North American Office Highlights Q4-12
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North American Office Highlights Q4-12

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Colliers International North American Office Highlights Q4-2012

Colliers International North American Office Highlights Q4-2012

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    North American Office Highlights Q4-12 North American Office Highlights Q4-12 Document Transcript

    • Q4 2012 | OFFICENORTH AMERICAHIGHLIGHTS Unlocking 2013 Office Property Performance What will be the right combination in 2013? K.C. CONWAY, MAI, CRE EMD | Market AnalyticsMARKET INDICATORSRelative to prior period KEY TAKEAWAYS US US Canada Canada • The North American and U.S. office vacancy rates declined further during Q4 2012 to 14.09% Q4 Q1 Q4 Q1 2012 2013* 2012 2013* and 14.63%, respectively. This was the fourth consecutive quarter of improvement for the 6.4 billion square feet of inventory in the 85 North American office markets tracked by Colliers. VACANCY • The market uncertainty and volatility of 2H2012 inhibited neither office leasing or transactionNET ABSORPTION     activity. Q4 North American net absorption of 21.1 MSF was more than double Q3’s 10.4 MSF. CONSTRUCTION 2012 total net absorption was 50.7 MSF (roughly the office inventory of Ft. Lauderdale), the best since the 2008–2009 financial crisis. RENTAL RATE *Projected • Major office property transactions totaled $77.6 billion in 2012, and surged at year-end 2012. Construction is the change in Under Construction Q4’s $29.1 billion in office building sales surpassed all prior quarters in 2012, according to Real Capital Analytics.NORTH AMERICAN OFFICE MARKETSummary Statistics, Q4 2012 NORTH AMERICAN OFFICE VACANCY, INVENTORY AND ABSORPTION – Q4 2012 US CAN NA VACANCY RATE 14.63% 6.80% 14.09% Change From Q3 2012 -0.21% -0.26% -0.21% ABSORPTION (MSF) 18.8 2.3 21.1 NEW CONSTRUCTION (MSF) 9.1 1.5 10.6UNDER CONSTRUCTION (MSF) 39.5 11.3 50.8 Absorption Per Market (SF) q3 12 - q4 12 2,500,000 ASKING RENTS PER SF US CAN 1,250,000 250,000 -250,000 Downtown Class A $41.22 $51.42 -1,250,000 -2,500,000 Change from Q3 2012 0.17% 1.67% Suburban Class A $26.21 $31.94 Sq. Ft. By Region 2 billion 2.00000000 1 billion 1.00000000 Change from Q3 2012 0.08% 0.16% 200 mil. 2.00000000 Occupied Sq. Ft. Total_OffSF-Vacant_OffSF Vacant_OffSF Ft. Vacant Sq.WWW.COLLIERS.COM
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICAKEY TAKEAWAYS (continued)• Capital is migrating out of the risk curve for investment in office building assets in search of yield. This trend, reported by Colliers in previous 2012 reports, was corroborated by the recent Association of Foreign Investors in Real Estate report in which four of the top five markets for investment were in the U.S., including Houston for the first time.• “ICEE” office markets are still hot. Intellectual Capital, Energy and Education (ICEE) markets continue to capture a disproportionate share of North American office absorption. During 2012, two-thirds of the 10 North American MSAs with the greatest absorption are characterized as ICEE markets. We see this trend continuing in 2013 as technology, energy and knowledge gateway centers remain the dominant generators of office-related employment.• Medical Office has been a sleeper office sub-property type that saw a 30% growth in transaction activity in CY 2012 to $6.1 billion, or just shy of the 10% total $77.6 billion in CY 2012 office property sales. And, approximately half of the 71 MSF of office space under construction in the U.S. at the onset of 2013 is for medical-related use.• Recovery in housing is an overlooked office demand driver that will gain additional traction in 2013.IN THIS QUARTER’S REPORT, WE TAKE A LOOK AT THECOMBINATION TO UNLOCKING VALUE IN 2013: CANADIAN OFFICE ABSORPTION BY MARKET Q4 2012 RIGHT 14: In 2013 look for North American vacancy to drop below 14%, fueled by Montréal, QC 365.7 another 50 MSF of absorption. Calgary, AB 330.0 203.3 LEFT 80:total office transactions above Toronto, ON 190.2 $80 billion Regina, SK Saskatoon, SK 138.9 RIGHT 10: CMBS office property Waterloo Region, ON 24.4 delinquencies rate below 10% Edmonton, AB 13.3 LEFT ICEE: Office job growth in Tech/ Winnipeg, MB 0.0 Energy/Education MSAs outperforms Halifax, NS -0.5 FIRE MSAs for a third consecutive year Victoria, BC -14.4 Vancouver, BC -130.9 RIGHT MO: Medical Office is the emerging -183.2 Ottawa, ON leader among office sub-property sectors -300.0 -200.0 -100.0 0.0 100.0 200.0 300.0 400.0 See page 7 for details  Thousands CANADIAN OFFICE UNDER CONSTRUCTION BY MARKET Q4 2012 Toronto, ON 2.78 Calgary, AB 1.66 Vancouver, BC 1.56 Ottawa, ON 0.36 Montréal, QC 0.30 Halifax, NS 0.19 Winnipeg, MB 0.13 Regina, SK 0.08 Waterloo Region, ON 0.07 Saskatoon, SK 0.05 Victoria, BC 0.00 Edmonton, AB 0.00 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Millions Note: Q3 data reported for Winnipeg, MBP. 2 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICAIN BRIEF: OFFICE OUTLOOK 2013 North American Downtown Markets:2012 finished—and 2013 began—as Colliers observed in fall 2012: with progress on all fronts. Excluding renewals, of the leases signed• North American Office Vacancy falls to just 14.09% at YE 2012. this quarter, did most tenants:• Net leasing activity best in five years: i) 21.1 MSF in Q4 2012; and ii) 50.7 MSF for CY 2012• A 19% surge in office building sales surpasses 2004 transaction volume (3,000+ properties Hold Steady totaling approximately $78 billion during 2012) 69.1% Expand 16.2%Despite the harmful summer “UV (Uncertainty & Volatility) rays” during 1H2012, and lingering anxiety Contractsurrounding the U.S. fiscal debt crisis, ongoing Eurozone recession, the cost and logistics of 14.7%implementing Obamacare, and anemic job growth (150,000/month) for two consecutive years, officereal estate is persevering and returning to a state of balance. However, the recovery is broadening,both in the factors that have driven it over the past 12 months, as well as the markets that it’s reaching.No longer is the recovery confined to the CBDs of the “sexy six” core MSAs of New York, Boston,Chicago, Los Angeles, San Francisco and Seattle; it’s expanding to suburban submarkets andsecondary MSAs. Real Capital Analytics’ Office Year In Review report noted a 31 percent increase in North American Downtown Markets: What was the trend in Free Rent (in months)suburban office building sales during 2012, and a 40 percent increase in office building sales outside offered by CBD landlords this quarter?the six core MSAs. While this new