Quarterly report

1. Nashville | Q2 2017
Quarterly Report
JLL Research
Q2 2017
Office Review

2. Office submarkets

3. © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Q2 2017
Nashville
Office Insight
Smashville’s score shows that tenants want new Class A space in the urban
core. As new buildings come online with high pre-leased percentages, around
67.5, second generation space is not absorbing as quickly. As a result,
Nashville vacancy has increased for the third consecutive quarter, witnessing
a marginal 50-basis-point increase between Q1 and Q2. Midway through 2017,
Nashville vacancy sits at 8.6 percent, which is 100 basis points below the city’s
near-term historical average. Nashville’s vacancy has averaged around 9.7
percent over the past 10 years.
Demand for new construction will continue to make the score of this real
estate cycle. Class B space in the urban core (Downtown and Midtown
submarkets) holds the highest class vacancy in the market – at 12.0 percent –
compared to a suburban Class B vacancy of 9.6 percent. Meanwhile, urban
Class A vacancy continues to decline, sitting at 5.1 percent, and Class A
suburban vacancy rose slightly to 7.8 percent. As a by product of shrinking
urban Class A vacancy and growing Class B vacancy, Q2 2017 witnessed a
minor rental decline of 1.2 percent. Market rents now sit at $25.46. Markets
with small inventories and vacancies, such as Nashville, tend to have rents
that react more sharply to fluctuations in vacancy. Over the course of the next
couple quarters, rental trends will help forecast where the market is headed.
Outlook
Vacancy is the highest it has been in 2.5 years, which will usher the market
into a more neutral stage. Leasing activity for the remainder of the year looks
active; however, the sheer number of deals in the market is shrinking. A
couple of large tenants are circling the market, so even with a reduced
number of deals, the square footage may keep up with leasing over the past
two years. Hopefully, Smashville will hook them with our team spirit!
Fundamentals Forecast
YTD net absorption -159,650 s.f. ▲
Under construction (new) 2,544,225 s.f. ▼
Total vacancy 8.6% ▶
Average asking rent (gross) $25.46 p.s.f. ▲
Concessions Rising ▲
-250,000
750,000
1,750,000
2013 2014 2015 2016 YTD
2017
Supply and demand (s.f.) Net absorption
Deliveries
Nashville’s office market is still hot like its hockey – even
though we lost a couple points
9.0% 9.3%
6.8%
6.2%
8.6%
2013 2014 2015 2016 2017
Total vacancy
$0.00
$10.00
$20.00
$30.00
2013 2014 2015 2016 2017
Average asking rents ($/s.f.) Class A
Class B
For more information, contact: Hensley Loeb | hensley.loeb@am.jll.com
• The office vacancy increased slightly for its 3rd consecutive quarter – by
50 basis points.
• Even still, the office market is currently tied with San Francisco for the
second most occupied market in the country.
• Rent declined marginally at 1.2 percent, landing at $25.46.
• 2.7 million square feet of new product is projected to deliver by Q4 2017;
73.0 percent of this product is already pre-leased.

4. Source: JLL Research | Note: This report analyzes all office developments under construction/renovation >10,000 s.f. 2017 Jones Lang LaSalle IP, Inc. All rights reserved.
Nashville
Q2 2017
Office development
Total available at delivery (%) 23.8%
Total leased at delivery (%) 76.2%
Average floor plate (s.f.) 28,862
Average number of stories 4
Average asking rent ($ p.s.f.) $33.10
Notable deliveries year-to-date
Building name Submarket RBA (s.f.) Delivered
Leased at
delivery (%)
Two Franklin Park 278,161 Q1 2017 74.7%
Brentwood Commons III 130,000 Q1 2017 70.0%
Seven Springs II 130,000 Q2 2017 60.7%
Berry Farms - TBC 105,000 Q2 2017 100.0%
Hill Center Brentwood - Building A 90,018 Q2 2017 100.0%
Total pre-leased (%) 58.7%
Total under construction (s.f.) 2,544,225
Total under renovation (s.f.) 143,955
Average floor plate (s.f.) 20,786
Average asking rent ($ p.s.f.) $35.89
Notable projects under construction
Building name RBA (s.f.)
Estimated
delivery
Pre-leased (%)
Bridgestone 514,000 Q3 2017 100.0%
222 2nd Ave 391,000 Q3 2017 41.4%
Capitol View - Building E 294,650 Q3 2019 22.1%
Capitol View - LifeWay HQ 250,000 Q4 2017 100.0%
CHS Shared Services Center 240,000 Q4 2017 100.0%
Cool Springs
Brentwood
Brentwood
Cool Springs
Brentwood
Historical completions
Deliveries
At a glance
796,535
YTD deliveries (s.f.)
Speculative
SpeculativeBoyle Investments
Speculative
Tennessee Baptist Co
Southeast Venture
Spec/BTSOwner/developer
BTS
SpeculativeSpectrum/JP Morgan
Highwoods Properties, Inc.
Downtown Highwoods Properties BTS
Owner/developer Spec or BTSSubmarket
Under construction/renovation
2,688,180
Under construction/renovation (s.f.)
At a glance
Upcoming deliveries by year (s.f., excludes YTD completions)
LifeWay Christian Resources
Speculative
BTS
Airport South CHS BTS
Downtown
Hines & CB RaglandDowntown
Downtown
Boyle
Investments/Northwestern
Speculative
1,854,575
538,955
294,650
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2017 2018 2019
405,991
675,471
348,000
1,507,884
796,535
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2013 2014 2015 2016 2017

