2017 Office Investment Forecast

U.S. OFFICE INVESTMENT FORECAST
IN-DEPTH LOCAL
MARKET ANALYSIS
INDUSTRY-FOCUSED
EXPERT RESEARCH
NATIONAL
PERSPECTIVE

1
To Our Valued Clients:
The investment climate entering 2017 has shifted from last year, most markedly following the election of President Trump in Novem-
ber. This event set in motion a rapid rise in interest rates, and opened numerous questions about what investors should expect in
fiscal, tax, monetary, trade, immigration and regulatory policies. Nonetheless, expectations of steady economic and employment
growth offer investors a positive outlook, particularly for office assets, which have enjoyed six years of steady performance gains.
The economic cycle is now well into its seventh year of growth. During this time, more than 15 million jobs have been created and in
excess of 460 million square feet of office space was absorbed. Though many believe that the longevity of the cycle alone predicts a
slowdown, few signs of a pending downturn are evident. Hiring remains sound, with employers adding between 2.0 million and 2.5
million jobs to the economy each year, while the unemployment rate has held steady in the sub-5.0 percent range. These trends will
bolster new demand for office space during a period of subdued office construction and will converge to sustain the downward trend
in office vacancy rates. Suburban properties, often overlooked amid the intense focus on urban cores of recent years, continue to
record solid performance gains and offer investors enticing investment options.
The investment climate will remain vibrant as a confluence of buyers seeking the stable returns of office assets make acquisitions from
property owners ready to monetize recent performance gains. Liquidity in secondary and tertiary markets remains positive, with many
metros yet to recover prior pricing peaks. The dynamics point to an engaging year of investment activity with a wide range of buyers
and sellers repositioning portfolios as they recalibrate their strategies ahead of the anticipated changes the new president will bring.
Many unknowns assuredly await investors in the coming year, with prospects of steady economic growth offsetting a rising interest
rate environment, a potentially more aggressive Federal Reserve and a wide range of unexpected decisions coming from Capitol Hill.
We hope this report provides useful insights that will help our clients navigate the changing landscape. As you recalibrate your strat-
egies, our investment professionals look forward to assisting you in meeting your goals.
Sincerely,
2017 U.S. Office Investment Forecast
John Chang
First Vice President
Research Services
Al Pontius
Senior Vice President, National Director
National Office and Industrial Properties Group

2
National Perspective
Executive Summary .............................................................................................................................. 3
2017 National Office Property Index ................................................................................................... 4-5
Specialty Indexes ............................................................................................................................... 6-7
National Economy ................................................................................................................................. 8
National Office Overview ........................................................................................................................ 9
Capital Markets .................................................................................................................................. 10
Office Investment Outlook ................................................................................................................... 11
Medical Office Outlook .................................................................................................................. 12-13
Market Overviews
Atlanta .........................................................................................................................................................14
Austin...........................................................................................................................................................15
Baltimore......................................................................................................................................................16
Boston.........................................................................................................................................................17
Charlotte......................................................................................................................................................18
Chicago .......................................................................................................................................................19
Cincinnati.....................................................................................................................................................20
Cleveland.....................................................................................................................................................21
Columbus ....................................................................................................................................................22
Dallas/Fort Worth.........................................................................................................................................23
Denver .........................................................................................................................................................24
Detroit..........................................................................................................................................................25
Fort Lauderdale............................................................................................................................................26
Houston.......................................................................................................................................................27
Indianapolis..................................................................................................................................................28
Kansas City..................................................................................................................................................29
Las Vegas ....................................................................................................................................................30
Los Angeles.................................................................................................................................................31
Statistical Summary ............................................................................................................................ 32-33
Louisville ......................................................................................................................................................34
Miami-Dade .................................................................................................................................................35
Milwaukee....................................................................................................................................................36
Minneapolis-St. Paul ....................................................................................................................................37
Nashville.......................................................................................................................................................38
New Haven-Fairfield County.........................................................................................................................39
New York City ..............................................................................................................................................40
Northern New Jersey...................................................................................................................................41
Oakland .......................................................................................................................................................42
Orange County ............................................................................................................................................43
Orlando........................................................................................................................................................44
Philadelphia..................................................................................................................................................45
Phoenix........................................................................................................................................................46
Pittsburgh ....................................................................................................................................................47
Portland .......................................................................................................................................................48
Raleigh.........................................................................................................................................................49
Riverside-San Bernardino ............................................................................................................................50
Sacramento .................................................................................................................................................51
Salt Lake City...............................................................................................................................................52
San Antonio .................................................................................................................................................53
San Diego....................................................................................................................................................54
San Francisco..............................................................................................................................................55
San Jose......................................................................................................................................................56
Seattle-Tacoma............................................................................................................................................57
St. Louis.......................................................................................................................................................58
Tampa-St. Petersburg..................................................................................................................................59
Washington, D.C..........................................................................................................................................60
West Palm Beach ........................................................................................................................................61
Client Services
Office Locations ............................................................................................................................ 62-63
Contacts, Sources and Definitions ...................................................................................................... 64
Written by Marcus & Millichap Research Services. The Capital Markets section was co-authored by William E. Hughes, Senior Vice President, Marcus & Millichap
Capital Corporation. Additional contributions were made by Marcus & Millichap investment brokerage professionals nationwide.
Table of Contents

3
National Office Property Index (NOPI)
• San Jose and Seattle-Tacoma take the top two spots in the 2017 Index. Last year’s top market, San Francisco, slipped to the third
position on a projected deceleration in job growth but remains one of six Western metros in the top 10. Four markets climbed into the
top 10 from one year ago, including Raleigh, which makes its debut this year.
• The markets filling out the top half of this year’s Index comprise a geographically diverse group. Miami-Dade and Tampa-St. Peters-
burg are the highest-rated Florida markets, while positive supply-and-demand dynamics enabled Nashville, Atlanta and Charlotte
to secure high rankings. In addition, elevated performance allowed Minneapolis-St. Paul to repeat its position as the highest-rated
Midwest market.
• Philadelphia leads off the second half of the NOPI and will post subdued job growth in 2017. Speculative construction was a factor in
the slight decline in the rankings of Phoenix. Other markets in the second half of the Index rose behind brighter prospects, including
Fort Lauderdale and Detroit.
National Economy
• The Trump administration has signaled plans to energize domestic economic growth via infrastructure and defense spending, com-
prehensive tax reform and deregulation. The Republican-led Congress is likely to favor many of these measures, and the removal of
gridlock could also enable quick resolution to the passage of a budget and a higher debt limit.
• Job creation will moderate as the labor market tightens. After adding roughly 2.2 million jobs in 2016, employers will create 2.0 million
positions this year. The total includes 690,000 workers in office-using employment sectors and matches last year’s pace of growth.
• Strength in the overall domestic economy, tightening monetary policy and expanding government spending will lift both interest rates
and the U.S. dollar. Higher interest rates in the U.S. could attract more foreign investment, but American exports could become more
expensive globally, imposing a potential headwind for U.S. manufacturers.
National Office Market Overview
• Net absorption of approximately 83 million square feet will generate a 20-basis-point decline in the U.S. vacancy rate to 14.3 percent,
marking the low point of the current cycle. The reduction in vacancy will spur an increase in the average asking rent of 3.5 percent.
• This year likely marks the high point in completions for the current cycle, as construction lenders maintain a conservative approach
to underwriting office construction. Developers will complete 82 million square feet of space in 2017, exceeding the amount of new
space delivered in the preceding year.
• The outperformance of CBD properties led the office sector out of the recession, but the suburbs continue to gain ground and make
larger contributions to the overall performance of the office sector.
Capital Markets
• Moderate economic expansion and muted inflation throughout the current cycle allowed the Federal Reserve to put off hiking its short-
term lending benchmark, but its increase in December conveys a positive outlook for economic growth. The central bank anticipates
raising the Fed Funds rate three times this year.
• Liquidity remains sound, but debt sources exercise discretion. Lenders continue to target urban properties with secure tenancies.
Properties in the suburbs may be subject to tighter scrutiny and more conservative loan underwriting, but assets with solid long-term
tenant rosters and on-site amenities will likely be viewed favorably.
Investment Outlook
• Current investor sentiment reflects a cautious outlook, as a widening bid-ask spread has slowed transaction velocity. Highly ame-
nitized CBD deals appear to generate less interest than in previous years, reflecting heavier construction volume in many downtowns
and slowing CBD rent growth.
• Heading into 2017, both the national average price per square foot and average cap rate are even with their 2007 benchmark, though
vacancies have yet to reach previous lows. Pricing disparities persist. While downtown prices are 59 percent above the downturn
trough, suburban prices have risen 35 percent.
Executive Summary

