Demand for office space is rising in five up and coming real estate markets, where costs are affordable and talent is strong. See more at http://bit.ly/1RJlmOU

1. NERDS markets are powering
growth in the office sector
January 2016Nashville, East Bay, Raleigh-Durham, Denver and Salt Lake City

2. Overview
1
What and where are the NERDS?
Source: JLL Research, Bureau of Economic Analysis, Bureau of Labor Statistics, U.S. Census Bureau
Denver
Population: 2.8 million
GMP: $171.5 billion
Employment growth: +2.0%
East Bay (Oakland)
Population: 2.7 million
GMP: $160.8 billion
Employment growth: +1.7%
Nashville
Population: 1.8 million
GMP: $106.7 billion
Employment growth: +3.0%
Salt Lake City
Population: 1.2 million
GMP: $75.7 billion
Employment growth: +3.5%
Raleigh
Population: 1.2 million
GMP: $71.6 billion
Employment growth: +1.4%
Durham
Population: 0.5 million
GMP: $43.5 billion
Employment growth: +2.6%

3. Gross metropolitan product
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
GMP($billions)
Denver East Bay Nashville Salt Lake City Raleigh Durham
2
NERDS reach $629.9 billion in output in 2014, 3.7x 1990 levels
Source: JLL Research, Bureau of Economic Analysis
$171,591
Denver
$160,848
East Bay
$106,695
Nashville
$75,672
Salt Lake City
$71,574
Raleigh
$43,484
Durham
GMP ($ millions)

4. Market
2010-14 growth
($ millions)
Share of
growth
Denver $29,889.5 26.4%
East Bay $21,528.7 19.0%
Nashville $21,494.0 19.0%
Raleigh $17,529.3 15.5%
Salt Lake City $12,128.8 10.7%
Durham $10,748.4 9.5%
NERDS $113,318.7 100.0%
Output growth by market
Denver East Bay Nashville Raleigh Salt Lake City Durham
3
Growth has been spread out across NERDS: no market responsible for more than 30% of increase
Source: JLL Research, Bureau of Labor Statistics

5. NERDS employment
-300.0
-250.0
-200.0
-150.0
-100.0
-50.0
0.0
50.0
100.0
150.0
200.0
250.0
12-monthnetchange(thousands)
Denver East Bay Nashville Salt Lake City Raleigh Durham
4
Year-on-year job growth higher than previous cycle and now stronger than during the ‘90s
Source: JLL Research, Bureau of Labor Statistics
+119.8 per month
51 months
+85.8 per month
54 months
+109.7 per month
119 months
+84.4 per month
101 months

6. NERDS employment
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
12-month%change(thousands)
Denver East Bay Nashville Salt Lake City Raleigh Durham
5
With the exception of SLC in the late 1990s, NERDS markets tend to be aligned in job growth rates
Source: JLL Research, Bureau of Labor Statistics

7. NERDS employment
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12-month%change(thousands)
NERDS United States
6
Apart from a few months at a time, NERDS employment growth has been faster than the U.S. overall
Source: JLL Research, Bureau of Labor Statistics
+2.3%
NERDS
1980-2014
average
+2.8%
NERDS
2015 only
average
+1.3%
U.S.
1980-2014
average
+2.1%
U.S.
2015 only
average

8. Market
12-month net
change
Share of
growth
Denver 27,300 24.5%
Nashville 26,900 24.1%
Salt Lake City 23,400 21.0%
East Bay 18,100 16.2%
Raleigh 8,300 7.4%
Durham 7,600 6.8%
NERDS 111,600 100.0%
Job growth by market
Denver Nashville Salt Lake City East Bay Raleigh Durham
7
NERDS gains over the past year have been distributed relatively evenly among geographies
Source: JLL Research, Bureau of Labor Statistics – data as of November 2015

9. Job growth by subsector
-5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
Information
Manufacturing
Financial activities
Government
Leisure and hospitality
Education and health
PBS
All other subsectors
12-month net change (thousands)
Denver East Bay Nashville Salt Lake City Raleigh Durham
8
Diversification of growth mirrors national trends, making “all other subsectors” the largest contributor
Source: JLL Research, Bureau of Labor Statistics – data as of November 2015

10. Total population
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
Totalpopulation
Denver East Bay Nashville Salt Lake City Raleigh Durham
9
NERDS markets are now home to 10.2 million people, or 3.2 percent of Americans
Source: JLL Research, Bureau of Economic Analysis
2,754,258
Denver
2,722,260
East Bay
1,792,649
Nashville
1,153,340
Salt Lake City
1,242,974
Raleigh
542,710
Durham
2014 population

