AQUILA Austin Market Report 3Q 2016

AUSTIN MARKET REPORT 3Q 2016 2

AQUILA KNOWS AUSTIN

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VIEW FROM THE

EAGLE'S NEST Earlier this quarter Zilker Park, Austin’s 350-acre urban oasis just south of the river, was transformed for the 15th time to host one of Austin’s most iconic events: The Austin City Limits music festival. As thousands of fans embarked upon the festival gates to indulge in thousands of songs, beers and tacos over two weekends, festival-goers were greeted by another treat: an ever-changing Austin skyline. One of the largest crowds in ACL history was drawn on the second Sunday of this year’s festival when

Clayton Schleimer

Willie Nelson took the stage as the sun was setting in his eyes, illuminating the backdrop of skyscrapers

Market Research Analyst

behind him. The last time Willie took the ACL stage

AQUILA Commercial

was ten years ago. Back then he was framed by a

schleimer@aquilacommercial.com

paltry handful of high-rises, nearly all of which were office towers. This year he performed before dozens of new office buildings, high-rise hotels, condos and apartment buildings. The Austin that Willie played for ten years ago is undoubtedly a changed one compared to today. If you take a step into your time machine and turn the clock back ten years, you will see that 2006 was a

4

VIEW FROM THE EAGLE'S NEST

The commercial real estate world was also riding high ten years ago. Construction was in the midst of its largest boom since 2001 with over a million square feet under construction citywide. The Domain movement had just begun, and the Offices at the Domain, the project’s first multi-tenant Class A office project, was breaking ground. The redevelopment of the ACL skyline in 2006

Robert

Mueller

Municipal

Airport

was just getting underway, and three major projects were under construction in the Southwest: 3600 San Clemente Building B, Parkway at Oak Hill and 7500 Rialto. According MarketView,

to

CBRE’s “The

2006

citywide

3Q total

vacancy rate fell almost one percent from the previous quarter to 15.42, a ACL skyline in 2016

rate not seen since mid-2001 and an affirmation that Austin’s office market

wonderful time to be in Austin. Austin was performing at its highest levels since the 2001 recession:

• The five-county MSA population broke the 1.5 million mark

• Unemployment rates were reaching new lows, dipping to 3.3% in December

• Venture capital was flowing steady with $693 million invested over the year, compared to $510 million in 2015

• Single and multifamily housing permits were being issued at their highest rates ever with 17,615 single family and 8,481 multifamily units authorized

is flourishing.” If a 15% vacancy rate was impressive back then, then the 9.3% that we are experiencing today is nothing short of an affirmation that today’s Austin office market is thriving – especially with over 13 million more rentable square feet on the market compared to ten years ago. Samsung made one of the year’s largest moves in Austin ten years ago when they built a new chip manufacturing plant in Northwest Austin. This investment in Austin has more than paid off for the consumer electronics company as they expanded once again this quarter into 100,000 SF in the Southwest submarket at 3900 San Clemente, which will double the company’s R&D presence in Austin. The talent pool that companies can pull from in Austin is

• Houses were being sold faster than ever at their highest

undeniably a major factor in tech companies relocating

values, with 29,767 sales at a median price of $171,272

and expanding here – STEM jobs are being created faster

and an average 2.9 months on the market

in central Texas than in California and New York1. In fact,

VIEW FROM THE EAGLE'S NEST

Percent Change in Employment Since November 2001 Seasonally Adjusted Source: Bureau of Labor Statistics

50%

Employment - Percent Change

40%

30%

20%

10%

0%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Date Austin-Round Rock, TX

Texas

U.S.

Houston-The Woodlands-Sugar Land, TX

San Francisco-Oakland-Hayward, CA

Los Angeles-Long Beach-Glendale, CA

Dallas-Fort Worth-Arlington, TX

New York-Newark-Jersey City, NY-NJ-PA

Chicago-Naperville-Arlington Heights, IL

according to Forbes’s recent article titled "The Next Great

slow summer months coming to an end, this likely doesn’t

American Metropolis" is taking shape in Texas, “Austin’s

indicate the start of any significant long-term trend.

job growth has been roughly three times that of New York, more than four times that of San Francisco, five times Los Angeles’ and 10 times that of Chicago. Simply put, Austin is putting the rest of the big metro areas in the shade.”2

If you were in Austin ten years ago you might have been asking yourself if things could get any better. Today, with nearly full employment, all-time high rental rates and historically low vacancy rates, we find ourselves asking the

Samsung’s latest investment comes at a time when venture

same question. Following the high times of 2006, Austin

capital investments seem to be slowing down. Austin

was one of last major metros in the country to feel the brunt

venture capital was down to $147 million this quarter,

of the Great Recession of 2008 and 2009 and among the

roughly half of what it was in the second quarter at $307

first to bounce back. Since then, Central Texas has been a

million . Although this quarter’s figure accounts for 55%

posterchild for economic prosperity and has set itself up

of all VC activity in Texas, its relatively low level mimics

for continued growth barring any major national or global

trends nation-wide, where only $14 billion was invested

economic setback. Ten years from now, the Austin skyline

– the lowest amount in two years and $3 billion less than

might be distinctly different, but hopefully the then 93-year-

2Q 2016. With the election looming and the usually-

old Highwayman will still be here to rock the ACL crowd.

3

¹http://www.citywatchla.com/index.php/the-la-beat/11833-california-s-boom-is-poised-to-go-bust-while-liberals-dream-of-scandinavia-on-the-pacific ²http://www.forbes.com/sites/joelkotkin/2016/10/13/the-next-great-american-metropolis-is-taking-shape-in-texas/#a0659115bcea 3

Source: Venture Pulse, Q3'16, Global Analysis of Venture Funding, KPMG International and CB Insights (data provided by CB Insights) October 13th, 2016.

SPECIAL REPORT

SPECIAL REPORT

SIX TI QUESTIONS ANSWERED Whether it’s your first time looking for office space or you’re a seasoned veteran of the site selection process, understanding basic local market conditions can help inform your search and ultimate negotiation for office space. In Austin, rental rates are rising to all-time highs and landlords are tightening up concessions all around. An allowance that once might have covered costs for a standard build-out, now might have some companies reaching into their own pockets due to rising construction costs. In this report, we will look at the current state of tenant improvement allowances in Austin and answer six important questions that all current and prospective Austin tenants – and landlords – need to read.

7

1

SPECIAL REPORT

DO TIS COVER THE COST OF CONSTRUCTION? The thought that the cost of moving into a new space will be covered by the tenant improvement allowance is becoming more of a myth than an expectation in today’s market. Listing brokers may sell this dream early in the touring stages, but when further due diligence is done, build-out costs rarely come in below final TI packages. TI allowances today range from $3 to $4 per square foot, per year of term, which comes out to $25 - $50 for a longterm deal. Construction costs alone rarely come in below $20/SF, proving that it is extremely difficult to negotiate a

2

deal in which your tenant improvement package covers the construction of your new space.

WHAT COSTS SHOULD I CONSIDER THAT AREN’T INCLUDED IN TI? In addition to construction costs, many tenants fail to account for other fees such as design, engineering and consulting fees. These can cost anywhere from $2 to $6/SF depending on the scope of the project. Things like testfits and architectural drawings typically fall outside the allowance that landlords provide. Legal fees pertaining to negotiation service and construction contracts, which can range between $1-$3/SF, can also be an overlooked cost that can end up making a large impact on the overall cost of a project. TIs are typically structured such that furniture, data, cabling and moving costs are specifically excluded. Because these items do not provide value to the building beyond the lease term, most savvy landlords won’t reimburse for these expenses.

Turner Building Cost Index Base year: 1967, index 100

1200

1000

800

600

400

200

0

The Turner Building Cost Index measures costs in the non-residential building construction market in the United States

8

SPECIAL REPORT

Lastly, hiring a project manager generally costs +/- 5% of the overall project cost, but can ultimately end up saving you twice that fee in design and construction. A skilled project manager can help identify efficiencies and, if brought

3

in prior to lease negotiations, draft preliminary budgets to help provide leverage during TI negotiations.

WHAT HAPPENS TO TIS IN RESPONSE TO OVERALL MARKET CONDITIONS? Some tenants think that as construction costs rise, landlords will be pressured to increase TI allowances accordingly. However, this is not the case. Tenant improvement allowances tend to increase with rental rates in a strong market, though not proportionately. The higher TI allowances in a tight market are more of a response to increasing construction costs than landlords providing an increased incentive for tenants to move into their buildings. The increase in construction costs means the tenants have less purchasing power with those TI dollars, thereby forcing them to come out of pocket more than in a down market. Some landlords may also use the strength of a market as an opportunity to drastically repurpose their spaces. By improving their properties’ spaces, they can fetch a higher rental rate, thereby increasing the capitalized value of

Average TI/SF/YR vs. Base Rental Rates

9

SPECIAL REPORT

the building, which will return a higher multiple on the additional TI provided. Furthermore, in high-demand markets, new construction is prevalent. Owners of new buildings typically offer much larger TI packages to tenants for shell spaces than the existing second generation ones – often twice as much. Landlords’ tenant improvement packages are quite different in down markets. Because construction costs typically follow the trend of the overall economy, so do TI allowances. However, the TI dollars will likely get tenants more than they would in a strong market. Furthermore, in a tenant’s market, landlords are more willing to promote shorter term deals with low TI allowances just to weather the downturn. While landlords may promote longer terms, tenants typically have more leverage regarding the length of their lease, which results in more long-term deals being signed

4

in down markets than in strong ones.

WHAT HAVE TI PACKAGES LOOKED LIKE IN RECENT HISTORY IN AUSTIN? Since 2010, Class A TI $/SF per year have only increased 17%, from $3.22 to $3.77 while base rental rates have increased over ten dollars to $26.27 from $15.55 – a 69% increase. More recently, since 2014, rental rates have increased 11.9% while TI $/SF per year have remained relatively flat, hovering around $3.80/SF/yr. Juxtapose this recent trend to 2006, when TI $/SF/yr jumped by more than a dollar and reached a record high of an average $4.42/SF/yr in 20071. In 2006 and 2007 a large swath of new construction was kicking off, giving way to large TI packages for the new shell spaces. New buildings to the market in this time period included San Clemente Building B, Las Cimas IV and Research Park Place 7 & 8.

GLG Space at 301 Congress; Photo by Casey Dunn

10

Patio at Burn Pizza + Bar on East 6th Street

Furthermore, several buildings such as Capitol Center, River Place and Arboretum Atrium were being forced to reconfigure from large, single-tenant blocks to smaller multi-tenant spaces. Landlords of these buildings were able to justify larger TI packages because these intricate buildouts required more capital than a typical second generation space build-out. Now, with rental rates reaching all-time highs and new construction delivering at a more deliberate pace, we expect average TIs to remain relatively level in the near future. As construction costs continue to creep upwards, there will

5

be even more pressure on tenants to bear more of the final cost to build out their new spaces.

WHAT DOES THIS MEAN FOR TENANTS? In today’s tight market, it is more important than ever to understand your improvement goals and financial situation before entering lease negotiations. Sharing this information with your broker will help them find you a space that matches your needs and negotiate a new lease or a renewal that best works for you. Whether you’re looking for a new space or to refresh your existing one, it’s important to know that landlords are being increasingly less forgiving on concessions and stingier with TI allowances. If covering the cost of your build-out with the TI allowance is a high priority, give your broker the leverage to compromise on other concessions such as term, free rent or rental rate.

11

Hiring a broker with an in-house project management team can help set expectations for what you can get for your budget. Getting a project manager involved before you’ve even decided on a space can help provide additional leverage during the negotiating process as they will be able to provide you with estimates of what build-out costs might be. A tenant representation broker alone may understand what comparable TI packages are, but fail to

6

understand what that will get you without having a project management team to freely consult with.