4
2017 National Office Property Index
Western Markets Head This Year’s Index;
Four New Entrants Break Into the Top 10
Three of the four highest-ranked markets from 2016 reappear at the top of the
2017 National Office Property Index, but their order has been shuffled from one
year ago. Tech-heavy metros San Jose (#1) and Seattle-Tacoma (#2) leap over
last year’s highest-ranked market, San Francisco (#3), to claim the highest po-
sitions in this year’s Index. San Jose and Seattle-Tacoma rode to the top on
job creation greater than the U.S. rate of growth and strong net absorption,
while San Francisco’s slip reflects slowing job growth. Also in the West, Portland
scales six places to claim the fourth position this year, and Boston’s seven-spot
ascent to No. 5 comes on a sharp drop in vacancy and a double-digit jump in the
average rent. New York City (#6) claims the second-highest placed East market
but fell three rungs to the spot Austin (#7) occupied one year ago. Consistently
robust job growth enabled Raleigh to debut in the NOPI in the eighth position
despite a modest gain in vacancy this year. Oakland is also a newcomer to the
top 10 of the NOPI, vaulting four spots to No. 9. Often overlooked next to oth-
er Bay Area markets, Oakland’s performance in 2017 will feature a restrained
construction pipeline and a drop in vacancy to the lowest level in the Bay Area.
Orange County (#10) is the final California market in the top 10 of the Index,
sliding three places from one year ago as completions jump and office-using job
creation eases.
Markets in Top Half of This Year’s Index
Represent Mix of Geographic Regions
The next 10 markets in the 2017 NOPI lead off with Miami-Dade (#11). The
market ceded six places in this year’s Index to other markets carrying great-
er momentum. After a significant injection of new space last year, vacancy will
decline in Salt Lake City (#12), prompting a climb of two slots. San Diego (#13)
slipped two rungs and Denver (#14) relinquished a place in the top 10 in 2016.
An increase in vacancy and slowing rent growth demoted Nashville (#15) seven
places but maintained the market one rung above Atlanta (a three-place climb,
to #16). A reduction in net absorption pushed down Minneapolis-St. Paul (#17)
one slot, while a favorable balance of demand to supply raised Tampa-St. Pe-
tersburg (#18) modestly higher in the Index. Charlotte (#19) and Los Angeles
(#20), where a large jump in completions is projected, fill out the top 20 of the
NOPI. Strengthening net absorption lifted Washington, D.C., one spot to No. 21
and elevated completions knocked down Dallas/Fort Worth (#22) five places.
Highest 2017 Completions
SquareFeet(millions)
0
2
4
6
8
10
San
Jose
Dallas/FortW
orth
Seattle-Tacom
a
Houston
San
Francisco
W
ashington,D.C
.
Boston
AtlantaLos
Angeles
C
hicago
Highest 2017 Emp. Growth
1% 2% 3% 4% 5%
United States
Phoenix
Denver
Raleigh
Dallas/Fort Worth
Sacramento
Oakland
Seattle-Tacoma
Salt Lake City
Fort Lauderdale
Orlando
Lowest 2017 Emp. Growth
0% 0.5% 1.0% 1.5% 2.0%
United States
Chicago
New York City
Baltimore
Louisville
Los Angeles
Kansas City
Milwaukee
New Haven-F.C.
Houston
Pittsburgh
Lowest 2017 Vacancy Rates
0% 4% 8% 12% 16%
United States
San Francisco
San Jose
Raleigh
Oakland
Louisville
New York City
Seattle-Tacoma
Portland
Nashville
Salt Lake City
Highest 2017 Vacancy Rates
0% 6% 12% 18% 24%
United States
Cleveland
Northern New Jersey
Detroit
Phoenix
New Haven-F.C.
Washington, D.C.
Las Vegas
Chicago
Dallas/Fort Worth
Houston
Nonfarm Employment (Y-O-Y Change)
Nonfarm Employment (Y-O-Y Change)
Vacancy Rate
Vacancy Rate

5
2017 National Office Property Index
Generally Positive Performance Outlooks
Common Among Markets in Second Half of Index
Markets in the second half of the NOPI generally trail higher-rated markets in var-
ious performance measures. Philadelphia (#24), which rose two rungs to lead off
the second half, will post a decline in vacancy and subdued job growth in 2017.
San Antonio (#25) declined one place and Houston (down eight spots to #31)
complete the Texas markets. New speculative projects pushed down Phoenix
(#26) one slot, and Chicago (#27) descended six places behind high vacancy
and restrained rent growth. Robust job growth will create new space demand,
enabling Fort Lauderdale (#28) to rise six places and outrank other Florida mar-
kets Orlando and West Palm Beach. Riverside-San Bernardino (#33) continues
to script a solid economic recovery but still receded six places. Louisville (#35)
retains its ranking from one year ago and takes its place above other small, slow-
er growth markets spanning Indianapolis (#36) to Kansas City (#39). The bottom
seven places in the NOPI, concluding with St. Louis (#46), comprise a mix of
metros rising and falling in the rankings. Detroit (#41) rose three rungs behind
respectable job growth and a projected decline in vacancy. High net absorption
and a robust increase in the average rent propelled the three-spot rise of North-
ern New Jersey (#43) from the final slot in last year’s Index.
Index Methodology
The NOPI ranks 46 major office markets based upon a series of 12-month,
forward-looking economic, supply-and-demand variables. Markets are ranked
based on their cumulative weighted-average scores for various indicators, in-
cluding projected employment growth, vacancy level and change, construction,
and rents. Weighing both the forecasts and incremental change over the next
year, the Index is designed to indicate relative supply-and-demand conditions
at the market level. Users of the Index are cautioned to be aware of several
important considerations. First, the NOPI is not designed to predict the perfor-
mance of individual investments. A carefully chosen property in a bottom-ranked
market could easily outperform a poor choice in a top-ranked market. Second,
the NOPI is a snapshot of a one-year time horizon. A market facing difficulties in
the near term may provide excellent long-term prospects, and vice versa. Third,
a market’s ranking may fall from one year to the next even if its fundamentals are
improving. Also, the NOPI is an ordinal index, and differences in rankings should
be carefully interpreted. A top-ranked market is not necessarily twice as good as
the second-ranked market, nor is it 10 times better than the 10th-ranked market.
1
See National Office Property Index Note on page 64.
MSA Name
Rank
2017
Rank
20161
16-17
Change
San Jose 1 2 g 1
Seattle-Tacoma 2 4 g 2
San Francisco 3 1 h -2
Portland 4 10 g 6
Boston 5 12 g 7
New York City 6 3 h -3
Austin 7 6 h -1
Raleigh 8 NEW ■ NA
Oakland 9 13 g 4
Orange County 10 7 h -3
Miami-Dade 11 5 h -6
Salt Lake City 12 14 g 2
San Diego 13 11 h -2
Denver 14 9 h -5
Nashville 15 8 h -7
Atlanta 16 19 g 3
Minneapolis-St. Paul 17 16 h -1
Tampa-St. Petersburg 18 20 g 2
Charlotte 19 15 h -4
Los Angeles 20 18 h -2
Washington, D.C. 21 22 g 1
Dallas/Fort Worth 22 17 h -5
Columbus 23 30 g 7
Philadelphia 24 26 g 2
San Antonio 25 24 h -1
Phoenix 26 25 h -1
Chicago 27 21 h -6
Fort Lauderdale 28 34 g 6
Orlando 29 28 h -1
West Palm Beach 30 29 h -1
Houston 31 23 h -8
Baltimore 32 36 g 4
Riverside-San Bernardino 33 27 h -6
Pittsburgh 34 32 h -2
Louisville 35 35 ■ 0
Indianapolis 36 31 h -5
Sacramento 37 38 g 1
New Haven-F.C. 38 43 g 5
Kansas City 39 33 h -6
Las Vegas 40 37 h -3
Detroit 41 44 g 3
Cleveland 42 41 h -1
Northern New Jersey 43 46 g 3
Cincinnati 44 42 h -2
Milwaukee 45 45 ■ 0
St. Louis 46 40 h -6
Highest 2017 Net Absorption
0
2
4
6
8
10
San
Jose
W
ashington,D.C
.
Dallas/FortW
orth
Boston
Seattle-Tacom
aLos
Angeles
N
ew
York
C
ity
Atlanta
C
hicago
Phoenix

6
High Yields Draw Cash-Flow Buyers to Midwest Markets
Yield-seeking investors are actively pursuing office assets in secondary and ter-
tiary markets as competitive bidding keeps cap rates compressed in many of the
nation’s premier metros. Improving fundamentals in many of these markets will
offer opportunities for net operating income (NOI) improvements that have yet to
be factored into pricing. While this index highlights markets with higher average
cap rates than most metros, assets in premier submarkets within these cities
may carry premium pricing. When considering investing in higher-yielding prop-
erties, buyers must consider their timing and exit strategies as market liquidity
may not align with investment horizons.
• The Midwest markets of Cleveland, Detroit, Cincinnati, Columbus and India-
napolis dominate this year’s list of high-yielding markets. In this business cy-
cle, these metros have had limited construction pipelines, providing value-add
opportunities in older Class B/C properties. As construction moderates in the
majority of these cities, healthy levels of absorption will place downward pres-
sure on vacancy rates in 2017, generating additional buyer attention.
• Asking rents in Miami-Dade, Northern New Jersey and Columbus are each ex-
pected to rise at or above 5 percent this year. Many yield-seeking investors will
be motivated by growing cash flows to inject capital into office assets. Though
Miami is considered a primary market, it ranks in the top ten of the High-Yield
Index as its Class A institutional assets seldom trade, causing the high volume
of Class B/C properties to skew this gateway city’s average yield.
• Investors seeking low-entry costs with potential for high first-year returns tar-
get Detroit and Cleveland as each have a three year average price per square
foot at or under $100.
Supply Imbalance Propels Vacancy Decline
Metros with the largest vacancy improvement combined with slower inventory
growth as a percentage of total office space in 2017 rank at the top of the Im-
proving Occupancy Index. The lack of new office space in these metros will re-
strict companies in expansion mode to leasing existing space, further tightening
vacancies. The markets in the Index vary as to their placement in the real estate
cycle. In later-recovering metros, still-high vacancy has not yet warranted new
development, while employment gains in others place absorption ahead of the
construction pipeline. Investors seeking properties in metros where the threat of
new competition is lowest this year will find opportunities in these markets but
need to remain mindful of longer-term construction pipelines.
• Steady job gains have boosted office space demand in Sacramento, Tam-
pa-St. Petersburg and San Diego. The increased need for space amid dwin-
dling inventory growth will tighten vacancy in existing buildings. These factors
will combine to push rents higher this year.
• In the later-recovery markets of Detroit, Northern New Jersey and New Hav-
en-Fairfield County, vacancy still remains above the national average, restrain-
ing inventory expansion. The renovation and repurposing of vacant buildings
in these metros contribute to improving market conditions.
• After corporate expansions prompted a wave of office development in prior
years, construction activity in Minneapolis-St. Paul and San Antonio will plum-
met in 2017, lowering vacancy further. Tightening rates amid office-using job
growth could prompt some projects in the pipeline to move forward.
Specialty Indexes
Improving Occupancy Index
MSA Name Rank 2017
Sacramento 1
Tampa-St. Petersburg 2
West Palm Beach 3
San Diego 4
Detroit 5
Northern New Jersey 6
San Antonio 7
New Haven-Fairfield County 8
Minneapolis-St. Paul 9
Louisville 10
High-Yield Index
MSA Name Rank 2017
Cleveland 1
Salt Lake City 2
Detroit 3
Cincinnati 4
Miami-Dade 5
Columbus 6
Las Vegas 7
Pittsburgh 8
Indianapolis 9
High-Yield Markets
5% 6% 7% 8% 9%
United States
Northern N.J.
Indianapolis
Pittsburgh
Las Vegas
Columbus
Miami-Dade
Cincinnati
Detroit
Salt Lake City
Cleveland
Three-Year Average Cap Rate
OfficeVacancy
Tightening Markets
Vacancy DropVacancy
Y-O-YBasisPointChange
0%
5%
10%
15%
20%
Sacram
ento
Tam
pa-St.Pete.
W
estPalm
Beach
San
DiegoDetroit
N
orthern
N
.J.
San
Antonio
N
ew
H
aven-F.C
.
Louisville
M
inneapolis-S.P.
0
-40
-80
-120
-160
U
nited
States

