AQUILA Austin Market Report 2Q 2016

AUSTIN MARKET REPORT 2Q 2016

2

AQUILA KNOWS AUSTIN

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VIEW FROM THE

EAGLE'S NEST In case you haven’t heard, Austin is hot. We’re now in the dog days of summer and the mercury is regularly reaching the century mark. Despite the fact that you could cook your breakfast taco on the pavement (and probably sell it at a nice premium by calling it “homegrown”), people continue to move to Austin in droves. As of June of this year, the Austin-Round Rock MSA added over 38,000 jobs in twelve months – the fourth most of major metros in the country. The month of June alone saw an

Clayton Schleimer Market Research Analyst AQUILA Commercial schleimer@aquilacommercial.com

increase of 10,645 people joining the labor force. Where are all of these people moving? The short answer is everywhere – anyone will tell you it’s hard to find a spot in central Texas that is less crowded than just a few years ago. The longer answer is Georgetown, New Braunfels and Pflugerville. These three cities rank among the fastest growing cities in the country with populations of 50,000 or more, with Georgetown topping out the list.

4

VIEW FROM THE EAGLE'S NEST

8,000

3,500,000

7,000

3,000,000

6,000

2,500,000

5,000

2,000,000

4,000

1,500,000

3,000

1,000,000

2,000

500,000

1,000

0

Building Permits

Office SF Under Construction

Austin Construction - Office & Housing 4,000,000

0

Office SF Under Construction

Housing Units Authorized by Building Permits

Where are all of these people working? The professional

amenities near their offices and residences. The bulk of

and business services industry added the most jobs from

these live/work/play environments are located in central

June 2015 to June 2016 at nearly 8,000 jobs, with leisure

areas like downtown, East Austin and The Domain.

& hospitality and construction & natural resources close behind at 5,700 and 6,000 jobs added, respectively. These three sectors alone account for more than half of the jobs added in the past year, and they each tell their own unique story.

The professional and business services industry – the employers who typically work in the buildings pertinent to this report and often pay the highest wages – attest to Austin as a dominant intellectual capital. The more centrally located office submarkets of the CBD, North Central and

It is not surprising that construction is among the fastest

East Austin have absorbed more than half the square feet

growing industries. 2Q 2016 housing permits reached

of the overall market this year: 472,501 out of 743,189

5,809 units, 3,818 of which were single-family. There

total. Furthermore, education & health services added the

is almost 1.6 million square feet of office space under

fourth-most jobs over the past 12 months, most likely at

construction as well – more than half of which is in the CBD

the University of Texas and its soon-to-be-completed Dell

or nearby submarkets.

Medical School downtown.

The Austin leisure and hospitality industries are also sending

So, to answer the question of where are all of these new

employees to the hottest areas of the city. As elaborated

people working, the answer is primarily in the more

in our previous market report, office tenants and young

centrally-located areas of Austin. Therein lies one of the

professionals are willing to pay a premium for walkable

greatest threats to Austin’s continued growth: transportation.

VIEW FROM THE EAGLE'S NEST

With more people commuting every day from Austin suburbs

place to live by addressing four main areas: natural and

to their jobs within the city, traffic woes are becoming even

built environment; household affordability; mobility; and

more of an issue. The theory that if traffic problems are

fiscal health. CodeNEXT and the strategic mobility plan

not addressed people will stop

are parts of the city’s overall

moving here has proven to not be

long-term comprehensive vision:

true. And the weather apparently isn’t holding anyone back either. As it stands now, there are only two main north-south thoroughfares to get you from one side of Austin to the other: I-35 and MoPac Expressway; and any Austinite will tell you to avoid those at all

With more people commuting every day from Austin suburbs to their jobs within the city, traffic woes are becoming even more of an issue. The theory that if traffic problems are not addressed people will stop moving here has proven to not be true.

Imagine Austin. One aspect of Imagine Austin that can already be seen is the implementation of several Transit Oriented

Developments,

most

notably Plaza Saltillo and MLK Station, both on the Eastside. These aim to provide a complete

costs during rush hour. If nothing

live/work/play/commute

is done and population maintains

environment

along

MetroRail

its current trend, it could take three hours to get from Austin

stations to further provide alternative living and commuting

to Round Rock by the year 2035. For perspective, I was

options. Also in East Austin, you can find one of the most

able to make it from UT to my parents’ house north of Dallas

talked about concepts dealing with the future of travel:

in three hours back in my college years (that was only four

several of Google’s self-driving cars being tested around

years ago, and I was driving a Hyundai).

the Mueller community. For a deep-dive into the rumblings

Luckily, the city is making serious moves towards solving our transportation issues (and I’m no longer driving a Hyundai).

going on in East Austin, see this quarter’s special report on page 7.

Mayor Steve Adler and City Council moved forward with

Austinites have always been prideful people hanging on

proposing an unprecedented $720 million mobility bond in

to their past as a small town. The old adage that “The best

June. The bond calls for improving several main corridors

time to live in Austin is five years ago” is a testament to the

throughout the city, allowing for improved bus and bike

fact that citizens think the city is getting too full, too big

lanes, incentivizing commuters to approach alternative

for its own britches, and generally too hot to handle itself.

forms of transportation, and bringing drivers away from

However, with the citizens’ support, it is poised to leverage

I-35 and MoPac and into the city’s more central corridors.

its recent explosive growth and continue to be one of the

Another city initiative, CodeNEXT, plans to revise the Land

hottest, most desirable cities in the country decades into

Development Code to make Austin an even more desirable

the future.

Note: There are some changes to the methodology in this quarter’s market report. For a full explanation of the AQUILA methodology, refer to page 67 at the end of the appendix.

1

http://www.tracer2.com/cgi/dataanalysis/labForceReport.asp?menuchoice=LABFORCE

2

http://kut.org/post/think-traffic-bad-now-2035-it-could-take-3-hours-get-austin-round-rock

3

http://austintexas.gov/department/austin-strategic-mobility-plan

4

http://austintexas.gov/sites/default/files/files/Planning_and_Zoning/CodeNEXT/2016_07_08_Mobility.pdf

SPECIAL REPORT

EASTSIDE SPECIAL: AUSTIN'S FOURTH PRIMARY SUBMARKET? Just

beyond

the

downtown

skyline lies Austin’s Eastside. Less than a mile from the CBD sits one of Austin’s most authentic, eclectic and rapidly changing neighborhoods. An area that has, for most of its recent history, been a working-class neighborhood is now one of the

HYDE PARK

UPPER EASTSIDE

city’s hippest hangouts. Named as one of the hippest neighborhoods in the country1, coffee shops, bars, breweries and taco stands can be found just steps from rows of quaint

MUELLER THE UNIVERSITY OF TEXAS

CHERRYWOOD

CENTRAL EASTSIDE

two-bedroom houses that have stood there since the days of the Great Depression.

DOWNTOWN AUSTIN

In 1990, out of the 21 census tracts

LOWER EASTSIDE

that make up the “Eastside,” 15 were eligible for gentrification2, but only one actually achieved gentrification status over the next ten years. In 2000, eighteen tracts were eligible for gentrification, and all but four of those have achieved it today – more than all other eligible tracts in Austin combined.3

7

EAST CESAR CHAVEZ

WINDSOR PARK

SPECIAL REPORT East Austin Household Income

Over the past decade, East Austin

100%

$75,000

has become a hotbed for house-

90%

$67,500

flippers, graduate students, young

80%

$60,000

professionals and new families. Multi-

70%

$52,500

family development has skyrocketed,

60%

$45,000

drawing a new demographic to live

50%

$37,500

in the neighborhood. Over the past

40%

$30,000

six years, more than 1,700 multi-

30%

$22,500

family units have delivered on the

20%

$15,000

Eastside. As of the second quarter

10%

$7,500

2015, there were another 1,900

0%

multifamily units under construction, with almost one thousand more approved for development and ready

$0

2014

<$25k

$25k-50k

$50k-100k

$100k-200k

>$200k

Median household income

to break ground.

East Austin & Citywide Education

To see the appeal of the neighborhood is easy: its relative affordability within

90% 80%

the city, proximity to downtown and

70%

rich culture have made it a popular

60%

place to live and play. And now,

50%

the authenticity and sense of quirk

40%

that

30%

originally

2010

2000

drew

in

Austin’s

creative class is attracting new office prospects as well.

20% 10%

The Eastside is serving up to tenants what it is they are looking for: close

0%

East Austin

Austin Citywide

proximity to CBD, affordability, a

2000

plethora of nearby amenities, diverse transportation options and “creative”

East Austin

High school graduate or higher

Austin Citywide

Bachelor's degree or higher 2010

2014

Median Home Values $250,000.00

office space build-outs. As rents in Austin’s primary three office

submarkets

steadily

climb,

demand has increased for welllocated,

amenity-rich

$200,000.00

$150,000.00

alternatives.

In the current real estate cycle, East

$100,000.00

Austin has emerged as a frontrunner to be Austin’s next established office

$50,000.00

market. $0.00

2000 Median Home Value East Austin

2010

2014

Median Home Value Austin Citywide

(Source: US Census and American Community Survey)

8

SPECIAL REPORT

A DIFFERENT OFFICE PRODUCT While many of the Austin office buildings AQUILA

Much like the houses in the area, the office buildings

traditionally analyzes are large, class “A” multi-tenant

each have their own unique architecture. Eleven11,

properties with built-in amenities such as fitness

for example, features a rust-colored facade with a

facilities, delis, etc., the office projects rising on the

striking cantilevered terrace covering the sidewalk

east side are of quite a different ilk. You won’t find

below. Further east, you will find old warehouses

high rises or large, sprawling corporate campuses

converted into creative office suites alongside

here. Instead, offices on the Eastside range from

breweries and bistros. These aesthetics and amenities

converted warehouses to new mid-rise, mixed-use

tend to attract a millennial-minded tenant-base.

construction. These office projects often embody the eclectic vibe of the neighborhood, giving way to multiple “creative office” projects under development. Given the unique positioning of East Austin within the overall office market, this budding area offers spaces to suit the needs of different types of tenants. Typical spaces offer open ceilings, stained concrete floors, and exposed brick and ductwork. Floorplates are also smaller than those in

Eleven11

the other primary submarkets, resulting in more open layouts. This is largely due to the land-use and development

While established accounting or legal firms continue

restrictions that run through much of the Eastside.

to look for space in the Southwest, Northwest or

Some of the built-in amenities typically found in the other submarkets aren’t found in Eastside office projects. Rather than having an on-site deli or fitness area, offices capitalize on the abundance of pre-existing retail within walking distance. Some companies even offer credit to their employees to make use of nearby fitness studios.