WHAT DOES THIS MEAN FOR LANDLORDS? It can’t be denied: right now we’re in a landlord’s market. But it won’t always be. And when competition ramps up amongst buildings, you want yours to stand out. When negotiating tenant improvement allowances, be sure to consider your space 5 to 10 years from now. Tenant improvement allowances are an investment in not just that tenant but your building as a whole. Working together to manage TIs can create residual value in the space and building, and will help justify additional investment by landlords. It may also help get a deal over the hump. A poorly conceived space can be difficult to repurpose or costly to revamp in a down market.

Analysis based on AQUILA’s lease comps in competitive set buildings for which tenant improvement allowances are greater than zero. Base rental rate analysis excludes operating expenses. 1

Photo on page 7: Latinworks interior space; Photo above: Eastside Village empty space; photo by Scott Mason Photography

12

AUSTIN CITYWIDE 3Q UPDATE 502,730 SF Net Absorption

9.30%

Direct & Sublease Vacancy Rate

$38.29

Avg. Class A Full Service Rental Rate

View 13 of downtown and UT from The Terrace; Photo by Scott Mason Photography

SNAPSHOT:

CAPITAL MARKETS MAJOR SALES TRANSACTIONS SEAHOLM

SOLD POWER PLANT

REDEVELOPMENT

ATRIUM OFFICE

SOLD CENTRE

STONEBRIDGE

SOLD PLAZA

Market

CBD

Market

Northwest

Market

Northwest

Class

A

Class

B

Class

A

Size (SF)

208,051

Size (SF)

121,901

Size (SF)

386,064

Buyer

Clarion Partners

Buyer

Eurus Capital Partners

Buyer

KBS Realty

Seller

CIM Group & Seaholm Power, LLC

Seller

Equity Commonwealth

Seller

Heitman

Price

$21,500,000

Price

$124,000,000

Price/SF

$176

Price/SF

$321

Price

$131,000,000

Price/SF

$630

ASPEN LAKE

SOLD TWO

AMBER OAKS

SOLD BLDG G

Market

Northwest

Market

Northwest

Class

A

Class

A

Size (SF)

128,990

Size (SF)

101,223

Buyer

Azrieli Group

Buyer

Alaska Mental Health Trust

Seller

Patrinley Group

Seller

Menlo Equities

Price

$40,000,000

Price

$22,400,000

Price/SF

$310

Price/SF

$221 Aspen Lake Two

14

MAJOR LEASES SIGNED Leases signed this quarter over 20,000 SF:

CBD • Vida Capital signed a lease for the 13th floor of Shoal Creek Walk. Set to deliver 3Q 2017, this brings the project to 61% preleased with the 11th, 12th, 14th and 15th floors still available. Vida Capital currently has a lease in the Las Cimas office park in the Southwest submarket.

• Fish & Richardson inked the only lease in the third quarter at 500 W 2nd. The law firm signed for 22,403 SF on the 18th floor, bringing the project to 57% preleased.

NORTHWEST • WeWork finalized its leases at Domain 1, bringing the Domain’s newest existing office building to 100% occupied. Taking roughly 62,000 SF on the second and third floors, the fast-growing coworking company will be joining Aristocrat Technologies on the 4th floor and Atkins on the 5th.

• Amazon expanded in the Domain this quarter, one year after moving into their 76,000 SF space at Domain 7. This quarter, they signed for 136,584 SF at Domain 8, scheduled to deliver early next year.

• Currently occupying the 9th through 12th floors at 300 W. 6th, Facebook expanded its Austin presence outside of downtown this quarter, signing a 102,438 SF lease for the top three floors at Domain 8. With Amazon and Facebook taking a combined 239,000 SF this quarter, only one full floor remains available at Domain 8.

• Cadence Design Systems will be moving next door to the new Research Park Plaza V. The software and programming company currently houses its engineering team at Research Park Place Building 7, where it began marketing 40,279 SF for sublease in August. The 67,955 SF lease at Research Park Plaza V brings the one-year-old property to 97% leased.

SOUTHWEST • Samsung

plans to relocate and double its R&D presence in Austin after signing a large lease in July for over

100,000 SF at 3900 San Clemente. Samsung will be moving its mobile system technology development facility from Ladera Bend in the Northwest submarket, where 56,460 SF is currently being marketed for sublease through the end of July 2019.

15

ALL MAJOR LEASES SIGNED Tenant

Property Name

Submarket

SF

Transaction Type

Amazon

Domain 8

Northwest

136,584

New Lease

Facebook

Domain 8

Northwest

102,438

New Lease

Samsung Electronics

3900 San Clemente

Southwest

101,596

New Lease

Cadence Design Systems

Research Park Plaza V

Northwest

67,955

New Lease

Fresenius

The Park on Barton Creek 2

Southwest

63,597

Renewal

WeWork

Domain 1

Northwest

61,969

New Lease

Oracle

Amber Oaks

Northwest

60,562

New Lease

Whole Foods Market

Las Cimas II

Southwest

54,551

Renewal

Amherst Holdings LLC

Plaza on the Lake I

Southwest

32,625

Renewal

Bankers Toolbox

Riata Corporate Park Bldg 4

Northwest

31,715

Renewal

PeopleAdmin Inc.

Las Cimas III

Southwest

28,078

Renewal

E2Open

Great Hills Plaza

Northwest

22,637

Renewal/Expansion

Fish & Richardson

500 W 2nd

CBD

22,403

New Lease

ShipStation

Lamar Central

Central

22,000

New Lease

360 Mortgage

Four Points Centre I

Northwest

21,765

Expansion/Extension

Catapult Systems Inc

Barton Skyway III

Southwest

21,373

Renewal

Vida Capital

Shoal Creek Walk

CBD

21,218

New Lease

OFFICE SUBMARKET MAP:

OFFICE SUBMARKET MAP:

Round Rock Round Rock Cedar Park

CBD

Cedar Park Pflugerville

Lake Travis

Pflugerville

McNeil

Central CBD North

Central

Northwest

Lake Travis

Arboretum McNeil

North

Domain

Southwest

Northwest

Arboretum

South/Southeast

Domain

East/Northeast Southwest Round Rock

South/Southeast

Tarrytown West Lake Hills

West Lake Hills

East/Northeast Austin

Round Rock

Tarrytown

Sunset ValleyAustin

ABIA

Sunset Valley

Buda

ABIA

16

AUSTIN OFFICE

DEVELOPMENT PIPELINE This timeline shows office projects over 30,000 SF that have either broken ground or will be breaking ground soon.





2016

2017

4Q

Braker Pointe III*

2018

1Q

195,230 SF

NW

The Station on Manor

31,600 SF

E

The Diamond Building at Mueller

35,015 SF

E

*Already existing-coming to market 4Q 2016

1Q

500 W 2nd

489,404 SF

CBD

Domain 8

290,983 SF

NW

2Q

Walsh Tarlton Overlook

55,500 SF

SW

Lantana Ridge I & II

175,000 SF

SW

Fourth &

42,000 SF

E

3Q

Shoal Creek Walk

218,432 SF

CBD

The Overlook at Barton Creek

53,091 SF

SW

4Q

Westview*

98,500 SF

CBD

MoPac Centre

95,863 SF

NW

801 Barton Springs

90,500 SF

S

*Already existing-coming to market 4Q 2017

17

Springdale General

165,000 SF

E

 PLANNED Future Developments

Future Developments

405 Colorado

195,511 SF

CBD

Paloma Ridge C

112,500 SF

NW

604 W 6th Street

31,035 SF

CBD

Research Park Bldg 6

117,314 SF

NW

Austin American Statesman

TBD SF

CBD

Riata Corporate Park Bldg 1

65,000 SF

NW

Novare/Post Office

TBD SF

CBD

Riata Crossing Bldg 6

49,716 SF

NW

Rainey Gateway

355,000 SF

CBD

Frontera Ridge

400,000 SF

Round Rock

Third + Shoal

338,279 SF

CBD

St. Elmo

225,000 SF

S

Waller Creek Center

325,000 SF

CBD

The Waterfront

625,000 SF

S

901 E 6th

132,000 SF

E

Galleria Oaks I & II

147,928 SF

SW

Canopy

40,200 SF

E

Overwatch Campus Phase II

123,525 SF

SW

Cityline at MLK

134,000 SF

E

Regency Park

90,000 SF

SW

Mueller Market District

2,000,000 SF

E

Rollingwood Center III

107,000 SF

SW

Plaza Saltillo

120,000 SF

E

Springdale General

165,000 SF

E

The Backyard Buildings B, J, & H

171,450 SF

SW

The Foundry (310 Comal)

75,369 SF

E

The Terrace 3

203,130 SF

SW

The Lakes at TechRidge Buildings A & B

97,600 SF

E

The Terrace 4

285,663 SF

SW

The Terrace 5

218,809 SF

SW

The Park at Mueller

116,000 SF

Amber Oaks Phase I

90,300 SF

NW

Amber Oaks Phase II

90,300 SF

NW

Amber Oaks Phase III

45,000 SF

NW

Aspen Lake Three

128,700 SF

NW

Domain Tower

308,000 SF

NW

Four Points Centre Building 3

250,000 SF

NW

Four Points Centre Building 4

80,000 SF

NW

E

18

CBD SUBMARKET 3Q UPDATE BY BETHANY PEREZ | Principal, AQUILA Asset Services

-25,262 SF Net Absorption

6.45%

Direct & Sublease Vacancy Rate

$54.62

Avg. Class A Full Service Rental Rate Hartland Plaza bridge over West 5th Street; Photo by Scott Mason Photography

19

CBD UPDATE

We sound like a broken record by, once again, stating that rental rates in the CBD hit an all-time high. Year to date, the CBD competitive set has seen a 74 basis point increase in occupancy rates and a $5.91 increase in asking full service rental rates. The third quarter posted an average full service rental rate of $54.62/SF for the Competitive Set1, climbing more than $8.00/SF over the

$35.00/SF NNN to $40.00/SF NNN. The Dropbox sublease at 501 Congress is the other larger block of space that remains available this quarter. Although not currently vacant, Capitol Tower and 100 Congress are marketing larger blocks of space coming available in the near future. If a tenant is looking for space over 20,000 SF, they are often forced to consider other submarkets outside of

past eight quarters. the CBD due to limited While operating supply. In contrast to The CBD continues to expenses account for a busy first half of the command a premium 30% of this increase, year, the third quarter a handful of the Class was relatively quiet as supply remains A buildings show an with no significant limited, especially with uptick in their asking new deals inked. respect to large blocks rental rates with Frost Albeit a small number, Bank Tower in the of contiguous space. the third quarter lead at $42.00/SF shows negative net NNN. Over half of absorption of 25,262 the buildings in the SF. There have been Competitive Set kept two nonconsecutive their asking rental quarters of negative rates flat this quarter absorption in the with an average rental rate of $32.18/SF NNN. downtown market over the past 12 months. The CBD continues to command a premium as However, comparing the total net absorption supply remains limited, especially with respect over the last 24 months to the past 10 years to large blocks of contiguous space. shows a market where demand outweighs During the third quarter, the CBD did not see any supply: over half of the space absorbed since new large blocks of direct or sublease available 2006 has occurred since the fourth quarter space open up. (300 West 6th, 301 Congress of 2014. Direct and sublease vacancies only and One Congress Plaza remain the only Class increased by 12,056 SF and 13,010 SF A buildings with 20,000 SF to nearly 30,000 respectively from the last quarter bringing the SF of contiguous space available.) The asking total vacancy in the CBD to just under 430,000 rental rate for these buildings ranges from SF, or a 6.45% vacancy rate. Additionally, no

20

CBD UPDATE

new supply hit the market this quarter and none is expected until 1Q 2017 when 500 W. 2nd delivers. Trammel Crow Company and Principal Real Estate Investors’ 500 W. 2nd development is currently 53% leased to tenants including Google, Deloitte and CBRE. Activity on new construction is strong, and rumor has it that there are leases out for most of the remaining space. Adjacent to 500 W. 2nd, demolition began on the old Austin Music Hall site with plans to develop Third + Shoal, a 338,000 SF office project by Cielo and TIER REIT. Other new construction set to deliver in the CBD is Shoal Creek Walk with a delivery date of 3Q 2017. It sits at 61% preleased with Cirrus Logic taking five floors and vacating its space at 300 West Sixth, where it currently occupies over 50,000

SF between the 13th and 14th floors. Vida Capital is the other committed tenant at this project that signed this quarter for a full floor leaving only four floors - or around 80,000 SF of space. Westview is an existing building located one block west of the Capitol. It will undergo renovations over the next year and will deliver over 98,000 SF by the end of 2017. Another project of note that sits on the edge of downtown is 801 Barton Springs. Construction started in July and the building is expected to deliver in November of 2017. Developed in partnership between Austin-based Generational Commercial Properties and Houston-based HTZ Investments, the 90,500 SF office project sits just south of the river and across from the Palmer Events Center. With very limited options for new space coming available in 2017, projects on the periphery of downtown like these are benefiting from the tightening of the downtown market. They provide tenants the ability to lease space at a slight discount while still being a stone’s throw from the CBD. The added supply coming online in 2017 in and around downtown should help keep the soaring rental rates at bay.