7
Job Gains and Rising Rents Offer Security and NOI Growth
Investors remain steadfast in their search for cash flow as heavy cap rate com-
pression in other property types and low-yield government debt limit the land-
scape of investment alternatives. The Secured Growth Index highlights markets
that have a strong office-using employment outlook and outsize NOI growth
potential. These metros offer investors a rising revenue climate while mitigating
the exposure to risk. Vacancy is on a sharp decline in many featured markets,
allowing investors ample opportunities to re-tenant underperforming assets
and bolster cash flow. The underlying demand in markets listed in the Secured
Growth Index is strong, though investors must apply diligence in their evaluation
of assets on a property by property basis.
• Burgeoning tech hubs dominate the ranking as expansions from IT-related
firms sustain space demand. Salt Lake City, Seattle-Tacoma and Oakland all
feature startup cultures as well as established corporate tech centers. Inves-
tors may turn to these up-and-coming tech destinations for security and NOI
growth potential.
• The Florida markets are well represented as ongoing economic prosperity bol-
sters office demand. Office-using employment growth in Fort Lauderdale and
Miami-Dade is among the highest in the country.
• The northeastern metros of Philadelphia and Boston fill the seventh and eighth
spots on the Secured Growth Index. These areas boast a well-established
office market with structural drivers of space demand. Biomedical and health-
care companies are highly active in both markets, acting as a stabilizing force
for office demand.
Tech Centers, Overlooked Midwest Top Total Return Index
Following eight years of tremendous growth in average asking rents and of-
fice-using employment, cap rates for office properties have heightened consid-
erably. Investors have aggressively acquired well-located assets in primary met-
ros, compressing expected returns to some of the lowest levels ever recorded.
Meanwhile, builders have been slow to respond with additional supply, feeding
this virtuous cycle. As a result, buyers have begun to transition capital to sec-
ondary and tertiary markets in some instances, but opportunities in the segment
remain abundant. The Total Return Index ranks metros by combining the highest
available current cap rate with the largest expected rent growth for the coming
year, emphasizing the two elements for appreciation in NOIs and potential for
increases in the future resale value of the asset.
• Investors are likely to exit high-value coastal markets in exchange for emerging
technology markets such as Salt Lake City, Nashville and Oakland, seeking
better-than-average returns. Cap rates will begin in the mid-6 percent range,
while rent growth is forecast to exceed 3.3 percent at a minimum.
• Dynamic metros with growing populations centered around a large millennial
base will spur cap rate compression in Columbus, Miami-Dade and Phoenix,
where beginning yields exceed 7 percent. However, high initial returns are not
the only incentive to move capital, with projected rent growth expected to
exceed 5 percent in each market.
• Overlooked Northeastern markets such as Philadelphia, Northern New Jer-
sey and Pittsburgh have yet to see compressed cap rates, offering investors
first-year returns above 7 percent. Rent growth will also surpass 3.5 percent,
providing additional upside in NOIs.
Specialty Indexes
Total Return Index
MSA Name Rank 2017
Salt Lake City 1
Columbus 2
Miami-Dade 3
Pittsburgh 5
Nashville 6
Phoenix 8
Philadelphia 9
Oakland 10
Secured Growth Index
MSA Name Rank 2017
Salt Lake City 1
Seattle-Tacoma 2
Fort Lauderdale 3
Miami-Dade 4
Phoenix 5
Oakland 6
Philadelphia 7
Boston 8
San Diego 9
Growing Demand Markets
Office-Using Emp. Growth
1%
2%
3%
4%
5%
SaltLake
C
ity
Seattle-Tacom
a
FortLauderdale
M
iam
i-Dade
Phoenix
O
akland
Philadelphia
Boston
San
Diego
Tam
pa-St.Pete.
Y-O-YEmp.Growth
Y-O-YRevenueGrowth
0%
7%
14%
21%
28%
Revenue Growth
U
nited
States
CapRate
High Revenue Markets
2017 Rental Growth3Q16 Cap Rate
Y-O-YRentalGrowth
5%
6%
7%
8%
9%
SaltLake
C
ity
C
olum
bus
M
iam
i-Dade
Northern
N.J.
Pittsburgh
N
ashville
Tam
pa-St. Pete.
Phoenix
PhiladelphiaO
akland
1%
3%
5%
7%
9%

8
Strength of Expansion Provides a Bridge
During U.S. Political Transition
U.S. economy enters 2017 on solid ground. Economic momentum picked
up in the latter half of 2016, as steady hiring and accumulating wage increas-
es spurred improved consumer activity and sentiment. The upswing supported
the Fed’s confidence in the U.S. economy, setting the stage for an increase
in the Fed Funds rates in December. The Fed has hinted it could raise rates
at a faster pace this year if the economy expands quickly. Yet, two issues
could mitigate immediate growth: the tightening labor market and the ambi-
guity of the Trump administration’s proposals regarding fiscal policy and trade.
Once the new administration’s policies are more clearly defined, the pace of
economic growth could elevate as businesses proceed with greater cer-
tainty. Additional job creation within the tight labor market could raise wage
pressure. Rising consumer confidence and increasing discretionary income
could spur more robust spending leading to moderate economic growth.
Alignment of White House and Congress a tailwind for change. The
Trump administration has signaled plans to energize domestic economic growth
via fiscal stimulus, especially through infrastructure and defense spending, com-
prehensive tax reform and deregulation. The Republican-led Congress is likely
to favor many of these measures, and the reduction of gridlock could enable
quick passage of a budget and a raised debt limit, all positives for the economy
in 2017. However, downside risks remain. In the short term, the striking shift in
policy could take time to work through, causing impatience among the populace
and dampening initial growth prospects. Longer term, the borrowing required to
finance the massive increase in fiscal spending proposed by the Trump admin-
istration could swell the deficit. A larger deficit would add to upward pressure
on interest rates in 2017. An interest rate hike has a comfortable runway given
rates’ current levels. Yet, overly rapid growth of both short and long-term inter-
est rates creates turbulence among investors and forces some portfolio realign-
ment. Steep interest rate hikes can also slow economic growth.
2017 National Economic Outlook
• Stable, sustained job growth reflects tight labor market. As labor mar-
ket slack diminishes into 2017, the pace of growth will likely moderate. After
creating approximately 2.2 million jobs in 2016, employers will make 2.0 mil-
lion new hires this year. Office-using employers will add 690,000 workers, a
2.2 percent rise, matching last year’s growth.
• GDP growth prospects lifted by consumption and fiscal spending tail-
wind. Consumer sentiment has escalated recently, propelled by an acceler-
ation in wage growth over the course of 2016. As the tight labor market gen-
erates additional wage pressure in 2017, rising consumption will join potential
fiscal stimulus to expand GDP 2.4 percent during 2017.
• Upward currency and interest rate trends present both upside and
downside risks. Strength in the overall economy, tightening monetary policy
and expanding government spending will lift both interest rates and the dollar,
with both positive and negative effects. Higher interest rates in the U.S. could
attract more foreign investment, but American exports could become more
expensive globally, imposing a headwind for U.S. manufacturers.
* Forecast
AnnualizedQuarterlyChangeinGDP
U.S. GDP
-10%
-5%
0%
5%
10%
17*161412100806040200
Interest Rates
0%
2%
4%
6%
8%
1615141312111009080706050403020100
Fed Funds Rate10-Year Treasury Rate
Y-O-YChange
Employment Trends
Total Employment Office-Using Employment
-6%
-3%
0%
3%
6%
17*161412100806040200
Tightening Labor Market Impact on Wages
0%
3%
6%
9%
12%
161412100806040200
UnemploymentRate
Wage IncreaseUnemployment Rate
Y-O-YWageIndexGrowth
1%
2%
3%
4%
5%
National Economy

