 14,737 (7,611) Sacramento, CA 18,928,930 - - - 11.39 55,597 (219,861) San Diego, CA 10,172,525 - - - 18.08 89,125 175,082 San Francisco, CA 88,097,076 400,000 400,000 3,384,820 9.61 557,685 1,011,487 San Jose/Silicon Valley 7,601,845 - - - 22.81 65,048 66,266 Seattle/Puget Sound, WA 55,903,513 272,912 399,912 308,899 12.18 (96,538) (33,479) Stockton, CA 8,221,819 - - - 17.68 22,921 38,812 Walnut Creek, CA 12,420,396 - - - 15.90 (4,688) (757) West Total 367,817,355 682,912 869,912 5,495,031 13.21 1,339,145 1,432,611 U.S. TOTAL / AVERAGE 1,968,770,093 1,747,034 2,449,943 24,503,398 13.25 2,481,601 853,424 (continued)
  • 10. P. 10 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA UNITED STATES | DOWNTOWN OFFICE | CLASS A MARKET EXISTING INVENTORY (SF) JUN 30, 2013 AVG. ANNUAL QUOTED RENT (USD PSF) JUN 30, 2013 QUARTERLY CHANGE IN RENT (%) ANNUAL CHANGE IN RENT (%) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) NORTHEAST Baltimore, MD 12,878,563 23.43 -2.7 0.9 14.64 14.27 47,941 (12,948) Boston, MA 41,412,537 48.46 3.6 6.2 13.49 13.38 43,837 (138,592) Hartford, CT 6,660,379 22.74 -0.2 -0.7 20.99 24.54 (236,401) (204,607) New York, NY – Downtown Manhattan 77,949,152 47.25 0.4 -0.8 17.10 18.05 742,024) (328,623) New York, NY – Midtown Manhattan 195,449,838 67.39 1.4 -4.2 13.45 13.08 729,655 (23,935) New York, NY – Midtown South Manhattan 33,221,396 60.92 2.4 28.9 9.39 9.27 38,743 19,901 Philadelphia, PA 32,888,160 26.06 -1.5 -1.7 10.23 12.08 (609,219) (536,402) Pittsburgh, PA 18,284,772 24.67 2.2 9.1 6.75 6.59 31,711 101,669 Stamford, CT 13,300,792 38.66 1.0 -0.5 22.68 22.87 (25,588) 46,109 Washington, DC 87,230,016 52.81 -0.9 -0.9 11.24 11.07 547,509 70,247 White Plains, NY 4,887,012 31.58 -0.1 -1.5 21.33 20.77 26,988 (131,279) Northeast Total 524,162,617 53.18 0.8 3.2 13.37 13.47 (146,848) (1,138,460) SOUTH Atlanta, GA 30,081,897 23.17 1.7 0.8 19.55 19.42 40,345 17,942 Birmingham, AL 3,322,353 21.06 0.0 0.7 12.47 10.85 53,855 16,435 Charleston, SC 957,994 32.64 2.0 8.5 3.30 5.03 (16,566) 3,397 Charlotte, NC 15,891,412 24.90 0.0 4.0 9.71 9.48 36,800 12,462 Columbia, SC 1,926,914 20.52 1.2 5.8 8.00 8.99 (19,150) 21,915 Dallas, TX 22,636,841 22.20 0.2 1.6 26.38 26.01 83,981 (86,611) Ft. Lauderdale-Broward, FL 4,477,321 31.21 -1.2 0.4 20.40 19.81 26,225 64,527 Ft. Worth, TX 5,698,546 28.15 0.5 1.4 12.14 12.70 (32,019) (59,006) Greenville, SC 1,871,715 19.32 -2.2 2.8 15.60 16.36 (14,104) (19,328) Houston, TX 28,517,756 36.86 -0.5 -0.2 11.19 11.73 (154,532) (528,122) Jacksonville, FL 6,830,482 19.92 1.8 2.5 15.12 15.12 162 (10,309) Little Rock, AR 2,636,353 14.78 -4.1 -5.2 12.20 11.48 18,958 12,028 Louisville, KY 10,052,414 19.85 0.5 4.1 13.62 13.11 51,531 96,747 Memphis, TN 2,009,825 17.38 0.5 4.0 20.35 27.84 (129,870) (143,557) Miami-Dade, FL 9,758,448 39.48 -1.5 -1.9 20.57 20.18 38,266 115,130 Nashville, TN 4,060,225 21.71 0.6 -0.3 16.96 14.53 98,798 241,152 Orlando, FL 5,828,365 24.38 0.5 -2.6 14.77 