Downtown Competitive Set buildings include Class A office buildings in or near the core of downtown. For a complete list of CBD Competitive Set buildings refer to page 43 in the Appendix 1

Rendering of 801 Barton Springs lobby

21

CBD

COMPETITIVE SET PERFORMANCE CBD COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

5,827,916

503,540

2015 Q1

6,344,401

421,858

69,160

-7,476

9.83%

$46.49

55,200

612,127

7.52%

$47.28

2015 Q2

6,466,952

479,092

2015 Q3

6,466,952

370,193

40,409

80,108

8.03%

$47.74

38,822

110,486

6.32%

$48.70

2015 Q4

6,471,834

237,718

55,748

120,431

4.53%

$52.03

2016 Q1 2016 Q2

6,471,834

239,406

101,083

-47,023

5.26%

$52.80

6,651,030

319,379

84,852

115,454

6.08%

$53.73

2016 Q3

6,650,834

331,435

97,862

-25,262

6.45%

$54.62

*Absorption includes sublease space

NET ABSORPTION

600

12%

400

8%

200 0

4%

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

Absorption (Thousands of SF)

16%

Vacancy Rate

Availability (Thousands of SF)

800

700

96%

600

95%

500

94%

400

93%

300

92%

200

91%

100

90%

0

89%

(100)

Di rect & Subleas e Vacancy Rate

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Occupancy Rate

AVAILABLE SF VS. VACANCY RATE

88%

Di rect & Subleas e Occupancy Rate

$57

11%

$55

10%

$53

9%

$51

8%

$49

7%

$47

6%

$45

5%

$43

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

4%

Di rect & Subleas e Vacancy Rate

22

CBD DEVELOPMENT & LARGE AVAILABILITY

WES TVIE

W

O H F E

Stre

et

N.

Lam

ar B

lvd.

5th

RISE 8TH NUE + CES SHO A 6 04 W EXT CRE L E . E SIX WA K STA NDED T H 5 Y SI LK TH & TE WES 300 T WES NO T 6T H POS VARE/ TO FFIC E IND THE EPE HOT NDE NT ZAZ EL A THIR G THE ABL / 308 D AUS ES G + SHO UAD TIN AL ALU PRO GRE PE PER E RES 500 IDEN N WAT W . E 4 TIAL 2ND R COL 05 TOW ORA NO ER RTH DO SHO RE

ALO F ELEM T & ENT

301

CON

Bar

ton

Spr

ings

Rd.

801 BA SPR RTON ING S 23

Ave . ress Con g

S. 1

st Str eet

O CON NE G PLA RESS ZA

AU AM STIN E STA RICAN TESM AN

GRE

SS

Cesa r

Chav

ez S

WA L CRE CEN E TE

RA

LARGE BLOCKS OF CONTIGUOUS AVAILABILITY Available SF

Max. Contiguous

One Congress Plaza

28,387 SF

23,142 SF

300 West 6th

32,733 SF

29,952 SF

301 Congress

69,862 SF

20,591 SF

OFFICE PROJECTS UNDER CONSTRUCTION Building

OFFICE UNDER CONSTRUCTION HOTEL/RESIDENTIAL UNDER CONSTRUCTION FUTURE DEVELOPMENTS EXISTING AVAILABILITIES

St.

Building

11th

H HOU YATT SE H OTE L

Total SF

500 W 2nd

58%

500,436 SF

1Q 2017

Shoal Creek Walk

61%

218,432 SF

3Q 2017

Westview*

0%

98,500 SF

4Q 2017

801 Barton Springs

0%

90,500 SF

4Q 2017

*Already existing - coming to market 4Q 2017

HOTEL/RESIDENTIAL UNDER CONSTRUCTION

Stree

t

Building

Units/Rooms

Est. Delivery

Hyatt House Hotel

190 Rooms

4Q 2016

NorthShore

436 Units

1Q 2017

Rise - 8th & Nueces

196 Units

1Q 2017

250 Rooms, 120 Units

2Q 2017

422 Rooms

3Q 2017

1,066 Rooms

3Q 2017

5th & West

154 Units

4Q 2017

70 Rainey

164 Units

2Q 2018

The Independent

370 Units

3Q 2018

226 Units, 160 Rooms

TBD

The Austin Proper Aloft & Element Fairmont

6th S

treet

Est. Delivery

% Preleased

Hotel Zaza/Gables

FUTURE/PLANNED DEVELOPMENTS Building

Size/Units

Use

31,035 SF

Office

405 Colorado

195,511 SF

Office

Waller Creek Center

325,000 SF

Office

Third + Shoal

338,279 SF

Office

Rainey Gateway

604 W 6th Street

FAIR M HOT ONT EL

LLER RAI EK NE ER GATEW Y AY

70 AIN EY

355,000 SF

Office

Austin American Statesman

TBD

Office

Novare/Post Office

TBD

Office

308 Guadalupe

TBD

Office

Extended Stay Site

TBD

Office

Green Water Residential Tower

TBD

Multifamily

24

AVAILABILITY SUMMARY CBD CLASS A SUBLEASE SPACE AVAILABLE SPACE 32 31 30

23

20 19

29

28

28

27

27

26

26

26

25

25

25

24

24

24

23

23

23

22

22

31,051 SF

22

22

22

29,952 SF

21

21

32,603 SF

21

21

21

8,083 SF

20

20

32,603 SF

20

20

20

19

19

33,931 SF

19

19

18

11,528 SF

18

18

18

31,822 SF

17

17

17

17

16

16

15

15

15

14

14

14

22 21

29

2,781

7,081

6,861 SF

19 782 SF

18

18

18

17

17

17

17

16

16

16

16

15

15

15

15,598

15

14

14

14

14

23,798

14

13

13

13

13

13

13

13

13

12

12

12

12

12

12

12

12

11

11

11

11

11

11

11

11

10

10

10

10

10

10

10

10

9

9

9

9

9

9

9

9

8

8

8

8

8

8

8

8

7

7

7

7

7

7

7

7

6

6

6

6

6

6

6

6

5

5

5

5

5

5

5

5

5

4

4

4

4

4

4

4

4

4

3

3

12,742

1,272

3

3

3

3

3

3

3

1,246 SF

2

2

19,912

2,962

2

2

2

2

2

2

7,887 SF

1

1

1

1

1

1

1

15 5,855 SF

2,809 SF

2,893 SF

942 SF

2,502 SF

7,254

3,722

20,591 SF

3,473 SF

6,432

6,858

1

16

4,571 SF

2,277 SF

20,396 SF

17,400 SF

16

19,087 SF

4,965 SF

2 12,405 SF

100 Congress 100 Congress Ave.

300 W 6th 300 W 6th St.

301 Congress 301 Congress Ave.

400 W 15th 400 W 15th St.

500 W 2nd 500 W 2nd St.

501 Congress 501 Congress Ave.

515 Congress 515 Congress Ave.

5th + Colorado 201 W 5th St.

600 Congress 600 Congress Ave.

411,536 SF 22 Floors 96% Leased $39.00-$40.00 NNN $22.69 Op/Ex $61.69 - $62.69 Gross

454,225 SF 23 Floors 93% Leased $38.00 NNN $22.00 Op/Ex $60.00 Gross

428,419 SF 22 Floors 84% Leased $34.00-35.00 NNN $19.55 Op/Ex $53.55-$54.55 Gross

281,196 SF 17 Floors 96% Leased $28.00 NNN $15.92 Op/Ex $41.42 Gross

500,436 SF 29 Floors 57% Pre-Leased $39.00 -$40.00 NNN $15.50 Op/Ex $54.50 -$55.50 Gross

122,551 SF 5 Floors 86% Leased $22.00 -$35.00 NNN $22.53 Op/Ex $44.53 -$57.53 Gross

258,176 SF 26 Floors 97% Leased $34.00 NNN $18.05 Op/Ex $52.05 Gross

179,000 SF 18 Floors 87% Leased $40.00 NNN $15.20 Op/Ex $55.20 Gross

503,951 SF 32 Floors 97% Leased $35.00 NNN $18.60 Op/Ex $53.60 Gross

25

Availability Summary - Preliminary

1

33 32 31

3,325 SF

30

30

30

29

29

29

28

28

28

27

27

27

26

26

26

25

25

25

24

24

24

23

23

23

22

22

22

21

21

21

21

21

20

20

20

20

20

20

19

19

19

19

19

19

18

18

18

3,600 SF

18

18

18

17

17

17

2,035 SF

17

17

17

14,364 SF

16

16

16

15

15

15

21,218 SF

14

14

14

21,218 SF

16

16

16

16

15

15

15

15

14

14

14

14

13

13

13

13

13

13

13

13

12

12

12

12

12

12

12

12

21,218 SF

11

11

11

11

11

11

11

21,218 SF

10

10

10

10

10

10

11

5,418 SF

10

10

9

9

9

9

9

9

23,142 SF

9

9

8

8

8

8

8

8

1,366 SF

8

8

7

7

7

7

7

2,118 SF

7

7

7

12,648 SF

1,761

4,797

6

6

6

6

6

6

5

5

5

5

5

5

5

4

4

4

4

4

4

4

4

3

3

3

3

3

3

3

2

2

2

2

2

2

2

2

1

1

1

1

1

1

1

1

6

3

10,821 SF

7,322 SF

6,191 SF

4,403 SF

1,318 SF

6 7,306 SF

5

816 Congress 816 Congress Ave.

Austin Centre 701 Brazos St.

Chase Tower 221 W 6th St.

Colorado Tower 303 Colorado St.

Frost Bank Tower 401 Congress Ave.

IBC Bank Plaza 500 W 5th St.

One Congress Plaza 111 Congress Ave.

San Jacinto Center 98 San Jacinto Blvd.

Shoal Creek Walk 835 W 6th St.