9
Office Sector Maintains Steady Course;
Growing Demand, Higher Completions Expected
New trends transforming office landscape. Growing space demand, declin-
ing vacancy and consistent rent growth provide opportunities for office property
investors to enhance asset performance. The decline in the U.S. vacancy rate in
2016 marked the sixth consecutive annual decrease and also highlighted emerg-
ing trends that could become more firmly entrenched. Most conspicuously, the
outperformance of CBD properties led the office sector out of the recession, but
the suburbs have been gaining ground and making larger contributions to overall
performance. Recently, a disproportionately greater share of total net absorption
is attributable to suburban properties, and the gap between CBD and suburban
rent growth is narrowing. In addition to the disparity in CBD and suburban asset
performance, tenants remain innovative in their use of office space. Technologies
that facilitate remote working arrangements are becoming increasingly common
while greater reliance on contract workers and smaller staffs of centralized full-
time employees have converged to reduce traditional worker space ratios.
Construction modest by historical standards. Subdued construction con-
tinues to contribute to the performance of the office sector by diverting new
space demand to existing properties. Property owners and investors rarely had
to consider competition from new supply as a factor affecting asset performance
throughout the current cycle, and supply pressures will only modestly intensi-
fy during 2017. This year will likely mark the high point in completions for the
current cycle as construction lenders maintain a conservative stance on office
development and the best sites are used for residential properties. Collectively,
completions in San Jose, Dallas/Fort Worth, Seattle-Tacoma, Houston and San
Francisco account for more than one third of the new square footage sched-
uled for delivery in 2017, and other metros will face minimal pressure from new
supply. Beyond 2017, construction will likely occur in select suburban locations
with walkable central cores and access to major transportation routes and mass
transit, factors that are becoming increasingly important to office tenants.
2017 National Office Market Outlook
• New supply will challenge CBD markets. Developers will complete 82
million square feet of space this year, exceeding the amount of new space de-
livered in 2016. New buildings in CBD locations, where space demand growth
has eased recently, may face longer periods to stabilize. The share of demand
growth in suburbia, however, is growing, a trend that will persist in 2017.
• Demand growth fuels improvement in performance. Net absorption of
approximately 83 million square feet will outpace completions and generate
a 20 basis point decline in the U.S. vacancy rate this year to 14.3 percent,
marking the low point of the current cycle. The projected level, though, re-
mains above the pre-recession low. The reduction in vacancy will support an
increase in the average asking rent of 3.5 percent.
• Changing demographics drive structural shift in office demand. As the
millennial generation reshapes the workforce, tenants will favor assets that
engender community and cohesion. Popular amenities include recreation
spaces, on-site medical offices, restaurants, and childcare centers. A growing
number of newly-formed millennial families will migrate to “urbanized” suburbs
with walkability and proximity to city centers, making office assets in those
types of location a compelling investment opportunity.
* Forecast
Sources: CoStar Group, Inc.; Real Capital Analytics
AskingRentperSquareFoot
Office Asking Rent Trends
Office Construction and Vacancy
0
45
90
135
180
17*161412100806040200
SquareFeetCompleted(millions)
Vacancy RateCompletions
VacancyRate
6%
10%
14%
18%
22%
$22
$25
$28
$31
$34
17*161412000806040200
PercentofTotalNetAbsorption
Quarterly Net Absorption by Location
0%
25%
50%
75%
100%
161514131211
SuburbsCBD
Vacancy by Location
VacancyRate
Suburban VacancyCBD Vacancy
11%
13%
15%
17%
19%
161514131211100908
National Office Overview

10
Debt Capital Flowing into Office Sector,
But Rising Interest Rates Merit Attention
Borrowers seek clarity on long-term interest rates. Low interest rates and
competitive lenders propelled the debt markets throughout most of 2016, but
several trends at the end of the year emerged that will affect capital markets
in 2017. The sharp rise in the yield on the 10-year U.S. Treasury following the
election prompted many borrowers to reassess pricing and potential returns.
If the climb in the 10-year Treasury continues, it could place upward pressure
on cap rates, which may force a longer period of price discovery as expecta-
tions are realigned. Whether refinancing or providing acquisition debt, lenders
will likely resist overextending leverage and will employ debt coverage ratios of
around 1.35X. Urban properties with secure tenancies remain in favor, and debt
providers will increasingly follow investors seeking higher yields to the suburbs.
Properties in the suburbs may be subject to tighter scrutiny and more conser-
vative loan underwriting, but assets with solid long-term tenant rosters and that
are proximate to amenities will likely be viewed favorably.
CMBS lenders look for upswing in 2017. CMBS accounted for a notably
smaller share of office property lending in 2016 as greater risk aversion early in
the year stymied bond trading and issuance. The first CMBS offerings written
under the new Dodd-Frank risk-retention rules were issued last summer and
comprised a relatively low risk loan pool. The offerings were well received and
provide a potential blueprint for future deals. In addition, expectations of higher
costs for borrowers associated with the new guidelines were not as significant
as anticipated. CMBS issuance may lag in the first quarter of 2017, though, until
lenders and bond investors gain greater clarity on rates and the future of risk-re-
tention requirements.
2017 Capital Markets Outlook
• Fed likely more aggressive this year. The 10-year U.S. Treasury rate held
below 2 percent until a surge following the election and the Fed’s rate hike
sparked a rise of nearly 80 basis points. Moderate economic expansion and
muted inflation throughout the current cycle allowed the Federal Reserve to
put off hiking their short-term lending benchmark, but their increase in De-
cember conveys a positive outlook for economic growth. The central bank will
likely be more assertive in its rate increases in 2017.
• Inflation rise tied to sound economy. Though inflationary pressures are
beginning to mount, the increases are occurring from a historically low base.
Further, inflationary pressure has arisen from wage growth and stabilization
of oil prices, both positive factors for the overall economy. Rising wages and
elevating consumer confidence could boost consumption, the primary driver
of economic growth.
• Disciplined lending practices persist. Acquisition debt remained plentiful
throughout 2016, but borrowers’ rates rose late in the year in conjunction
with higher Treasury yields. Loan-to-value ratios compressed slightly, with
65 percent leverage marking the upper limit for office property loans. The
combination of higher rates and tighter lender underwriting cultivated some
investor caution that slowed deal flow in late 2016, a trend that will likely carry
over into early 2017. A potential easing of Dodd-Frank regulations on financial
institutions, though, could create additional lending capacity for other capital
sources, and higher interest rates may also encourage additional lenders to
participate this year.
Office Mortgage Originations
By Lender
U.S. CMBS Issuance
AverageRate
10-Year Treasury vs. Core Inflation
CMBSIssuance(billions)
$0
$60
$120
$180
$240
161412100806040200
PercentofTotal
0%
25%
50%
75%
100%
1615141312111009
Private/Other
Financial
Insurance
CMBS
Reg'l/Local Bank
Int'l Bank
Nat'l Bank
AverageRate
Office Cap Rate Trends
Office Cap Rate 10-Year Treasury Rate
0%
3%
6%
9%
12%
161412100806040200989694
Cap Rate Long-Term Avg.
10-Year Treasury Long-Term Avg.
Note: Sales $1M and above
490bps
530bps
230bps
630bps
0%
1.5%
3.0%
4.5%
6.0%
16141210080604
Core Inflation10-Year Treasury Rate
Avg. 10-Year Treasury
Avg. Core Inflation
440bps
480bps
480bps
Capital Markets

11
Property Cycle Propelled
By Suburban Second Wind
Solid asset performance tempers the overall climate of risks. As inves-
tors contemplate the year ahead, positive economic growth combined with
solid office expectations must be calibrated with a rising interest rate environ-
ment. Additionally, the Trump administration’s tax reform plan introduces some
short-term uncertainty into the investment environment, which could slow de-
cision-making. Though greater-than-expected upward pressure on long-term
rates will likely increase investor caution and intensify risk assessment, histor-
ically cap rates have not moved in tandem with Treasuries. Additionally, the
decline in vacancy and a projected rise in rent growth anticipated for 2017
could generate sufficient NOI growth to counterbalance the anticipated rise in
interest rates. Still, opportunities will be more closely scrutinized in the new,
more challenging investment environment.
Private investors active; capital flows to suburbs may accelerate. Trans-
action volume declined slightly last year, primarily reflecting fewer deals by RE-
ITs at higher price points. Private investors in the $1 million to $10 million price
tranche dipped 3 percent compared to the preceding year’s trend. Access to
acquisition financing will sustain purchases in this segment of the market and
offer additional opportunities to transact for owners seeking to monetize recent
gains in property income. Heading into 2017, both the average price per square
foot and cap rates are on par with their 2007 peak, though vacancies have yet
to reach previous lows. The recent rise in long-term interest rates may slow the
compression of cap rates, potentially bringing additional investors into the mar-
ket. Arbitrage opportunities exist in trading out of CBD properties and into sub-
urban assets that generally offer higher yields. As suburban assets continue to
contribute a greater share of net absorption and vacancy rates compress, a
greater flow of capital to the suburbs could ensue.
2017 Investment Outlook
• Yields will become more critical. As benchmark rates have risen at a rap-
id rate, investors have increasingly sought opportunities to preserve spreads.
The higher cap rates in secondary and tertiary markets have enticed a grow-
ing cadre of investors. The cap rate spread between primary and tertiary
markets stands at 80 basis points, down 30 basis points from 2015, and
reflects the shift in momentum from classic trophy assets in primary CBDs.
• Asset performance will be scrutinized. Investor sentiment has become
increasingly cautious, as a widening bid-ask spread has slowed transac-
tion velocity. Though construction is expected to remain historically low, it
is highly concentrated in CBD locations. Highly amenitized CBD deals have
sparked less interest than in previous years, given heavier construction and
slowing CBD rent growth.
• Foreign capital targets will evolve. Although traditionally institutional for-
eign capital has favored primary market CBD deals, some foreign investors
are increasingly looking toward suburban properties in secondary markets
to satisfy investment growth needs. The upturn in suburban property income
growth should invigorate this trend.
Office Property Price Trends
Office Buyer Composition
Office Transactions
By Price Category
$1M-$10M $10M-$20M
$50
$100
$150
$200
$250
161412100806040200
AveragePriceperSq.Ft.
AverageCapRate
6%
7%
8%
9%
10%
Cap RatePrice per Sq. Ft.
TotalTransactions
$20M+
0
750
1,500
2,250
3,000
161412100806040200
PercentofTotal
0%
25%
50%
75%
100%
161514131211
User/Other
Private
Listed/REITs
Inst'l/Eq. Fund
Cross-Border
U.S. Office Cap Rate Trends
By Location
CBD Suburbs
AverageCapRate
4%
6%
8%
10%
12%
161412100806040200
CBD Average: 7.1%
Suburban Average: 8.2%
Office Investment Outlook