14.20 33,577 31,721 Raleigh/Durham/Chapel Hill, NC 5,771,598 22.88 -0.5 -2.4 7.03 6.90 42,570 95,914 Richmond, VA 5,905,865 23.23 -2.0 0.1 8.33 8.54 (12,397) (69,975) Savannah, GA 642,460 20.59 0.0 7.5 9.43 11.42 (12,802) (24,214) Tampa Bay, FL 4,782,093 23.13 -0.1 -0.1 16.58 15.23 64,423 673 West Palm Beach/Palm Beach County, FL 3,329,557 37.67 5.3 1.1 21.31 20.48 27,601 6,670 South Total 176,990,434 26.37 0.1 0.7 15.95 15.86 225,652 (204,409)
  • 11. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 11 UNITED STATES | DOWNTOWN OFFICE | CLASS A MARKET EXISTING INVENTORY (SF) JUN 30, 2013 AVG. ANNUAL QUOTED RENT (USD PSF) JUN 30, 2013 QUARTERLY CHANGE IN RENT (%) ANNUAL CHANGE IN RENT (%) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) MIDWEST Chicago, IL 61,083,777 37.12 0.1 -0.6 13.71 13.35 222,420 564,419 Cincinnati, OH 8,824,601 21.69 -0.3 -6.6 21.98 21.26 63,807 68,555 Cleveland, OH 10,454,147 22.07 1.1 2.7 16.21 16.94 384,484 88,325 Columbus, OH 8,377,149 19.20 -0.4 -3.5 11.57 11.88 (26,049) 178,155 Detroit, MI 8,195,021 22.90 0.1 -3.1 18.44 17.96 39,660 86,654 Grand Rapids, MI 1,445,108 19.37 0.1 0.2 23.87 23.61 3,802 3,802 Indianapolis, IN 9,603,552 18.85 -0.4 -1.0 11.70 11.83 (12,490) (6,091) Kansas City, MO 10,163,363 18.88 -0.2 -0.8 19.59 19.62 (3,167) 45,814 Milwaukee, WI 5,347,141 19.99 -0.2 1.7 11.56 11.05 27,351 36,916 Minneapolis, MN 13,618,828 16.90 0.4 10.8 11.43 12.68 (170,844) (121,014) Omaha, NE 3,417,878 20.13 5.0 1.3 4.41 4.41 - (12,064) St. Louis, MO 10,388,420 17.96 -0.9 2.8 13.71 13.26 46,435 93,364 St. Paul, MN 2,773,960 13.38 0.2 1.6 9.79 10.17 (10,283) 743 Midwest Total 153,692,945 26.47 0.0 0.0 14.29 14.23 565,126 1,027,578 WEST Albuquerque, NM 575,047 19.76 0.0 -1.5 26.55 26.55 - (20,753) Bakersfield, CA 729,798 17.40 0.0 0.0 4.10 4.10 - 57,068 Boise, ID 2,177,754 19.03 -2.1 -8.1 4.10 14.12 (266,676) (241,936) Denver, CO 21,274,480 30.70 -0.3 4.1 13.27 12.40 185,709 126,630 Fresno, CA 1,058,046 24.00 0.0 0.0 12.13 11.19 9,951 12,501 Honolulu, HI 4,966,720 34.85 -0.3 -0.9 12.49 12.47 686 (12,015) Las Vegas, NV 807,588 31.20 0.8 1.2 6.89 15.35 (68,273) (50,489) Los Angeles, CA 18,098,100 36.60 1.0 0.7 18.20 18.33 (24,600) (21,200) Oakland, CA 10,198,245 31.80 3.5 0.0 10.24 8.56 171,341 270,853 Phoenix, AZ 9,468,011 22.47 -1.2 -5.2 21.67 22.04 (34,936) (50,518) Portland, OR 13,249,724 24.61 -1.8 -0.3 8.44 7.98 61,123 104,912 Reno, NV 583,955 24.05 0.8 5.4 16.10 13.61 14,554 722 Sacramento, CA 9,062,614 31.80 -1.1 -2.6 11.30 11.29 771 (258,546) San Diego, CA 7,257,266 28.08 -0.8 -2.1 16.80 15.99 58,194 99,629 San Francisco, CA 56,345,281 50.29 5.3 12.2 9.73 9.15 156,032 507,542 San Jose/Silicon Valley 3,365,127 31.80 0.0 -4.0 28.05 26.04 51,776 17,182 Seattle/Puget Sound, WA 20,699,527 31.68 -1.2 3.4 14.56 15.16 (120,723) (46,961) Stockton, CA 2,790,574 21.60 9.1 4.7 25.06 25.96 (24,991) 13,740 Walnut Creek, CA 8,255,502 27.60 0.9 5.0 14.91 15.00 (7,939) 32,505 West Total 190,963,359 35.91 2.0 5.4 13.14 12.95 161,999 540,866 U.S. TOTAL / AVERAGE 1,045,809,355 41.56 0.8 0.8 13.90 13.89 805,929 225,575 (continued)