9

CBD, Eastside office projects are competing instead to attract more creative tenants such as advertising, media, music and web-design companies, which are the fastest-growing segments of talent moving to Austin, and more specifically the Eastside.

SPECIAL REPORT

DEFINING THE SUBMARKET In order to more clearly analyze the Eastside as an

professionals spending their weekends in the area,

office submarket, we limited the definition of the

whereas the thought of crossing I-35 on a Saturday

East Austin office submarket to the following area:

night was not even a consideration just five years

north of the Colorado river, between I-35 and US

ago. Now, locally-owned businesses thrive east of

183. This area can also be parsed into three smaller

downtown, bringing in customers who might live just

micromarkets: The Lower Eastside, Central Eastside

blocks away or across the country on vacation. What

and Upper Eastside. (See the map on page 7 for

was once a generally overlooked neighborhood full

reference.) These three areas each have their own

of worn-down houses is now being redeveloped into

unique culture and style, attracting a mixed pool of

a tourist destination live with contemporary homes

tenants and office product.

and nationally-renowned boutiques, bars and restaurants.

Lower Eastside

The increase in popularity can be partially attributed to the city designating East 6th as a core

The Lower Eastside is comprised of the area north

transportation corridor, allowing increased traffic

of the river, west of 183 and south of 12th Street.

flow to and from downtown. The added ease-of-

This micromarket is so close to the CBD—just across

access has given rise to thousands of Class A multi-

I-35—that it is almost an extension of downtown

family units being developed over the past decade,

itself. The city has instituted several measures to

with many more under construction and in the

help facilitate growth in the area, and the area has

planning stages.

responded favorably.

Developers are also taking advantage of the Lower

Here you will find the highest density of bars and

Eastside’s popularity with several mixed-use projects.

restaurants outside of downtown. The East 6th

One such project, Eastside Village, is currently

Street entertainment district, for example, has

under construction and offers both a new Class A

seen an explosion of college students and young

10

Patio at Burn Pizza + Bar on East 6th Street

SPECIAL REPORT

office building (recently purchased by CIM Group

developer of the Domain in Northwest Austin first

in June) and 800 multi-family units atop ground

dipped their toes into Lower Eastside waters with a

floor retail. Tenants who have signed on at Eastside

little project at 2021 E. Fifth Street in 2013. Targeted

Village early to take advantage of the excitement of

towards the creative workers that reside in the area,

the area include C3 Presents, who relocated their

the project was quickly preleased by EnviroMedia,

headquarters from downtown, and Conde Nast,

one of Austin’s most notable marketing firms. The

who will be opening their new Digital Innovation

success of the development has since been followed

Center in the building.

by another, larger proposed office project, 901 E.

Blocks

away

6th, which is still in the

from

planning stages.

Eastside Village will be Endeavor Real Estate Group’s Plaza Saltillo, which will offer over 100,000 square feet of retail and office space, a public park, and 800 residential units. Plaza Saltillo is one of the city’s two designated

Some of the greatest potential on the Eastside lies in redeveloping existing owner-occupied offices into multi-tenant, Class A buildings.

Transit

Adjacent to Eastside Village and

Plaza

Saltillo

are

two more multi-use office developments: The Foundry by Cielo and Fourth & by Capsa Ventures. Currently under construction, these two projects combined will feature over 100,000 sf of office space and 115

Oriented Development

residential units. Although

(TOD) sites on the Eastside. The TOD presents an

smaller

exciting opportunity for tenants to capture a whole

developments, the rise of these live/work/play

new mix of commuters who will be brought to their

solutions attest to the growth of the Lower Eastside’s

area from as far away as Leander via MetroRail.

popularity, proving that just one or two developments

Endeavor’s involvement on the Eastside is a testament

are not enough to capture all of the demand in the

to the area’s high demand for office product. The

area.

11

Food truck park on East 6th Street

than

Transwestern’s

and

Endeavor’s

SPECIAL REPORT

Starting Rental Rates - CBD vs Lower Eastside Source: AQUILA Market Research Lease Comparables

$45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 1/1/2010

1/1/2011

1/1/2012

12/31/2012

1/1/2014

1/1/2015

1/1/2016

Lower Eastside Starting Rent

CBD Starting Rent

Lower Eastside Starting Rent Trendline

CBD Starting Rent Trendline

1/1/2017

1/1/2018

While large ground-up mixed-use redevelopment

in redeveloping existing owner-occupied offices

projects like the Eastside Village and Plaza Saltillo

into multi-tenant, Class A buildings. Prime examples

are getting most of the hype on the Lower Eastside,

of such projects are the former Goodwill Career

there is a plethora of smaller projects that continue to

Academy building at East 6th and Chicon Streets

change the landscape. Central Austin Management

and the Capital Area Rural Transportation System

Group, for example, has two projects along

office less than a block down the street. These

Springdale Road – Canopy and Springdale General

projects—recently sold to office developers—will

– that will include over 200,000 sf of space across

add over 200,000 sf to the market. Riverside

more than 15 buildings. Also in planning stages

Resources has four total sites of this kind under

is 1719 East 2nd Street. Much like the recently

ownership on the Lower Eastside awaiting lead

delivered 2400 Webberville and 1711 Cesar

tenants to break ground on potentially 300,000+ sf

Chavez projects, this 10,000 sf project embodies

of space between the four of them.

the “creative” solution that small marketing and technology firms are looking for on the Eastside: white-box conditioned with custom finish-outs at a low rent. Some of the greatest potential on the Eastside lies

As

demand

for

limited

downtown

space

increases, the rise of the Lower Eastside as an extension of downtown appears to be imminent. As shown in the graph above, starting rental rates are quickly approaching downtown levels

12

EAST AUSTIN

51

ST ST

11 AIR

LVD

38

TH

MANOR

18

KING

RT B

5

BERKMAN DR

DEVELOPMENTS

LUTHER MARTIN

12

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1/

2S T

7

RD

26

D JR BLV

2

29 1 1TH ST

SP

10 30

AL ST

CES

1 16 CH

AVE Z

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24

CH

AR

17

D

CO M

3

V RT BL

15 31 23 19 20 4

25

T V ALLE Y RD

8 21 27 13 32 14 22

AIRPO

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9

PLEA SAN

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33

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28

6 13

OFFICE Project Name

Status

Completion Date

Office SF

Developer/Owner

Endeavor

1

2021 E. Fifth Street

Recently Delivered

2014

30,100

2

2921 E 17th St Bldgs B-D

Recently Delivered

2015

100,000

3

2400 Webberville

Recently Delivered

2015 Q2

8,000

4

1711 Cesar Chavez

Recently Delivered

2016 Q2

7,156

Emergence Commercial Realty

5

The Diamond Building at Mueller

Under Construction

2016 Q3

37,198

Catellus

6

atx Factory

Under Construction

2016 Q3

11,500

Vijay Mehra

7

The Station on Manor

Under Construction

2016 Q4

31,600

Lincoln Ventures

8

901 E 6th

Planned

2017 Q1

132,000

Endeavor

9

Springdale General

Planned

2018 Q1

165,000

Central Austin Management Group

10

The Lab on East Sixth (CARTS Site)

Planned

2018 Q4

115,000

Altair

11

Build to Suit Opportunities at Mueller

Planned

TBD

2,000,000

Catellus

12

The Park at Mueller

Planned

TBD

116,000

Catellus

13

6th & Onion

Planned

TBD

100,000

Riverside Resources

14

5th & Onion

Planned

TBD

82,000

Riverside Resources

15

1817 E 6th (Former Goodwill)

Planned

TBD

80,000

Riverside Resources

16

4th & Robert Martinez

Planned

TBD

43,000

Riverside Resources

17

Canopy

Planned

TBD

40,200

Central Austin Management Group

18

2015 Manor

Planned

TBD

23,000

Lincoln Ventures

19

Chavez Village

Planned

TBD

14,618

ECC Commercial

20

1719 East 2nd

Planned

TBD

10,000

Lonestar Syndicate

MIXED USE Project Name

Status

Completion Date

Office SF

Retail SF

Residential Units

Developer/Owner

16,000

256

Cypress

7,500

348

Transwestern

97

Capsa Ventures LLC

208

Trammel Crow Residential

18

Cielo Property Group

21

Corazon

Recently Delivered

2015 Q2

22

Eastside Village

Recently Delivered

2016 Q2

94,500

23

Fourth &

Under Construction

2017 Q2

42,000

24

Alexan on 6th

Under Construction

2017 Q2

25

The Foundry

Under Construction

2017 Q4

75,369

26

The CityLine at MLK Station

Planned

2017 Q3

134,000

11,000

22

CityLine Development

27

Plaza Saltillo

Planned

TBD

120,000

110,000

800

Endeavor

28

One Two East

Planned

TBD

472

Legend Communities

6,440

MULTI-FAMILY Project Name

Status

Residential Units

Completion Date

Developer/Owner

29

Eleven by Windsor

Recently Delivered

257

2013

Windsor

30

7East

Recently Delivered

186

2015

Stonelake

31

Eastside Station

Recently Delivered

330

2016 Q2

Flournoy

32

Spire

Planned

260

TBD

33

8th and Embassy

Planned

176

TBD 14

SPECIAL REPORT for new deals done on the Lower Eastside.

million square feet of office and retail use, and over

While rates have historically hovered around 60%

100 acres of public open space. The development

of those in the CBD, recent deliveries of Class A

is nearing its final stages of construction, with the

spaces within the past year have fetched rates on

majority of commercial space completed with the

par with those in older buildings downtown. With

exception of several build-to-suit opportunities.

over 800,000 sf of office product in its pipeline, the Lower Eastside is set to prove itself as a major player for centrally-located Austin office space.