12
Generational Differences Driving Growth,
Advancement in Today’s Medical Office Market
Generational cohorts diverge trends in healthcare. The aging U.S. pop-
ulation, combined with emerging differences in the way generations process
information, have been significant drivers in the nation’s healthcare industry. As
the 65-and-older age segment increases by 20 million individuals over the next
10 years, demand for healthcare services will rise. While this generation has a
huge impact on the growth of the industry, the millennial generation is driving a
major shift in the care delivery model.
• Technological advances as well as the ability to shop online for doctors, re-
search treatment options and use Web-based diagnostic and health track-
ing tools are placing a wealth of knowledge and information about personal
healthcare into the hands of the patient.
• Millennial and future generations will further drive an emerging trend in the
revitalization of healthcare, preferring quick access to physicians and more
transparency from providers and insurance companies.
• Urgent/acute care centers, retail clinics (walk-in centers often located in phar-
macies and grocery stores) and stand-alone emergency departments are re-
placing primary care physicians and hospital emergency rooms as this gener-
ation strives for more efficient and affordable healthcare options.
As healthcare industry evolves, so do office design and building ame-
nities. The impact of an aging population and generation drivers on the design
of medical office space has been realized in recent years as builders conform
to the standards of a patient-centered approach to healthcare and advances in
technology. Large healthcare providers are acquiring and expanding services
off campus and closer to residential areas, providing easier access to care.
• This has prompted the development of ambulatory surgery centers, stand-
alone emergency rooms and large multi-tenant medical office buildings.
• As the way people seek medical care and approach changes, developers
must keep up by offering flexible floorplates, convenient locations and ameni-
ties such as lean design, up-to-date technology, and green building features.
• Medical office absorption has been concentrated in buildings constructed
since 2000, with vacancy falling more than 500 basis points over the past five
years. Constricting vacancy at these properties will drive additional deliveries.
Strong demographic trends support growing industry, remain driver
in investment activity this year. Institutional funds and REITs are actively
searching for larger deals and portfolios. Private capital is emerging as a major
option in the $5 million to $20 million price tranche and could begin to take a
larger share of transactions this year. A rise in cross-over capital is also increas-
ing competition for medical office properties as single-tenant retail investors tar-
get similar investment opportunities in this segment for higher yields. For-sale
inventory is limited as medical office assets are in high demand with cap rates
compressing over the past several years.
• On-campus buildings command premium cap rates, trading at sub-6 percent
initial yields for single-tenant buildings, while multi-tenant buildings draw first-
year returns in the mid-6 to low-7 percent range.
• Off-campus properties with strong tenancy and long lease terms are in high
demand, fetching initial returns in the mid-6 percent area.
• Yields on other off-campus medical assets can trade up to 200 basis points
higher depending on quality and location, deferred maintenance and tenancy.
PercentofTotalDollarVolume
MOB Buyer Composition
2016 Medical Office Asking Rents
Medical Office Vacancy Rates
VacancyRate
4Q15 4Q16
AverageAskingRentperSq.Ft.
0%
4%
8%
12%
16%
$10
$15
$20
$25
$30
0%
25%
50%
75%
100%
161514131211
User/Other
Private
Listed/REITs
Inst’l/Eq Fund
Cross-Border
Based on trans. of $2.5M+ (excludes entity-level and partial-interest sales)
M
ountain
W
.S.C
ntrl*
M
idw
est
N
ortheast
C
aliforniaSoutheast
C
ntrlPlainsPac
N
W
Pac
N
W
C
alifornia
N
ortheast
U.S.M
etro
Total
M
ountain
W
.S.C
ntrl*
Southeast
M
idw
est
C
ntrlPlains
2016 MOB Completions
By U.S. Region
Regional shares based on preliminary U.S. total of 7.5 million square feet.
No recorded deliveries in Central Plains.
MW
Pac NW
Mtn
CA
NE
W.S. Cntrl*
SE
U.S.M
etro
Total
Medical Office Outlook
* West South Central

13
Medical Office Outlook
Healthcare Delivery Model
Is Shifting From the Primary Care Physician (PCP) to the Patient
1995
2015
Patient
Discovers Issue
!
Visit PCP Might be Sent
to Hospital or Specialist
Decision Evaluation Issue Resolution
Feedback Loop
Issue Resolution
PCP, ER, Masseuse, Retail Clinic,
Nurse Practitioner, Physical Therapist
Cardiologist, Dermatologist,
Gynecologist
Consults with one or more providers:
SPEEDY DELIVERY
PRIMARY CARE
Retail**
Acute Care
Clinics**
34%
17%
15%
Millennials
Boomers
Seniors
61%
80%
85%
25%
14%
11%
Primary Care
Physicians**
48% Millennials
40% Baby Boomers
28% Seniors
Patient
Discovers Issue
!
Use Online Reviews* (e.g. Yelp, Healthgrades)
Millennials Quickly Embrace Retail & Acute Care Clinics
Online Research
Vacancy:
Strong absorption trends push down the medical office vacancy rate to 7.8 percent this year.
Minimal supply additions in the Pacific Northwest and Central Plains regions over 2017 keep
vacancy tightest in these areas, ranging from the mid- to high-4 percent area through the year.
Vigorous demand facilitated a 80-basis-point decline in overall vacancy last year.
40 basis point
decline
2017 Medical Office Building Forecast
Construction:
Completions rise from last year as more than 8.5 million square feet of medical office space
is underway and slated for completion in 2017. Developers’ focus is shifting from Southern
states, and the Midwest will lead deliveries this year as approximately 2.1 million square feet
is scheduled to come online in this region.
8.5 million
square feet
Asking Rent:
Industry consolidation is placing major medical providers in control of a large share of leasing
activity, producing modest and steady rent gains in the sector. This year’s gain will match that
of 2016 as the average advances to $22.81 per square foot by year-end. West Coast mar-
kets, including those in California and up through the Pacific Northwest, command some of
the highest rental rates in the country.
0.3%
increase
** Based on a survey of 5,092 adults.
Participants had option to select one or more providers.
Sources: PNC Healthcare, Patients Take the Wheel Strategic Research
* Last time the respondent searched for a provider

14
* Forecast
AtlantaSquareFeet(millions)
Office Supply and Demand
VacancyRate
AveragePriceperSquareFoot
13 14 15 1612
Rent Trends
Asking Rent Y-O-Y Rent Change
Year-over-YearChange
Employment Trends
Sales Trends
0
1
2
3
4
12%
14%
16%
18%
20%
$80
$100
$120
$140
$160
Nonfarm Office-Using
0%
2%
4%
6%
8%
Completions Absorption Vacancy
Year-over-YearChange17*16151413
$18
$20
$22
$24
$26
17*16151413
0%
2%
4%
6%
8%
17*16151413
Employment Gains Position Atlanta
For Strong Office Demand in 2017
Corporate expansions fuel the need for office space, driving a surge in
construction. A steady pace of job growth in the professional and business
services sector will underpin demand for office space in Atlanta. Companies
including Anthem, Mercedes-Benz and Honeywell have announced plans to ex-
pand their office footprints, bringing hundreds of new jobs to the market. Devel-
opers have responded to the demand and deliveries are expected to increase
significantly from 2016. Nearly 2 million square feet of Class A office space is
scheduled for completion along the northern and northwestern portion of the
perimeter. The majority of these projects are located near high-end and niche
shopping, along with restaurants and nightlife. Despite the surge in construction,
strong demand and healthy pre-leasing will place further downward pressure on
the vacancy rate this year, spurring an increase in asking rent.
Well-located office facilities in secondary areas will pique investor in-
terest. Atlanta’s improving market fundamentals and vibrant economy are mo-
tivating investors to inject capital into the area’s office market. While properties
in Buckhead and Midtown will remain a target among investors, limited listings
may push several buyers to secondary submarkets. Additionally, office facilities
near the interstate system, or those in proximity to MARTA, will typically sell
at a premium as tenants desire easier commutes. The influx of Class A stock
this year may provide additional opportunities at the top end of the market for
institutional buyers. These properties in high-demand areas typically trade with
cap rates in the low-5 to mid-6 percent span. Private investors tend to target
the smaller value-add assets in the mid-7 to mid-8 percent range throughout
the metro. Overall, first-year returns for office buildings in Atlanta average in the
low-7 percent area.
2017 Market Forecast
Strong demand drivers and lower vacancy facilitated At-
lanta’s rise in this year’s rankings.
Employers in Atlanta will create 68,000 jobs this year,
including 20,000 office-using positions. In 2016, approx-
imately 70,500 jobs were created.
Development will reach a cycle high this year as a signif-
icant amount of Class A office space is on track for de-
livery. Last year, 1.2 million square feet was completed.
Net absorption of 3.5 million square feet will slightly out-
pace construction this year, pushing vacancy down 30
basis points to 15.5 percent. A decline of 90 basis points
was registered last year.
After a 4.6 percent increase last year, asking rent will
climb 3.3 percent to $23.30 per square foot in 2017.
Buyers from New York and California will remain active in
Atlanta’s office market for lower entry prices and returns
up to 100 basis points higher than their home markets.
NOPI Rank
16, up 3 places
Employment
up 2.5%
Construction
3.4 million sq. ft.
Vacancy
down 30 bps
Rent
up 3.3%
Investment

15
* Forecast
Austin
Tight Vacancy Encourages Development in Austin;
Tech Industry Drives Absorption
Growing space demand maintains vacancy near historical low in Austin.
Tightening vacancy during this cycle supported a surge in deliveries over the
past three years, and this year’s completions will more than double the amount
of space delivered in 2016. Several large office projects are slated for delivery
in the downtown area, including the 500,000-square-foot tower at 500 West
Second St. Google will occupy approximately 40 percent of the building, con-
solidating operations from two locations north of downtown. Demand for space
in the downtown area is strong, with vacancy falling below 10 percent in the
submarket, pushing the average rent to above $45 per square foot. Amazon, Ac-
cruent, Facebook, and Samsung will all take additional office space in the metro
this year. A healthy amount of pre-leasing of select speculative projects slated to
come online will keep vacancy in the low- to mid-11 percent area, encouraging
a vigorous pace of rent growth.
Out-of-state buyer pool grows as investors pursue higher yields. Buyers
from the East and West coasts are targeting office assets in the Austin metro,
searching for stronger returns than those found in home markets. Properties
located north of downtown along Lamar and Burnet roads, as well as near the
Domain, are in high demand and trade for a premium. Assets in need of reposi-
tioning are strongly desired, and rising office construction in the southern portion
of the metro could prompt some owners to list assets that need capital infusions
to compete with new supply. The opportunity to add value through building im-
provements and thereby increase rents would attract a number of buyers and
intensify bidding. Class B properties typically sell for initial yields in the 6 percent
to 8 percent span, depending on tenant credit, lease terms and property loca-
tion. Class A office assets trade for first-year returns closer to the 5 percent to 6
percent range.
NOPI Rank
7, down 1 place
Employment
up 2.0%
Construction
2.7 million sq. ft.
Vacancy
up 30 bps
Rent
up 3.5%
Investment
Austin loses one place in the ranking this year on slower
employment growth amid a rise in deliveries.
Employers added 18,800 workers in 2016, and 20,000
jobs will be created this year, including 7,200 positions in
office-using sectors.
Properties slated for completion during 2017 surpass
last year’s delivery of 1.2 million square feet.
Supply additions in excess of net absorption push up the
vacancy rate to 11.3 percent this year. A decline of 120
basis points was recorded in 2016.
This year’s increase lifts the average asking rent to
$33.92 per square foot. The average asking rent surged
7.7 percent last year.
Office properties in the northern portion of the metro will
remain in high demand throughout the year. Leveraged
returns can range from 10 to 12 percent for assets in
these areas.
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
1.5
3.0
4.5
6.0
6%
8%
10%
12%
14%
$80
$135
$190
$245
$300
0%
2%
4%
6%
8%
17*16151413
$20
$24
$28
$32
$36
17*16151413
17*16151413
0%
3%
6%
9%
12%