  • 12. P. 12 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA UNITED STATES | SUBURBAN OFFICE | ALL INVENTORY MARKET EXISTING INVENTORY (SF) JUN 30, 2013 NEW SUPPLY Q2 2013 (SF) YEAR-TO-DATE NEW SUPPLY (SF) UNDER CONSTRUCTION (SF) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) NORTHEAST Baltimore, MD 87,566,421 367,764 573,964 - 12.80 12.66 450,100 357,512 Boston, MA 111,593,294 347,926 347,926 1,387,323 18.70 18.29 735,271 1,221,168 Fairfield County, CT 41,219,333 - - - 13.16 13.33 (67,268) (78,128) Hartford, CT 12,251,551 - - - 14.02 13.43 72,978 124,377 Long Island, NY 73,301,695 - - 104,000 10.80 10.59 154,783 200,253 New Jersey – Central* 103,932,091 - - 88,724 16.75 16.75 673,930 673,930 New Jersey – Northern* 137,463,824 - - 737,600 15.81 15.54 362,711 362,711 Philadelphia, PA 110,361,669 50,000 50,000 802,755 14.92 14.60 392,810 364,009 Pittsburgh, PA 90,770,505 358,000 493,518 576,855 7.28 7.25 347,253 316,689 Washington, DC 284,135,019 411,767 637,410 6,997,084 16.14 16.21 142,265 (283,211) Westchester County, NY 36,869,560 - - - 15.50 15.02 178,656 136,250 Northeast Total 1,089,464,962 1,535,457 2,102,818 10,694,341 14.77 14.64 3,443,489 3,395,560 SOUTH Atlanta, GA 171,340,789 344,476 344,476 954,650 17.12 16.89 684,734 823,062 Birmingham, AL 14,628,662 - - - 17.40 17.55 (39,734) 25,857 Charleston, SC 9,363,809 - 75,000 100,000 13.29 12.98 29,345 44,081 Charlotte, NC 61,732,087 55,003 102,539 221,754 14.67 14.18 344,722 513,339 Columbia, SC 4,954,406 - - - 26.69 25.71 48,445 890 Dallas, TX 239,866,810 244,205 721,325 1,712,061 15.47 15.56 571 793,368 Ft. Lauderdale-Broward, FL 43,472,016 - - 280,000 15.03 14.64 168,820 (16,995) Ft. Worth, TX 20,280,813 44,065 87,703 259,453 7.74 7.67 54,370 23,622 Greenville, SC 5,093,953 - - - 16.13 18.80 (135,883) (35,663) Houston, TX 134,491,562 576,602 676,602 9,374,982 15.15 15.20 415,105 248,856 Jacksonville, FL 44,973,689 51,211 57,601 14,902 13.25 12.16 532,107 542,492 Little Rock, AR 7,577,346 - - - 12.11 13.46 (90,155) (69,911) Memphis, TN 27,567,694 113,392 113,392 40,000 14.59 14.47 128,498 98,506 Miami-Dade, FL 63,172,528 35,298 128,185 242,887 13.60 13.04 382,915 449,144 Nashville, TN 14,841,014 - - 731,000 6.71 6.72 (63,019) (10,364) Orlando, FL 53,981,842 - - 416,567 14.79 13.86 502,767 503,192 Raleigh/Durham/Chapel Hill, NC 64,112,623 20,671 20,671 133,593 13.24 13.00 167,946 525,049 Richmond, VA 34,573,839 - - - 10.44 10.54 (34,916) 284,682 Savannah, GA 1,467,758 - - - 19.59 19.16 6,253 9,233 Tampa Bay, FL 71,236,172 21,145 271,145 95,474 15.13 15.61 (263,194) 370,106 W. Palm Beach/Palm Beach, FL 28,662,154 - 30,000 119,250 18.05 17.78 78,001 115,088 South Total 1,117,391,566 1,506,068 2,628,639 14,696,573 14.92 14.77 2,917,698 5,237,634 *New Jersey markets reported Q1 data this quarter.