The most notable tenants of the Mueller district include Seton Healthcare’s administrative campus and Texas Mutual Insurance Co., who announced

Furthermore, Reconnect Austin plans to physically

in April that it will be building its new corporate

remove the greatest barrier between downtown

headquarters next to Dell Children’s Medical

and the Lower Eastside: I-35. The Reconnect Austin

Center – one of largest office deals of the year at

plan proposes to bury I-35 underground and literally

270,000 sf. The close proximity to the new UT

bridge the gap between downtown and East Austin

medical school and Dell Children’s Medical Center

with surface-level walkways, mixed-use buildings

makes the area desirable to medical office users.

and open areas. While such plans will likely not be realized anytime soon, they point to the growth of

As the popularity of East Austin

East Austin as a primary urban area.

continues to grow, tenants and residents Central Eastside

alike will surely desire the next, hippest spots with affordability and

To the north of 12th Street from the Lower Eastside lies

proximity to downtown.

the Central Eastside. The Central Eastside extends up to 51st Street and East to Highway 183. If the Lower Eastside is considered an extension of downtown, then the Central Eastside would be considered an

The Central Eastside is also home Austin’s second

extension of the University of Texas. Just east of I-35,

transit oriented development east of I-35: MLK

UT has its baseball and softball fields, as well as

Station. Cityline Companies LLC is planning the

several administrative buildings. The university is still

Cityline at MLK Station development. Set to deliver

in the market to purchase and redevelop lots as it

in 2017, the CityLine Development will offer over

expands its footprint.

130,000 of office space, 11,000 sf of retail,

The Central Eastside is tamer than the Lower Eastside, as residents are typically graduate students or young families, often new to Central Texas. To that end, multi-national retailers are more apt to lay claim to this area, most notably in the Mueller Community. After Austin’s first civilian airport, Robert Mueller Municipal Airport, was replaced by Austin Bergstrom International Airport in 1999, the 700-acre site was redeveloped into a Planned Unit Development (PUD) by Catellus. The area is replete with single and multi-family housing for over 13,000 residents, 4

15

and 36,000 sf of residential townhomes, as well as a structured parking garage. Currently under construction across the street, the MLK Station Apartments will also offer 355 multi-family units as well as 11,000 sf of restaurant and retail space. 100,000 sf of office space already exists at MLK Station. Completed in 2015, 2921 East 17th Street Buildings B-D are fully leased and home to several Austin

nonprofits,

including

Sustainable

Food

Center, PeopleFund, Creative Action and Interfaith Action of Central Texas.

SPECIAL REPORT

Eastside Village

Thoroughfares such as Airport Boulevard, Manor Road and Martin Luther King Jr. Boulevard are examples of core transit corridors connecting the Central Eastside to the rest of Austin, and many retailers are capitalizing on the added traffic generated by the increased accessibility. Manor Road, for example, has several of the hippest new bars outside of the downtown and East 6th areas, as well as Salty Sow, one of Austin’s must-eat restaurants, as evidenced by Michelle Obama’s recent patronage during this year’s SXSW conference. Lincoln Ventures is one of the first office developers to capitalize on the Manor Road frenzy with two creative office buildings under construction at The Station on Manor – just blocks away from the MLK Station TOD – and another mixed-use development set to break ground later this year: 2015 Manor, which has already signed Texas Mutual Insurance Company for approximately 270,000 sf.

Upper Eastside The Upper Eastside, defined by the area north of 51st Street, south of Highway 290 and west of Highway 183, is the least developed office market. Here you will find mainly older, Class B and C office buildings along the highways and mid-to-late-century homes in between. The area is not to be dismissed; however, as just north of Highway 290 lie several industrial complexes, and many would argue that the Lower and Central Eastside looked much like this area does now just a few decades ago. As the popularity of East Austin continues to grow, tenants and residents alike will surely desire the next, hippest spots with affordability and proximity to downtown. Furthermore, with Round Rock just to the north and quickly expanding down I-35 as plans are set in place to ease the traffic flow, the two growing areas will have to meet somewhere in between.

16

SPECIAL REPORT

1711 Cesar Chavez

WHAT DOES THIS MEAN FOR YOU? Landlords: The Eastside presents an exciting

Tenants: If you’re looking for an opportunity to re-

opportunity to invest in one of Austin’s fastest grow-

locate within Austin, the Eastside is in high demand

ing submarkets. With so much support from the

and can be a great fit for modern tenants. With

City of Austin to develop the area, and with more

a burgeoning bar and restaurant scene, employees

gracious land-use regulations, the neighborhood

will be enlivened to office within walking distance

has certainly not hit its full potential yet. As long as

of some of Austin’s coolest amenities. Chances are

Austin continues to grow, people are going to flock

some of your employees are already living there.

to the Eastside since it embodies so much that Aus-

Time is of the essence though, as rents are growing

tin stands for: quirky, creative, authentic, unique.

at a faster pace than in other submarkets. One of

This makes the Eastside more of a competitor to

AQUILA’s own clients, for example, signed a lease

capture the media-type and technology firms that

on the Eastside for $12 per sf in 2012. Just three

may have historically looked for space in the other

years later they signed another lease on the Eastside

primary submarkets. An example of such a com-

for double that amount. With most new build-outs,

pany is Conde Nast. Just five years ago it would

asking rents are in the low-to-mid-twenties, compa-

have been unimaginable to see a multinational

rable to those in the Northwest submarket.

media publishing company sign a lease for space east of I-35. Now, however, the company will feel right at home.

1

http://www.forbes.com/sites/morganbrennan/2012/09/20/americas-hippest-hipster-neighborhoods/#30546b41ccaa

To be eligible to gentrify, a tract's median household income and median home value needed to fall within the bottom 40th percentile of all tracts within a metro area at the beginning of the decade. Tracts considered to have gentrified recorded increases in the top third percentile for both inflation-adjusted median home values and percentage of adults with bachelors’ degrees. 2

17

3

http://www.governing.com/gov-data/austin-gentrification-maps-demographic-data.html

4

Reconnectaustin.com

AUSTIN CITYWIDE 2Q UPDATE 300,427 SF Net Absorption

10.40%

Direct & Sublease Vacancy Rate

$37.02

Avg. Class A Full Service Rental Rate

View of Hartland Plaza and downtown via 5th Street; Photo by Scott Mason Photography

18

SNAPSHOT:

CAPITAL MARKETS MAJOR SALES TRANSACTIONS 100 CONGRESS

SOLD AVENUE Market

CBD

CHAMPION

SOLD OFFICE PARK Market

AUSTIN

SOLD CENTRE

NW

Market

CBD A

Class

A

Class

A

Class

Size (SF)

412,000

Size (SF)

221,136

Size (SF)

326,335

Buyer

Invesco Real Estate

Buyer

Menlo Equities

Buyer

Sidra Real Estate, Inc.

Seller

Metlife Real Estate Investors

Seller

Granite Properties

Seller

Lincoln Property Company

Price

$125,000,000

Price

$92,900,000

Price

$130,000,000

Price/SF

$607

Price/SF

$420

Price/SF

$398

Notes

Invesco bought 50% stake, Metlife retained 50%

PLAZA ON THE

SOLD LAKE I & II

EASTSIDE

SOLD VILLAGE

LAKEWOOD ON

SOLD THE PARK, BLDG B

Market

SW

Market

E

Market

NW

Class

A

Class

A

Class

B

Size (SF)

234,874

Size (SF)

95,135

Size (SF)

102,056

Buyer

Intercontinental Real Estate Corp

Buyer

CIM Group

Buyer

CapRidge Partners

Seller

Cornerstone

Seller

Equity Commonwealth

$74,750,000

Transwestern Development Co.

Seller

Price

Price

$20,958,958

Price/SF

$318

Price/SF

$205

Price

$32,750,000

Price/SF

$344

Interior Space at Eastside Village

19

RIATA CORPORATE

SOLD PARK

STONEBRIDGE

SOLD PLAZA

NW

Market

NW

Class

A

Class

A

Size (SF)

688,433

Size (SF)

386,101

Buyer

Partners Group

Buyer

KBS

Seller

Accesso Partners

Seller

Heitman

Price

Undisclosed

Price

Unknown

Price/SF

Undisclosed

Price/SF

Unknown

Partners Group bought 50% stake, Accesso retained 50%

Notes

Currently under contract

Market

Notes

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

CBD • Deloitte signed three big leases this quarter, the largest of which is for 47,374 sf at 500 W 2nd. The financial

consulting firm will be relocating their current offices at 400 W. 15th to the new location downtown. Deloitte signed two smaller leases as well: 12,153 sf at 7700 Parmer Bldg C in the Far Northwest and 13,607 sf at Westlake Oaks Executive Park in the Southwest submarket.

NORTHWEST • Trend Micro announced it will fully occupy Domain 5. The IT security firm will be moving in to the 74,805 sf building this Fall.

• Aristocrat Technologies leased 24,412 sf at Domain 1 in June. Set to move in December, the gaming company will be relocating from their current offices at Northview Centre II, also in the Northwest submarket.

• Cognitive Scale signed a new lease for 35,751 sf at 9500 Arboretum. • Atkins Global signed for approximately 37,000 sf at Domain 1. The engineering firm is currently at Bridgepoint Square, also in the Northwest submarket.

SOUTHWEST • Emergo Group subleased 20,724 sf of EZCorp’s space at Rollingwood Center I. • Mirna Therapeutics

leased 23,578 SF at Encino Trace II, bringing the newest Class A office product in the Southwest to 36% occupied.