16
* Forecast
BaltimoreSquareFeet(millions)
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
-4
-2
0
2
4
8%
10%
12%
14%
16%
$80
$100
$120
$140
$160
0%
1.5%
3.0%
4.5%
6.0%
$20
$21
$22
$23
$24
17*16151413
0%
1%
2%
3%
4%
17*16151413
Elevated Yields Entice Investors to Baltimore;
Urban Core Assets Prized
Slower development offers stability to operations; office demand re-
mains steady. Following the largest volume of development since 2009, office
operations have seen an uptick in vacancy as net absorption trailed completions.
However, that trend is set to reverse in 2017 as deliveries stall by half, allowing
the market to stabilize. Job growth, while slower than peak years in the business
cycle, remains supportive of hiring in numerous industries including healthcare,
financial services and high-tech research and development. In addition, federal
government employment has surged, providing an additional tailwind. Over the
long term, retailer Under Armour is expanding with a new 50-acre campus at
Port Covington with plans to hire 10,000 over the next two decades. In the
interim, office construction declines will allow net absorption to remain roughly
in balance with supply injections, allowing the market to tighten. However, the
improvement will come at the expense of more substantial average asking rent
growth, which will record a meager advancement, albeit still in positive territory.
The increase will be the fifth consecutive annual increase in rents.
Buyers slow acquisitions; activity remains concentrated in metro core.
As operations struggled amid rising construction, buyers have pulled back from
aggressive acquisitions seen in prior years toward more stable assets in the
metro core. Seeking yields that can be more than 300 basis points higher than
similar Washington, D.C. properties, buyers have sought to position themselves
in assets with long leases signed by key metro tenants. Broadly, cap rates will
extend into the 9 percent range in outlying suburbs, while typically pricing in the
mid- to high-7 percent band inside the urban core. Nearly half of all deals are
closed inside downtown Baltimore, underscoring the extreme significance of in-
stitutional quality product to investors. Buyers seeking outsize returns will bid for
stable properties in suburban areas.
Baltimore improves its standing in the NOPI behind
steady job growth and moderating completions.
Baltimore organizations will hire 19,000 workers this
year. Last year, 25,000 jobs were created.
Following the delivery of 1.9 million square feet in 2016,
developers will slow construction this year.
After rising 40 basis points in the previous year, vacancy
will slightly contract to 14.7 percent this year as a slow-
er pace of development balances supply-and-demand
pressures in the market.
This year’s rise in average asking rents to $22.79 per
square foot matches the percentage advancement re-
corded in 2016.
Properties along Interstate 95 with improvement poten-
tial offer investors opportunities for outsize returns, while
buyers seeking stable assets stick to the metro core with
fully leased buildings.
NOPI Rank
32, up 4 places
Employment
up 1.4%
Construction
930,000 sq. ft.
Vacancy
down 10 bps
Rent
up 1.1%
Investment

17
* Forecast
Boston
Market Conditions and Keen Investor Interest
Place Boston Among Nation’s Top Performers
Low vacancy feeds a robust pace of rent growth. A continual rise in of-
fice-using job creation will elevate overall employment growth to its highest level
since 2000. Hiring activity in the tech industry leads the way, with startups and
existing systems, design and software firms bolstering payrolls. Aided by a sig-
nificant university and hospital presence, office-using vendors supporting these
institutions and the finance sector are also driving office absorption. Developers
have responded to heightened demand by delivering an above-average volume
of space, including speculative properties. Roughly 2 million square feet will come
online along Route 128 to the west and to the north, with core completions lo-
cated in Cambridge and Boston’s Seaport District. Net absorption will outpace
deliveries for an eighth straight year, compressing vacancy to a historically low
level, as swelling demand for second-tier space rises. Dwindling availability will
support record rent, pushing rental growth into the double digits this year.
Core and suburban appeal attracts diverse buyer pool. Broad-based em-
ployment growth, historically low vacancy and record rent growth have institu-
tional investors scouring Boston’s core for opportunities, with competition esca-
lating values. Top-tier assets in these locales, namely the Financial District, Back
Bay and Cambridge, will trade at cap rates near 3 percent, with other upper-tier
properties changing hands at low- to mid-4 percent cap rates. Buyers target-
ing higher yields will look westward and northward along Route 128 and Inter-
state 495, where high-quality buildings trade at 6 percent yields and second-tier
assets net initial maximum yields as high as 9 percent, depending on quality.
Investment in the suburbs could offer an opportunistic play for buyers moving
forward, as rents are half of those in the core, with upside potential.
NOPI Rank
5, up 7 places
Employment
up 2.6%
Construction
3.4 million sq. ft.
Vacancy
down 70 bps
Rent
up 11.7%
Investment
A drop in vacancy and double-digit rent growth vault
Boston to fifth place in this year’s ranking.
Approximately 18,000 office-using jobs are included in
the forecast of 70,000 total positions this year. In 2016,
payrolls expanded by 60,000 workers.
Led by a wave of suburban deliveries, completion vol-
ume elevates above the five-year metro average during
2017. Last year, 2.9 million square feet was finalized.
Robust demand in the core and suburbs outperforms
deliveries, tightening vacancy to 11.5 percent in 2017,
the lowest rate since 2007. Last year vacancy declined
60 basis points.
Led by rent surges in Boston and Cambridge, average
asking rents reach a record high of $38.26 per square
foot in 2017, following a 4.9 percent jump last year.
Buyers seek stabilized medical office properties along
I-495 and Route 128, prior to 5 million square feet of
proposed space coming online. Assets within suburban
economic hubs trade at 4 to 5 percent cap rates.
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
2
4
6
8
8%
10%
12%
14%
16%
$150
$180
$210
$240
$270
0%
1%
2%
3%
4%
17*16151413
$20
$26
$32
$38
$44
17*16151413
-5%
0%
5%
10%
15%
17*16151413

18
* Forecast
CharlotteSquareFeet(millions)
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
1
2
3
4
8%
10%
12%
14%
16%
$140
$155
$170
$185
$200
0%
2%
4%
6%
8%
$16
$18
$20
$22
$24
17*16151413
0%
2%
4%
6%
8%
17*16151413
Investors Active as Company Relocations,
Steady Job Gains Buoy Charlotte Office Market
Office construction soars to meet corporate growth. Employers’ addition
of nearly 150,000 jobs in the last five years is sustaining demand for offices.
Financial firms are leading the charge for office space, with new headquarters
for LPL Financial and Lash Group delivered in Fort Mill last year. During 2017,
Wells Fargo will expand into the recently completed Brigham Building in Ballan-
tyne and Barings will become a major tenant in 300 South Tryon. The 25-story,
640,000-square-foot tower in Charlotte’s Third Ward neighborhood is the largest
building to be completed in five years and is roughly 40 percent leased. Mar-
ketwide, deliveries will reach the highest pace since 2010. The surge in specu-
lative space entering the market will temporarily push vacancy higher as these
buildings stabilize and space vacated by tenants waits to be filled. Although the
construction pipeline is expected to thin after this year, sizable demand for office
space could quicken the timelines of some planned projects.
Charlotte’s economic prowess captures investor attention. The metro’s
sustained job growth, well-educated workforce, growing corporate presence
and prominence as a major financial hub contribute to producing a vibrant office
market. These factors coupled with lower entry costs than many larger East
Coast markets are attracting a greater influx of out-of-state capital to the region.
Buyers are targeting stable Class A assets that typically trade at cap rates in the
6 percent range but may dip below that for best-of-class buildings. Investors
seeking higher returns will search for Class B or Class C properties, especially
near buildings being revitalized in downtown Charlotte, or move into the suburbs
where initial yields can extend into the 8 percent span. Demand for medical office
buildings remains robust, although few assets are brought to market, leaving
many buyers waiting on the sidelines.
An increase in completions and the vacancy rate demot-
ed Charlotte four places in the rankings.
The creation of 6,000 office-using positions in 2017 sup-
ports total employment growth of 25,000 jobs. Last year,
payrolls expanded by 19,000 workers.
Deliveries are expected to rise to the highest point since
2010 as nearly 2.4 million square feet is completed in
2017. The total is more than 900,000 square feet above
last year’s level.
The surge in completions will bump vacancy up 50 basis
points to 11.8 percent in 2017 as new buildings stabilize
and vacated space is backfilled. Last year, the vacancy
rate declined 60 basis points.
The average asking rent advances to $22.84 per square
foot in 2017, the sixth consecutive year of annual rent
growth. One year ago, a 2.3 percent climb was posted.
The relocation and growth of international companies in
the metro will bolster demand for office space while cre-
ating a more vibrant market.
NOPI Rank
19, down 4 places
Employment
up 2.2%
Construction
2.4 million sq. ft.
Vacancy
up 50 bps
Rent
up 2.0%
Investment