  • 13. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 13 UNITED STATES | SUBURBAN OFFICE | ALL INVENTORY MARKET EXISTING INVENTORY (SF) JUN 30, 2013 NEW SUPPLY Q2 2013 (SF) YEAR-TO-DATE NEW SUPPLY (SF) UNDER CONSTRUCTION (SF) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) MIDWEST Chicago, IL 157,838,190 207,819 327,819 79,847 16.54 16.48 263,098 749,780 Cincinnati, OH 35,557,700 - 147,378 - 18.96 18.13 297,384 528,188 Cleveland, OH 88,023,988 154,974 819,457 27,280 10.30 11.48 (900,048) (162,940) Columbus, OH 43,764,261 - 103,000 362,500 11.87 11.35 229,264 236,862 Detroit, MI 139,700,460 - - 83,882 18.73 18.49 249,230 (207,749) Grand Rapids, MI 10,944,100 - - 145,000 25.41 24.85 61,755 101,015 Indianapolis, IN 44,280,262 - - - 9.75 9.80 (22,709) 8,862 Kansas City, MO 57,980,107 530,000 540,820 884,496 13.01 12.53 738,699 724,129 Milwaukee, WI 33,429,900 100,427 100,427 - 12.49 12.29 153,784 146,573 Minneapolis, MN 79,538,983 - - 608,700 14.57 13.55 817,437 1,067,737 Omaha, NE 21,111,750 512,972 512,972 377,500 12.42 12.43 416,983 342,368 St. Louis, MO 55,605,662 - - 735,000 10.18 9.58 332,544 508,965 Midwest Total 767,775,363 1,506,192 2,551,873 3,304,205 14.59 14.40 2,637,421 4,043,790 WEST Albuquerque, NM 10,877,999 - - - 18.10 16.86 134,884 79,602 Bakersfield, CA 6,011,449 30,000 30,000 51,594 6.89 7.52 (21,754) (16,515) Boise, ID 12,797,231 - - - 18.88 20.92 663,262 1,132,545 Denver, CO 103,335,682 397,979 482,065 344,252 13.75 13.86 217,765 764,273 Fairfield, CA 4,878,427 - - - 25.54 24.20 65,145 44,580 Fresno, CA 18,081,047 98,815 98,815 158,000 13.04 13.39 (43,728) (11,011) Honolulu, HI 7,490,275 - - - 12.25 12.30 (7,200) 50,147 Las Vegas, NV 35,318,604 - 42,123 279,478 24.41 24.25 28,671 109,266 Los Angeles, CA 167,663,500 532,100 532,100 1,143,200 17.81 18.08 (18,700) 83,700 Los Angeles – Inland Empire, CA 20,493,200 22.04 21.67 76,900 83,700 Oakland, CA 16,165,151 - - - 19.68 19.05 100,589 (173,284) Orange County, CA 81,047,500 - - 790,000 15.92 15.19 541,900 1,034,700 Phoenix, AZ 110,202,571 - 30,000 68,867 20.31 20.14 187,546 472,127 Pleasanton/Tri-Valley, CA 27,421,359 - - - 10.92 10.63 78,180 102,190 Portland, OR 42,684,995 10,916 10,916 36,300 10.43 10.34 48,165 143,296 Reno, NV 9,748,827 - - - 15.53 15.22 30,283 26,295 Sacramento, CA 75,158,085 - 148,625 209,527 16.91 16.55 270,624 806,454 San Diego, CA 71,124,181 248,882 248,882 778,558 13.11 12.78 450,811 642,424 San Francisco Peninsula 35,146,938 4,739 4,739 - 14.10 12.91 421,429 397,547 San Jose/Silicon Valley 55,865,346 1,048,564 1,366,564 1,689,796 12.33 12.53 759,464 1,012,477 Seattle/Puget Sound, WA 56,694,296 42,414 42,414 - 11.19 10.62 252,333 111,261 Walnut Creek, CA 5,562,703 - - - 15.03 14.57 25,624 42,514 West Total 973,769,366 2,414,409 3,037,243 5,549,572 15.92 15.75 4,262,193 6,068,388 U.S. TOTAL / AVERAGE 3,948,401,257 6,962,126 10,320,573 34,244,691 15.06 14.90 13,260,801 18,745,372 (continued)
  • 14. P. 14 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA UNITED STATES | SUBURBAN OFFICE | CLASS A MARKET EXISTING INVENTORY (SF) JUN 30, 2013 AVG. ANNUAL QUOTED RENT (USD PSF) JUN 30, 2013 QUARTERLY CHANGE IN RENT (%) ANNUAL CHANGE IN RENT (%) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) NORTHEAST Baltimore, MD 30,851,141 25.06 0.3 -1.6 15.61 14.90 447,189 448,426 Boston, MA 47,464,674 25.03 -0.9 -0.6 17.56 16.82 638,058 803,290 Fairfield County, CT 17,379,924 36.57 -1.3 -3.2 13.16 13.13 6,408 40,348 Hartford, CT 7,906,889 20.91 2.4 1.2 12.55 12.42 9,892 25,668 Long Island, NY 23,317,018 30.44 -0.3 1.3 12.75 11.25 348,147 316,996 New