20

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

3Q

1Q

Braker Pointe III*

195,230 SF

Northwest

500 W 2nd

489,404 SF

CBD

Pioneer Bank Building

46,000 SF

Central

Domain 8

290,983

Northwest

The Diamond Building at Mueller

35,015 SF

East

*Already existing-coming to market 2Q 2016

4Q

The Station on Manor

31,600 SF

East

2Q

801 Barton Springs

90,500 SF

South

Walsh Tarlton Overlook

55,500 SF

Southwest

Lantana Ridge I & II

175,000 SF

Southwest

Fourth &

42,000 SF

East

3Q

Shoal Creek Walk

218,432 SF

CBD

The Overlook at Barton Creek

53,091 SF

Southwest

3Q

Westview*

98500 SF

*Already existing-coming to market 4Q 2017

21

CBD

î&#x192;¡ PLANNED Future Developments

Future Developments

405 Colorado

195,511 SF

CBD

Paloma Ridge C

112,500 SF

Northwest

604 W 6th Street

31,035 SF

CBD

Research Park Bldg 6

117,314 SF

Northwest

Austin American Statesman

TBD SF

CBD

Riata Corporate Park Bldg 1

65,000 SF

Northwest

Novare/Post Office

TBD SF

CBD

Riata Crossing Bldg 6

49,716 SF

Northwest

Rainey Gateway

355,000 SF

CBD

Frontera Ridge

400,000 SF

Round Rock

Third + Shoal

338,279 SF

CBD

St. Elmo

225,000 SF

South

Waller Creek Center

325,000 SF

CBD

The Waterfront

625,000 SF

South

901 E 6th

132,000 SF

East

Galleria Oaks I & II

147,928 SF

Southwest

Canopy

40,200 SF

East

Overwatch Campus Phase II

123,525 SF

Southwest

Cityline at MLK

134,000 SF

East

Regency Park

90,000 SF

Southwest

Mueller Market District

2,000,000 SF

East

Rollingwood Center III

107,000 SF

Southwest

Plaza Saltillo

120,000 SF

East

Southwest

165,000 SF

East

The Backyard Buildings B, J, & H

171,450 SF

Springdale General The Foundry (310 Comal)

75,369 SF

East

The Terrace 3

203,130 SF

Southwest

The Lakes at TechRidge Buildings A & B

97,600 SF

East

The Terrace 4

285,663 SF

Southwest

The Terrace 5

218,809 SF

Southwest

The Park at Mueller

116,000 SF

East

Amber Oaks Phase I

90,300 SF

Northwest

Amber Oaks Phase II

90,300 SF

Northwest

Amber Oaks Phase III

45,000 SF

Northwest

Aspen Lake Three

128,700 SF

Northwest

Domain Tower

308,000 SF

Northwest

Four Points Centre Building 3

250,000 SF

Northwest

Four Points Centre Building 4

80,000 SF

Northwest

22

23

CBD

2Q UPDATE Last quarter, Austinâ&#x20AC;&#x2122;s CBD saw the biggest quarter-over-quarter jump in asking Class A rental rates of all time: a $3.88 jump from 4Q 2015 to 1Q 2016. The primary cause of this spike can be attributed to the dramatic increases in operating expenses. This quarter, the positive trend continued, though much more steadily, with a stable $0.41 increase to $47.93. The fact that there was not a negative shift in rental rates from such a drastic spike in the first quarter points to the strength of the market.

115,454 SF Net Absorption

6.08%

Direct & Sublease Vacancy Rate

$53.73

Avg. Class A Full Service Rental Rate

View of the State Capitol from the 5th floor of 900 Congress; By: Scott Mason Photography

24

CBD UPDATE

Downtown asking rental rates reached all-time highs for the second consecutive quarter across all classes of buildings this quarter. While the CBD saw negative absorption for the first time in two years, the majority of this negative activity occurred in Class B and C buildings. When looking at the list of Class A buildings in or near the core of downtown (the list of these competitive set buildings can be found on page 47), over 100,000 sf of space was absorbed. This comes in the wake of the delivery of Lincoln Property Group’s 5th + Colorado, the first Class A office delivery since 501 Congress one year ago. 5th + Colorado delivered 84% occupied with an asking rental rate of $40.00 – tying it for the highest asking rate in Austin with 100 Congress and Frost Bank Tower. One of the largest increases in vacancy occurred at 301 Congress, which saw an increase in vacancy of 44,541 sf this quarter. This can be attributed to the fact that Gerson Lehrman Group was occupying about 40,000 sf of temporary space while their new space on the 14th & 15th floors was being built-out and off market. Considering this, only six buildings saw a true increase in directly unoccupied space,

25

with the average of those increases totaling approximately 10,500 sf. In total, there was just over 400,000 sf available to lease within the downtown Class A competitive set at the close of the quarter. This is the highest total of available square footage in three quarters, but well below the ten-year average of approximately 700,000 sf. Over the past ten years, the CBD competitive set has added 1.3 million sf with an average total vacancy rate of 12.3%. With rental rates continuing to squeeze upwards, the market for prime downtown office space further tightened this quarter. Between the two new office projects under construction – 500 W 2nd and Shoal Creek Walk – there is only 320,213 sf remaining to pre-lease. Given these statistics, it appears as though there is no slowdown in sight for downtown rental rates, further highlighting the importance of comparable spaces on the periphery of downtown.

For an in depth analysis of increasing operating expenses, see the special report in AQUILA’s 2015 Q4 Austin Market Report 1

Delivery Quarter

Building Name

NRA (SF)

% Occupied at Delivery

Asking Base Rental Rate at Delivery

2014 Q3

IBC Bank Plaza

194,749

93%

$28.50

2015 Q1

Colorado Tower

373,334

96%

$33.00

2015 Q1

Seaholm

143,151

100%

$28.00

2015 Q2

501 Congress

122,551

81%

$32.00

2016 Q2

5th + Colorado

179,000

84%

$40.00

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 Q3

5,827,916

483,868

81,356

227,210

9.70%

$45.13

2014 Q4

5,827,916

503,540

69,160

(7,476)

9.83%

$46.49

2015 Q1

6,344,401

421,858

55,200

612,127

7.52%

$47.28

2015 Q2

6,466,952

479,092

40,409

80,108

8.03%

$47.74

2015 Q3

6,466,952

370,193

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

6,471,834

239,406

101,083

(47,023)

5.26%

$52.80

2016 Q2

6,651,030

319,379

84,852

115,454

6.08%

$53.73

*Absorption includes sublease space

NET ABSORPTION

600

12%

400

8%

200

0

4%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

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)

0%

Di rect & Subleas e Vacancy Rate

2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Occupancy Rate

AVAILABLE SF VS. VACANCY RATE

88%

Di rect & Subleas e Occupancy Rate

$55

16%

$53

14%

$51

12%

$49

10%

$47

8%

$45

6%

$43

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

4%

Di rect & Subleas e Vacancy Rate

26

CBD DEVELOPMENT & LARGE AVAILABILITY

27

LARGE BLOCKS OF CONTIGUOUS AVAILABILITY Building

Available SF

Max. Contiguous

300 West 6th

31,373 SF

29,952 SF

301 Congress

62,471 SF

20,591 SF

One Congress Plaza

26,136 SF

23,142 SF

OFFICE PROJECTS UNDER CONSTRUCTION Building

500 W 2nd 801 Barton Springs Shoal Creek Walk Westview*

Est. Delivery

% Preleased

Total SF

53%

500,436 SF

1Q 2017

0%

90,500 SF

2Q 2017

61%

218,432 SF

3Q 2017

0%

98,500 SF

4Q 2017

*Already existing - coming to market 4Q 2017

HOTEL/RESIDENTIAL UNDER CONSTRUCTION Units/Rooms

5th & West

Units/Rooms

Est. Delivery

154 Units

4Q 2017

226 Units, 160 Rooms

TBD

422 Rooms

3Q 2017

1,066 Rooms

3Q 2017

190 Rooms

4Q 2016

436 Units

1Q 2017

The Austin Proper

250 Rooms, 120 Units

2Q 2017

The Independent

370 Units

3Q 2018

Hotel Zaza/Gables Aloft & Element Fairmont Hyatt House Hotel NorthShore

FUTURE/PLANNED DEVELOPMENTS Units/Rooms

405 Colorado 604 W 6th Street Austin American Statesman Novare/Post Office

Size/Units

Use

195,511 SF

Office

31,035 SF

Office

TBD

Office

TBD

Office

Rainey Gateway

355,000 SF

Office

Third + Shoal

338,279 SF

Office

Waller Creek Center

325,000 SF

Office

164 Units

Multifamily

TBD

Multifamily

196 Units

Multifamily

70 Rainey Green Water Residential Tower Rise - 8th & Nueces

28

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

23

29

28

28

27

27

26

26

26

25

25

25

24

24

24

23

23

23

22

2,674 SF

22

22

31,051 SF

22

22

22

21

29,952 SF

21

21

32,603 SF

21

21

21

20

20

32,603 SF

20

20

20

19

19

33,931 SF

19

19

18

33,931 SF

18

18

18

31,822 SF

17

17

17

17

16

16

16

16

15

15

15

14

14

14

20 19

1,421 SF

6,861 SF

18

18

17

17

17

17

16

16

16

16

15

15

15

15,598 SF

15

14

14

14

14

23,798 SF

14

13

13

12

12

11

11

10

10

9

9

8

15 5,855 SF

29

942 SF

2,502 SF

1,648 SF

2,277 SF2,838 SF

19

19,087 SF

782 SF

18

13

13

13

13

13

13

12

12

12

12

12

12

11

11

11

11

11

11

10

10

10

10

10

10

9

9

9

9

9

9

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

4,118 SF

3

3

3

3

3

3

3

6,593 SF

2

2

19,912 SF

2

6,432 SF2,358 SF

2

2

2

2

2

7,887 SF

1

1

1

2,195 SF

1

1

1

1

1

2,809 SF

2,893 SF

8,487 SF

20,591 SF

17,436 SF

20,396 SF

28,967 SF

4,995 SF

2,965 SF

2 8,860 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 95% Leased $39.00-$40.00 NNN $20.84 Op/Ex $59.84-$60.84 Gross

454,225 SF 23 Floors 93% Leased $36.00 NNN $21.75 Op/Ex $57.75 Gross

428,419 SF 22 Floors 85% Leased $34.00-35.00 NNN $19.55 Op/Ex $53.55-$54.55 Gross

281,196 SF 17 Floors 97% Leased $25.50 NNN $14.65 Op/Ex $40.15 Gross

500,436 SF 29 Floors 47% Pre-Leased $38.00 - $40.00 NNN $15.50 Op/Ex

122,551 SF 5 Floors 76% Leased $20.00-$35.00 NNN $20.93 Op/Ex $40.93-$55.93 Gross