434,081 SF 20 Floors 98% Leased $27.00 -32.00 NNN $17.59 Op/Ex $44.59 -$49.59 Gross

326,335 SF 16 Floors 92% Leased $28.00 NNN $17.65 Op/Ex $45.65 Gross

389,503 SF 21 Floors 100% Leased $35.00 -$37.00 NNN $19.85 Op/Ex $54.85 - 56.85 Gross

373,334 SF 30 Floors 100% Leased $34.00 NNN $16.83 Op/Ex $50.83 Gross

535,078 SF 33 Floors 96% Leased $38.00 -$42.00 NNN $22.00 Op/Ex $60.00 -$64.00 Gross

194,749 SF 13 Floors 100% Leased $35.00 NNN $21.00 Op/Ex $56.00 Gross

518,385 SF 30 Floors 95% Leased $36.00 -$40.00 NNN $18.14 Op/Ex $54.14 -$58.14 Gross

406,279 SF 21 Floors 100% Leased $36.00 NNN $20.02 Op/Ex $56.02 Gross

218,432 SF 15 Floors 61% Leased $31.00 -$35.00 NNN $16.50 Op/Ex $47.50 -$51.50 Gross

26

NORTHWEST SUBMARKET 3Q UPDATE BY SETH STUART | Associate, AQUILA Asset Services

49,936 SF Net Absorption

12.20%

Direct & Sublease Vacancy Rate

$35.72

Avg. Class A Full Service Rental Rate UFCU Plaza; Photo by Scott Mason Photography

NORTHWEST UPDATE

The Northwest competitive set experienced

positive absorption of nearly 50,000 SF this quarter following a negative second quarter. Counting against this small absorption figure are three large subleases new to market this quarter: 37,480 SF at Research Park Place Building 7 by Cadence Design Systems; 35,824 SF at Aspen Lake One by Informatica; and 45,457 SF at Riata Corporate Park Building 8 by Pervasive Software.

was quite a bit of preleasing and construction activity in the third quarter. Domain 8 went from 0% to 82% preleased this quarter, with Facebook and Amazon signing large leases in the Domain’s newest office building. WeWork also finished leasing the recently delivered Domain 1, bringing it to 100% leased.

While there haven’t been any new deliveries

HPI has joined in on the Domain movement and plans to build a 308,000 SF office building called Domain Tower that will be located at Braker Lane and Burnet Road. TIER REIT and

since Brandywine purchased and repurposed the IBM Broadmoor Campus earlier this year, there

Endeavor also recently announced plans for Domain 11 & 12, which would bring another

NORTHWEST MICROMARKETS

Round Rock Cedar Park

FAR NORTHWEST/ ROUND ROCK Pflugerville

Lake Travis

McNeil

Arboretum

Domain

SHEPHERD MOUNTAIN/ 2222

ARBORETUM/ DOMAIN

West Lake Hills

Tarrytown

Austin

28

NORTHWEST UPDATE

600,000 SF to Austin’s “second downtown” in 2018 between the Whole Foods and Domain 8. These new developments will be a minute’s walk from the newly opened Rock Rose, which includes a number of local bars and restaurants that have downtown locations, including Kung Fu, Lavaca Street Bar, Sway and Dogwood. Amenities such as these embody the live/work/ play atmosphere that tenants are looking for to lure young talent, but at a relatively more affordable rate than the downtown alternative. The Domain’s success has led many nearby landlords to refocus on their own building’s amenities. Braker Pointe I & II, for example, recently added a transportation service during lunch hours that takes tenants to a number of lunch spots in and around the Domain, while Braker Pointe III is adding a tenant lounge and fitness center and has upgraded its café. The Campus at Arboretum renovated all lobbies, outdoor amenities and landscaping, while UFCU Plaza upgraded its fitness center earlier this year.

Further south along MoPac Expressway from the Domain, on the other side of 183, The Atrium Office Centre was purchased by Eurus Capital Partners this quarter. The partnership has major plans for upgrading the lobby, elevators and roof of the building while developing the newly announced 95,863 SF MoPac Centre. Riata Crossing 6, a planned 50,000 SF office building next to the Apple Campus could give a tenant the ability to be in a new building but at a much more affordable price point and less than five miles from the Domain. There is no doubt that the flurry of capital market activity taking place in the Northwest is a response to the growing demand for the submarket – buyers can come in and buy an older building or campus, renovate it to make it more competitive with the Domain and surrounding areas, and capitalize on the high rental rates.

Riata Crossing 6 Rendering

29

NORTHWEST

COMPETITIVE SET PERFORMANCE NORTHWEST COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

12,845,611

1,197,426

320,587

171,918

11.82%

$32.93

2015 Q1

12,931,909

992,203

292,334

319,774

9.93%

$33.39

2015 Q2

13,120,924

897,208

284,035

292,309

9.00%

$33.83

2015 Q3

13,634,732

1,453,835

287,248

-46,032

12.77%

$33.40

2015 Q4

14,156,083

1,460,249

235,206

566,979

11.98%

$34.14

2016 Q1

15,142,863

1,422,335

395,496

864,404

12.00%

$35.14

2016 Q2

15,142,863

1,471,413

425,470

-79,052

12.53%

$35.44

2016 Q3

15,142,863

1,363,757

483,190

49,936

12.20%

$35.72

*Absorption includes sublease space

NET ABSORPTION 15% 12%

1,200

9% 800

6%

400 0

1,000

3% 2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

95%

800

93%

600

91%

400

89%

200

87%

0

85%

(200)

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Occupancy Rate

18%

1,600

Absorption (Thousands of SF)

2,000

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

83%

Di rect & Subleas e Vacancy Rate

Net Abs orption*

Di rect & Subleas e Occupancy Rate

$37

15%

$36

14%

$35

13%

$34

12%

$33

11%

$32

10%

$31

9%

$30

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

8%

Di rect & Subleas e Vacancy Rate

30

CEDAR PARK

ROUND ROCK 14 13 25

PFLUGERVILLE

2 1 3

19

LAKE TRAVIS

18 17

22

ARBORETUM 16

23 15

SHEPHERD MOUNTAIN

12 9

20 21

7

10

6

8

DOMAIN

4

11

24 5

NORTHWEST AUSTIN LARGE OFFICE AVAILABILITY 20,000 SF + of available space

Sublease Available SF

Total Available SF

60,652

0

60,652

6,245

33,147

39,392

0

35,824

32,952 62,448 167,158

0

Building

Direct Vacant SF

1

Amber Oaks F

2

Amber Oaks J

3

Aspen Lake One

4

Atrium Office Centre

5

Austin Oaks

6

Braker Pointe III

7

Domain 3

8

IBM Broadmoor Campus

9

Building

Direct Vacant SF

Sublease Available SF

Total Available SF

14

Paloma Ridge B

81,101

0

83,915

15

Park Centre Bldg 3

45,711

0

45,711

35,824

16

Prominent Pointe I

29,801

3,403

33,204

0

32,952

17

Research Park Place 7

0

40,279

40,279

8,499

70,947

18

Research Park Place 8

33,518

0

33,518

167,158

19

Research Park Plaza IV

3,355

96,334

99,689

0

33,390

33,390

20

Reserve at Bull Creek B

43,713

0

43,713

144,249

0

144,249

21

Reserve at Bull Creek C

43,695

0

43,695

Ladera Bend 3

0

27,980

27,980

22

Riata Corporate Park Bldg 8

0

45,457

45,457

10

Lakeview Plaza

11

Lakewood Center I

12

Lakewood on the Park B

13

Paloma Ridge A

31

9,276

23,952

33,228

23

River Place Corporate Park II

9,616

16,662

26,278

23,885

45,020

68,905

24

The Park at 8300 N. MoPac

38,869

0

38,869

37,232

0

37,232

25

Tower of the Hills/Tower Point

26,083

0

26,083

103,368

0

106,200

NORTHWEST AUSTIN OFFICE DEVELOPMENT Building

Total SF

Percent Preleased

Estimated Delivery

Status

1

Braker Pointe III*

195,230

16%

2016 Q4

Coming to Market

2

Domain 8

290,983

82%

2017 Q1

Under Construction

3

MoPac Centre

95,863

0%

2017 Q4

Under Construction

4

Four Points Centre Bldg 3

250,000

0%

2018 Q1

Planned

5

Domain Tower

308,000

0%

Planned

Planned

6

Amber Oaks Phase I

90,300

0%

Planned

Planned

7

Amber Oaks Phase II

90,300

0%

Planned

Planned

8

Amber Oaks Phase III

45,000

0%

Planned

Planned

9

Aspen Lake Three

128,700

0%

Planned

Planned

10

Frontera Ridge

400,000

0%

Planned

Planned

11

Four Points Centre Bldg 4

80,000

0%

Planned

Planned

12

Paloma Ridge C

112,500

0%

Planned

Planned

13

Preserve at 620

50,000 - 500,000

0%

Planned

Planned

14

Research Park Bldg 6

117,314

0%

Planned

Planned

15

Riata Corporate Park Bldg 1

65,000

0%

Planned

Planned

16

Riata Crossing Bldg 6

49,716

0%

Planned

Planned

*Already existing - Coming to market 4Q 2016

Planned

Under Construction

ROUND ROCK

CEDAR PARK

12

9

10

PFLUGERVILLE

6 7 8

14

15

16

13

LAKE TRAVIS

4 11

1 5

ARBORETUM

2

DOMAIN

3 32

SOUTHWEST SUBMARKET 3Q UPDATE BY DAVID PUTMAN | Principal, AQUILA Asset Services

19,331 SF Net Absorption

10.84%

Direct & Sublease Vacancy Rate

$38.88

Avg. Class A Full Service Rental Rate Lobby at Terrace 1; Photo by Scott Mason Photography

SOUTHWEST UPDATE

Much like the CBD and Northwest submarkets, the Southwest had a relatively quiet summer– no new projects were delivered, and asking rental rates continued to steadily march upwards, climbing $1.47 since 3Q 2015 to $38.88 Gross. This marks the 18th consecutive quarter of increasing rental rates – an impressive trend, further defining it as one of Austin’s most consistently desirable and resilient submarkets.

available for sublease next year at the Summit at Lantana: 58,480 SF available on the fourth floor of Building 3 of the AMD campus coming available in January of 2017 and 59,409 SF on the third floor coming available July 2017. This major sublease activity comes just three years after the IT Management Software company moved into the AMD Campus from its previous location at The Park on Barton Creek. Larger

tenants

Among competitive like the ones set buildings, it was above are not the only submarket all that constitute There is strong demand from small to to see positive net the demand for medium sized tenants touring Class A absorption in the Southwest Austin third quarter. Much office space. There space in the Southwest – particularly of this absorption is strong demand in the Near Southwest, where there came from Samsung from small to are no large blocks of new space. signing a new lease medium sized for over 100,000 tenants touring SF at 3900 Class A space in San Clemente. the Southwest – The consumer particularly in the electronics company plans to double its research Near Southwest, where there are no large blocks and development center for chip design in of new space. The primary industries looking Austin by moving into their new space in the for these smaller spaces are professional service Far Southwest early next year from its current firms such as law firms, engineering firms, location at Ladera Bend off RR 2222 in the investment advisors and private equity groups. Northwest submarket. Demand for the large availabilities in the Far Southwest appears to be limited as large block While Samsung’s move will not be reflected availabilities along Southwest Parkway remain in CBRE’s overall submarket’s absorption unchanged from last quarter, and prospect tours figures until next year, another major consumer are rumored to be down. electronics company, Apple, moved into their new 215,000 SF space at Capital Ridge this With vacancy rates between 10-11% and no quarter, also in the Far Southwest. Meanwhile, new deliveries on the horizon, rental rates Solarwinds will be listing over 100,000 SF will likely continue to be squeezed upwards

34

SOUTHWEST UPDATE

– particularly for Class A spaces in the Near Southwest. With the significant cost differential between the Near Southwest and the tightening downtown market, tenants being pushed out of the CBD will provide sustained demand in the

nearby alternatives just southwest of the Colorado River. Rental rates in the Far Southwest will likely remain relatively level due to additional sublease supply and limited demand on Southwest Parkway.