interest is driven by a dearth of assets in the core MSAs and thesearch for yield in response to Federal Reserve monetary policy and cap rate compression, it has beenoffice job growth in technology, energy and primary-education focused MSAs (what Colliers coined theIntellectual Capital, Energy and Education, or “ICEE” markets in 2011) that has defined which secondary Samemarkets were participating in this broadening recovery in the office property sector thus far. Less 80.9% 14.7% MoreIn 2013, two other positive influences will impact this expansion: the housing recovery and growth in 4.4%medical office demand. Both are broad-based across the U.S. and will have more of an effect onsuburban office submarkets than CBDs. Why? First, professional services associated with a rise innew home construction and existing home sales activity will rebuild in proximity to this increasinghousing activity in the suburbs. Second, our healthcare delivery model is shifting from one concentratedon expensive urban hospital campuses to less capital-intensive, suburban outpatient facilities. North American Downtown Markets:The ICEE, housing, and medical office factors, along with the continuing search for yield by investors, What was the trend for tenantadd up to M.O.T.S (More Office To Secondaries) in 2013. As the diagram below depicts, rising improvement allowances offered byabsorption and modest new supply are driving vacancy down, and the requisite conditions to improve CBD landlords this quarter?NOI are in place to absorb any interest rate risk in 2H2013. Hold Steady 91.2% U.S. OFFICE MARKET Q4 2010–Q4 2012 Contract Expand 2.9% 5.9% 20.0 16.11 15.57 15.36 15.14 18.0 15.03 14.96 14.88 14.83 14.63 16.0 16.0 14.0 14.0 12.0 12.0 North American Suburban Markets: Vacancy % 10.0 Excluding renewals, of the leases signed 10.0 8.0 this quarter in your CBD/downtown, 8.0 did most tenants: 6.0 6.0 4.0 4.0 2.0 Expand 2.0 30.9% Hold Steady 60.3% - - Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Contract 8.8% 2011 2012 Absorption MSF Completions MSF Vacancy % COLLIERS INTERNATIONAL | P. 3
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA Vacancy From a regional perspective, Canada has the lowest average vacancy rate at 6.8 percent; and in the U.S., the Northeast has the lowest vacancy rate just shy of 14 percent. The highest vacancy rate among North American regions is the Western U.S. at 15.27 percent. The South and Midwest have average regional vacancy rates of 14.81% and 14.71%, respectively. Housing has been slow in its recovery in both these regions, and the job growth has been more focused on manufacturing, transportation and distribution, favoring industrial real estate over office. US CA NA Vacancy Rate: 14.63% 6.80% 14.09%BEHIND THE STATISTICS & BEYOND THE BASICS Change from Q3 2012 -0.21% -0.26% -0.21%Scope of Colliers Office Outlook Report: Colliers monitors office propertyconditions in 85 North American markets from Toronto to Tampa, totaling Absorption6.4 billion square feet of inventory. Approximately 93 percent (6.0 billion The final tally on 2012 net office absorption was not in the cards insquare feet) of this inventory is located in the United States. mid-2012, when it appeared that tenants and businesses were pulling back from leasing activity driving absorption down 6% over the prior six-monthThe largest 20 North American markets (those with at least 100 MSF of period (2H2011). However, despite the market’s anxiety over the Novemberexisting inventory) constitute approximately 60 percent of the 6.4 billion 2012 election and the Fiscal Cliff, 2012’s net office absorption had itssquare feet of North American office space tracked by Colliers. All of the best performance since the 2008–2009 financial crisis. Q4 net absorption>90 million-square-foot markets are located in the U.S., except one: Toronto. was more than double that for any prior quarter during 2012 (21.1 MSF inWith respect to 2012 net absorption, just 10 of the 85 markets accountedfor 53 percent of the 50.7 MSF of net absorption, and all but one market Q4 compared to 10.0 MSF for the rest of the year).(Calgary) are located in the U.S. Below are the ten absorption-leadingMSAs for 2012—seven of which are ICEE markets. Which markets outperformed and why? Examination of the top ten North American markets with respect to absorption in Q4 and YTD 2012 reveals the impact of ICEE employment drivers, commencement of a true housing ICEE MARKETS LEAD IN 2012 ABSORPTION recovery, and importance of having a nationally or regionally recognized medical center. MSA 2012 ABSORPTION 1 Houston (ICEE) 4.50 MSF TOP MARKETS FOR ABSORPTION MSA Q4 2012 MSA CY 2012 2 Dallas (ICEE) 2.90 MSF Detroit 4.50 MSF 1 1.66 MSF Houston (Auto + Housing) (ICEE) + Medical Center 3 Atlanta (ICEE) 2.80 MSF 2.90 MSF 2 Phoenix 1.46 MSF Dallas (ICEE) + Medical Center 4 Detroit 2.75 MSF Atlanta 2.80 MSF 3 Chicago 1.13 MSF (Housing Recovery) (ICEE) + Medical Center 5 Chicago 2.70 MSF Montreal 2.75 MSF 4 0.99 MSF Detroit (ICEE) Medical Center Philadelphia 2.70 MSF 6 Calgary (ICEE) 2.5 MSF 5 0.98 MSF Chicago (ICEE) Medical Center Houston 2.5 MSF 6 0.93 MSF Calgary (ICEE) (ICEE) 7 Phoenix 2.4 MSF Boston Phoenix 7 0.93 MSF 2.4 MSF (ICEE) (Housing Recovery) 8 Boston (ICEE) 2.2 MSF Dallas 2.2 MSF 8 0.84 MSF Boston (ICEE) (ICEE) + Medical Center 9 Philadelphia (ICEE) 2.2 MSF 2.2 MSF 9 Minneapolis 0.82 MSF Philadelphia (ICEE) + Medical Center 10 Seattle (ICEE) 2.2 MSF 2.2 MSF 10 Sacramento 0.82 MSF Seattle (ICEE) + Medical CenterP. 4 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICALooking at this list, several themes emerge: Association of Foreign Investors in Real Estate’s annual 2013 Foreign Investment Survey ranked the U.S. as the top place overall to invest; four • The overlapping seven MSAs: Seven of the top ten most active U.S. markets were among their top five picks, including Houston, which markets for leasing activity in Q4 were also among the ten most active had never before made this report’s global ranking. MSAs for all of calendar 2012. Houston, Dallas, Detroit, Chicago, Phoenix, Boston, and Philadelphia are prominent in both categories. Construction Activity To assess the risk of overbuilding, new construction activity needs • The predominance of ICEE: Seven of the top ten markets for net to be considered from three perspectives: 1) new supply as a percent absorption in 2012 are MSAs with an ICEE employment profile of existing inventory; 2) geographic concentration; and 3) sub-property (technology, energy and/or primary education). type concentration. • The increasing role of housing and medical