Jersey – Central* 60,412,197 26.31 0.0 15.5 17.19 17.19 807,970 807,970 New Jersey – Northern* 84,496,914 26.36 0.3 -0.5 15.11 15.08 138,287 138,287 Philadelphia, PA 68,018,576 25.27 2.0 3.2 14.20 13.56 479,801 496,354 Pittsburgh, PA 16,511,151 22.41 0.3 3.6 6.07 5.79 309,173 216,514 Washington, DC 134,720,703 31.91 -0.5 -1.8 15.69 15.81 191,862 239,435 Westchester County, NY 16,971,309 27.02 1.6 0.3 19.18 17.58 271,232 146,991 Northeast Total 508,050,496 27.82 0.1 1.2 15.28 14.97 3,648,019 3,680,279 SOUTH Atlanta, GA 79,940,734 22.11 -0.3 0.2 16.18 15.68 688,617 912,544 Birmingham, AL 9,246,750 20.73 -0.5 -2.0 15.55 16.19 (65,266) (45,377) Charleston, SC 3,500,470 24.37 -0.4 5.5 8.81 7.84 33,993 13,886 Charlotte, NC 19,884,200 22.91 0.5 1.8 16.12 15.13 195,094 336,565 Columbia, SC 973,189 16.72 1.6 -1.1 19.38 14.73 45,286 1,971 Dallas, TX 91,458,998 23.50 0.6 1.3 14.54 15.20 (467,794) 403,729 Ft. Lauderdale-Broward, FL 10,973,930 27.34 0.0 -1.8 18.69 17.96 79,282 64,343 Ft. Worth, TX 2,649,272 24.20 0.8 0.8 2.83 2.71 3,199 25,413 Greenville, SC 2,245,798 17.61 -1.1 0.1 13.50 10.04 77,642 58,652 Houston, TX 55,239,500 28.82 0.0 1.7 11.90 11.83 517,471 1,020,517 Jacksonville, FL 9,206,865 19.40 -1.9 -0.5 8.40 7.71 63,551 55,474 Little Rock, AR 3,027,212 19.12 -0.6 -1.5 18.26 17.34 31,370 44,873 Memphis, TN 8,115,712 21.23 1.2 -1.7 8.50 8.53 (2,502) (20,930) Miami-Dade, FL 16,344,890 31.49 -0.6 3.1 18.35 17.78 93,080 111,031 Nashville, TN 7,288,561 23.97 0.3 5.2 5.53 6.29 (55,610) (43,412) Orlando, FL 16,814,825 21.07 1.1 -2.3 19.22 17.95 213,715 328,229 Raleigh/Durham/Chapel Hill, NC 24,633,625 20.35 -0.1 -2.5 12.30 11.71 145,511 454,423 Richmond, VA 13,795,044 18.40 2.0 -0.2 10.96 10.85 14,555 342,371 Savannah, GA 490,035 23.24 2.8 2.6 19.37 19.49 (573) (8,314) Tampa Bay, FL 24,325,155 23.06 0.2 0.7 13.86 14.72 (80,268) 487,063 W. Palm Beach/Palm Beach, FL 9,326,273 30.21 2.3 0.5 16.82 17.05 (21,511) 13,918 South Total 409,481,038 23.74 0.2 0.7 14.31 14.20 1,508,842 4,556,969 *New Jersey markets reported Q1 data this quarter.
  • 15. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 15 UNITED STATES | SUBURBAN OFFICE | CLASS A MARKET EXISTING INVENTORY (SF) JUN 30, 2013 AVG. ANNUAL QUOTED RENT (USD PSF) JUN 30, 2013 QUARTERLY CHANGE IN RENT (%) ANNUAL CHANGE IN RENT (%) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) MIDWEST Chicago, IL 77,711,164 27.18 -0.3 0.1 17.02 17.17 19,722 494,595 Cincinnati, OH 16,233,224 20.64 1.5 1.1 18.58 17.67 147,771 306,215 Cleveland, OH 14,354,514 21.23 0.7 -0.7 9.57 9.89 (46,071) 550,512 Columbus, OH 18,074,079 19.19 0.1 3.5 12.05 10.71 242,279 91,189 Detroit, MI 34,050,663 20.38 0.8 -1.9 16.34 16.26 29,913 (125,820) Grand Rapids, MI 554,841 17.50 0.0 -9.4 42.12 42.12 - 2,226 Indianapolis, IN 12,451,342 18.25 0.0 -0.1 11.69 12.32 (12,819) 128,301 Kansas City, MO 15,325,428 20.55 0.7 -0.3 11.55 10.46 634,990 519,877 Milwaukee, WI 6,103,854 20.44 -0.6 0.4 13.98 13.90 4,954 (82,366) Minneapolis, MN 26,015,101 13.83 0.2 4.3 15.41 15.22 49,276 229,111 Omaha, NE 4,861,660 25.95 -5.9 0.5 4.34 3.00 504,091 498,985 St. Louis, MO 26,156,707 22.01 -0.9 0.3 10.01 9.30 183,663 235,449 Midwest Total 251,892,577 21.96 0.0 0.4 14.52 14.24 1,757,769 2,848,274 WEST Albuquerque, NM 811,008 20.85 - 1.1 13.74 13.74 - 20,771 Bakersfield, CA 2,748,627 24.00 0.0 0.0 4.93 5.48 33,047 42,376 Boise, ID 5,208,798 15.10 5.6 -12.0 16.99 18.43 168,993 609,791 Denver, CO 33,283,870 24.33 1.1 4.4 11.81 12.09 (95,784) (33,899) Fairfield, CA 1,918,096 25.83 0.1 1.1 32.25 30.20 39,425 51,949 Fresno, CA 4,029,660 25.20 0.0 0.0 18.67 17.66 40,648 