SOUTHWEST MICROMARKETS Lake Travis

McNeil

Arboretum

Domain

FAR SW West Lake Hills

Barton Creek

Tarrytown

Austin

Lost Creek

NEAR SW

Sunset Valley

ABIA

35

SOUTHWEST

COMPETITIVE SET PERFORMANCE SOUTHWEST COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

7,102,547

386,333

182,477

-104,946

8.01%

$35.87

2015 Q1

7,100,750

399,919

188,613

-21,519

8.29%

$36.76

2015 Q2

7,782,464

428,605

213,812

627,829

8.25%

$37.35

2015 Q3

7,949,325

353,625

264,345

191,308

7.77%

$37.41

2015 Q4

8,158,872

634,326

246,492

-53,301

10.80%

$37.94

2016 Q1

8,161,143

680,309

195,638

7,142

10.73%

$38.47

2016 Q2

8,161,143

696,616

213,561

-34,230

11.15%

$38.65

2016 Q3

8,153,822

611,657

271,868

19,331

10.84%

$38.88

*Absorption includes sublease space

15%

800

12%

600

9%

400

6%

200

3%

0

0%

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

800

95%

600

93%

400

91%

200

89%

0

87%

(200)

Di rect & Subleas e Vacancy Rate

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Occupancy Rate

1,000

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

85%

Di rect & Subleas e Occupancy Rate

$40

12%

$38

10%

$36

8%

$34

6%

$32

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

4%

Di rect & Subleas e Vacancy Rate

36

9 1

2

6

WEST LAKE HILLS

BEE CAVE

8

5

BARTON CREEK UT SO

T ES HW

11

PK

WY

4 14 10

12 13

7

SOUTHWEST AUSTIN LARGE OFFICE AVAILABILITY 20,000 SF + of available space Building

37

Direct Vacant SF

Sublease Available SF

Total Available SF

1

3700 San Clemente

51,534

0

51,534

2

3900 San Clemente

22,912

0

22,912

3

Barton Oaks Plaza V

28,784

0

28,784

4

Barton Skyway II

5,896

35,624

41,520

5

Cityview Center

0

24,478

24,478

6

Crystal Mountain 1, 2 & 3

24,070

4,800

28,870

7

Encino Trace II

101,822

0

101,822

8

Las Cimas II

19,402

30,259

49,661

9

Plaza on the Lake I

8,936

21,596

30,532

10

Rialto II

0

36,421

36,421

11

Rollingwood Center I & II

0

44,435

44,435

12

The Park on Barton Creek 1

21,262

0

21,262

13

The Park on Barton Creek 2

38,777

0

38,777

14

The Summit at Lantana Bldgs 1-5

52,934

0

52,934

3

SOUTHWEST AUSTIN OFFICE DEVELOPMENT Building

Total SF

1

Walsh Tarlton Overlook

2

Lantana Ridge I & II

3

The Overlook at Barton Creek

4

3800 San Clemente

5

Galleria Oaks I & II

6

Percent Preleased

Estimated Delivery

Status

55,500

0

2017 Q2

Under Construction

175,000

100%

2017 Q2

Under Construction

53,091

0

2017 Q3

Under Construction

130,000

0

Planned

Planned

147,928

50%

Planned

Planned

The Backyard - Buildings B, J, & H

171,450

0

Planned

Planned

7

Overwatch Campus Phase II

123,525

0

Planned

Planned

8

Regency Park

90,000

0

Planned

Planned

9

Rollingwood Center III

107,000

0

Planned

Planned

10

The Terrace 3

203,130

0

Planned

Planned

11

The Terrace 4

285,663

0

Planned

Planned

12

The Terrace 5

218,809

0

Planned

Planned

Planned

Under Construction

4

3 6

5

WEST LAKE HILLS

BEE CAVE

BARTON CREEK UT SO

9

T ES HW

PK

WY

1 10 12 11

2 7 8

38

AVAILABILITY SUMMARY SOUTHWEST CLASS A 5

5

5

5

4

4

4

4

4

4

3

3

3

25,137 SF

3

3

3,647 SF

2

2

1

1

3 2,500 SF

2

2,840 SF

1

NSW

6,982 SF

7,123 SF

3,677 SF

2

5,736 SF

2

2

1

5,438 SF

1

1

NSW

NSW

NSW

5

NSW

NSW

Barton Oaks Plaza I 901 S Mopac Expy

Barton Oaks Plaza II 901 S Mopac Expy

Barton Oaks Plaza III 901 S Mopac Expy

Barton Oaks Plaza IV 901 S Mopac Expy

Barton Oaks Plaza V 901 S Mopac Expy

One Barton Skyway 1501 S Mopac Expy

5 Floors 99,404 SF 97% Leased $28.00 NNN $15.98 Op/Ex $43.98 Gross

5 Floors 116,448 SF 88% Leased $27.00 NNN $15.56 Op/Ex $42.56 Gross

5 Floors 121,467 SF 91% Leased $27.00 NNN $14.59 Op/Ex $41.59 Gross

5 Floors 112,000 SF 100% Leased $27.00 NNN $14.93 Op/Ex $41.93 Gross

5 Floors 119,549 SF 76% Leased $27.00 NNN $14.47 Op/Ex $41.47 Gross

4 Floors 195,324 SF 100% Leased $26.50-$27.50 NNN $14.95 Op/Ex $41.45-$42.50 Gross

5 42,671 SF

4

3

42,369 SF

3

3

13,280 SF

2

16,782 SF

2

2

19,402 SF 2,433 SF

1

14,546 SF

4

1

1

FSW

FSW

3,700 SF

FSW

3

3,021 SF

4

4,745 SF

15,047 SF

3

14,373 SF

2

2

1

1

1

FSW

FSW

FSW

Encino Trace I 5707 Southwest Pkwy

Encino Trace II 5707 Southwest Pkwy

Las Cimas I 804 Las Cimas Pkwy

Las Cimas II 807 Las Cimas Pkwy

Las Cimas III 805 Las Cimas Pkwy

Las Cimas IV 900 S Capital of Tx Hwy

4 floors 161,606 SF 100% Leased $24.50 NNN $13.15 Op/Ex $37.65 Gross

4 floors 158,137 SF 36% Leased $24.50 NNN $13.15 Op/Ex $37.65 Gross

3 Floors 85,000 SF 96% Leased $23.50 NNN $14.29 Op/Ex $37.79 Gross

4 Floors 156,682 SF 88% Leased $26.50 NNN $14.92 Op/Ex $41.42 Gross

4 Floors 156,682 SF 88% Leased $26.50 NNN $14.73 Op/Ex $41.23 Gross

5 Floors 138,008 SF 97% Leased $27.00 NNN $14.58 Op/Ex $41.58 Gross

5 4

4 17,159 SF

27,276 SF

NSW

2

2

2

1

1

3

2

2

1

1

NSW

Rollingwood Center II 2500 Bee Caves Rd

4 Floors 145,437 SF 100% Leased $30.00 NNN $12.00 Op/Ex $42.00 Gross

2 Floors 69,150 SF 100% Leased $30.00 NNN $12.00 Op/Ex $42.00 Gross

FSW

3600 San Clemente B 3600 N Capital of Tx Hwy 3 Floors 90,267 SF 100% Leased $27.00 NNN $15.63 Op/Ex $42.63 Gross

51,534 SF

FSW

3700 San Clemente 3700 N Capital of Tx Hwy 5 Floors 249,870 SF 79% Leased $27.00 NNN $13.27 Op/Ex $40.27 Gross

11,038 SF

3 52,934 SF

FSW

3900 San Clemente 3900 N Capital of Tx Hwy 5 Floors 251,146 SF 91% Leased $26.00 NNN $13.81 Op/Ex $39.81 Gross

Southwest Submarket

2

1

1

Availability Summary 39

4

4 3

3

Rollingwood Center I 2500 Bee Caves Rd

5 11,874 SF

3

3

3

2

FSW

The Summit at Lantana Bldg 300 7171 Southwest Pkwy 4 Floors 217,077 SF 76% Leased $25.00 NNN $13.06 Op/Ex $38.06 Gross

7 6 5

5

4

4

4

4

4

3

3

3

3

3

2

2

2

2

2

2

1

1

1

1

1

1

4

3

5,896 SF 35,624 SF

NSW

9,302 SF

NSW

5

NSW

FSW

FSW

FSW

Two Barton Skyway 1601 S Mopac Expy

Three Barton Skyway 1221 S Mopac Expy

Four Barton Skyway 1301 S Mopac Expy

Capital Ridge 320 Capital of Tx Hwy

Dimensional Place 1 6304 Bee Caves Rd

Dimensional Place 2 6300 Bee Caves Rd

4 Floors 195,639 SF 97% Leased $26.50-$27.50 NNN $14.61 Op/Ex $41.11-$42.11 Gross

4 Floors 173,302 SF 95% Leased $26.50-$27.50 NNN $14.52 Op/Ex $41.02-$42.02 Gross

5 Floors 222,580 SF 100% Leased $26.50-$27.50 NNN $13.86 Op/Ex $40.36-$41.36 Gross

7 floors 216,511 SF 100% Leased $30.00 NNN $10.56 Op/Ex $40.56 Gross

7 Floors 220,000 SF 100% Leased $24.00 NNN $12.42 Op/Ex $36.42 Gross

5 Floors 156,000 SF 100% Leased $24.00 NNN $12.42 Op/Ex $36.42 Gross

5 4

5 21,262 SF

4

3

3

3

2

2

2

1

1

4,125 SF

1

NSW

NSW

Mira Vista 2705 Bee Caves Rd

4,779 SF

3

21,596 SF

3

20,228 SF

2

9,506 SF

2

8,936 SF

2

18,549 SF

1

1,806 SF

1

NSW

The Park on Barton Creek One 3711 S Mopac Expy 5 floors 102,608 SF 79% Leased $26.00 NNN $14.02 Op/Ex $40.02 Gross

3 Floors 121,147 SF 100% Leased $27.50 NNN $14.02 Op/Ex $41.52 Gross

3

FSW

The Park on Barton Creek Two 3711 S Mopac Expy 5 floors 102,587 SF 62% Leased $26.00 NNN $14.47 Op/Ex $40.47 Gross

FSW

5000 Plaza on the Lake 5000 Plaza on the Lake Dr. 3 Floors 118,063 SF 86% Leased $27.50 NNN $15.85 Op/Ex $43.35 Gross

6

5,725 SF

Plaza on the Lake I 5001 Plaza on the Lake Dr. 3 Floors 122,530 SF 93% Leased $28.50 NNN $15.62 Op/Ex $44.12 Gross

6

6,297 SF

5

3,493 SF

5

5

5

4

4

4

4

4

3

3

6,354 SF

3

3

3

2

2

1,281 SF

2

2

2

1

1

1

1

FSW

The Summit at Lantana Bldg 400 7171 Southwest Pkwy 4 Floors 220,218 SF 100% Leased $25.00 NNN $13.06 Op/Ex $38.06 Gross

1

NSW

3,447 SF

NSW

2,974 SF

8,456 SF

NSW

1

NSW

The Terrace I 2600 Via Fortuna

The Terrace II 2700 Via Fortuna

The Terrace VI 2901 Via Fortuna

The Terrace VII 2801 Via Fortuna

5 Floors 115,460 SF 93% Leased $26.50 NNN $15.99 Op/Ex $42.49 Gross

5 Floors 114,635 SF 97% Leased $26.50 NNN $15.65 Op/Ex $42.15 Gross

6 Floors 196,717 SF 96% Leased $29.50 NNN $15.92 Op/Ex $45.42 Gross

6 Floors 196,215 SF 95% Leased $30.00 NNN $15.99 Op/Ex $45.99 Gross

Austin, TX Q3 2016 Class A Office Space

To find out more, visit:

FSW

Plaza on the Lake II 4801 Plaza on the Lake Dr. 3 Floors 111,166 SF 100% Leased $28.50 NNN $14.96 Op/Ex $43.46 Gross

SUBLEASE SPACE AVAILABLE SPACE

aquilacommercial.com/reports

40

Caption; Photo by

TheAppendix Competitive Sets

43-54

Central Business District

43

Arboretum/Domain

44

Shepherd Mountain/2222

47

Far Northwest

49

Near Southwest

51

Far Southwest

53

Longterm Performance of Submarkets

55

Longterm Performance: CBD vs. Suburban

56

CBD Overall Performance

57

Southwest Overall Performance

59

Northwest Overall Performance

61

The AQUILA Methodology

63

COMPETITIVE SET

BUILDING LISTS AND SUBMARKET DATA CBD COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