258,176 SF 26 Floors 99% Leased $34.00 NNN $18.05 Op/Ex $52.05 Gross

179,000 SF 18 Floors 85% Leased $33.00-$40.00 NNN $15.20 Op/Ex $48.20-$55.20 Gross

32 Floors 98% Leased $34.00 NNN $18.75 Op/Ex $52.75 Gross $52.75 Gross

29

Availability Summary

1

33 32 31

3,325 SF

30

30

29

29

29

28

28

28

27

27

27

3,733 SF

26

26

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

18

18

18

17

17

17

17

17

17

16

16

16

26 4,471

25

16

16

16

16

15

15

15

15

15

15

15

14

14

14

14

14

14

14

13

13

13

13

13

13

13

13

21,218 SF

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

878 SF

10

10

21,218 SF

9

9

9

9

23,142 SF

9

9

8

8

7

7

11

7,322 SF

10

10 9

2,110 SF

7 6

8,933 SF 4,403 SF

5

5,418 SF

9 1,993 SF

14,328 SF

8

8

8

8

7

7

7

7

7

6

6

6

6

6

6

5

5

5

5

5

5

8

8

10,821 SF

30

2,116 SF

6 7,306 SF

5

4

963 SF

4

4

4

4

4

4

4

3

1,716 SF

3

3

3

3

3

3

3

2

2

2

2

2

2

2

2

1

1

1

1

1

1

1

1

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 97% Leased $27.00 -32.00 NNN $17.59 Op/Ex $44.59 - 49.59 Gross

326,335 SF 16 Floors 93% Leased $28.00 NNN $17.65 Op/Ex $45.65 Gross

389,503 SF 21 Floors 99% Leased $37.50 NNN $19.85 Op/Ex $57.35 Gross

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

535,078 SF 33 Floors 97% Leased $40.00 NNN $21.75 Op/Ex $61.75 Gross

194,749 SF 13 Floors 100% Leased $33.00 NNN $21.00 Op/Ex $54.00 Gross

518,385 SF 30 Floors 95% Leased $35.00-$38.00 NNN $18.14 Op/Ex $53.14-$56.14 Gross

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

218,432 SF 14 Floors 61% Pre-Leased $31.00 - $35.00 NNN $16.50 Op/Ex $47.50 - $51.50 Gross

30

NORTHWEST SUBMARKET 2Q UPDATE -79,052 SF

Net Absorption

12.53%

Direct & Sublease Vacancy Rate

$35.44

Avg. Class A Full Service Rental Rate

Following a drop in vacancy rates at the end of 2015, the NW submarket has experienced an uptick in vacancy rates this year. The 1Q 2016 vacancy rate rose significantly in response to the delivery of two major projects, Domain 1 and Domain 5, which introduced over 200,000 sf of new space to the Northwest submarket. Coupled with the addition of IBMâ&#x20AC;&#x2122;s Broadmoor Campus, the vacancy rate rose over two hundred basis points from 4Q 2015 to 1Q 2016.

NORTHWEST UPDATE

Domain 8, currently under construction with an estimated delivery date of 1Q 2017, will add another 300,000 sf to the NW submarket. This addition, which will be the largest Class A office building at The Domain, is currently 0% preleased. However, it is widely believed that there are deals in place to fill most of this space upon delivery. This quarter, the bulk of the availability in the competitive set can be attributed to Braker Pointe III. As renovations are underway at the old Harcourt building, almost 200,000 sf of vacant space is being counted against the areaâ&#x20AC;&#x2122;s absorption. Out of the 132 competitive

set buildings in the Northwest submarket, only 17 saw an increase in directly available area, while 27 experienced positive direct absorption. Several transactions occurred this quarter in the NW submarket. Two major properties exchanged hands, including the 137,000 sf Quarry Oaks III, leased by Bazaarvoice, and the 100,000 sf Lakewood on the Park B, which sold for approximately $21 million. Trend Micro signed on for approximately 75,000 sf of space at Domain 5. Accruent also recently announced that it will consolidate its Austin headquarters in a building at the Domain.

32

NORTHWEST UPDATE

NORTHWEST MICROMARKETS

Round Rock Cedar Park

FAR NORTHWEST/ ROUND ROCK PďŹ&#x201A;ugerville

Lake Travis

McNeil

Arboretum

Domain

ARBORETUM

SHEPHERD MOUNTAIN

West Lake Hills

Tarrytown

Austin

The flurry of activity within the Arboretum/ Domain Micromarket suggests that proximity to amenities is a major factor attracting tenants to the Northwest submarket. The 2Q 2016 rental rate for this micromarket, $36.09, is more than a dollar higher than the rental rate for the overall submarket and quickly approaching rates in the Southwest submarket. At $34.62 in 2Q, rental rates in the Northwest

33

remain the lowest of the three major submarkets. Combined with the growth of amenities in and around the Domain, comparatively low rental rates will likely continue to draw major companies into the Northwest submarket.

Images on pages 31 + 32: Aspen Lake Two; By: Scott Mason Photography

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 Q3 2014 Q4

12,389,252

911,833

321,739

12,845,611

1,197,426

320,587

189,579

9.96%

$32.12

171,918

11.82%

$32.93

2015 Q1

12,931,909

992,203

2015 Q2

13,120,924

897,208

292,334

319,774

9.93%

$33.39

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 2016 Q1

14,156,083

1,460,249

235,206

566,979

11.98%

$34.14

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

*Absorption includes sublease space

NET ABSORPTION 12%

1,200

9%

800

6%

400

3%

0

0%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

1,000

92%

600

91%

400

90%

200

89%

0

88%

(200)

Di rect & Subleas e Vacancy Rate

93%

800

2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Occupancy Rate

15%

1,600

Absorption (Thousands of SF)

2,000

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

87%

Di rect & Subleas e Occupancy Rate

$36

15%

$35

13%

$34

11%

$33

9%

$32

7%

$31

5%

$30

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

3%

Di rect & Subleas e Vacancy Rate

34

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

27,384

0

Building

Direct Vacant SF

1

Amber Oaks F

2

Amber Oaks J

3

Atrium Office Centre

4

Austin Oaks

5

Braker Pointe III

6

Bridgepoint Square 2

Sublease Available SF

Total Available SF

81,101

0

81,101

45,711

5,397

51,108

Prominent Pointe I

30,987

0

30,987

Building

Direct Vacant SF

14

Paloma Ridge B

15

Park Centre Bldg 3

27,384

16

53,246

2,659

55,905

17

Research Park Place 8

33,518

0

33,518

167,158

0

167,158

18

Research Park Plaza IV

3,355

96,334

99,689

4,814

16,005

20,819

19

Research Park Plaza V

72,709

0

72,709

7

Domain 1

86,271

0

86,271

20

Reserve at Bull Creek B

43,713

0

43,713

8

Domain 3

0

20,041

20,041

21

Reserve at Bull Creek C

43,695

0

43,695

9

IBM Broadmoor Campus

144,818

0

144,818

22

Riata Corporate Park Bldg 4

57,188

0

57,188

10

Ladera Bend 3

Riata Corporate Park Bldg 7

0

21,477

21,477

11

Lakewood Center I

9,616

16,662

26,278

12

Lakewood on the Park B

13

Paloma Ridge A

35

0

27,980

27,980

23

23,885

45,020

68,905

24

River Place Corporate Park II

24,446

0

24,446

25

The Park at 8300 N. MoPac

6,911

31,958

38,869

103,368

0

103,368

26

Tower of the Hills/Tower Point

25,383

0

25,383

NORTHWEST AUSTIN OFFICE DEVELOPMENT Building

Total SF

Percent Preleased

Estimated Delivery

Status

1

Braker Pointe III*

195,230

15%

2016 Q3

Coming to Market

2

Domain 8

290,983

0%

2017 Q1

Under Construction

3

Four Points Centre Bldg 3

250,000

0%

2018 Q1

Planned

4

Amber Oaks Phase I

90,300

0%

Planned

Planned

5

Amber Oaks Phase II

90,300

0%

Planned

Planned

6

Amber Oaks Phase III

45,000

0%

Planned

Planned

7

Aspen Lake Three

128,700

0%

Planned

Planned

8

Domain Tower

308,000

0%

Planned

Planned

9

Frontera Ridge

400,000

0%

Planned

Planned

10

Four Points Centre Bldg 4

80,000

0%

Planned

Planned

11

Paloma Ridge C

112,500

0%

Planned

Planned

12

Research Park Bldg 6

117,314

0%

Planned

Planned

13

Riata Corporate Park Bldg 1

65,000

0%

Planned

Planned

14

Riata Crossing Bldg 6

49,716

0%

Planned

Planned

*Already existing - Coming to market 3Q 2016

Planned

Under Construction

36

SOUTHWEST SUBMARKET 2Q UPDATE -20,795 SF Net Absorption

10.99%

Direct & Sublease Vacancy Rate

$38.82

A historically resilient submarket, the performance of the competitive set of Southwest Class A office buildings remained fairly on par with the previous two quarters. With no major deliveries since Encino Trace in 3Q 2015, vacancy rates steadily climbed for the third quarter in a row, reaching its highest level in almost four years at nearly 11%. Absorption is now at a negative 13,653 sf for the year.

Avg. Class A Full Service Rental Rate

Lobby of The Terrace; Photo by Scott Mason Photography

SOUTHWEST UPDATE

In spite of these seemingly adverse statistics, asking rental rates steadily marched upwards to a record high rate of $38.82 – the 17th consecutive quarter of record highs – and several new projects and leases were announced this quarter.

lifestyle company prepares for explosive growth with mentions of an initial public offering, the move down the street from their current headquarters at 5301 Southwest Parkway will be a short, but huge event for both the company and the Austin real estate market.

Mirna Therapeutics signed for approximately 24,000 sf at the recently delivered Encino Trace II. According to their Form 8-K filing

In addition to Lantana Ridge, two more projects broke ground this quarter: Walsh Tarlton Overlook and The Overlook at Barton

with the SEC in June, Mirna is entitled to approximately $80/ sf of improvement allowances and three months of free rent for a 123-month lease with a starting base rental rate of approximately $25/ sf – $1.50/sf higher than the asking rate.