19
* Forecast
Chicago
Vacancy, Rents Improve Despite Construction;
Investors Eye Suburbs for Yield
Tenants gravitate toward urban core amid flurry of development. In addi-
tion to Chicagoland’s status as the gateway to the Midwest, the metro boasts a
deep pool of talent and a lifestyle that is attractive to many young professionals.
These factors, together with an accelerating pace of office-using job growth, will
spur further office tenant expansion and reduce vacancy. The metro’s center is
best positioned for improvement entering 2017 as the ongoing corporate migra-
tion from the suburbs to the city drives space demand. Construction, however,
is picking up. Developers are on pace to complete nearly 3 million square feet
of office space for the second consecutive year, the vast majority of which is
slated for the city. The West Loop, one of Chicago’s most active neighborhoods,
will receive this year’s largest delivery, a 54-story Class A office tower totaling
1.2 million square feet. The project will not interrupt a decline in vacancy, with
annual net absorption on pace to reach a current cycle high. The falling vacancy
rate, coupled with new high-end properties hitting the market, will place upward
pressure on asking rents.
Variety of investment options available; suburbs to receive bulk of in-
vestment capital. A diverse spectrum of demand persists for Chicago assets
as the metro’s deep inventory affords opportunities for buyers with a range of
investment goals. Healthy returns and continued access to financing will sustain
investment through 2017, though rising interest rates could weigh on transaction
volume. The suburbs will garner heavy investor interest, particularly properties in
the East-West Corridor and Schaumburg areas. Assets here generally trade at
cap rates in the high-7 to low-8 percent range. Well-funded investors seeking
capital appreciation prospects will focus on areas in the metro core where intrin-
sic drivers of office demand mitigate the risk of tenant turnover. Deals occurring
in the River West and East Loop areas garner cap rates in the 5-percent band.
NOPI Rank
27, down 6 places
Employment
up 1.5%
Construction
3.1 million sq. ft.
Vacancy
down 20 bps
Rent
up 3.3%
Investment
The market’s nominal decline in vacancy to a still-high
level and modest job growth spurred a drop in the Index.
Chicago employers are on pace to hire 60,000 employ-
ees in 2017, building on a job gain of 31,500 workers last
year. Roughly 27,000 of these jobs will be office-using.
Following a supply addition of 2.9 million square feet in
2016, developers will top last year’s total, reaching an
eight-year high in 2017.
Net absorption of 3.7 million square feet will drive down
the metrowide vacancy rate to 18.1 percent this year. Chi-
cago recorded a vacancy rise of 20 basis points in 2016.
The average asking rent will climb to $24.99 per square
foot in 2017. Class A offices in marquee submarkets
downtown will charge a steep premium, while more af-
fordable space can generally be found in the suburbs.
Medical office properties will remain an investor favorite
as generally longer-term tenants offer buyers added se-
curity. Cap rates for these assets average approximately
50 basis points lower than competitive office buildings.
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
-4
-2
0
2
4
16%
17%
18%
19%
20%
$100
$115
$130
$145
$160
0%
1%
2%
3%
4%
17*16151413
$20
$22
$24
$26
$28
17*16151413
-8%
-4%
0%
4%
8%
17*16151413

20
* Forecast
CincinnatiSquareFeet(millions)
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
1
2
3
4
12%
13%
14%
15%
16%
$70
$80
$90
$100
$110
0%
1%
2%
3%
4%
$14
$15
$16
$17
$18
17*16151413
0%
1%
2%
3%
4%
17*16151413
Growing Healthcare Segment, Class B/C Demand
Fueling Cincinnati Office Market
Class B/C performance sustains office market’s health. A second consec-
utive year of historically strong job creation bodes well for Cincinnati, with hiring
in the health services sector driving medical office-using employment growth.
Currently, TriHealth, Cincinnati Children’s Hospital and the University of Cincinnati
Medical Center are expanding, adding nurses, therapists and technicians while
breaking ground on new care centers. Office deliveries will ease this year, as
completions fall below 1 million square feet after surpassing this benchmark in
each of the previous two years. Increased demand for Class B/C space, coupled
with the cool down in construction, will drive vacancy to a low point for this cycle.
Gains in the Class B/C sector will negate a decrease in Class A rents and sup-
port a nominal increase in the average rent for a third consecutive year.
Investors target suburban opportunities as tenants migrate. Steady yields
and prices below the previous peak will attract a variety of investors to the metro,
sustaining a high level of transaction activity. As more tenants vacate the city’s
core in favor of suburban locations, buyers will re-evaluate their strategies, po-
tentially directing their attention to assets near major transportation routes and
residential communities. Institutional capital eyeing Class A properties should
shift their attention to the North Cincinnati employment hubs of Blue Ash and
Kenwood, where vacancy among high-quality buildings has significantly de-
clined. Assets in these areas trade at cap rates in the mid-6 percent range.
Competition for Class B/C assets in Northern Kentucky will escalate amid con-
sistent low vacancy and higher-than-average rent growth. Value-add assets will
trade in the mid-7 percent up to the 10 percent territory, depending on location.
In the city’s core, spaces vacated in tenant relocations and potential rent de-
clines could provide a chance for opportunistic local buyers to acquire assets at
discounted pricing.
A slowdown in office-using job creation and rent growth
placed Cincinnati near the bottom in this year’s Index.
Approximately 2,600 office-using jobs are included in the
forecast of 22,000 positions this year. In 2016, the work-
force expanded by 21,000 jobs.
This year’s total marks a tempering of deliveries. During
the previous two years, completions reached historically
high levels, nearing 1.1 million square feet in 2016.
Stable tenant demand keeps pace with deliveries, com-
pressing vacancy to 13.0 percent, the lowest rate in nine
years. A 60-basis-point reduction occurred last year.
Rent growth among Class B and C properties supports
a marketwide increase to $16.90 per square foot, the
highest average rate in a decade. Last year a 2.5 percent
rise was registered.
Buyer competition for medical office assets escalates, as
compressing vacancy and gains in health-related hiring
drive growing tenant demand.
NOPI Rank
44, down 2 places
Employment
up 2.0%
Construction
850,000 sq. ft.
Vacancy
down 70 bps
Rent
up 2.3%
Investment

21
* Forecast
Cleveland
Lean Construction Pipeline Underpins
Vacancy Drop in Cleveland
Net absorption outpaces completions in 2017. Cleveland’s relatively lower
cost of doing business compared with East Coast markets will generate cor-
porate expansions this year, fueling demand for office space. In particular, im-
provements in the financial industry have motivated New York Life Insurance and
Quicken Loans to pen two of the largest leases in 2016 in the metro. While both
of these companies targeted office space in the CBD, the few projects on track
for delivery this year will be located outside of downtown Cleveland. Develop-
ment will primarily consist of smaller Class B office projects in the suburbs that
are built-to-suit. The limited construction pipeline and a healthy level of absorp-
tion will tighten vacancy for a third consecutive year, fostering a slight tick up in
average rent.
Improving market fundamentals motivate investors to inject capital into
office properties. Low entry costs and returns up to 300 basis points higher
than gateway markets are attracting buyers to Cleveland’s office assets. Proper-
ties in the downtown area will remain a prime target among investors this year as
many tenants desire walkability to restaurants and shopping, along with access
to transportation. Limited listings in downtown, however, will push some buy-
ers into well-located assets in the suburbs. In particular, several investors have
begun to seek buildings in Stark County. Here, the significant presence of the
healthcare sector draw many buyers of medical office space. Properties typically
trade with initial yields in the mid-6 to mid-7 percent range within the county.
Metrowide, first-year returns for medical office buildings typically fall in the low-8
to low-9 percent range. Overall, office cap rates trade in the mid-8 percent range
on average, but an increased buyer pool may place further downward pressure
on returns.
NOPI Rank
42, down 1 place
Employment
up 1.8%
Construction
97,000 sq. ft.
Vacancy
down 20 bps
Rent
up 1.2%
Investment
Cleveland remains close to last year’s position and is the
second-highest placed Ohio market.
Cleveland employers are anticipated to expand payrolls
by 19,100 workers this year. Last year, the employment
base increased by 12,500 jobs.
After reaching a cycle high in 2016 with 764,000 square
feet, development moderates this year. Completions will
include a 22,500-square-foot medical office facility in the
Southwest submarket.
In 2017, a positive level of absorption pushes vacancy
down to 16.2 percent, after a decline of 30 basis points
recorded last year.
An increase in this year’s asking rent brings the average
to $17.50 per square foot. In 2016, asking rent regis-
tered a 1.6 percent advance.
Yield-seeking investors will flock to Cleveland’s office as-
sets as the market boasts some of the highest average
returns nationally.
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
-2
-1
0
1
2
14%
15%
16%
17%
18%
$0
$25
$50
$75
$100
0%
1%
2%
3%
4%
17*16151413
$14
$15
$16
$17
$18
17*16151413
-8%
-4%
0%
4%
8%
17*16151413

22
* Forecast
ColumbusSquareFeet(millions)
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
0.5
1.0
1.5
2.0
8%
9%
10%
11%
12%
$40
$60
$80
$100
$120
0%
1.5%
3.0%
4.5%
6.0%
17*16151413
$12
$14
$16
$18
$20
17*16151413
0%
2%
4%
6%
8%
17*16151413
Columbus Momentum Persists,
Pushing Down Vacancy and Lifting Rents
Healthy tenant demand and employment growth will spur a second con-
secutive year of strong rent gains. Steady job growth, led by office-using
sector hiring, will persist in 2017, fueling corporate expansions and generating
the need for larger spaces. One million square feet will be delivered this year,
with 70 percent of this volume spread between three build-to-suit projects, new
offices for Alliance Data and Abbott Laboratories and a city hall campus. The
lack of new space will intensify demand for existing offices of semi-comparable
quality. As the majority of new space is occupied, new demand will allow net ab-
sorption to keep pace with new product, sustaining vacancy below 12 percent
for a fifth consecutive year. Limited availability will prompt a second-straight year
of healthy annual rent gains, as average rents reach a new high. Price escalation
in the Class B/C sector will spark overall rent growth, aided by sub-10 percent
vacancy in this segment.
Investors’ confidence swells amid continued hiring and rapid absorp-
tion. As one of the top performing Midwest markets, Columbus will attract a
wide range of buyers, resulting in demand outstripping supply. Most investors
will favor assets north of Interstate 70 in Columbus and properties along the 270
Loop in the cities of Dublin, Grove City and Hilliard. Buyer’s desire for Class B/C
buildings in Central Columbus could surge, as vacancy in this area sits below
the metro average, which has accelerated rent gains. Investors targeting oppor-
tunistic plays could eye suburban assets in North Columbus where strong rent
growth is occurring amid slightly rising vacancy. Value-add investors, motivated
by a lack of new available space, may seek vacant stores or warehouses, with
office conversion plans in mind. Overall, office assets will trade with initial yields
in the 6 percent to 10 percent range, with the metro average holding steady year
over year at just below 8 percent.
Solid rates of rent and employment growth vault Colum-
bus seven spots into the top half of the Index.
Office-using employment will rise by 12,000 workers this
year, lifting overall employment by 21,000 positions. Last
year, 18,600 jobs were created.
Deliveries this year will fall below the almost 1.2 million
square feet completed during 2016. Last year the ma-
jority of new space was added to stock in the northern
Columbus area.
Strong pre-leasing and demand in 2017 will tighten va-
cancy to 10.7 percent. Last year, vacancy dropped by
40 basis points.
Average asking rent will advance in 2017, reaching a cy-
cle high of $18.61 per square foot. Rent growth will trail
2016, when rates escalated by 7.2 percent.
The metro’s growing health industry should fuel demand
for medical office assets. The limited number of listings
in this segment will require buyers to scan all submarkets
and bid aggressively.
NOPI Rank
23, up 7 places
Employment
up 2.0%
Construction
1 million sq. ft.
Vacancy
down 20 bps
Rent
up 5.0%
Investment