100 Congress

411,536

14,835 ↓

5,855

$40.00

$22.69 ↑

300 West 6th

454,225

32,733 ↑

16,106 ↑

$38.00 ↑

$22.00 ↑

301 Congress

418,338

69,862 ↑

7,956 ↑

$35.00

$19.55

400 West 15th

281,196

9,905 ↑

6,858 ↓

$28.00 ↑

$17.47 ↑

501 Congress

122,551

17,400 ↓

20,396

$35.00

$22.53 ↑

515 Congress

263,058

6,848 ↑

0↓

$34.00

$18.05

5th + Colorado

179,000

24,052 ↓

0

$40.00

$15.20

600 Congress Ave.

503,951

13,187 ↑

0

$35.00 ↑

$18.60 ↓

816 Congress

434,081

10,821

3,325

$32.00

$17.59

Austin Centre

326,335

25,691 ↑

0↓

$28.50 ↑

$17.65

Capitol Center

164,044

9,985

1,616 ↓

$30.00

$19.70

Capitol Tower

172,837

10,580

0

$31.00

$16.52

Chase Tower

389,503

0↓

5,418

$37.00 ↓

$19.85

Colorado Tower

373,334

0

0

$34.00

$16.83

Frost Bank Tower

535,078

20,555 ↑

5,635 ↑

$42.00 ↑

$22.00 ↑

IBC Bank Plaza

194,749

0

0

$35.00 ↑

$21.00

Lavaca Plaza

118,635

6,714 ↓

0

$32.50

$21.74

Littlefield Building

109,779

19,907 ↑

5,979 ↑

$33.00 ↓

$18.08

One Congress Plaza

518,385

28,387 ↑

4,797 ↑

$40.00 ↑

$18.14

San Jacinto Center

406,279

0

7,306

$36.00

$20.02

Scarbrough Building

130,789

9,973 ↓

6,615 ↑

$35.00

$19.04

Seaholm

143,151

0

0

$28.00

$12.00

Building Name

43

COMPETITIVE SET

ARBORETUM/DOMAIN MICROMARKET PERFORMANCE ARBORETUM/DOMAIN COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

6,474,987

445,544

121,157

214,458

8.75%

$34.38

2015 Q1

6,553,774

447,850

71,595

126,043

7.93%

$34.46

2015 Q2

6,742,789

389,248

63,891

255,321

6.72%

$34.77

2015 Q3

6,719,697

407,169

76,078

-53,200

7.19%

$34.38

2015 Q4

6,938,611

322,314

93,200

286,647

5.99%

$34.82

2016 Q1

8,253,506

617,666

88,016

1,024,727

8.55%

$35.76

2016 Q2

8,253,506

687,546

100,846

-82,710

9.55%

$36.09

2016 Q3

8,253,506

664,105

94,513

29,774

9.19%

$36.42

*Absorption includes sublease space

15%

800

12%

600

9%

400

6%

200

3%

0

0%

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

Di rect & Subleas e Vacancy Rate

1,100 1,000 900 800 700 600 500 400 300 200 100 0 (100)

97% 95% 93% 91% 89%

Occupancy Rate

1,000

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

87% 2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

85%

Di rect & Subleas e Occupancy Rate

$37

11%

$36

9%

$35

7%

$34

5%

$33

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

3%

Di rect & Subleas e Vacancy Rate

44

COMPETITIVE SET

ARBORETUM/DOMAIN MICROMARKET COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

3307 Northland

98,888

1,645 ↑

0

$17.50

$11.52

9500 Arboretum

182,331

0

0

$22.00

$13.51

Arboretum Atrium

90,280

8,222 ↑

8,222

$21.00

$14.38

Arboretum Plaza One

146,347

4,998 ↑

0

$28.00 ↑

$15.53

Arboretum Plaza Two

98,828

0

0

$28.00 ↑

$15.53

Arboretum Point

150,033

0

0

$23.00

$13.44

Atrium Office Centre

199,858

32,952 ↑

0

$18.50 ↑

$9.95 ↑

Austin Oaks

445,240

62,448 ↑

8,499 ↑

$19.00

$11.60

Balcones Centre

74,876

0

0

$26.00 ↑

$10.67 ↑

Braker Pointe I

77,454

8,714

0

$22.50

$13.31

Braker Pointe II

103,114

1,953

5,162

$22.50

$13.07

Braker Pointe III

196,380

167,158

0

$25.00

$12.84

Colina West

69,299

3,245 ↓

0↓

$20.50

$11.73

Domain 1

124,571

0↓

0

$31.00 ↑

$11.00

Domain 2

143,331

0

0

$31.00 ↑

$11.00

Domain 3

179,006

0

33,390 ↑

$27.00 ↑

$11.90 ↑

Domain 4

152,012

0

0

$25.00 ↑

$11.16

Building Name

Domain 5

78,987

0

0

$26.00

$11.00

Domain 7

221,973

13,948 ↑

0

$29.00

$12.00

Domain Gateway

173,962

0

0

$28.00

$14.95

Great Hills Corporate Center I

59,228

11,196 ↑

0

$18.50

$11.39

Great Hills Corporate Center II

60,429

0

0

$18.00

$1139

Great Hills Corporate Center III

56,422

0↓

0

$18.50

$11.39

Great Hills Plaza

139,252

5,855

0

$22.00 ↑

$13.65 ↑

Greystone Plaza

78,248

16,119 ↑

0

$20.00

$13.04

Heritage Plaza

74,736

7,677

0

$29.00 ↑

$12.49

IBM Broadmoor Campus

45

Estimated OpEx

1,111,734

144,249 ↓

0

$24.00 ↓

$11.00 ↓

Kaleido I & II

73,149

8,409 ↑

0

$18.50

$9.93

Lakeview Plaza

120,559

9,276

23,952 ↑

$22.50 ↑

$13.10 ↑

Northpoint Centre I & II

151,126

6,714 ↑

0

$23.00

$12.33

COMPETITIVE SET

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Offices at the Domain Bldg 1

92,955

0

0

$27.50

$15.49

Offices at the Domain Bldg 2

75,509

0

0

$27.50

$14.75

One Far West Plaza

70,642

1,518 ↑

0

$18.00

$12.87

Park North I & II

133,568

0↓

0

$19.50

$11.83

Plaza 7000

155,076

1,712 ↓

2,653

$26.00

$13.82

Prominent Pointe I

150,376

29,801 ↓

3,403 ↑

$24.50

$14.72

Prominent Pointe II

102,567

10,201 ↑

8,409 ↓

$24.50

$15.62

Quarry Lake Business Center

117,512

0

0

$22.00 ↑

$13.75 ↑

Quarry Oaks I

165,435

0

0

$27.00

$11.82

Quarry Oaks II

126,000

0↓

0

$27.00

$11.48

Quarry Oaks III

137,615

0

0↓

$28.00

$12.00 ↓

Reunion Park

118,142

18,962 ↑

0

$19.00

$11.16

Stone Creek I

76,860

0

0

$24.00

$10.90

Stone Creek II

162,723

0↓

0

$24.00

$13.31

Stone Creek Park

77,185

0

0

$20.00

$13.45

Stonebridge Plaza I

193,200

0

0

$28.00 ↑

$14.97

Stonebridge Plaza II

192,864

10,986 ↑

0

$28.00 ↑

$15.04

Stratum Executive Center Bldg A

61,000

0↓

0

$22.00 ↑

$14.12

Stratum Executive Center Bldg B

61,000

0

0

$22.00 ↑

$14.12

Stratum Executive Center Bldg C

61,000

3,099 ↓

0

$22.00 ↑

$14.12

Stratum Executive Center Bldg D

61,000

3,715

0

$22.00 ↑

$14.12

The Campus at Arboretum 1

60,059

0↓

0

$23.50

$14.13

The Campus at Arboretum 2

33,135

0

823 ↑

$23.50

$13.60

The Campus at Arboretum 3

32,765

0

0

$23.50

$14.53

The Campus at Arboretum 4

85,916

10,066 ↓

0

$23.50

$14.17

The Campus at Arboretum 5

105,000

0

0

$23.50

$13.94

The Park at 8300 N. MoPac

93,317

38,869 ↑

0↓

$23.00

$14.01

UFCU Plaza

246,869

7,892 ↓

0

$22.00

$13.30

Westech 360 Bldgs 1-4

175,529

6,225 ↑

0

$21.00 ↑

$13.60

Westpark Office 1-4

97,034

6,281 ↓

0

$18.50

$10.89

Building Name

46

COMPETITIVE SET

SHEPHERD MOUNTAIN/2222 MICROMARKET PERFORMANCE SHEPHERD MOUNTAIN/2222 COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

2,688,442

389,788

2015 Q1

2,690,750

207,238

127,233

21,008

19.23%

$33.10

179,538

132,553

14.37%

$34.17

2015 Q2

2,690,750

2015 Q3

2,690,750

181,807

152,245

52,724

12.41%

$34.45

193,874

135,899

4,279

12.26%

$34.55

2015 Q4

2,690,835

173,907

79,703

76,248

9.42%

$35.16

2016 Q1

2,690,835

266,741

97,821

-110,952

13.55%

$36.11

2016 Q2

2,690,835

293,144

137,974

-66,556

16.02%

$36.16

2016 Q3

2,690,835

304,989

137,636

-11,507

16.45%

$36.65

*Absorption includes sublease space

18%

525 350

12%

175 0

6%

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

$36

18%

$34

12%

$32

6%

$30

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

47

2015 Q4

2016 Q1

2016 Q2

2016 Q3

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 24%

160

91%

120

89%

80

87%

40

85%

0

83%

(40)

81%

(80)

79%

(120)

77%

(160)

Di rect & Subleas e Vacancy Rate

$38

Absorption (Thousands of SF)

24%

Vacancy Rate

Availability (Thousands of SF)

700

NET ABSORPTION

2014 Q4

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Di rect & Subleas e Occupancy Rate

75%

Occupancy Rate

AVAILABLE SF VS. VACANCY RATE

COMPETITIVE SET

SHEPHERD MOUNTAIN/2222 MICROMARKET COMPETITIVE SET BUILDINGS Building Name

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Bridgepoint Plaza I

105,333

0

0

$23.50

$13.54

Bridgepoint Plaza II

72,640

5,016

0↓

$23.50

$13.54

Bridgepoint Square 1

84,692

6,636

0↓

$25.00 ↑

$13.22

Bridgepoint Square 2

92,459

0↓

16,005

$25.00 ↑

$13.22

Bridgepoint Square 3

78,352

0

0

$25.00 ↑

$13.22

Bridgepoint Square 4

109,175

15,330 ↑

0

$25.00 ↑

$13.22

Bridgepoint Square 5

76,793

5,646

12,000 ↑

$25.00 ↑

$13.22

Champion Office Park I & II

230,000

0

0

$26.50

$11.00

Four Points Centre I & II

192,396

0

0

$23.50

$13.44

Ladera Bend 1

56,466

0

0

$22.00

$16.34

Ladera Bend 2

45,732

0

0

$22.00

$14.10

Ladera Bend 3

56,196

0

27,980

$22.00

$14.67

Lakewood Center I

47,389

23,885

45,020

$22.50

$13.49

Lakewood Center II

44,611

0

0

$22.50

$13.49

Lakewood on the Park B

102,086

37,232 ↑

0

$21.50

$12.51

Lakewood on the Park C

78,596

12,808 ↓

0

$21.50

$12.51

Millennium Building

125,612

6,290 ↑

0

$24.00

$12.58

Park Centre Bldg 1

89,822

0

3,279 ↑

$18.00

$12.60

Park Centre Bldg 2

35,095

18,730

0

$18.00

$12.60

Park Centre Bldg 3

78,270

45,711

0↓

$18.00

$12.60

Reserve at Bull Creek A

43,867

11,365

0

$20.00

$12.20

Reserve at Bull Creek B

43,713

43,713

0

$20.00

$12.20

Reserve at Bull Creek C

43,695

43,695

0

$20.00

$12.20

River Place Corporate Park I

76,529

0

0

$23.00 ↑

$14.50

River Place Corporate Park II

114,491

9,616

16,662

$23.00 ↑

$14.12

River Place Corporate Park III

113,465

0

15,707

$23.00 ↑

$13.82

River Place Corporate Park IV

87,639

8,601

0

$23.00 ↑

$14.07

River Place Corporate Park V

67,601

0

0

$23.00 ↑

$14.21

River Place Corporate Park VI

62,037

0

0

$23.00 ↑

$14.13

River Place Corporate Park VII

69,119

0

0

$23.00 ↑

$14.39

Shepherd Mountain Plaza

100,937

0↓

983

$38.00 ↑

$12.39

Stone Cliff

66,027

10,715

0

$18.00

$12.46

48

COMPETITIVE SET

FAR NORTHWEST MICROMARKET PERFORMANCE FAR NORTHWEST COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

3,682,182

362,094

72,197

-63,548

11.79%

$30.26

2015 Q1

3,687,385

337,115

41,201

61,178

10.26%

$30.93

2015 Q2

3,687,385

326,153

67,899

-15,736

10.69%

$31.66

2015 Q3

4,224,285

852,792

75,271

2,889

21.97%

$31.12

2015 Q4

4,526,637

964,028

62,303

204,084

22.67%

$32.36

2016 Q1

4,198,522

537,928

209,659

-49,371

17.81%

$33.30

2016 Q2

4,198,522

490,723

186,650

70,214

16.13%

$33.73

2016 Q3

4,198,522

394,663

251,041

31,669

15.38%

$33.56

*Absorption includes sublease space

24%

1,000

20%

800

16%

600

12%

400

8%

200

4%

0

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

$32

16%

$30

8%

$28

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

49

2015 Q4

2016 Q1

2016 Q2

2016 Q3

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 24%

98%

200

91%

100

84%

0

77%

(100)