Over a million square feet of planned developments remain in the pipeline waiting to sign major tenants and begin construction.

Apple plans to start moving in to its 215,000 sf space at Capital Ridge later this year – more than a year after the lease was signed. Given this information, CBRE, who tracks absorption according to physical occupancy of space, will likely show a huge uptick in absorption in the Southwest submarket in 3Q. It was confirmed this quarter that Yeti signed on to fully occupy 175,000 sf at Lantana Ridge I & II upon its delivery in 2017. As the outdoor

Creek, which will add 55,500 sf and 53,091 sf of space, respectively. Meanwhile, over a million square feet of planned developments remain in the pipeline waiting to sign major tenants and begin construction.

Given the above information, the Southwest submarket proves to be a curious one. Landlords are proceeding cautiously with developments, hoping to land credit or desirable tenants like Apple or Yeti before breaking ground. Smaller companies are still attracted to the Southwest submarket as well due to its proximity to Westlake Hills, where many executives reside. There is increasing demand for higher-quality spaces – much like in the CBD. For example, in the Near Southwest

38

SOUTHWEST UPDATE

micromarket, there have been ten deals under 10,000 sf this year in The Terrace project alone. The movement of tenants towards newer spaces has caused Class A rental rates to rise while

Class C rates dropped by $1.74 this quarter. Furthermore, Class A is the only property class to experience positive total absorption year-to-date.

SOUTHWEST MICROMARKETS

Lake Travis

McNeil

Arboretum

Domain

FAR SW West Lake Hills

Barton Creek

Tarrytown

Austin

Lost Creek

NEAR SW

Sunset Valley

ABIA

39

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 Q3

7,102,874

294,587

169,604

132,700

6.54%

$35.27

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

200,126

(20,795)

10.99%

$38.82

*Absorption includes sublease space

15%

800

12%

600

9%

400

6%

200 0

3%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

800

95%

600

93%

400

91%

200

89%

0

87%

(200)

0%

Di rect & Subleas e Vacancy Rate

2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

4%

Di rect & Subleas e Vacancy Rate

40

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

41

Direct Vacant SF

Sublease Available SF

Total Available SF

0

70,192

1

3700 San Clemente

70,192

2

3900 San Clemente

135,366

0

135,366

3

Barton Skyway II

5,896

24,275

30,171

4

Cityview Center

5

Encino Trace II

6

Las Cimas II

7 8 9

0

24,478

24,478

101,822

0

101,822

19,402

6,641

26,043

Rialto II

0

36,421

36,421

Rollingwood Center I & II

0

31,000

31,000

The Park on Barton Creek 1

21,262

2,203

23,465

10

The Park on Barton Creek 2

38,991

0

38,991

11

The Summit at Lantana Bldgs 1-5

52,934

0

52,934

12

The Terrace 6

13,055

8,258

21,313

SOUTHWEST AUSTIN OFFICE DEVELOPMENT Building

Total SF

1

Walsh Tarlton Overlook

2

Lantana Ridge I & II

3

The Overlook at Barton Creek

4 5

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

Galleria Oaks I & II

147,928

50%

Planned

Planned

The Backyard - Buildings B, J, & H

171,450

0

Planned

Planned

6

Overwatch Campus Phase II

123,525

0

Planned

Planned

7

Regency Park

90,000

0

Planned

Planned

8

Rollingwood Center III

107,000

0

Planned

Planned

9

The Terrace 3

203,130

0

Planned

Planned

10

The Terrace 4

285,663

0

Planned

Planned

11

The Terrace 5

218,809

0

Planned

Planned

Planned

Under Construction

42

AVAILABILITY SUMMARY SOUTHWEST CLASS A 4,901 SF

5

5

5

5

5

4

4

4

4

4

4

3

3

3

3

3

2

2

1

1

3

11,073 SF

2 1

NSW

7,153 SF

2

5,736 SF

2

2

1

5,438 SF

1

1

NSW

NSW

NSW

3,647 SF

2,762 SF

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 95% Leased $27.00 NNN $15.98 Op/Ex $42.98 Gross

5 Floors 116,368 SF 84% Leased $26.50 NNN $15.56 Op/Ex $42.06 Gross

5 Floors 121,467 SF 91% Leased $26.50 NNN $14.59 Op/Ex $41.09 Gross

5 Floors 104,324 SF 100% Leased $26.27 NNN $14.73 Op/Ex $41.00 Gross

5 Floors 119,549 SF 97% Leased $27.00 NNN $14.47 Op/Ex $41.47 Gross

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

5 42,671 SF

4

3

42,369 SF

3

3

2

16,782 SF

2

4

1

1

FSW

FSW

3,700 SF

3

2

19,402 SF 2,947 SF

1

3,694 SF

FSW

3,042 SF

4

6,176 SF

3

2

1

1

1

FSW

FSW

FSW

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 $23.50 NNN $13.15 Op/Ex $36.65 Gross

4 floors 158,137 SF 36% Leased $23.50 NNN $13.15 Op/Ex $36.65 Gross

3 Floors 82,853 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 94% Leased $26.50 NNN $14.73 Op/Ex $41.23 Gross

5 Floors 142,000 SF 100% Leased $27.00 NNN $14.58 Op/Ex $41.58 Gross

18,658 SF

17,159 SF

27,276 SF

NSW

5

5

4

11,874 SF

4

3

50,798 SF

3

3

3

3

2

2

2

2

50,798 SF

2

1

1

1

1

21,896 SF

1

NSW

Rollingwood Center I 2500 Bee Caves Rd

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 $26.50 NNN $15.63 Op/Ex $42.13 Gross

51,534 SF

FSW

3700 San Clemente 3700 N Capital of Tx Hwy 5 Floors 249,870 SF 72% Leased $26.00 NNN $10.50 Op/Ex $36.50 Gross

3

2

Encino Trace I 5707 Southwest Pkwy

4

FSW

3900 San Clemente 3900 N Capital of Tx Hwy 5 Floors 251,146 SF 46% Leased $24.50 NNN $13.81 Op/Ex $38.31 Gross

Availability Summary 43

14,373 SF

2

Southwest Submarket

4

3 52,934 SF

2

1

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 24,275 SF

NSW

9,303 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 NNN $14.61 Op/Ex $41.11 Gross

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

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

7 floors 238,000 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 $22.50 NNN $15.00 Op/Ex $37.50 Gross

5 4

3

3

2

2

4,125 SF

1

1

NSW

5 21,262 SF

4 3

2,203 SF

5

3

9,506 SF

2

20,228 SF

2

1

18,763 SF

1

NSW

The Park on Barton Creek One 3711 S Mopac Expy 5 floors 102,608 SF 79% Leased $25.00 NNN $14.02 Op/Ex $39.02 Gross

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

9,980 SF

2

NSW

Mira Vista 2705 Bee Caves Rd

3

Plaza on the Lake I 5001 Plaza on the Lake Dr. 3 Floors 122,530 SF 93% Leased $28.50 NNN $15.35 Op/Ex $43.85 Gross

6

5,725 SF

6

5

8,258 SF

5

2,974 SF

4

4

4

4

4

3

3

6,354 SF

3

3

3

2

2

3,840 SF

2

2

2

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

NSW

3,447 SF

NSW

1

4,356 SF

NSW

FSW

Plaza on the Lake II 4801 Plaza on the Lake Dr. 3 Floors 114,261 SF 100% Leased $28.50 NNN $14.96 Op/Ex $43.46 Gross

2,052 SF

19,000 SF

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 91% Leased $25.50 NNN $15.68 Op/Ex $41.18 Gross

5 Floors 114,635 SF 97% Leased $25.50 NNN $15.65 Op/Ex $41.15 Gross

6 Floors 197,909 SF 93% Leased $28.50 NNN $15.92 Op/Ex $44.42 Gross

6 Floors 192,214 SF 99% Leased $28.50 NNN $15.99 Op/Ex $44.49 Gross

Austin, TX Q2 2016 Class A Office Space

2 1

FSW

5000 Plaza on the Lake 5000 Plaza on the Lake Dr. 3 Floors 119,463 SF 92% Leased $27.50 NNN $15.85 Op/Ex $43.35 Gross

5

1

8,936 SF

1

FSW

The Park on Barton Creek Two 3711 S Mopac Expy 5 floors 102,587 SF 62% Leased $25.00 NNN $14.47 Op/Ex $39.47 Gross

3

To find out more, visit:

SUBLEASE SPACE AVAILABLE SPACE

aquilacommercial.com/reports

44

View from a patio at The Terrace; Photo by Scott Mason Photography

TheAppendix Competitive Sets

47-58

Central Business District

47

Arboretum/Domain

48

Shepherd Mountain/2222

51

Far Northwest

53

Near Southwest

55

Far Southwest

57

Longterm Performance of Submarkets

59

Longterm Performance: CBD vs. Suburban

60

CBD Overall Performance

61

Southwest Overall Performance

63

Northwest Overall Performance

65

The AQUILA Methodology

67

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

20,182

5,855

$40.00 ↑

$20.84

300 West 6th

454,225

31,373 ↑

3,616 ↑

$36.00

$21.75

301 Congress

418,338

62,471 ↑

0↓

$35.00

$19.55

400 West 15th

281,196

8,627

21,442

$25.50 ↓

$15.92

501 Congress

122,747

28,967 ↑

20,396

$35.00

$20.93

515 Congress

263,058

2,277 ↓

2,838 ↓

$34.00 ↑

$18.05

5th + Colorado

179,000

27,047

0

$40.00

$15.20

600 Congress Ave.

503,951

9,642 ↓

0

$34.00

$18.75

816 Congress

434,081

10,821

3,325 ↑

$32.00 ↑

$17.59

Austin Centre

326,335

21,621 ↓

3,826 ↓

$28.00

$17.65

Capitol Center

164,044

9,985 ↑

7,097 ↓

$30.00

$19.70

Capitol Tower

172,837

10,580 ↑

0

$31.00

$16.52

Chase Tower

389,503

1,993 ↓

5,418

$37.50 ↑

$19.85 ↑

Colorado Tower

373,334

0

0

$34.00

$16.83

Frost Bank Tower

535,078

14,328 ↑

0

$40.00

$21.75

IBC Bank Plaza

194,749

0

0

$33.00

$21.00

Lavaca Plaza

118,635

7,784 ↑

0↓

$32.50

$21.74

Littlefield Building

109,779

15,132 ↓

0

$35.00

$18.08

One Congress Plaza

518,385

26,136 ↓

3,733

$38.00 ↓

$18.14 ↑

San Jacinto Center

406,279

0

7,306 ↑

$36.00

$20.02 ↑

Scarbrough Building

130,789

10,413 ↓

0

$35.00 ↑

$19.04

Seaholm

143,151

0

0

$28.00

$12.00

Building Name

47

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 Q3

6,253,014

401,651

157,535

173,068

8.94%

$33.66

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

*Absorption includes sublease space

15%

800

12%

600

9%

400

6%

200

3%

0

0%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

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 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