11. Population growth
-50,000
0
50,000
100,000
150,000
200,000
Annualpopulationgrowth
Denver East Bay Nashville Salt Lake City Raleigh Durham
10
Average annual growth over the past three years (+174,430) has surpassed the previous cycle
Source: JLL Research, Bureau of Economic Analysis

12. Population growth
10.0%
9.6%
8.3% 8.2%
7.6%
7.3% 7.1%
6.6% 6.4% 6.2% 6.0% 5.9%
4.0% 3.9%
3.0%
1.4%
1.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2010-2014populationgrowth(%)
11
Raleigh is currently one of the few markets nationally experiencing double-digit population growth
Source: JLL Research, Bureau of Labor Statistics – San Francisco excludes East Bay counties

13. Median household income
$51,996
$52,250
$53,492
$61,250
$61,760
$62,760
$72,399
$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000
Nashville
United States
Durham
Salt Lake City
Raleigh
Denver
East Bay
12-month net change (thousands)
12
Concentrations of specialized and highly educated employees result in above-average incomes
Source: JLL Research, U.S. Census Bureau

14. Net absorption
-2,000,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
Netabsorption(s.f.)
Denver East Bay Nashville Salt Lake City Raleigh-Durham
13
Over the course of the current cycle, NERDS markets have absorbed 22.1 m.s.f. of office space
Source: JLL Research – 2005 data for Salt Lake City unavailable
8,507,757
Denver
3,243,994
East Bay
2,670,565
Nashville
2,717,900
Salt Lake City
5,004,741
Raleigh-Durham
2010-present
net absorption (s.f.)

15. Asking rents
$10
$15
$20
$25
$30
$35
Directaverageaskingrent($p.s.f.)
Denver East Bay Nashville Salt Lake City Raleigh-Durham
14
Rental growth is accelerating due to low vacancy, particularly in the East Bay, Denver and Nashville
Source: JLL Research

16. Asking rents
$25.72
$26.05
$28.05
$31.45
$38.76
$48.06
$48.17
$0 $10 $20 $30 $40 $50 $60
Salt Lake City
Durham CBD
Raleigh CBD
Nashville
Denver
United States
Oakland CBD
CBD Class A direct average asking rent ($ p.s.f.)
15
Tech-related demand and lack of construction pushing Oakland CBD above the national average
Source: JLL Research
-36.6%
NERDS discount for
CBD Class A space

17. Accelerating ahead of the pack, Nashville’s value is quickly
catching up to its appeal
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Nashville East Bay Raleigh-Durham Denver Salt Lake City
Average cap rate %
2014 2015
U.S. average cap
rate 4.5%
16
Source: JLL Research, Real Capital Analytics

18. Strong demographics, industry growth and rising values are
attracting local, institutional and foreign investors in Denver
$0
$500
$1,000
$1,500
$2,000
$2,500
Nashville East Bay Raleigh-Durham Denver Salt Lake City
Total sales volume ($, millions)
2014 2015
17
Source: JLL Research, Real Capital Analytics

19. As tenant demand mounts, so too does pricing across NERDS,
with East Bay and Nashville increasing at an average of 38.4
percent, year-over-year
$0 $50 $100 $150 $200 $250
Salt Lake City
Denver
Raleigh-Durham
East Bay
Nashville
Average price ($ p.s.f.)2015 2014
18
Source: JLL Research, Real Capital Analytics

20. NERDS offer an attractive discount to primary markets, though
price at a premium to the secondary markets at large
19
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Q3)
Averagecaprates(%)
10-year Treasury Primary markets Secondary markets NERDS markets
Source: JLL Research, NCREIF

21. While Denver is historically active in investment sales, Raleigh
had the highest year-over-year growth of the NERDS in 2015
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Denver Nashville Oakland-East Bay Raleigh-Durham Salt Lake City
Total sales volume ($, millions)
2010 2011 2012 2013 2014 2015
20
Source: JLL Research, Real Capital Analytics

22. COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
Julia Georgules
Director – Office Research
+1 415 354 6908
Julia.Georgules@am.jll.com
Phil Ryan
Research Analyst – Office and Economy Research
+1 202 719 6295
Phil.Ryan@am.jll.com
Sean Coghlan
Director – Investor Research
+1 215 988 5556
Sean.Coghlan@am.jll.com
Rachel Johnson
Research Analyst – Capital Markets
+1 312 228 3017
Rachel.Johnson@am.jll.com