Di rect & Subleas e Vacancy Rate

$34

300

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Di rect & Subleas e Occupancy Rate

70%

Occupancy Rate

1,200

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

COMPETITIVE SET

FAR NORTHWEST MICROMARKET COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Amber Oaks A

78,164

19,124 ↑

0

$19.50

$11.67

Amber Oaks B

44,184

0

0

$19.50

$8.30

Amber Oaks C

44,184

0

0

$19.50

$8.60

Amber Oaks D

28,733

0

0

$19.50

$10.45

Building Name

Amber Oaks E

63,111

0

0

$19.50

$8.03

Amber Oaks F

79,732

60,652

0

$19.50

$11.64

Amber Oaks G

106,455

6,760 ↑

0

$19.50

$11.61

Amber Oaks H

101,045

0

0

$19.50

$10.93

Amber Oaks I

50,313

10,828

0

$19.50

$13.03

Amber Oaks J

50,111

6,245

33,147

$19.50

$12.14

Aspen Lake One

204,940

0

35,824 ↑

$22.00

$13.26

Aspen Lake Two

129,000

0

0

$24.50

$10.00

Crossings at Lakeline I

114,726

0

0↓

$22.50 ↑

$11.83

Crossings at Lakeline II

118,046

5,192 ↓

0↓

$22.50 ↑

$12.03

Paloma Ridge A

106,200

106,200

0

$19.00 ↑

$9.50

Paloma Ridge B

106,200

83,915 ↓

0

$19.00 ↑

$9.50

Parmer Business Park 7, 8, 9

123,731

0

0

$18.50

$5.60

Parmer Business Park D, E, F

107,283

0

0

$18.50

$5.60

Pecan Park I

136,444

2,328 ↑

0

$22.50

$11.92 ↑

Pecan Park II

136,245

0

0

$19.50

$9.45

Research Park Place 7

125,701

0

40,279 ↑

$23.00

$13.20

Research Park Place 8

125,700

33,518

0

$23.00

$13.20

Research Park Plaza I

135,541

7,641 ↓

0

$23.00

$14.98

Research Park Plaza II

131,027

0

0

$23.00

$14.98

Research Park Plaza III

173,530

0

0

$24.00

$13.08

Research Park Plaza IV

184,114

3,355

96,334

$24.00

$14.93

Research Park Plaza V

172,854

4,754 ↓

0

$24.00

$11.06

Riata Corporate Park Bldg 2

63,372

7,054

0↓

$22.00

$13.65

Riata Corporate Park Bldg 3

63,849

0

0

$22.00

$13.65

Riata Corporate Park Bldg 4

93,737

10,445 ↓

0

$22.00

$13.65

Riata Corporate Park Bldg 5

93,828

6,215

0

$22.00

$13.65

Riata Corporate Park Bldg 6

93,835

0

0

$22.00

$13.65

Riata Corporate Park Bldg 7

92,719

0

0↓

$22.00

$13.65

Riata Corporate Park Bldg 8

93,718

0

45,457 ↑

$22.00

$13.65

Riata Corporate Park Bldg 9

92,973

0

0

$22.00

$13.65

Riata Crossing Bldg 1

81,775

0

0

N/A

N/A

Riata Crossing Bldg 2

114,906

0

0

N/A

N/A

Riata Crossing Bldg 3

81,229

0

0

N/A

N/A

Riata Crossing Bldg 4

79,465

0

0

N/A

N/A

Tower of the Hills/Tower Point

175,802

26,083 ↑

0

$21.00 ↓

$12.82

50

COMPETITIVE SET

NEAR SOUTHWEST MICROMARKET PERFORMANCE NEAR SOUTHWEST COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

2,713,137

158,703

124,248

18,099

10.43%

$37.50

2015 Q1

2,711,340

143,863

125,110

12,181

9.92%

$38.69

2015 Q2

2,925,937

110,815

101,710

271,045

7.26%

$38.96

2015 Q3

2,925,937

105,532

175,528

-68,535

9.61%

$39.31

2015 Q4

2,925,937

149,170

165,733

-33,843

10.76%

$40.02

2016 Q1

2,926,017

137,847

113,003

64,133

8.57%

$40.53

2016 Q2

2,926,017

185,286

98,583

-33,019

9.70%

$40.93

2016 Q3

2,926,017

198,831

117,508

-32,470

10.81%

$41.35

*Absorption includes sublease space

16%

300

12%

200

8%

100

4%

0

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

$41

15%

$39

12%

$37

9%

$35

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

51

2015 Q4

2016 Q1

2016 Q2

2016 Q3

6%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 18%

100%

200

96%

100

92%

0

88%

(100)

Di rect & Subleas e Vacancy Rate

$43

300

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

84%

Di rect & Subleas e Occupancy Rate

Occupancy Rate

400

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

COMPETITIVE SET

NEAR SOUTHWEST MICROMARKET COMPETITIVE SET BUILDINGS Building Name

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Barton Creek Plaza I

72,974

9,875

0

$24.00

$13.65

Barton Creek Plaza II

64,718

2,798 ↓

8,929

$24.00

$12.83

Barton Creek Plaza III

64,842

0

9,432 ↑

$24.00

$12.83

Barton Oaks Plaza I

99,404

2,500 ↓

2,840 ↑

$28.00 ↑

$15.98

Barton Oaks Plaza II

116,448

14,135 ↓

3,667 ↑

$27.00 ↑

$15.56

Barton Oaks Plaza III

121,467

11,174

0

$27.00 ↑

$14.59

Barton Oaks Plaza IV

112,000

0

0

$27.00 ↑

$14.73

Barton Oaks Plaza V

119,549

28,784 ↑

0↓

$27.00

$14.47

Barton Skyway I

195,324

0↓

0↓

$26.50

$14.95

Barton Skyway II

195,639

5,896

35,624 ↑

$26.50

$14.61

Barton Skyway III

173,302

9,302 ↓

0

$26.50

$14.52

Barton Skyway IV

222,580

0

0

$26.50

$13.86

Centre I

39,903

2,725 ↑

0

$20.50

$12.50

Centre II

54,610

11,083

0

$19.50

$12.47

Mira Vista

121,147

0

4,125

$27.50

$14.02

Overlook at Gaines Ranch

50,725

10,949

0

$26.50

$14.61

Rollingwood Center I & II

214,587

0

44,435

$30.00

$12.00

Spyglass Point

58,576

0

0

$22.00

$13.45

The Park on Barton Creek 1

102,608

21,262

0↓

$26.00 ↑

$14.02

The Park on Barton Creek 2

102,587

38,777 ↓

0

$26.00 ↑

$14.47

The Terrace 1

115,460

7,635 ↓

0

$26.50 ↑

$15.99

The Terrace 2

114,635

3,447

0

$26.50 ↑

$15.65

The Terrace 6

196,717

8,699 ↓

8,456 ↑

$29.50 ↑

$15.92

The Terrace 7

196,215

9,790 ↑

0

$30.00 ↑

$15.99

52

COMPETITIVE SET

FAR SOUTHWEST MICROMARKET PERFORMANCE FAR SOUTHWEST COMPETITIVE SET Quarter

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

4,389,410

227,630

58,229

-123,045

6.51%

$34.86

2015 Q1

4,389,410

256,056

63,503

-33,700

7.28%

$35.57

2015 Q2

4,856,527

317,790

112,102

356,784

8.85%

$36.39

2015 Q3

5,023,388

248,093

88,817

259,843

6.71%

$36.31

2015 Q4

5,232,935

485,156

80,759

-19,458

10.81%

$36.75

2016 Q1

5,235,126

542,462

82,635

-56,991

11.94%

$37.28

2016 Q2

5,235,126

511,330

114,978

-1,211

11.96%

$37.34

2016 Q3

5,227,805

412,826

154,360

51,801

10.85%

$37.47

*Absorption includes sublease space

15%

600

12%

450

9%

300

6%

150

3%

0

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

$36

12%

$34

8%

$32

4%

$30

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

53

2015 Q4

2016 Q1

2016 Q2

2016 Q3

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 16%

99%

300

96%

150

93%

0

90%

(150)

Di rect & Subleas e Vacancy Rate

$38

450

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Di rect & Subleas e Occupancy Rate

87%

Occupancy Rate

750

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

COMPETITIVE SET

FAR SOUTHWEST MICROMARKET COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

3600 San Clemente Bldg B

90,267

0

0

$27.00 ↑

$15.63

3700 San Clemente

249,870

51,534 ↓

0

$27.00 ↓

$13.27

3900 San Clemente

251,146

22,912 ↓

0

$26.00 ↑

$13.81

5000 Plaza on the Lake

118,063

16,091 ↑

0↓

$27.50

$15.85

7000 West at Lantana 1 & 2

136,075

0

0

DND

DND

Canyon at Wild Basin

74,580

5,172 ↓

0

$24.50

$12.04

Capital Ridge

216,511

0

0

$30.00

$10.56

Cielo Center

270,711

7,322 ↑

5,656 ↑

$20.50 ↑

$13.32

Cityview 1

46,702

0

0

$22.00

$13.55

Cityview 2

47,809

0

0

$22.00

$13.55

Cityview 3

48,044

0

0↓

$22.00

$13.55

Cityview Center

137,763

0

24,478

$26.00

$11.79

Crystal Mountain 1, 2 & 3

61,762

24,070 ↑

4,800 ↑

$25.50 ↓

$9.41

Dimensional Place I

220,000

0

0

$24.00

$12.42

Dimensional Place II

156,000

0

0

$24.00

$12.42

Encino Trace I

161,606

0

0

$24.50 ↑

$13.15

Encino Trace II

158,137

101,822

0

$24.50 ↑

$13.15

Escalade Bldg A

58,344

9,440

0

$21.50 ↑

$13.46

Escalade Bldg B

57,142

2,180 ↓

0

$21.50 ↑

$13.46

Lake Pointe II

42,933

5,489

0

$14.00

$10.09

Las Cimas I

85,000

3,700

0

$23.50

$14.29

Las Cimas II

156,682

19,402

30,259 ↑

$26.50

$14.92

Las Cimas III

156,682

18,068 ↑

0

$26.50

$14.73

Las Cimas IV

138,008

4,745 ↑

14,373

$27.00

$14.58

Lost Creek Point

73,026

4,695

0

$18.00

$12.29

Parkway at Oak Hill I & II

145,475

6,021

0

$24.00

$13.84

Plaza 290

63,163

5,331 ↑

0

$19.00 ↑

$12.50

Plaza on the Lake I

122,530

8,936

21,596 ↑

$28.50

$15.62 ↑

Plaza on the Lake II

111,166

0

0

$28.50

$14.96

Rialto I

77,755

16,853 ↑

0↓

$23.50

$13.23 ↓

Rialto II

77,732

0

36,421

$23.50

$13.23 ↓

The Enclave Bldgs 1-4

44,704

5,500 ↑

2,750 ↑

$19.00

$9.97

The Summit at Lantana Bldgs 1-5

865,832

52,934

0

$25.00

$13.06

Travis Oaks

123,434

4,110 ↑

1,750 ↑

$23.50 ↓

$13.30

Vista Ridge I

67,933

2,199

0

$19.00

$11.00

Westlake Place

61,184

4,585 ↓

0

$20.00

$13.39

Wild Basin Atrium Bldg A & B

118,910

6,859

0

$18.00

$9.40

Wild Basin I

60,498

2,856

0↓

$19.50 ↑

$11.81

Wild Basin II

74,626

0

12,277 ↓

$19.50 ↑

$10.87

Building Name

54

LONG TERM PERFORMANCE OF SUBMARKETS Numbers based on CBRE statistics.