85%

Di rect & Subleas e Occupancy Rate

$37

11%

$36

9%

$35

7%

$34

5%

$33

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

3%

Di rect & Subleas e Vacancy Rate

48

COMPETITIVE SET

ARBORETUM/DOMAIN MICROMARKET COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

3307 Northland

98,888

1,103 ↓

0

$17.50

$11.52 ↑

9500 Arboretum

182,331

0

0

$22.00

$13.51

Arboretum Atrium

90,280

2,515

8,222 ↑

$21.00

$14.38

Arboretum Plaza One

146,347

2,446 ↑

0

$27.00

$15.53

Arboretum Plaza Two

98,828

0

0

$27.00

$15.53

Arboretum Point

150,033

0

0

$23.00

$13.44

Atrium Office Centre

199,858

27,384 ↑

0

$18.00

$8.05

Austin Oaks

445,240

53,246 ↑

2,659

$19.00

$11.60

Balcones Centre

74,876

0

0

$24.00

$9.86

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

3,448 ↑

1,150

$20.50

$11.73

Domain 1

124,571

86,271

0

$30.00

$11.00

Domain 2

143,331

0

0

$29.00

$11.00

Domain 3

179,006

0

20,041

$26.00 ↑

$10.34

Domain 4

152,012

0

0

$24.00

$11.16

Building Name

Domain 5

78,987

0

0

$26.00

$11.00

Domain 7

221,973

0↓

0

$29.00

$12.00

Domain Gateway

173,962

0

0

$28.00 ↑

$14.95

Great Hills Corporate Center I

59,228

2,403 ↓

0

$18.50

$11.39

Great Hills Corporate Center II

60,429

0↓

0

$18.00

$11.39

Great Hills Corporate Center III

56,422

13,207 ↑

0

$18.50

$11.39

Great Hills Plaza

139,252

5,855 ↓

0

$21.00 ↑

$12.93

Greystone Plaza

78,248

5,800 ↓

0

$20.00

$13.04

Heritage Plaza

74,736

7,677

0

$28.50 ↑

$12.49

IBM Broadmoor Campus

49

1,111,734

144,818

0

TBD

Neg.

Kaleido I & II

73,149

2,072 ↓

0

$18.50

$9.93

Lakeview Plaza

120,559

9,276 ↑

4,608 ↑

$21.00

$12.22

Northpoint Centre I & II

151,126

1,394 ↓

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

Building Name

One Far West Plaza

70,642

885

0

$18.00

$12.87

Park North I & II

133,568

1,337

0

$19.50

$11.83

Plaza 7000

155,076

6,214 ↓

2,653

$26.00

$13.82

Prominent Pointe I

150,376

30,987 ↓

0

$24.50

$14.72

Prominent Pointe II

102,567

0↓

12,579

$24.50

$15.62 ↓

Quarry Lake Business Center

117,512

0↓

0

$21.00

$11.88 ↓

Quarry Oaks I

165,435

0

0

$27.00 ↑

$11.82

Quarry Oaks II

126,000

2,044

0

$27.00 ↑

$11.48

Quarry Oaks III

137,615

0

11,814

$28.00 ↑

TBD ↑

Reunion Park

118,142

17,116 ↑

0

$19.00

$11.16

Stone Creek I

76,860

0

0

$24.00

$10.90

Stone Creek II

162,723

5,077

0

$24.00

$13.31

Stone Creek Park

77,185

0

0

$20.00

$13.45

Stonebridge Plaza I

193,200

0↓

0

$27.50 ↑

$14.97

Stonebridge Plaza II

192,864

10,898

0

$27.50 ↑

$15.04

Stratum Executive Center Bldg A

61,000

4,055

0

$21.50 ↑

$14.12

Stratum Executive Center Bldg B

61,000

0

0

$21.50 ↑

$14.12

Stratum Executive Center Bldg C

61,000

6,169

0

$21.50 ↑

$14.12

Stratum Executive Center Bldg D

61,000

3,715 ↑

0

$21.50 ↑

$14.12

The Campus at Arboretum 1

60,059

5,351 ↑

0

$23.50

$14.13

The Campus at Arboretum 2

33,135

0

0

$23.50

$13.60

The Campus at Arboretum 3

32,765

0

0

$23.50

$14.53

The Campus at Arboretum 4

85,916

12,572

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

6,911

31,958

$23.00

$14.01

UFCU Plaza

246,869

15,194 ↓

0

$22.00 ↑

$13.30

Westech 360 Bldgs 1-4

175,529

4,025 ↑

0

$20.00

$13.60

Westpark Office 1-4

97,034

8,256

0

$18.50

$10.89

50

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 Q3

2,453,857

2014 Q4

2,688,442

211,437

92,007

(14,565)

12.37%

$32.28

389,788

127,233

21,008

19.23%

$33.10

2015 Q1 2015 Q2

2,690,750

207,238

179,538

132,553

14.37%

$34.17

2,690,750

181,807

152,245

52,724

12.41%

$34.45

2015 Q3

2,690,750

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

*Absorption includes sublease space

525

18%

350

12%

175 0

6%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

Di rect & Subleas e Vacancy Rate

$36

18%

$34

12%

$32

6%

$30

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

51

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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) (160)

0%

$38

Absorption (Thousands of SF)

24%

Vacancy Rate

Availability (Thousands of SF)

700

NET ABSORPTION

77% 2014 Q3

2014 Q4

2015 Q1

Net Abs orption*

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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 ↓

6,287

$23.50

$13.54

Bridgepoint Square 1

84,692

6,636 ↓

3,933

$24.50

$13.22

Bridgepoint Square 2

92,459

4,814

16,005 ↑

$24.50

$13.22

Bridgepoint Square 3

78,352

0

0

$24.50

$13.22

Bridgepoint Square 4

109,175

10,987

0

$24.50

$13.22

Bridgepoint Square 5

76,793

5,646

0

$24.50

$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

24,446 ↑

0

$21.50

$12.51

Lakewood on the Park C

78,596

14,573 ↑

0

$21.50

$12.51

Millennium Building

125,612

0

0

$24.00

$12.58

Park Centre Bldg 1

89,822

0↓

0

$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 ↓

5,397

$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

$22.00

$14.50

River Place Corporate Park II

114,491

9,616 ↓

16,662 ↑

$22.00

$14.12

River Place Corporate Park III

113,465

0

15,707

$22.00

$13.82

River Place Corporate Park IV

87,639

8,601

0

$22.00

$14.07

River Place Corporate Park V

67,601

0

0

$22.00

$14.21

River Place Corporate Park VI

62,037

0

0

$22.00

$14.13

River Place Corporate Park VII

69,119

0

0↓

$22.00

$14.39

Shepherd Mountain Plaza

100,937

4,995 ↑

983 ↑

$33.00

$12.39

Stone Cliff

66,027

10,715

0

$18.00

$12.46

52

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 Q3

3,682,381

298,745

72,197

31,076

10.07%

$29.40

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

*Absorption includes sublease space

24%

1,000

20%

800

16%

600

12%

400

8%

200

4%

0

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

Di rect & Subleas e Vacancy Rate

25% 20%

$32

15%

$30

10%

$28

5%

$26

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

53

2015 Q3

2015 Q4

2016 Q1

2016 Q2

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

$34

96%

200

90%

100

84%

0

78%

(100)

0%

$36

300

2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Di rect & Subleas e Occupancy Rate

72%

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

0

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

4,572

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

0

$22.00 ↑

$13.26

Aspen Lake Two

129,000

0

0

$24.50

$10.00

Crossings at Lakeline I

114,726

0

6,612 ↓

$21.50

$11.83 ↓

Crossings at Lakeline II

118,046

6,788 ↓

2,189 ↑

$21.50

$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

0

0

$22.50 ↑

$11.91 ↑

Pecan Park II

136,245

0

0

$19.50

$9.45

Research Park Place 7

125,701

0↓

2,799

$23.00 ↑

$13.20 ↑

Research Park Place 8

125,700

33,518

0

$23.00 ↑

$13.20 ↑

Research Park Plaza I

135,541

11,747

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

72,709 ↓

0

$24.00

$11.06

Riata Corporate Park Bldg 2

63,372

7,054

9,767 ↑

$22.00

$13.65 ↑

Riata Corporate Park Bldg 3

63,849

0

0

$22.00

$13.65 ↑

Riata Corporate Park Bldg 4

93,737

57,188 ↑

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

21,477

$22.00

$13.65 ↑

Riata Corporate Park Bldg 8

93,718

0

14,325 ↓

$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

25,383 ↑

0

$26.00 ↑

$12.82 ↓

54

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 Q3

2,712,851

174,207

126,557

56,791

11.09%

$37.06

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

85,148

(19,584)

9.24%

$40.93

*Absorption includes sublease space

16%

300

12%

200

8%

100

4%

0

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

0%

$41

15%

$39

12%

$37

9%

$35

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

55

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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 Net Rentable Area