45,507 Las Vegas, NV 4,979,076 29.28 -0.8 0.4 33.60 32.20 70,108 40,828 Los Angeles, CA 102,474,400 34.32 0.7 5.5 16.83 17.02 190,200 27,600 Los Angeles – Inland Empire, CA 4,934,300 24.36 1.0 5.2 23.12 23.06 3,200 (142,100) Oakland, CA 3,870,228 29.52 7.9 6.5 27.31 26.27 40,491 (78,953) Orange County, CA 32,650,900 25.56 -0.5 -0.5 17.45 16.10 387,800 398,600 Phoenix, AZ 30,425,480 23.45 0.6 3.5 19.68 18.98 211,842 259,552 Pleasanton/Tri-Valley, CA 15,234,184 26.04 -0.9 - 8.44 8.46 (2,798) 49,579 Portland, OR 10,880,217 22.59 -1.1 -1.1 11.63 11.50 13,471 189,227 Reno, NV 912,364 19.21 0.7 4.9 19.49 21.11 (14,789) (33,518) Sacramento, CA 17,141,271 21.96 -0.5 -2.1 18.85 17.83 174,233 802,332 San Diego, CA 23,786,330 33.72 0.0 4.1 11.25 10.61 372,786 245,935 San Francisco Peninsula 22,436,779 43.20 2.0 3.4 13.29 12.89 224,424 403,711 San Jose/Silicon Valley 28,454,222 40.80 4.3 2.4 14.66 15.71 600,275 802,065 Seattle/Puget Sound, WA 20,754,950 33.12 -0.6 3.8 9.93 9.21 147,198 173,766 Walnut Creek, CA 737,964 33.36 18.2 24.7 13.75 16.13 (17,614) (22,967) West Total 367,672,724 30.59 1.2 7.1 15.56 15.36 2,587,156 3,852,152 U.S. TOTAL / AVERAGE 1,537,096,835 26.44 0.4 2.5 14.96 14.74 9,501,786 14,937,674 (continued)
  • 16. P. 16 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA CANADA | DOWNTOWN OFFICE | ALL INVENTORY MARKET EXISTING INVENTORY (SF) JUN 30, 2013 NEW SUPPLY Q2 2013 (SF) YEAR-TO-DATE NEW SUPPLY (SF) UNDER CONSTRUCTION (SF) VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) Calgary, AB 39,779,846 - - 2,520,000 5.03 (269,967) (525,725) Edmonton, AB 11,260,840 - - - 8.02 14,191 31,107 Halifax, NS 4,679,727 2,607 2,607 190,000 11.29 18,140 10,663 Montréal, QC 49,331,103 - - 943,543 4.67 (193,746) (291,539) Ottawa, ON 15,636,942 - - 360,000 7.28 (57,796) 4,247 Regina, SK 3,519,664 - - 80,000 5.84 (28,162) (106,971) Saskatoon, SK 2,369,148 50,000 50,000 - 5.34 52,979 512 Toronto, ON 69,551,319 - - 4,484,698 4.02 246,297 444,761 Vancouver, BC 24,408,488 - - 2,199,812 4.41 (96,005) (129,266) Victoria, BC 4,901,126 - - - 8.52 (27,541) (27,541) Waterloo Region, ON 3,899,737 25,200 48,200 44,075 12.83 36,147 71,584 Winnipeg, MB 11,352,054 216,655 216,655 130,375 7.75 202,927 202,927 CANADA TOTAL 240,689,994 294,462 317,462 10,952,503 5.35 (102,536) (315,241) CANADA | DOWNTOWN OFFICE | CLASS A MARKET EXISTING INVENTORY (SF) JUN 30, 2013 AVG. ANNUAL QUOTED RENT (CAD PSF) JUN 30, 2013 QUARTERLY CHANGE IN RENT (%) ANNUAL CHANGE IN RENT (%) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) Calgary, AB 26,727,389 61.46 3.2 -0.9 2.78 3.04 (71,719) (320,803) Edmonton, AB 9,074,913 41.63 0.0 0.5 8.26 8.27 (255) 16,839 Halifax, NS 1,934,103 32.58 0.2 0.7 8.68 7.96 14,179 19,397 Montréal, QC 23,302,596 45.00 0.0 7.1 4.45 4.99 (124,640) 17,374 Ottawa, ON 9,645,830 50.00 -2.0 1.4 4.73 5.03 (28,365) 79,033 Regina, SK 1,392,816 44.00 4.8 8.9 2.17 2.53 (5,030) (11,096) Saskatoon, SK 570,571 43.00 7.5 13.2 4.65 4.65 - (6,066) Toronto, ON 40,130,328 54.31 3.6 1.6 4.48 4.54 (11,485) 50,695 Vancouver, BC 10,029,234 56.35 0.2 0.4 2.07 3.03 (96,005) (110,759) Victoria, BC 513,808 35.00 0.0 -2.8 4.88 6.97 (10,739) (10,739) Waterloo Region, ON 1,559,429 25.97 0.0 2.7 10.64 10.64 - 21,386 Winnipeg, MB 2,619,428 33.75 0.7 2.3 3.71 4.03 (8,359) (8,359) CANADA TOTAL 127,500,445 51.70 1.9 2.0 4.32 4.59 (342,418) (263,098)