5. Source: JLL Research | Note: This report analyzes all closed office leases >1,000 s.f. 2017 Jones Lang LaSalle IP, Inc. All rights reserved.
Nashville
Q2 2017
Office leasing activity
633,077
28
1,093,774
66
408,181
224,896
71
Growing Shrinking Stable
169,811
0
474,599
146,200
280,164
23,000
Notable YTD leasing transactions > 10,000 s.f.
Size Footprint
224,000 Growing
143,955 Growing
65,000 Shrinking
54,568 Stable
49,835 Growing
41,426 Growing
40,000 Stable
37,421 Growing
34,561 Growing
34,555 Growing
New to market
Relocation within market
Expansion in market
Expansion in market
Relocation within market
Renewal
New to market
Expansion in market
Smile Direct Club 601-655 Bakertown Rd Airport South
Houzz Inc 315 Deaderick St Downtown
Verus Healthcare 1569 Mallory Ln Cool Springs
Vanderbilt University Medical 3322 West End Avenue Midtown
WeWork
BMG 1 Music Circle S Midtown Relocation within market
1000-1028 Airpark Center Dr Airport SouthPathGroup
HealthStream
BCBS - Onlife Renewal 9020 Overlook Blvd Brentwood
150 4th Ave N Downtown
Type
Relocation within market
11th Ave N @ Nelson Merry St Downtown
YTD Leasing activity by transaction type
Ovation Cool SpringsMars Petcare
Tenant Address Submarket
At a glance
Quarterly leasing activity (s.f.)
Quarterly number of
transactions
YTD Leasing activity by size (s.f.)
YTD leasing activity (s.f.)
YTD Tenant footprint
31 1 34
YTD number of transactions
YTD Leasing activity by submarketYTD Leasing activity by industry
Quarterly Class A leasing
activity (s.f.)
Expansion in market
Expansion in building
Renewal
Extension (< 36-month term)
Relocation within market
New to market
Average term (months)
Quarterly Class B leasing
activity (s.f.)
367,955
-
119,568
237,798
93,875
124,835
149,743
-
100,000
200,000
300,000
400,000
100,000+ 75,000-99,999 50,000-74,999 30,000-49,999 20,000-29,999 10,000-19,999 <10,000
26%
24%
15%
11%
11%
9%
3%
2%
Downtown
Midtown
Cool Springs
Airport South
Brentwood
Airport North
North
MetroCenter
12%
12%
21%
8%1%3%
11%
23%
4%
5%
Creative
Financial services
Healthcare and Life Sciences
Institutions
Logistics and distribution
Manufacturing
Other
Professional and business services
Retail
Scientific and technical
-
200,000
400,000
600,000
800,000
Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
Historical leasing activity