office: However, only five of the top ten markets for Q4 leasing activity are ICEE MSAs. At the onset of 2013, approximately 78.5 MSF of new office supply is What explains the difference, and what explains the emergence of underway in the U.S. and Canada, according to Dodge Pipeline. That MSAs like Atlanta, Detroit and Phoenix? The answer is two-fold: activity translates to a North American new supply to existing inventory 1) the real housing recovery is taking hold in even the most ratio of 1.2%. Historically, only when this ratio passes 2.0% is it considered distressed housing markets, such as Atlanta, Detroit and Phoenix; elevated and indicative of overbuilding risk. What’s more, the current and 2) high-profile medical centers are strongly impacting demand supply-to-inventory ratio is actually much lower for most U.S. office for medical office space: Eight of the leading MSAs for absorption markets due to geographic and sub-property type concentration. in 2012 have nationally or regionally recognized medical centers. With respect to sub-property type construction, 51% of the 78.5 MSF ofLooking forward to 2013, the only brake on office leasing activity in key total new supply is medical-office-related construction. Of the remainingenergy markets—Dallas, Denver, Houston, Oklahoma City, Philadelphia 38.5 MSF, 17.55 MSF (45.7% of the non-medical office new supply) is(impact of Bakken shale), and Calgary—will be the delayed delivery of new concentrated in just five states. The following table delineates thesespace under construction. Houston and Denver can’t complete new space geographic and sub-property type ratios:fast enough to keep pace with demand. ICEE will also continue to be animportant office space demand driver in markets like Atlanta and Detroit New Supplywhere auto technology is fueling demand for engineers, and the office Delineation Ratio (%) (MSF)space to house them. (In 2012, Porsche and General Motors both madematerial commitments to locating auto technology centers in Atlanta.) North America 78.5 100.0And, the housing recovery will benefit suburban office space demand ascontractors and professional service providers (closing attorneys, Canada 7.2 9.2architects, engineers, building inspectors, etc.) rebuild or expand theiroperations to service housing activity of approximately 1.0 million new United States 71.3 91.8units—after years of less than half that level of activity. Atlanta, Charlotte,Nashville, Phoenix, Tampa, and inland California markets will see the most Office Property 78.5 100.0benefit from this housing recovery in 2013. In aggregate, 2013 shouldsurpass 2012’s 50 MSF of net absorption by conservative estimates of15%–20%, or 57.5 to 60.0 MSF in total. Market forces will see 2H2013 Medical Office 40.0 51.0disproportionately higher net leasing activity than 1H2013, as was the casein 2012. Non-Medical Office 38.5 49.0Transaction Activity U.S. Non-Medical Office 38.5 100.0Transactions of major office property were also uninhibited by 2H2012uncertainty. There were more than 3,000 transactions in 2012, totaling Top 5 States 17.5 45.7$77.6 billion, with a noticeable surge at year-end 2012: the $29.1 billion inQ4 office building sales surpassed all prior quarters in 2012, according to Texas 6.7 17.4Real Capital Analytics. As in recent years, New York, San Francisco, LosAngeles, Washington D.C., and Seattle accounted for approximately 50percent of the total dollar volume of office building sales during 2012. California 4.9 12.8Houston and Denver (two key ICEE MSAs) now rank among the topmarkets for office building transaction volume. Pennsylvania 2.5 6.4The $77.6 billion in office transaction activity from 2012 is likely to be New York 2.0 5.2surpassed in 2013, given the amount of idle domestic and foreign capitalsearching for yield in tangible assets, such as commercial real estate. The New Jersey 1.5 3.9 COLLIERS INTERNATIONAL | P. 5
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA ENGINEERING NEWS-RECORD’S CONSTRUCTION COST INDEX YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG 2013 9437 9453 Note: Construction Costs never dropped post 2007 & are rising at a faster pace. 2012 9176 9198 9268 9273 9290 9291 9324 9351 9341 9376 9398 9412 9308 2011 8938 8998 9011 9027 9035 9053 9080 9088 9116 9147 9173 9172 9070 2010 8660 8672 8671 8677 8761 8055 8844 8837 8836 8921 8951 8952 8799 2009 8549 8533 8534 8528 8574 8578 8566 8564 8586 8596 8592 8641 8570 2008 8090 8094 8109 8112 8141 8185 8293 8362 8557 8623 8602 8551 8310 2007 7880 7880 7856 7865 7942 7939 7959 8007 8050 8045 8092 8089 7966 2006 7660 7689 7692 7695 7691 7700 7721 7722 7763 7883 7911 7888 7751 2005 7297 7298 7309 7355 7398 7415 7422 7479 7540 7563 7630 7647 7446 2004 6825 6862 6957 7017 7065 7109 7126 7188 7298 7314 7312 7308 7115 2003 6581 6640 6627 6635 6642 6694 6695 6733 6741 6771 6794 6782 6694 2002 6462 6462 6502 6480 6512 6532 6605 6592 6589 6579 6578 6563 6538 2001 6281 6272 6279 6286 6288 6318 6404 6389 6391 6397 6410 6390 6343 2000 6130 6160 6202 6201 6233 6238 6225 6233 6224 6259 6266 6283 6221INDEX METHODOLOGY: 200 hours of common labor at the 20-city average of common labor rates, plus 25 cwt of standard structural steel shapes at the mill price prior to 1996 and the fabricated20-city price from 1996, plus 1.128 tons of portland cement at the 20-city price, plus 1,088 board-ft of 2x4 lumber at the 20-city price.The good news is that the U.S. ratio of new supply to inventory (excluding CAPITAL MARKETSmedical office construction) is less than a one-half of one percent—the What is better than improving office property type fundamentals? Forlowest since 2003. And, only 21 MSF of new construction is underway those that purchased any of the 3,000 office properties that traded inoutside of the five most active states, where energy and technology 2012, the answer is availability of capital. Domestic and foreign sourcescompanies, such as Exxon Mobil and Shell Energy in Texas and Endo are flush with capital ready to invest in tangible assets like real estate, thatPharmaceutical in Pennsylvania, account for 60 percent of activity. can offer 2.5 to 3.0 times the yield offered by the U.S. government’s 10-year Treasury bond. And, the CMBS debt markets are opening up againHowever, rising construction costs are a concern that spans all commercial after four consecutive years of annual new issuance below $50 billion.property types. It may surprise many to learn that construction costs Underwriting terms and pricing spreads have also compressed in favor ofnever actually declined during the 2008–2009 financial crisis and the borrowers: Improving market conditions have enabled even propertiesensuing recession. As documented by the Engineering-News Record, with elevated vacancy rates to become financeable again due to the lowConstruction, costs have risen 17% since the end of 2007, and are up over DSCR hurdle provided by sub-5.0 percent interest rates and 90 percent5.0 percent since February 2011. Investors and developers considering LTVs. Declining CMBS delinquency rates have further aided new issuancenew construction investments should budget construction cost increases at interest, and have CMBS investors enthusiastic about 2013 new issuancedouble the CPI for 2013 and 2014, due to pressures on labor and materials. increasing 50 percent over 2012’s $50 billion level to $75 billion. If you have tenants, and can meet a 1.4 DSCR using a 4.5% loan coupon, the capital markets are once again open to refinance your office building. PERCENTAGE 30+ DAYS DELINQUENT BY PROPERTY TYPE 12 PERCENTAGE 30+ DAYS DELINQUENT BY PROPERTY TYPE JAN ‘13 DEC ‘12 NOV ‘12 3 MON 6 MON 1 YEAR 10.34 10.16 10.13 Industrial 11.32 11.24 11.48 11.53 11.72 12.14 10.04 9.99 10 9.68 9.80 9.69 9.71 9.71 9.57 9.52 9.37 Lodging 11.77 11.73 12.24 11.24 13.06 12.09 Multifamily 13.43 13.98 14.21 14.26 15.69 15.39 Office 10.48 10.66 10.37 10.20 10.69 8.90 8 Jan 2012 Mar 2012 May 2012 Jul 2012 Sep 2012 Nov 2012 Jan 2013 Retail 7.79 7.62 7.75 8.03 8.03 7.88Source: Trepp – January 2013 CMBS Delinquency Report Source: Trepp – January 2013 CMBS Delinquency ReportP. 6 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA THE COMBINATION TO UNLOCKING 2013 OFFICE PROPERTY PERFORMANCE RIGHT 14 – Vacancy: LEFT ICEE – Office Demand Drivers: If the absorption momentum from 2H2012 carries over into The greatest opportunity for value enhancement and yield will 2013 and Congress can maneuver its fiscal debt obstacle remain in those secondary markets with an ICEE employmentcourse in 1H2013, the North American office vacancy rate will decline profile. Traditional FIRE (Finance Insurance and Real Estate) markets arebelow 14.0 percent for the first time since 2005. Office property investors going to face office absorption headwinds as financial institutions reduceare keenly focused on the need for improvement in NOI in office properties operating costs and the amount of office space they occupy. Financialgoing forward to be positioned to absorb higher interest rate costs 3-5 institutions will be returning office inventory to the market underminingyears out. Cap rate compression has aided property values the past two recent improvement in vacancy. For this part of the combination, turn toyears, but future value enhancement will have to be unlocked through NOI ICEE vs. FIRE.improvement (i.e., increasing occupancy and rental rates). RIGHT MO – Medical Office: LEFT 80 – Office Transaction Activity: The role of medical office space in the overall office vacancy With improving office property fundamentals and cheap debt to picture warrants monitoring in 2013, particularly as the Obama leverage transactions to maximize yield, 2013 should see office administration’s healthcare legislation and mandated healthcare exchangestransaction activity surpass the $80 billion mark by as much as 20%. The are implemented. Due to strong demand and an absence of much newopportunity to unlock value here is in quality assets in secondary ICEE supply since 2007, demand for medical office space has risen dramaticallymarkets, such as Atlanta, Austin, Baltimore (now a post-Panamax ready and is fueling a boom in new construction. The states with the mostport), Denver, Fort Worth, and Houston. medical office construction activity are Texas, California, Maryland, New York, North Carolina and Ohio. Medical office offers an unlocked opportunity RIGHT 10 – CMBS Office Delinquency: as contraction continues among traditional users of office space, such For the capital markets to contribute to the improving office as financial services firms. Do your homework before jumping into this property conditions, CMBS delinquency rates need to continue sub-property sector, though. Vacancy and rental rates vary widely, andon their downward trajectory and remain south of 10 percent overall. As this subsector lacks the same availability of data and transparency as thenew issuance increases to a level north of $50 billion (increases the greater North American office market.denominator in the delinquency calculation), and special servicerscontinue to resolve in excess of $1.0 billion in delinquent or defaulted loans(decreases the numerator portion of the delinquency ratio calculation),CMBS delinquency is likely to remain below 10 percent. This trend needsto translate over to the office property sector. With a January CMBS officedelinquency rate of 10.48%, this ratio should decline further, and maybeeven drop below 10%, as mature legacy office property loans are finallyable to refinance. CMBS delinquency below 10 percent is critical to capitalmarket confidence and unlocking more opportunity for office propertyleverage in 2013.Houston COLLIERS INTERNATIONAL | P. 7
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA UNITED STATES | DOWNTOWN OFFICE | ALL INVENTORY EXISTING NEW SUPPLY UNDER VACANCY VACANCY ABSORPTION MARKET INVENTORY (SF) Q4 2012 CONSTRUCTION RATE (%) RATE (%) Q4 2012 DEC 31, 2012 (SF) (SF) SEP 30, 2012 DEC 31, 2012 (SF) NORTHEAST Baltimore, MD 28,840,782 234,874 - 14.06 14.02 9,076 Boston, MA 60,725,404 98,096 2,435,000 14.08 13.06 616,698 Hartford, CT 9,769,060 - - 21.24 20.72 50,896 New York, NY – Downtown Manhattan 110,942,138 - 5,200,000 16.09 15.36 814,431 New York, NY – Midtown Manhattan 227,532,283 - 1,052,150 11.94 12.04 (226,585) New York, NY – Midtown South Manhattan 165,368,697 - 850,000 7.96 8.03 (119,601) Philadelphia, PA 43,133,883 654,000 - 11.17 10.76 178,159 Pittsburgh, PA 32,161,109 52,000 800,000 9.68 10.9 (129,087) Stamford, CT 18,966,293 - - 19.55 21.00 (274,722) Washington, DC 140,909,953 - 1,903,911 10.44 10.48 (59,655) White Plains, NY 7,741,025 - - 15.19 15.78 (45,062) Northeast Total 846,090,627 1,038,970 12,241,061 11.86 11.77 814,548 SOUTH Atlanta, GA 49,933,614 433,822 450,000 17.04 16.94 47,727 Birmingham, AL* 4,338,335 - - 22.00 19.80 95,482 Charleston, SC 2,068,469 - 52,000 7.70 7.24 9,369 Charlotte, NC 22,511,630 828,831 - 8.80 7.94 193,649 Columbia, SC 4,490,309 - - 16.80 14.21 116,125 Dallas, TX 34,744,566 204,109 - 26.98 27.58 (208,846) Ft. Lauderdale-Broward, FL 8,003,061 - - 16.49 16.33 12,534 Ft. Worth, TX 10,400,974 - 154,801 13.05 12.14 94,885 Greenville, SC 3,143,679 - 235,000 12.24 15.68 (107,938) Houston, TX 36,514,081 50,000 - 14.45 13.72 269,002 Jacksonville, FL 15,994,027 73,423 - 14.66 14.42 30,994 Little Rock, AR 6,422,699 - - 11.30 12.48 (22,714) Louisville, KY 43,630,770 300,000 - 11.80 11.89 228,712 Memphis, TN 6,108,640 - 26,000 14.77 14.66 6,481 Miami-Dade, FL 18,491,614 33,930 - 18.29 18.36 (12,903) Nashville, TN 12,087,245 48,000 - 14.76 13.52 167,473 Orlando, FL 12,744,796 - - 11.83 11.86 (3,379) Raleigh/Durham/Chapel Hill, NC 13,657,917 - - 6.49 6.08 55,964 Richmond, VA 17,066,905 - 112,000 10.76 10.70 10,479 Savannah, GA 825,240 72,072 - 15.21 14.18 68,561 Tampa Bay, FL 8,607,635 66,927 - 12.91 13.36 (39,132) West Palm Beach/Palm Beach County, FL 10,130,113 - - 17.79 16.69 110,753 South Total 341,916,319 2,111,114 1,029,801 15.10 14.88 1,123,278*Absorption and vacancy figures for Birmingham account for direct space onlyP. 