23
* Forecast
Dallas/Fort Worth
Corporate Expansions Drive Substantial Metroplex
Absorption, But Deliveries Keep Pace
Diverse economy, highly educated workforce encourage tenant expan-
sions. A number of companies are headlining expansions in the North Texas
region, with more set to execute growth strategies in the months to come. These
large moves prompted a significant amount of office development over the past
two years, and deliveries will rise to a level not posted since 2008 as several
notable projects are delivered. Though a large share of this year’s deliveries will
be concentrated in two major build-to-suit projects, other newly constructed
buildings or recently updated business parks will attract additional tenants near-
by. While much of the growth is occurring in the north Dallas portion of the metro,
Solana Business Park in Westlake is undergoing a transformation, drawing tech
giant Sabre Corp. Other companies also growing in the Westlake and Southlake
area include financial services firms TD Ameritrade and Charles Schwab. Healthy
absorption trends will keep vacancy steady this year as deliveries reach a cyclical
high, and rents will rise to a 10-year peak.
Strong job creation and favorable economic outlook fuel office transac-
tions. A wave of corporate relocations and tenant expansions spurred intense
investor interest for area assets. Value-add opportunities are becoming more lim-
ited as private local buyers scour the region for deals. As a result, many of these
investors are targeting Class B and C office properties under 50,000 square feet
with minimal vacancy and in primary employment hubs or along major thorough-
fares. Initial yields for these properties are typically in the 8 percent to 9 percent
range, depending on asset quality, tenant mix and credit, and location. Office
assets in North Dallas, Frisco, McKinney, the Mid-Cities and west of downtown
Fort Worth are especially popular with investors. Overall, cap rates for Class B
and C properties generally start near 8.5 percent and trend upward 100 basis
points, while Class A assets change hands in the mid- to high-7 percent area.
NOPI Rank
22, down 5 places
Employment
up 2.9%
Construction
7.8 million sq. ft.
Vacancy
no change
Rent
up 2.6%
Investment
One of the largest completion totals in the country this
year precipitates a decline out of the top 20 of the NOPI.
Approximately 105,000 workers will be added to payrolls
in the Metroplex this year, with the primary office-using
sectors creating 33,000 jobs. In 2016, employers gener-
ated 112,800 positions.
Developers brought 5.2 million square feet of space on-
line in 2016 but will increase production this year. In addi-
tion to large built-to-suits in Plano, developers are adding
new space in Uptown, Las Colinas and the Mid-Cities.
Net absorption of 6.2 million square feet of office space
keeps vacancy at 18.6 percent in 2017. The rate de-
clined 110 basis points last year.
The average rent advances to $24.30 per square foot
this year following an increase of 4.0 percent in 2016.
Limited development in Fort Worth is attracting a num-
ber of investors to this portion of the metro. Office prop-
erties located to the north and west of downtown will be
highly desired by investors.
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
3
6
9
12
16%
17%
18%
19%
20%
$100
$130
$160
$190
$220
0%
1.5%
3.0%
4.5%
6.0%
17*16151413
$18
$20
$22
$24
$26
17*16151413
0%
2%
4%
6%
8%
17*16151413

24
* Forecast
DenverSquareFeet(millions)
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
1
2
3
4
10%
12%
14%
16%
18%
$100
$125
$150
$175
$200
0%
1.5%
3.0%
4.5%
6.0%
$20
$22
$24
$26
$28
17*16151413
0%
2%
4%
6%
8%
17*16151413
Tenants Eyeing New Speculative Buildings
For Expansion Spaces in Denver
Healthy net absorption keeps Denver office vacancy near historical lows
as completions reach cyclical high. Vigorous hiring in the primary office-us-
ing sectors during the past few years has benefited the local office market as
firms expand into larger spaces. Several years of a relatively stable vacancy rate
and a strong job market are prompting developers to move forward with a num-
ber of speculative office projects to meet growing space demand. Developers
are largely focused on the areas of downtown and along Interstate 25 through
the Denver Tech Center, Greenwood Village and Centennial. Denver’s commit-
ment to providing a vast network of commuter rail lines and alternate modes of
transportation is attracting residents and companies to these areas. Comcast
and Charter Communications have targeted these recently built large blocks
of contiguous space in the southern portion of the metro. These firms, which
already have a presence in the area, are consolidating space from smaller build-
ings nearby into single locations in Denver and plan to add workers over the next
several years. Though demand will not outweigh supply for a second straight
year, the vacancy rate will remain well below the average of the past 10 years.
Investor demand strengthens for area office assets. Rising deliveries and
strong space demand trends are luring a number of institutional-grade buyers
and large funds into the market. Newly stabilized properties and those priced
above $20 million are gaining attention, and as additional newly built properties
are brought online, trades in this price tranche could potentially rise. These as-
sets typically sell at cap rates starting near 6 percent. Private local and regional
buyers will remain the main player this year, chasing yield in western and south-
ern submarkets, where first-year returns are 25 to 50 basis points above the
metro average.
Slowing job growth and an increase in vacancy will con-
tribute to Denver slipping five places this year.
Following the addition of 47,900 employees during 2016,
establishments will expand headcounts by 41,500 work-
ers. The total includes 10,000 office-using positions.
Deliveries reach a cyclical high during 2017 as office
completions increase from last year’s total of 960,000
square feet.
The vacancy rate rises to 14.8 percent in 2017. The rate
remained flat in the previous annual period.
Vacancy remains near a historical low this year, support-
ing an advance in the average asking rent to $25.57 per
square foot. In 2016, the average ticked up 1.6 percent.
Strong space demand and rising rents are diminishing
the number of value-add opportunities available for sale,
and investors in search of upside will seek opportunities
in underutilized buildings with light-rail access.
NOPI Rank
14, down 5 places
Employment
up 2.8%
Construction
2.3 million sq. ft.
Vacancy
up 20 bps
Rent
up 1.7%
Investment

25
* Forecast
Detroit
Auto Industry Expansion Fuels Detroit’s
Office Market, Motivates Investors
Office market feeding on positive economic trends. Auto-industry advanc-
es and technology associated with autonomous driving are drawing new com-
panies to the metro while others expand. These factors are generating demand
for office space and in some areas, the lack of large floor plates is instigating
the construction of headquarter buildings. Magna Seating and Daifuku North
American Holding are among the firms moving into new facilities this year and
will contribute to pushing deliveries to the highest level in 10 years. In addition,
the renovation of older office buildings will provide tenants with quality space
options. Auto supplier Adient is moving to the region and planning to refurbish
the Marquette building in downtown Detroit for its headquarters. Firms in need
of a large footprint or more affordable rent will find opportunities in Southfield or
Troy. Here older inventory along with changing geographic and amenity prefer-
ences leave sizable blocks of space empty. Metrowide, businesses moving into
new offices will leave older space available, limiting asking rent growth this year.
Elevated yields and growth potential draw buyers to Detroit. Regional
economic gains, large-scale redevelopment projects and sizable performance
improvements in the metro’s office sector are being noticed by a wide range of
investors who are funneling worldwide capital into the area. Properties in down-
town Detroit, along the Q Line and in strong suburban submarkets are especially
desired at cap rates that generally begin in the 8 percent range but will dip into
the 7 percent bracket for well-located premium properties. Buildings with easy
access or near auto companies will receive heightened attention. Buyers seeking
yield will search for assets near redeveloping blocks in Detroit’s core. Well-lo-
cated suburban assets with a large volume of unoccupied space or that can be
functionally upgraded will also provide investment opportunities at cap rates that
typically start in the mid-8 percent span.
NOPI Rank
41, up 3 places
Employment
up 1.8%
Construction
730,000 sq. ft.
Vacancy
down 70 bps
Rent
up 0.8%
Investment
Stronger office operations support one of the largest in-
creases in the lower third of the 2017 rankings.
Detroit employers are on track to generate 35,000 po-
sitions during 2017, including 15,000 office-using jobs.
Last year, employment grew 1.8 percent.
This year’s deliveries mark the highest inventory expan-
sion since 2007. An additional 300,000 square feet of
renovated office space will be placed into service in
2017. Last year, 440,000 square feet was completed.
Strong net absorption cuts vacancy to 16.6 percent in
2017, the lowest level in more than 10 years. The vacan-
cy rate fell 180 basis points last year.
The average asking rent ends 2017 at $19.27 per square
foot, after holding steady in 2016. Rents will remain 37
percent below the national average.
Approximately 200,000 square feet of medical office
projects are due for completion in 2017 and another
200,000 square feet is underway. These new buildings
should provide some additional buying opportunities.
VacancyRate
13 14 15 1612
Rent Trends
Employment Trends
Sales Trends
0
1
2
3
4
15%
17%
19%
21%
23%
$40
$60
$80
$100
$120
0%
1.5%
3.0%
4.5%
6.0%
17*16151413
$10
$13
$16
$19
$22
17*16151413
-6%
-3%
0%
3%
6%
17*16151413

2017 Office Investment Forecast

2017 Office Investment Forecast

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2017 Office Investment Forecast