6. Source: JLL Research | Note: This report analyzes all year-to-date office sales > $2M and > 10,000 s.f. 2017 Jones Lang LaSalle IP, Inc. All rights reserved.
Nashville
Q2 2017
Office sales activity
$170,078,772
14
$274
7.1%
4.0%
96.0%
5.5-7.0% 0 1 $41,000,000
6.5-7.5% 0.0% 12 $114,328,772
Notable sales transactions year-to-date
RBA (s.f.) $ p.s.f. Sale date
27,181 $478 Feb-17
96,153 $426 Mar-17
106,389 $198 Jan-17
169,209 $141 Jan-17
171,433 $141 Jan-17
Transactions details
Number of partial interest
transactions
Core Class A CBD
Core Class A suburban
Number of domestic
buyers
Foreign capital
Average partial interest
acquired
Number of foreign
buyers
Domestic capital
Average Class A price p.s.f.
Sales activity by building classAt a glance
YTD sales volume
Number of transactions
Average Class A cap rate
Sales volume $ by submarket
Urban sales volume as % of
total
Suburban sales volume as %
of total
Cap rate range
Cordia Harrington Ewing Properties $13,000,000
Building Buyer Seller Sale price ($)
Highland Ridge I
Highland Ridge II
35 Music Square East
Horizon Center
The Astoria
Top buyers (s.f.)
$41,000,000
$20,850,000
$23,858,469
$24,172,053
Top sellers (s.f.)
Smith/Hallemann Partners &
Harbert Management Corp
Smith/Hallemann Partners &
Harbert Management Corp
Warren Smith, TRP Investors
and William Frist
Zurich Alternative AM Panattoni Development
Self Service Mini Storage
Goldman Sachs
Goldman Sachs
42%
21%
13%
12%
6%
4%
3%
Smith/Hallemann Partners and Harbert Management Corp
Dilweg Companies
Warren Smith, TRP Investors and William Frist
Zurich Alternative AM
Wedgewood
Motorists Commerical Mutual Insurance Company
Cordia Harrington
42%
21%
13%
12%
6%
4%
3%
Goldman Sachs
Atapco
Self Service Mini Storage
Panattoni Development
Frank Mastrapasqua
Consumers Realty Group LLC
Ewing Properties
$6,850,000
$7,898,250
$13,000,000
$20,850,000
$32,450,000
$41,000,000
$48,030,522
Downtown
Rutherford
County
Green Hills
Brentwood
MetroCenter
Midtown
Airport
North
$130,778,772
$24,550,000
$14,750,000
$0
$25,000,000
$50,000,000
$75,000,000
$100,000,000
$125,000,000
$150,000,000
A B C