8 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICAUNITED STATES | DOWNTOWN OFFICE | ALL INVENTORY (continued) EXISTING NEW SUPPLY UNDER VACANCY VACANCY ABSORPTIONMARKET INVENTORY (SF) Q4 2012 CONSTRUCTION RATE (%) RATE (%) Q4 2012 DEC 31, 2012 (SF) (SF) SEP 30, 2012 DEC 31, 2012 (SF)MIDWESTChicago, IL 159,986,353 297,763 - 13.45 13.23 347,362Cincinnati, OH 18,047,286 - - 18.12 18.09 5,408Cleveland, OH 34,140,929 710,100 475,000 19.26 19.07 66,433Columbus, OH 19,597,350 395,500 280,000 11.00 11.90 36,469Detroit, MI 26,153,283 1,165,425 - 21.04 20.88 42,065Grand Rapids, MI 5,461,588 - - 23.24 22.34 49,026Indianapolis, IN 23,453,317 - 18,000 13.71 13.34 94,650Kansas City, MO 34,664,036 - 215,000 14.60 14.43 61,577Milwaukee, WI 19,887,288 145,000 - 13.71 13.39 62,655Minneapolis, MN 31,840,763 - - 15.13 14.98 46,977Omaha, NE 6,358,928 60,000 - 7.16 8.53 9,192St. Louis, MO 27,493,907 - - 16.52 16.66 (37,405)St. Paul, MN 12,904,838 - - 13.85 13.82 4,013Midwest Total 419,989,866 2,773,788 988,000 14.98 14.86 788,422WESTBakersfield, CA 3,020,093 - - 8.86 7.62 44,571Boise, ID 3,741,536 241,208 260,000 10.95 10.24 66,851Denver, CO 34,251,235 39,656 112,000 12.43 12.26 70,574Fresno, CA 3,284,713 - - 11.40 11.66 (8,393)Honolulu, HI 7,119,083 - - 14.00 13.21 55,973Las Vegas, NV 4,192,128 - 458,200 12.31 12.37 (2,488)Los Angeles, CA 31,942,700 418,600 229,500 18.46 19.03 (178,200)Oakland, CA 16,891,513 - - 12.90 13.45 (92,321)Phoenix, AZ 21,016,381 203,609 - 21.30 21.52 29,081Portland, OR 33,287,613 100,083 - 9.77 9.89 (40,940)Reno, NV 1,388,078 - - 19.58 19.50 9,309Sacramento, CA 18,949,701 130,000 - 9.80 9.59 39,662San Diego, CA 10,149,972 - - 20.14 19.84 30,448San Francisco, CA 88,179,309 189,835 2,510,615 10.51 10.28 387,187San Jose/Silicon Valley 7,601,845 318,000 - 23.69 24.73 (81,425)Seattle/Puget Sound, WA 56,216,928 340,563 625,501 12.01 12.04 284,779Stockton, CA 8,221,819 - - 18.86 18.16 58,138Walnut Creek/Pleasanton, CA 12,561,714 - - 16.26 15.71 (4,731)West Total 362,016,361 1,981,554 4,195,816 13.32 13.29 668,075U.S. TOTAL 1,970,013,173 7,905,426 18,454,678 13.36 13.25 3,394,323 COLLIERS INTERNATIONAL | P. 9
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA UNITED STATES | DOWNTOWN OFFICE | CLASS A AVG ANNUAL QUARTERLY ANNUAL EXISTING VACANCY VACANCY ABSORPTION QUOTED RENT CHANGE CHANGE MARKET INVENTORY (SF) RATE (%) RATE (%) Q4 2012 (USD PSF) IN RENT IN RENT DEC 31, 2012 SEP 30, 2012 DEC 31, 2012 (SF) DEC 31, 2012 (%) (%) NORTHEAST Baltimore, MD 13,228,621 14.93 0.7 5.9 14.93 14.92 1,726 Boston, MA 41,333,537 13.92 1.5 1.7 13.92 13.07 349,709 Hartford, CT 6,660,379 22.39 -1.0 -0.3 22.39 21.47 60,970 New York, NY – Downtown Manhattan 77,672,777 18.75 -0.1 -2.2 18.75 17.54 940,170 New York, NY – Midtown Manhattan 192,290,701 12.60 -1.2 0.7 12.60 12.76 (297,418) New York, NY – Midtown South Manhattan 32,865,338 6.79 0.1 11.7 6.79 8.33 (504,207) Philadelphia, PA 32,656,957 10.59 -0.5 - 10.59 10.52 19,612 Pittsburgh, PA 18,279,017 7.64 2.9 4.1 7.64 7.13 29,859 Stamford, CT 13,299,364 21.77 -1.9 -6.4 21.77 23.01 (164,957) Washington, DC 85,704,698 11.90 0.3 2.1 11.90 11.92 (20,351) White Plains, NY 4,885,999 17.00 -2.0 -4.3 17.00 18.10 (53,855) Northeast Total 518,877,388 13.30 -0.2 1.2 13.30 13.22 361,258 SOUTH Atlanta, GA 30,000,462 18.87 0.1 -1.3 18.87 18.53 101,522 Birmingham, AL* 3,322,353 11.56 - 1.0 11.56 11.34 7,962 Charleston, SC 1,043,494 3.33 1.2 10.1 3.33 2.55 8,134 Charlotte, NC 16,040,594 10.40 1.9 1.4 10.40 9.11 208,132 Columbia, SC 1,926,914 15.02 3.9 4.1 15.02 10.13 94,216 Dallas, TX 22,693,924 23.68 0.9 2.3 23.68 24.69 (230,826) Ft. Lauderdale-Broward, FL 4,454,238 21.30 -0.4 -0.5 21.30 21.27 1,229 Ft. Worth, TX 5,850,052 11.69 0.9 0.9 11.69 10.54 67,382 Greenville, SC 1,871,715 8.83 6.1 -3.5 8.83 15.32 (121,511) Houston, TX 26,119,764 10.69 0.4 5.2 10.69 9.75 244,855 Jacksonville, FL 6,830,482 15.40 0.3 2.0 15.40 14.97 29,314 Little Rock, AR 2,636,353 9.72 0.2 0.6 9.72 11.83 (3,212) Louisville, KY 10,560,672 13.05 0.4 -4.6 13.05 14.57 100,131 Memphis, TN 1,966,542 18.26 -0.1 0.3 18.26 18.63 (7,338) Miami-Dade, FL 9,758,448 21.50 -0.9 -3.2 21.50 21.31 18,821 Nashville, TN 3,953,423 20.50 -1.5 -6.7 20.50 18.37 84,077 Orlando, FL 5,784,868 16.57 -1.2 -2.1 16.57 15.93 37,028 Raleigh/Durham/Chapel Hill, NC 5,633,684 8.74 0.4 -3.1 8.74 8.33 22,893 Richmond, VA 5,895,522 7.46 0.1 4.6 7.46 7.37 4,979 Savannah, GA 642,460 13.02 7.5 7.2 13.02 7.65 97,201 Tampa Bay, FL 4,791,174 13.98 -0.5 2.0 13.98 15.22 (59,515) West Palm Beach/Palm Beach County, FL 3,337,557 22.51 -0.3 3.2 22.51 20.69 60,785 South Total 175,114,695 15.62 0.7 1.0 15.62 15.40 766,259*Absorption and vacancy figures for Birmingham account for direct space onlyP. 10 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICAUNITED STATES | DOWNTOWN OFFICE | CLASS A (continued) AVG ANNUAL QUARTERLY ANNUAL EXISTING VACANCY VACANCY ABSORPTION QUOTED RENT CHANGE CHANGEMARKET INVENTORY (SF) RATE (%) RATE (%) Q4 2012 (USD PSF) IN RENT IN RENT DEC 31, 2012 SEP 30, 2012 DEC 31, 2012 (SF) DEC 31, 2012 (%) (%)MIDWESTChicago, IL 60,846,877 37.36 0.3 0.7 14.52 14.05 284,974Cincinnati, OH 8,815,068 21.96 - -6.0 19.11 22.06 (260,407)Cleveland, OH 9,728,269 21.33 -0.3 6.3 13.68 13.34 32,992Columbus, OH 8,106,210 18.52 -1.4 -1.5 12.15 11.14 82,018Detroit, MI 9,120,878 22.80 -0.2 -3.1 17.14 17.07 6,139Grand Rapids, MI 1,542,050 19.28 0.1 -8.1 22.34 19.56 42,756Indianapolis, IN 9,928,804 19.03 2.0 -1.2 18.92 18.30 50,070Kansas City, MO 10,276,792 18.90 -0.3 0.7 19.91 19.89 2,029Milwaukee, WI 5,411,144 20.17 2.8 0.9 13.09 12.07 55,208Minneapolis, MN 13,618,828 16.52 6.9 15.3 12.33 11.78 75,272Omaha, NE 3,417,878 19.62 -0.6 1.7 4.22 4.54 (10,025)St. Louis, MO 10,678,000 17.73 0.5 -0.3 13.53 13.78 (25,983)St. Paul, MN 2,773,960 13.35 -0.4 17.8 9.64 10.19 (15,440)Midwest Total 154,264,758 27.20 0.6 0.8 14.85 14.64 319,603WESTBakersfield, CA 699,798 17.40 - - 4.35 3.86 3,413Boise, ID 2,228,115 20.12 -2.6 8.1 7.05 5.21 200,470Denver, CO 21,238,158 30.0 0.1 4.2 13.54 13.02 110,767Fresno, CA 1,058,046 24.00 - -7.7 12.37 12.37 -Honolulu, HI 4,966,720 34.45 0.7 -1.0 13.34 12.23 43,171Las Vegas, NV 807,588 31.32 0.4 0.8 10.67 11.60 (7,551)Los Angeles, CA 17,749,600 36.12 - -6.2 16.46 18.00 (267,100)Oakland, CA 10,198,245 30.72 -3.0 -3.0 9.86 11.22 (138,461)Phoenix, AZ 9,459,620 22.86 - 1.5 20.05 21.15 (104,497)Portland, OR 13,189,621 24.89 - - 8.76 8.78 (3,087)Reno, NV 557,635 21.31 -1.3 -7.5 20.87 18.03 15,817Sacramento, CA 9,062,614 32.40 - - 8.34 8.08 23,514San Diego, CA 7,254,266 28.20 - -0.4 17.67 17.37 21,659San Francisco, CA 56,642,612 49.56 5.6 20.5 10.31 9.71 508,711San Jose/Silicon Valley 3,365,127 31.83 -6.6 -0.7 25.84 27.02 (40,361)Seattle/Puget Sound, WA 32,531,336 30.96 2.1 3.4 14.12 13.60 428,837Stockton, CA 2,790,574 20.16 - -4.5 27.05 26.45 16,621Walnut Creek/Pleasanton, CA 8,233,222 27.72 0.4 0.9 14.97 15.44 (38,786)West Total 202,032,897 35.43 - 0.8 13.07 12.96 773,137U.S. TOTAL 1,050,289,738 41.22 0.2 1.0 13.87 13.74 2,220,257 COLLIERS INTERNATIONAL | P. 11
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA UNITED STATES | SUBURBAN OFFICE | ALL INVENTORY EXISTING NEW SUPPLY UNDER VACANCY VACANCY ABSORPTION MARKET INVENTORY (SF) Q4 2012 CONSTRUCTION RATE (%) RATE (%) Q4 2012 DEC 31, 2012 (SF) (SF) SEP 30, 2012 DEC 31, 2012 (SF) NORTHEAST Baltimore, MD 86,786,838 234,874 1,163,140 12.65 12.44 386,882 Boston, MA 110,971,331 98,096 1,563,851 19.37 19.10 314,921 Fairfield County, CT 41,493,424 74,726 - 12.56 12.88 -68,762 Hartford, CT 12,251,551 - - 14.96 14.44 63,815 Long Island, NY 71,732,215 768,000 55,000 10.71 10.66 718,538 New Jersey – Central 103,723,820 315,670 116,057 20.92 20.70 487,335 New Jersey – Northern 137,967,000 30,000 737,600 21.03 21.09 -52,196 Philadelphia, PA 110,578,994 654,000 322,005 15.17 14.94 802,694 Pittsburgh, PA 89,275,846 52,000 764,395 7.57 7.06 46,342 Washington, DC 283,566,213 - - 15.44 15.83 -1,118,510 Westchester County, NY 37,071,839 - - 15.05 15.39 -126,457 Northeast Total 1,085,419,071 2,227,366 4,722,048 15.73 15.73 1,454,602 SOUTH Atlanta, GA 171,243,642 433,822 674,097 17.04 17.03 363,892 Birmingham, AL* 14,213,847 - - 18.48 17.93 77,062 Charleston, SC 9,379,515 - 75,000 15.00 14.79 35,516 Charlotte, NC 75,365,988 828,831 108,596 13.31 13.45 626,394 Columbia, SC 5,016,258 - - 24.04 25.61 -79,155 Dallas, TX 241,020,318 204,109 1,027,817 15.94 15.57 1,050,842 Ft. Lauderdale-Broward, FL 42,982,403 - 806,572 13.73 13.71 6,984 Ft. Worth, TX 20,158,197 - 144,233 7.73 7.25 97,536 Greenville, SC 5,093,005 - - 18.52 18.10 21,540 Houston, TX 159,079,088 50,000 4,394,827 14.20 13.81 664,309 Jacksonville, FL 44,916,088 73,423 2,607 13.36 13.26 96,049 Little Rock, AR 7,625,053 - 46,000 12.58 12.45 -43,423 Memphis, TN 27,443,840 - 113,392 14.82 14.46 100,717 Miami-Dade, FL 63,016,310 33,930 162,063 13.96 13.64 229,620 Nashville, TN 14,842,231 28,000 - 7.49 7.51 23,248 Orlando, FL 53,927,670 - 87,895 15.58 14.95 431,065 Raleigh/Durham/Chapel Hill, NC 64,136,382 - - 14.15 13.97 119,064 Richmond, VA 34,412,752 - - 11.73 12.21 -164,213 Savannah, GA 1,534,208 - - 23.69 18.94 48,350 Tampa Bay, FL 71,219,715 66,927 269,272 16.08 15.69 404,271 West Palm Beach/Palm Beach County, FL 28,655,101 - 30,000 19.18 18.30 251,828 South Total 1,155,281,611 1,719,042 7,942,371 15.03 14.78 4,361,496*Absorption and vacancy figures for Birmingham account for direct space onlyP. 12 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICAUNITED STATES | SUBURBAN OFFICE | ALL INVENTORY (continued) EXISTING NEW SUPPLY UNDER VACANCY VACANCY ABSORPTIONMARKET INVENTORY (SF) Q4 2012 CONSTRUCTION RATE (%) RATE (%) Q4 2012 DEC 31, 2012 (SF) (SF) SEP 30, 2012 DEC 31, 2012 (SF)MIDWESTChicago, IL 157,535,389 297,763 - 17.07 16.73 783,012Cincinnati, OH 35,718,611 - - 20.10 21.01 -326,094Cleveland, OH 107,371,768 710,100 788,866 9.94 9.97 605,183Columbus, OH 43,849,812 156,500 111,000 11.88 12.06 56,993Detroit, MI 137,172,750 1,165,425 31,232 19.08 18.59 1,619,025Grand Rapids, MI 11,557,283 - 382,000 23.28 23.19 10,173Indianapolis, IN 45,740,597 - 75,000 13.29 13.15 90,627Kansas City, MO 56,941,429 - 1,510,765 13.45 13.27 103,240Milwaukee, WI 33,034,701 145,000 - 11.51 11.70 -59,970Minneapolis, MN 82,273,735 - 931,700 14.33 13.39 776,569Omaha, NE 20,597,840 60,000 180,000 12.12 12.10 72,609St. Louis, MO 55,244,405 - - 11.53 11.08 247,729Midwest Total 787,038,320 2,534,788 4,010,563 14.86 14.62 3,979,096WESTBakersfield, CA 5,994,188 - 81,594 6.60 6.98 -22,693Boise, ID 11,093,685 196,235 - 18.77 18.98 135,657Denver, CO 104,416,469 - 745,767 14.29 14.08 126,306Fairfield, CA 4,877,417 - - 25.28 25.70 -20,478Fresno, CA 18,008,675 - 70,000 12.99 13.25 -47,197Honolulu, HI 7,490,275 - 40,000 12.89 12.88 9,218Las Vegas, NV 35,115,687 - 42,123 25.55 24.64 320,637Los Angeles, CA 168,909,400 418,600 1,213,700 17.76 17.78 410,100Los Angeles – Inland Empire, CA 21,626,300 - - 22.84 21.25 344,823Oakland, CA 16,165,151 - - 19.54 18.11 231,011Orange County, CA 80,477,400 - 380,000 17.08 16.61 315,300Phoenix, AZ 109,902,559 108,609 375,482 21.58 20.36 1,435,184Portland, OR 44,445,096 100,083 163,874 11.71 11.19 322,024Reno, NV 5,547,351 - - 16.37 15.99 38,829Sacramento, CA 73,472,600 130,000 257,451 18.74 17.82 781,917San Diego, CA 70,818,124 - 946,457 13.92 13.59 235,680San Francisco Peninsula 35,142,199 18,781 - 13.69 14.03 -102,740San Jose/Silicon Valley 54,745,633 318,000 - 12.86 12.42 390,701Seattle/Puget Sound, WA 74,567,897 - 82,950 12.47 10.98 370,396Walnut Creek/Pleasanton, CA 32,987,041 - - 12.77 11.73 343,070West Total 975,803,147 1,290,308 4,399,398 16.56 16.00 5,617,745U.S. TOTAL 4,003,542,149 7,771,504 21,074,380 15.56 15.31 15,412,939 COLLIERS INTERNATIONAL | P. 13