  • 17. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 17 CANADA | SUBURBAN OFFICE | ALL INVENTORY MARKET EXISTING INVENTORY (SF) JUN 30, 2013 NEW SUPPLY Q2 2013 (SF) YEAR-TO-DATE NEW SUPPLY (SF) UNDER CONSTRUCTION (SF) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 ABSORPTION YEAR-TO-DATE (SF) Calgary, AB 25,164,191 141,834 396,884 1,039,562 9.96 9.37 274,466 929,335 Edmonton, AB 9,291,098 80,000 185,150 225,000 12.32 12.22 65,881 52,722 Halifax, NS 6,547,115 438 438 73,500 11.13 11.25 (7,943) (16,194) Montréal, QC 24,694,665 91,821 91,821 942,519 8.60 10.76 (450,488) (471,646) Ottawa, ON 21,106,795 - - 395,450 9.83 9.73 83,496 54,280 Regina, SK 675,313 - - 40,000 4.74 3.92 5,522 5,522 Toronto, ON 68,555,862 288,632 369,582 634,268 7.52 7.86 27,018 57,592 Vancouver, BC 29,130,276 73,791 308,452 2,321,686 9.37 10.53 (197,705) (142,707) Victoria, BC 3,728,644 47,501 47,501 99,642 9.39 11.30 (26,413) (26,413) Waterloo Region, ON 7,241,479 16,641 84,001 199,850 10.80 10.75 22,608 60,876 Winnipeg, MB 4,052,004 75,257 75,257 70,000 9.16 10.10 30,285 30,285 CANADA TOTAL 200,187,442 815,915 1,559,086 6,041,477 8.99 9.51 (173,273) 533,652 CANADA | DOWNTOWN OFFICE | CLASS A MARKET EXISTING INVENTORY (SF) JUN 30, 2013 AVG. ANNUAL QUOTED RENT (CAD PSF) JUN 30, 2013 QUARTERLY CHANGE IN RENT (%) ANNUAL CHANGE IN RENT (%) VACANCY RATE (%) MAR 31, 2013 VACANCY RATE (%) JUN 30, 2013 ABSORPTION Q2 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) Calgary, AB 12,294,319 44.00 0.0 2.3 8.78 8.23 196,010 272,375 Halifax, NS 2,853,857 28.50 0.5 -2.5 9.46 9.18 8,656 (100) Montréal, QC 13,530,469 28.00 3.7 3.7 7.60 10.00 (170,711) (283,235) Ottawa, ON 11,991,451 30.58 0.4 -2.8 9.77 9.83 (12,730) (69,888) Toronto, ON 31,893,339 30.72 -0.2 -0.3 8.59 8.91 82,285 256,108 Vancouver, BC 14,555,232 33.65 -1.0 0.6 8.77 10.64 (96,294) (41,296) Victoria, BC 802,299 38.00 0.0 5.6 13.98 16.65 5,110 5,110 Waterloo Region, ON 3,522,767 24.07 -0.5 -0.9 10.84 11.20 1,957 34,409 CANADA TOTAL 91,443,733 32.29 0.3 0.8 8.82 9.54 14,283 173,483
  • 18. P. 18 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA UNITED STATES | OFFICE INVESTMENT MARKET CBD SALES PRICE (USD PSF) CBD CAP RATE (%) SUBURBAN SALES PRICE (USD PSF) SUBURBAN CAP RATE (%) Albuquerque, NM 150.00 8.8 175.00 8.0 Atlanta, GA 230.00 7.3 138.50 8.0 Bakersfield, CA 84.00 - 165.00 - Baltimore, MD 69.00 - 41.43 8.8 Boston, MA 236.00 7.1 232.00 6.3 Charleston, SC 250.00 8.0 135.00 11.0 Chicago, IL 350.00 6.5 225.00 7.5 Cincinnati, OH 120.00 9.5 135.00 9.5 Columbia, SC - 8.8 - 9.5 Columbus, OH 94.00 8.5 - 8.5 Dallas, TX 98.00 - 123.00 7.5 Denver, CO 275.00 6.5 140.00 7.5 Detroit, MI 55.54 - 59.16 8.6 Fairfield County, CT - - 105.00 6.0 Fresno, CA 125.00 9.0 150.00 8.5 Ft. Lauderdale-Broward, FL 121.00 6.9 103.00 8.5 Grand Rapids, MI - - 309.43 - Hartford, CT - - 174.52 7.5 Houston, TX 494.00 5.8 326.00 6.3 Indianapolis, IN 165.00 8.3 140.00 7.7 Jacksonville, FL - - 276.34 7.9 Las Vegas, NV - - 112.54 - Little Rock, AR 88.00 9.0 125.00 8.5 Long Island, NY - - 177.53 7.7 Los Angeles – Inland Empire, CA - - 200.00 7.8 Los Angeles, CA 204.00 6.0 279.00 6.4 Miami-Dade, FL - - 352.00 - Milwaukee, WI 120.00 9.0 100.00 9.5 Minneapolis, MN 147.56 - 78.99 7.0 Nashville, TN 200.00 7.0 120.00 7.0 New Jersey – Central** - - 121.00 5.7 New Jersey – Northern** - - 128.00 5.7 New York, NY – Downtown Manhattan 301.00 5.0 - - New York, NY – Midtown Manhattan 1,140.00 5.6 - - New York, NY – Midtown South Manhattan 847.00 4.7 - - Oakland, CA 164.91 7.5 - 8.5 Orange County, CA - - 350.00 6.3 Orlando, FL 210.00 8.3 131.00 8.5 Philadelphia, PA 165.00 7.0 175.00 8.0 Phoenix, AZ 46.00 8.0 91.00 7.8 Pittsburgh, PA 110.00 8.5 100.00 8.5 Pleasanton/Tri-Valley, CA - - 151.85 9.9 Portland, OR - - 276.07 - Sacramento, CA 139.12 - 90.02 -