20%

6

15%

4

10%

2

5%

0

0%

Citywide Sublease Availability

5

40%

4

32%

3

24%

2

16%

1

8%

0

0%

$50 $45 $40 $35 $30 $25 $20

Southwes t

15%

600

10%

300

5%

0

0%

CBD Dire ct Availability CBD Vacancy Rate

Northwest

2,500

30%

2,000

24%

1,500

18%

1,000

12%

500

6%

0

0%

Southwes t Di rect Avai lability Southwes t Vacancy Rate

Southwes t Su blease Availability Citywide Vacancy Rate

ABSORPTION & OCCUPANCY RATE *Absorption includes sublease space. 4

95%

3

90%

2

85%

1

80%

0

75%

-1

70%

-2

65%

Citywide

CBD

55

CBD Sublease Availability Citywide Vacancy Rate

SOUTHWEST AVAILABLE SF VS. VACANCY RATE

Year Over Year Direct & Sublease Absorption (Millions of SF)

$55

CBD

20%

900

Northwest Sublease Availabi lity Citywide Vacancy Rate

CITYWIDE AVERAGE CLASS A ASKING RATES

Full Service Rental Rate

Direct & Sublease Vacancy Rate

Availability (Millions of SF)

NORTHWEST AVAILABLE SF VS. VACANCY RATE

Northwest Direct Availability Northwest Vacancy Rate

25%

1,200

Citywide Vacancy Rate

Availability (Thousands of SF)

Citywide Direct Availability

30%

1,500

Direct & Sublease Vacancy Rate

8

1,800

Direct & Sublease Vacancy Rate

25%

Direct & Sublease Occupancy Rate

30%

10

Availability (Thousands of SF)

12

CBD AVAILABLE SF VS. VACANCY RATE Direct & Sublease Vacancy Rate

Availability (Millions of SF)

CITYWIDE AVAILABLE SF VS. VACANCY RATE

Northwest

Southwes t

Citywide Occupancy Rate

LONG TERM PERFORMANCE CBD VS. SUBURBAN Numbers based on CBRE statistics.

DIRECT & SUBLEASE VACANCY RATES 30%

$50

25%

$40

20%

Vacancy Rate

$60

$30 $20 $10

10% 5% 0%

$0

CBD

Su burban

CBD Vacancy Rate

Citywide

12

30%

10

25%

8

20%

6

15%

4

10%

2

5%

0

0%

CBD

Su burban

Su burban Vacancy Rate

Citywide Vacancy Rate

SF UNDER CONSTRUCTION

Citywide Vacancy Rate

Direct & Sublease Vacancy Rate

DIRECT & SUBLEASE AVAILABILITY Direct & Sublease Availability (Millions of SF)

15%

Area Under Construction (Millions of SF)

Full Service Rental Rate

AVERAGE CLASS A ASKING RATES

4 3 2 1 0

CBD

Northwest

Southwes t

56

CBD

OVERALL PERFORMANCE CBD SUBMARKET Quarter

Net Rentable Area

Direct Vacant SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

9,252,285

802,517

176,610

9.44%

$43.13

2015 Q1

9,768,770

1,135,835

139,236

12.81%

$43.83

2015 Q2

9,809,755

870,240

291,638

10.20%

$41.90

2015 Q3

9,809,755

672,222

135,085

7.83%

$44.17

2015 Q4

9,732,884

631,228

83,341

7.07%

$43.64

2016 Q1

9,732,884

565,112

88,208

5.94%

$47.52

2016 Q2

9,954,349

706,027

25,998

7.80%

$47.93

2016 Q3

9,953,924

618,517

111,343

6.70%

*Absorption includes sublease space

15%

300

99%

1,200

12%

250

96%

200

93%

150

90%

100

87%

50

84%

900

9%

600

6%

300

3%

0

0%

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

Di rect & Subleas e Vacancy Rate

$52

24%

$50

20%

$48

16%

$46

12%

$44

8%

$42

4%

$40

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Vacancy Rate

Rental Rate

VACANCY RATES VS. RENTAL RATES

0%

Di rect & Subleas e Vacancy Rate

Absorption (Thousands of SF)

1,500

0

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

81%

Di rect & Subleas e Occupancy Rate

Occupancy Rate

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

57

$50.89 Numbers based on CBRE statistics.

AUSTIN CBD OFFICE RENTAL RATE PROJECTIONS $60

3% Job Growth $55

1% Job Growth

Full Service Rental Rates

$50 $45 $40 $35 $30 $25 $20 $15 2004

2005

2006

2007

2008

2009

Historic Rental Rate

2010

2011

AQUILA Model

2012

2013

3% Job Growth

2014

2015

2016

2017

2018

1% Job Growth

AUSTIN CBD OFFICE VACANCY RATE PROJECTIONS 35%

11.5

801 Barton Springs Westview

11.0

Shoal Creek Walk

30%

500 W 2nd

Total Vacancy Rate

10.0 20% 9.5 15% 9.0 10%

1% Job Growth

5%

Market Size (Millions of SF)

10.5

25%

8.5

8.0

3% Job Growth 0% 2004

2005

2006

2007 Market Size

2008

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014 3% Job Growth

2015

2016

2017

2018

7.5

1% Job Growth

58

NORTHWEST

OVERALL PERFORMANCE NORTHWEST OVERALL SUBMARKET PERFORMANCE Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

1,540,054

93,312

10.46%

$30.83

1,879,975

138,145

11.65%

$32.06

17,269,310

1,819,734

180,936

11.56%

$32.74

2015 Q3

17,269,310

1,665,124

237,697

9.96%

$33.26

2015 Q4

17,535,625

1,283,335

311,312

8.99%

$34.14

2016 Q1

18,039,828

1,868,483

136,576

11.17%

$33.77

2016 Q2

18,114,632

1,788,996

167,959

10.60%

$34.62

2016 Q3

17,913,936

1,465,141

308,550

9.03%

$34.67

Quarter

Net Rentable Area

Direct Vacant SF

2014 Q4

16,817,337

2015 Q1

17,154,310

2015 Q2

*Absorption includes sublease space

Numbers based on CBRE statistics.

15%

2,000

12%

1,500

9%

1,000

6%

500

3%

0

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

0%

$34

13%

$32

10%

$30

7%

$28

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

59

2015 Q4

2016 Q1

2016 Q2

2016 Q3

4%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY RATES VS. RENTAL RATES 16%

95%

450

93%

300

91%

150

89%

0

87%

(150)

Di rect & Subleas e Vacancy Rate

$36

600

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Di rect & Subleas e Occupancy Rate

85%

Occupancy Rate

2,500

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

NORTHWEST SUBMARKET OFFICE RENTAL RATE PROJECTIONS $40

3% Job Growth

Full Service Rental Rates

$35

1% Job Growth $30

$25

$20

$15 2004

2005

2007

2006

2009

2008

Historic Rental Rate

2010

2011

AQUILA Model

2012

2013

3% Job Growth

2014

2015

2016

2018

2017

1% Job Growth

NORTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS 30%

MoPac Centre

Domain 8

19.0

Braker Pointe III 25%

17.0 16.0

15%

15.0

1% Job Growth 10%

14.0 13.0

3% Job Growth

5%

Market Size (Millions of SF)

18.0

20%

Total Vacancy Rate

20.0

12.0 11.0

0% 2004

2005

2006

2007

Market Size

2008

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014

2015

3% Job Growth

2016

2017

2018

10.0

1% Job Growth

60

SOUTHWEST

OVERALL PERFORMANCE SOUTHWEST OVERALL SUBMARKET PERFORMANCE Quarter

Net Rentable Area

Direct Vacant SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q4

9,418,793

640,998

29,201

8.41%

$34.87

2015 Q1

9,446,430

589,875

66,172

7.98%

$34.35

2015 Q2

10,109,725

1,070,609

21,626

12.21%

$33.76

2015 Q3

10,257,625

1,192,565

200,870

12.29%

$35.03

2015 Q4

10,484,922

769,552

131,055

9.80%

$35.85

2016 Q1

10,484,886

777,581

80,164

9.25%

$36.65

2016 Q2

10,484,886

985,849

-90,753

11.40%

$37.18

2016 Q3

10,484,922

789,995

101,770

10.40%

$38.05

*Absorption includes sublease space

Numbers based on CBRE statistics.

15%

1,200

12%

900

9%

600

6%

300

3%

0

0%

2014 Q4

2015 Q1

Di rect Vacant SF

2015 Q2

2015 Q3

2015 Q4

2016 Q1

Su blease Avai lable SF

2016 Q2

2016 Q3

15% 12%

$36

9%

$34

6%

$32

3%

$30

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

61

2015 Q4

2016 Q1

2016 Q2

2016 Q3

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY RATES VS. RENTAL RATES

$38

95%

200

93%

100

91%

0

89%

(100)

87%

(200)

Di rect & Subleas e Vacancy Rate

$40

300

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Di rect & Subleas e Occupancy Rate

85%

Occupancy Rate

1,500

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

SOUTHWEST SUBMARKET OFFICE RENTAL RATE PROJECTIONS $45

3% Job Growth

Full Service Rental Rates

$40

1% Job Growth

$35

$30

$25

$20

$15 2004

2005

2006

2007

2008

2009

Historic Rental Rate

2010

2011

AQUILA Model

2012

2013

2014

3% Job Growth

2015

2016

2017

2018

1% Job Growth

SOUTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS 25%

12.0

The Overlook at Barton Creek

Galleria Oaks I & II 11.0

Lantana Ridge I & II Walsh Tarlton Overlook

20%

15%

9.0

1% Job Growth

10%

8.0

7.0

Market Size (Millions of SF)

Total Vacancy Rate

10.0

3% Job Growth

5%

6.0

0% 2004

2005

2006

2007 Market Size

2008

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014

3% Job Growth

2015

2016

2017

2018

5.0

1% Job Growth

62

THE AQUILA

METHODOLOGY

DEFINITIONS CBD Competitive Set Buildings: Class A buildings located in, or near, the core of downtown.

Suburban Competitive Set Buildings: Newer suburban office buildings that typically have structured parking and amenities such as conference rooms, workout facilities and/or delis.

Direct Vacant SF: Space that is currently vacant and immediately available to lease.

Sublease Available SF: Space that is currently available to sublease.

Direct & Sublease Vacancy Rate: (Direct Vacant SF + Sublease Available SF)/(Net Rentable Area)

Absorption: (NRA2 – Direct Vacant SF2 – Sublease Available SF2) – (NRA1 – Direct Vacant SF1 – Sublease Available SF1)

63

YOUR

NOTES:

64

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