7. Nashville
Q2 2017
Office Statistics
Class
Inventory
(s.f.)
Total net
absorption
(s.f.)
YTD total net
absorption
(s.f.)
YTD total net
absorption
(% of stock)
Direct
vacancy (%)
Total
vacancy (%)
Average
direct asking
rent ($ p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
Downtown Totals 8,098,648 88,419 49,222 0.6% 8.5% 8.8% $25.88 0 1,609,650
Midtown Totals 3,737,474 890 -115,700 -3.1% 6.6% 6.7% $30.59 0 0
Urban Totals 11,836,122 89,309 -66,478 -0.6% 7.9% 8.1% $27.12 0 1,609,650
West Totals 632,448 -550 3,162 0.5% 1.9% 1.9% $27.85 0 0
Cool Springs Totals 5,534,310 -58,703 -4,382 -0.1% 7.3% 9.4% $30.92 446,517 571,031
Brentwood Totals 6,220,406 115,412 101,581 1.6% 5.7% 7.0% $29.64 350,018 0
Airport North Totals 3,531,719 -50,101 -84,297 -2.4% 6.0% 6.2% $21.87 0 0
MetroCenter Totals 1,662,538 -66,274 -103,001 -6.2% 9.6% 10.2% $20.23 0 0
Airport South Totals 4,123,640 3,511 -21,262 -0.5% 13.9% 15.8% $19.30 0 265,000
Green Hills Totals 1,299,188 8,534 12,424 1.0% 3.2% 3.2% $26.86 0 98,544
North Totals 511,941 1,203 2,603 0.5% 5.1% 5.1% $16.94 0 0
Suburban Totals 23,516,190 -46,968 -93,172 -0.4% 7.6% 8.8% $24.59 796,535 934,575
Nashville Totals 35,352,312 42,341 -159,650 -0.5% 7.7% 8.6% $25.46 796,535 2,544,225
Downtown A 3,836,664 97,495 92,231 2.4% 3.0% 3.4% $32.18 0 1,609,650
Midtown A 2,382,929 7,288 -141,901 -6.0% 7.8% 7.8% $31.90 0 0
Urban A 6,219,593 104,783 -49,670 -0.8% 4.8% 5.1% $32.01 0 1,609,650
West A 320,724 0 803 0.3% 0.5% 0.5% $31.00 0 0
Cool Springs A 4,693,506 -47,095 13,692 0.3% 8.3% 10.6% $31.42 446,517 531,000
Brentwood A 2,899,455 131,550 233,000 8.0% 5.6% 6.6% $32.08 350,018 0
Airport North A 1,880,606 -45,125 -79,936 -4.3% 8.1% 8.1% $22.83 0 0
MetroCenter A 369,257 -1,953 -28,679 -7.8% 10.6% 10.6% $20.00 0 0
Airport South A 797,931 0 0 0.0% 0.0% 0.0% - 0 265,000
Green Hills A 709,730 9,578 14,302 2.0% 4.3% 4.3% $30.76 0 98,544
North A 201,014 -1,414 -1,414 -0.7% 4.7% 4.7% $21.65 0 0
Suburban A 11,872,223 45,541 151,768 1.3% 6.6% 7.8% $29.19 796,535 894,544
Nashville A 18,091,816 150,324 102,098 0.6% 6.0% 6.8% $29.97 796,535 2,504,194
Downtown B 3,774,402 -9,076 -38,273 -1.0% 13.5% 13.7% $25.39 0 0
Midtown B 945,887 -5,631 22,228 2.3% 4.4% 4.9% $28.91 0 0
Urban B 4,720,289 -14,707 -16,045 -0.3% 11.7% 12.0% $25.65 0 0
West B 150,000 0 0 0.0% 5.1% 5.1% $29.53 0 0
Cool Springs B 840,804 -11,608 -18,074 -2.1% 1.7% 2.9% $17.54 0 40,031
Brentwood B 2,747,377 5,269 -111,804 -4.1% 6.6% 8.0% $27.64 0 0
Airport North B 1,551,113 -3,716 -3,101 -0.2% 3.8% 4.2% $19.41 0 0
MetroCenter B 857,231 -64,321 -69,548 -8.1% 12.8% 13.4% $20.13 0 0
Airport South B 2,506,582 -704 -21,923 -0.9% 14.7% 18.0% $23.57 0 0
Green Hills B 487,933 -2,520 -1,878 -0.4% 2.3% 2.3% $16.37 0 0
North B 145,874 0 0 0.0% 0.0% 0.0% - 0 0
Suburban B 9,286,914 -77,600 -226,328 -2.4% 8.1% 9.6% $23.57 0 40,031
Nashville B 14,007,203 -92,307 -242,373 -1.7% 9.3% 10.4% $24.45 0 40,031
Downtown C 487,582 0 -4,736 -1.0% 13.0% 13.0% $18.38 0 0
Midtown C 408,658 -767 3,973 1.0% 4.5% 4.5% $21.08 0 0
Urban C 896,240 -767 -763 -0.1% 9.1% 9.1% $18.99 0 0
West C 161,724 -550 2,359 1.5% 1.8% 1.8% $21.69 0 0
Brentwood C 573,574 -21,407 -19,615 -3.4% 1.5% 4.7% $26.22 0 0
Airport North C 100,000 -1,260 -1,260 -1.3% 1.3% 1.3% $21.00 0 0
MetroCenter C 436,050 0 -4,774 -1.1% 2.6% 3.7% $22.00 0 0
Airport South C 819,127 4,215 661 0.1% 24.8% 24.8% $11.52 0 0
Green Hills C 101,525 1,476 0 0.0% 0.0% 0.0% - 0 0
North C 165,053 2,617 4,017 2.4% 10.1% 10.1% $14.26 0 0
Suburban C 2,357,053 -14,909 -18,612 -0.8% 10.4% 11.3% $12.90 0 0
Nashville C 3,253,293 -15,676 -19,375 -0.6% 10.0% 10.7% $14.42 0 0
Hensley Loeb | Research Analyst, TN Markets
1801 West End Avenue Suite 1100 Nashville TN 37203 | hensley.loeb@am.jll.com
2017 Jones Lang LaSalle IP, Inc. All rights reserved.

8. David Tennery
Managing Director
+1 404 995-2090
David.Tennery@am.jll.com
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© 2017 Jones Lang LaSalle IP, Inc.
All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Hensley Loeb
Research Analyst, TN Markets
+1 615 928 5322
Hensley.Loeb@am.jll.com
For more information on this report, please contact:
Tom Hooper
Managing Director
+1 615 928 5302
Tom.Hooper@am.jll.com
For leasing assistance, please contact your office brokerage experts:
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Managing Director
+1 615 928 5303
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Vice President
+1 615 928 5306
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