  • 19. HIGHLIGHTS | Q2 2013 | OFFICE | NORTH AMERICA COLLIERS INTERNATIONAL | P. 19 COLLIERS INTERNATIONAL 601 Union Street, Suite 4800 Seattle, WA 98101 TEL +1 206 695 4200 FOR MORE INFORMATION Andrea B. Cross Office Research Manager | USA TEL +1 415 288 7892 EMAIL andrea.cross@colliers.com James Cook Director of Research | USA TEL +1 602 633 4061 EMAIL james.cook@colliers.com CONTRIBUTORS KC Conway Chief Economist | USA Jeff Simonson Senior Research Analyst | USA Jennifer Macatiag Graphic Designer | USA Cliff Plank National Director | GIS & Mapping 482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 • $2 billion in annual revenue • 13,500 professionals and staff • 1.12* billion square feet under management • $71 billion USD in total transaction value *Together, Colliers International and FirstService manage 2.51 billion square feet of property— second-largest in the world. Copyright © 2013 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. Accelerating success. UNITED STATES | OFFICE INVESTMENT MARKET CBD SALES PRICE (USD PSF) CBD CAP RATE (%) SUBURBAN SALES PRICE (USD PSF) SUBURBAN CAP RATE (%) San Diego, CA 273.03 8.0 228.55 6.9 San Francisco Peninsula - - 250.00 6.8 San Francisco, CA 470.00 4.5 - - San Jose – Silicon Valley 270.00 7.0 375.00 6.9 Savannah, GA 150.00 9.5 120.00 9.8 Seattle/Puget Sound, WA 337.00 6.0 171.22 7.1 St. Louis, MO 90.00 9.5 130.00 8.5 Stamford, CT 186.00 8.0 - - Tampa Bay, FL 118.07 8.0 150.12 8.5 Walnut Creek, CA 220.00 7.3 180.00 8.0 Washington, DC 623.00 4.5 246.60 6.6 West Palm Beach/Palm Beach County, FL - - 162.00 8.0 Westchester County, NY - - 73.00 8.0 White Plains, NY 93.00 8.0 - - U.S. AVERAGES* 229.27 7.2 171.41 7.8 * *Straight averages used. **Q1 data. CANADA | OFFICE INVESTMENT MARKET CBD SALES PRICE (CAD PSF) CBD CAP RATE (%) SUBURBAN SALES PRICE (CAD PSF) SUBURBAN CAP RATE (%) Calgary, AB 550.00 5.5 480.00 5.5 Montréal, QC 275.00 6.5 195.00 7.0 Regina, SK 240.00 6.8 200.00 7.3 Saskatoon, SK 240.00 6.8 - - Vancouver, BC 461.00 5.0 - 6.3 Victoria, BC 359.00 6.2 280.00 6.3 Waterloo Region, ON 89.00 9.2 175.00 7.5 Winnipeg, MB 150.00 7.3 140.00 7.3 CANADA AVERAGES* 295.50 6.6 245.00 6.7 *Straight averages used. Inventory — Includes all existing multi- or single- tenant leased and owner-occupied office properties greater than or equal to 10,000 square feet (net rentable area). In some larger markets this minimum size threshold may vary up to 50,000 square feet. Does not include medical or government buildings. Vacancy Rate — Percentage of total inventory physically vacant as of the survey date, including direct vacant and sublease space. Absorption — Net change in physically occupied space over a given period of time. New Supply — Includes completed speculative and build-to-suit construction. New supply quoted on a net basis after any demolitions or conversions. Annual Quoted Rent — Includes all costs associated with occupying a full floor in the mid-rise portion of a Class A building, inclusive of taxes, insurance, maintenance, janitorial and utilities (electricity surcharges added where applicable). All office rents in this report are quoted on an annual, gross per square foot basis. Rent calculations do not include sublease space. Cap Rate — (Or going-in cap rate) Capitalization rates in this survey are based on multi-tenant institutional grade buildings fully leased at market rents. Cap rates are calculated by dividing net operating income (NOI) by purchase price. NOTE: SF = square feet MSF = million square feet PSF = per square foot CBD = central business district Glossary (continued)

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