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA UNITED STATES | SUBURBAN OFFICE | CLASS A AVERAGE EXISTING QUARTERLY ANNUAL VACANCY VACANCY ABSORPTION ANNUAL QUOTED MARKET INVENTORY (SF) CHANGE IN CHANGE IN RATE (%) RATE (%) Q4 2012 RENT (USD PSF) DEC 31, 2012 RENT (%) RENT (%) SEP 30, 2012 DEC 31, 2012 (SF) DEC 31, 2012 NORTHEAST Baltimore, MD 30,282,850 24.87 -1.03 -3.23 15.91 15.37 362,930 Boston, MA 47,074,119 24.74 -1.55 -3.06 17.80 17.88 -40,309 Fairfield County, CT 17,597,470 35.35 -2.67 9.24 13.25 13.77 -27,217 Hartford, CT 7,906,889 20.25 -2.78 -3.39 13.53 12.75 61,867 Long Island, NY 23,077,975 30.47 0.20 1.84 11.46 11.56 -21,446 New Jersey – Central 60,391,076 26.52 -0.86 -1.78 22.45 21.95 546,337 New Jersey – Northern 84,682,274 26.28 -1.05 -1.28 20.62 20.42 193,221 Philadelphia, PA 68,076,073 24.73 0.91 2.96 14.54 14.27 740,149 Pittsburgh, PA 17,179,193 21.95 0.87 2.09 6.49 5.30 148,053 Washington, DC 132,646,603 32.03 -1.39 -1.51 15.26 15.83 -745,611 Westchester County, NY 17,442,819 26.42 -0.38 -2.87 18.72 19.26 -94,133 Northeast Total 506,357,341 27.65 -0.92 -0.61 16.74 16.73 1,123,841 SOUTH Atlanta, GA 79,312,905 22.34 0.68 0.81 16.61 16.34 527,253 Birmingham, AL* 8,943,059 21.09 -0.80 0.43 16.81 15.96 76,173 Charleston, SC 3,942,925 23.18 0.17 -2.56 11.45 11.49 809 Charlotte, NC 19,403,225 22.80 0.62 6.19 15.18 16.61 410,325 Columbia, SC 973,189 16.55 -1.55 -4.00 13.77 14.93 -11,304 Dallas, TX 91,055,763 23.30 - 1.30 16.20 15.50 634,612 Ft. Lauderdale-Broward, FL 10,963,059 27.14 0.04 -2.44 18.82 18.45 40,574 Ft. Worth, TX 2,638,353 24.00 - -2.04 3.89 3.85 1,032 Greenville, SC 2,245,798 17.32 1.88 -0.40 15.60 12.66 66,172 Houston, TX 66,845,822 28.20 3.26 3.15 12.00 11.44 379,470 Jacksonville, FL 9,206,865 19.58 - -3.59 8.46 8.32 13,028 Little Rock, AR 3,027,212 19.25 0.94 3.89 18.98 18.71 9,217 Memphis, TN 8,113,880 21.44 -0.79 -1.02 8.42 8.10 25,608 Miami-Dade, FL 16,308,475 30.52 0.07 -3.05 19.81 18.70 180,756 Nashville, TN 7,288,561 23.23 0.13 6.32 5.34 5.87 -39,206 Orlando, FL 16,827,628 20.93 -1.60 -3.77 21.08 19.88 201,731 Raleigh/Durham/Chapel Hill, NC 24,532,197 20.76 -0.48 -2.21 14.39 13.76 154,190 Richmond, VA 13,564,697 18.78 -0.05 0.48 14.24 13.60 86,395 Savannah, GA 490,035 22.70 0.18 0.35 23.70 17.79 28,932 Tampa Bay, FL 23,629,402 22.78 -0.35 -2.15 16.07 14.48 214,151 West Palm Beach/Palm Beach County, FL 9,163,879 29.68 -1.53 -2.94 18.14 17.23 83,092 South Total 418,476,929 23.80 0.61 0.57 15.23 14.70 3,083,010*Absorption and vacancy figures for Birmingham account for direct space onlyP. 14 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICAUNITED STATES | SUBURBAN OFFICE | CLASS A (continued) AVERAGE EXISTING QUARTERLY ANNUAL VACANCY VACANCY ABSORPTION ANNUAL QUOTEDMARKET INVENTORY (SF) CHANGE IN CHANGE IN RATE (%) RATE (%) Q4 2012 RENT (USD PSF) DEC 31, 2012 RENT (%) RENT (%) SEP 30, 2012 DEC 31, 2012 (SF) DEC 31, 2012MIDWESTChicago, IL 76,979,405 27.00 - 1.89 18.23 17.70 403,696Cincinnati, OH 15,916,607 20.54 0.39 0.20 19.40 20.31 -144,815Cleveland, OH 13,701,278 21.34 -0.33 0.05 10.44 10.05 689,788Columbus, OH 18,133,071 19.05 0.37 2.14 10.57 11.50 -27,569Detroit, MI 33,643,164 20.52 -0.24 -2.01 15.52 15.72 -67,275Grand Rapids, MI 2,206,876 17.50 -2.78 -9.00 28.84 28.22 13,520Indianapolis, IN 12,403,471 18.00 0.39 1.58 17.72 17.10 85,772Kansas City, MO 14,734,064 20.30 0.30 -1.93 11.87 11.78 14,100Milwaukee, WI 5,912,609 22.32 9.90 9.79 10.93 10.58 20,889Minneapolis, MN 26,674,839 13.80 -1.43 -0.50 16.12 15.62 131,289Omaha, NE 4,342,362 26.15 - 0.85 5.07 5.01 104,815St. Louis, MO 25,996,388 21.89 0.05 -1.40 10.62 10.79 -45,320Midwest Total 250,644,134 21.91 0.14 0.77 15.26 15.12 1,178,890WESTBakersfield, CA 2,697,867 24.00 - - 4.74 5.28 -14,426Boise, ID 3,108,058 15.12 0.13 0.47 14.14 13.57 17,779Denver, CO 34,321,698 23.74 1.32 4.49 11.95 11.96 -3,198Fairfield, CA 1,917,086 25.61 -2.07 2.11 26.88 29.77 -55,433Fresno, CA 4,017,507 25.20 - - 17.26 18.85 -63,910Las Vegas, NV 4,979,076 29.28 - -1.61 34.96 33.02 96,889Los Angeles, CA 102,533,800 33.96 0.71 1.43 17.26 17.20 455,100Los Angeles – Inland Empire, CA 5,194,800 23.52 1.03 2.08 27.39 23.62 195,866Oakland, CA 3,870,228 26.40 - -0.90 26.20 24.23 76,225Orange County, CA 32,834,800 25.56 -0.93 -0.47 17.93 16.96 253,700Phoenix, AZ 30,242,049 23.29 0.26 -1.06 23.12 20.31 918,319Portland, OR 11,012,912 22.95 -0.35 0.31 14.02 14.06 -4,348Reno, NV 2,989,478 18.62 - -7.09 13.90 13.91 34,636Sacramento, CA 16,324,396 22.20 -0.54 -1.60 21.51 20.99 185,646San Diego, CA 23,418,247 32.88 - 4.18 11.52 10.73 184,465San Francisco Peninsula 22,281,029 41.64 -0.29 10.16 13.53 14.09 -109,899San Jose/Silicon Valley 27,077,797 39.07 -1.34 8.17 14.02 14.43 145,393Seattle/Puget Sound, WA 20,850,141 31.68 0.86 4.55 10.38 8.57 132,984Walnut Creek/Pleasanton, CA 15,972,148 25.92 3.85 14.89 10.33 8.98 216,974West Total 365,643,117 30.38 0.35 3.37 16.25 15.68 2,662,762U.S. TOTAL 1,541,121,521 26.21 -0.08 0.82 15.97 15.67 8,048,503 COLLIERS INTERNATIONAL | P. 15
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA CANADA | DOWNTOWN OFFICE | ALL INVENTORY EXISTING NEW SUPPLY UNDER VACANCY VACANCY ABSORPTION MARKET INVENTORY (SF) Q4 2012 CONSTRUCTION RATE (%) RATE (%) Q4 2012 DEC 31, 2012 (SF) (SF) SEP 30, 2012 DEC 31, 2012 (SF) Calgary, AB 39,567,994 256,657 1,661,000 4.52 3.68 330,012 Edmonton, AB 11,260,840 117,768 - 8.42 8.30 13,280 Halifax, NS 4,684,110 38,948 190,000 11.44 11.45 -470 Montréal, QC 49,428,581 127,000 304,000 5.01 4.27 365,660 Ottawa, ON 15,526,942 87,700 360,000 5.57 6.75 -183,170 Regina, SK 3,801,824 220,000 80,000 1.92 2.59 190,164 Saskatoon, SK* 2,319,464 109,000 50,000 3.25 3.34 138,900 Toronto, ON 69,531,181 464,455 2,784,698 5.10 4.58 203,259 Vancouver, BC 24,408,488 20,299 1,563,810 3.50 4.03 -130,891 Victoria, BC 4,952,849 80,455 - 7.79 8.28 -14,428 Waterloo Region, ON 3,772,982 - 66,075 14.87 14.22 24,360 Winnipeg, MB 11,188,648 - 130,375 6.59 6.59 - CANADA TOTAL 240,443,903 1,522,282 7,189,958 5.35 5.04 936,676 *Saskatoon tracks but does not submit suburban inventory figures for this report CANADA | DOWNTOWN OFFICE | CLASS A AVG ANNUAL EXISTING QUARTERLY ANNUAL VACANCY VACANCY QUOTED RENT ABSORPTION MARKET INVENTORY (SF) CHANGE CHANGE RATE (%) RATE (%) (CAD PSF) Q4 2012 (SF) DEC 31, 2012 IN RENT (%) IN RENT (%) SEP 30, 2012 DEC 31, 2012 DEC 31, 2012 Calgary, AB 26,727,389 60.21 - 8.7 1.46 1.84 -102,756 Edmonton, AB 9,074,913 42.02 0.7 5.3 8.27 8.45 -16,593 Halifax, NS 1,933,746 32.35 - 1.7 9.06 8.95 2,144 Montréal, QC 23,075,596 45.00 7.1 7.1 4.49 4.13 82,257 Ottawa, ON 9,535,830 51.60 3.5 6.7 4.52 4.92 -38,670 Regina, SK 1,094,911 42.00 4.0 13.5 0.96 1.42 212,815 Saskatoon, SK 570,571 40.00 5.3 8.1 1.84 3.59 67,509 Toronto, ON 40,130,328 54.28 0.6 2.4 5.70 4.70 187,396 Vancouver, BC 10,029,234 54.57 -1.1 0.1 2.08 2.65 -60,827 Victoria, BC 513,808 35.00 -2.8 -7.4 9.43 4.88 39 Waterloo Region, ON 1,559,429 25.66 - -0.8 12.48 12.01 7,282 Winnipeg, MB 2,619,428 33.50 - N/A 4.76 4.76 - CANADA TOTAL 126,865,183 51.42 1.7 4.5 4.46 4.24 340,596P. 16 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA CANADA | SUBURBAN OFFICE | ALL INVENTORY EXISTING NEW SUPPLY UNDER VACANCY VACANCY ABSORPTION MARKET INVENTORY (SF) Q4 2012 CONSTRUCTION RATE (%) RATE (%) Q4 2012 DEC 31, 2012 (SF) (SF) SEP 30, 2012 DEC 31, 2012 (SF) Calgary, AB 24,444,605 256,657 - 8.54 9.34 40,263 Edmonton, AB 9,110,948 117,768 315,150 11.24 11.13 103,952 Halifax, NS 6,545,973 38,948 73,500 10.45 10.98 -152 Montréal, QC 24,355,843 127,000 153,516 8.93 8.55 627,008 Ottawa, ON 21,181,500 87,700 416,450 9.10 9.84 -78,742 Regina, SK 720,541 - - 0.41 - - Toronto, ON 68,333,270 250,000 924,250 8.12 7.47 377,866 Vancouver, BC 27,698,230 20,299 1,712,524 11.13 10.00 309,956 Victoria, BC 3,681,143 80,455 121,000 8.51 9.39 19,167 Waterloo Region, ON 7,112,148 - 154,710 10.76 10.85 -3,876 Winnipeg, MB 3,353,094 - 192,000 12.26 12.26 - CANADA TOTAL 196,537,295 978,827 4,063,100 9.17 8.95 1,395,442 CANADA | SUBURBAN OFFICE | CLASS A AVG ANNUAL EXISTING QUARTERLY ANNUAL VACANCY VACANCY ABSORPTION QUOTED RENT MARKET INVENTORY (SF) CHANGE CHANGE RATE (%) RATE (%) Q4 2012 (CAD PSF) DEC 31, 2012 IN RENT (%) IN RENT (%) SEP. 30, 2012 DEC 31, 2012 (SF) DEC 31, 2012 Calgary, AB 11,635,483 44.00 2.3 7.3 7.10 7.63 176,873 Halifax, NS 2,875,036 27.44 - -2.5 10.64 9.84 20,869 Montréal, QC 13,562,834 27.00 - -3.6 7.80 6.66 272,484 Ottawa, ON 12,123,116 30.58 -2.8 -2.2 8.86 9.70 -69,890 Regina, SK 395,432 N/A N/A N/A - - - Toronto, ON 31,584,389 30.59 -0.1 1.0 9.40 8.87 306,382 Vancouver, BC 13,426,379 33.50 0.4 -6.9 11.13 9.91 179,328 Victoria, BC 770,939 38.00 - -5.0 8.39 13.98 32,512 Waterloo Region, ON 3,422,481 24.15 -0.8 -0.6 10.39 9.99 13,845 CANADA TOTAL* 89,796,089 31.94 0.2 -0.5 9.08 8.72 932,403*Edmonton and Winnipeg do not track Suburban Class A inventory. COLLIERS INTERNATIONAL | P. 17
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA UNITED STATES | OFFICE INVESTMENT CBD CBD SUBURBAN SUBURBAN MARKET SALES PRICE CAP RATE SALES PRICE CAP RATE (USD PSF) (%) (USD PSF) (%) Atlanta, GA 170.00 7.7 125.00 8.3 Baltimore, MD 48.01 131.82 7.5 Boise, ID 84.73 7.4 Boston, MA 246.00 5.5 154.48 Charleston, SC 250.00 8.0 135.00 11.0 Chicago, IL 350.00 6.5 225.00 7.5 Cincinnati, OH 120.00 9.8 137.50 9.5 Columbia, SC 180.00 Columbus, OH 67.40 80.58 8.2 Dallas, TX 150.00 7.0 Denver, CO 144.00 6.5 125.00 7.4 Detroit, MI 75.29 10.3 47.89 Fairfield County, CT 243.00 5.0 Fresno, CA 125.00 9.0 175.00 8.5 Ft. Lauderdale-Broward, FL 175.00 167.00 7.5 Grand Rapids, MI 102.56 8.8 Hartford, CT 95.87 7.8 Houston, TX 200.00 7.3 Indianapolis, IN 165.00 9.0 155.00 8.5 Jacksonville, FL 150.00 8.5 Las Vegas, NV 132.60 Long Island, NY 190.23 7.6 Los Angeles, CA 200.00 8.0 Los Angeles – Inland Empire, CA 191.00 7.0 247.00 6.6 Memphis, TN 32.57 9.0 84.25 Miami-Dade, FL 285.00 6.0 239.00 5.4 Milwaukee, WI 120.00 9.0 100.00 9.5 Minneapolis, MN 121.27 7.3 Nashville, TN 200.00 7.0 120.00 7.0 New Jersey – Central 172.00 7.5 New Jersey – Northern 190.00 7.9 New York, NY – Downtown Manhattan 533.00 5.0 New York, NY – Midtown Manhattan 712.00 5.0 New York, NY – Midtown South Manhattan 400.00 5.2 Oakland, CA 152.47 7.5 111.49 8.5 Orange County, CA 350.00 6.3 Orlando, FL 175.00 8.0 135.00 8.3 Philadelphia, PA 150.00 8.0 159.00 8.0 Phoenix, AZ 65.00 8.0 108.00 7.5 Pittsburgh, PA 130.00 8.0 105.00 8.3 Portland, OR 175.11 8.8 131.62 7.3 Sacramento, CA 151.44 128.97 8.9 San Diego, CA 244.52 6.7 218.44 6.8P. 18 | COLLIERS INTERNATIONAL
    • HIGHLIGHTS | Q4 2012 | OFFICE | NORTH AMERICA UNITED STATES | OFFICE INVESTMENT (continued) 522 offices in MARKET CBD SALES PRICE CBD CAP RATE SUBURBAN SALES PRICE SUBURBAN CAP RATE 62 countries on (CAD PSF) (%) (CAD PSF) (%) 6 continents San Francisco, CA 500.00 5.0 United States: 147 San Francisco Peninsula 250.00 7.0 Canada: 37 Latin America: 19 San Jose/Silicon Valley 280.00 7.0 350.00 6.0 Asia Pacific: 201 Savannah, GA 150.00 9.5 120.00 9.8 EMEA: 118 Seattle/Puget Sound, WA 170.22 4.4 367.60 7.4 • $1.8 billion in annual revenue • 1.25billion square feet under St. Louis, MO 85.00 9.8 120.00 8.8 management Stamford, CT 72.00 8.0 • Over 12,300 professionals and staff Tampa Bay, FL 115.62 7.4 120.87 9.0 Walnut Creek/Pleasanton, CA 210.00 7.5 180.00 8.0 Washington, DC 575.00 5.6 260.00 6.5 COLLIERS INTERNATIONAL West Palm Beach/Palm Beach County, FL 122.00 188.00 6.4 601 Union Street, Suite 4800 Seattle, WA 98101 Westchester County, NY 125.00 8.0 TEL +1 206 695 4200 White Plains, NY 72.00 8.0 U.S. AVERAGES* 204.62 7.4 163.49 7.8 FOR MORE INFORMATION CANADA | OFFICE INVESTMENT K.C. Conway Calgary, AB 550.00 5.5 460.00 5.8 Executive Managing Director, Market Analytics | USA Edmonton, AB 354.67 5.8 TEL + 678 458 3477 1 EMAIL kc.conway@colliers.com Montréal, QC 275.00 6.5 190.00 7.3 Ottawa, ON 360.00 6.3 165.00 7.4 James Cook Director of Research | USA Regina, SK 125.00 7.0 TEL +1 602 633 4061 Saskatoon, SK 240.00 7.0 EMAIL james.cook@colliers.com Victoria, BC 354.00 6.2 280.00 6.3 CONTRIBUTORS Waterloo Region, ON 140.00 7.3 150.00 7.5 Jeff Simonson Senior Research Analyst | USA CANADA AVERAGES* 299.83 6.4 249.00 6.8 Jennifer Macatiag*Straight averages used. Graphic Designer | USAGlossary Cliff Plank National Director | GIS & MappingInventory — Includes all existing multi- or single- Annual Quoted Rent — Includes all costs associatedtenant leased and owner-occupied office properties with occupying a full floor in the mid-rise portion Copyright © 2013 Colliers International.greater than or equal to 10,000 square feet (net of a Class A building, inclusive of taxes, insurance,rentable area). In some larger markets this minimum maintenance, janitorial and utilities (electricity The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made tosize threshold may vary up to 50,000 square feet. surcharges added where applicable). All office rents in ensure its accuracy, we cannot guarantee it. No responsibility isDoes not include medical or government buildings. this report are quoted on an annual, gross per square assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material foot basis. Rent calculations do not include sublease space. contained in this report.Vacancy Rate — Percentage of total inventoryphysically vacant as of the survey date, including Cap Rate — (Or going-in cap rate) Capitalization ratesdirect vacant and sublease space. in this survey are based on multi-tenant institutional grade buildings fully leased at market rents. Cap ratesAbsorption — Net change in physically occupied space are calculated by dividing net operating income (NOI)over a given period of time. by purchase price.New Supply — Includes completed speculative and Note: SF = square feetbuild-to-suit construction. New supply quoted on a net MSF = million square feetbasis after any demolitions or conversions. PSF = per square foot Accelerating success. CBD = central business district COLLIERS INTERNATIONAL | P. 19