Direct Vacant SF

Barton Creek Plaza I

72,974

Barton Creek Plaza II

64,718

Barton Creek Plaza III

64,842

Building Name

Sublease Available SF

Asking Rental Rate

Estimated OpEx

9,875 ↑

0

$24.00 ↑

$13.65

6,466

8,929 ↑

$24.00

$12.83 ↑

0

0

$24.00

$12.83 ↑

Barton Oaks Plaza I

99,404

4,901

0

$27.00

$15.98

Barton Oaks Plaza II

116,448

18,226 ↑

0

$26.50

$15.56

Barton Oaks Plaza III

121,467

11,174 ↑

0

$26.50

$14.59

Barton Oaks Plaza IV

112,000

0

0

$26.27

$14.73

Barton Oaks Plaza V

119,549

3,647

2,762 ↑

$27.00

$14.47

Barton Skyway I

195,324

3,240

3,596

$26.50 ↑

$14.95

Barton Skyway II

195,639

5,896 ↓

24,275

$26.50 ↑

$14.61

Barton Skyway III

173,302

9,303 ↑

0↓

$26.50 ↑

$14.52

Barton Skyway IV

222,580

0

0

$26.50 ↑

$13.86

Centre I

39,903

1,525 ↑

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

31,000 ↓

$30.00 ↑

$12.00

Spyglass Point

58,576

0

0

$22.00

$13.45

The Park on Barton Creek 1

102,608

21,262

2,203

$25.00

$14.02

The Park on Barton Creek 2

102,587

38,991 ↑

0

$25.00

$14.47

The Terrace 1

115,460

10,194 ↓

0↓

$25.50 ↑

$15.99

The Terrace 2

114,635

3,447

0

$25.50 ↑

$15.65

The Terrace 6

196,717

13,055 ↓

8,258

$28.50 ↑

$15.92

The Terrace 7

196,215

2,052

0

$28.50 ↑

$15.99

56

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 Q3

4,390,023

120,380

43,047

75,909

3.72%

$34.16

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%

$37.58

*Absorption includes sublease space

12%

450

9% 300 6% 150

0

3%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

Di rect & Subleas e Vacancy Rate

$36

12%

$34

8%

$32

4%

$30

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

57

2015 Q3

2015 Q4

2016 Q1

2016 Q2

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 16%

450

99%

300

96%

150

93%

0

90%

(150)

0%

$38

Absorption (Thousands of SF)

15%

Vacancy Rate

Availability (Thousands of SF)

600

NET ABSORPTION

2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

87%

Di rect & Subleas e Occupancy Rate

Occupancy Rate

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

$26.50

$15.63

3700 San Clemente

249,870

70,192 ↓

0

$29.50

$13.27

3900 San Clemente

251,146

135,366 ↑

0

$24.50

$13.81

5000 Plaza on the Lake

118,063

9,560 ↑

9,980

$27.50

$15.85

7000 West at Lantana 1 & 2

136,075

0

0

DND

DND

Canyon at Wild Basin

74,580

11,207 ↑

0

$24.50

$12.04 ↑

Capital Ridge

216,511

0

0

$30.00

$10.56

Cielo Center

270,711

6,292 ↑

0↓

$19.50

$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

2,015

$22.00 ↑

$13.55

Cityview Center

137,763

0

24,478

$26.00

$11.79

Crystal Mountain 1, 2 & 3

61,762

17,544 ↑

1,590

$26.00

$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

$23.50

$13.15

Encino Trace II

158,137

101,822 ↓

0

$23.50

$13.15

Escalade Bldg A

58,344

9,440

0

$19.50

$13.46

Escalade Bldg B

57,142

4,621

0

$19.50

$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

156,069

19,402

6,641 ↑

$26.50

$14.92

Las Cimas III

157,418

9,218 ↑

0

$26.50

$14.73

Las Cimas IV

138,008

0

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

3,585 ↑

0

$18.50

$12.50

Plaza on the Lake I

122,530

8,936

0

$28.50 ↑

$15.35

Plaza on the Lake II

111,166

0

0

$28.50 ↑

$14.96

Rialto I

77,755

11,003 ↑

3,892 ↑

$23.50

$13.64

Rialto II

77,732

0

36,421

$23.50

$13.64

The Enclave Bldgs 1-4

44,704

2,781 ↑

0

$19.00

$9.97

The Summit at Lantana Bldgs 1-5

865,832

52,934

0

$25.00

$13.06

Travis Oaks

123,434

0↓

0

$24.00 ↑

$13.30

Vista Ridge I

75,131

2,199

0

$19.00

$11.00

Westlake Place

61,184

5,608

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

1,004 ↑

$19.00

$11.81

Wild Basin II

74,626

0

14,584 ↑

$19.00

$10.87

Building Name

58

LONG TERM PERFORMANCE OF SUBMARKETS Numbers based on CBRE statistics.

20%

6

15%

4

10%

2

5%

0

0%

Citywide Sublease Vacancy

5

40%

4

32%

3

24%

2

16%

1

8%

0

0%

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

Southwest

Northwest

12% 6% 0%

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

59

CBD Sublease Availability Citywide Vacancy Rate

SOUTHWEST AVAILABLE SF VS. VACANCY RATE

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

$50

CBD

18%

CBD Dire ct Availability CBD Vacancy Rate

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

24%

Citywide Vacancy Rate

Availability (Thousands of SF)

Citywide Direct Vacancy

30%

Direct & Sublease Vacancy Rate

8

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

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

60

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 Q3

9,252,285

1,041,014

185,807

11.90%

$41.39

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%

*Absorption includes sublease space

NET ABSORPTION

1,500

15%

300

95%

1,200

12%

250

93%

600

6%

300

3%

0

0%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

Di rect & Subleas e Vacancy Rate

VACANCY RATES VS. RENTAL RATES 24%

$48

21%

$47

18%

$46

15%

$45

12%

$44

9%

$43 $42

6%

$41

3%

$40

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Vacancy Rate

Rental Rate

$49

0%

Di rect & Subleas e Vacancy Rate

91% 89%

150

87%

100

85%

50 0

83% 2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Di rect & Subleas e Occupancy Rate

81%

Occupancy Rate

9%

200

Absorption (Thousands of SF)

900

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

61

$47.93 Numbers based on CBRE statistics.

AUSTIN CBD OFFICE RENTAL RATE PROJECTIONS $60

3% Job Growth

$55

Full Service Rental Rates

$50

1% Job Growth

$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%

11.0

Shoal Creek Walk

10.5

25%

10.0

20%

9.5

15%

9.0

10%

8.5

Market Size (Millions of SF)

Total Vacancy Rate

500 W 2nd 30%

1% Job Growth 5%

0% 2004

8.0

3% Job Growth 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

62

NORTHWEST

OVERALL PERFORMANCE NORTHWEST OVERALL SUBMARKET PERFORMANCE Quarter

Net Rentable Area

Direct Vacant SF

Net Absorption*

Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2014 Q3

16,697,337

1,566,544

(78,989)

10.64%

$30.65

2014 Q4

16,817,337

1,540,054

93,312

10.46%

$30.83

2015 Q1

17,154,310

1,879,975

138,145

11.65%

$32.06

2015 Q2

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

*Absorption includes sublease space

Numbers based on CBRE statistics.

15%

2,000

12%

1,500

9%

1,000

6%

500

3%

0

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

0%

$34

13%

$32

10%

$30

7%

$28

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

63

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

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

2006

2007

2008

2009

Historic Rental Rate

2010

2011

AQUILA Model

2012

2013

3% Job Growth

2014

2015

2016

2017

2018

1% Job Growth

NORTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS 30%

20.0

Domain 8 Braker Pointe III

19.0

25%

17.0

Total Vacancy Rate

20%

16.0

1% Job Growth

15%

15.0 14.0

10%

3% Job Growth

13.0

Market Size (Millions of SF)

18.0

12.0

5%

11.0 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

10.0

1% Job Growth

64

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 Q3

9,458,793

653,880

187,746

9.24%

$31.38

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%

*Absorption includes sublease space

NET ABSORPTION

12%

900

9%

600

6%

300

3%

2014 Q3

2014 Q4

Di rect Vacant SF

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Su blease Avai lable SF

2016 Q1

2016 Q2

400

Di rect & Subleas e Vacancy Rate

$38

16%

$36

12%

$34

8%

$32

4%

$30

2014 Q3

2014 Q4

2015 Q1

2015 Q2

Average Class A Full Service Rental Rate

65

2015 Q3

2015 Q4

2016 Q1

2016 Q2

0%

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY RATES VS. RENTAL RATES

92%

200

90% 0

(200)

0%

94%

88%

2014 Q3

2014 Q4

Net Abs orption*

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Di rect & Subleas e Occupancy Rate

86%

Occupancy Rate

15%

1,200

Absorption (Thousands of SF)

1,500

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

0

$37.18

Numbers based on CBRE statistics.

SOUTHWEST SUBMARKET OFFICE RENTAL RATE PROJECTIONS $40

3% Job Growth 1% Job Growth

Full Service Rental Rates

$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 Lantana Ridge I & II Walsh Tarlton Overlook

11.0

Total Vacancy Rate

10.0 15%

9.0

1% Job Growth 8.0

10%

3% Job Growth 7.0

Market Size (Millions of SF)

20%

5% 6.0

0% 2004

2005

2006

2007

2008

Market Size

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014

3% Job Growth

2015

2016

2017

2018

5.0

1% Job Growth

66

THE AQUILA

METHODOLOGY

CHANGES THIS QUARTER •

All submarket, micromarket and individual property materials, tables and graphs prior to the appendix are based on AQUILA research unless otherwise noted. Historically, submarket statistics have been based on CBRE statistics. CBRE-based submarket statistics have been moved to the appendix.

•

The figures on the title pages for each of the submarkets (pages 24, 31, 37) are now based on AQUILA research. Historically, they have been based on CBRE statistics. The figures on the title page for the citywide update (page 18) is still based on CBRE statistics.

•

Absorption figures based on CBRE statistics have historically been our calculation of the difference of total occupied square feet (Absorption = (NRA2 – Total Vacant SF2) – (NRA1 – Total Vacant SF1)). This differs from CBRE’s calculation, which is measured as changes on physically occupied space — amount occupied compared and measured to amount occupied. As of 2016 Q1, CBRE no longer discloses Total Vacant SF. Therefore, on the datasets that are based on CBRE statistics, the absorption figures now directly reflect those provided by CBRE, rather than on our calculation.

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)

67

YOUR

NOTES:

68

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